Make something free (or nearly so), and people will use lots of it. CA's water problem is by no means insoluble.
1. Figure out how much water the state can sustainably use.
2. Set a price for water usage. Set a flat price for all users, residential, commercial, industrial. No reason that some users of water should get it more cheaply than others.
3. If usage remains above the level determine in #1, raise the price.
4. Repeat process until usage falls to the level determined in #1.
Of course, this process would likely result in a big chunk of the unsustainable agriculture in CA going under, but so be it - basing a business on the assumption that you'll get continued massive discounts on a key input isn't particularly wise planning, and there's no reason why other CA water users should be forced to subsidize those businesses.