Symbolism, Imagery, Allegory
There's definitely "water, water everywhere" in Wicked (Coleridge shout-out). Well, there's water symbolism and imagery at any rate. Oz suffers a severe drought for a large part of the novel, which is significant. Water is all about Oz's opposing regions. In this novel, water is both a giver of life and a cause of death; it has very strong positive and negative connotations attached to it.
Elphaba's weird connection to water helps illuminate water's positive and negative connotations here. We all remember the Witch screeching "I'm melting!" at the end of the movie. And water definitely causes Elphaba pain, fear, and eventually death. But she's also oddly attracted to and enthralled by water throughout the book. Many of the instances of water imagery in the book tie in to significant things in Elphaba's life: her magical mirror, Fiyero, and the Vinkus, when she finally becomes a Witch.
She put her hand on the shining disk. The glass circlet caught the last blue of the sky, until it looked like a magic mirror showing nothing but silver-cold water within. (1.5.52)
The next time he came, he thought, he must wear a shirt open at the neck, so she could see that the pattern of blue diamonds on his face continued unbroken down his chest ...Since she seemed to like that. (3.2.18)
If one could drown in the grass, thought Elphie, it might be the best way to die. (188.8.131.52)
The Wizard too is a character strongly linked with water symbolism:
When the Witch realized what he was approaching, she tried to back out of the dream with a howl, but could not manage to disengage herself. This was the mythical ocean, and the Wizard walked into water. (5.11.35)
It seems that Elphaba experiences a perverse response to life-giving and baptismal water because of her unique position. Elphaba is a hybrid of two worlds and doesn't fully belong in either one or the other. Since Water really represents the "Other World" to Elphaba (with its "mythical sea"), it makes sense that she would react to it differently from anyone else in Oz (except for the other person who doesn't fully belong there: the Wizard). The three "foreigners" here – the Wizard, the Witch, and Dorothy – are arguably more important to Oz than anyone else. Water symbolism and imagery helps emphasize their anomalous statuses, especially Elphaba's.