EDIT: Perhaps more importantly, dynamic priceing could be more efficient than a regime in which you can use huge amounts of water at a low fixed cost, and then suddenly none when it runs out.
Right, and the point of a water ration is to ensure that everybody limits their water use to some prescribed amount.
What you and the OP are describing is arguably a bug, not a feature.
The point of contention here is not of price economics per se, but of politics. At issue is whether or not one should be able to circumvent a ration by virtue of his monetary resources. Some people (including myself) find this notion distasteful.
It shouldn't be this way. It serves no purpose. You first claim that everybody has access to resource X at a reasonable price (because we don't want to discriminate against poor people), then when resource X starts to run out, they enforce bans instead of charging more to people willing to pay a premium (and getting the resource first) and then using it to expand production and access to everyone.
This story plays out everywhere, whether in Soviet Russia or in California or in NHS.
