AC current predated Tesla. He should get credit for the induction motor , which required AC current. But as AC current allows for inductive transmission of power, once Michael Faraday had discovered many of the principles of electromagnetic induction many others soon began to experiment with it and create useful devices.

There were quite a few people involved in the development of practical transformers. You won't hear their names much, but the first step-down transformer design that could handle large amounts of current was created by Lucien Gaulard, with funding by John Dixon Gibbs. In 1882 they also proposed what would be the most common power transmission system- high-voltage AC sent across long distances, stepped down to lower-voltage AC at local power distribution stations. Westinghouse would buy Gaulard and Gibb's design, and then William Stanley would adapt it to be more easily manufactured and efficient, in 1885. In 1886, Westinghouse and Stanley would electrify the entire town of Great Barrington , Massachusetts . Tesla would create his induction motor soon after, in 1887.

Although Tesla has become quite famous as an eccentric, brilliant, and tragic inventor, Gaulard should get more notice as another. His first patent application of 1882 was denied, with the sneering remark that the inventor " claimed to be able to do something from nothing", and his second patent was challenged by another inventor. Ruined by the subsequent legal fight, at the age of 38 he became delusional. In 1888 he came to the Élysée Palace and told the concierge, ""I am God and I want Universal peace". He died in a mental asylum soon after.

The Edison Tech Center has a pretty nice history of transformers here