Here's how to solve the puzzle:
1. Talk to the trainer on the second floor: He'll tell you about the generator and how it's "off".
2. Go to the back of the first floor: You'll find a switch with a red button.
3. Press the button: This will power on the generator, making the water currents stop on the second floor and allowing you to access Misty.
Let me know if you have any other questions about Pokémon Crystal or need help with another puzzle!