Many electric utilities use small reservoirs in mountainous regions to generate hydropower to meet peak energy demands. Water input depends on the water budget of the catchment, whereas output depends on user demand, which is inยฏuenced by temperature. Hence reservoir performance depends on climatic factors and is sensitive to climate change. A model, based on the systems of Duke Power and Virginia Power in the south-eastern USA, was developed to simulate performance. The annual maximum draw-down of the reservoir, which represents the minimum dam size needed to maintain continuous energy generation, is considered here. The model was tested for four regions in the eastern USA using 1951ยฑ1995 observations. The amount of draw-down depended on the linked daily sequences of precipitation and temperature, the former dictating the water available, the latter inยฏuencing both evaporation and energy demand. The time and level of the annual extreme emphasized that small changes in the timing of a dry spell had a major impact on the draw-down. Climatic changes were simulated by uniformly increasing temperatures by 2 C and decreasing precipitation by 10 per cent. The resultant draw-down increased from current simulated values by about 10 per cent to 15 per cent with extremes up to 50 per cent. This was of the same order, but in the opposite direction, as the change created by a 10 per cent increase in the efยฎciency of energy generation. Without such an efยฎciency increase, many utilities will face the prospect of reduced or less reliable hydroelectric generation if climate changes in the manner examined here.