In the 1932 case of Los Angeles Gas & Electric Corp. v. Railroad Commission of California, the Supreme Court ruled in favor of state regulatory power over utility rates. The Los Angeles Gas and Electric Corporation challenged a decision by the California Railroad Commission that reduced gas and electricity rates for consumers, arguing it was an unconstitutional deprivation of property without due process under the Fourteenth Amendment because it would not allow them to earn a fair return on their investment. However, Justice Benjamin Cardozo wrote for a unanimous court that while corporations have a right to charge reasonable rates for services provided, they do not have an absolute right to profits from those services at consumer expense. Therefore, states can regulate utility prices as long as they are within reason and provide utilities with just compensation.

In the dissenting opinion for Los Angeles Gas & Electric Corp. v. Railroad Commission of California, Justice McReynolds disagreed with the majority's decision to uphold a rate order issued by the California Railroad Commission against LA Gas & Electric Corp. He argued that this ruling effectively allowed state authorities to confiscate private property without just compensation, violating constitutional rights under the Fourteenth Amendment’s due process clause. According to him, it was not enough for rates set by public utilities commissions to merely prevent bankruptcy; they should also allow utility companies a reasonable return on their investments and properties used in service delivery. Furthermore, he criticized how evidence was evaluated in determining whether rates were fair or discriminatory and suggested that courts should have more leeway in reviewing such decisions made by regulatory bodies like public utilities commissions.