The Keifuku Electric Railroad Co., Ltd., was established in 1942 to succeed the railway and tramway business that was operated by the Kyoto Dento in Kyoto Prefecture (Arashiyama, Kitano and Eizan lines) and Fukui Prefecture (Echizen Electric Railway Line), with the dissolution of the Kyoto Dento to transfer the power-distribution business to the Kansai-haiden Power Distribution (関西配電) (a predecessor of the Kansai Electric Power Co., Inc.) and the Hokuriku-haiden Power Distribution (北陸配電) (a predecessor of the Hokuriku Electric Power Company), and the electric generation and transmission business to the Japan Electric Generation and Transmission Company (日本発送電) under the power distribution control law (配電統制令); in the same year, the collateral companies, the Kurama Electric Railway and the Mikuni Awara Electric Railway (三国芦原電鉄), were merged into the Keifuku Electric Railroad Co., Ltd.
配電統制令により、京都電燈が配電事業を関西配電（関西電力の前身）・北陸配電（北陸電力の前身）へ、発送電事業を日本発送電へ譲渡し解散するのに伴い、同社の京都（嵐山線・北野線・叡山線）と福井（越前電気鉄道線）での鉄軌道事業を引き継ぐため1942年に設立され、同年中に傍系の鞍馬電気鉄道・三国芦原電鉄が合流した。