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# Doing the Math on Power Factor: Should You Just Pay, Or Make It Go Away?

How far should you go when it comes to optimizing Power Factor?

To answer this, it’s worthwhile to consider how your utility charges for poor Power Factor. In addition to the basic energy charge on the bill, a Power Factor penalty is added when a business is running below required Power Factor — as they are taking up unnecessary capacity in the utility system.

Indeed, not every utility charges the same way. Many penalize based on a kW amount, and essentially convert kW to kVA and multiply by the required power factor.

In the example below, 4855.68kW Demand / 0.7997333 = 6071.62 kW (based on unity PF, or in kVA).

Assuming a required or allowed PF of 0.95, the number is then adjusted x 0.95= 5768.04kW (so-called Actual Demand on the system).

The utility then takes the difference between actual demand and the billed demand, caused by poor Power Factor based on the peak demand of the system. In the above example, 5768.04 – 4855.68 = 912.36 is multiplied by their published penalty rate for that period.

Power Factor correction and selection of the right system hinges on a number of variables that need to be navigated properly. Take the next step and talk to a Powerside professional who can advise you.