I'm glad to hear that you're studying it. First, let's clean up the nomenclature. Speed governors work inside one power plant. The central control for all the power plants in the region, used to be called LFC, later ALFC, and most modern AGC (for Automatic Generator Control).
Second, governors work with proportional control. That means that frequency error is proportional to power. The reciprocal of constant of proportionality is called droop. The classical value for droop was 5%. That means a 5% change in speed gives 100% change in power, or a gain of 20:1 per unit power / per unit speed.
I'm sure that there are some mechanical flyball governors still in service, but most plants do it electronically or digitally today. The "speed changer" sets the speed reference point (which is proportional to power reference point). Many plants call it the speed/load changer to emphasize that it does both functions at once. During startup, before synchronization with the grid, it changes speed. After synchronization, the same adjustment it is used to change load (i.e. generation).
That picture is of James Watt's original governor. The turnbuckle on the vertical member to the right could be used as the speed changer. If you adjust the turnbuckle, you change the amount of power without changing speed. An adjustment nut on the top of the flyball assembly could do the same thing.
Take away the word "sudden" from your description; frequency is incapable of sudden changes.
The governor acts to change power in response to speed changes. A proportional controller does not force the speed error to return to zero, so yes an error remains in steady state. The key thing to remember is that speed governors act locally, and swiftly. They do not need information other than the locally measured frequency. AGC does need central measurements and remote communications, and it controls all generators in the area, not just one. ACG is necessarily slower than governor action.
See the PF Insights articles.
https://www.physicsforums.com/insights/what-happens-when-you-flip-the-light-switch/
https://www.physicsforums.com/insights/ac-power-analysis-part-1-basics/
https://www.physicsforums.com/insights/ac-power-analysis-part-2-network-analysis/
https://www.physicsforums.com/insights/ac-power-analysis-part-3-cyber-resilience/
The central grid control does two main things. It determines the optimum allocation of total load to the various generators and sends that signal to the "speed changers" in each plant. We call them power base points in the central control. In the old days, we call this function ED for economic dispatch.
Central control also biases the power base points in response to grid frequency and interchange power errors. That is what we call AGC. AGC forces the grid frequency and interchange errors to zero in the steady state. Once in a while, all the control centers in the entire interconnection will change the frequency set point slightly for a short period of time to correct the time on electric clocks.
All of this was laid out in the 1959 book
Economic control of interconnected systems by Leon Kirchmayer. Kirchmayer was my first boss when I graduated from college.