PUBLIC UTILITIES - RATE REGULATION - REPRODUCTION COST AND PRUDENT INVESTMENT AS FACTORS IN DETERMINING "FAIR VALUE"

At a hearing conducted by the California Railroad Commission, the existing gas rates charged by a utility were deemed unreasonable, and a new schedule of rates was prescribed. The commission, in determining the rate base, used historical cost exclusively, and refused to attach any weight to the present cost of reproducing the properties. A three-judge federal court enjoined the enforcement of the rates without making a finding that as prescribed the rates were confiscatory. Held, by a majority of the Court, the trial court was without power to enjoin the enforcement of the rates, regardless of the method of valuation employed by the commission, as long as the rates were not confiscatory and the company was not denied the elements of a fair hearing.

Railroad Commission of California v. Pacific Gas & Electric Co., (U.S. 1938) 58 S. Ct. 334.