The government reforms in power sector led to the formation of APGENCO on 28 December 1998 and commenced operations from 1 February 1999.

[2] The imbalance of the revenues against the cost of production, no significant reduction in technical losses and energy thefts, high cost purchases from IPP's, other SEB's gradually worsened the financial position of APSEB.

Government of Andhra Pradesh realizing the declining tendency of the financial position of APSEB and considering the recommendations made by committee it was unbundled into Andhra Pradesh Power Generation Corporation (APGENCO) & Transmission Corporation of Andhra Pradesh Limited (APTRANSCO) on 1 February 1999 by AP Electricity REFORMS ACT.

From Feb 1999 to June 2005 APTransco remained as single buyer in purchasing and selling of power to DISCOMs.

Operating the thermal power stations in the range of 75 to 100% capacity in 'frequency follow mode' with good part load efficiency is the needful strategy in surplus electricity grid except during peak demand hours.