Energy suppliers will undergo financial stress testing from January to measure their resilience after the collapse of 28 firms this year, Ofgem has said.
The energy regulator said those who fail stress tests will be put on an improvement plan, particularly where consumers are at risk - some could even be paused.
It comes after more than four million customers were left without a supplier this year, following record global gas prices that left providers struggling to cover overheads and unable to stay afloat.
The price cap will also be revised to ensure it is able to handle energy market volatility, Ofgem said.
While the cap is in place to protect customers who are at risk of paying the highest prices, Ofgem said it exposes suppliers to risks that are harder to manage at times of high energy price volatility.
There is a risk that, if not tackled, this could lead to higher costs for consumers.
Ofgem said it has also launched a consultation today on a short term, temporary intervention to help stabilise the market.
It follows a damning report by Citizens Advice this month which accused the regulator of failing to act against unfit energy suppliers for almost a decade - leaving households paying an extra £2.6billion as a result.
The charity alleged multiple instances in which Ofgem did not act on evidence of rule-breaking and said it allowed the number of firms in the market to balloon in the pursuit of competition.
Jonathan Brearley, chief executive of Ofgem, said: “Ofgem has worked hard to protect consumers as gas prices have risen by over 500% in under a year.
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"We have ensured that over four million customers of failed suppliers have stayed on supply, household credit balances have been protected and all customers have been protected by the price cap from fast and extreme price rises this winter.
“Today, I’m setting out clear action so that we have robust stress testing for suppliers so they can’t pass inappropriate risk to consumers. I want to see more checks on staff in significant roles, and better use of data to help us regulate. We need a regime that can enable a sustainable market, to promote our transition to net zero.
“Our priority has been, and will always be, to act in the best interests of energy consumers. The months ahead will be difficult for many, and we are working with the government and energy companies to mitigate the impact as much as we can, particularly for the most vulnerable households.”
