water heaters | Financial Crooks

Like many Canadians, we won’t have much steady income in retirement. We don’t have any defined benefit pension plans. Yes, CPP and possibly OAS will pay us a certain amount per month. But most of our income will come from dividend and interest payments from our investments and those are not all paying monthly. (We do have some money invested in stocks that pay a monthly dividend though.) So one of my goals has been to reduce the number of bills we must pay on a fixed schedule.

Reduction One: Getting Rid of our Rental Water Heater

In a recent gas bill from Enbridge, I received a flyer called “Information for Direct Energy’s Customers about Residential Water Heaters.” Although I’m not a Direct Energy customer, I read it anyway.

First it had the usual fear factors listed under the heading of “Typical Water Heater Repairs:”

Ventor motor $827
Gas valve $526
Flame sensor $342

I call this fear mongering. A brand new GE 40 gallon natural gas water heater with a 12 year warranty (the longest available) is $688.50 from Home Depot in Toronto. I know you’d have to pay installation on top of that, but even so a brand new tank would be cheaper than the repair for the ventor motor!

Anyway, it says that
a CV40 is $15.59 a month,
a PV40 is $24.49 a month,
a DV40/50 is $25.49 a month,
and a PDV 40/50 is $29.99 a month.

I believe a PDV is a power direct vent, a DV is a direct vent, a PV is a power vent, and a CV may be a conventional (or convection?) vent. Direct Energy doesn’t provide any explanation for these tank descriptions on the flyer.HST is applied on top of those prices.

Another asterisk points out that “unlisted tanks will be subject to an average 2.5% increase over the 2013 rates.

2.5% in one year! For a tank that’s one year older and in many cases has long since paid out the capital and installation costs. Robbery!

I believe that means that we would be paying $25.49*1.13 or $28.80 for our tank if we were renting it.

Fortunately, we bought and installed our own water heater tank with the help of Home Depot and a local contractor several years ago. That removed another fixed monthly bill of over $28.80 a month from our budget.

Yes, we have to save to replace the tank and/or to fix it if it breaks down.

When we paid to have everything done the last time, from delivery to installation to removal of the old tank, it cost $910.90. Based on the price we were paying to rent a tank that was almost 20 years old, it would have taken 5 years to pay that out. The payout compared to a new rental tank was 3 years.

Which means it paid out 3 months ago. Cool!

It’s been working fine and the maintenance is the same as for a rental heater (just draining it once a month to help reduce the buildup of scale.)

So by replacing our rental water heater with one we purchased, we have removed the need to pay a fixed monthly bill of about $28.80 a month.

Reduction Two: Eliminating our Cable TV Bill

So far our experiment with switching to an Over the Air indoor antenna has been working well. We no longer have to pay a monthly cable TV bill. Since we are not huge sports fans this has not been a problem for us.

Cutting our ties to Rogers has removed a fixed monthly bill of over $40.50 from our budget. (And it was steadily increasing. It grew from 26.44 a month to 40.50 a month in 10 years with no change in the channels we received or the quality of our signal. In fact, I just checked online and basic cable would be $43.37 not including a digital or HDTV box, plus an asterisk says that rates will increase on March 24 2014.)

What Other Fixed Monthly Bills Can We Eliminate or Reduce?

Some of our bills can’t be eliminated easily. We’ll have to pay for water, electricity, and natural gas.

I plan to check the details of our property taxes, car and house insurance, though. We pay those monthly. I have a bad feeling that we may be paying more than if we just paid them with a lump sum annual payment. If so, we’ll switch to annual. That wouldn’t really fit into this category of eliminating a monthly bill, but it might be a good idea just to save money.

Other Fixed Monthly Bills We’ve Avoided or Minimized

Monthly condo fees: We don’t live in a condo.
Security and alarm fees: Our police officer friends say that alarms don’t stop break ins. (We leave our drapes open so thieves who are shopping can see we don’t own anything of value.)
Voice mail fees: We have a machine that cost $20 over 20 years ago. It’s still working beautifully.
Other telephone fees: We don’t pay anything for “features.”
Internet fees: We just use our neighbour’s Wifi. (Oops. I hope he doesn’t read this blog.)
Gym fees: We have some weights and an exercise bike for the off season and regular bikes and sports equipment for the rest of the year.
Golf/Tennis/Racquet/Yacht Club fees: We’re more “pay as you go” people than club joiners.
Gasoline costs: Have feet will travel.

Right now, we tend to focus more on increasing our earnings than on decreasing our costs. As we shift into retirement in a decade or so, though, I expect that will change. These steps are gradually taking us to where we want to be.

Related Reading

How We Cancelled Our Water Heater Rental and Installed Our Own Tank

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Have you eliminated any monthly bills to simplify your retirement spending? Which bills could you banish? Please share your experiences with a comment.

