Abstract: A method for optimally operating co-generation of electricity and heat in which the district heating power range is divided to a lower range and a higher range is characterized in that base load electricity and regulation electricity are produced with a steam turbine operating like a condensing turbine; the lower heating power range (B) is produced mainly by heat pumps using the energy of the exhaust steam of the turbine as an energy source; peak-load power and wintertime regulation electricity are produced with a peak-load engine; and the higher heating power range (A3, A4) is produced partially by heat pumps using said energy as the energy source and partially by the exhaust gas heat of said peak-load engine. Both the electricity and the heat are produced with a remarkably higher fuel utilization rate and significantly more electricity in relation to heat is produced than with conventional district heating power plants.