FREMONT -- Even as Tri-City water customers brace for a significant rate hike that will help fund pipeline upgrades, thousands of residents are opting to pay a little more for a waterline insurance service offered to them for the first time.

About 3,600 of Alameda County Water District's 55,000 residential customers, or 6.5 percent, are paying $4.95 a month to receive insurance for emergency repairs to broken service lines on their properties, under a deal the utility struck last year with HomeServe USA, a Connecticut company providing the repairs.

Though the insurance offer is optional, some residents say they are put off by another request to pay up, after the rate increase -- effective last Friday -- is raising the average customer's water bill by 17 percent.

"There are many baby boomers here on a fixed income, people who can't afford $4.95 a month," said Olivia Armijo, a longtime Union City resident. "I can pay it, but what if my neighbor can't?"

The service covers problems that occur on water lines set between the home and water meter on a customer's property, HomeServe spokesman Myles Meehan said.

"A water utility typically is responsible for water mains on the street, and homeowners are responsible for lines on their property," Meehan said. "Our plan covers that point on the property where responsibility transitions from the utility to the homeowner."


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Walt Wadlow, the district's executive director, said the agreement would help lower future water bills. The more revenue the agency collects now, the less likely it will raise future rates to offset the $400 million tab for upgrading its aging pipelines, 20 percent of which are more than 50 years old, he said.

"It's a little bit of a nontraditional model for utilities, but we'll be looking for other opportunities like this," he said.

HomeServe paid the Fremont-based water agency an $80,000 startup fee last year, Wadlow said. The district, which gets a 10 percent cut of HomeServe's gross sales, has received about $11,500 in sales revenue thus far.

When a customer's water line breaks or leaks, he calls HomeServe, which dispatches a local technician who inspects the problem within 24 hours and makes repairs. The insurance pays for repairs up to $3,000, Meehan said. A customer can make up to four claims per year.

District customers usually report more than 400 leaks per year on their properties, Wadlow said. Since the district partnered with HomeServe last summer, customers have made nine claims and the company has rejected just one, because the customer called a repair worker not contracted with HomeServe, agency officials said.

HomeServe, which says it has 120,000 policyholders statewide, has a similar contract with the Contra Costa Water District -- which serves about 500,000 people in central and East Contra Costa County. About 11.7 percent of that district's 53,155 customers receiving treated water have signed up for the insurance program since it started there in 2011, spokeswoman Jennifer Allen said.

Some Tri-City customers, such as Robert Bush, say they support the district's new insurance program for the revenue it generates.

But Bush, a Fremont resident, had problems with the new rate increase. He said the hike should have come in phases, easing the financial burden for cash-strapped residents. Likewise, John Becker, Newark's city manager, and Larry Cheeves, Union City's city manager, recently wrote letters to complain that the district's new rates will cost each city an extra $30,000 annually. Wadlow said that district officials are sympathetic to the fiscal challenges city budgets are facing. "The board certainly considered that before adopting the rate increase," he said.

Contact Chris De Benedetti at 510-353-7011. Follow him at Twitter.com/cdebenedetti.