Is the water heater gas or electric? I had a very interesting one where a subpanel was fed with 3 wires using the conduit for the equipment ground. Someone added circuits and landed the neutrals on the equipment grounding bus, thus sending neutral current through the conduit. Well the conduit eventually failed as a conductor and the neutral current found it's way back thru the furnace grounding conductor, which was on that same bus.The neutral current from the other loads in the panel was travelling on the furnace grounding conductor back to the furnace, where it then travelled along the gas line to the water heater, where it travelled to the water lines and out to the main. Whenever someone would take a shower, they became part of this return circuit.
The gas pipe in the kitchen actually got so hot it blackened the ceiling where it passed thru to the attic, probably touching against the metal lath.
Rewiring the panel and providing a 4 wire feed fixed everything, although at first it was not obvious to me why the pipes were hot and I thought there might be another problem. I knew the panel was wrong and fixed it right away, but it took me a lot of forehead wrinkling thinking in the days after to figure out exactly what was happening and why.
Brian
