Power-factor penalty explained (and how to end it)
If your power factor sits below the utility's threshold, you are paying a surcharge every month for energy you never used. It is one of the fastest paybacks on any bill.
What power factor actually is
Power factor is the ratio of the real power that does work to the total power the utility must supply. Motors, transformers and older lighting draw reactive power that does no useful work but still loads the network — so utilities charge for a low power factor to recover that cost.
What the penalty costs you
Below the threshold — commonly 0.90 — the tariff applies a percentage surcharge, or bills the reactive energy directly. On a heavy motor load this can be a meaningful slice of the bill, and it recurs every month until the power factor is corrected.
How correction works
A capacitor bank supplies the reactive power locally, so the utility no longer has to. Sized to your load and switched automatically, it lifts the measured power factor above the threshold and removes the surcharge. Because the penalty is on the bill and the fix is well understood, the payback is usually short.
Frequently asked
What power factor do utilities require?
Most industrial tariffs set the threshold at 0.90; below it they apply a surcharge or bill reactive energy directly.
How much does power-factor correction cost to fix?
A switched capacitor bank sized to the load is a modest capital item, and because it removes a recurring monthly surcharge the payback is typically well under two years.
Can you tell my power factor from my bill?
Yes — it is printed on most industrial bills, and the surcharge (if any) is a measured line, not an estimate.