Municipal utilities are usually a part of the municipal government of a city or area, and function like a department of that government. However, sometimes they are an agency of the city governed by a separate board. Money for capital comes basically from taxes and/or local government or municipal utility bonds. Operating revenues again pay for operating expenses, and help contribute toward capital.
Municipal utilities usually serve a city or town and the "service area" or geographical territory in which they delivery electricity is often defined precisely by the town's city limits. Some municipal utilities serve several cities or other governmental areas depending on geographic contiguity and state or local statutes. Municipals may be quite large or quite small. They may own all facets of the electricity-producing system like an investor-owned utility, or they may own just the facilities to deliver the power, buying electricity in bulk from another company, typically an investor-owned utility.
Most municipal utilities in the United States belong to an industry association called the American Public Power Association. APPA helps develop marketing, operating and technical equipment guidelines for its members.
A municipal utility is, of course, completely operated by its city government or its separate city agency. City and county governments decide issues that affect a utility's operations, such as zoning laws, procedures for acquiring property easements, certain equipment requirements and so forth.