Kejriwal claimed that Delhi is now supplying the cheapest electricity in the country. The new scheme has been implemented from August 1.
"People consuming till 200 units of electricity in a month won't have to pay the electricity bills. Their bills will be waived from August 1," he said.
But if a consumer uses 201 units in a month, "he will have to pay the full charge", he said.
"For consumption of electricity between 201 and 400 units per month, about 50 per cent of subsidy will be provided on the electricity bill," Kejriwal said.
When top officials and government people can get free electricity, so can a common man, the Chief Minister added.
Tracing the journey of major electricity sector reforms in Delhi, Kejriwal said when his government was formed four-and-a-half years ago, the electricity sector was in a complete mess.
"Today electricity consumers are getting 24x7 electricity at cheapest rates in the country, discoms' financial health has improved considerably, electricity infrastructure has been strengthened beyond imagination and people no longer need inverters and generators in Delhi."
The Chief Minister said the foundation for electricity sector reforms in Delhi was laid during his 15-day fast on the issue in March 2013.
"There were four major issues with respect to electricity when we came in. First, each year Delhi's power tariffs would be hiked arbitrarily. People were extremely concerned about their rising power bills.
"Second, discoms were on the verge of bankruptcy, and a blackout was imminent. Third, the power infrastructure of Delhi was crumbling. The cables, transformers needed to supply electricity had not been changed for years.
"Transformers were burning up. No investment was being made for augmentation and maintenance of the existing infrastructure," he said.
He also said that the power cuts were a harsh reality of that time. "People had to rely on generator sets and inverters to access 24x7 power."
He added that in the last four-and-a-half years, there has been a striking turnaround on all four counts.
Kejriwal also said that the announcement will lead to people developing a habit of saving electricity.
"There are two reasons for doing this (making electricity free). Similar to the lifeline water commitment of the government under which each household gets a certain amount of free water, we believe each household should get lifeline electricity free," Kejriwal said.
He added that in 200 units an ordinary household can run basic appliances like a fridge, a TV, two light bulbs, and fans.
"If any family is poor in the city, will they not use electricity? The government is committing to provide a basic lifeline power supply to all households."
He added that when the government provided free water, "instead of wasting water, people started conserving water."
"Those who were consuming slightly more than 20,000 liters of water, began reducing consumption to under 20,000 to avail the free water benefit. Our expectation is that a similar trend will be seen after the lifeline electricity scheme is in place as well."
He said the increasing load on Delhi, which has become 7,400 MW this season, will also be brought under control.
"The subsidy needed to fund this is more or less the same as the previous subsidy we had provided. We have restructured the same subsidy."
Comparing with the past, he said under the previous government, in 2013, people were paying Rs 928 for 200 units of electricity.
"Until yesterday, this figure was at Rs 622 for 200 units. From today onwards, this will now cost nothing."
For 250 units, in 2013 the bill was about Rs 1,250 while until yesterday, this was Rs 800.
"From now on, consumers will only have to pay Rs 252 per month for 250 units. For 300 units, the bill in 2013 was Rs 1,585. Until yesterday this was Rs 971 and from now on it will be Rs 526. For 400 units, the bill was Rs 2,250 in 2013. Until yesterday this was Rs 1,320 and from now on it will be Rs 1,075."
"For 200 units, Mumbai pays Rs 1,400, Bangalore pays Rs 1,350, Gurgaon pays Rs 975, Noida pays Rs 1,310 and Amritsar pays Rs 1,318. While Delhi will pay zero."
Kejriwal said people will criticise his government for giving "freebies".
"We are not siphoning off public money for ourselves. We are investing public money back into the people. The country's politic, ministers, MPs, MLAs, and senior officers are all enjoying free power. But no one calls those freebies. All I'm doing is extending those benefits to this country's 'aam aadmi' (common man)."
The Delhi government said in the month of August about 35 per cent of consumers use less than 200 units of power, and in the winter months this goes up to 67 per cent of consumers.
( With inputs from IANS )