When a raindrop falls at terminal velocity (uniform velocity), the net force is zero (gravity = air resistance). The raindrop's mechanical energy (KE + PE) decreases continuously because work is done against air resistance (friction). This energy is transferred to the air as heat and turbulence. The total energy of the system (raindrop + air) is conserved, but the raindrop's mechanical energy alone is not - it dissipates into the atmosphere.