This paper investigates the load development of power systems, the characteristics of the hydropower, and the tremendous advantages of the hydropower in peak adjusting of power systems. Using the East China power system as an illustrative example,the inconsistencies in the calculating principle of the hydropower installed capacity and the demand of the power system are assested. A new calculating principle that minimizes the cost of the power system is proposed. The effect of the new calculating principle on the hydropower installed capacity is evaluated by using a real case. The analysis provides significant insights in calculating the installed capacity of large hydropower in China.