Failure of the Mtera-Kidatu Reservoir System within the Rufiji River Basin in Tanzania in the early 1990s is investigated by considering four possible causes (i.e. sudden decrease in inflows, sudden increase in losses, sudden increase in hydropower generation or unnecessary spills; or a combination of these) and it was found out that unaccounted spillage seems to be the main cause. Consequently, the system’s simulation model has been proposed in this paper that takes into consideration the flows that are generated in the intervening catchment (i.e. catchment between Mtera and Kidatu) with the operational policy that maximum power is produced at Kidatu most of the time because Kidatu has higher head for greater power generation than at Mtera. The paper shows that if this proposed model had been in place then the Mtera Reservoir should not have gone dry in the 1991-1994 period. The validity of the proposed model is tested with the TALSIM 2.0 Model and the regression analysis of the water levels at Mtera Reservoir produced by the models had an efficiency of 95%, indicating a very good correlation. The proposed model operates the reservoir system in an integrated manner by considering the flows into the Mtera Reservoir as well as accounting for the flows generated by the intervening catchment.