Heat Procurement Price Cap Introduced: Amendments to the Energy Law and the New Thermal Energy Procurement Procedure from October 1, 2026

As of October 1, 2026, the procedure by which a thermal energy producer sells its produced thermal energy to a district heating system operator will change. These changes are included in the amendments to the Energy Law, which the Saeima supported on February 12 with a clearly defined objective: to address price fluctuations in the thermal energy market and reduce household heating expenses. From a legal regulatory perspective, this means that the thermal energy market and commercial relations between producers and operators will be supplemented with a more precisely defined price discipline mechanism implemented by the regulator.

At the center of the amendments is the introduction of thermal energy procurement price caps and the associated change in the sales procedure between thermal energy producers and district heating system operators. According to the amendments, district heating system operators, when procuring thermal energy from independent producers under competitive conditions, may not purchase it at a price higher than that set by the Public Utilities Commission (PUC). Thus, a normatively clear restriction is established in the field of pricing, the application of which will be directly linked to the maximum procurement price set by the regulator; this aspect is particularly significant for legal compliance assessment and law enforcement practice.

Simultaneously, the amendments provide that the PUC will develop a procedure for calculating the price caps. From the perspective of public service regulation and energy law, this calculation procedure is not a technical annex but an essential component of the legal instrument, as the methodology itself will determine how the thermal energy procurement price caps are practically implemented. Consequently, the regulator’s competence is manifested here in two ways: both by setting the maximum procurement price and by defining a normatively applicable calculation framework that ensures predictability and legal clarity for market participants.

Deadlines are set differentially depending on the scale of the district heating system operator. By the end of June this year, the PUC will set the maximum procurement price for the district heating system operator whose volume of thermal energy supplied to users exceeds 2 million megawatt-hours per year, a threshold that applies only to the capital. Meanwhile, for other district heating system operators, the maximum procurement price will be set by June 30, 2028. This approach provides for a sequential implementation of the regulation, where the largest system is covered earlier, while other market participants follow later, maintaining a unified normative goal and a gradual transition to the new rules.

The entry into force of the new procedure is also planned gradually. For large district heating operators with a supply volume over 2 million megawatt-hours per year (in Riga), the new procedure must be applied from October 1, 2026. For other district heating system operators, it must be applied from October 1, 2028. This transition period is legally significant as it simultaneously determines both the regulator’s action schedule (setting the maximum procurement price) and the timing for the commencement of market participants’ obligations.

Thus, the thermal energy procurement regulation is strengthened with specific legal consistency: if a district heating system operator procures thermal energy from independent producers under competitive conditions, the procurement price is subject to a maximum level set by the PUC, while the calculation criteria and methodology become an integral part of the regulatory mechanism. The reason stated in the explanatory notes to the amendments—reducing price fluctuations and decreasing household expenses—is achieved in this framework through a legally clear instrument, in which the regulator’s decisions and their practical application play a decisive role.