In January 2007 Maharashtra Distribution utility (MSEDCL) handed over power distribution in power-loom town of Bhiwandi to M/s. Torrent Power Ltd. under a 10 year franchisee agreement. This urban, input based franchisee model is considered to be next step in distribution reforms. Prayas (Energy Group) carried out a detailed study of this model for the Planning Commission of India. The study included consumer survey, and reviewed selection process for franchisee, distribution franchisee agreement and post-franchisee performance. This study revels that though franchisee model could help in reducing high distribution losses and in improving consumer service in such areas, this model raises important questions of governance. For this model to be effective and in the consumer interest, it is essential to ensure rational, transparent competitive bidding process and to have effective monitoring of post-franchisee performance. Unfortunately, review of Bhiwandi franchisee experiment highlights several lacunae in these very crucial aspects. Under this model, the role of licensee essentially becomes that of a ‘regulator’ or ‘monitor’ of the franchisee process and the study shows limitations of licensee to fulfil this role. Hence the study recommends that two crucial aspects of franchisee model, i.e. selection of franchisee through a competitive bidding process and post-franchisee performance monitoring, need to be brought under the purview of state regulatory commissions. Replicating franchisee model without such a regulatory oversight may lead to significant revenue loss for licensees and may compromise broader public interest for short term gains.