United Fuel Gas Co. v. Railroad Comm'n - 278 U.S. 300 (1929)
U.S. Supreme Court
United Fuel Gas Co. v. Railroad Comm'n, 278 U.S. 300 (1929)
United Fuel Gas Company v. Railroad Commission of Kentucky
Argued November 28, 1927
Reargued October 15, 16, 1928
Decided January 2, 1929
278 U.S. 300
1. Federal courts having jurisdiction of a cause through questions raised under the federal Constitution may pass on all questions of state law involved. P. 278 U. S. 307.
2. Parties who have procured action by a state commission under a state statute may not assail that action in a federal court of equity upon the ground that that statute, or the one creating the commission, is void under the state constitution. P. 278 U. S. 307.
3. A state may compel a public service company to continue to use its facilities to supply an existing need so long as it continues to do business elsewhere in the state. P. 278 U. S. 308.
4. A public service company is bound by the common law, if not by statute, to render its service at reasonable rates, and if the rates fixed by a state commission are not shown to be confiscatory, a suit in equity to enjoin their enforcement will not lie merely because the order purporting to impose them was void for other reasons under the state or federal constitution. P. 278 U. S. 309.
5. A public utility seeking to set aside as confiscatory a rate fixed by state authority has the burden of proving by clear and convincing evidence the value of property on which it is constitutionally entitled to earn a fair return. P 278 U. S. 313.
6. In an attack on rates fixed for a company supplying gas to consumers in Kentucky which was a subsidiary of a West Virginia company owning, leasing and operating extensive natural gas fields in the latter state, it was sought to prove the value of the West Virginia gas rights in order that a portion of it might be allocated to the subsidiary, and the method adopted depended on an estimate of the quantity of available gas in the lands and a computation of the profits that would accrue if, during the next eighteen years, this were extracted, piped to a place in Pennsylvania where there was a market for fuel gas free from public regulation, and there sold at current prices. Held that the value, so computed, of property used in a business whose rates are regulated could not be accepted, for not only was it made to depend on an assumed earning capacity, but also the evidence of this earning power was too speculative because, among other possible objections, it rested on predictions that the prices would remain unregulated for a long future period, and that gas, to the amount estimated, would be available as required and could be sold at those prices through that period in a market yet to be established, despite future inventions and improved business and manufacturing methods, and a prediction of what plant and equipment must be constructed and maintained to effect delivery of gas for that period, and of the cost of maintaining and operating it. P. 278 U. S. 317.
7. A public service corporation may not make a rate confiscatory by reducing its net earnings through the device of a contract unduly favoring a subsidiary or a corporation owned by its shareholders. P. 278 U. S. 320.
13 F.2d 510 affirmed.
Appeal from a decree of the district court which dismissed a bill for an injunction to restrain the Railroad Commission of Kentucky from establishing an alleged confiscatory rate for the sale of natural gas.