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Although the Energy Information Administration is expecting natural gas prices to post a small 3.6 percent rise during the 2010-2011 heating season, there’s still good news for homeowners with gas-fired water heaters that need replacing.

Combining state, local government and utility rebates with a 30 percent federal tax credit could give you a nearly free gas-fired storage or tankless water heater. And since up to 25 percent of a home’s energy consumption is used to heat water, the efficiency gains can quickly pay off. Be aware that the federal tax credit expires at the end of the year and many states’ cash for appliance programs are running out of money.

To qualify for most of the rebates, storage-tank heaters must have an Energy Factor of 0.67 and the tankless models must have an EF of at least 0.82. For the federal tax credit, both types must have a EF of 0.82, (few storage-tank models make the cut). The Air Conditioning, Heating and Refrigeration Institute maintains a searchable list of qualifying heaters. The federal tax credit is limited to $1,500 (including installation), but you can claim it in combination with the rebates below.

Cash for appliance rebates

• Arkansas: $300 rebates (tank and tankless)
• Utah: $300 (tankless) $200 (storage-tank)
• Colorado: $300 (tankless)
• New Hampshire: $300 (tankless) $100 (storage tank)
• Virginia: $225 (tankless)  $35 (storage tank)
• Georgia: $199 (tankless) $99 (storage tank). (Waiting list only.)
• California: $100 (tankless)
• Maine: $100 (tankless)

Local government and utilities
Most of states above also allow cash for appliances incentives to be combined with local government and utility rebates, such as:

• In Calilfornia, the city of Palo Alto is offering a $200 rebate on storage tank heaters; and Southern California Gas Company (SoCalGas) gas is providing $200 off tankless models.
• Atlanta Gas Light is giving its customers $300 on tankless and $200 on storage-tank models.

Even if your state isn’t offering any cash for appliances rebates, a search of the Database of State Incentives for Renewables and Efficiency may turn up an incentive in your area. Rebates for electric and propane-powered storage-tank heaters are also available in many areas.

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