Co-operative Energy is paying out £1.8 million in compensation to customers after subjecting them to "unacceptable" levels of service.
Ofgem said Co-operative Energy let customers down in its complaints resolution, call handling and billing processes.
The regulator and Citizens Advice saw a steep increase in complaints after customers were unable to log into their accounts online, leaving them unable to submit meter readings or check their bill.
Bills were delayed and direct debit updates stopped, and new customers also experienced delay transferring to the supplier.
Ofgem said Co-operative also took too long to resolve a significant number of customer complaints.
The issues were the result of the introduction of a new IT system in March 2015.
Co-operative has already paid out £1.6 million, and any amount it cannot return will go to the charity StepChange to help energy consumers who are in financial difficulties.
Ofgem senior partner Martin Crouch said: "While customers experienced unacceptable levels of service, Co-operative Energy has done the right thing by taking responsibility for the situation and paying out compensation to those people affected.
"If trust is to be restored in the energy market suppliers must make amends to their customers when things go wrong. We want all suppliers to constantly ensure customers are treated fairly."
Ben Reid, chief executive of Midcounties Co-operative, said: "As the UK's only member-owned energy supplier, we put our customers at the heart of everything we do and their interests first.
"We have apologised to those customers who were affected by the problems we experienced when we introduced a new IT system last year.
"The system issues are now resolved and we have made significant improvements to our service."
Chief Ombudsman Lewis Shand Smith said: " We've been working closely with Co-operative Energy to help them improve their customer service following the difficult introduction of their new IT system earlier this year. Some good progress has been made, but there is still a lot of work to do.
"In the first six months of this year, we received 692 complaints about Co-operative Energy, 3% of the total for the energy sector. A significant proportion of their customers have experienced issues, and we're committed to helping them get back in track following a series of IT glitches.
"We encourage any consumer who has complained to Co-operative Energy but remains dissatisfied with their response to contact Ombudsman Services."