Same thing in some California water districts in previous drought. Asked for conservation, people conserved. Revenue went down so they jacked up the prices more than 4x!
The worst part is that the largest increase was done in the base rate which you pay regardless of consumption. So now the rate structure doesn't promote conservation that much since we have to pay nearly $100/mo even on zero consumption.
It is understood that these expensive and pervasive infrastructure projects are natural monopolies - it is much more efficient to have one provider than a competitive market. Imagine what a mess it would be if you had several sets of water pipes and power lines running through your neighborhood.
For one reason or another, local governments often let someone else manage all of that. Ostensibly, the tradeoff is that the utility company should be more heavily-regulated than a normal company would be.
But there is also some overlap between areas, and sometimes a handful of competitors are allowed to share physical infrastructure, so in practice it's more like a hodge-podge of hyperlocal oligopolies.