Transparency and the Electricity Market

A belated comment about electricity markets, which I suddenly realised when I was reading the FT magazine recently.  Tim Harford wrote a piece in the Undercover Economist called 'Don't Judge a Book By Its Cover Price'.  The article was about amazon and computer pricing models, but he mentioned the problems of price transparency.

As JLF Bertrand pointed out in the nineteenth century, is two companies are offering an identical product and have transparent pricing, then rational customers will just go to the one that is the cheapest. This will lead to a race to the bottom in terms of pricing, until the price is at, or just above the cost of production.  This surely highlights a reason why electricity pricing is far from transparent.  The more complicated each company makes its products, the harder it is for customers to compare, and then move to the competition.

Bertrand's argument was too simple, however.  While a cartel would be illegal, imagine if the competing companies understand this model and find a way to raise prices between themselves, or just never start the price competition in the first place.  In fact, it would be entirely irrational to start undercutting your competitor, as you know where it ends - zero profit for everyone.

Which makes me wonder which way electricity prices are heading.