Both old and new energy suppliers could face tougher financial tests under new plans being considered by Ofgem.
The regulator said it will be reviewing its approach to awarding supply licenses as well as financial requirements.
It comes amid concerns energy companies can be set up easily and more could go bust following GB Energy Supply’s downfall last year.
BEIS, Ofgem and the Treasury have developed a Memorandum of Understanding to ensure consumers continue to receive an uninterrupted supply of energy if a supplier goes bust.
Dermot Nolan, CEO of Ofgem said: “With the increasing number of energy suppliers, many of whom are very small and rising wholesale prices, there has been a lot of interest in the sector’s financial stability.
“We have had many representations from those who consider we should require companies to meet more significant financial tests both before and after receiving a license. We are conscious also of the benefits that consumers derive from the competition that new entrants can bring. So we will review our approach to awarding supply licenses, the financial requirements on suppliers and how we monitor supplier performance later this year.”
He added suppliers need to do more to reach out to their own customers and help them engage in the market.
The regulator also plans to continue its work on the database, another remedy aimed at helping disengaged customers to switch.
Mr Nolan believes price comparison websites and other third party intermediaries are “increasingly coming to the fore” to engage with customers.
Ofgem plans on making a decision on the first step towards implementing the CMA remedy in the first quarter.