3Ar.EI-C
HERALD AND NEWS, Klamath Falls, Ore.
WL-dnetday, May 22, 1963
Court Upholds Area Gas Rate Plan
WASHINGTON UPI - The
.Supreme Court has upheld the
Federal Power Commission's new
method of regulating natural gas
producers rales by areas instead
of by each company's individual
.costs.
I-iThe decision was by a 5-4 vote,
Iiilh Justice John M. Harlan writ
'iba the majority opinion.
i"We recognize the unusual dif-j
firulties inherent in regulating the!
, price of a commodity such as na
. tural gas." Harlan said. "We re
spect the commission's considered
judgment, backed by sound and
persuasive reasoning, that the in
dividual company cost-of-service
method is not a feasible or suit
. able one for regulating the rates
'.oS independent producers."
; :"We share the commission's
hopes that the area approach may
prove to be the ultimate solu
tion," he said for the majority.
Hie court's action empowers the
FPC to stabilize gas rates for thel
consumer. Under the individual
cost formula, rates fluctuated
widely.
Dissenters were Chief Justice
Earl Warren and Justices Tom C
Clark, Hugo L. Black and William
IJ- Brennan Ar.
The lawsuit was a continuation
of a 1954 landmark case when the
Supreme Court ruled that the;
rPC has jurisdiction lo regulate
wholesale rates of 3,(Xin or more
producers. Before that, it had been
confined to rates of pipelines.
In fixing pipeline rates, the com
mission traditionally considered
separately each company's costs
of service. Then it allowed rates
to provide a fair return on invest
ment. In the 1934 Phillips case, the
commission adopted an entirely
new formula because of the vast
differences between producer and
pipeline operations.
It announced that it would fix
prices on a sectional bases by fix
ing ceilings in 23 specified areas.
Clark, speaking fnr Ihe dissent-1
ers, was highly critical ol the
commission,
Discussing the area plan, he
said:
"If the higher and lower costs
are averaged, as the commission
indicates it intends lo do. then the
higher cost producer will still not
recover his cost and the rate will
be confiscatory.
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