The pylon collapsed last night on to the roof of a house in St Annes Terrace, Mayobridge.
Extensive damage was caused to the roof space of one property and a neighbouring home also caught fire.
Two families were taken to Daisy Hill Hospital in Newry for treatment, but no one was believed to be seriously injured.
SDLP MLA Karen McKevitt said: “At around 10pm a pylon fell on two houses and caused one to go on fire. There was two families at home at the time but thank goodness they got out safely and after treatment they are now back with their families.”
Around 35,000 homes are without power across Ireland as storms continue to batter the country.
Met Éireann downgraded its national weather warning from a red alert to orange, as power cuts, phone and broadband outages and travel disruption continued to affect thousands.
ESB Networks said its crews had managed to restore electricity to more than 35,000 homes affected overnight.
“We hope to restore supply to all customers today, however some damage may require more extensive construction work to be carried out and we are assessing the situation and will give further updates later,” it said in a statement.
“We will also be redeploying crews from areas less affected to help those locations experiencing more extensive damage.”
More than 5,000 customers were without supply in Kerry, around 3,500 in Clare and 1,000 in West Cork, Drimoleague and Dunmanway.
The north, north west and north east were among the least affected, while 1,800 were without power in the Kinnegad, Clonard and Rhode area, 1,500 in the Monasterevin area and 300 in Shannonbridge.
Some 700 customers lost power in the Dublin area.
More than 7,500 Eircom customers were without telephone and broadband service as a result of strong winds, heavy rainfall and lightning overnight.
The company said it expected the figure to rise as the bad weather continues.
Cork, Galway, Mayo, Kilkenny, Carlow and Wexford were among the areas where services were worst hit.
“Working conditions in many areas of the country remain extremely difficult as a result of the dangerously high winds and lightning,” Eircom said.
“These conditions are hampering our repair efforts in some areas of the country.”
It said 700 crews were working to restore services to those affected.
Around 2,250 customers had services restored between Christmas Eve and St Stephen’s Day.
Met Éireann raised a red alert yesterday – the most serious of its weather warnings.
Gale force winds reached 140kph in some areas, with further gusts of 150kph ravaging coastal areas.
It has since downgraded its alert but is still warning of strong winds across the country – particularly in Cavan, Monaghan, Donegal, Dublin, Carlow, Kildare, Kilkenny, Laois, Longford, Louth, Wicklow, Offaly, Westmeath, Meath, Leitrim and Sligo.
The national forecaster also warned there is a danger of coastal flooding in the north west.
The winds are expected to die down in the evening.
Meanwhile, around 5,000 customers in the North were without electricity after severe gales with gusts of up to 75mph swept across southern and eastern counties overnight.
Trees fell across power lines and electricity poles were broken, and the Met Office weather warning for high winds and heavy rain remains in place until 7pm, a Northern Ireland Electricity (NIE) statement said.
Julia Carson, communications manager, said: “We were in regular contact with the Met Office and had mobilised NIE emergency crews, engineers and call handlers in preparation for any damage the severe weather may cause.”
She added: “We have engineers and emergency crews currently working in difficult weather conditions.
“Overnight we restored power to over 30,000 customers and are continuing to assess the damage and carry out repairs in Counties Down, Armagh and Antrim.”