Those situations aren't analogous: if the water utility cuts me off, my options are things like drilling a well, trucking in water, or moving. If Cloudflare declines not to do business with me, there are many competitors around the world who I can switch to at varying levels of service depending on how much control I want.
It’s not a higher standard, just recognizing that the situations are different. People need water in a way that they don’t need a CDN, and the options for getting it are local rather than global.
I worked for one of the "bad actors" that was terminated by Cloudflare. To this day they have not provided anyone with a reason for the termination. To my knowledge, the site in question was not breaking any terms of service and when I asked customer support why the account had been terminated they pointed me to the clause that said something to the effect of "Cloudflare may terminate an account for any reason or no reason at all."
They also refused to provide a refund. I will never use Cloudflare again nor recommend them to any of my clients.
This is a convenient ethical construction for Cloudflare: "Sure, our customers did terrible things, but really, the real lapse would be if we didn't accept money from them!" But it doesn't hold up. While everyone needs food and water, nobody needs a CDN.
One could argue that they have the right and/or duty to do that, but being closer and closer to a "internet backbone" provider, this can become scary.
Would you like water to be cut off to "bad actors"?