When we bought our current house it came with a water heater tank rented from (then) Enbridge. Soon after the rental contract was shifted to Direct Energy. No one changed the tank though. It was ancient and getting older. Eventually we cancelled our water tank rental and had our own tank installed. Here’s why.

Ancient Water Heater Tank Struggles On

According to the information on the side of the tank, our water heater was installed by Consumers Gas in August 1991. We live in an area with hard water so goodness knows how much scale had deposited in the tank over the years. I have no reason to believe the previous owners had followed the required maintenance practice of flushing the tank regularly. (A neighbour whose tank finally failed found there was over a foot of solid scale at the bottom when the tank was cut open.)

I started hearing stories from relatives and friends of tanks of this age suddenly failing, often when the owners were away. Often their basement was damaged by flooding. Our tank is in an unfinished part of our basement with a clear short run to the floor drain but even so it made me nervous to hear.

Rent Versus Buy for a Water Heater Tank

I knew I wanted our tank replaced before anything nasty happened.

At that time, we were renting the tank for $14.93 per month (including the HST.) Yes, we were paying almost $180 a year for a tank that was almost 20 years old!

It was not necessarily going to be easy to convince Direct Energy to replace the tank because it wasn’t broken yet. If we could convince them, we knew the rental cost per month would increase.

The other option was to buy and install our own tank.

Checking Prices and Warranties

We did a bit of scouting around online looking at prices and warranties. To be honest, we could have spent more time and been more thorough. But we saw an offer that looked good and went with it.

Home Depot at that time was selling 40 gallon natural gas water heater tanks with three levels of quality. A 6-year tank, a 9-year tank and a 12-year tank. From reading reviews and consumer information, it appeared that usually the difference between tanks is the thickness of the walls and parts and the use of one or more sacrificial anodes. All of these things are intended to increase a tank’s life by slowing down how quickly it rusts out. Since we wanted a tank that could last as long as possible (since labour costs are a big part of tank replacement costs) we went with the 12-year tank. (If they’d offered a longer life we probably would have bought it.)

The warranty offered by Home Depot if you had the tank installed by their Installation Services department was great. For the 6- and 9-year tanks, the tanks and functional parts were only guaranteed for the 6 and 9 year expected life, but the labour was also covered. For the 12-year tank, the warranty covers the tank and functional parts and LABOUR not just for 12 years, but for life! Their tagline is “The last hot water heater you’ll ever buy!”

Do we realistically expect to be able to hold Home Depot to that warranty if the tank has problems in, say, 15 years? No. But it sounds great on paper! (We do have a copy of the information in writing but I suspect there is some way it can be weaseled out of.)

What this warranty really suggests to me is that the tank is probably of a reasonable quality.

Installation Is Easier for a Replacement Water Heater Tank

Our installation costs were not that high. We were replacing a natural gas water heater tank with another of the same. Due to some changes in the shape and height of tanks over the years a small amount of pipefitting adjustment was needed. However the actual gas lines were already in place, etc, which means the required work was minimal.

What Did It Cost to Replace our 40 Gallon Natural Gas Water Heater Tank?

All in, taxes, delivery, tank, installation, and removal of the old tank from the basement to the great out of doors, cost us $910.90. Probably not the best deal available but it was acceptable to us.

What Did We Do With Our Old Tank?

Believe it or not, Direct Energy wanted back the old tank! When I phoned them to cancel our rental they told us they would pick up the tank for free or we could deliver it to one of their depots. (There may be a cost now for tank pickup. Check your contract.) We opted to have them pick it up.

Ever mindful of the horror stories I read in The Star about water heaters I didn’t really relax till they picked it up about a week later. I even kept a tarpaulin over it to keep the snow off just in case. Fortunately in my case there was absolutely no problem with Direct Energy.

When Will We Payout the Water Tank?

The rental cost for our old tank was $12.99 per month plus HST, so just over $14.93 per month. At $179.26 per year the payout on the new tank would take a long time: about 5 years.

It’s important to remember though that the reason we replaced the tank was

we thought it would leak and damage our basement at any time
the rental fee for a new tank would be much higher

At the time, a new rental from Direct Energy would be about $25 per month. At that rate, the tank would payout in about 3 years.

Yes, technically I should include the value that money could have earned if invested. I didn’t. I’m mathematically lazy.

Having Control of My Water Heater Costs Appeals to Me

~~I’m a control freak~~. I enjoy feeling in control. I like knowing that no one can arbitrarily raise the cost of my water heater.

Do We Regret Buying Our Own Water Heater?

We had our water heater installed in December 2010. Two and a half years later it’s still working well. So we’ve almost paid it out. After December if it breaks and we have to pay to replace it, we’ll be no worse off than if we rented. If it doesn’t break, we will start saving money each month versus renting.