The electrical characteristics of the diagonally connected MHD generator are studied analytically using a two-dimensional, time dependent numerical modeling technique which is based on a finite element mathematical formulation for electrodynamics. The analysis is directed at study of the near electrode electrical behavior as influenced by slag coverage. The Component Development Integration Facility (CDIF) 1A(4) generator is analyzed, and experimental results from CDIF testing are used as boundary values of the electrical model. Simulation results agree well with CDIF experimental results, i.e. the electrical measurement for the electric field and current density based upon Faraday voltage and inter-electrode voltage. By the influence of the Hail electrical field, the current patterns are slightly complex in the boundary layer. Because of the thermal insulation effect of the slag coverage, the current transport is maintained by diffuse discharge through the boundary layers. Through elevated electrical conductivity of the slag and the strong influence of the Hall effect in the boundary layer, the equipotential lines bend into complex patterns near the electrodes. The numerical simulation was also performed considering the effect of slag polarization. The leakage current in the slag layer had some effect on the behavior of the slag. Slag polarization causes a reversed current phenomenon by which a cathode exhibits operation of an anode within the slag layer. The high electrical conductivity of the slag is a main factor to support leakage currents and are currents in the slag layer. A local blowout of the slag can be supported by the "Fuse Theory", where the slag leakage current is locally broken by leakage and are currents, much like a fuse. The damage of electrode and insulator walls :Is caused by local concentrations of the current density and the large electric field near the electrodes.