Is it cheaper to run a gas or electric water heater?

Gas, in most of the country, by roughly half — a typical gas tank costs somewhere around $220 to $350 a year to run against $500 to $800 for an electric resistance tank, on national average utility rates. That is a fuel price difference, not an efficiency one: gas tanks are actually less efficient than electric ones, but natural gas costs far less per unit of delivered heat. The exception is a heat pump water heater, which runs on electricity but delivers two to three times more heat than the energy it consumes, and undercuts gas in many markets.

Does turning down the water heater save money?

Yes, measurably. Every 10°F reduction in stored temperature cuts standby losses by roughly 3 to 5 percent, and reduces the energy used to heat each gallon. Going from 140°F to 120°F is a meaningful saving on a bill that is a fifth of your home energy use, and 120°F is what the CPSC recommends for scald prevention. The counter-argument is that some households store hotter for bacterial control and use mixing valves at the fixtures — our page on water heater temperature works through that trade-off.

How much does a leaking hot faucet cost per year?

More than people expect, because you pay twice — once for the water and once for heating it. A drip every second is roughly 2,000 to 3,000 gallons a year. If that is hot water at a 70°F rise, you are heating around 1,400,000 BTU that goes straight down the drain, which is roughly 400 kWh of electricity or 17 therms of gas. Fixing a $10 cartridge is one of the better returns available in a house.

Do water heater timers save money?

Less than the marketing suggests. A timer stops an electric tank reheating overnight, but a well-insulated modern tank loses only a modest amount of heat while idle, so the saving is typically a few percent rather than the large numbers sometimes claimed. The energy to reheat what cooled has to be spent anyway. Timers make more sense on time-of-use electricity rates, where you are shifting consumption to cheaper hours rather than avoiding it.

Is a heat pump water heater worth the extra cost?

On running cost alone, usually yes if you currently have electric resistance. A hybrid unit moves heat rather than making it, delivering roughly three units of heat per unit of electricity, which cuts a $600 electric bill to something nearer $180. The caveats are physical: it needs roughly 700 to 1,000 cubic feet of surrounding air, it cools and dehumidifies the space it sits in, it makes a noise like a small refrigerator, and it recovers more slowly than resistance so it usually needs a larger tank.

How Much Does It Cost to Run a Water Heater?

Written & researched by Priya Anand DIY & Tools Editor

Updated October 2026

Over-the-shoulder view of a person's hands tightening a fitting under a kitchen sink with a wrench, in warm late-afternoon light

Affiliate Disclosure

Some links on this page are affiliate links. As an Amazon Associate, we earn from qualifying purchases — at no extra cost to you. We do not buy, test, or physically handle the products we cover; our rankings come from aggregated owner reviews, ratings and expert consensus. Commissions never change our verdicts. How we rank · full disclosure.

Running a water heater costs a typical US household somewhere between about $150 and $800 a year, depending almost entirely on the fuel. As of July 2026, national averages work out at roughly $500 to $800 for an electric resistance tank, $220 to $350 for a natural gas tank, $170 to $270 for gas tankless, and $140 to $220 for a heat pump (hybrid) electric unit. Water heating is around a fifth of home energy use — second only to heating and cooling — so the gap between the top and bottom of that range is real money.

What does each type actually cost per year?

These figures assume a household using about 45 gallons of hot water a day at a 70°F temperature rise, on national average utility rates. Your own number moves with your rate more than with anything else.

Heater type	Typical efficiency	Annual energy	Annual cost (US average)
Electric resistance tank	~0.90–0.95 UEF	~3,000–4,500 kWh	$500–$800
Natural gas tank	~0.58–0.70 UEF	~150–220 therms	$220–$350
Gas tankless	~0.80–0.95 UEF	~110–170 therms	$170–$270
Heat pump / hybrid	~3.0–3.5 UEF	~800–1,200 kWh	$140–$220
Propane tank	~0.58–0.70 UEF	~170–250 gallons	$400–$700

The counterintuitive row is the first two. An electric tank is more efficient than a gas one — almost all the electricity becomes heat in the water, while a gas tank sends a share of its heat up the flue. Gas still wins on cost because the fuel is so much cheaper per unit of delivered heat. The EIA's residential electricity price table and its residential natural gas price series are the authoritative current figures, and both update monthly.

