There are hybrid systems. To pick one off the top of my head, you could have market-priced water generally, but then every household gets the first N gallons of

There are hybrid systems. To pick one off the top of my head, you could have market-priced water generally, but then every household gets the first N gallons of water usage at a state-subsidized rate. It's a kind of regulation in the sense of the state mucking with the water-delivery system, but some kinds of regulation have more room for price signals than others. It does require the political decision to not subsidize agricultural usage, though (only household usage).