In the North-Eastern European region, a quality of life of population and an activity of the economic sector is largely affected by availability of a qualitative and safe thermal energy for adequate prices. District heating (DH) systems are inherent of natural monopoly elements and in the majority of cases are subject to regulation The existing DH regulation environment often has a range of serious drawbacks having as their main cause a “stringent” regulatory regime and rigid “cost+” method for DH tariff setting: “overinvestment” risk, low incentive to increase efficiency and to optimize costs, time-consuming and ponderous tariff setting process. The purpose of this study was to create a benchmark-based model for regulation of district heating (DH) tariffs. Based on the previous studies about the most important elements of DH supply tariffs, properties and nature of individual tariff components, as well as the impact of parameters of DH systems on tariffs, a framework and a structure for the algorithm, which might be used for benchmarking and for checking compliance of the specific tariff against benchmarks was formed. Based on the framework and the structure defined in this publication, as well as by integrating the proposed modules and mechanisms (Monte Carlo simulation; instruments for a regulator for implementation of energy policy; specific tariff compliance tests), it is possible to create algorithms for calculation of benchmarks for DH generation, transmission and distribution tariffs and evaluation of specific tariffs. These algorithms allow to make radical changes in the regulatory regime, i.e. to refuse from the scrupulous ex-ante regulation and to focus the activity of a regulator on supervision and stimulation of efficiency of DH companies, thus eliminating any drawbacks, which are characteristic for the “stringent” regulatory regime.