Households may have to pay up to £125 per year to cover the cost of “green” home improvements for the poorest customers under Coalition plans, energy companies have warned.

 Industry sources said the cost of a new green scheme has been underestimated by up to £1.8 billion per year by Whitehall officials.

The new policy, called the Energy Company Obligation, will begin to hit households next year at a time when rising gas prices have already pushed the average bill above £1,335 annually.