I am an attorney. Although I don’t claim to be an expert on the topic you asked about, I know enough about the basics to be confident of this much.
1. Arizona would be in breach of contract, as another poster said.
2. Arizona would also probably be acting unconsititutionally as its actions would violate what is known as the commerce clause.
3. Within days of Arizona even announcing that it would cut off power and water to California, a federal lawsuit would be filed. The judge would issue a temporary restraining order at the request of the United States or the State of California. This would prohibit Arizona from cutting of power and water to California.
4. Later, Arizona would lose the lawsuit.
5. When all is said and done, neither power nor water would be disrupted, even temporarily, and only the lawyers involved in the case will have benefitted.