The controversial $5 warranty charge on Pittsburgh water and sewer bills resembles a plan pitched regionally by a Utah businessman who believes that his concept fell into the hands of a local, politically tied firm.

Starting in 2007, Stephen Gallo tried to sell local water providers on a product he called Groundwater Green -- universal water and sewer line warranties that would also fund efforts to get storm water out of sanitary sewers, thus reducing sewer overflows.

He made sales calls through May 2009. "And then all of a sudden, just out of thin air, everyone stopped returning my phone calls," he said.

A month later, water industry veteran Christopher H. Kerr created Wilkinsburg-based Utility Line Security LLC, which since January has received the $5 charge added to city water and sewer bills. That development led Mr. Gallo to suspect that his ideas "were simply passed onto the local 'good old boys club' behind my back."

Not true, said Mr. Kerr.

"It's not uncommon for people in the wastewater industry to talk about [stormwater in sewers] and throw those kinds of options out at meetings," he said, adding that he never met or heard from Mr. Gallo.

The novel combination of assigning everyone with water and sewer line warranties, allowing those who don't want it to opt out, and using proceeds to stem the flow of rainwater into sewers, has drawn praise and catcalls locally.

Pittsburgh Water and Sewer Authority Executive Director Michael Kenney said Friday that since the agency's customers were given ULS's product, around 138 line problems have been fixed, some of which could have bankrupted residents if they had not been given the coverage. ULS also has started disconnecting storm drains from sanitary sewers.

One ratepayer, however, filed a lawsuit that could become a class action alleging that charging ratepayers for the coverage without their consent is illegal. Attorney General Tom Corbett's representatives have met with Mr. Kenney to ask about the billing procedure. And city council has scheduled a March 25 special meeting on the subject.

Mr. Kerr said that 8 to 9 percent of ratepayers have opted out, leaving around 90,000 in. That suggests that ULS is on track to gross more than $5 million a year.

His business bears similarities to the one Mr. Gallo pitched to representatives of South Fayette, North Huntingdon, Peters, Irwin and 3 Rivers Wet Weather, an agency dedicated to reducing sewer overflows as demanded by federal and state consent orders.

Mr. Kerr and Mr. Gallo combined an established product -- warranties against line clogs -- with the opt-out billing system. The resulting near-universal coverage allowed them to offer rates that were half of those charged by competitors who have to convince people to buy their warranties.

Mr. Gallo proposed charging $4.50 a month, plus $2 or more that would have been spent separating storm drains from sanitary sewers. Similarly, ULS's $5-a-month charge comes with a pledge that for every 5,000 customers, it will spend $50,000 a year on sewer separation.

City Councilman Patrick Dowd, a water authority board member who voted for the ULS plan, said Mr. Gallo's plan "looks very similar."

There are differences. Mr. Gallo proposed a $5,000 claim limit, while Mr. Kerr's program has no limit. Mr. Gallo was backed by a national insurance firm, while Mr. Kerr's firm does not have insurance backing its warranties. State law doesn't require insurance backing for warranties.

Mr. Kerr has run water line warranty firm Utilishield Inc. since 1997. He said the concept of an expanded warranty that everybody gets, and that helps pay for stormwater separation, may have bubbled forth from the many meetings he attends on the region's overflowing sewers.

He's also an executive with Resource Development and Management, a consulting firm that manages water systems, including the 400,000-customer Municipal Authority of Westmoreland County. "I manage the largest water authority in the state of Pennsylvania, and if [Mr. Gallo was] pitching a program, why didn't he pitch it to me?" Mr. Kerr asked.

Mr. Gallo said that John Schombert, executive director of 3 Rivers Wet Weather, steered him away from the big agencies, but helped him get audiences with smaller public water agencies and with contractor Michael Baker Corp.

Some of those with whom Mr. Gallo met said that they became leery when he and a partner split. Others didn't want to be the first to sign on or felt that Mr. Gallo didn't have enough specifics. All said they didn't share Mr. Gallo's idea with others.

Mr. Kerr's association with RDM gives him many connections. RDM includes as its president former Allegheny County Development Director Joseph M. Hohman and as executive vice president attorney James Dodaro, a former turnpike commissioner and current Port Authority board member who has long interacted with construction firms. Mr. Dodaro's law partner, John Cambest, serves as solicitor to numerous local governments.

Mr. Kerr's ties to Mr. Kenney are longstanding.

Before coming to Pittsburgh, Mr. Kenney was operations director for the Municipal Authority of Westmoreland County, working side-by-side with RDM and simultaneously serving as an occasional paid consultant for the firm.

After coming to Pittsburgh, he hired RDM for $100,000 to study his new employer's management structure. And in January, his daughter briefly worked for ULS, until Pittsburgh Water and Sewer Authority board members' concerns prompted him to ask her to quit, which she did.

Mr. Kerr created ULS in June, just as the Pittsburgh Water and Sewer Authority invited proposals from firms seeking to market water and sewer line insurance to its customers. ULS beat out Linebackers Inc. of Wexford, in a two-bid contest that escaped the notice of other firms in the business.

Other service providers, including Mr. Kerr, have complained they never saw legal ads seeking bids.

When ULS only got a few thousand takers for its product, the authority board in December approved placement of the $5 charge on all of its bills, without a new bidding process.

"I put in all of this work," Mr. Gallo said, "and I was never even invited to the dance."

Mr. Kenney said he was unaware of Mr. Gallo until a reporter told him about the Utah businessman in February.

Mr. Kerr said he hopes people focus on his product. "Once the controversy of the politics settles down, people will recognize that it's an outstanding program."

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