The next‐generation electric power grid, also known as the Smart Grid, is expected to address the operational challenges of the nation's aging and outmoded electrical grid infrastructure. This article investigates the impacts of the Smart Grid technologies on operations and planning of electric energy systems at both the transmission and the distribution levels. This article presents a comprehensive overview of the emerging technologies (e.g., plug‐in electric vehicles, microgrids, distributed renewable energy sources and storage, demand‐side management and smart metering) and the development of distribution automation in Smart Grid. This article also discusses the technical information regarding the emerging technologies (e.g., wide‐area monitoring and measurements) and developments for transmission system operations in Smart Grid. There is still a significant amount of investigation to be done before the full vision of Smart Grid comes to fruition. Therefore, this article lists the future research needs covering both transmission and distribution systems in a Smart Grid environment.