My question is is not being able to power all your cities probable, or did we just play bad?
There are 2 situations that come to mind that this might occur (at least right off the top of my head). Which was yours?
It is highly possible that you might outbuild yourself in Powergrid. As you want to get the cheapest real eastate and be the most effecient with you money you can, you sometimes build more than you can power at that time. You build in hopes of being able to buy bigger plants that will power everything. This has the downside of normally putting you in "1st" place. I have stayed in first for most of a game and won it, though you will find that it is usually more beneficial to be "last".
It is also possible a resource may become unavailable, and you may not be able to fire all your plants; even though you would have been able to power all your cities. This is especially crushing in the last round or two, as it can kill you chances of winning....and many time people will buy up extra resources to screw other players; a very valid tactic.