ENERGY market regulator Ofgem has moved to protect the hundreds of thousands of customers of Spark Energy, following the failure of the Borders company’s energy supply subsidiary.

Spark, which employs more than 400 people at its Selkirk head office, has been consulting corporate advisers at KPMG in recent weeks to plot a way ahead for the company as it battles challenging conditions in the energy supply sector.

The Herald revealed last week that Spark, which has around 290,000 customers, had been in merger talks with an unnamed English company. That came after it missed the deadline for a £14.4 million renewables obligation payment, due to have been paid by October 31, sparking an investigation into the Scottish firm by Ofgem.

However, the merger previously under discussion is not going ahead.

It was announced yesterday afternoon that the subsidiary of Spark Energy which held its energy supplier licence, Spark Energy Supply, will cease to trade. The rump of Spark Energy will be acquired by Ovo Energy, the UK’s second biggest independent supplier with around one million customers.

READ MORE: Spark misses £14.4m payment

A spokesman said the acquisition will see Spark’s staff transfer to the new owner, with its offices in Selkirk, Edinburgh and Horsham remaining open. He added that Spark will continue to trade as a “standalone” entity under its new owner, and continue with its focus on the tenanted property market. It will operate under the licence of the new owner.

Ofgem confirmed in a statement yesterday that Spark Energy Supply has ceased trading in the energy market. The regulator said that, under Ofgem’s safety net, customers will continue to be supplied as normal, and that the outstanding credit balances of domestic customers will be protected.

Ofgem added that it would select a new supplier to take on Spark Energy Supply’s customers, under its Supplier of Last Resort process, as “quickly as possible”. That process can take up to two weeks. Ofgem said the new supplier will contact customers shortly after being appointed.

Ofgem noted that its investigation into Spark’s non-payment of its renewable obligation charge will now close. The payment Spark had been due to pay will now be “mutualised”, meaning that it will be spread out among suppliers which have met their payments.

READ MORE: Investigation launched into energy suppliers

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.”

Commenting on the Ofgem announcement, Spark Energy said in a statement: “The company referred to in today’s Ofgem press release is Spark Energy Supply Ltd, the part of the Spark group which holds our energy supplier licence.

“Meanwhile Spark Energy Ltd, the group’s parent company, has been working on creating an opportunity for our workforce which could see us becoming a part of one of the UK’s largest independent energy suppliers. KPMG has been assisting us in this process.

“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.”

Six small energy companies have gone out of business so far this year, Extra Energy, Future Energy, National Gas and Power, Iresa Energy, Gen4U and Usio Energ. Spark Energy chief executive Chris Gauld said last week that the energy sector had been thrown into “chaos” because of the UK Government’s decision to impose a price cap for customers on standard variable tariffs. He also cited the effects of rising wholesale prices on suppliers.