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How does the power grid work?

Updated

General information, not a substitute for the advice of an attorney.

Short answer: Power plants make electricity, high-voltage transmission lines move it long distances, transformers at substations step the voltage down, and lower-voltage distribution lines carry it to buildings. The lower 48 states run on three interconnections (Eastern, Western, and ERCOT in Texas) that mostly operate independently, and about 5% of the electricity is lost between the plant and the meter (EIA).

Generation, transmission, distribution

EIA describes the chain in three steps: electricity is produced at power plants, carried over long distances on high-voltage lines strung from tall metal towers (higher voltage makes long-distance transmission more efficient), and delivered to homes and businesses on lower-voltage distribution lines. Transformers at substations step voltage up or down between stages (EIA, delivery to consumers). EIA puts the system at thousands of miles of high-voltage lines and millions of miles of low-voltage lines connecting thousands of power plants to hundreds of millions of customers; in the early 20th century, more than 4,000 isolated utilities ran their own systems (EIA).

Three interconnections

  • Eastern Interconnection: east of the Rocky Mountains, plus part of the Texas panhandle (EIA).
  • Western Interconnection: from the Rockies west (EIA).
  • ERCOT: most of Texas. It serves about 90 percent of the state's load and more than 27 million customers over more than 54,100 miles of high-voltage transmission (ERCOT fact sheet, April 2025).
  • The three mostly operate independently and rarely transfer electricity among themselves; the Eastern and Western grids are linked to Canada's (EIA).

Who runs it

Balancing authorities keep supply matched to demand second by second. Most are electric utilities; every regional transmission organization (RTO) is also a balancing authority, and ERCOT is unusual in being the balancing authority, the interconnection, and the RTO all at once (EIA). Utilities come in three ownership types: municipal (city-owned), cooperative (member-owned), and investor-owned, plus federal power authorities such as the Bonneville Power Administration and the Tennessee Valley Authority. Whoever generated or sold the power, the local utility operates the distribution wires to your building (EIA).

On rules: NERC develops and enforces mandatory reliability standards, and FERC approves them (EIA). EIA's overview does not describe state regulators, but Texas shows how the state layer works inside ERCOT: ERCOT is a nonprofit subject to oversight by the Public Utility Commission of Texas and the Texas Legislature, which restructured the market in 1999 (ERCOT). EIA also flags unclear federal rules on who pays for new transmission as a current challenge (EIA).

Losses

EIA estimates annual transmission and distribution losses averaged about 5% over 2018 to 2022 (EIA FAQ, updated November 7, 2023).

See what ERCOT is, substation vs. transmission line, grid interconnection by market, and outage history by county and ZIP.

General information from the sources linked above, not legal, tax, or financial advice.

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