The retail prices index is flawed but the way it is calculated will not be changed, the Office for National Statistics has decided.

Instead, following a three month consultation, the ONS announced it would develop a new price index known as RPIJ in parallel with RPI. The new formula will be designed to address the gap that exists between RPI and the consumer prices index.

The RPI will continue to be calculated on the basis of a formula called the Carli index, which the ONS accepts systematically overstates inflation and does not meet international standards.

National statistician Jil Matheson said there was “significant value to users in maintaining the continuity of the existing RPI’s long time series without major change”.

John Musk, analyst at RBC Capital Markets, had expected the ONS to get rid of the Carli formula. Such a move “could have significantly hit the growth prospects of regulated utilities such as the UK water companies, National Grid and (to a lesser extent) SSE”, he said.

Today’s announcement gives a short term boost to regulated industries, said Musk. “Although in the longer term there could be pressure from regulators to switch to the RPIJ measure, this would likely require further consultation with the industry.”

Moody’s said it was unclear what practical use the RPIJ index would have, other than for information. The ratings agency agreed the ONS decision to keep RPI was credit positive for regulated utilities.