TVA files claim against City
The Tennessee Valley Authority has filed a breach of contract claim against the City of Holly Springs in Federal Court in Oxford.
TVA said it filed the claim at 11 a.m. Thursday, May 1, alleging multiple violations of the wholesale power contract by the city, according to Julia Wise, Senior Strategic Communicator, Southwest and West Regions, with TVA.
Central to the issue according to a TVA press release, is the continued PILOT, Payments in Lieu of Taxes, to the City of Holly Springs while carrying outstanding balances due TVA for wholesale power use and for HSUD's failure to maintain cash reserves.
Wise said it is rare that TVA initiates legal action of this nature.
“Tennessee Valley Authority has initiated legal action against the City of Holly Springs citing the Holly Springs Utility Department's prolonged failure to meet power contract obligations,” Wise said.
The complaint underscores TVA's concern regarding the HSUD's financial management and compliance, Wise said. The wholesale power contract between TVA and the City contains certain requirements related to the HSUD's financial health.
“TVA has escalated these matters to litigation because, despite TVA's repeated efforts to work with the City, the HSUD has failed to operate its electric system on a selfsupporting and financially sound basis,” Wise said. “”It has failed to submit to TVA necessary financial documentation, which has ultimately deteriorated the utility's overall financial condition.”
The complaint alleges breach of contract for multiple violations of the Wholesale Power Contract, including the HSUD's failure to maintain financially sound and selfsufficient electric system, Wise said. In its court filing, TVA highlights ongoing issues with HSUD concerning its failure to receive timely and accurate financial reporting.
Wise said concerns over HSUD's financial stability goes back to 2023 with TVA raising alarms during meetings with the Holly Springs mayor and board of aldermen.
“Adding to the strain, HSUD has failed to pay its TVA invoices timely and in full since 2024,” Wise said. “The situation reached a tipping point when HSUD made Payment in Lieu of Taxes (PILOT payments) in November 2024, despite having an outstanding balance due to TVA for energy and power usage and for having no cash reserves.”
According to TVA, HSUD made a total of five PILOT payments to the City of Holly Springs from November 2024 to March 2025.
“In its complaint, TVA asserts that by HSUD making these payments, the City of Holly Springs has violated the terms of the Wholesale Power Contract, which mandates that electric system revenues be prioritized appropriately,” Wise said. “Pursuing legal action was a measure of last resort, one rarely utilized in TVA's 90-year history. Nonetheless, TVA is committed to ensuring reliable service for HSUD's customers and working with HSUD and the City leadership to restore financial stability.
“TVA's goal has been, and remains, to partner with HSUD so the electric department is able to provide affordable and reliable power to those it serves and is able to operate in a financially sound and self-sustaining manner.”