This paper is concerned with the pivotal role of the transmission grid in achieving high energy efficiency over interconnected power systems. Since the transmission grid is taking on greater importance in responding to the evolving competition and deregulation of the utility business, we first briefly review its basic role and the methods by which it has been compensated and controlled in the past. In the future it is likely that the grid will be called upon to accommodate large energy transfers over far electrical distances, maximize power flow over the contractual paths while minimizing its effects on the rest of the system, and accommodate additional transfer needs caused by an increased presence of the independent power producers (IPP). While much discussion is concerned with the regulatory aspects of these changes, it is also necessary to revisit basic engineering issues in planning and operating the transmission grid subject to these changes.This paper deals strictly with the engineering aspects of the problem. It reviews fundamental planning and operating questions of the transmission grid as seen by the author. Its emphasis is on network/control concepts considered essential in planning new compensation of the transmission grid and its adaptation to very dynamic and uncertain changes in generation and load inputs to the grid.