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An enormous power blackout cascaded throughout the Northeast, the Midwest and eastern Canada late Thursday afternoon, knocking out electricity to millions of people in New York, Toronto, Detroit, Buffalo, Cleveland and elsewhere.

THE ELECTRICITY WE depend on usually comes from a local, regional power generator. As electricity is created at generation sites, it is instantaneously transmitted through a network of high-voltage transmission lines to substations. At the substations, its voltage is decreased and the electricity then goes to consumers in the proper voltage through various distribution lines.
Each network of electricity lines connects to a series of others ? and ultimately makes up what is known as the power grid.
The power grid, essentially an interconnected grid of transmission lines, covers most of the United States as well as parts of Canada and Mexico. It?s divided into three major regions: the East, the West and Texas. These three regions are called ?interconnections? and they provide all consumer electricity in their areas.
Each interconnection is broken down into many smaller areas to make distribution more manageable. Utilities and independent power generators create electricity through various means, including water power, or hydroelectricity, coal, natural gas, petroleum and nuclear energy.
?Whatever happens to one utility, all the others can feel.?
? GENE GORZELNIK

"Director of communications for the North American Electric Reliability Council Because all utilities on the power grid are interconnected, they are also interdependent. ?Whatever happens to one utility, all the others can feel,? said Gene Gorzelnik, director of communications for the North American Electric Reliability Council.
When one utility has a shortage, it can buy electricity from a neighboring utility or an independent power generator, which essentially produces energy on a freelance basis. But that also means that when there is an outage in one area, it could affect other areas as well.
Because electricity can?t be stored, utility companies must carefully plan production. The amount of usable electricity available in any particular area depends on the amount generated as well as the amount the transmission lines can carry. "

from: How the US power system works.