issued under the provisions of the Natural Gas Act. The injuries here were therefore occasioned by the application of federal law in a federal court, and raised federal, and not state law questions. For a federal court to remedy this injury by affording that protection to consumers which the act contemplated, cannot, in my judgment, be said to amount to a regulation of local gas rates.

The Natural Gas Act contemplates that federal reduction of wholesale gas rates to distributors will be reflected in reduction of retail rates to the ultimate consumers. Information before the Congress when it passed the Natural Gas Act showed that a large percentage of the retail cost of gas was attributable to the wholesale cost. Thus the wholesale cost is a critical element in a state proceeding to regulate retail cost. An effective order of the Federal Power Commission reducing wholesale costs affords local consumers a basis for a corresponding retail reduction. But a federal rate reduction order cannot be utilized before state regulatory agencies where the federal reduction order has been stayed by a federal court. Thus, during the three years that the Power Commission's rate reduction was held in abeyance pursuant to the stay orders, the Iowa consumers were deprived of the opportunity to obtain a reduction of their rates from the local regulatory agencies. The City of Muscatine, Iowa, promptly passed an ordinance reducing local gas rates after vacation of the orders staying enforcement of the Power Commission's rate reduction.

Ultimate consumers can secure benefits from a federal rate reduction in two ways: (1) by using the order to get

4 * See Final Report of the Federal Trade Commission to the Senate, Sen. Doc. 92, Part 84-A, 70th Cong., 1st Sess., pp. 611, 612; Cong. Record, 75th Cong., 1st Sess., vol. 81, pp. 6723, 6725, 6728; Hearings Before the House Committee on Interstate & Foreign Commerce, 75th Cong., 1st Sess., on H. R. 4008, pp. 27, 38-39, 56–57; Hearing on H. R. 11662, House Subcommittee on Interstate & Foreign Commerce, 74th Cong., 2d Sess., pp. 25, 34-35, 81.

637582° 46- -14

reduced rates before their local regulatory bodies; (2) by the impounding of funds for their benefit if a judicial stay of the federal reduction order is granted. The stay deprived these local consumers of a chance to use the Commission's order to obtain a local rate reduction. The holding of this Court partially, if not completely, deprives them of the benefits of the impounded funds. Cf. First National Bank v. Flershem, 290 U. S. 504, 520.

To deny petitioner distributing company a refund of the impounded monies would impose no deprivation upon it. Petitioner's local rates were fixed by a Muscatine city ordinance, to which rates the petitioner alleges it voluntarily agreed. That schedule of rates, petitioner argues, was "presumptively reasonable." 5 Petitioner admits that Iowa law requires the wholesale cost of gas to be one of the factors considered in determining the reasonableness of rates. The petitioner's rates must therefore be considered reasonable on the basis of the old wholesale price of gas, and any increment above those rates is a "windfall."

6

Furthermore, the petitioner says it was free under Iowa law to attack the rates at any time as too low. This it never did. Instead, it refrained from doing so until this Court had sustained the Commission's order reducing wholesale rates, and until the Circuit Court of Appeals had adjudged that the monies belonged to the consumers. Not until then did it file its intervention claim for the impounded funds. The reason for this delay is not difficult to find. Petitioner, in arguing here that it should get

5 Petitioner cites in support of its argument, Iowa Railway & Light Co. v. Jones Auto Co., 182 Iowa 982, 164 N. W. 780; Town of Williams v. Iowa Falls Electric Co., 185 Iowa 493, 170 N. W. 815; Knotts v. Nollen, 206 Iowa 261, 218 N. W. 563; Mapleton v. Iowa Public Service Co., 209 Iowa 400, 223 N. W. 476.

See Cedar Rapids Gas Co. v. Cedar Rapids, 144 Iowa 426, 120 N. W. 966, aff'd 223 U. S. 655.

this impounded fund, asserts that under Iowa law "municipalities may only fix rates prospectively." Iowa cases cited by the petitioner seem to give some support to this contention, especially when considered with decisions of this Court dealing with analogous statutory situations. I am therefore unable to see much likelihood of these consumers obtaining relief in the Iowa state courts for the injury they have suffered as a result of the federal court's action in granting a stay of the Federal Power Commission's order.

