diff --git a/compute_tools/src/compute.rs b/compute_tools/src/compute.rs
index 38f3b53f65..b33f4f05dd 100644
--- a/compute_tools/src/compute.rs
+++ b/compute_tools/src/compute.rs
@@ -142,14 +142,14 @@ fn create_neon_superuser(spec: &ComputeSpec, client: &mut Client) -> Result<()>
         .cluster
         .roles
         .iter()
-        .map(|r| format!("'{}'", escape_literal(&r.name)))
+        .map(|r| escape_literal(&r.name))
         .collect::<Vec<_>>();
 
     let dbs = spec
         .cluster
         .databases
         .iter()
-        .map(|db| format!("'{}'", escape_literal(&db.name)))
+        .map(|db| escape_literal(&db.name))
         .collect::<Vec<_>>();
 
     let roles_decl = if roles.is_empty() {
diff --git a/compute_tools/src/config.rs b/compute_tools/src/config.rs
index 99346433d0..68b943eec8 100644
--- a/compute_tools/src/config.rs
+++ b/compute_tools/src/config.rs
@@ -47,30 +47,22 @@ pub fn write_postgres_conf(path: &Path, spec: &ComputeSpec) -> Result<()> {
     // Add options for connecting to storage
     writeln!(file, "# Neon storage settings")?;
     if let Some(s) = &spec.pageserver_connstring {
-        writeln!(
-            file,
-            "neon.pageserver_connstring='{}'",
-            escape_conf_value(s)
-        )?;
+        writeln!(file, "neon.pageserver_connstring={}", escape_conf_value(s))?;
     }
     if !spec.safekeeper_connstrings.is_empty() {
         writeln!(
             file,
-            "neon.safekeepers='{}'",
+            "neon.safekeepers={}",
             escape_conf_value(&spec.safekeeper_connstrings.join(","))
         )?;
     }
     if let Some(s) = &spec.tenant_id {
-        writeln!(
-            file,
-            "neon.tenant_id='{}'",
-            escape_conf_value(&s.to_string())
-        )?;
+        writeln!(file, "neon.tenant_id={}", escape_conf_value(&s.to_string()))?;
     }
     if let Some(s) = &spec.timeline_id {
         writeln!(
             file,
-            "neon.timeline_id='{}'",
+            "neon.timeline_id={}",
             escape_conf_value(&s.to_string())
         )?;
     }
diff --git a/compute_tools/src/pg_helpers.rs b/compute_tools/src/pg_helpers.rs
index 6a78bffd1b..75550978d8 100644
--- a/compute_tools/src/pg_helpers.rs
+++ b/compute_tools/src/pg_helpers.rs
@@ -16,15 +16,26 @@ use compute_api::spec::{Database, GenericOption, GenericOptions, PgIdent, Role};
 
 const POSTGRES_WAIT_TIMEOUT: Duration = Duration::from_millis(60 * 1000); // milliseconds
 
-/// Escape a string for including it in a SQL literal
+/// Escape a string for including it in a SQL literal. Wrapping the result
+/// with `E'{}'` or `'{}'` is not required, as it returns a ready-to-use
+/// SQL string literal, e.g. `'db'''` or `E'db\\'`.
+/// See https://github.com/postgres/postgres/blob/da98d005cdbcd45af563d0c4ac86d0e9772cd15f/src/backend/utils/adt/quote.c#L47
+/// for the original implementation.
 pub fn escape_literal(s: &str) -> String {
-    s.replace('\'', "''").replace('\\', "\\\\")
+    let res = s.replace('\'', "''").replace('\\', "\\\\");
+
+    if res.contains('\\') {
+        format!("E'{}'", res)
+    } else {
+        format!("'{}'", res)
+    }
 }
 
