Ohio Valley Water Co. v. Ben Avon Borough

Background

A water company and several local boroughs fought over whether the company was charging unreasonable rates. The Pennsylvania Public Service Commission investigated, valued the company’s property at $924,744, and ordered lower rates designed to yield a seven percent return. The company appealed; the state Superior Court reviewed the record, raised the valuation to $1,324,621.80, and ordered higher rates. The Pennsylvania Supreme Court then reinstated the Commission’s lower- rate order.

Reasoning

The key question was whether Pennsylvania’s review procedures allow an independent judicial hearing when a company claims the rate order amounts to confiscation of its property. The majority concluded the state courts, as the Supreme Court of Pennsylvania had construed the statute, did not give the company the clear, independent judicial review the Fourteenth Amendment requires. The U.S. Supreme Court therefore reversed the state supreme court and sent the case back so the state courts can provide or identify an adequate judicial forum.

Real world impact

The decision means utilities subject to state rate-making may get a clearer chance in state court to argue that orders would confiscate their property. Regulators must recognize that when confiscation is claimed, a plainly available judicial review is required. This ruling remands the case and does not itself decide whether the company’s property was undervalued.

Dissents or concurrances

Justice Brandeis dissented, arguing the company already had an adequate remedy (an injunction procedure under the statute) and that substantial evidence supported the Commission’s valuation, so the state court’s reinstatement should stand.