Additionally, the worst strains on the grid are really measured by the peak loads, so if you change billing a way that makes the peak energy less expensive, and therefore disincentivize people to (a) reduce usage at peak times or (b) install solar panels/batteries to mitigate their peak usage, then it actually might make the grid more unreliable.
Water is different in that we really only have usage concerns about water, AFAIK there is never any issue with the water pressure drops at peak times (perhaps thanks to water towers). With electricity the concerns are mostly about the peak usage, and not so much the overall usage.
Yes, that's what you see in the commercial side, where demand charges based on your highest peak usage in a month are common. However, they are un-intuitive and easy to generate big bills for small amounts of power used, so I agree with the general idea that they're not a good idea for residential users.
You could institute something like time-of-day-based fees based on average demand for residential users without having the large unexpected bill problem.
I’m told that Industry gets charged not by how much current they draw but by how much it distorts the grid power waveforms. In fact there are experimental designs out there for power correction facilities that delay the waveforms by for instance 90% of a wavelength (so everything lines up again) and convert the delta to DC to store in batteries. The battery power can be used for their own purposes or to reinject in low voltage situations.
I was watching this one video where they were talking about how they dropped their electric bill by changing how whatever machine they were demonstrating started up. Instead of off to full on they set it to ramp up slow enough to not push them into the higher peak pricing bracket. Electricity usage was the same overall but the bill was less.
Water is different in that we really only have usage concerns about water, AFAIK there is never any issue with the water pressure drops at peak times (perhaps thanks to water towers). With electricity the concerns are mostly about the peak usage, and not so much the overall usage.