Abstract: A thermally actuated modulating valve preferably for fail safe energy conservation systems includes a valve body having, a main inlet for cold source water, an outlet for heated water, and a fluid transfer chamber connected for delivering heated water to the outlet. A proportioning slide valve assembly formed in said valve body connected to the main inlet to receive cold water therefrom includes, spaced outlets, a slide valve to vary the volume of cold water delivered respectively through the spaced outlets, one of said spaced outlets for delivering varying volumes of cold water to be heated. The valve body has a mixing chamber connected to one of the spaced outlets of the proportioning slide valve assembly to receive cold water therefrom, an inlet for the heated water from the other of said spaced outlets, an outlet for delivering the mixture of cold and heated water to the fluid transfer chamber.