Power Factor Penalty

An electric rate may also include additional charges when the customer has a power factor less than some preset limit, typically between 80 and 90 percent. This is called a power factor penalty since it is a penalty assessed on the customers electrical bill for lower than optimum power factor. Special devices called capacitors can be installed by either the utility or the customer to improve a poor power factor. The power factor penalty is an incentive for the customer to pay attention to the power factor at their operation and consider installation of power factor correction capacitors rather than pay a penalty. Power factor correction can be tricky to calculate. Always refer to the appropriate electric rate tariff sheet and have the calculations checked by a professional.

What causes a power factor penalty in power bills?

Power Factor penalty is spelled out in the contract between the Power Company and Industrial or Commercial customer with large three phase loads. If the contract calls for 85% Power Factor, once the customer’s power factor falls below 85%, the Power Company bills the Customer according to the agreed penalty rates.

The Power Company is charging the customer for KW demand in addition to the KWH energy consumed plus penalty charges for low Power Factor. KWH meter with KW Demand register plus Power Factor register are used by the Power Company.

Industrial loads are mostly induction electric motors. When these motors are lightly loaded mechanically they contribute reactive power (KVAR) to, and consume energy (KWH) from the Power Supply. When the reactive power or energy is too much the systems power factor become low.

Reactive Power or Energy is not good for the Power Company. When the Power Factor is low, the Power Plants are consuming more fuel and the Billed KW Demand and KWH energy is lower than when the Power Factor is good.

How to avoid power factor penalty

Low power factor is expensive and inefficient. Many utility companies charge you an additional fee if your power factor is less than 0.95. Low power factor also reduces your electrical system’s distribution capacity by increasing current flow and causing voltage drops. This fact sheet describes power factor and explains how you can improve your power factor to reduce electric bills and enhance your electrical system’s capacity.

Correcting Your Power Factor by improving power factor

Low voltage automatic capacitor banks

Medium voltage automatic capacitor banks

Low voltage Static var Generator

Medium voltage Statcom

Low voltage active power filter.