The water supply system is one of the most important elements in a city. Currently, many cities struggle with a water deficit problem. Water is a commonly available resource and constitutes the majority of land cover; however, its quality, in many cases, makes it impossible to use as drinking water. To treat and distribute water, it is necessary to supply a certain amount of energy to the system. An important goal of water utility operators is to assess the energy efficiency of the processes and components. Energy assessments are usually limited to the calculation of energy dissipation (sometimes called “energy loss”). From a physical point of view, the formulation of “energy loss” is incorrect; energy in water transport systems is not consumed but only transformed (dissipated) into other, less usable forms. In the water supply process, the quality of energy—exergy (ability to convert into another form)—is consumed; hence, a new evaluation approach is needed. The motivation for this study was the fact that there are no tools for exergy evaluation of water distribution systems. A model of the exergy balances for a water distribution system was proposed, which was tested for the selected case studies of a water supply system and a water treatment station. The tool developed allows us to identify the places with the highest exergy destructions. In the analysed case studies, the highest exergy destruction results from excess pressure (3939 kWh in a water supply system and 1082 kWh in a water treatment plant). The exergy analysis is more accurate for assessing the system compared to the commonly used energy-based methods. The result can be used for assessing and planning water supply system modernisation.