One of water utility’s managerial challenges is to make a balance in between two distinctive managerial goals, cost-effective provision of water service and improving customer satisfaction of water service. As management priorities of the water utility perspective do not reconcile from the customer’s perspective, this gap challenges the sustainable provision of water service. In this study, the new methodology based on a gap analysis was proposed to improve the Overall Level of Service (O-LOS) of water service. Two new indexes (Gap Index [GI] and the Efficiency Index [EI]) were developed to improve the O-LOS and minimize the gap between the customers and the service providers. The methodology proposed in this study is effective in supporting the water utility decisions on budget allocation to make a balance in between the customers’ demand and the service providers’ needs.