First, let me say that water rights are not usually a use it or lose it right. That might be true in some part of the American West that you are familiar with, but not in the part of the American West where I use water.
Secondly, where there exist rights there is usually a market for those rights. For instance, people buy and sell publishing rights or the right to first refusal. So it is with water rights. If I need more water than I have the right to use, I talk to my neighbor to see if I can buy her rights. If she won't sell them, maybe she'll let them. I can tell you exactly what the market price is for a share of water (a water right) where I live in the American West. I can tell you what it was last year and what it was 20 years ago. And there is a very active market to buy or lease water. My local municipal water company can require somebody wanting a new meter to sign over an irrigation water share to the company. The company pumps water from a well, processes the water and delivers it to the meter for a fee.
Where I live (Central Oregon) the irrigation districts literally fly planes over the fields of people with water rights and send them warning letters if their fields are insufficiently green. If you're wondering how that affects people who try to use water-saving methods such as hoop houses or greenhouses, they also get these warning letters.
It sounds like where you are, the irrigation water and the municipal supply is also co-mingled in pipes? Where I am the systems are entirely separate, there's the potable municipal supply, and separately a series of surface canals operated by irrigation districts that bring water directly from the Deschutes river to fields.
For this reason (canals delivering irrigation water from source to destination via gravity), irrigation rights are fully tied to the land as they require adjacency to these canals. Properties may not sell their rights, even to other users of the same canal. Either they use it themselves, or they lose it and the rights revert back to the management of the irrigation district who may sell those acre-feet to a different user of the same canal.
It's not a great system, but unfortunately as the irrigation districts here are privately owned rather than public, the people required to change this are those currently benefiting from the status quo.
Where I live, irrigation and municipal supply are two completely different systems managed by completely different entities. But the municipal provider can still say, "We don't have any more water than we are currently providing. If you want us to provide you with water, you have to sign over your water rights. Then we can use those rights to provide you with water."
Secondly, where there exist rights there is usually a market for those rights. For instance, people buy and sell publishing rights or the right to first refusal. So it is with water rights. If I need more water than I have the right to use, I talk to my neighbor to see if I can buy her rights. If she won't sell them, maybe she'll let them. I can tell you exactly what the market price is for a share of water (a water right) where I live in the American West. I can tell you what it was last year and what it was 20 years ago. And there is a very active market to buy or lease water. My local municipal water company can require somebody wanting a new meter to sign over an irrigation water share to the company. The company pumps water from a well, processes the water and delivers it to the meter for a fee.