> Putting a price on it does not solve it because the entities that compete for the water with the data centers are out-matched financially.

I don't think this argument works at all, because bigger datacenter operator does NOT mean "tolerates higher OPEX".

> How is a city [...] supposed to pay more for water than a multi-billion dollar company?

I do not understand this; the city would not compete with the datacenter operator for water-- the farmers would, and both of those would be paying the municipality for the water (ideally), not vice-versa. Residential users already pay much more for water (typically, compared to farming/industry) so any renegotiation is unlikely to affect them much.