In the case of Puget Sound Power & Light Co. v. Seattle in 1933, the Supreme Court ruled on a dispute between a private utility company and the city of Seattle over rates for electricity. The court held that while cities have broad powers to regulate utilities within their jurisdiction, they cannot set rates so low as to be confiscatory or prevent companies from earning a reasonable return on their investment. This decision established an important precedent in American law by recognizing that private property used for public service is still protected under the Fifth Amendment's prohibition against taking property without just compensation.

In the dissenting opinion for Puget Sound Power & Light Co. v. Seattle, Justice McReynolds disagreed with the majority's decision to uphold a municipal ordinance that allowed Seattle to charge higher rates for electricity than those set by state law. He argued that this violated the company's constitutional rights under the Fourteenth Amendment, which guarantees equal protection of laws and prohibits states from depriving any person or corporation of property without due process of law. According to him, it was unfair and unconstitutional for different jurisdictions within a single state to impose different rate structures on utilities providing essential services like electricity. This inconsistency in regulation could lead to arbitrary and discriminatory practices against utility companies operating in multiple jurisdictions within a state.