Consider a typical demand curve. When the price of the good rises, it gives consumers an incentive to reduce the amount they'd like to have. In times of shortages, reducing quantity demanded is one way to alleviate the problem.
The supply side of the tap water market is controlled by public utilities, and political considerations such as "I want to get re-elected" take center stage when debating ways to control water shortages. The result is that about every proposal gets debated - every proposal, that is, but raising prices.