New rules in the pipeline for district heating pricing

On 8 October, the Norwegian Ministry of Energy sent out for public consultation a proposal for amendments to the price regulation of district heating under the Energy Act and the Energy Act Regulations.

The price regulation of district heating has remained largely unchanged since it was introduced in 1987, while the calculation of energy prices has become more complex. According to the Ministry, the proposal is intended to ensure stable framework conditions for the district heating industry while safeguarding customers' need for predictable and transparent price regulation.

What's new in the Ministry's proposal?

Maximum price regulation continued

The Ministry proposes to continue today's maximum price regulation, under which the maximum permitted district heating price must not exceed the total price electricity customers pay for electric heating of a comparable building, including the electricity price, administration cost, network tariff and taxes/duties. Under the proposal, this four-part model is set out in a new section 5-5 of the Energy Act Regulations, making current practice more accessible to both the industry and customers.

The calculation of the network tariff for electricity is now more complex than before, which has made it difficult to determine what the network tariff would have been for district heating customers under electric heating. Today's temporary solution has proven imprecise and may, over time, create a gap between the district heating price and the actual cost of electric heating. The Ministry therefore proposes a new, fixed calculation method in a new section 5-7 of the Energy Act Regulations. NVE's estimates for a sample of district heating undertakings show possible annual revenue changes of between NOK -15 million and NOK +10 million for 2025.

Maximum price regulation applicable also for customers not subject to mandatory connection

The Ministry proposes that the maximum price should apply to all supply from a licensed district heating undertaking, regardless of whether the customer is subject to a mandatory connection obligation. As a result, voluntarily connected customers must also be offered the regulated price, and the right to complain is extended to cover these customers as well.

Opens for use of hourly prices for non-household customers

The proposal opens for the use of hourly prices when calculating the electricity price component for non-household (business) customers. This has been requested by the industry and, according to the Norwegian Water Resources and Energy Directorate's (NVE's) calculations based on 2025 data, could give an estimated additional combined revenue of NOK 140 million per year, provided customers do not adjust their consumption.

Stricter requirements for connection costs and invoice disclosures

The Ministry further proposes a new section 5-4 of the Energy Act Regulations clarifying that the connection cost may not exceed the direct costs of connecting the relevant customer to the district heating network and requiring undertakings to document these costs on request. It is also proposed to remove the ability to charge a fixed annual fee from customers subject to a mandatory connection obligation under section 5-5 of the Energy Act.

The Ministry also proposes to require district heating undertakings to disclose the maximum permitted district heating price on the customer's monthly invoice, pursuant to the proposed new section 5-9 of the Energy Act Regulations. This may require adjustments to undertakings' billing systems and lead to increased administrative costs.

Opens for agreements deviating from the maximum price

Several stakeholders have, in submissions to the Ministry, called for greater contractual freedom than today's regulation allows, including the ability to enter into fixed-price agreements for greater price predictability. It has also been pointed out that current rules do not account for differences in customers' bargaining power, depending on whether they are subject to a connection obligation.

The proposal addresses this by allowing both household and non-household customers to enter into agreements deviating from the price regulation, pursuant to proposed new section 5-8 of the Energy Act Regulations. Individual agreements deviating from the maximum price regulation must be in writing, require mutual consent and be for a limited period.

For household customers, a maximum term of one year at a time is proposed, whereas no maximum contract period is proposed for non-household customers. During the contract period, the customer's right to complain and the NVE's power to issue orders cease to apply, but undertakings must inform the customer of this in writing in advance.

No price regulation yet for near-heating

District heating plants without a licence, so-called near-heating installations (Nw. nærvarme), are currently not covered by the maximum price regulation. The Ministry considers that the need for, and consequences of, regulating such plants have not been sufficiently assessed, and therefore does not propose any specific price regulation for them at this stage. The consultation paper does, however, include a statutory authority allowing the Ministry to establish such regulation at a later stage, and the Ministry specifically invites consultation input on whether near-heating should be subject to price regulation.

Special rules to secure heat supply in the event of bankruptcy

There are currently no dedicated bankruptcy rules for district heating undertakings; general rules under the Bankruptcy Act and the Creditors' Recovery Act apply. Since a district heating licence does not automatically transfer to the bankruptcy estate, the estate must have the licence transferred, or the plant exempted from the licensing requirement, before it can lawfully continue operating.

The Ministry therefore proposes a special regulation for licensed district heating plants in a new section 5-10 of the Energy Act. Under this proposal, the bankruptcy estate may, upon notifying the Ministry, continue to operate the plant temporarily for up to six months, and the Ministry may, in certain cases, order the estate to continue operations for up to twelve weeks in the interest of security of supply.

Since the costs of continued operation will be treated as necessary estate expenses under the statutory lien provision in section 6-4 of the Mortgages and Pledges Act, this may affect secured creditors' recovery. To mitigate this effect, the Ministry proposes that district heating supplies during this period may be priced at the documented direct costs of production and delivery. The proposal nonetheless introduces a new, unquantified risk that may affect risk assessments and lending terms for district heating undertakings.

The consultation deadline is set for 8 December 2026, with the amendments expected to enter into force on 1 January 2028. The consultation paper can be read here.

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