In the 1916 case of Puget Sound Traction, Light & Power Company v. Reynolds et al., the U.S. Supreme Court dealt with a dispute over rates set by Washington State's Public Service Commission for electricity provided by Puget Sound Traction, Light & Power Company (PSTLPC). The PSTLPC argued that these rates were unreasonably low and violated their constitutional rights to due process and equal protection under the Fourteenth Amendment. However, the court ruled in favor of Reynolds and upheld the state commission's rate-setting authority. It found no violation of PSTLPC’s constitutional rights as long as it was allowed a fair return on its investment; this principle became known as "just compensation". This decision reinforced states' regulatory powers over utilities while also establishing guidelines to prevent potential abuses against utility companies.

In the dissenting opinion for Puget Sound Traction, Light & Power Company v. Reynolds et al., it was argued that the state of Washington did not have the authority to regulate rates charged by a private utility company without violating constitutional protections against unlawful seizure of property. The dissenters believed that setting maximum rates effectively seized control over a portion of the company's revenue stream and thus constituted an unconstitutional taking without just compensation. They also contended that such regulation interfered with interstate commerce, as many customers affected were outside Washington State. Furthermore, they asserted that due process rights had been violated because there was no fair hearing before rate changes were imposed; instead decisions were made unilaterally by a public service commission whose members may have held biases or conflicts of interest.