Pilot reported an electrical failure during cruise requiring an immediate return to the departure airport. Post flight inspection revealed the engine muffler had not been reinstalled correctly; resulting in an exhaust leak that set fire the the generator harness.

Narrative

I regret to inform you that on the evening of Day 0; while flying Aircraft X; a Mooney M20C; I experienced a sudden and unexpected electrical failure. As a result; all electrical systems on the aircraft ceased to function; including the cockpit instrumentation; lights; and radios. Additionally; smoke began to emanate from the cockpit; further complicating the situation.In response to this situation; I immediately started an immediate procedure and began the process of identifying a suitable landing site. After carefully assessing my options; I decided to return to ZZZ; the departure airport; as it was the closest and most familiar landing site available. I was able to safely land the aircraft without incident. Once on the ground; I immediately shut down the engine and evacuated the aircraft. Subsequent examination after landing revealed that the intake air filter was on fire and with the assistance from the people on the ground; I was given a fire extinguisher and put out the fire. The police were called and the fire department both responded to the incident. The next day during daylight hour the ZZZ Fire Department investigated the incident. A qualified fire official revealed faulty wiring as a possible root cause of the electrical failure.I can assure you that I followed all appropriate procedures and acted with the utmost caution and professionalism throughout this incident.For the safety of aviation and other people; I will tell you how the problem arose from poor maintenance. 2 days before the flight I was inspecting the muffler and left the cabin heater cover over the muffler loose. The fumes escaped from a hole in the muffler and started a fire on the cabin heating duct under the generator. This engine is not very fuel efficient and a great amount of fuel vapor got out of the exhaust unburned. Unfortunately; it was discovered in flight where a rich mixture was been used during takeoff. Contributing factors; a nice day for an early spring flight and forgetting about the muffler heating problem. The heater was not needed since it was a hot day. Correct actions are not needed because this item gets inspected during annual maintenance and you only see the hole on the muffler if you remove the heater cover over the muffler. Human factors affecting the quality of the muffler; it is hard to get parts for this old airplane. I asked the maintenance facility on the field which is a Mooney authorized repair station for a muffler and they told me that I should remove my muffler and sent it for repair. I asked why; I just wanted a new muffler. The Inspection Authority (I.A.) said that this muffler will get shaped to the engine and a new muffler will cause problems. This misinformation caused me not to replace the muffler and caused this incident. The electrical issue I noticed probably was caused by the fire under the generator. The aircraft is not air worthy; and it looks like is not going to be flying for a while. The actions not to replace the muffler caused the problem.