Ash and his friends have finally reached Vermilion City, after two weeks of journeying. They are all so happy to be back in civilization. Ash wants to challenge the gym right away, but Pikachu is in no condition to fight. Misty thinks that he is probably hungry, and they decide to all eat first at the cities Pokémon Center. They go there and are surprised to see Nurse Joy. She explains that her first cousin works in Pewter City, and her second cousin works in Viridian. She thinks that she's the prettiest one out of all and Brock wholeheartedly agrees.
Suddenly, a Rattata is brought in on a stretcher. Nurse Joy explains that the Rattata, as well as several others, have all lost to the local gym leader, Lt. Surge. Ash and Misty start to argue about how Ash won't stand a chance versus Lt. Surge. Nurse Joy breaks them up, reminding them that they are in a hospital. She adds that when two people fight, they really care for each other. Ash and Misty disagree. The bell goes off, signaling that Ash's Pokémon are ready, and they rush out. Ash asks if Pikachu is ready to fight, and he is about to agree when another Pokémon, this time a Pidgey, is wheeled in. Misty comments on how it most likely came from the gym, which frightens Pikachu. Ash tells him not to worry and tries pulling Pikachu with him, but Pikachu just shocks him. Misty points out that, with the amount that they fight, Ash and Pikachu must like each other a lot.
Ash convinces Pikachu to come to the gym. There they meet the man himself, Lt. Surge. The huge man mistakenly welcomes Misty to his gym, adding how cute his next opponent is. Misty is flattered, but tells him that she isn't the challenger, Ash is. Lt. Surge laughs and calls him a baby, since this is what he always calls the opponents who lose to him. He then notices Ash's Pikachu and calls it a baby Pokémon. Ash asks why he's making fun of Pikachu. Lt. Surge replies by sending out Raichu, Pikachu's evolved form. Lt. Surge gives Ash a chance to leave, but Ash refuses. Lt. Surge goes on to pick on Ash for not evolving Pikachu when he got it, saying that electric Pokémon are only helpful when they've learned all the electric moves. Pikachu is getting is getting really ticked off at both Lt. Surge and his Raichu, and wants to start as soon as possible. The battle begins.
Pikachu uses Thundershock, but Raichu isn't the least bit phased. Raichu then uses his Thundershock, knocking Pikachu to the ground. Lt. Surge believes the match is over already and Ash tries to call Pikachu back. Pikachu however, still wants to battle and lunges at Raichu, only to be knocked down again by a Mega Punch and Mega Kick.
Team Rocket appears outside, peering in at the proceedings through a window. They laugh at the beating Pikachu is getting, until Jessie points out that, if Pikachu does lose to Raichu, it isn't strong enough to steal after all and all the time they've already spent on it was to waste. Meowth suggests that they steal Raichu, but only to get whacked a few times on the head. Jessie and James start to root for Pikachu, in spite of themselves. They watch in sadness as Lt. Surge finishes Pikachu off with another Thundershock.
Ash takes Pikachu back to the Pokémon Center, where it wakes up. It turns away from Ash, it's spirits broken. Brock explains how Pikachu was overpowered by Raichu. Ash says that Pikachu can win if it tries harder, but Misty explains that Pikachu was doing its best during the battle. Nurse Joy comes in, and explains that Pikachu could win with the Thunder Stone, a stone that will make Pikachu evolve into Raichu. Misty warns Ash to think hard about the decision, since if Pikachu does evolve into Raichu, it will never be able to turn back. He leaves the decision to Pikachu. Team Rocket, outside the window, wonders what Pikachu will decide. Pikachu gets up, looks at the stone, and hits it out of Ash's hand. It then goes into a fairly long series of saying its name over and over. Outside, Meowth is sobbing. Jessie asks him what Pikachu said, and he explains that Pikachu won't change. If he is going to beat Lt. Surge, he wants to do it as Pikachu. He wants to do it "in the name of all Pikachus." At this, James starts to cry.
Ash trusts that Pikachu can do it, but Misty and Brock don't agree. They say that Ash should try using his other Pokém
on. Ash is set on using Pikachu. Outside, Meowth goes on, saying that Pikachu will prove it can beat Raichu, and will defend both his and Ash's honor. Ash asks if Pikachu is ready, but he slumps back onto the pillow. Joy tells Ash, that Pikachu still needs to rest some more to fully recover his strength. As he does so, Ash, Misty, and Brock wait outside. Ash wonders how Pikachu can beat Raichu, when Brock comes up with an idea. He remembers how Lt. Surge said that he evolved his Raichu as soon as he got it. Because if this, Raichu didn't learn the speed and agility that it can only learn as Pikachu. He thinks he knows how Ash can beat him.
The next day, Pikachu is fully recovered. Ash says that their lucky star is shining, but Pikachu looks confused. Misty looks over Ash's shoulder and wonders aloud how Ash can see any stars in the daytime sky. Ash shakes her off and says that he doesn't mean its actually shining. He then makes his way towards the gym. He is interrupted, however, by Team Rocket (dressed as a rooting squad). Ash asks them who they are, and Jessie and James start their motto, only to be hit by the disguised Meowth. Meowth explains that they are a cheering squad for the brave challenger, Pikachu. They do a brief, rather odd, cheer, and run off. Brock expresses how disturbing that was and Misty thanks them, surprising them by calling them Team Rocket.
Ash arrives at the gym once again and Lt. Surge makes fun of him some more, laughing at how, even after the battle the day before, Ash kept Pikachu as Pikachu. The battle starts with Misty, Brock, and Team Rocket looking on. Ash tells Pikachu to use the strategy they went over. Pikachu lunges at Raichu, but Raichu whacks him away with his tail. Raichu then continues to beat Pikachu with his tail then uses Body Slam. Everyone gets worried, since Pikachu is losing already. Raichu uses Body Slam again, but Pikachu darts out of the way just in time. Ash tells Pikachu to use Agility while Lt. Surge orders another Body Slam. This time however, Pikachu is too nimble for Raichu and keeps dodging him. Pikachu starts running circles around Raichu, making it a little dizzy. Ash informs Lt. Surge as to how slow Raichu is, and he orders Raichu to use the powerful Thunderbolt attack. Raichu sends out a tremendous amount of electricity, tearing up the floor and shattering windows. Team Rocket cowers as shards of glass rain down on them.
When the dust settles, Lt. Surge thinks that he has won. Then he sees Pikachu, still alive and well. Pikachu used his tail as a ground and completely dodged the attack. Lt. Surge orders another Thunderbolt, but Raichu is out of electricity. Pikachu performs a Quick Attack on Raichu, and then whacks him with his tail. The battle is over and Pikachu has won. Everyone is happy.
Lt. Surge is very impressed and gives Ash a Thunder Badge. He praises Ash on how well Ash and Pikachu work together, and says that he's not a baby. Team Rocket leave, happy that Pikachu won, and wondering when they'll ever get Pikachu. They suddenly realize, however, that they "wasted" the entire episode rooting for the good guys.