Since the beginning of 2018, 14 energy companies have exited the domestic energy market. In this event, a Supplier of Last Resort (SoLR) is appointed, and any debts to the failed company are then pursued by insolvency firms.

However, these firms are not bound by energy industry regulations, and many consumers have reported being the subject of aggressive debt recovery practices.

Ofgem said the letter reflects its experience of dealing with insolvency practitioners appointed to failed energy suppliers and sets out its expectations of insolvency practitioners operating in this context.

Welcoming the letter, Citizens Advice Scotland (CAS) said it has long been critical of the role of administrators in recovering consumer debt in the event of supplier failure.

The charity said Ofgem’s letter has addressed some of its key concerns, but it believes that more must be done to protect consumers in these circumstances.

Dr Jamie Stewart, energy spokesperson for CAS, said: “We are pleased that Ofgem recognises that the current SoLR process does not always produce positive outcomes for consumers. CAS recognises that the circumstances around each supplier failure are different and, therefore, a degree of flexibility is required in terms of what remedial action is required.

“However, the variety of different arrangements between appointed suppliers and insolvency practitioners outlined in Ofgem’s letter highlights a need for greater consistency.”

Dr Stewart added: “The Citizens Advice network in Scotland helps hundreds of thousands of people each year, and many thousands of those people come to us with energy issues. Experiencing a supplier failure can be stressful for households, so it is important that they are protected from further detriment. Ofgem’s letter is a step in the right direction.”