Two models are used for assessing the annual operation costs of electric and natural-gas residential water heaters. One model estimates the real utility costs based on local utility rates, water-heater efficiency, daily water usage, and average required temperature rise. The other adds (to this) penalizing factors for the amount of carbon dioxide and sulphur dioxide produced by either electricity generation by a coal-fired power plant or the carbon dioxide released when burning natural gas with stochiometric air. An analysis is done of low-, medium- and high-efficiency models of electric, natural-gas and heat-pump-style water heaters.