Mycrohydro power (MHP) is one of the alternative energies that have been developed to meet the electricity demand, especially for rural communities. Developments of MHP can be done either with a connected system (on-grid) with PLN and not connected (off-grid) that are sold directly to the public. MHP existing operations in Indonesia, especially those off-grid has a relatively shorter time operation than on-grid system. One cause of this failure is that the non exist institutional establishment for managing MHP which has community welfare and sustainability environmental orientation. The study was conducted to respond to questions about what MHP management alternatives that can improve the welfare of the community and support the growth of micro and small business in the community, as well as preserve the surrounding natural environment, particularly the flow of rivers and water catchment areas which in turn maintain operational sustainability MHP.