The Costly Effect of Poor Power Factor on an Electric Utility Bill

Much of the industrialized world contains significant motor loads which can greatly increase the reactive power demand of any power system. Which increases the overall demand as well. This forces power utility companies to produce more energy to meet this demand than if the system were running more efficiently. Measuring reactive power with typical utility meters and directly billing for reactive power is difficult and ambiguous. Moreover, having to produce and supply reactive power is costly and inefficient for the utility company. As such, each utility has their own internal or region-wide rules/tariffs for recouping this cost from their customers. Looking at the United States, given the many different state laws and utility companies, it is not feasible to have a standard method for billing customers for their reactive power consumption. Therefore, it is left to state legislature and the policies of the power utility companies. In addition to this lack of standard, the lack of understanding surrounding power factor leaves many customers, who own/operate industrial plants with large motor loads, confused and with rather expensive monthly electric bills. This paper intends to investigate the general billing of power and energy from a utility, and especially the many ways to bill reactive power. This study also features an analysis and comparison of how the United States' top five power utility companies define and charge industrial plants for reactive power.