Eagerton, Robert Pierce

Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400 (1983), is a U.S. Supreme Court decision interpreting the Contract Clause of the U.S. Constitution. The Court upheld the Kansas Natural Gas Price Protection Act, finding that it did not unconstitutionally interfere with existing private contracts. The case arose when Energy Reserves Group, Inc. challenged the Kansas law. Energy Reserves Group’s predecessor had previously entered into two intrastate gas contracts with Kansas Power & Light Co., both of which included price escalator clauses. After the Federal Natural Gas Policy Act of 1978 was passed to promote the deregulation of natural gas, the state of Kansas passed a law that restricted price increases in contracts. Kansas Power & Light followed the state law, refusing to pay higher prices. Energy Reserves Group argued that the law violated the Contract Clause by interfering with contract pricing terms. The Supreme Court disagreed, finding that Kansas had a legitimate interest in protecting consumers from price hikes. The Court made clear that the Contract Clause does not ban all state involvement in private contracts.