Spark Energy is the seventh energy provider to go out of business this year, citing "tough trading conditions" as the reason behind its collapse.
The company supplied around 290,000 customers across the UK but has today announced that it will cease trading.
"The part of our group which supplies gas and electricity to homes across the country – Spark Energy Supply Limited – will be unable to continue supplying customers due to increasingly tough trading conditions in the energy industry," a statement read.
It claimed that customers have nothing to fear as they will be protected by the energy regulator's safety net.
Ofgem has announced that customers' energy supply will continue as normal, while outstanding credit balances will also be protected.
The regulator's advice is to not switch energy providers, as it is currently appointing a new supplier for the more than quarter of a million households affected.
Customers are advised to take meter readings and wait for the new supplier to contact them.
“Our message to energy customers with Spark is there is no need to worry," said Mark Starks, Ofgem’s executive director for consumers and markets. "As under our safety net we will make sure your energy supplies are secure and your credit balance is protected.
“Ofgem will now choose a new supplier and ensure you get the best deal possible. Whilst we’re doing this our advice is to ‘sit tight’ and don’t switch. You can rely on your energy supply as normal. We will update you when we have chosen a new supplier, who will then get in touch about your new tariff.
“Although we have seen a number of supplier failures this year, our safety net procedures are working as they should to protect customers.”
It comes just days after Extra Energy, which supplied more than 100,000 customers, suffered a similar fate, with smaller energy companies struggling to stay afloat in a tough market.
The sector watchdog is tightening rules for new market entrants in a bid to prevent further collapses hurting customers, proposing that new suppliers must have the means to operate for at least one year.
Ofgem also confirmed that an investigation launched earlier this week into Spark Energy's non-payment into the government’s renewable obligation schemes will close.
Meanwhile, Citizens Advice chief executive Gillian Guy has called upon Ofgem to give more attention to the poorly performing suppliers still in the market.
“The failure of two suppliers in a week is yet more evidence that this is a market where firms must have robust finances and sound business models," Guy said.
"Ofgem’s announcement of proposals to tighten the rules for new energy suppliers is positive news. But there are poorly performing suppliers in the market now that require the regulator’s attention.”