Background
The Town of Lexington (Lexington) had been providing or was prepared to provide wastewater services to a particular area. The City of West Columbia subsequently annexed that area. West Columbia then sought to expand its own sewer system into the annexed territory. Lexington filed a declaratory judgment action against West Columbia and the Central Midlands Council of Governments, claiming it retained the right to provide wastewater services to the area notwithstanding the annexation. The Lexington County Circuit Court granted West Columbia’s Rule 12(b)(6) motion to dismiss, finding Lexington had no right to institute or expand service in the area without West Columbia’s consent. Lexington appealed.
The Court’s Holding
The Court of Appeals affirmed, holding that once an area is annexed by a municipality, the annexing municipality controls whether any other entity may provide utility services within that territory.
South Carolina precedent and statutory law establish a clear rule: a previously assigned utility supplier—whether public or private—does not retain an absolute right to serve premises within a newly annexed area without the annexing municipality’s consent. City of Aiken v. Aiken Elec. Co-op., Inc., 305 S.C. 466, 409 S.E.2d 403 (1991), affirmed that upon annexation a municipality may either (a) consent to continued or expanded service by the previously assigned supplier, or (b) choose to provide the service itself. Berkeley Elec. Co-op., Inc. v. S.C. Pub. Serv. Comm’n, 304 S.C. 15, 402 S.E.2d 674 (1991), and Blue Ridge Elec. Co-op., Inc. v. City of Seneca, 297 S.C. 283, 376 S.E.2d 514 (1989), confirm that “previously assigned suppliers have no absolute statutory right to serve [newly] annexed areas” absent the annexing municipality’s consent. Comm’rs of Pub. Works of the City of Laurens v. City of Fountain Inn, 428 S.C. 209, 833 S.E.2d 834 (2019), similarly confirms that S.C. Code Ann. § 5-7-60 (2004), which provides that municipalities “may” furnish services outside their corporate limits “by contract,” does not create a right for an outside supplier to continue service in an annexed area without consent.
Lexington argued that it had an existing service territory or could readily serve the area, entitling it to continue. The court rejected that argument: the right to “continue” or “expand” service in an annexed area is not self-executing. It requires the annexing municipality’s authorization. Because West Columbia had not consented to Lexington’s continued service in the annexed territory, Lexington had no legally cognizable right to assert in a declaratory judgment action. The Rule 12(b)(6) dismissal was therefore proper.
Key Takeaways
- Once territory is annexed by a South Carolina municipality, the annexing municipality—not any previously assigned utility supplier—controls who may provide utility services (including water, sewer, and electricity) in the annexed area; the prior supplier’s right to serve does not survive annexation absent affirmative consent from the annexing municipality.
- A previously assigned utility supplier that loses service territory to annexation has no independent legal right to compel the annexing municipality to permit continued service; that decision belongs exclusively to the annexing municipality under Aiken Electric, Berkeley Electric, Blue Ridge Electric, and City of Laurens.
- A declaratory judgment action brought by a supplanting utility does not state a claim when the legal predicate for the right claimed—continued service authority in annexed territory—is defeated as a matter of law by annexation; such a complaint is properly dismissed under Rule 12(b)(6), SCRCP, without further proceedings.
- S.C. Code Ann. § 5-7-60, which authorizes municipalities to furnish services outside their limits “by contract,” is permissive authority for the annexing municipality; it does not create rights in favor of outside suppliers seeking to serve newly annexed areas.
Why It Matters
As South Carolina municipalities continue to annex unincorporated areas, disputes between existing utility providers and annexing cities will arise with increasing frequency. Town of Lexington v. City of West Columbia reaffirms the settled rule that annexation is a decisive event for utility service rights: the annexing municipality wins, and prior service arrangements yield to its authority. Municipal attorneys advising cities pursuing annexation campaigns should confirm that utility service plans are addressed as part of the annexation process to avoid litigation with displaced providers. Conversely, utility providers serving territory targeted for annexation should negotiate service-territory agreements before annexation occurs—because once the annexation is complete, they have no legal recourse to compel continuation of service.
Practitioners representing Lexington-style intergovernmental utility disputes should be aware that the existing right-of-way or prior territory assignment does not create a property right that survives annexation. The South Carolina Supreme Court’s consistent line of decisions on this question, from Blue Ridge through City of Laurens, leaves no room for a utility to claim continued service authority without the annexing municipality’s consent.