Drawing by Thomas Edison in 1880 patent file. From the U.S. National Archives.
In the early days of electricity, energy systems were small and localized. The Pearl Street Station in New York City, launched in 1882, was the first of these complete systems, connecting a 100-volt generator that burned coal to power a few hundred lamps in the neighborhood. Soon, many similar self-contained, isolated systems were built across the country.
During this era, two major types of systems developed: the AC and DC grids. Thomas Edison, who designed Pearl Street, was a proponent of direct current (DC). In a direct current, the electrons flow in a complete circuit, from the generator, through wires and devices, and back to the generator.
William Stanley, Jr. built the first generator that used alternating current (AC). Instead of electricity flowing in one direction, the flow switches its direction, back and forth. AC current is what is used almost exclusively worldwide today, but in the late 1800s it was nearly 10 years behind DC systems. AC has a major advantage in that it is possible to transmit AC power as high voltage and convert it to low voltage to serve individual users.
From the late 1800s onward, a patchwork of AC and DC grids cropped up across the country, in direct competition with one another. Small systems were consolidated throughout the early 1900s, and local and state governments began cobbling together regulations and regulatory groups. However, even with regulations, some businessmen found ways to create elaborate and powerful monopolies. Public outrage at the subsequent costs came to a head during the Great Depression and sparked Federal regulations, as well as projects to provide electricity to rural areas, through the Tennessee Valley Authority and others.
By the 1930s regulated electric utilities became well-established, providing all three major aspects of electricity, the power plants, transmission lines, and distribution. This type of electricity system, a regulated monopoly, is called a vertically-integrated utility. Bigger transmission lines and more remote power plants were built, and transmission systems became significantly larger, crossing many miles of land and even state lines.
As electricity became more widespread, larger plants were constructed to provide more electricity, and bigger transmission lines were used to transmit electricity from farther away. In 1978 the Public Utilities Regulatory Policies Act was passed, making it possible for power plants owned by non-utilities to sell electricity too, opening the door to privatization.
By the 1990s, the Federal government was completely in support of opening access to the electricity grid to everyone, not only the vertically-integrated utilities. The vertically-integrated utilities didn’t want competition and found ways to prevent outsiders from using their transmission lines, so the government stepped in and created rules to force open access to the lines, and set the stage for Independent System Operators, not-for-profit entities that managed the transmission of electricity in different regions.
Today’s electricity grid – actually three separate grids – is extraordinarily complex as a result. From the very beginning of electricity in America, systems were varied and regionally-adapted, and it is no different today. Some states have their own independent electricity grid operators, like California and Texas. Other states are part of regional operators, like the Midwest Independent System Operator or the New England Independent System Operator. Not all regions use a system operator, and there are still thousands TK of municipalities that provide all aspects of electricity.
Who has the authority over transmission is also equally convoluted. Individual states control some aspects of the lines on their soil, but the rules are implemented by the operators. And others are managed by the North American Reliability Council, the Federal Energy Regulatory Commission, and the Department of Energy.
In today’s market, some states are deregulated and some are not. Even in non-deregulated states, different companies own the power plants and the utilities to which you write your monthly checks.
For details about how electricity gets to you today, see Power Grid Technology and the Smart Grid.
For more information about how electricity is bought and sold, see the Electricity Marketplace.