They need to completely change the way water in California is billed. Right now rates keep going up as we get better at conservation, which disincentives conservation.
At the same time, in areas with a flat rate, people use way too much water. When Sacramento had a flat rate, you'd see people turn on their hose as they left for work and let it flood their lawn all day, running into the street, to keep their lush green lawns in 105F weather. As soon as they introduced water meters, the lawns went brown and the bills went up.
I think the billing needs to be a flat rate for everyone that is high enough to cover all water delivery costs, based on size of property, and then you get a credit if your usage is below median for similar families/farms/industries and you get an equal surcharge if you're above that. Then you'd be encouraged to use less water than your neighbors, but all the costs would even out since 1/2 the people by definition would pay extra, so they wouldn't have to raise the flat rate part so quickly, only slowly as the overall cost of the water system increases. It would put the consumer in much more control of their water costs.
My family for example gets hit with a huge surcharge because we added two people to our family since they started tracking, so we aren't "conserving" anymore. We're conserving more than before, we just have double the people!