Holly Springs officials have filed a lawsuit in federal court against the Mississippi Public Service Commission accusing the agency of exceeding its authority and for violating the city’s right to due process.

The complaint, filed Thursday, comes less than two months since the PSC voted to impose daily fines of up to $12,500 against the city for failing to address deficiencies with its power system. The Holly Springs Utility Department, which serves about 12,000 customers across multiple counties, has struggled for years to maintain its power grid infrastructure and subsequently left customers with frequent electric outages.

In September, just days before imposing the daily fines, the PSC held a hearing in New Albany to listen to the utility’s customers and to give city officials a chance to respond. After the session, the three-member commission voted unanimously to move forward with steps to place the utility into a receivership.

But the commission, the new complaint alleges, overstepped its authority by interfering with the city’s contract with the Tennessee Valley Authority. Since 1935, Holly Springs has purchased and distributed electricity from TVA, a federal agency created under the New Deal to provide power to rural areas in the Southeast. Because TVA is a federal body, the lawsuit says, the PSC can’t “intrude upon” the city’s power agreement.

TVA, though, has itself recently sued Holly Springs for multiple breaches of the contract. That lawsuit, filed in May, alleges the city took money from the utility department before ensuring the electric system was stable, among other financial mishaps. After a stay in the case, U.S. District Judge Debra Brown ordered the parties last week to show cause by Tuesday.

The PSC didn’t allow the city an “opportunity to cure (its) alleged negligence,” Holly Springs’ lawsuit also claims. The city had elected a new mayor and brought on new counsel shortly before the September hearing.

“As a result, the Plaintiff was unable to conduct a full review of the case file, identify relevant evidence, or prepare a complete presentation of its position,” the complaint says. “Proceeding under such circumstances deprived the Plaintiff of a meaningful opportunity to be heard, in violation of fundamental due process principles.”

The PSC’s authority over the city’s utility department came from state legislation in 2024. Republican Sen. Neil Whaley of Potts Camp wrote the bill, which allows the PSC to investigate whether utility service for certain customers is “reasonably adequate.” The commission’s September hearing found Holly Springs fell short of that bar.

The PSC told Mississippi Today on Monday that it has only issued one fine of $12,500 against the city so far. Kyle Jones, an attorney for the commission, said, while the city is subject to further fines as long as it provides inadequate service, the PSC would have to hold another hearing before it could actually impose more fines.

Regarding next steps toward placing the utility under a receivership, the PSC said it would present its petition to a chancery court judge through the state attorney general’s office. The AG’s office did not respond to a request for comment before publication.