The city owns and operates the water department under the laws of the State. When the people, directly or through their elected representatives, decided to have a central water delivery system they surrendered their right to drill their own well and acquire water in a manner contrary or detrimental to the qualified rights of the jurisdiction created. All people to whom we deliver water are, thereby, subject to the rules and regulations that we impose on that use in conformity with the State laws, including regulations, we are required to follow. 
Those we cannot serve due to infrastructure deficiencies or distance have the right to drill their own well or have another provider sell water to them. However, due to the boundaries of the jurisdiction, a permit must be secured from the City prior to doing so.  
Those who have us deliver water to their private leased, rented or owned property agreed at the time of hook-up to abide by any rules of use imposed. That agreement runs with the land and cannot be abrogated unilaterally.
The California Constitution:
Article 1, Declaration of Rights, only mentions "water" regarding the use of eminent domain to acquire property. Water comes into it in regards to removing the exemption to take a private residence if it is necessary for "public health", "flood protection", "water-related and wastewater-related facilities or infrastructure … for recovery from natural disasters". The State has defined lack of sufficient rain to be such a disaster.
Specifically, Article 10, Water, has this to say:
Sec. 2. It is hereby declared that because of the conditions prevailing in this State the general welfare requires that the water resources of the State be put to beneficial use to the fullest extent of which they are capable, and that the waste or unreasonable use or unreasonable method of use of water be prevented, and that the conservation of such waters is to be exercised  with a view to the reasonable and beneficial use thereof in the interest of the people and for the public welfare.
We as the governing board of the water purveyor are required to obey the laws of the State. 
See California Constitution, Article 10, Water, Section 5 and 6:
Sec. 5. The use of all water now appropriated, or that may hereafter be appropriated, for sale, rental, or distribution, is hereby declared to be a public use, and subject to the regulation and control of the State, in the manner to be prescribed by law.
Sec. 6. The right to collect rates or compensation for the use of water supplied to any county, city and county, or town, or the inhabitants thereof, is a franchise, and cannot be exercised except by authority of and in the manner prescribed by law.
Tiered rates are in legal dispute. Therefore, the Governor and Water Board have instructed us to use penalties for violation of State policy handed down to us for implementation.
On another note, the State has specifically excluded agriculture, manufacturing and commerce from the reduction requirements. However, every home in the state is required to meet the schedule of reductions passed by the State Board. For Paso Robles that is a 28% reduction from use in 2013. For our rural neighbors, I believe, it is a 25% reduction. That includes all non-agricultural, manufacturing and commercial uses even if they are present on a property primarily dedicated to an excluded use.
The reduction requirement is for the entire utility, not each individual.
We, as a city, thanks to everyone's cooperation met our reduction goal for 2015 and 2016.
As your representative I have stood for a "level playing field" for all people in each general category: residential, commercial, manufacturing, recreational. I have also recognized that no law or regulation can ever be drawn that is 100% fair to all circumstances. We continue to monitor an listen to our citizens and various experts in the water field as we adjust an amend our regulations and fee structure. The new fees provide for safe an continuos supplies of water from three sources with a fourth to be added soon. The newest fee structure, when fully implemented, will still keep the cost of water to your tap at less than one cent a gallon.