[scott00]

They do not literally mean that money collected from ratepayers can't be used to pay political expenses.

I'm not an expert in this, but roughly speaking the way utility rate regulation works is that rates are set at a level that gives the utility a certain return on capital. (roc = profit/equity = (revenue - expenses) / equity).

What they probably want is for political spending to be excluded from the expenses section of that formula for the purposes of the rate setting calculation. (They would still appear there in GAAP financial statements.)

So the utility would pay those expenses by accepting reduced profits.