Power Factor (PF) measures how efficiently a building uses power being supplied by the utility. PF of 1 is 100% efficient. PF of .70 is quite inefficient. PF is the percentage of "Consumed Power", which is the kW demanded, to "Supplied Power" (KVA), which is the amount of energy supplied by the utility.

An induction motor with no "load" has little or no demand for power. The utility, however, has to supply much more current to the motor than is theoretically required, due to the magnetic fields of coiled wire that is in motors and transformers. This current, which performs no useful work, is charged as KVAR on the bill. More KVAR load added to the KW load will lower PF.

In addition, transformers and cables have to carry this extra current, to reduce efficiency and increase cost. Furthermore, heat loss, which requires increased energy use to compensate for those losses, occurs as a result of the added current through conductors. The utilities often have a line item charge on your bill for low power factor.

A Power factor correction system uses capacitors to better manage the flow of power from the utility. The capacitors create a condition where the power supply is more constant and the capacitors are used to better supply the varying loads in the facility. The result is a power factor level increase up to .99, resulting in an elimination of most, if not all, of the utility penalty, and significant efficiency and operating benefits at the facility. The reduction of utility penalties is seen immediately on the bill.