A water heater including a tank, first and second heating elements, first and second temperature sensors, a communication module, and a controller. The controller is operable to determine a first temperature value related to a first temperature sensed by the first temperature sensor, determine a second temperature value related to a second temperature sensed by the second temperature sensor, and receive a command from the external controller. When the received command is a first command, the controller control current to the first heating element based on the first temperature value traversing a first set point, and controls current to the second heating element based on the second temperature value traversing a second set point. When the received command is a second command, the controller controls current only to the first heating element and not the second heating element, the control being based on the first temperature value.