Power factor explained: why it appears on your electricity bill

Many commercial and industrial electricity bills include a line for power factor. When it falls below the level set in the tariff, a surcharge can be added. Here is what it means and how to fix it.

Real power and apparent power

Motors, transformers and fluorescent ballasts need magnetising current to work. This reactive power (measured in kvar) flows back and forth without doing useful work, but your cables and transformer still have to carry it.

Power factor = real power (kW) ÷ apparent power (kVA)

A power factor of 1.0 means all the current does useful work. At 0.75, the supply carries about a third more current than the useful load needs.

Why a low power factor costs money

• Utility tariffs for larger users can add a surcharge when power factor is low
• Higher current means higher losses in your cables
• Transformer and cable capacity is used up by reactive current, limiting expansion
• Voltage drop can increase, affecting sensitive equipment

How correction works

Capacitors supply reactive power locally, so it no longer has to come from the grid. Automatic capacitor banks switch steps in and out as your load changes.

The capacitor rating needed is:

kvar = kW × (tan φ₁ − tan φ₂), where φ₁ is the angle at the existing power factor and φ₂ at the target.

Worked example	Value
Average load	300 kW
Existing power factor	0.78 (tan φ₁ ≈ 0.80)
Target power factor	0.95 (tan φ₂ ≈ 0.33)
Correction required	300 × (0.80 − 0.33) ≈ 142 kvar

Watch out for harmonics

Variable speed drives, UPS systems and LED drivers create harmonic currents. Standard capacitors can resonate with these and fail early or amplify the problem. Where harmonics are significant, detuned capacitor banks with reactors are used. Measure before you buy.

Next step

Check your last twelve bills for power factor charges, then have the load measured. See our power factor correction service.