The proximity effect is a phenomenon that occurs in AC circuits when two or more conductors carrying alternating current are placed close to each other. The alternating magnetic field generated by the current in one conductor induces a non-uniform distribution of current in the nearby conductors. This "current crowding" effect forces the current to flow through a smaller cross-sectional area of the conductor, which in turn increases the conductor's effective AC resistance and leads to higher power losses.

The proximity effect is more pronounced in underground power cables where conductors are more closely spaced than in overhead transmission lines.