Officials in the city located in Michigan's Berrien's County, about 166 miles west-southwest of Detroit, say they're looking into turning the dam back into an electrical power generator.
Today, the dam mainly serves as the source of a fishing pond and an occasional cause of flooding problems as happened in September.
But Niles officials tell Indiana's South Bend Tribune they're considering hiring a consultant to see if the dam can resume its work producing power.
City Administrator Terry Eull says interest in renewable energy is growing because of a new Michigan law requiring utilities to get 10 percent of their power from green sources by 2015.
He said the consultant also may look at the feasibility of harnessing the St. Joseph River to produce electricity in Niles.
The Niles utility is exempt from the state law because it buys it from American Electric Power Co. But Eull said green power could become a hot enough commodity to make it worth the investment.
"If we can do that and save electricity users in Niles some money, that's what we should do," Eull said.
Electricity produced in Niles wouldn't necessarily be used by the city's utility customers but could be sold on the open market, Eull said. He said that would help offset the electricity costs for city customers.
William Gallagher, a member of the Niles Utilities Board and an advocate of hydroelectric generation, said such low-velocity turbines now produce power on the Ohio and Mississippi rivers. In-water turbines are relatively small, don't require powerhouses and don't necessarily require even dams, he said.
"But if you have a dam, it helps," he said. "To make them turn, you have to have water flowing."
In northern Michigan, two Boardman River dams also could get new life.
Charles Peterson of Peterson Machinery Sales said he will pay for all needed upgrades to three Boardman River dams if he is allowed to operate the structures for hydroelectric power generation.
"We've had this plan in mind for some time. We knew finances would make a big difference," Peterson told the Traverse City record-Eagle.
A committee has been reviewing the dams since Traverse City Light & Power abandoned operations them several years ago.