I read and reread your statement, do you have home runs with your water piping like a zern manifold. You have some cross bleeding in your water piping. That would be your final answer. You have to determain how water in cold is going through the water heater if the water heater only makes hot water. The fan comes on when there is .5 gpm going thru it. somewhere you have water going thrue your tm-32 to make it come on. That is the only way it ever goes on. Also sincce its in a closet do you have it directly vented outside, do you have servicing valves on your unit and make sure you have below.7 grains of hard water.

I think in your case, supply line hot would be the only option. For us, the old water heater was in the kitchen so we just transfered the wait time from the kitchen to the bathroom. We're having a tough time changing our water use habits. Prior to the new on-demand, turning on the shower and waiting seemed part of the routine. For handwashing after a potty stop, you knew to turn on the water when you entered! Now, in the kitchen the wait seems so long. A quick rince of dishes or a handwash doesn't seem worth the wait so everything but washing dishes is in cold water. I'm trying to figure out if the few times we need unlimited hot water (hot supply line) is worth paying for heating a small amount of hot water to sit in the pipes each time you use less than 3 gallons in the kitchen. I'm really leaning towards the cold supply line and seeing if 6 gallons will meet our needs. A dishwasher, which we do NOT currently own, uses 5-6. I've heard that hand washing wastes more water but I need to actually measure. Then the consideration is the cost. We thought we were going to heat water with gas and now are considering electric for the kitchen. I'll post what we finally decide to do.

Plumbed incorrectly. Wired incorrectly Valve closed

riellebee So I'm going to rough-in some numbers: Range: 15k btu/h Fireplace: 80k btu/h Furnace: 75k btu/h (x2) = 150kbtu/h water heater 200k btu/h (x2) = 400k btu/h Total potential load: 645k btu/h - again, an estimate. You can check your furnaces if you want to be be sure. is it likely that you would have enough things on at the same time to exceed your 425k btu/h service? - Yes, it's quite likely. What happens when you exceed the capacity of the service? The gas pressure drops and the range and the gas logs will just not run at full capacity - no big deal. But the things like the furnace and water heaters will throw error codes showing low gas pressure. The water heaters are likely to have that problem anyway, because at 30' of 3/4" pipe they are only getting about enough gas to run one of those heaters full tilt (the water heaters are variable input). The meter may be 20' away, but in actual length of pipe it's probably close to 30' including elbows. I can see close to 10' of pipe in the photo. The fact that the return line for the circulation isn't warm suggests it's not working. Fix that and insulate your pipes and your immediate problem will probably go away. BTW: Insulating the pipes is not expensive or difficult. Foam pipe insulation comes in 4' sections that just snaps around the pipes and uses self adhesive strips to hold it closed. It cuts with scissors. Even if you just did the exposed pipes in the basement you would reduce a lot of heat loss. My guess is that the builder can't really fix the "over-subscribed" gas service at a reasonable cost. One solution is to use a different water heater. A hybrid tank/tankless would solve the problem. The link goes to an AO Smith Vertex 75 gal water heater 100k btu/h and is 92% efficient and vents with the PVC vent pipe you have. I'm not particularly endorsing that brand - just using it as an example. It would provide you with plenty of hot water (you could run 1 shower continuously) and would reduce your BTU load by 300k BTU/h (gas service problem AND undersized gas pipe to water heater solved). In addition, because it's a tank of hot water - along with about 6' of hot water in the pipe - your wait would be significantly reduced even without a circulation pump. It sucks for your builder because it would cost them about $3500-4000 to fix it. They could probably realize some salvage value from the tankless heaters - say $1000-1500. But If they are only out $2-3k total I'd say they should consider themselves lucky.