Thanks for your nice feedback. actually I was looking for kind of algo to apply on the whole area rather than selecting a site and then apply this method. I just want to provide the DEM and precipitation data. Rest my application should do to find out the potential energy based on slope and amount of the water flowing down. It will give me the rough idea of the sites suitable for the hydro power projects. Then I can further refine it with the methodology you just mention here.
I am attaching a paper where the methodology is described but I am unable to figure it out in ArcGIS.