The U.S. Supreme Court case Bluefield Water Works & Improvement Company v. Public Service Commission of the State of West Virginia in 1922 revolved around a dispute over rate regulation for public utilities. The Bluefield Water Works and Improvement Company challenged the rates set by the Public Service Commission of West Virginia, arguing that they were so low as to be confiscatory and thus violated their constitutional rights under the Fourteenth Amendment's due process clause. However, the court upheld these rates, asserting that it was within states' regulatory powers to establish reasonable utility rates aimed at protecting consumers from excessive charges while still allowing companies a fair return on investment. This decision established an important precedent in American law regarding rate-setting for public utilities.

In the dissenting opinion for Bluefield Water Works & Improvement Company v. Public Service Commission of West Virginia, Justice McReynolds argued that the court overstepped its bounds by intervening in a state matter and substituting its judgment for that of local authorities. He contended that it was not within the purview of federal courts to determine fair rates for public utilities at a state level, as this responsibility should be left to local regulatory bodies who are more familiar with specific conditions and needs. Furthermore, he expressed concern about potential negative impacts on future investments in public utilities if investors feared federal intervention could lead to lower returns. Ultimately, he believed such decisions were better suited for legislative rather than judicial action.