The Office for National Statistics is expected to report that inflation fell to roughly 2% in June, the lowest level in nearly three years. That headline figure will be seized on by ministers as evidence that the cost-of-living crisis is easing. But for the 24 million households on standard variable energy tariffs, a very different number matters more: the £63 increase in the price cap that takes effect on 1 October.
The timing could hardly be worse. As reported by the Herts Advertiser, inflation may have cooled in June, but the energy price cap rise means average annual bills will climb to £1,717 from October. That is still below the peak of £2,500 in early 2023, but it is a significant step up from the current £1,654 cap. For a typical 3-bed semi using 12,000 kWh of gas and 2,900 kWh of electricity, the increase works out at about £5.25 a month, not catastrophic, but enough to push stretched budgets into the red.
Why inflation figures mislead homeowners
Inflation measures the rate of change in prices. When it falls to 2%, it means prices are still rising, just more slowly. For energy, the Office for Budget Responsibility forecasts that household energy costs will remain 40% above pre-pandemic levels through 2025. The October cap rise is driven by higher wholesale gas and electricity costs, plus increased network charges that Ofgem has authorised. The regulator’s own data shows that network costs now account for roughly 23% of a typical bill, up from 18% in 2021.
The catch is that households cannot wait for inflation to solve their energy problem. Fixed tariffs are starting to reappear after a two-year absence. Octopus Energy, EDF, and British Gas now offer 12-month fixes at around £1,600–£1,650, slightly below the October cap. Switching now could save a typical household £60–£100 over the next year. But the window is narrow: as more suppliers re-enter the fixed market, the best deals may vanish by September.
What it costs a typical 3-bed semi
Ofgem’s price cap assumes a household using 12,000 kWh of gas and 2,900 kWh of electricity. At the current cap of £1,654, that works out to roughly 6.1p per kWh for electricity and 6.0p for gas (standing charges add about £220 a year). From October, the per-unit rates will rise to around 6.6p and 6.3p respectively. For a home with poor insulation, say, an EPC rating of D or E, the actual consumption could be 30% higher, pushing the annual bill above £2,200.
The Energy Saving Trust estimates that draught-proofing and loft insulation (costing £200–£500) can save £100–£150 a year. Cavity wall insulation (£500–£1,500) can save another £150–£200. These measures pay back within two to four years and can lift an EPC rating by one or two bands. That matters because from 2025, landlords will face minimum EPC C requirements, and homeowners selling will need a better rating to attract buyers.
Heat pumps and solar: the long-term hedge
The government’s Boiler Upgrade Scheme offers £7,500 towards an air-source heat pump. A typical installation costs £8,000–£12,000 after the grant. For a 3-bed semi, a heat pump can cut heating bills by 20–40% compared to a gas boiler, depending on the home’s insulation and the system’s efficiency. The payback period is 7–12 years, but with the price cap rising, it shortens.
Solar panels, meanwhile, cost £5,000–£8,000 for a 4 kW system. With the Smart Export Guarantee paying 5–15p per kWh exported, a typical household can save £200–£300 a year on bills and earn £100–£200 from exports. The payback period is 8–12 years, and panels can add 5–10 points to an EPC rating. Both technologies protect against future cap rises, and inflation is not going to make energy cheaper.
What homeowners should do now
First, check your current tariff. If you are on a standard variable rate, compare fixed deals on Ofgem-accredited sites. Second, book a free home energy assessment through your local council or the Energy Saving Trust. Third, act on low-cost insulation before winter. Fourth, if your boiler is over 10 years old, consider a heat pump, the grant is guaranteed until March 2028, but installer lead times are already stretching to 8–12 weeks. The time to act is now, not after the October cap rise hits your bank statement.
Frequently Asked Questions
No. Only households on standard variable tariffs (about 24 million) will see the £63 increase. Those on fixed tariffs are protected until their deal ends. Check your latest bill or contact your supplier to see which tariff you are on.
Yes. The Boiler Upgrade Scheme is open to all homeowners in England and Wales who replace an existing fossil fuel heating system with an air-source or ground-source heat pump. The grant is £7,500 and is available until March 2028, but funding is limited so apply early.
