Since OP used American terminology, probably they’re claiming America, which would mean you need to ask which state, as water bills and such are a state law thing.

So far as I know there is no state with a law like this, but odds are very good OP never learned the nuances of the situation and something else illegal was going on, like delinquency or fraud on the water bill, or if they were in drought conditions and going over their ration due to supplying a bonus household.

In fact, my first guess is fraud, if this “hose” was connected before the meter, meaning the family was drawing more water than they were paying for.