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The neutral in single phase AC circuits is used as the common power return conductor for half phase operation. In a typical (US/Canada) 120/240 split phase system, generally used in residential applications, the voltage between neutral and either of the two hot conductors is 120 VAC, and the voltage between the two hot conductors is 240 VAC.

Neutral is also grounded at the distribution panel, as well as at the utility distribution transformer, in order to limit the voltage of any conductor relative to ground, and also to be able to detect ground faults by sensing imbalance between neutral and hot currents.

Note that this is not called two phase power. It is single phase, or split phase, and it comes from one center tapped transformer winding. The center tap is neutral.

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