Real Estate

Behind the Scenes: How Electricity Companies Power Your Home

The electric grid is so common that it’s easy to take for granted. Historically, utilities controlled the entire system, from power plants to household electrical outlets. Today, a patchwork of federal and state agencies oversees wholesale and retail electricity generation, transmission and distribution.


The electricity that comes to your home from the grid is measured on your meter. The meter also tracks how much electricity you use so your power provider can bill you accordingly. A meter is the basic unit of length in the International System of Units (SI). The SI is the world’s standardized system of measurement, which helps ease the exchange of commerce and scientific data.

After big power plants generate electricity, they travel long distances over high-voltage transmission lines. At electricity companies in Houston, the electricity is sent through step-up transformers to increase the voltage to a level that can travel to homes and businesses over distribution wires.

Transformers on power poles then step down the low-voltage electricity to your meter, and the meter measures how much you use. You may pay permitting fees, engineering/inspection charges, metering charges (if you get a second meter), and stand-by bills for the power company to maintain its system as a backup in an emergency.

But, investing in energy-efficient appliances, constructing more energy-efficient buildings, and installing solar panels in your home can help you lower these costs by reducing the amount of electricity that has to be transmitted over long distances.

One of the greatest benefits of net metering is that it lets you keep two uni-directional meters: one to record the electricity you draw from the grid and another to record the excess electricity your system feeds back into the grid. This arrangement lets you pay retail for the electricity you draw while your power provider pays you wholesale for the excess you produce.

Power Plants

The power that lights up your home comes from a nationwide network of more than 11,000 electricity generators. These power plants run on a mix of fossil fuels and renewable energy sources like water, wind, solar, and geothermal.

These large electricity generators use power transformers to convert their output to high voltages needed for transmission. The electricity is then sent over long distances on transmission lines, where it flows through more step-down transformers and distribution transformers that lower the voltage to a level that can be used in homes and businesses.

These electricity systems are interconnected for reliability and commercial purposes but operate independently. As the electric grid evolved through the early 1900s, utilities began connecting their transmission lines and forming local electricity distribution systems (or “grids”).

These interconnections allowed them to benefit from economies of scale by sharing the cost of large central station generating plants. It also reduced their backup electricity generating capacity to maintain since they could draw from other systems in the area during peak demand.

Today, electricity generation is regulated by both federal and state agencies. For example, the EPA tries to limit greenhouse gas emissions from power plants, and state agencies set appropriate electricity rates within their territory.

Transmission Lines

A network of power lines carries electricity from regions where it is generated to areas where it is needed. These are called transmission lines, which can be either overhead or underground. They can use alternating or direct current, and they can be operated at high voltages.

They are distinct from local wiring between electric power substations and customers, referred to as electric distribution. Together, transmission and distribution form the nation’s electricity grid. Overhead transmission lines are typically metal cables supporting up to 765 kilovolts of voltage, supported by tall towers (known as pylons).

They are built within a right-of-way 100 to 2,000 feet wide to accommodate maintenance and emergency repairs. To protect against arcing, the conductors are separated by air gaps or by being positioned far enough apart to prevent them from getting too close, and they can be coated with oil to reduce friction. The tall towers also help keep people and animals away from the conductors.

The electric transmission industry is highly regulated at the state level (PUCs or PSCs). At the national level, the Federal Energy Regulatory Commission (FERC) governs electricity transmission transactions between market participants to ensure sufficient capacity to meet demand.

Some people oppose the construction of new transmission lines, citing concerns about electromagnetic fields and other environmental impacts. The scientific evidence suggests that low-level electromagnetic fields from transmission lines do not pose a long-term health risk.

Distribution Lines

The electric grid is a network of power lines that carry electricity to homes and businesses. These power lines run overhead and underground and are distinguished by their voltage levels. We commonly use the terms transmission and distribution when talking about these wires, but they are separate stages of the grid.

The main distinction between them is that transmission lines move higher-voltage electricity over longer distances, connecting large distant generating plants to local load centers like cities and towns. Distribution lines carry lower-voltage electricity over shorter distances to individual consumers, bringing electricity closer to where it will be used.

They connect to substations, which reduce the high-voltage electricity from transmission lines to a more usable level called distribution voltage. From there, it can be carried through primary distribution lines to consumers, whose connections to these lines are protected by step-down transformers that reduce the distribution voltage to the “utilization voltage” or “supply voltage” used for lighting and interior wiring systems.

These steps are governed by a regional entity known as a grid operator, sometimes called a system operator or balancing authority. This entity manages energy production and delivery across a region, controlling the power flow to ensure that demand is met every second of the day. The grid also supports our energy independence by allowing customers to choose their retail provider for power generation and transmission services.