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Power Factor: The Line on Your Factory Bill Nobody Reads

Industrial bills charge you for capacity, not just consumption. A poor power factor means paying for capacity you never used — and it is one of the fastest paybacks in a factory.

Asia Engineers
3 min read
Updated 24 September 2026
Factory interior showing structure and services

The short version

  • Industrial connections are billed on two things: the units you consume, and the maximum demand the network had to be sized for.
  • A poor power factor inflates the second one without changing the first. You pay for capacity you never used.
  • The threshold is commonly 0.90 lagging, but check your own tariff — the structure varies by DISCO and by tariff category.
  • The fix is usually a capacitor bank, and it is one of the shorter paybacks in a factory.
  • Do a harmonic check first. On a site with drives and inverters, an untuned bank can make things worse.

A domestic bill has one meaningful number on it: units. An industrial bill has several, and one of them is quietly costing many factories real money every month.

This is the least glamorous saving available to an industrial consumer, and frequently the fastest.

What is power factor, without the textbook

In one lineMotors, welders and transformers draw more current than they convert into useful work. Power factor is the ratio between the two — and the network has to be built for the larger figure, so that is what you are charged for.

A resistive load, like a heater, uses essentially everything it draws. An induction motor does not. It needs magnetising current to build the field, and that current flows back and forth without doing work. The wires, the transformer and the switchgear all have to be big enough to carry it anyway.

WHAT YOU USE VS WHAT YOU ARE BILLED FOR kW — real work what actually turns your motors kVAR reactive — does no work kVA what the DISCO bills you on φ Power factor = kW ÷ kVA 0.90 penalty zone no penalty 0.70 1.00 Why it costs you money The network has to be sized for kVA, not for the kW you actually use. So a low power factor is charged for — and correcting it is usually cheap. The threshold is commonly 0.90 lagging, but the exact structure varies by distribution company — check your own tariff.
kW is what you use. kVA is what the network had to provide. Power factor is the ratio, and the gap between them is what you are paying for.

Why a low power factor costs money

Industrial tariffs in Pakistan generally bill two separate things: energy in kWh, and maximum demand in kVA. Demand charges are applied to kVA precisely because that is what the network was sized for.

Power factorFor 100 kW of real workEffect
0.95≈ 105 kVAComfortably above threshold
0.90≈ 111 kVAAt the usual threshold
0.80125 kVA25% more capacity than work done
0.70≈ 143 kVA43% more, plus penalty exposure

Below the threshold, a surcharge usually applies on top. So a poor power factor hits you twice: a bigger demand figure, and a penalty on it.

One honest caveat: the exact threshold, the surcharge formula and how maximum demand is measured differ between distribution companies and tariff categories, and they change. Read your own bill and your own tariff schedule. Anyone quoting you a single universal penalty figure for all of Pakistan is guessing.

Free bill review for industrial connections

Send us a bill and we will tell you what your power factor is costing

Send a photo of a recent industrial bill — both sides. We will read the demand and power factor lines and give you a figure, whether or not you buy anything from us.

We use your details only to answer this enquiry. No lists, no resale, no cold calls afterwards.

What drags it down

  • Induction motors running lightly loaded. The worst single cause. A motor at 30% load has a far worse power factor than the same motor at 80%. Oversized motors are everywhere.
  • Welding sets — intermittent, and hard on power factor while they run.
  • Old transformers, particularly when lightly loaded.
  • Arc and induction furnaces, which are their own category of problem.
  • Fluorescent and discharge lighting on magnetic ballasts.

The fix, and the trap in it

The standard answer is a power factor improvement capacitor bank — capacitors supplying the magnetising current locally so it is not drawn across the meter. An automatic bank switches steps in and out as the load varies, holding the target rather than overshooting it.

Here is what an honest supplier tells you and a salesman does not: on a site with variable frequency drives, inverters, LED drivers or rectifiers, a plain capacitor bank can make things worse. Those loads inject harmonic currents, and capacitors can resonate with the supply impedance at a harmonic frequency. The result is amplified current, overheated capacitors, blown fuses and sometimes damaged equipment.

The answer is not to avoid correction. It is to measure the harmonic content first, and where it is significant, fit a detuned bank with reactors that shift the resonance away from the harmonics present. That costs more than a plain bank. It also works.

  • Measure before you quote. Load pattern and harmonics, over days and not minutes.
  • Size to the measured load, not to the transformer rating.
  • Automatic, not fixed, where load varies — over-correction has its own penalties.
  • Detuned reactors where drives are present.
  • Protection and ventilation. Capacitors are heat sensitive and a factory switch room is hot.

How this sits with solar

A point worth making because it catches people out: solar reduces your kWh consumption, but it does not by itself fix your power factor, and your demand charge may barely move.

A factory that installs solar and expects the whole bill to fall proportionally is often disappointed, because the demand portion carries on. Correcting power factor and installing solar address two different lines. Do both, and understand which one each is fixing. Our guide on reading an electricity bill covers the anatomy of both lines.

Not sure what your power factor is?

It is printed on most industrial bills. Send us a photo and we will read it for you.

Power factor: questions people actually ask

What is power factor in simple terms?
It is the ratio of the power that does real work to the total power your installation draws from the network. Motors, transformers and fluorescent lighting draw additional reactive power that does no useful work but still has to be carried by the cables and the transformer. Power factor is the measure of how much of what you draw is actually useful.
Why am I being penalised for it?
Because the distribution network has to be sized for the total apparent power in kVA, not for the useful kilowatts. A consumer with a poor power factor imposes real cost on the network, so the tariff recovers it through a surcharge once the power factor falls below a threshold, commonly 0.90 lagging. The exact structure varies by distribution company.
How do I find out what my power factor is?
On an industrial connection it is usually shown on the bill, alongside the kVA maximum demand. If it is not, a clamp meter with power factor measurement or a short logging exercise at the main panel will establish it, along with how it varies through the shift.
How is it corrected?
With a capacitor bank, normally as an automatic power factor improvement panel that switches capacitor steps in and out to hold the power factor near the target as your load changes. Sizing follows from measurement of your actual load profile rather than from a rule of thumb.
Is it worth doing?
On most industrial connections the payback is short, because the surcharge is recurring and the equipment is not expensive relative to the rest of a plant. It also frees up capacity in your existing transformer and cables, which matters if you are planning to add load or install solar.

The bottom line

Find the power factor line on your bill. If it is below 0.90, there is money on the table, and the payback on correcting it is usually measured in months rather than years. Just insist that whoever quotes you measures the harmonics first — and be suspicious of anyone who offers a price without visiting the site.

Measurement, design, supply, installation

Get a power factor correction proposal based on measurement

We log your load and harmonics before quoting, size the bank to what we measured, and tell you when a detuned bank is genuinely needed — and when it is not.

We use your details only to answer this enquiry. No lists, no resale, no cold calls afterwards.

Asia Engineers — engineering desk

We design, manufacture and install solar systems, cranes and material handling, electromechanical works and steel structures from Lahore. Everything here is written by the people who do the surveys, not by a marketing agency. Where a rule or a price is likely to change, we say so rather than pretending it is fixed.

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