American Water Resources has been confusing some people with an advertisement that resembles a water bill from Tennessee American Water. Photo illustration by Dan Henry

The letter arrives in an official-looking envelope from what appears to be local utility Tennessee American Water. Inside, in bold type, it announces a "Notice of repair responsibility." Other letters declare a "Notice of sewer pipe repair" or a "Homeowner sewer line repair advisory."

In reality, the letters are none of these things.

The "notice" is merely an opportunistic sales pitch from a company calling itself American Water Resources, city officials say. And it comes at the worst possible time for some area residents, who are in the midst of a big change in how they pay their sewer fees.

Martha Hagan, an East Ridge resident, says she's been hounded since 2006 by various companies repeatedly warning her of massive liabilities stemming from her fragile water and sewer pipes. An East Ridge resident, she can technically get her sewer problems fixed for free through a monthly $8 fee she pays. But no one has told her that.

Hagan already must dip into her life savings to pay her existing utility bills, and her three-figure Social Security income means she can neither afford American Water Resources' protection program, nor the cost of fixing a pipe problem on her own.

Most of all, she's confused and a little worried by all the water warnings she gets in the mail. If something happens to her pipes, she could lose everything.

"When a person gets to be my age, we just hope we don't outlive our resources," she said.

Her antagonist isn't some fly-by-night scammer working out of a dingy basement with a color printer from Office Depot.

American Water Resources is actually a subsidiary of Vorhees, N.J.-based American Water Works Co., the nation's biggest publicly traded water utility. American Water Works is the parent company of Tennessee American Water, the state's biggest privately-owned water supplier.

City Hall Challenge

"It's misleading, there's no other way to characterize it," said Chattanooga Mayor Ron Littlefield, who himself received one of 35,000 notices that were sent out this year. "They've just created a confusing situation. It's yet another irresponsible act from this water company."

Denise Free, external communications manager for American Water Resources, said any mailings with Tennessee American Water's return address were "a mistake," and that the affiliate company has been winding down its relationship with Tennessee American for some time.

She argued that there was nothing confusing about the mailings, despite their official, bill-like appearance.

"Our mailings are educational in nature," she said. "They inform people of their responsibility to make any needed repairs to their sewer lines. Most people don't realize it's their responsibility, they think it's whoever the water company is, or they think it's their homeowners insurance."

According to one mailing, customers can buy "protection and peace of mind" for between $66 and $150 per year and "an affordable means of protection from expensive repairs that can easily cost thousands of dollars."

Sandy Watson, who has paid for the service for years, says she does receive peace of mind knowing that her old pipes are in good hands.

"They sent me all of this stuff about how the water company only pays for so many feet from the road, and the water lines are really old, and if something went wrong, it would cost a fortune," Watson said.

Buyer Beware

The lateral line connecting each home to the water or sewer main is indeed every homeowner's responsibility. But in some instances, American Water Resources' program may duplicate government programs already under way and could cost far more than a simple rainy day fund, experts say.

For instance, sewer repairs are already provided for free to many Hamilton County residents, according to Michelle Loftin, SLP coordinator for the Hamilton County Water and Wastewater Treatment Authority.

"If they have an emergency, they call one of our master plumbers who works with us in this program, the plumber goes out there, videos the line, determines if its clay, PVC or iron, and they come up with an action plan for repairing it or replacing it," Loftin said.

The service is covered under a monthly $8 fee for residents of East Ridge, Red Bank, Soddy-Daisy, Signal Mountain, Lookout Mountain, Ridgeside, Lakesite and all unincorporated areas of Hamilton County.

Even for those lacking such utility coverage, Consumer Reports magazine advised homeowners in May 2012 that they are better off putting money in a rainy day fund than paying the monthly premium.

Jim Winsett of the Better Business Bureau in Chattanooga concurs, adding that customers need to carefully read the fine print for anything they receive in the mail.

"What you're going to pay for this on an annual basis, you could save that money and pay for any repair problem that you had," he said. "My response to the consumer is typically, how often have you had a problem with the water line running from the street to your home? They then realize my possibility of having a need for this is very slim."

Barbara Boyarsky, vice president and general manager of American Water Resources, said the company does not reveal how many service calls it typically answers in the Chattanooga area.

"That's really proprietary information, and for competitive reasons we don't share this information," she said.

Boyarsky said on Friday that she had not heard of the free service offered to Hamilton County residents, but said if the company's marketing department was aware of it, "We certainly are not mailing to it, and if we're not aware of it, we are now and will begin suppressing the area."

The fix

Most American Water customers like Gina Howell believe that the company will protect them from any damage to their pipes. For Howell, like many Chattanooga-area customers, paying the fee gives them one less thing to worry about.

"My house was built in 1950," said Howell, a Lookout Mountain resident. "I'm not against the service, because it would cost a fortune if something needed to be dug up where the leak was."

The way she understands it, "if something happened to the line, they would repair it free of charge," she said.

But in addition to monthly fees of up to $12.50, the company also charges a $50 fee per incident, according to the fine print on the actual contract. The contract -- which American Water doesn't include with its notice -- reveals that the company won't fix many types of pipe problems.

Included in the "won't fix" list are frozen pipes, clogs or blockages in the water line, anything caused by defective materials, natural disasters, anything caused by the home- owner or anything caused by anyone else -- basically anything not resulting from normal wear and tear, according to the contract.

Littlefield said a notable clause for the Chattanooga area is the part where the company opts-out of repairing anything required by any local, state or federal agency inspection.

Chattanooga is under a $250 million consent order from the EPA that was handed down in July, he said, requiring the city to repair its aging sewer and stormwater infrastructure over the next 15 years.

Hydro Confusion

Adding to some homeowners confusion over their water bills, the city itself just finished its own round of water-related mailers to area residents.

Following Tennessee American's decision to stop billing customers' sewer fees on behalf of the city, Chattanooga will begin to collect fees directly starting in January. It will cost about $1.40 extra per billing period to run the program, city officials said.

Littlefield said that the water company is "taking advantage" of the confusion that it has itself created. It's doing that by offering a duplicate service at a time when water bills are fluctuating, he said.

"It puts us in a difficult position to say, 'please ignore these scary messages from the water provider,' but that's what we have to do," Littlefield said.

The water company, for its part, claims that some of its mailings are a result of "regulatory constraints encountered in Tennessee," which means that customers must update their payment information to stay protected.

"As a result of regulatory proceedings before the Tennessee Regulatory Authority, costs were imposed on the relationship between Tennessee American and American Water Resources, including the billing services, that made continuation of these services unworkable," Free said.

But according to the Tennessee Regulatory Authority, it was the water company's own idea to split off its protection business from the rest of the company, said Greg Mitchell, a spokesman for the agency.

"Tennessee American Water filed a tariff with the TRA last year requesting to be allowed to stop third-party sewer billing, which included their own sewer protection company, American Water Resources," Mitchell said. "The tariff was approved, per their request; however, it is not something we forced them to do."

Littlefield blasted the entire scheme as a ploy to make money by confusing customers and muddling the issues.

"This is irresponsible on the part of a utility that's said it's too expensive to carry the sewer bill, and now wants to sell its own overpriced sewer insurance product," he said.

Boyarsky argued that it is never American Water Resources' intent to cause confusion.

"This program was created 10 years ago because we realized that people were not aware of their responsibilities," she said. "There are many customers who have been with us for 10 years, and are still with us now."