Companies applying for a licence now need to demonstrate they can adequately fund their operations for their first year.
Tougher entry tests for new energy suppliers come have come into force after a spate of recent failures.
Companies applying for a licence now need to demonstrate they can adequately fund their operations for their first year, outline how they expect to comply with regulatory obligations, and show their intentions to provide a proper level of customer service.
Ofgem said the new controls will help drive up standards for customers and reduce the risk of supplier failure.
Directors and major shareholders of companies applying for a licence, as well as senior managers, will also have to show they are “fit and proper” to hold a licence.
The list of failed suppliers has grown rapidly in recent months.
Brilliant Energy, Our Power, Economy Energy, Spark Energy, Extra Energy, Future Energy, National Gas and Power, Iresa Energy, Gen4U, One Select and Usio Energy have all gone bust.
Ofgem will consult on new proposals in the summer with the aim of raising standards of existing suppliers.
This will include considering new reporting requirements for suppliers who are already active in the market and rules around how suppliers manage customer credit balances.
Natalie Hitchins, Which? head of home products and services, said: “Energy customers have too often faced a lottery when their supplier goes bust – not knowing if they will face an overnight price increase of hundreds of pounds or potentially have to wait months for credit refunds.
Matthew Vickers, chief executive at the Energy Ombudsman, said: “Setting standards for new suppliers from the outset – and introducing consequences of falling short of these – should help to foster greater consistency across the sector and avoid some of the problems we’ve seen recently.”