Edinburgh-based Our Power, which has 38,000 customers, has gone out of business.
Its website said the interests of customers would be protected and power supplies were “secure”.
The jobs of 70 members of staff at the not-for-profit company are at risk. An administrator is expected to be appointed on 31 January.
The Scottish government is thought to have lost nearly £10m in loans to the failed energy supplier.
The firm was set up four years ago with the high-profile support of Scottish ministers.
By buying energy at wholesale rates for housing association tenants, it was expected to save them money and reduce fuel poverty.
The government agreed to three commercial rate loans, totalling £9.5m, alongside social investors and after making checks into the business plans.
In a letter to customers, the company’s CEO, Dawn Muspratt, blamed the company’s collapse on several factors.
The firm was forced to implement a new billing system in 2018 after their system was withdrawn from the market. This resulted in bills being issued late and cashflow issues.
Volatile wholesale gas and electricity markets meant a lot of cash was taken out of the business.
And changes to the energy industry, including regulated price caps, made it difficult to grow the customer base.
Our Power joins a long list of small providers that have gone bust recently, including Economy Energy, Spark Energy, Extra Energy, Future Energy, National Gas and Power, Iresa Energy, Gen4U, One Select and Usio Energy.
The regulator Ofgem said it would choose a new supplier to take on the customers “as quickly as possible”.
It said repayment meters can be topped up as normal and the outstanding credit balances of domestic customers would be honoured.
Ofgem director for future retail markets Philippa Pickford said: “Our message to energy customers with Our Power 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 for you, ensuring 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.”
She added: “We will update you when we have chosen a new supplier, who will then get in touch about your new tariff.”
The Scottish government said it was disappointed to learn the company had ceased trading.
Communities Secretary Aileen Campbell said: “The Scottish government has supported Our Power in its aim of tackling fuel poverty since 2015.
“This will be a worrying time for all the employees”
She added that support for staff would be available through the government’s Partnership Action for Continuing Employment (Pace) scheme.