The world’s water infrastructures suffer from inefficiencies, such as high energy consumption and water losses due to inadequate management practices and feeble pressure regulation, leading to frequent water and energy losses. This strains vital water and energy resources, especially in the face of the worsening challenges of climate change and population growth. A novel method is presented that integrates micro-hydropower plants, with pumps as turbines (PATs), in the water network in the city of Funchal. Sensitivity analyses evaluated the microgrid’s response to variations in the cost of energy components, showing favorable outcomes with positive net present value (NPV). PV solar and micro-wind turbines installed exclusively at the selected PRV sites within the Funchal hydro grid generate a combined 153 and 55 MWh/year, respectively, supplementing the 406 MWh/year generated by PATs. It should be noted that PATs consistently have the lowest cost of electricity (LCOE), confirming their economic viability and efficiency across different scenarios, even after accounting for reductions in alternative energy sources and grid infrastructure costs.