-/// Escape a string so that it can be used in postgresql.conf.
-/// Same as escape_literal, currently.
+/// Escape a string so that it can be used in postgresql.conf. Wrapping the result
+/// with `'{}'` is not required, as it returns a ready-to-use config string.
 pub fn escape_conf_value(s: &str) -> String {
-    s.replace('\'', "''").replace('\\', "\\\\")
+    let res = s.replace('\'', "''").replace('\\', "\\\\");
+    format!("'{}'", res)
 }
 
 trait GenericOptionExt {
@@ -37,7 +48,7 @@ impl GenericOptionExt for GenericOption {
     fn to_pg_option(&self) -> String {
         if let Some(val) = &self.value {
             match self.vartype.as_ref() {
-                "string" => format!("{} '{}'", self.name, escape_literal(val)),
+                "string" => format!("{} {}", self.name, escape_literal(val)),
                 _ => format!("{} {}", self.name, val),
             }
         } else {
@@ -49,7 +60,7 @@ impl GenericOptionExt for GenericOption {
     fn to_pg_setting(&self) -> String {
         if let Some(val) = &self.value {
             match self.vartype.as_ref() {
-                "string" => format!("{} = '{}'", self.name, escape_conf_value(val)),
+                "string" => format!("{} = {}", self.name, escape_conf_value(val)),
                 _ => format!("{} = {}", self.name, val),
             }
         } else {
diff --git a/compute_tools/src/spec.rs b/compute_tools/src/spec.rs
index 520696da00..575a5332a8 100644
--- a/compute_tools/src/spec.rs
+++ b/compute_tools/src/spec.rs
@@ -397,10 +397,44 @@ pub fn handle_databases(spec: &ComputeSpec, client: &mut Client) -> Result<()> {
                 // We do not check either DB exists or not,
                 // Postgres will take care of it for us
                 "delete_db" => {
-                    let query: String = format!("DROP DATABASE IF EXISTS {}", &op.name.pg_quote());
+                    // In Postgres we can't drop a database if it is a template.
+                    // So we need to unset the template flag first, but it could
+                    // be a retry, so we could've already dropped the database.
+                    // Check that database exists first to make it idempotent.
+                    let unset_template_query: String = format!(
+                        "
+                        DO $$
+                        BEGIN
+                            IF EXISTS(
+                                SELECT 1
+                                FROM pg_catalog.pg_database
+                                WHERE datname = {}
+                            )
+                            THEN
+                            ALTER DATABASE {} is_template false;
+                            END IF;
+                        END
+                        $$;",
+                        escape_literal(&op.name),
+                        &op.name.pg_quote()
+                    );
+                    // Use FORCE to drop database even if there are active connections.
+                    // We run this from `cloud_admin`, so it should have enough privileges.
+                    // NB: there could be other db states, which prevent us from dropping
+                    // the database. For example, if db is used by any active subscription
+                    // or replication slot.
+                    // TODO: deal with it once we allow logical replication. Proper fix should
+                    // involve returning an error code to the control plane, so it could
+                    // figure out that this is a non-retryable error, return it to the user
+                    // and fail operation permanently.
+                    let drop_db_query: String = format!(
+                        "DROP DATABASE IF EXISTS {} WITH (FORCE)",
+                        &op.name.pg_quote()
+                    );
 
                     warn!("deleting database '{}'", &op.name);
-                    client.execute(query.as_str(), &[])?;
+                    client.execute(unset_template_query.as_str(), &[])?;
+                    client.execute(drop_db_query.as_str(), &[])?;
                 }
                 "rename_db" => {
                     let new_name = op.new_name.as_ref().unwrap();
diff --git a/compute_tools/tests/pg_helpers_tests.rs b/compute_tools/tests/pg_helpers_tests.rs
index 265556d3b9..7d27d22a78 100644
--- a/compute_tools/tests/pg_helpers_tests.rs
+++ b/compute_tools/tests/pg_helpers_tests.rs
@@ -89,4 +89,12 @@ test.escaping = 'here''s a backslash \\ and a quote '' and a double-quote " hoor
         assert_eq!(none_generic_options.find("missed_value"), None);
         assert_eq!(none_generic_options.find("invalid_value"), None);
     }
+
+    #[test]
+    fn test_escape_literal() {
+        assert_eq!(escape_literal("test"), "'test'");
+        assert_eq!(escape_literal("test'"), "'test'''");
+        assert_eq!(escape_literal("test\\'"), "E'test\\\\'''");
+        assert_eq!(escape_literal("test\\'\\'"), "E'test\\\\''\\\\'''");
+    }
 }