In the 1974 case Jackson v. Metropolitan Edison Co., the U.S. Supreme Court ruled that a privately owned utility company was not considered a state actor under the Fourteenth Amendment and therefore, did not have to provide due process before terminating service. The plaintiff, Mrs. Jackson, had her electricity cut off by Metropolitan Edison Co., without notice or hearing for alleged tampering with her electric meter which she denied doing so. She argued this violated her right to procedural due process under the Fourteenth Amendment as it deprived of property without due process of law since she claimed that public utilities were essentially government entities because they are heavily regulated by government agencies and often hold exclusive territorial franchises granted by states or municipalities. However, in its decision (5-3), the court held that while private companies may be subject to extensive regulation and serve a public function, these factors alone do not make them an arm of the state for purposes of constitutional requirements such as providing procedural safeguards prior to termination services like electricity supply.

In the dissenting opinion for Jackson v. Metropolitan Edison Co., Justice William O. Douglas argued that the majority's decision was a departure from established precedent regarding state action and public function theories. He contended that by providing a monopoly to Metropolitan Edison, Pennsylvania had effectively transformed it into an arm of the state, making its actions subject to constitutional scrutiny under Fourteenth Amendment due process protections. Furthermore, he asserted that because electricity is such an essential service in modern society, any company providing it should be considered as performing a public function and thus held accountable under constitutional law standards regardless of whether they are privately or publicly owned.