ABSTRACTIn most of arid and semi-arid regions, there are limited sources of available fresh water for different domestic and environmental demands. Strategic and parsimonious fresh water-use in water-scarce areas such as Southern New Mexico is crucially important. Elephant Butte and Caballo reservoirs are two integrated reservoirs in this region that provide water supply for many water users in downstream areas. Since Elephant Butte Reservoir is in a semi-arid region, it would be rational to utilize other energy sources such as wind energy to produce electricity and use the water supply to other critical demands in terms of time and availability. This study develops a strategy of optimal management of two integrated reservoirs to quantify the savable volume of water sources through optimal operation management. To optimize operations for the Elephant Butte and Caballo reservoirs as an integrated reservoir operation in New Mexico, the authors in this case study utilized two autoregressive integrated moving average models, one non-seasonal (daily, ARIMA model) and one seasonal (monthly, SARIMA model), to predict daily and monthly inflows to the Elephant Butte Reservoir. The coefficient of determination between predicted and observed daily values and the normalized mean of absolute error (NMAE) were 0.97 and 0.09, respectively, indicating that the daily ARIMA prediction model was significantly reliable and accurate for a univariate based streamflow forecast model. The developed time series prediction models were incorporated in a decision support system, which utilizes the predicted values for a day and a month ahead and leads to save significant amount of water volume by providing the optimal release schedule from Elephant Butte into the Caballo Reservoir. The predicted daily and monthly values from the developed ARIMA prediction models were integrated successfully with the dynamic operation model, which provides the optimal operation plans. The optimal operation plan significantly minimizes the total evaporation loss from both reservoirs by providing the optimal storage levels in both reservoirs. The saved volume of the water would be considered as a significant water supply for environmental conservation actions in downstream of the Caballo Reservoir. Providing an integrated optimal management plan for two reservoirs led to save significant water sources in a region that water shortage has led to significant environmental consequences. Finally, since the models are univariate, they demonstrate an approach for reliable inflow prediction when information is limited to only streamflow values. We find that hydroelectric power generation forces the region to lose significant amount of water to evaporation and therefore hinder the optimal use of freshwater. Based on these findings, we conclude that a water scarce region like Southern New Mexico should gain independence from hydroelectric power and save the freshwater for supporting ecosystem services and environmental purposes.