Although heat pump based district heating is often an obvious solution, adapting the delivery temperature to the most exigent users is detrimental to overall system performance. This pitfall can be avoided with a centralized plant of heat pumps, cogeneration and an auxiliary furnace, supplemented by decentralized heat pumps. However, the problem of mixed energy production and delivery which this poses is complex and presents for the daunting if not impossible task of adequately, much less optimally, determining the best system for the job. An environomic methodology for aiding in this task is proposed. It is used to model the thermodynamic, economic, and environmental characteristics of such a system in order that its final configuration and corresponding component designs can be optimized. Our approach is an attempt to respond at the synthesis, design and operational level of an energy system to the concept of sustainablility. The optimization of the model developed results in a highly nonlinear, non- contiguous solution space effectively searched using a genetic algorithm. The system’s environmental characteristics are introduced into the model through pollution damage cost terms and pollution penalty functions adapted to the system’s changing emissions and to local and global pollutant conditions. Results are shown for various district heating user distributions and fuel and electricity prices. In this first of a series of two articles, our methodology is described and the details of the environomic model for a district heating network based on centralized and decentralized heat pumps presented. In the accompanying article [1], a complete set of results for the optimal synthesis, design and operation of the network is given and discussed.