Demand management for water heaters

A water heating control and storage system, including an insulated tank for containing water to be heated. The storage system has a heat exchanger connected to the tank for using energy stored during off peak times as in water heated above normal storage temperature. An operation control device receives a demand response signal and enables water to be heated in a heat storing mode to heat water for usage. A method for controlling a water heating storage system includes providing an insulated tank for containing water to be heated; providing a heat exchanger coupled to the tank; and selectively operating in a heat storing mode in which water in the tank is heated to a higher than normal temperature and a heat exchange mode during which heat is extracted from the water stored in the tank by a heat exchanger for supplying stored energy to another energy consuming load in response to a demand response signal.