This paper develops the frequency controller for a battery energy storage system (BESS) to facilitate a smooth island transition of a hydro-powered microgrid during an unplanned grid outage. The proposed frequency controller uses a PI-based droop structure. The analytical expression of the controller parameter tuning is derived that accounts for the limitations in the power response of a hydro generator and the desired frequency performance criteria set by the microgrid operator. The effectiveness of the frequency controller tuning was verified in Simulink using phasor simulations. Results show that the proposed PI-based droop outperforms the classical proportional droop control in order to fulfil the frequency quality requirement of the microgrid without over-dimensioning the size of the storage capacity.