We mentioned a couple of months back that in order to determine whether a market is competitive or not it's not really possible to look at pricing alone. For manipulated markets and free ones can look remarkably similar through that one lens. We can though look for other events which will guide as to whether we've that desired competitive market.
One of which is people attempting to be the low cost provider going bust:
We can though think about what should be true if it is a competitive market, look for that occurring and thus come to a determination. One of those things being, well, if the market is competitive on price then we'd expect to see those attempting to be the lowest cost provider experiencing significant difficulties in keeping going. For trying to be the lowest cost provider - without any particular low cost production method - is a precarious place to be in a competitive market.
Everyone is already charging just the minimum necessary to keep afloat and you're coming in lower? You're going to have a little problem there or two, aren't you?
Our example of someone apparently suffering such competitive problems was Iresa. And Lo!
Almost 100,000 energy customers have been left in limbo after Britain’s cheapest energy supplier went under after months of poor service and more than 2,000 complaints to the Ombudsman this year alone.
Iresa Energy, which is also the country’s most complained about energy supplier, collapsed on Friday after a lengthy, public battle with the regulator over its poor customer service and billing.
The company is the latest casualty of fast-rising energy costs that have forced standard energy tariffs across the market higher in the last few months.
A competitive market should see some people going bust as a result of that price competition. We are seeing people going bust because of that price competition. A useful conclusion would thus be that we've a competitive market here.