How do you suggest this is implemented for mains water supply? Should miles and miles of new water pipe be laid down for every new water supply company on the area and the customer is given a key from Water Corp to turn on their Water Corp supply valve and Water 4 U Corp sends a guy to turn off their valve?

Have you ever even paid a water bill in your life or spent a few seconds thinking about how water is actually supplied?

First you need to create a market. Aka have multiple players. The network will be one(many) companies that will be bidding usage to wholesale companies. This(these) network companies will be using the proceedings to improve the network.

The wholesale companies will then have their own pricing strategy for the end customer. But they will be paying both the network operators and the local gov.

Since water is municipal resource, the players should be paying the muni/city/state for the resource they are utilizing. The proceedings will be used by the muni to maintain the water availability.