Law Review THE PERMIAN BASIN AREA RATE CASES AND THE REGULATORY DETERMINATION OF PRICE *

The first area rate proceeding conducted by the Federal Power Commission is now pending before the United States Supreme Court.' In this proceeding, the Federal Power Commission established ceiling prices for natural gas produced in the Permian Basin area of Texas and New Mexico and sold to interstate pipelines. In additional proceedings, now at various stages of prosecution, the Commission will establish ceiling prices for the other gas producing areas of the United States.2 The Permian Basin decision raises a fundamental question about price regulation in an era freed from the constraints of substantive due process: What legal standards govern price regulation under traditional American regulatory statutes providing for "just and reasonable" rates? In the Permian Basin decision the Federal Power Commission established a ceiling price of 16.5 cents per thousand cubic feet (known