Power factor penalty — calculation, thresholds and how to avoid it
Tariffs & billing · 7 min read · Updated 2026-04-21
TL;DR
PF penalty rules vary by DISCOM, but many apply charges when PF < 0.90 and rebates when PF > 0.95. In kVAh billing, the penalty is baked into higher billed units. APFC + measurement is the reliable fix.
Why penalties exist
Low PF increases current, heat losses and capacity requirement on the utility network. Penalties incentivise correction using capacitors and better load management.
Two common penalty mechanisms
- —Direct PF penalty/rebate line item in the bill (threshold-based).
- —Indirect: energy billing in kVAh so PF automatically increases billed units.
How to fix low PF sustainably
- —Install APFC with detuned filters where harmonics exist.
- —Avoid running oversized motors at low load.
- —Monitor PF by shift/season to ensure the APFC is tuned.
Frequently asked questions
Is PF penalty always separate on the bill?
Not always. If your bill is in kVAh, low PF increases billed units even without a separate penalty line.
What PF is considered “good”?
Target ≥0.95 at the main incomer. Many utilities penalize below 0.90.
Can harmonics damage capacitors?
Yes. Use detuned reactors and harmonic assessment if you have VFD-heavy loads.