Avoid a Power Factor Penalty: What to Look For in Your Utility Tariff

Is your company struggling with a power factor penalty or way too high power utility bills? The good news is that you are not the only one, and this can be a quick fix with the proper quality study.  

Hundreds of people and companies have the same problem, and the bad news is that most of them don’t even realize it. 

Don’t slip on your electric bills, and don’t be one of the people who are constantly overcharged for tariffs they don’t understand and penalties that are easily preventable.

Welcome to The Power Grid Podcast; in this first episode, Brian Branigan helps you Identify power factor penalties to save money. 



The Importance of a Reliable Electrical System 

So, before talking about how to read your power tariff and the different penalties that utility companies charge, you must understand why a reliable electrical system is crucial for your company.

A reliable electrical system is far more than just a convenience—it’s an essential part of keeping your company running smoothly and safely.

A system with issues can pose significant risks, such as electrical fires or equipment failures that can lead to injuries. By ensuring your system is reliable, you’re creating a safer environment for everyone involved.


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How to Achieve a Reliable System?

  • Understand Your Power Bill: Your bill can tell you a lot about your energy use. Look at it closely, and you’ll see how much energy you’re using and when you’re using it.
  • Learn About Tariffs: Tariffs are how your utility company charges you. 

There might be different rates for using energy at peak times versus off-peak times. By knowing these details, you can plan your company’s energy use better.

  • Know the Penalties: Utility companies charge extra if you use more energy than you’ve agreed upon or during certain hours. Avoiding these penalties can save your company a lot of money.

Understanding Power Factor

Power factor is a measurement of how effectively electrical power is being used by a system. 

It is a ratio between the actual productive power (active power) and the total power consumed by the load, which includes both active and reactive power components. 


power factor penalty with Brian Branigan

Active Power

Active power, measured in kilowatts (kW), represents the real energy consumed by all electrical equipment and machinery to perform work. 

It’s the power that you typically see being utilized in a facility’s operations – from lighting to running motors and computers.

Total Power

Total power, often expressed as apparent power and measured in kilovolt-amperes (kVA), combines active power with reactive power. 

Reactive power, measured in kilovars (kVar), does not perform any actual work but is necessary for the functionality of inductive loads like motors and transformers often used in high-energy companies. 

That’s why many businesses often tend to look for kVar energy savings solutions. 

The Power Factor Penalty

The most common scenario for electrical systems not being reliable is the constant power factor penalties. 

But what exactly is a power factor penalty, and why should businesses, especially those with large factories or heavy machinery, be mindful of it?

As we explained before, your utility company can raise your bill prices all the time. This is a measure of how effectively the power factor is being used by your system.


penalty Avoid a Power Factor Penalty_ electricity tarrif

The Penalty Power

Utilities companies may impose what’s known as a power factor penalty. This penalty is an additional demand charge for not using your energy effectively. 

Electrical utilities require systems to operate with a high power factor because inefficiency can cause stress on the power grid and result in higher operating costs. 

Power is used to build a magnetic field around the wires in your system; this takes extra energy, so it incurs a cost to the utility that needs to be recovered, hence the penalty charges.

There are a few different types of penalties that your company can be charged for; these are some of the most common ones.

Power factor penalty 

  • kVA billing
  • kVA demand billing
  • kW billing
  • kVar demand beeling 


The Impact on Businesses

Power factor penalties can represent a significant financial burden for businesses with large equipment, particularly those in manufacturing sectors where transformers and motor-driven machinery are common. 

So, how can you avoid these penalties? 


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Power Quality Study

A Power Quality Study is an essential analysis that offers comprehensive insights into the electrical system’s performance within your company. 

This study serves two primary purposes: identifying the appropriate power factor correction methods required for your specific operational setup and devising strategies to eliminate various utility penalties associated with inefficient power usage.

Implementing power factor correction can have significant benefits, like the elimination of power factor penalties and even generating a credit score in your favor. 

By improving the power factor, your company could achieve lower operational costs and improved energy efficiency.

Customized Solutions by Experts

Consulting our specialists at Power Protection Products ensures that your company receives a tailored solution. Our experts conduct thorough examinations to determine the optimal:

  • Size and Type of Capacitor: They calculate the ideal capacitor specification to meet your company’s power factor correction needs effectively.
  • Placement: Strategic placement of the capacitor bank within the electrical system is crucial for maximizing efficiency and minimizing potential issues.
  • Harmonics Consideration: High levels of harmonic currents can lead to inefficiencies and damage. Experts assess the harmonic distortion present in the system and recommend solutions to mitigate these effects.
  • Future Growth Requirements: It is important that any corrective measures taken today do not impede future expansion.

 Therefore, experts take into account your company’s anticipated growth to ensure scalable and adaptable power quality solutions.


Contact us Today and Avoid Any Costly Power Factor Penalty

If your business is like most, you’re always looking for ways to reduce operational costs and boost your bottom line. 

Don’t let power factor penalties chip away at your company’s profits. Contact us today to schedule your Power Quality Study and step into a future of optimized energy usage and cost savings.