Spark Energy has become the seventh small energy supplier to cease trading this year amid severe turmoil in the sector.
The Press Association reported reported earlier on Friday that the company had enlisted KPMG to assess all options for the firm, including an administration.
KPMG was initially brought in to oversee an accelerated sale or merger with another provider, but the collapse of rival Extra Energy this week and well-documented pressures in the industry caused alarm among would-be investors.
A Spark spokesman said that the company is still working to merge the parent firm and its workforce with a larger provider.
“If successful, it would mean Spark becomes a standalone part of this large independent supplier – operating from our offices in Selkirk, Edinburgh and Horsham offices, supplying our customers under the new parent company’s licence,” he said.
Spark’s failure means it is the seventh small energy supplier to to go bust this year, leaving hundreds of thousands of customers in limbo.
Spark has nearly 300,000 customers in the UK and employs 400 people at its head office in Selkirk in the Scottish Borders.
The failure comes days after Spark missed a deadline to make a £14.4 million renewable energy payment and barely 48 hours after rival Extra Energy went bust.
The energy market has been hit by stinging regulation, including a Government-enforced price cap on standard variable tariffs amid anger over rising bills.
Spark is backed by its chief executive, Chris Gauld, and finance chief Hamish Osborn, who led a management buyout of the firm in 2016.
Mr Gauld told Scottish media last week that the rising costs of wholesale energy and the price cap were hammering the sector.
Spark was founded in 2007, has a turnover of more than £200 million and also has around 15,000 broadband and telecoms customers.
Rival firms Extra Energy, Future Energy, National Gas and Power, Iresa Energy, Gen4U and Usio Energy have all gone bust in 2018.
The energy supply of Spark’s customers will continue under Ofgem’s “safety net” procedure, and the regulator will choose a new supplier to transfer accounts.
Mary Starks, Ofgem’s executive director for consumers and markets, said: “Our message to energy customers with Spark is there is no need to worry, 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.”
The regulator has recently tightened up rules for new energy suppliers entering the market.
New entrants will have to show they have adequate financial resources and can meet customer service obligations.
Ofgem said the tests should ensure new entrants are robust while encouraging competition and innovation in the market.