An early but notable exercise in power reform was carried out by a committee of the National Development Council way back in 1994. Following a series of Chief Ministers Conferences in late 1996, a 'Common Minimum National Action Plan for Power' was agreed upon based on the following points: independent regulatory commission, rationalisation of tariffs and private sector participation in distribution. Accordingly, the regulatory reform started off in 1996 with the establishment of State Electricity Regulatory Commission (SERC) in Orissa, followed by Haryana in 1998 prior to the Central enactment, namely the Electricity Regulatory Commission Act, 1998. The Central Electricity Regulatory Commission (CERC) was set up in 1998 as an independent regulatory body.

Twenty-two States have so far either constituted or notified the constitution of State Electricity Regulatory Commission (SERC), of which 13 have already issued tariff orders. State Electricity Reforms Act has been enacted by nine states e.g., Orissa, Haryana, Andhra Pradesh, Uttranchal, Uttar Pradesh, Karnataka, Rajasthan, Madhya Pradesh and Delhi. Of these, State Electricity Boards have been corporatised for all except Madhya Pradesh. Though separate state-owned generation, transmission and distribution companies were established with an ultimate aim of privatising it, most of them have made progress in that regard only to a limited extent (e.g. corporatisation but not privatisation). In fact, though generation has improved in some states, transmission and distribution units have seen further mounting of losses.

States such as Andhra Pradesh, Orissa, Haryana, Karnataka, Rajasthan and UP have completed unbundling of their respective SEBs into separate entities for generation, transmission and distribution. Orissa and Delhi are the only States so far to have privatised their distribution. In Orissa, distribution is presently carried out by four companies. Besides, 49 per cent disinvestment has taken place in its thermal power company with a similar plan on the agenda for its hydro-power generation company. Financial stress of the Grid Corporation of Orissa, with an estimated liability of Rs.1,160 crore in 2000-01, has been mitigated with concerted efforts. Andhra Pradesh Government plans to privatise its distribution activity by 2002. In Gujarat, the reform programme has emphasised on metering of all categories of consumers with a cap on agricultural subsidy.

During the reform period, though the demand-supply gap in power supply has narrowed down to some extent, it still persists and the financial position of most of the SEBs has further deteriorated. However, it is noteworthy that major problems such as recovery of receivables, settlement of past dues, metering of all consumers, reduction in subsidies to the agricultural and domestic sectors, reduction in Transmission and Distribution (T&D) losses, improvement in Plant Load Factor (PLF) and restructuring of SEBs have been identified, and remedial measures have been initiated by the Central as well as State Governments to tackle these problems in the medium term.

Against this backdrop, some SERCs have clearly identified governance as the primary issue. The governance issue arises because of the complicated structure, inadequate information flows from the field offices to the management, lack of action by the senior management against the non-performing executives and staff, undefined role of the political executive, absence of guidelines and norms for personnel policies, lack of transparency and finally, outdated work processes that are not in tune with the commercial status of the Electricity Corporations (Government of Uttar Pradesh, 2002). It is, therefore, crucial for the States to have a vision, work out a credible strategy of power development and lay down implementation milestones.