Electrical substations are critical elements of a power grid, enabling the transmission and distribution of electric power from power generators to the end‐users. Experiences from previous earthquakes have shown that electrical substations can be damaged due to ground shaking, reducing their functionality and potentially preventing the generated electric power from reaching end‐users. To assess the seismic vulnerability of a substation, a modular quantitative assessment method is proposed. In this method, the relation between the functionality state of a substation and the damage state of its components was established through the connection matrix technique. A substation is viewed as a network system, whose topology is defined by the connections among various pieces of electrical equipment (i.e., the components), represented in the connection matrix. The maximum allowable power transmission capacity of the substation after an earthquake is adopted as the system functionality metric, which is jointly determined by the power input, transform, and output capacity of the substation. The seismic vulnerability of an electrical substation is quantified by probabilistically calculating its postearthquake functionality when exposed to various earthquake intensities using Monte Carlo sampling. Finally, the risk of substation functionality loss is quantified by integrating the seismic hazard curve with the seismic vulnerability model of the substation. Two realistic case studies on a distribution substation and a transmission substation, with the same equipment configuration but different power delivery paths, were performed using the proposed method. Furthermore, a sensitivity analysis regarding the equipment fragility parameters is conducted, providing a risk‐informed basis for improving the seismic performance of the substation system.