William O. Douglas

“ Averages are apt to take us with Alice into Wonderland. That is one reason why the case should be remanded to the Commission for further findings.
The Commission will allow individual application for relief from these new rates. But it has not prescribed the terms and conditions on which relief will be granted. It has said, however, that an individual producer must show more than that its cost of service is greater than the averages on which the rate is based. 34 F.P.C., at 180.
In a regulated industry there is no constitutional guarantee that the most inefficient will survive. ”

“ Now that Phillips has put the prices of producers under federal control, the interests of the producing States must be considered, appraised, and weighed as an important ingredient of the 'public interest.' Regulation of wellhead prices by the Commission directly influences the level and feasibility of production, and can significantly affect the producing States' regulation of production. ”

“ Justice Jackson in Hope that a system of regulation be authorized which would center not on the producer but on the product 'which would be regulated with an eye to average or typical producing conditions in the field.' 320 U.S., at 652, 64 S.Ct., at 311. But the Court rejected that approach, saying that §§ 4 (a) and 5 (a) of the Natural Gas Act contained 'only the conventional standards of rate-making for natural gas companies.' Id., at 616, 64 S.Ct., at 294.
Group regulation of rates is not, of course, novel. It has at times been authorized. ”

“ Justice Brandeis said, 'averages' are apt to be 'misleading.' An average cost may indeed not be representative of any producer.
The Commission allowed a 12% rate of return, the return being 'on capital invested in finding new gas well gas.' 34 F.P.C., at 306, 343. 'Production investment costs' constituted this 'capital invested' and were the bases to which the Commission applied the 12% rate to arrive at a return of 5.21¢ per Mcf to be included in the rate base for new gas-well gas. ”

“ A substantial portion of their taxes on the production of natural gas within their boundaries goes into school funds. They say that the 'public interest' entrusted to the Commission by 15 U.S.C. § 717 (a) includes the interest of the States where the gas is found. They claim that pricing can be disastrous to the producing States and urge the need for threefold findings by the Commission to ensure an adequate supply of natural gas for future use:
'First, the Commission must determine the quantity of gas needed to constitute an adequate future supply. ”

“ Does that make 52.5¢ per Mcf representative of either producer or typical of all producers, or, indeed, typical of any producer, even if the 52.5¢ per Mcf is stable over the entire period of years?
The Commission could follow the lead of the Interstate Commerce Commission and produce rates on a group basis. But it simply has not done so in any rational way. ”

“ But they were likewise determined on the basis of averages. See 34 F.P.C., at 197-198, 295, 377-382.
The average per capita income of a Middle East kingdom is said to be $1,800 a year. But since one man-or family-gets most of the money, $1,800 a year describes only a mythical resident of that country.
The 12% return allowed by the Commission and computed on an average-cost basis may likewise have no relation whatever to the reality of the actual costs of any producer.
One producer's cost, though varying from year to year, may average out at $1 per Mcf. Another's may average out at 5¢ per Mcf. ”

“ Hope Natural Gas Co., supra, 320 U.S., at 616, 64 S.Ct., at 294) and providing in §§ 4 (a) and 5 (a) that all rates of 'any' natural gas company be 'just and reasonable.' Beyond the group is the single producer; beyond the community of producers is the individual. ”

“ Cost of service includes operating expenses and capital charges. FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 607, 62 S.Ct. 736, 753, 86 L.Ed. 1037 (concurring opinion) . With that protection I can see no reason why group rates may not be sanctioned here. But more is required than the Commission undertook to do in these cases. In the present cases the Commission found averages; but there are no findings as to the typicality and representative nature of those averages. [2] We certainly cannot take judicial notice that the averages are typical. Mr. ”

“ Abilene & S.R. Co., 265 U.S. 274, 44 S.Ct. 565, 68 L.Ed. 1016; Chicago & N.W.R. Co. v. A., T. & S.F.R. Co., 387 U.S. 326, 87 S.Ct. 1585, 18 L.Ed.2d 803. See also § 15 of the Interstate Commerce Act, as amended, 24 Stat. 384, 49 U.S.C. § 15 (3) . ”