Gas or Electric?

I have to replace my natural gas water heater but am concerned about the cost of the fuel.  Should I replace with another gas heater or electric? 
phillib

In the 10 years I have been answering home improvement questions on the radio, I never had anyone ask if electricity would actually be cheaper than gas!  However, since Hurricane Katrina interrupted gas production and costs temporarily shot up, I have had that question many times.

The answer was the same then, as it is now: natural gas is the best way to go.  According to recent Energy Information Administration data, the cost of natural gas on a per BTU basis is less than half the cost of electricity:

•   Natural Gas = $13.40 per million BTU
•   Oil = $17.45 per million BTU
•   Propane = $21.46 per million BTU
•   Electric = $30.19 per million BTU

If you want to save energy on your gas water heating costs, there are two options.  First, add an insulating blanket to your gas water heater.  These are cheap and easy to install.  Just be careful not to cover the vent pipe on top, or the burner compartment. 

Secondly, consider a tankless water heater.  Although more expensive to buy and install, they are highly efficient because they only heat water as you need it.

For those that have electric water heaters, installing a 240 volt timer is also a good option.  In most cases, water only needs to be heated for a few hours in the morning and a few in the evening.  Water will stay warm in between and as long as you don't need it for bathing or laundry, there is no point heating water that won't be used.