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In this paper, we propose a novel nonlinear approach to solve the short-term hydro scheduling problem under deregulation, considering head-dependency. The actual size of hydro systems, the continuous reservoir dynamics and constraints, the hydraulic coupling of cascaded hydro systems, and the complexity associated with head-sensitive hydroelectric power generation still pose a real challenge to the modelers. These concerns are all accounted for in our approach. Results from a case study based on one of the main Portuguese cascaded hydro systems are presented, showing that the proposed nonlinear approach is proficient. [ABSTRACT FROM AUTHOR]