£221 Added to Your Bill, and the Energy Price Cap Isn't Done

Britain's energy price cap went up 13% at the start of July, and it took less than seven weeks for that single decision to turn up in the national inflation figures. The Office for National Statistics says consumer price inflation reached 2.9% in the year to July, up from 2.6% in June. That was a 15-month low in June and the first increase in the measure since March.

The cash number is the one worth holding on to. Ofgem's adjustment added roughly £221 to a typical annual dual-fuel bill — about £18 a month, every month, before anyone touches the thermostat. Gas prices alone climbed 14.7% in the month, the steepest monthly rise since October 2022, when the country was in the thick of the energy crisis. Electricity rose 3.6%.

It isn't over either. Cornwall Insight's final forecast, published the same day as the inflation data, has the cap rising another 4% in October. Ofgem confirms the actual level by 26 August. On a unit-for-unit basis, that would take bills to their highest point since July 2023 — a fact that sits awkwardly next to a headline inflation rate under 3%.

What Actually Pushed the Number Up

Housing and household services did nearly all the work, with the annual rate for that category jumping to 4.1% from 2.7%. Everything else was comparatively quiet. Food inflation actually eased to 1.3% from 1.7%. Core inflation, which strips out energy, food, alcohol and tobacco, held steady at 2.6%. Services inflation, the measure the Bank of England watches most closely, slipped to 3.4% from 3.6%.

Pump prices went the other way and softened the blow. Petrol averaged 152.2p a litre in July, down 3.1p on the month, while diesel fell 8.8p to 167.6p. In the same month a year earlier, both had risen. There were smaller quirks too, according to the ONS.

Upward pressures included furniture prices falling by less than usual for this time of year, and also a smaller fall for clothing prices due to reduced discounting.

CPIH, the measure that folds in owner-occupier housing costs and tends to reflect what people actually pay to keep a roof up, rose further — to 3.1% from 2.8%.

The Energy Price Cap Quietly Changed Its Own Maths

Here's the detail almost nobody mentioned. On 1 July, Ofgem also cut its definition of a typical household. Assumed annual electricity use dropped from 2,700 kWh to 2,500 kWh, and assumed gas use fell from 11,500 kWh to 9,500 kWh, because homes genuinely burn less than they used to.

That change alone reshapes the headline figure. The same quarter's cap is £1,663 under the new assumptions and £1,862 under the old ones — a gap of nearly £200 created by arithmetic, not by anything happening in wholesale markets. Cornwall Insight's October forecast carries the same split: £1,729 on the new basis, £1,941 on the old one. So if a number looks lower than one you remember, check which yardstick it's using.

Worth remembering as well: the cap limits unit rates and standing charges, not your total bill. Use more, pay more.

What This Means for Your Money

Pay is only just keeping pace. Regular pay grew 3.5% in the three months to June, but private sector regular pay rose just 2.8% — below the 2.9% inflation rate. For a large slice of the workforce, July was a real-terms pay cut.

If You're on a Standard Variable Tariff

You're the one directly exposed to Ofgem's decision, and any October change lands automatically. Submit a meter reading close to 30 September so your supplier bills the cheaper units at the cheaper rate rather than estimating across the boundary. The government's VAT reduction on electricity, which took effect on 21 July, is already baked into the forecasts.

If You're Fixed or on Prepayment

A fix priced below the forecast October level buys certainty, though most analysts expect the peak to arrive later in 2026 or early 2027 rather than this autumn. Prepayment customers feel changes fastest, because the new rates apply to the next top-up.

Will the Bank of England Still Cut Rates?

The Monetary Policy Committee held Bank Rate at 3.75% on 30 July, a fifth consecutive hold, and the 6-3 split told its own story: Huw Pill, Megan Greene and Catherine Mann all wanted a rise to 4%, worried that expensive energy would seep into everything else. July's data hands them ammunition. The next decision comes on 17 September.

Longer-term borrowing costs are the quieter worry. Ten-year gilt yields have touched 5.155%, close to 20-year highs, and that feeds into how lenders price fixed-rate mortgages regardless of what the Bank does with Bank Rate. J.P. Morgan's Scott Gardner tied the July figures to the Iran conflict working its way through to household bills.

What to Watch Over the Next Month

Two dates matter. Ofgem publishes the October cap by 26 August, which tells you what your unit rates do from 1 October. The Bank decides on 17 September. Between now and then, dig out your latest bill and check three things: whether you're capped or fixed, what your standing charge is, and when your current deal ends. If a fix beats the forecast, the decision gets easier — but do the sum on your own usage, not on a typical household that may no longer look anything like yours.