I think that's an idealization of what government management would provide. We've had several scandals in the US in recent years where government water utilities were poisoning people.

Outcomes follow incentives and government utilities are not incentivized to provide quality products.

What you're concerned about is an abuse of "market power". Setting aside the debate about how significant that ever is, it isn't plausible for a commodity like water. Food producers have very little power over market prices, because food comes from lots of places and is produced by many people. Producers have to take the best price they can find. Water is a very similar product.

Notice that I'm not making an appeal based on anyone having noble intentions. Plain old rational self-interest is enough for this situation. I don't think you can make the same claim with respect to government management.