With incredibly high-water stress conditions, water conservation is an uphill task for the municipalities in the Kingdom of Saudi Arabia (KSA). Most of these municipalities rely on periodic active leakage control programs for their water distribution systems (WDS) to meet the ministerial target of allowable water losses of up to 10%. This target does not appear to be ambitious for countries in arid regions where the impacts of droughts limit water resources, and population growth and urbanization overexploit them. In addition to the overuse of water, consumers are least bothered about the possible leakage on their side due to low water rates. For intermittent water supplies in arid regions, a framework based on the environmental valuation of water loss was proposed to establish the economic level of leakage. The process initiates with an estimation of real losses and their comparison with the unavoidable real losses. The framework propagates the idea of reducing the real losses up to the unavoidable real losses with an infrastructure leakage index of ‘1’. Implanting the framework on a WDS in the Qassim region reveals that conventional strategies, including active and passive leakage control, pressure management, and management of consumer-side issues, can reduce the Infrastructure Leakage Index (ILI) from 20 to 5.26. Recognizing and implementing the environmental cost of water loss in arid environments using an environmental valuation technique (i.e., based on evoking consumer preferences about the expected degradation of existing water resources) can further reduce the ILI with a nominal increase in water prices.