In 1885, ill health almost cut short his career - some say he worked himself too hard. But it proved a disguised blessing, because it necessitated a move to his family home, Great Barrington, Massachusetts. In those peaceful surroundings, he was able to develop some ideas he had suggested two years earlier to his employer, George Westinghouse (who helped finance Stanley's lab) for a new type of transformer. This work resulted, on March 20, 1886, in the demonstration of a prototype system of high voltage transmission employing Stanley's parallel connected transformer. This system was used by him to provide lighting for offices and stores on the town's Main Street.

Stanley recieved a patent on his transformer: Induction-Coil, Patent No. 349,611. These various inventions and discoveries led up within a year to commercial production of transformers of high efficiency and excellent regulating qualities. The development was a fine engineering performance in speed and in quality. The most important single contribution was by Stanley. He brought out the parallel connection in which the transformers are connected in parallel, across the constant-potential alternating-current system, instead of being arranged in series, as in the Gaulard and Gibbs connection. He obtained patents on the method, involving the construction of transformers in which the counter electromotive force generated in the primary coil of the transformer was practically equal to the electromotive force of the supply circuit. This is obvious now, but in 1886, when the principles and characteristics of the alternating current were practically unknown, it was a wonderful invention, and revolutionary in character. On this invention Stanley's fame largely rests. Of course Stanley did not discover or invent a theory of counter electromotive force before any one else had thought of it. Such fundamental things seldom happen in invention. His claim to great and original merit rests on the discovery of a theory which was new to him and the use of it in making a structure of immense importance in the affairs of men. Briefly, all transformers now made are built upon practically the same principles as those that were developed in these early products of the Westinghouse Company.

Assisted by William Stanley, Westinghouse worked to refine the transformer design and build a practical AC power network. In 1886, Westinghouse and Stanley installed the first multiple-voltage AC power system in Great Barrington, Massachusetts. The network was driven by a hydropower generator that produced 500 volts AC. The voltage was stepped up to 3,000 volts for transmission, and then stepped back down to 100 volts to power electric lights.

In 1890 Stanley established the Stanley Electric Manufacturing Company in Pittsfield, Massachusetts, to make transformers and auxiliary electrical equipment as well as electrical appliances. To organize it, he joined forces with two talented associates: John J. Kelley, an outstanding designer of motors: and a former Stanley laboratory worker, Cummings C. Chesney. The company was purchased by General Electric in 1903. Stanley also developed the alternating-current watt-hour meter, making it possible to measure electricity use with a high level of accuracy. Stanley with E. P. Thomson had also invented an incandescent lamp with a filament of carbonized silk. During his lifetime he was granted 129 patents covering a wide range of electric devices. William Stanley died on May 14, 1916.