The Folsom story began with Horatio Gates Livermore, a Maine native who came to California with thousands of other gold seekers in 1850. Livermore was elected to the State Senate in 1854 and, on his visits to the state capitol, he was impressed by the possibilities of the American River for logging and for development of waterpower to operate sawmills and other industrial plants. He envisioned an industrial city at Folsom similar to Lowell, Massachusetts, where water wheels had long been used to operate mills and factories. H.G. Livermore became interested in a company organized to divert American River water to placer workings in the foothills, and by 1862 he and his sons, Horatio Putnam and Charles Edward Livermore, had obtained control of the Natoma Water and Mining Company.
H.P. Livermore had gradually assumed leadership of the enterprises started by his father. In 1888 he launched a lumber enterprise similar to the timbering plan formulated many years before by the elder Livermore, but the log drives were difficult in the boulder-strewn river, and the costly experiment was abandoned. Yet in another project the younger man's determination paid off. In the late 1880s, Livermore began to realize that instead of using waterpower as a direct motive force, the water of the American River could turn generators for electricity in Sacramento, 22 miles downstream. Although up to that time power had never been transmitted more than about five miles, Livermore persuaded manufacturers to design a workable system. In 1892 he incorporated the Sacramento Electric Power and Light Company to build the powerhouse and construct the long-distance power line and a distribution station in the Capital City.
Principal partners in Livermore's venture were his brother Charles and businessman Albert Gallatin, president and general manager of Huntington and Hopkins Hardware, who became a major stockholder and president of Sacramento Electric. Though skeptics scoffed at the project and electrical engineers were doubtful, Gallatin persuaded the General Electric Company to invest in the project. In the midst of a national depression, G.E. put $20,000 into the powerhouse in the form of machinery and equipment. The Electrical Securities Company, a firm with which G.E. had close financial relations, agreed to underwrite a block of the Livermore company's bonds. Work on the powerhouse began immediately. A transmission line to a new substation at Sixth and H Streets in Sacramento was completed and equipped to deliver direct current to a street railway system for which Livermore had obtained the franchise. During work on the powerhouse, Sacramento Electric also purchased street railways from the Central Electric Railway, which had been operating its cars on batteries. After extensive testing, the Folsom Powerhouse began generating 11,000 volts of electric power on July 13, 1895. In honor of the event a detachment of soldiers formed near the substation to fire a 100-gun salute.