Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTLeonard Hyman & William TillesMon, June 29, 2026 at 9:00 PM GMT+2 6 min readFollowing the June 2026 primary elections in NYC, in which democratic socialist Mayor Mamdani's preferred slate enjoyed considerable electoral success, much has been written about the political implications. Our take is really simple. The last time the democratic socialists gained power, especially in major US cities, many of their policies were adopted by Progressives or New Dealers. In either case, that meant a far more intrusive regulatory environment for utilities. The Progressives laid the foundation for our existing regulatory apparatus with scrutiny over operations and capital funding, while the New Deal experimented with outright public ownership as a means of reducing the influence of investor-owned monopolies such as the Southern Company. And now we've had roughly 100 years of experience with Progressive administrative reforms and 80-plus years with New Deal-inspired public ownership of utility assets. To us the results are pretty clear. Regulatory agencies were initially created, with the best of intentions, to represent the public's interest versus powerful monopolies. Due to regulatory capture (i.e. domination of administrative proceedings by wealthy corporate interests), these once Progressive-inspired entities have been hollowed out like a cheap chocolate easter bunny.But the main issue for us today is that leftist political movements always ask very unpleasant questions from an investor's perspective. For instance, why do we need equity investors at all in a low-risk, monopoly business like electricity? Critics claim, not without some justice, that utility equity investors provide higher cost risk capital for a low-risk monopoly that does not require it. Stated simply, they ask whether equity investors are being paid too much for, in essence, doing too little. If we look around the world, we can see the difference and it's not simply how generously equity investors are rewarded in other places, but rather how differently US utilities are capitalized. Comparatively speaking, we allow our utilities to employ an enormous amount of equity financing, around 50% of capital structures currently, in an extremely low risk monopoly business, which makes absolutely no sense. Why? Because business risk (potential revenue volatility) and financial risk (the percent of debt in the capital structure) are supposed to be inversely correlated. Meaning low business risk utilities with extremely stable revenue streams can tolerate the highest levels of (much cheaper) debt in their capital structures. And instead we do the opposite, which increases power costs dramatically. By contrast, the comparable percentage of equity in the capitalization of a typical French utility is zero because it is government-owned. In Japan, in the pre-Fukushima-Daiichi days, the utilities only had 20% equity layers and were highly regarded by investors. And when Bonbright published his seminal work on US utilities in the 1930s, he thought a 30% equity layer was just about right. This is our best evidence of regulatory capture in the US. From a comparable perspective, our regulators permit way too much equity in a low risk, monopoly business (thereby unnecessarily imposing higher costs on all energy consumers) and that equity is also being compensated at a historically relatively high rate as well.Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info