Owing to its huge potential to provide easy access to high-speed video and data, power line communication (PLC) has recently grabbed the attention of the researchers. The PLC is an emerging field of communication for the home area network of smart grid. Because power lines were not initially designed for communication purposes, they offer a difficult communication environment in the form of impulsive noise and multiplicative noise, in addition to the background noise. This elucidates the need for evaluating the performance of PLC systems by taking into account all these factors. The performance of a PLC system under the influence of Rayleigh distributed channel gain, background noise (with nonuniform phase), and impulsive noise is comprehensively studied in this paper. We evaluate closed-form expressions of the average bit error rate and outage probability for different cases depending on the presence or absence of impulsive noise and channel gain. We provide a further insight into the system by obtaining the diversity of the PLC system. Simulation results closely match with our analysis, thereby establishing the validity of the derived expressions. Copyright © 2016 John Wiley & Sons, Ltd.