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Last updated October 2026.
What is power factor and why does it matter?
Power factor is the ratio between the real power a site uses to do work (kW) and the apparent power the network has to deliver to it (kVA). Motors, transformers, fluorescent lighting and older drives draw current that is out of step with the voltage; the out-of-step part is reactive power (kVAr), and it does no useful work but still has to be carried by the cables and transformers. A site with a power factor of 1.0 draws only what it uses; at 0.8 the network delivers 25 percent more apparent power than the site turns into work.
Network operators recover the cost of that wasted capacity through a reactive power charge on half-hourly supplies, typically applied to reactive units above a threshold equivalent to a power factor of 0.95. The charge appears as a separate line on the bill, in kVArh, and most sites that have it can remove most of it.
How do reactive power charges appear on an electricity bill?
On a half-hourly bill, look for a line labelled reactive power, reactive energy, kVArh or excess reactive. The quantity is the reactive units above the allowed threshold for the month and the rate is set by the distribution network operator for your region. The charge is usually small per unit but accrues every half hour the site runs, so on a manufacturing site with a poor power factor it can run to thousands of pounds a year. It also pushes up the apparent demand in kVA, which can tip a site over its agreed capacity and trigger excess capacity charges, and it can mean paying for a larger supply than the site really needs. Half-hourly metering explains the other capacity-based charges alongside it.
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How can we reduce reactive power charges on our bill?
- Measure it. The half-hourly data from your supplier or data collector shows kW, kVA and kVAr by half hour; power factor is kW divided by kVA. Below 0.95 and the charge applies; below 0.90 and the cost is usually worth acting on.
- Find the cause. Large motors running lightly loaded, compressors, refrigeration, welding equipment and old lighting ballasts are the usual sources.
- Fit power factor correction. Capacitor banks installed at the incoming supply or at large loads supply the reactive power locally, so the network no longer has to. Automatic units switch capacitor stages in and out as load changes.
- Re-check the data after installation to confirm the charge has gone and the kVA peak has fallen.
- Review agreed capacity. With the kVA peak reduced you may be able to lower the agreed supply capacity and the availability charge with it.
What does power factor correction cost and when does it pay back?
Equipment and installation are priced on the kVAr of correction needed and the complexity of the installation; for a typical small manufacturing site the cost runs from a few thousand pounds, and larger multi-stage automatic units cost more. Payback is the annual reactive charge plus any capacity saving divided by that cost; sites with a significant charge typically see payback inside two to four years, and the equipment lasts well beyond that. Correction also reduces losses in the site’s own cables and transformers, which shows up as a small reduction in kWh. An electrical contractor or the equipment supplier will survey the site and quote; the half-hourly data is what they need first.
Power factor correction for manufacturing sites
Manufacturers are the sites most affected, because motor-driven plant dominates the load. The pattern we see on bills: a reactive charge every month, apparent demand well above real demand, and an agreed capacity set years ago for a different production level. Correcting the power factor usually removes the first, cuts the second and allows the third to be reduced, which is three lines of the bill improved by one piece of equipment. We can read the half-hourly data, show the charge in pounds, and introduce a contractor to survey the site; the energy contract itself is then priced on the corrected profile. Electricity for manufacturers covers the wider picture.
Power factor questions
What is a good power factor?
Above 0.95. Network operators apply reactive power charges to half-hourly supplies below that threshold, and the closer to 1.0 the less apparent power the site draws for the work it does.
Why is there a reactive power charge on my electricity bill?
Because the site’s power factor fell below the network operator’s threshold, usually 0.95, so the network delivered more apparent power than the site turned into useful work. The charge covers the capacity that reactive power ties up.
How do I reduce reactive power charges?
Fit power factor correction, normally capacitor banks at the incoming supply or at large motor loads, sized from your half-hourly data. Then confirm on the data that the charge has gone and consider reducing agreed capacity.
Does power factor correction save electricity?
Mainly it removes the reactive charge and lowers apparent demand in kVA; it also slightly reduces losses in the site’s own wiring, which shows as a small kWh reduction. The bill saving comes from the charge and the capacity, not from a large drop in units.
Is power factor correction worth it for a small business?
Only on half-hourly supplies that show a reactive charge; non-half-hourly meters are not charged for reactive power. On a half-hourly site with a charge every month it usually pays back within a few years.
Who can help me check my power factor?
Your supplier or data collector can provide the half-hourly kW, kVA and kVAr data; an electrical contractor or correction equipment supplier can survey and quote. We read the data and show the charge in pounds as part of a contract review.
Want this priced for your meters?
Send us a recent bill and we will compare the suppliers on our panel on the same start date and term, and show you the annual cost of each option. No obligation.