If there's a drought looming, a water district would like water users to cut back their water usage. If they don't, the water district could run out of water, which is bad for everyone.
Ramping up the price of any water usage is one option, but it would fall unfairly on the folks with less money. Water is not something you can opt out of using if the price of using it passes a certain point. We are not a society that openly embraces dessicating the poor.
Since people need to use some water (to drink, to boil ramen noodles, to wash, etc.), a water district wants a policy that acknowledges the necessity of water usage while discouraging water usage that can be avoided.
She goes on to describe how alternative proposals, e.g. charging for relative increases in use, create bad incentives and are unfair on those who had previously "cut their water usage down to the bone." How, then, can a society ration scarce resources effectively without "dessicating the poor"?
Actually, it's easy. Ramp up the (tax) price of all water usage, just as initially suggested, and then redistribute the proceeds among all taxpayers. Those who use more water end up compensating those who use less, so the poor (and other low-consumption users, e.g. conservationists) can actually expect to make a net profit out of this system. (They receive an $(X/n) payout, which is more than enough to pay for their essential water usage, and they can then pocket the rest.)
Really, this should be a no-brainer. And note that the lesson generalizes. Whenever someone complains that an economic disincentive "unfairly burdens the poor", the solution is to redistribute the proceeds. (Example: worried that gas taxes are a burden to the poor? Solution: redistribute the proceeds. The poor will profit, as will the environment.)
Why is this not common knowledge?