Industry regulator Ofgem has blocked the transfer of thousands of former customers of failed supplier Economy Energy to E (Gas and Electricity) Limited.

Ofgem has discovered that Economy Energy “agreed the sale” of around 30,000 customers to E in December 2018.

The move may have been a last-ditch attempt by Economy Energy to prevent its demise.

Ofgem has issued a provisional order to stop E completing the switch of the customers.

It said Economy Energy failed to notify Ofgem of this sale when it stopped trading.

The regulator believes that the contract between E and Economy Energy may no longer be effective as a result of Economy Energy ceasing to trade and the appointment of Ovo Energy to take over its customers.

The provisional order, which will remain in place for up to three months unless it is confirmed, is designed to “prevent further harm and uncertainty” being experienced by former customers of the failed supplier while Ofgem investigates the transaction.

During the period of the order E must stop the transfer of all former customers of Economy Energy to E and write to Ofgem to state what steps it has taken to satisfy the requirements of the provisional order.

In response to the order Matthew Vickers, chief executive and chief ombudsman at the Energy Ombudsman, said: “The supplier of last resort (SoLR) process is there to protect people when a supplier fails. It needs to be straightforward and low stress.

“We welcome Ofgem’s focus on consumers and we’re working closely with Ovo Energy and Ofgem to make things as smooth as possible for former Economy Energy customers.”

Economy Energy ceased trading on 8 January, just one day after the company was revealed to be in credit default and less than a week after it was banned from taking on new customers.

Ovo Energy was chosen as SoLR for the troubled company’s 235,000 domestic customers.

Ofgem has previously alleged that Economy Energy and E breached competition law along with consultancy firm Dyball Associates.

The regulator opened the investigation in 2016 and issued a statement of objections to the companies under the Competition Act 1998 in May last year. It stressed its findings were provisional.

The investigation, which is still open, alleges Economy Energy, E and Dyball Associates had an agreement that prevented the two energy suppliers “actively targeting” each other’s customers through face-to-face sales.

Ofgem closed two other enforcement investigations into Economy Energy after the supplier ceased trading – one into the company’s compliance with the Renewables Obligation and one observing its sales and marketing obligations.

E (Gas and Electricity) has been contacted for comment but no response was received at the time of publication.