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Energy supplier Economy Energy, which was recently banned from taking on new customers, has collapsed.

The supply to its 235,000 domestic customers will continue, any credit they have will be protected, and a new supplier will take on their accounts.

Regulator Ofgem said a new supplier would be appointed as soon as possible. On Friday, it had ordered the company to improve customer service.

Economy Energy is the latest of a host of small suppliers to fold.

Troubles

Customers had spoken of problems with disputed account balances, the firm's failure to issue refunds, and concerns over billing delays. The Energy Ombudsman said it was looking into 1,303 complaints about the failed supplier.

Economy Energy had posted a message on its website saying that after "recent speculation and circulating misinformation" it had "no intention of closing our doors".

However, Ofgem stepped in on Friday, banning the company from taking on new customers for three months to ensure it improved its customer procedures.

The regulator said Economy Energy had to address billing and payment failures, and issue customer refunds in a timely manner.

Now, just a few days later, the business has ceased trading.

What should customers do?

Ofgem said that Economy Energy customers should not do anything at the moment, apart from taking a fresh meter reading. Prepayment meters can be topped up as normal.

They will be told which supplier is taking on their gas and electricity service, and from that point they will be told about their new tariff and opportunities to switch.

Some customers, who pay a set amount by direct debit each month, will have paid more than the energy they have used. This credit will be protected by the new supplier, so will not be affected.

Behind the scenes, these costs are claimed by the new supplier from an industry levy.

"Ofgem will now choose a new supplier for you, ensure you get the best deal possible. While we are 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," said Philippa Pickford, of Ofgem.

"We have seen a number of supplier failures over the last year and our safety net procedures are working as they should to protect customers."

In the past year, a number of small energy suppliers have gone bust, including Spark Energy, Extra Energy, Future Energy, National Gas and Power, Iresa Energy, Gen4U, One Select and Usio Energy.

Gillian Guy, of Citizens Advice, said: "The failure of energy suppliers is becoming an all too familiar story. Ofgem's moves to tighten up the licensing rules should address the problem of unprepared companies coming into the market. But the continued failure of suppliers shows there are firms operating that require the regulator's urgent attention."

Two Ofgem investigations into Economy Energy will now end, but a competition inquiry will continue.

On its website, the company said: "Economy Energy has ceased to trade. Ofgem, the energy regulator, is appointing a new supplier for its customers."