How Much Is Inefficient Power Usage Costing You?

The power company charges you for the electricity that you don’t use. If that statement sounds strange, then you’re probably paying too much on your electric bill. Here’s why.

Introducing Power Factor

If you are a primary metered customer, your power company wants you to use the electricity that you draw from the grid as efficiently as possible, so they charge you for using it inefficiently. They determine the efficiency of your electrical power usage based on your power factor. Power factor or unity power factor measures your power efficiency on a scale from 0 (least efficient) to 1 (most efficient). There are three components critical to understanding your power factor.

Working Power – Also called active power or real power. This is the electricity that powers your equipment so that it can do useful work.

Reactive Power – This power is consumed to create and maintain the magnetic fields in equipment such as transformers and motors when they are not doing useful work. It is considered wasted power.

Apparent Power – The sum of working power plus reactive power. It is the total amount of electricity you consume, and it is what the power company bills you for every month. 

To understand the relationship between power factor and power efficiency, think of beer. When you buy beer by the glass you want the most beer you can get, the beer is equivalent to working power because it is what you are paying for. Unfortunately, part of what fills your beer glass is foam. The foam is like reactive power because it is not useful, and the more of it fills your glass the less beer you have. Apparent power is like the beer glass. You pay the same price for the glass no matter how much beer or how much foam it contains.

The Cost of Inefficiency

If reactive power makes up 10% of your total power consumption, your power factor is .9 (apparent power of 1 – 10% or .1 =.9). So, the more reactive power you consume the less efficiently you are using electricity.

To encourage users to consume power efficiently, electric utilities impose a penalty when the power factor drops below .9.  For example, the On-Peak Power, as recorded by your power meter, will be increased by 3/4 of 1% for every 1% that the Power Factor is less than .9. Check your power bill, and if the power factor is below .9 you may be getting charged for consuming reactive power that does no actual work.

What You Can Do

You can save money on your monthly electric bill by installing capacitors on inductive equipment. Capacitors store energy when equipment is working, and they release it to maintain the equipment’s magnetic field when it isn’t doing useful work. This decreases the amount of reactive power you draw from the grid and improves your energy efficiency.

How We Can Help

If you’re a primary metered customer with your local utility, you could be paying a power factor penalty on your power bill. Not sure if you are being charged a power factor penalty every month? We can review your power bill and identify any penalties you may be paying.

Hunt Electric has more than 30 years of experience helping businesses like yours cut costs by using power more efficiently. Contact us today for help understanding your power bill and learning how you can save.

Different amounts of power usage require different solutions, so if your facility has more than 2 megawatts of load contact our high voltage division at

If your facility uses around 480v and below request our Service Division at