Electricity contracts for housing cooperatives: how the board procures the right one

Why the electricity contract falls through the cracks

In most housing cooperatives (BRF, from the Swedish bostadsrättsförening), electricity for the building is one of the largest shared costs. Stairwell lighting, ventilation, lifts, the laundry room, the garage and sometimes heat pumps draw power around the clock. Yet the electricity contract is often the agreement the board knows least about.

The reason is rarely lack of interest. The board works on a voluntary basis, members change at every annual general meeting, and the contract may have been signed by a treasurer who moved away years ago. The supply contract renews automatically, the grid subscription has never been reviewed and nobody really knows which terms apply.

This guide explains how the board can procure the electricity contract in a way that holds up even when the board changes.

Two contracts, two counterparties

Start by separating the two parts of the electricity cost:

• The supply contract is signed with an electricity retailer of your choice. This is where contract type, markup and commitment period are decided.
• The grid contract is with the grid company in your area. You cannot switch it, but you can influence the subscription: fuse size or subscribed capacity, and the number of metering points.

Many cooperatives have several metering points, for example one for the building, one for the garage and one for a substation. Each metering point has its own fixed fees, both with the retailer and the grid company. Review them together using the grid contract checklist.

Which contract type suits a cooperative?

A cooperative has two characteristics that drive the choice. Consumption is relatively even and hard to shift in time, and the finances are based on an annual fee that the board would rather not change mid-year.

That is why many cooperatives choose a fixed price or a winter-secured contract, where the winter months have a cap or fixed price and the rest follows the spot price. This gives predictability without locking the entire volume at a price level that may turn out to be high.

A variable contract is cheapest on average over time but requires the cooperative to have a buffer for expensive winters. It can suit a cooperative with good liquidity and a board prepared to explain fluctuations to members. Read more about the trade-off in Which electricity contract suits your business and about budgeting in Electricity budget for housing cooperatives.

Whatever the contract type, the same questions determine the price: the markup in öre/kWh, fixed fees per metering point and what happens when the contract expires. The guide on hidden markups shows where costs tend to hide.

How the board procures, step by step

1. Gather the data. Get monthly consumption for the past two years and the facility ID of every metering point. These are on the invoices or available from the grid company.
2. Read the current contract. Note the end date, notice period and what happens if you do not give notice. Many contracts renew automatically on worse terms. See renewal traps in electricity contracts.
3. Decide on the contract type before requesting quotes. Otherwise you will be comparing apples and oranges.
4. Request quotes on the same basis. State consumption, metering points, bidding zone (elområde), preferred contract type and start date. Ask for the markup in öre/kWh and all fixed fees separately.
5. Convert to annual cost. Use your own consumption, not the supplier's example.
6. Record the decision in the board minutes. Note which quotes were obtained, which one was chosen and why.

Example: A cooperative uses 90,000 kWh per year. Quote A has a markup of 3 öre/kWh and fixed fees of 300 kr per month. Quote B has 1.5 öre/kWh and 650 kr per month. A comes to 2,700 + 3,600 = 6,300 kr per year. B comes to 1,350 + 7,800 = 9,150 kr per year. The lowest markup is therefore not the cheapest contract.

The property manager's role

Many cooperatives have a financial or technical property manager. The manager pays the invoices and may have a framework agreement for electricity that the cooperative has joined. That can be fine, but the board is still responsible for the decision.

Ask the manager three questions:

• Which electricity contract does the cooperative have today, and who signed it?
• Does the manager receive any compensation from the retailer for the cooperative being connected?
• Does the manager monitor the end date and notice period, and where is this stated in the management agreement?

A framework agreement through the manager need not be more expensive, but the board should be able to see markups and fees in the same way as in its own procurement.

Continuity when the board changes

The most common trap is not a bad contract, but that nobody on the new board knows when it expires. Solve this with a simple routine:

• A contract binder or digital folder with the supply contract, grid contract, latest quotes and decision minutes.
• A contract list with supplier, contract type, end date, notice period and the last day to give notice.
• A calendar reminder six months before the last day to give notice, linked to the cooperative's email rather than to an individual board member.
• A handover item at the first board meeting after the annual general meeting, where the contract list is reviewed.

What should be documented?

Write down enough for a new board to understand the decision without asking the previous one:

• Annual consumption, per metering point, that the quotes were based on
• Which suppliers were asked and their prices
• The chosen contract type and the reasoning, for example budget security
• The contract's end date and notice rules
• Who on the board is responsible for electricity matters

What you can do today

• Find the latest electricity invoice and note the retailer, markup and the contract's end date.
• Count the metering points and check that all of them are still needed.
• Add the last day to give notice to the cooperative's shared calendar.
• Ask the property manager in writing which contract applies and who signed it.

If the cooperative has charging points or is considering shared electricity for the apartments, this affects the procurement. Read Charging points in housing cooperatives and Shared electricity subscription in housing cooperatives.

Savera can review the cooperative's contracts and invoices and prepare comparable data ahead of the procurement.