It's time to run a new cable to the panel. Prior practice was to use the neutral wire to ground the frame of the dryer. It was never acceptable to use a pipe (or whatever the bare wire went to) to get the neutral connection for the dryer. FYI, a neutral connection is required for most dryers so a "ground" wire of questionable origin doesn't qualify.

New installations will require a 4 wire cable - 2 hots, neutral, and ground; 4 wire receptacle, and a 4 wire cord on the dryer.

Sounds like we will have to run a new 4 wire cable. Do you think my assumption is correct, that the old wire is two-conductor w/o ground (I didn't know there was such a thing), and they just ran a ground wire to some plumbing? Was that common practice in the past for 240v circuits?

It does sound like it was just 2-wire cable. Possibly when the circuit was first installed, the house had a dryer that ran strictly off of 240V and didn't require a neutral. If that were the case, the installation would have been compliant with codes of the day, probably. But such a dryer would have used a different plug with a different arrangement of the blades, which a modern 3-wire dryer pigtail would not plug into. Possibly, later on, the dryer was replaced with a model that did need a neutral, and someone just swapped out the outlet and connected the ground connection to the neutral terminal. At that point, the installation would have been non-compliant even under 1950s codes. It has not been, for a long time, acceptable to use a water pipe as a conductor carrying current under non-fault conditions. Grounding was allowed via the neutral, but the reverse -- running the neutral current through ground -- was not allowed.

As of 2000 IIRC, code no longer allows the dryer to be grounded via the neutral. So now you need four conductors -- two hots, neutral, and ground.

OK, now I'm even more confused. My parents had an electrician out, and he connected the ground terminal of the receptacle to a nearby water pipe (the washer pipe, on the outside of the wall). As we know, this is not the right way to do it, but this is what the electrician did. There is 240v between the two hots, and 120v between the hots and the ground, so he was satisfied. But the dryer still did not work, so he said they need to have someone come check the dryer. So they called out an appliance person. And he says it's the receptacle, the way it's wired is wrong (neutral to the water pipe). To demonstrate, he manually connected two of the dryer cord prongs (one hot, one ground) to the hot/neutral of a nearby 120v outlet and the motor worked.

So, this leads to two questions (just out of curiosity--I know we need to run a new cable).

1. Why does the dryer not work when the neutral is run to the water pipe?

2. How did the thing work before? I still am not sure what the ground terminal was connected to originally, but I can't imagine it was anything other than some plumbing pipe in the wall.

The "electrician" was totally wrong in what he did. I would demand my money back. The water pipe has never been an acceptable substitute for the neutral and is no longer considered an acceptable attachment for the ground wire.

You need to run new wires. That is the only satisfactory solution for your situation.

Got that. Any ideas on my two questions? I'm very curious. Thanks.

It's possible for a meter to read 120v hot to ground, but if the ground has too much resistance, it won't provide 120v to a real world appliance.

The pipe you used may not be bonded to the rest of the system. This could be because of nonmetallic pipe in the rest of the system, or the jumper across the water heater or meter might be loose or missing. Or, the service itself might not be properly grounded. In any case this should be investigated by a pro; it could be an unsafe condition. And that's apart from the necessity of getting the dryer recept rewired correctly.

I have no idea why it worked before.