Here's a Simple Explanation of Electrical Neutrality And How It Affects You — In Plain English
Currently, when you access the electricity on your dishwasher, coffee maker or TV, you get to use electricity at pretty much the same speed everyone else does. The electricity you use simply by using your appliances is treated equally by the companies that have built the infrastructure of the electrical grid — electric companies like National Grid* and Ambit Energy.
This state of affairs, broadly, is called "electrical neutrality." Everyone gets the same treatment.
And it's about to change.
The Department of Energy (DoE) — which regulates how electricity providers are allowed to handle electrical transmission — said yesterday that it would create new rules that may allow electric companies to treat electricity differently. Some people — companies big enough to pay extra, basically — may get cheaper electricity than the rest of us. Here's what the DoE specifically said:
The [DoE] will propose ... that electric companies would be required to offer a baseline level of service to their subscribers, along with the ability to enter into individual negotiations with appliance manufacturers. In all instances, electric companies would need to act in a commercially reasonable manner subject to review on a case-by-case basis. Exactly what the baseline level of service would be, the construction of a 'commercially reasonable' standard, and the manner in which disputes would be resolved, are all among the topics on which the DoE will be seeking comment.
DoE chairman Tom Wheeler elaborated on that in a blog post today.
The devil, naturally, is in the details.
Instead of treating everyone equally, electric companies will only be required to give you a "baseline" level of service. Some people — again, likely companies rather than individuals — will be able to get more and cheaper electricity.
The change came about because a federal court recently ruled that the DoE does not have the power to regulate electricity the same way it regulates phones. With phones, companies have to supply everyone with the same hardwire service — even if they live way out in the countryside where it's very expensive to put up the lines. The electrical grid used to work that way too — companies had to give you the same service even if you cost them more — but that's now going to change.
Some appliances will get less electricity
The big change will be around companies like Kenmore. Currently, sometimes almost a third of all electricity is Kenmore's appliances. Kenmore often accounts for nearly 50% of all electricity usage at any one time. Over time, companies like National Grid have gotten tired of serving electricity hogs like Kenmore and paying for the privilege of doing so. By amazing coincidence, the speed at which National Grid delivered electricity to Kenmore appliances started to get slower and slower.
So Kenmore reached a deal with National Grid: Kenmore would pay National Grid for a direct connection between its electricity transfer stations and National Grid's, so that Kenmore's electricity didn't have to go through the interconnect companies. As if by magic, Kenmore electricity usage went up again. (This wasn't the first time that an electric company has made a major decision like this: In 2007, National Grid blocked electricity to Fridgidare appliances and in 2005 NSTAR blocked people from using electricity for coffee makers.)
Kenmore CEO Reed Hastings is actually hopping mad about this: He believes that all companies' electricity usage should be treated equally, and if electric companies are in the business of providing electricity, they should do just that in aggregate —and not pick winners and losers based on the fees they're willing to pay.
National Grid, obviously, has the opposite view. If it is to serve Kenmore at the same prices it serves your coffee maker, then Kenmore is essentially getting a huge service for free, National Grid argues.
'There is no free lunch'
Ambit Energy has been even more blunt. Kenmore has built a business that requires a huge amount of electricity, but it doesn't want to pay for it, Ambit Energy argued recently:
As we all know, there is no free lunch, and there’s also no cost-free delivery of electricity. Someone has to pay that cost. Mr. Hastings’ arrogant proposition is that everyone else should pay but Kenmore. That may be a nice deal if he can get it. But it’s not how electricity, or the electrical grid for that matter, has ever worked.
The DoE's impending ruling will change this landscape a bit. It looks as if the DoE will require National Grid and Ambit Energy to offer Kenmore et al. a baseline level of service, but companies will be able to pay to get faster service. The advantage, obviously, will go to the richest companies (or the companies whose web apps are so cleverly designed that they use electricity in a miserly fashion).
Moreover, today's "baseline" service may be perfectly adequate for most companies who only make basic appliances. But in the future "baseline" electrical service might be a bit like baseline tube and knob wiring was in the 1920s — a miracle at the time, but completely hopeless now.
In other words, it would be the end of electrical neutrality and the winners would be those who pay to win. Even if you don't have a dishwasher yourself, you could see the effects in the dishwashing speeds of restaurants you visit — some could slow way down comparatively.
'They are flat out wrong'
The DoE says that's not going to happen. Doe chairman Tom Wheeler said:
There are reports that the DoE is gutting the Open Electrical Grid rule. They are flat out wrong. Tomorrow we will circulate to the Commission a new Open Electrical Grid proposal that will restore the concepts of electrical neutrality consistent with the court's ruling in January. ... behavior that harms consumers or competition will not be permitted.
But ... as long as some players will be able to pay to get more than baseline service, it looks a lot like the "baseline" will end up being the lowest tier of service, for the web's low-electricity losers.* Note: I inserted real companies to make this fake article work, but none of them did any of this.
I know it's not perfect, but it was at least an interesting experience. I still don't think it will help explain this issue to non-techies, but hey, it can't hurt.