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The government鈥檚 review of green levies on energy bills is 鈥渄amaging policy credibility鈥� and 鈥渟eriously undermining鈥� investor confidence, the chair of the energy and climate change committee Robert Smith, has said.

The warning came as pressure continues to mount on David Cameron to scrap plans to 鈥渞oll back鈥� green levies on energy bills as 140 landlords and local authorities write to him saying projects funded by green leives are being shelved.

The government is currently undertaking a review of green levies, in an attempt to bring down the cost of energy bills.

But confusion has reigned about what exactly is included within the review. While the Department of Energy and Climate Change has said a number of policies that support renewable energy projects such as feed-in-tariffs, the renewables obligation and contracts for difference are not included in the review, energy minister Michael Fallon has said everything is included.

In a letter to the prime minister, Smith, a Liberal Democrat MP, said: 鈥淚f the government is to unlock the 拢110bn of investment needed for new electricity generation and transmission by 2020 industry confidence is vital.鈥�

He said the government鈥檚 contract for difference system, where firms are paid a fixed price for the electricity from newly built power stations, was a 鈥渃ornerstone鈥� of government energy policy and should not be undermined.

He said: 鈥淏acktracking on these legally binding contracts will damage policy credibility, seriously undermine investor confidence and could increase the cost of capital for new energy investments 鈥� thus pushing up energy bills.鈥�

Smith backed keeping the Energy Companies Obligation, but said funding for it should come from general taxation rather than a charge on energy bills.

Meanwhile, another letter to David Cameron signed by 140 landlords and local authorities, organised by consultant Sustainable Homes, said the uncertainty over ECO was 鈥渁lready having a damaging impact as social landlords rethink their plans鈥�.

It added: 鈥淢any of our members are considering delaying or disbanding much needed investment. This will have perverse impact, increasing fuel bills and reducing employment.鈥�

It said he should 鈥渞etain and improve鈥� ECO.