FPC v. Hope Nat. Gas Co.,
320 U.S. 591 (1944)

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U.S. Supreme Court

FPC v. Hope Nat. Gas Co., 320 U.S. 591 (1944)

Federal Power Commission v. Hope Natural Gas Co.

No. 34

Argued October 20, 21, 1943

Decided January 3, 1944*

320 U.S. 591


1. The validity of an order of the Federal Power Commission fixing rates under the Natural Gas Act is to be determined on judicial review by whether the impact or total effect of the order is just and reasonable, rather than by the method of computing the rate base. P. 320 U. S. 602.

2. One who seeks to have set aside an order of the Federal Power Commission fixing rates under the Natural Gas Act has the burden of showing convincingly that it is unjust and unreasonable in its consequences. P. 320 U. S. 602.

3. An order of the Federal Power Commission reducing respondent's rates for sales of natural gas in interstate commerce held valid under the Natural Gas Act. P. 320 U. S. 603.

The rate base determined by the Commission was found by it to be the "actual legitimate cost" of the company's interstate property, less depletion and depreciation, plus allowances for unoperated acreage, working capital, and future net capital additions. "Reproduction cost new" and "trended original cost" were given no weight. Accrued depletion and depreciation and the annual allowance for depletion and depreciation were determined by application of the "economic service life" method to "actual legitimate cost."

4. Considering the amount of the annual return which the company would be permitted to earn on its property in interstate service, and the various factors which that return reflects, this Court is unable to say that the rates fixed by the Commission are not "just and reasonable" under the Act. P. 320 U. S. 604.

5. Rates which enable a natural gas company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed cannot be condemned as unjust and unreasonable under the Natural Gas Act, even though

Page 320 U. S. 592

they might produce only a meager return on a rate base computed on the "present fair value" method. P. 320 U. S. 605.

6. The rationale of the decision renders it unnecessary to determine whether the Commission's exclusion from the rate base of well drilling and other costs, previously charged to operating expenses, was consistent with the "prudent investment" theory as developed and applied in particular cases. P. 320 U. S. 605.

7. United Railway Co. v. West, 280 U. S. 234, so far as it rejects cost as the basis of depreciation allowances, is disapproved. P. 320 U. S. 606.

8. The requirements of the Constitution in respect of rates are not more exacting than the standards of the Act, and a rate order valid under the latter is consistent with the former. P. 320 U. S. 607.

9. In fixing "just and reasonable" rates under §§ 4 and 5 of the Natural Gas Act, for natural gas sold in interstate commerce by a private operator through an established distribution system, the Commission was not required to take into consideration the indirect benefits -- affecting the economy, conservation policies, and tax revenues -- which the producing State might derive from higher valuations and rates. P. 320 U. S. 609.

10. The suggestion that the Commission did not allow for gas production a return sufficient to induce private enterprise to perform completely and efficiently its functions for the public is unsupported. P. 320 U. S. 615

11. The Commission is not empowered by the provisions of §§ 4 and 5, which authorize it to fix "just and reasonable" rates, to fix rates calculated to discourage intrastate resales for industrial use. P. 320 U. S. 616.

12. The question whether the rates charged by the company discriminate against domestic users and in favor of industrial users is not presented. P. 320 U. S. 617.

13. Findings of the Commission as to the lawfulness of past rates held not reviewable under §19(b) of the Act. P. 320 U. S. 618.

134 F.2d 287 reversed.

Certiorari, 319 U.S. 735, to review a decree setting aside an order of the Federal Power Commission, 44 P.U.R.(N.S.) 1, under the Natural Gas Act.

Page 320 U. S. 593

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