There are lots of reasons to run the canal across the ridge. If you want a purely gravity-fed system then there will be locks or the upper lake will start to drain uncontrollably. One act of sabotage in the right place leads to uncontrolled flow, lowering of lake levels, and many unhappy denizens.
Maybe the locks and pumps on the canal are driven by "mysterious forces" that turn out to be mindless undead. That's an instant tension between those that must destroy all undead and those that want the canal system to keep going).
Perhaps the canal was completed relatively recently and is generally like the Panama canal (lake at the top fed by aquaducts that divert all the rivers on each side for 50 miles). With the other rivers diverted to run the canal, the local flora and fauna now have reason to want the canal destroyed. Lots of opportunity to get those activist nature-huggers doing the wrong thing.
How about a cut across the ridge for the canal that interrupts an annual migration? The migrating whatevers (trees work well for a fantasy setting, but various sorts of herd animals work equally well) no longer have a dry crossing point along the ridge and have to try to find alternative routes, usually along the locks. Consider what would happen if a million bison ran on their annual migration and began falling into the top cut for the canal. There's a fun one for the PCs to sort out.
Don't want a cut? How about a tunnel? Maybe one that accidentally hits an underground cave system and floods it, causing a migration of nasties out from below ground.
Lots of things can happen with one powerful wizard who's not overly farsighted or with lots of nonmagical folks who are motivated purely by profit.