During the Millennium Drought in Australia, a wide range of supply-side and demand-side water management strategies were adopted in major southeast Australian cities. This study undertakes a time-series quantification (2001–2014) and comparative analysis of the energy use of the urban water supply systems and sewage systems in Melbourne and Sydney before, during and after the drought, and evaluates the energy implications of the drought and the implemented strategies. In addition, the energy implications of residential water use in Melbourne are estimated. The research highlights that large-scale adoption of water conservation strategies can have different impacts on energy use in different parts of the urban water cycle. In Melbourne, the per capita water-related energy use reduction in households related to showering and clothes-washing alone (46% reduction, 580 kWhth/p/yr) was far more substantial than that in the water supply system (32% reduction, 18 kWhth/p/yr). This historical case also demonstrates the importance of balancing supply- and demand-side strategies in managing long-term water security and related energy use. The significant energy saving in water supply systems and households from water conservation can offset the additional energy use from operating energy-intensive supply options such as inter-basin water transfers and seawater desalination during dry years.