Power generation from water networks is a new practice in the optimization of water systems management. In water supply networks, pressure relief valves are often used to avoid additional pressures on the downstream. With the presence of extra energy head in Water supply pipelines, hydropower generation is possible using either turbine or pump as turbine (PAT). In this study, the potential of energy recovery from the existing water supply system in the City of Ilam, Iran, was investigated using turbine and PAT hydropower plants. This survey indicated the feasibility of hydropower generation in almost ten stations along the Ilam’s water supply system, with the capacities in orders of mini to Pico hydropower plants. The total amount of generated energy per year is about 1641780 kWh using turbines, and 1231335 kWh in the case of using PATs. The results from economic analysis indicate that the cost of unit energy is about 1065 Rials using turbines, and 365 Rials with the use of PATs. The benefit-cost ratio is 1.7 and 5.9 for using turbines and PATs, respectively. In general, the use of PATs in small hydropower systems on the Ilam’s water supply system is technically feasible, and economically affordable alternative.