Water supply management in Rhode Island has evolved under the traditional public service criterion of meeting the projected requirements for water. Continuation of this policy could exhaust the state's developable fresh water resources in another 40 years. An alternative is for the state to adopt a policy of resource management, under which both supply and demand would be regulated to achieve broader economic and social objectives. The Big-Wood reservoir project provides the state government with an opportunity to implement resource management policies by maintaining control over the development of these reservoirs and the allocation and pricing of their waters. The economic, environmental, and institutional implications of this project are analyzed, and policy options for the state are presented.