I think the best thing to do is just make a power called "Water" under the Elemental category, assuming the character is generating and controlling water, shooting water blasts, etc. If they turn into water, I'd suggest they take the Self Control powers that describe that (Elasticity, Intangibility, Size Changing... Part Detachment?).
Actually, it might work better as a Material... it seems to me that the Elemental/Energy category is better for things similar to damage types in the card game (especially since you can take immunities to Energy/Elemental types). For instance, I don't really see someone being "Immune to Water damage!" and I can't make sense of "When you would take Water damage, heal that much instead!" So... yeah, Materials is probably a better Category.