Could you explain how water conservation lowers the cost of running water utilities?

When you have less annual volume of water to treat, you use less resources to treat it compared to a larger volume.

Could you then further explain how these saved funds goes to politicians as opposed to being allocated to the rest of the government's budget?

Before taxes are collected, each government office and service submits all their paperwork to deduce which group needs funding based on their annual running costs. If a major utility such as water has a low running cost, all of that money can be diverted elsewhere... and it just so happens that we conveniently let whoever's in charge at the time choose where the money goes themselves in those situations...

Or are you just angry and looking for an outlet without any care about what that outlet is?

I'm not angry at all. I think it's hilarious. I'm not even trying to change anyone's mind here... just having fun expressing my point of view.