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One of the cheapest and easiest ways to do this is to install low-flow showerheads and faucet aerators. A 2 1/2-gallon-per-minute showerhead will reduce your water consumption by one-third to one-half. A typical bathtub holds about 60 gallons. If you want to relax, a bath is great, but if you just need to clean up, a quick shower can save up to 40 gallons. Another way to reduce hot water consumption is to wash your clothes in warm water rather than hot, or in cold water rather than warm.

The greatest inefficiency in a typical storage water heater is the heat loss between uses, generally referred to as standby loss. Lowering the heater's thermostat to 120 de grees (130 degrees if you have a dishwasher without a hot water booster) will help minimize loss, saving energy and also reducing the danger of accidental scalding.

For older heaters, wrapping the tank with an inexpensive insulating blanket may reduce standby loss. To determine if your heater needs a blanket, place the palm of your hand on the tank's exterior. If you feel noticeable warmth, you should consider using such a blanket.

If your tank is more than 12 years old, consider replacing it with a new unit (the last two digits of your heater's serial number usually represent the year of manufacture). Some utilities offer rebates on new, energy-efficient models. If you decide to buy a new tank-type water heater, find out the Energy Factor (EF) ratings to help you choose the right model.

The EF rating, based on an assumed use of 64 gallons of water per day, is the basis for the estimated annual energy consumption number found on the yellow Energy-Guide label (see example, Page 50) on new water heaters. The EF rating you should look for will vary among the different types of water heaters.

Electric water heaters have an EF rating between 0.78 and 0.96. Look for an EF of 0.91 or better. The most efficient electric water heaters have EFs between 0.94 to 0.96. Gas water heaters generally have an EF between 0.5 to 0.6; some high-efficiency models may have an EF of 0.8. Look for an EF of 0.6 or better when buying a gas model. For oil water heaters, expect to find an EF range of 0.51 to 0.68; an EF of 0.59 or better is best.

Choose a water heater with a first-hour rating that will meet your family's needs (see "Meet Your Hot Water Needs,"). The first-hour rating, listed on the unit's EnergyGuide label, indicates how many gallons of hot water a heater can supply per hour (starting with a full tank).

Avoid buying a tank that is too small or too large. An undersized tank will frequently run out of hot water; an oversized water heater is not only more expensive to purchase, it also will cost more to operate due to excessive on/off cycling and standby losses.

An alternative to a storage water heater is a tankless, or on-demand, water heater. Popular in Europe, on-demand water heaters use electricity or gas to heat water instantaneously, reducing energy consumption 20 percent to 30 percent. With no storage tank, standby loss is completely eliminated, and hot water always is available. The major drawback with on-demand heaters is limited flow rate. To ensure an ample hot water supply, correctly size and carefully place the unit.

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