Small energy supplier Iresa has ceased trading and Ofgem is in the process of choosing a supplier of last resort.
The troubled company, which has less than 100,000 customers, had been banned from taking on new customers since March this year.
It was also not allowed to request one-off payments or increase direct debits until customer service failings had been addressed.
The company was subject to a wider investigation by Ofgem, launched in February, into its customer service processes. The news followed customers facing a sudden direct debit increase or a one-off payment of hundreds of pounds.
Iresa’s website is no longer operational and includes a statement advising customers about the closure.
It said: “Iresa Limited will be ceasing to trade. Ofgem, the energy regulator, is appointing a new supplier for its customers.
“Customers need not worry, their supplies are secure and credit balances are protected.
“Ofgem’s advice is not to switch, but to sit tight and wait until the new supplier has been appointed. “This will help make sure that the process of handing customers over to a new supplier, and honouring credit balances, is as hassle free for customers as possible.”
Ofgem confirmed energy supply of Iresa customers will “continue as normal” and outstanding credit balances will be protected under the regulator’s safety net.
A new supplier will be chosen and customers will be contacted by this supplier once the process is complete.
Rob Salter-Church, Ofgem’s interim executive director for consumers and markets, said: “If you are an Iresa customer there is no need to worry as we will make sure your energy supplies are secure and your credit balance is protected.
“Ofgem is working to choose a new supplier as quickly as possible for you. Whilst we’re doing this our advice is to ‘sit tight’ and don’t switch. Your energy supply will not be affected and will continue as normal – the thing that will change is that your energy will come from a new supplier.”
Ofgem suggests customers should take meter readings today (27 July) and wait until their new supplier contacts them to tell them what to do about credit balances.
Once a new supplier is in place customers will not be charged exit fees if they choose to switch away from the provider.
Ofgem’s regulation of small suppliers was under scrutiny following problems coming to light at Iresa. Critics claim it is too easy for new suppliers to enter the market without the correct processes in place.
The regulator is reviewing its approach to supplier licensing and could toughen rules for entry to the energy market.
Earlier this week, non-domestic provider National Gas and Power had its supply licence revoked by Ofgem as it was unable to pay debts of more than £200,000. Hudson Energy was appointed supplier of last resort.
In January, Ofgem appointed Green Star Energy, the domestic trading name of Hudson Energy, as the supplier of last resort for the 10,000 customers of Future Energy, which collapsed because of “trading difficulties”.
The regulator also intervened in November 2016 when Co-op Energy took on 160,000 customers from GB Energy Supply when the small supplier went bust.