After leaving Lapras with its mother, Ash, Misty, and Tracey reach Hamlin Island in hopes of finding a ferry that'll take them back to Pallet Town. Excited, Ash tells the gang that he can't wait for one of his mom's special deep-dish chili dog and pizza pot pies. Tracey is also eager to meet Professor Oak in person. Coming across the bridge leading to the island with their ticket back home, Ash sees a sign warning him that it's too dangerous to cross. Ignoring the warning, the group decides to continue. However, they suddenly see an explosion, changing their mind.
The gang gets to the island via rowboat, and they arrive in what seems like a ghost town. Ash manages to find the ferry station, but the door to the pier is locked. While Ash, Misty, and Tracey are preoccupied with their worries, Togepi wanders outside and finds a Voltorb in an alleyway. Moments later, Misty notices her missing Pokémon and sets off to find it. She finds Togepi playing with Voltorb. Knowing that Voltorbs can explode without warning, Misty tries to take Togepi, but it won't let go of its new friend. Ash tells her to be careful because he has a feeling that they're not alone. Tracey agrees, and the group sees a pack of Electrode closing in on them. Realizing that they're about to explode, Ash decides to escape. However, a gust of wind knocks down a nearby sign, aggravating the Electrode and causing them to self-destruct, creating a huge chain reaction. The group runs away and comes to an intersection, where they're surrounded. As the gang loses all hope, a man dressed in a poncho sends out a group of Diglett. His Diglett start to dig tunnels under the Electrode, shielding the team from the blast. Afterward, the man asks Ash and the others to follow him into a nearby building.
Inside, Tracey asks the man why the island is deserted, and the he explains that many tourists and visitors used to come here. However, a few years ago, an inventor started using Voltorb as an experiment to generate electricity. One day it got loose from the lab, multiplying and later evolving into Electrode. The Pokémon population started to grow, so the town got overcrowded. The Electrode became irritated and eventually they blew up, scaring everyone off the island. Ash asks about the Pallet Town ferry, and the man tells him that it's been out of service. Ash then accuses him of being a thief because he's alone in an abandoned city. Misty yells at Ash telling him to apologize, but the man says that he's not a thief, and his name is Poncho, a Diglett rancher. He tells Ash that somewhere on the island there's an open field where the Electrode aren't crowded together and can live happy. He trains his Diglett to dig tunnels under the Electrode so that they can guide and send them to the field. Although Poncho's methods are better, he tells the gang that the people of the island are complaining that his way is too slow and cost-efficient. A phone call from the mayor interrupts their conversation, and Poncho learns that he only has one more day to round up the Electrode or he's off the team. Someone else has been hired to replace Poncho.
A rumbling occurs, and the team runs out to investigate. There is a giant machine, and Team Rocket appears. Meowth shows Poncho his contract and introduces him to the Electrode Eliminator; a machine designed to make Electrode explode, rendering them helpless and easy to capture. Jessie, James, and Meowth get to work, and their plan succeeds. Unable to do anything, the group watches as Team Rocket attacks the Electrode one by one. The Electrode decide to group up and confront Team Rocket's machine, surrounding it. Having seen enough, Voltorb tries to help its kinfolk. Jessie decides to catch the Voltorb too. Trying to protect its friend, Togepi uses Metronome, but it fails. However, Voltorb still manages to dodge Team Rocket's mechanical arms. Togepi runs over and stands next to Voltorb. Soon after, Pikachu joins them. He uses a Thunderbolt on Team Rocket's machine, but Meowth says that it's shockproof. Team Rocket prepares to run over Pikachu, Togepi, and Voltorb.
Having seen enough, Poncho sends out his Dugtrio, which makes a giant crater under Team Rocket's machine, plunging them to underground tunnel system. With Team Rocket gone, Poncho calls out his Diglett to finish the job. The Electrode are sent underground, and Team Rocket is carried away with the group.
The Electrode reach the meadow, and coming in from a Diglett balloon, the group sees that this is the perfect home for them. Voltorb decides to stay with the Electrode too, which saddens Togepi. Togepi cries, but Misty tell it that sometimes friends have to say goodbye, but when they're gone they can still be friends in their heart.
As the city is restored, Tracey, Misty, and Ash prepare to board the ferry. Poncho tells them that the mayor gave him a key to the city and a big bonus. Poncho says, "We sure showed that Team Rocket." and Misty tells Poncho that that's something a movie hero would say. Blushing, Poncho says that he'll never be a movie hero, but Ash tells him that he's their hero. As the gang heads back to Pallet Town, they bid farewell to the Orange Islands and take a look at their bright futures ahead of them.