I spoke to John Quiggin of the University of Queensland about water issues in Australia and Queensland. I learned that California and Australia are similar in many ways (dams, salinity, politics, paper water rights, ag trading, desalination, etc.)
I was quite surprised to hear that Brisbane's dramatic drop in per capita use (to 130 liters/capita/day) was accomplished with regulations more than prices. (BUT, they -- the water managers -- did pay a lot of attention to metered water volumes.)
Here's our 50 min chat [17 MB mp3]
It turns out that we agree on "some water for free, pay for more" (per capita), so he's obviously a great guy :)
John keeps a very busy and important blog on Aussie economics and politics here.