If my previous analysis is correct, the rule announced by the Court today means simply this: So long as litigation can be kept pending in the courts as to the validity of a Federal Power Commission rate reduction order, the benefits of the Natural Gas Act will be suspended as to ultimate consumers, and will be largely, if not exclusively, restricted to retail distributors. Thus, by a strange quirk of statutory construction, the effort of Congress to protect consumers from excessive rates is transformed, where litigation is pending, into an Act which exploits consumers and unjustly enriches distributing companies. This Company has already received a reasonable compensation for

* See note 5, supra.

Cf. Public Utilities Commission v. United Fuel Gas Co., 317 U. S. 456; Arizona Grocery Co. v. Atchison, T. & S. F. R. Co., 284 U. S. 370, 389.

• When a rate schedule embodying a proposed increase in wholesale rates becomes effective, pending a determination by the Commission of the reasonableness of such increase, the Commission is authorized to require appropriate guarantees by §4 (e) of the Act. The Commission may require the natural gas companies ". . . to furnish a bond, to be approved by the Commission, to refund any amounts ordered by the Commission, to keep accurate accounts in detail of all amounts received by reason of such increase, specifying by whom and in whose behalf such amounts were paid . . ." This would appear to be broad enough to protect consumers where the amounts were paid in their behalf. Surely the Act gives no less power to a court.

DOUGLAS, J., dissenting.

324 U.S.

its services. It is entitled to no more under Iowa or federal law.

MR. JUSTICE MURPHY and MR. JUSTICE RUTLEDGE concur in this dissent.

MR. JUSTICE DOUGLAS, dissenting.

I think that the claims to the fund in possession of the court below are to be determined by state law. The Federal Power Commission has no authority to determine the rates which petitioner may charge in these Iowa cities. Under the Natural Gas Act that is for Iowa and Iowa alone to determine. Public Utilities Commission v. United Fuel Gas Co., 317 U. S. 456, 467; Federal Power Commission v. Hope Natural Gas Co., 320 U. S. 591, 610. In that respect this case differs markedly from United States v. Morgan, 307 U. S. 183. If there had been no stay order entered and the interstate rate from the Pipeline company to petitioner had been reduced when the Federal Power Commission entered its order, it still would have taken action by the local authorities to reduce the rates in these Iowa cities.

But the federal court which has this fund has considerable discretion in its management. United States v. Morgan, supra. I fail to see how it abused its discretion in handing the fund over to the local officials. It is only fair to assume that a reduction in the interstate rate would have been followed by a reduction in local rates.' That indeed was the primary objective of the Natural Gas Act. Federal Power Commission v. Hope Natural Gas Co., supra. We are pointed to no provision of local law which raises any substantial question concerning the power of the local authorities to make a readjustment of rates

1 The City of Muscatine did in fact reduce the rates after the stay order had been vacated.

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DOUGLAS, J., dissenting.

through the distribution of funds impounded under a stay order. And the claim of petitioner that the local law would prevent a reduction in its rates for the period while the stay order was in effect is far too vague to acquire the dignity of a substantial question.3 He who maintains that position has the distinct burden of overcoming the presumption that as a matter of local law the consumers were entitled to the benefits of this rate reduction. Petitioner fails to carry that burden. The record is void of any credible evidence that a reduction in the interstate rate would not have warranted a reduction in local rates.

Petitioner is adequately protected by the decree entered by the court below. That court did not undertake finally to determine the rights of the parties in the fund. It has turned the fund over to respondents without prejudice to petitioner's rights in it. Those rights are determinable under Iowa law. That procedure does not preclude petitioner from its day in an Iowa court if its claim to the fund turns out to be less frivolous and more substantial than it appears to be. I think the court below selected the most equitable and just method of rectifying the injury done by its stay order.

2 Petitioner asserts, and I assume, that under the Iowa law rates can be made only prospectively. But it appears from Town of Williams v. Iowa Falls Electric Co., 185 Iowa 493, 500, 170 N. W. 815, that the Iowa courts under their "balance of convenience" rule will impound alleged excessive amounts collected by a utility company pending the outcome of rate litigation so as to protect the rights both of the utility and the consumers. If the rate increase is ultimately disallowed, the impounded funds will be returned to the customers; otherwise they will be turned over to the company. We are pointed to no authority which suggests that Iowa would not sanction the use of such a method of readjustment under the circumstances of this case.

3 So far as appears the rates which petitioner was charging during the period of the stay order had been volunta" proposed by it.