The trend these days is to say if you won't conserve willingly, then we'll have the government make you do it. That's almost what happened in Petaluma recently. The city council rejected a proposal to make all new home buyers pay for expensive inspections and retrofittings to make households use less water.
What's the worst case scenario? People will have limited water, and will have to spend more money on store bought water, and maybe be a little smelly. At least then they will know -- without the government having to tell them so -- that water conservation is a useful thing.