The installation cost quoted is also absurd, even if it fit. A good reason to get multiple quotes.

Randy, do you think both quotes are absurd or just the gas conversion? I was blown away to think that a gas water heater would cost more than my newly installed high efficiency gas furnace. From research I've learned, the installed electric unit is quoted at about $250 above base cost. Bradford White water heaters are pricey in these parts.

I agree that both quotes seem absurdly high. I would have kicked the sales rep out of my house when he "sarcastically offered to add a pan". Now that he has ordered the wrong size unit I would cancel the whole deal, and go with a different company. They might complain that they already have costs into the job, but the costs are for the wrong sized unit which they'd have to return anyway.
I just bought a 40 gal electric Bradford-White short boy water heater which cost approx. $250, which was less than the comparable sized Whirlpool or GE units carried by the box stores (which were both approx. $330)

Thanks for your comments, Bob. I've cancelled my installation of the $830 electric water heater and am scheduling other estimates. Interestingly, the guy who quoted the erroneously sized unit treated that news nonchalantly, as if "Oh, well....". He then quoted a smaller (appropriately sized) unit at the same price although on-line prices for the unit show it as less expensive. I dread the process of getting half a dozen quotations for anything that's done in the house, but I guess water heaters are no different than anything else. I'm figuring that $350 for installation -- since I can't install the unit -- is fair. True or false?

My "yikes" is getting worse! After suggestions from WebGarden mates, I obtained three additional estimates for a replacement electric water heater. Those estimates came in at $1749, $1846 and $1984, representing more than twice the amount of my original quote. The least costly quote did not include an expansion tank which leads me to believe that guy might not be qualified to install a new unit. My last estimate quoted a drain pan for NINETY-ONE DOLLARS. Interestingly, all four estimators couldn't understand why I would want a drain pan under the unit despite the fact that it's located adjacent to finished areas.

Something seems seriously wrong. Those prices seem to be in the range of "I'm not interested in doing the job so I'll quote something outlandishly high." Unless there is something to the job that makes it unusual, a like-for-like replacement in the same place shouldn't take more than 2-3 hours (in my admittedly non-professional opinion) counting the time to drain the water out of the old unit. I can't imagine their hourly rate is around $500/hour.

If is to be in a different location than it was, or if the drain pan is a new addition and there is no existing way for the drain line from the pan to be connected, then that might account for the large estimates.

You can see why I'm confused, Bob. My water heater situation is about as simple as it gets: Remove old tank and install new unit with expansion tank. (The expansion tank is new to me but everyone seems to recommend it.) No upgrade in piping or electricity is needed. Because my house is on a slab and there is no floor drain, my intention is to place the water heater in a drain pan that contains a water sensor so that an alarm will sound if there's a leak. Incidentally, the unit is in a closet that's used frequently throughout the day, I'm hoping that my proposed arrangement will be sufficient.

You may want to reconsider gas. A high efficiency direct vent unit (can vent using a plastic pipe out the wall, no roof penetration) runs $1000-1200. Piping the gas may cost another kilobuck, depending on what's involved, but the operating cost will be substantially lower. In some areas the gas company offers some pretty good incentives for conversions which may make it less painful, and many such units qualify for a federal tax credit worth up to a couple hundred bucks.

Thanks for suggesting a HE direct vent gas unit, rwiegand. Gas was my first choice but quotes for gas have ranged between $2600 and $2900. Shocking and beyond my financial stretch! Are prices in metropolitan Philadelphia truly so much higher than other parts of the country? Meanwhile, I haven't met with a single plumber (out of 4) whose quote includes a drain pan until I mention it and, even then, nobody know how to drain that pan to the outside since there's no basement. I subsequently learned that my township requires a permit (and inspection) for water heater installation. With the prospect of selling the house in the next several years, I can't afford to ignore that requirement. Can I? Three more plumbers are scheduled to give quotes but I'm thinking that my search needs to start anew. How can I locate a quality plumber who knows about (and respects) plumbing codes?