The study was conducted at the Banyumas Regency of Central Java Province, Indonesia, where the water supply and demand imbalances in several basins are becoming critical. The main objective of this study was to analyze the pricing policy of residential water based on the social benefit point of view. The major concern was the estimation of the marginal opportunity cost of providing residential water. The method used was the full cost pricing or marginal opportunity cost pricing approach which involves estimating the marginal external cost (MEC) and the marginal use cost (MUC) on top of the marginal production cost (MPC).