Wide environmental view of a person's hands tightening a fitting under a kitchen sink with a wrench, in warm late-afternoon light

How do you calculate it for your own house?

The physics is simple enough to do on a phone. Heating one gallon of water by one degree Fahrenheit takes 8.33 BTU.

Daily BTU = gallons per day × 8.33 × temperature rise (°F)
Then divide by the heater's efficiency, and convert: 1 kWh = 3,412 BTU · 1 therm = 100,000 BTU

Worked through: 45 gallons a day at a 70-degree rise is 26,240 BTU. On an electric tank at 0.92 efficiency that is 28,500 BTU, or 8.4 kWh a day — about 3,050 kWh a year. At the mid-2026 national average of roughly 17 to 18 cents per kWh, that is around $540. The same heat from a gas tank at 0.60 efficiency needs 43,700 BTU a day, or about 160 therms a year, which at roughly $1.50 a therm is around $240.

Our appliance running cost calculator will do this with your own rate, and what size water heater do I need covers how to estimate your household's actual hot water use rather than guessing.

Low-angle view of a person's hands tightening a fitting under a kitchen sink with a wrench, in soft overcast light

How much does your state change the answer?

A great deal — enough to reverse the usual advice. Residential electricity ranged from around 11 cents per kWh in the cheapest states to well over 40 cents in Hawaii in recent EIA reporting, so an identical electric tank costs roughly four times as much to run in Honolulu as in Boise. Natural gas shows a similar spread between producing states and New England.

Practical consequences:

Cheap hydro electricity (the Pacific Northwest, parts of the Southeast) narrows or erases the gas advantage.
Expensive electricity (California, New England, Hawaii) makes a heat pump water heater the strongest financial case in the country, because it cuts consumption by roughly two-thirds.
Propane, common on rural properties without gas mains, is far more expensive than natural gas and frequently costs more to run than electric resistance.
Cold climates raise costs regardless of fuel, because groundwater arriving at 40°F needs nearly twice the temperature rise of water arriving at 70°F for the same shower.

Low-angle view of a person's hands tightening a fitting under a kitchen sink with a wrench, in warm evening lamplight

What actually reduces the bill?

Set the thermostat to 120°F. Each 10°F reduction cuts standby loss by roughly 3 to 5 percent and reduces the energy per gallon. See water heater temperature for the safety trade-offs.
Fix hot-water leaks. A one-drip-per-second faucet wastes 2,000 to 3,000 gallons a year, and you pay to heat every gallon. Fixing a leaky faucet is usually a $10 cartridge.
Fit WaterSense showerheads. Dropping from 2.5 to 2.0 GPM is a 20 percent cut in the largest single hot water draw in the house.
Insulate the first six feet of hot and cold pipe at the tank. Cheap foam sleeves, and they reduce the heat that walks out of the tank through the plumbing.
Flush the tank annually. Sediment insulates the burner from the water, so the heater runs longer for the same result — see how to flush a water heater.
Add a jacket to an older tank. Worthwhile on pre-2015 units; modern tanks already carry thick foam insulation and gain little. Never cover the top of a gas unit or block any air intake.

For a replacement decision rather than an efficiency tweak, the ENERGY STAR water heater listings compare certified models, and the EIA Residential Energy Consumption Survey is where the share-of-home-energy figures come from. Costs and rates quoted here were compiled in July 2026 and utility prices move — check the live EIA tables above for current figures, and note that rates vary substantially by state and by utility within a state.

Related reading: how long a water heater lasts, best tankless water heater, best gas water heater and the DIY plumbing hub. Our method is in how we rank.