This paper examines the major economic and technical determinants in the development of electric power systems. It first studies the fundamental motivations for centralization in the systems, i.e., increasing size of equipment and degree of interconnection. It then quantitatively analyzes the interrelationships among the average size of generating units, the degree of interconnection, and the level of system peak load. The analysis indicates that although the economic advantages of centralization have been much exploited in existing systems, additional benefits, particularly from scale economies of generating equipment may still be achieved. Moreover, for low load factor end users, such as residential customers, electricity production by small generators with low degrees of interconnection would not only be more expensive, but more capital-intensive than production by centralized systems.