The quality of water for human consumption depends on the supply method and source type. Water may contain pathogens and excessive constituents that pose health risks, and timely monitoring and planned service provision help ensure its quality. This study assessed the supply system, quality, and health risks associated with the consumption of water from three sources in the high-elevation Andean city of Andahuaylas, Peru, managed by the Municipal Sanitation Service Provider Chanka (EMSAP). The sources were found to provide between 0.8 and 32 L/s, with consumption of about 17 m³ per connection per month, at a cost of 0.20 USD/m³. The system shows a current deficit and a projected deficit for 2027 due to increasing user debts and the absence of mechanisms for payment for ecosystem services (PESs), despite the existence of cross-subsidies. Water quality, assessed using the WQI-Pe, ranged from regular to excellent, although with high levels of heavy metals according to the Environmental Quality Standards for Water (EQS–Peru), which increases the non-carcinogenic health risk. Chronic non-carcinogenic exposure (HQ) from consumption and dermal contact exceeded one, mainly for arsenic (As), while the deterministically and probabilistically evaluated incremental lifetime cancer risk (ILCR) was linked to high levels of As, Cr, and Cd across all age groups (infants, children, adolescents, and adults). Overall, this study provides insight into the state of water in areas without conventional treatment, so the implementation of buffer zones in the basin’s headwaters in localities with similar characteristics is vital.