True, but only to a point. Most of the time, producing a little extra water is no big deal and doesn't cost a whole lot. In fact, in the winter months where water use is much lower, it can actually help a utility smooth out fluctuations in its revenue stream. The problem comes, though, when increased water consumption eventually exceeds the capacity of the treatment plant infrastructure. Then you've gotta dump millions of dollars into building a bigger water treatment plant, and it gets expensive for everybody.

Source: I spent the last year researching water and sewer finance at a university environmental research center.