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In the current scenario of Brazilian low water availability, the financial compensation funded by hydroelectric power plants (HPPs) represents an important tool for water management and conservation of the hydrographic basin. This payment could be applied to mitigate HPP's greatest problems such as water scarcity and reservoir silting. We propose an apportionment proportional to the average water flow provided by each municipality within the HPP's catchment area and the size of the flooded area by its reservoir. The water flow was obtained through the balance between precipitation and evapotranspiration for all municipalities in the study area with only 3% difference from the observed water flow in the HPP. As a result of the proposed methodology, the number of benefiting municipalities increased from 41 to 167 in the drainage area of Furnas’ HPP, providing financial resources to the upstream municipalities and enabling them to invest in conservation techniques to ensure the maintenance of water resources, promoting social and environmental development, and mitigation of HPP's greatest problems such as water scarcity and reservoir silting.

Financial compensation in hydropower generation: a tool for social and environmental development