THE DEMISE OF FAIR VALUE

Two years ago, in discussing the Natural Gas Pipeline Company case, the writer ventured the opinion that "while it cannot be stated with certainty that the decision marks the demise of that hardy perennial--fair value--since the majority opinion did not explicitly repudiate that doctrine," there was language which indicated that such would nevertheless be the result of the decision. This prophecy now appears to be substantiated by the decision of the Supreme Court on January 3, 1944, in Federal Power Commission v. Hope Natural Gas Company. In the Pipeline Company case Chief Justice Stone stated significantly that "the Constitution does not bind rate-making bodies to the service of any single formula or combination of formulas," and that "if the Commission's order, as applied to the facts before it and viewed in its entirety, produces no arbitrary result, our inquiry is at an end." This statement is not necessarily inconsistent with the Smyth v. Ames doctrine," however, and it was not clear in the Pipeline Company case whether the rate reduction ordered by the Federal Power Commission was sustained because the rate base and level of earnings allowed by the commission were higher than were required by the Smyth v. Ames test of confiscation, or whether the Court had substituted for that test the economic test of confiscation and had sustained the reduction because it did not prevent the company from operating profitably and successfully.