“Charging extra doesn’t mean more people get water”
Yes, it does. Price has an effect on demand, and it discourages people from buying more than they need. Are you not aware of the rationing function of price? How long has it been since you cracked an economics book?
“it just means DIFFERENT people get water”
Not just, but yes, they are different. Namely, now the people who more highly value water will tend to get it. Also more people overall will get it, because below market prices ensure the market will not clear where supply meets demand, but rather demand will suffer and remain unfulfilled when supply runs out.
“the gouget is just making money picking and choosing”
But his does he make money? What is the mechanism whereby who he chooses bakes him more money under higher prices if more people aren’t buying? Or in other words, what color is the sky in your world?
“Charging extra doesn’t mean more people get water”
A demand that generates profit will attract supply. If someone finds the potential gain sufficient, they will bring more water to the area. The resulting competition will further effect the unit cost.
The same goes for generators or fuel.