An immediate replacement supplier is the solution that the regulator plans to bring into place, especially as some accounts of a closing energy supplier may be in credit.

As part of the process for selecting a replacement supplier, Ofgem said it will take into account which alternative supplier can best protect consumers’ credit balances.

Part of the proposal is to look at how the cost of reimbursement is shared. It is proposing to allow the costs of reimbursing the credit balances to be spread across all energy customers to better protect customers' money and will have a small impact on bills..

Rachel Fletcher, Senior Partner for Consumers and Competition at Ofgem said: “We are proposing a safety net to protect customers’ credit balances in the unlikely event of a supplier failure. There are big savings to be made from switching of around £200 to £300 and now over 40 suppliers to choose from. These protections are designed to give people peace of mind so they can have complete confidence to shop around for the best deal.”

Ofgem is seeking views on its approach to dealing with supplier insolvency and its consequences for consumers until 29th July 2016.