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This paper examines the economic and regulatory effects of legalizing
electric utility campaign contributions. Exploiting variation
in state campaign finance laws and the 2005 repeal of the
Public Utility Holding Company Act, which lifted a federal ban on
utility treasury contributions, I find that legalization significantly
increased the return on equity authorized by state regulators. Although
higher authorized returns encourage investment, distribution
plant in service declined, contributing to a deterioration in
service reliability and billions in annual outage costs. These findings
show that utility campaign contributions can shape regulatory
policy in utilities’ favor while imposing substantial costs on consumers.
