Federal Power Commission v. Hope Natural Gas Company
United States Supreme Court
320 U.S. 591 (1944)
- Written by Galina Abdel Aziz , JD
Facts
Hope Natural Gas Company (Hope) (plaintiff) sold gas in interstate commerce. Hope’s customers complained that the rates were excessive. The Federal Power Commission (FPC) (defendant) ordered a reduction to a future rate of $33,712,526. Hope challenged the rates as confiscatory and contended that the rate base should be $66,000,000. Hope’s rate included reproduction cost and the trended original cost, which FPC refused to include because such estimates were not predicated on facts. Hope also contended that the rate of return should be 8 percent, and FPC contended that the rate of return should be 6.5 percent, which would have produced $2,191,314 annually. The circuit court of appeals set aside FPC’s order, finding that (1) the rate should reflect the present fair value, not the actual legitimate cost, including the reproduction cost and the trended original cost; (2) the rate should include the well-drilling costs and overhead items; and (3) the accrued depletion and depreciation and annual allowance should be computed based on the present fair value, not the actual legitimate cost.
Rule of Law
Issue
Holding and Reasoning (Douglas, J.)
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