[LazyPup]

Your second contractor is absolutely correct.

Any flue, whether it is a flue pipe or chimney relies upon the hot gases in the flue to create a thermal lift, which we commonly call the 'Draft". The rate at which the hot air rises depends upon the temperature differential between the ambient air temperature and the temperature of the flue gases. In a nutshell, the hotter the flue gas, the faster it will rise.

When your burner is firing the hot exhaust gases from the burner could heat a flue to the point where it creates an excessive draft, which would then result in sucking outside air through the combustion chamber having the same result as fanning the fire. If left unchecked that would result in dangerously overheating the burner, tank flue and the chimney or flue pipe system. In order to prevent overheating the flue naturally aspirated water heaters are required to have a "Draft Hood". The base of the draft hood is open to atmospheric air so that as the hot gases rise in the flue it can draw in some outside air to prevent the flue from getting too hot. (on a furnace flue they have a draft relief damper on the flue stack. For residential furnaces the draft dampers are generally gravity controlled by a built in weight, while on a larger commercial or industrial furnaces the draft damper is thermostatic controlled and power driven)

The Mechanical Codes are very strict in regards to the size, length, pitch of horizontal run, ratio of horizontal to vertical length and overall height of the vertical rise on flue pipes.

When the water heater burner is firing we generally have no problems with flue draft however; during those idle periods between firing the only heat being supplied to the flue is the slight thermal energy from the pilot flame, a small amount of thermal energy being radiated into the water heater flue from the stored hot water in the tank plus a very minor amount of heated room air that gets in through the combustion chamber or the draft hood.

If the size of the flue pipe is too big, or especially when a water heater is vented into a masonry chimney the rising flue gases cool too quickly and their is not enough thermal rise to lift the combustion bi-products to the top of the chimney. This causes a number of problems. 1. The water vapor in the flue gases will condense on the walls of the chimney or flue pipe. 2. It does not carry the carbon-monoxide out of the structure and 3. There is a very slight amount of sulfur-dioxide in the flue gases that will combine with the water vapor and form sulfuric acid, which will then eat away at your flue pipe or chimney.

In order to insure a proper draft the Code states that the diameter of the flue pipe must be equal to the diameter of the collar on the top of the water heater draft hood.

When connecting to a chimney the International Residential Code stipulates that the total cross sectional area of the chimney may not exceed 7x the cross sectional area of the flue pipe. (Under the Uniform Plumbing Code the cross sectional area of a chimney may not exceed 4x the cross sectional area of the flue pipe.

In my humble opinion your heating contractor elected to take the lazy way out, at your expense, whereas the second contractor is being totally honest in regards to what should be done.