I'm sure at some point, they can pinpoint when you take a shower or flush the toilet. Then fine you based on how much time you spend in the shower or how much water you use to flush, or maybe call and tell you to turn off the water while you are brushing your teeth.
You'll use so much water per minute showering and be forced to install a water saver shower head. Their computer will look something like this.
07:00 - 07:01 am - 5 gal water consumption
07:02 - 07:05 am - 2 gal water consumption
07:05 - 07:15 am - 30 gal water consumption
05:35 - 05:36 pm - 5 gal water consumption
They'll now when you sit on the toilet, brush your teeth, take a shower, wash clothes, turn on dishwasher, wash your car, water your lawn or garden.