Ofgem's measures include limits on payments billed via direct debit, to "ensure credit balances do not become excessive".

Other proposals include ensuring suppliers have enough money during difficult circumstances and allowing firms to have sufficient control over key assets.

Also included are rules to protect those credit balances when a company fails and customers are moved to a new supplier.

More than 25 energy suppliers collapsed last year and the cost of moving their customers to new suppliers was £94 per household.

This included the cost of new suppliers having to buy extra gas at short notice while prices were at record highs, replacing lost customer credit balances and green levy payments.

Monday's announcement comes as household energy bills are set to surge further, with the price cap forecast to rise by £830 to £2,800 in October.

That will worsen the cost of living crisis for those struggling with an increase in national insurance, council tax, fuel and food.

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Jonathan Brearley, chief executive of Ofgem, said: "Today's plans are another step in making sure the complex energy market is fair, resilient and works for everyone.

"The energy market remains incredibly volatile and there are a number of huge geopolitical issues continuing to apply massive pressure. Ofgem is working hard to ensure energy suppliers shore up their positions so they can weather the ongoing storm.

"By ensuring that suppliers are operating well-financed, sustainable, and have more resilient business models, we can avoid the supplier failures we saw last year which caused huge stress and worry and added costs to everyone's bills.

"But if some do still fail, consumer credit balances and green levy/renewables payments will be protected. Currently they are used by some suppliers like an interest free company credit card.

"Moving forward, all suppliers will have to have enough working capital to run, without putting their customers' credit balances at risk.

"Today's proposals will make sure that customers' hard-earned money is properly protected so that a company must foot the bill if it fails, rather than consumers picking up the tab."

Gillian Cooper, of Citizens Advice, said: "Ofgem has previously allowed energy suppliers to run risky business models. As a result, it's customers who've been left to foot the bill when companies collapse.

"We're glad that Ofgem has listened to our warnings and is taking necessary steps to tackle some of the root causes of these issues.

"It must now ensure suppliers stick to these tougher standards so that people are better protected in the future."

Chris O'Shea, chief executive of British Gas owner Centrica said: "When customers pay up front for their energy, they are trusting their supplier to look after their hard earned money.

"They would be appalled to learn their money was being used to fund day to day business activities, but that's exactly what's happening today.

"As a responsible supplier we have already voluntarily ring fenced our customers' money, currently holding almost £200m in a separate bank account. It's not our money, it's our customers' money.

"Energy customers have overwhelmingly said that they expect their credit balances to be fully protected and it's time we all acted in the interests of customers.

"Six months have now passed following a wave of supplier failures which has resulted in the disappearance of more than £400m of UK consumers money.

"Consumers are paying much higher standing charges than they should be to replace the "disappeared" money, some of which "reappeared" in the pockets of wealthy private owners of failed suppliers.

"We welcome this consultation but we are worried at the length of time it is taking to make the changes necessary and we urge Ofgem to work with greater urgency to protect customers fully and to prevent the events of last year ever happening again.

"While some energy companies argue that prices will increase if they have to ring fence customer deposits, they won't. Energy companies must be adequately capitalised by their shareholders so that if they fail, the shareholders feel the pain, not the hard pressed UK consumer - it really is as simple as that."