Municipal Authority to Operate Utility Systems
Municipalities acquire, own, and operate their water, sewer, electric, and gas systems under several general laws and their municipal charters. Generally, under each of the general law statutes, a utility system may issue revenue bonds, exercise eminent domain, and provide utility services outside the limits of its parent municipality. (Other laws that apply generally to utilities are found in the next section, General Provisions.) The applicable statutes are:

• T.C.A. §§ 7-34-101, et seq. The Revenue Bond Law authorizes municipalities to acquire, own, and operate water, sewerage, electric, and gas systems, along with parking operations. Under this statute, the utility:
  • May not construct any public works within the corporate limits of another municipality without the latter’s consent, T.C.A. § 7-34-105;
  • Must charge municipalities the same rates for utility services that other customers are charged under similar conditions, T.C.A. § 7-34-108; and
  • Must impose rates and charges that will ensure the system is self-supporting. T.C.A. §§ 7-34-114–115.
• T.C.A. § 7-35-401,et seq. Authorizes municipalities to acquire, own, and operate water and sewer systems under a board of waterworks or sewer commissioners appointed by the municipality’s governing body. Alternatively, the governing body may, by ordinance, serve as that board. T.C.A. § 7-35-406. Under this law:
  • The city’s governing body sets fees and charges for the utility system, which must be sufficient to support the system;
  • A municipality that owns a gas system may transfer jurisdiction over the system to the board; and
  • Municipalities must pay for utility services.
• T.C.A. §§ 7-52-101, et seq. The Municipal Electric Plant Law of 1935, requires the utility to be operated under a board of public utilities, which includes a member of the municipality’s governing body (or the city manager) appointed by the mayor with the consent of the municipality’s governing body. Alternatively, the city’s governing body may function as the board of public utilities. Municipalities operating a waterworks, sewer works, or gas system may transfer jurisdiction over the system to the board of public utilities. Most of the municipal electric systems in the state operate under this law.