With so many controversial items included in the energy bill being considered in Congress, a utility consumer protection act has gotten little attention. That’s too bad.

The Public Utilities Holding Company Act has prevented utility megamergers of the kind that contributed to the stock market crash of 1929. The act would be repealed under both the House and Senate versions of the energy bill. The Senate bill at least requires some Federal Energy Regulatory Commission oversight of proposed utility mergers, but it will not replace the safeguards that PUHCA provided.

PUHCA, pronounced pooka, signed into law in 1935 by President Franklin Roosevelt, aimed to end speculative investing and profiteering in the utility industry. In the 1920s three large companies owned half the nation’s utilities. Utilities were touted as good investment because customers were guaranteed to provide income to shareholders through the rates they paid for electricity and other forms of energy. With the crash of 1929, many small investors were wiped out after having been sold on the reliability of utility stock as an investment.

For more than 50 years, PUHCA has not hindered the production of electric power, nor has it prevented economic growth. No company regulated under the act has gone bankrupt.

The act requires that the Securities and Exchange Commission approve the merger of utility companies. Such oversight is needed because state Public Utilities Commissions are not able to evaluate the merits and pitfalls of a merger between companies that are often located in distant states. The PUCs are also not in position to determine if a non-utility company is capable of reliably running a utility. PUHCA also restricts foreign ownership of U.S. utilities and restricts mergers of utilities in areas that are not geographically contiguous. The SEC recently rejected the merger of a Missouri utility and another in the southwestern United States, saying there would be no benefit to consumers in either area.

PUHCA also subjects utility finances and operations to strict regulation by the states and federal government. Most importantly, it restricts ownership of utilities to public or private entities that are in the business of producing power.

The Senate energy bill helps a little by giving FERC some oversight. However, the standards for review are weaker and the FERC review can be “fast tracked,” meaning it will be less thorough.

The repeal of PUHCA has been proposed numerous times in the last decade. Repeal failed last year when Congress could not agree on an energy bill. That could happen again this year. If so, Congress will have more time to consider the benefit of PUHCA and the pitfalls of repealing it.