A water heater comprises a body defining a chamber for holding water to be heated, an inlet opening and an outlet opening in communication with the chamber for flowing water therethrough and one or more power consuming features/functions including a heater for heating the water within the chamber. A controller is operatively connected to the one or more power consuming features/functions. The controller is configured to receive and process a signal indicative of a utility state. The controller operates the water heater in one of a plurality of operating modes, including at least a normal operating mode and an energy savings mode, in response to the received signal. The controller is configured to at least one of selectively adjust and deactivate at least one of the one or more power consuming features/functions to reduce power consumption of the water heater in the energy savings mode.