What is power factor, and why is it relevant to my energy bill costs?

Your power factor is a measure of how efficiently all the equipment at your site uses the electricity supplied by the network distributor. It is the ratio of the working power (kW) your equipment at your site is actually using, to the power (kVA) the network distributor has allocated to your site to ensure there is enough power to keep your business running through those peak loads.

Power Factor With Inverters

Power Factor Correction for Large Market Customers

- If you’re a large market customer, you’re charged for demand in the electricity network charges section of your electricity bill.

- This demand charge is for the maximum kilowatt (kW) or kilovolt-amps (kVA) that a network distributor has made available to cover peak loads of your operations on each site.

- This is calculated based on your power usage pattern. If this buffer of electricity supply sits idle, you’re still charged a fee for it being available to you.

Think of a power factor measure a little like a mobile data plan.

The mobile data you actually use is like your working power (or kW), and your mobile phone plan commitment of $49 per month is like your kVA (the amount of data your mobile phone provider is giving you access to).

You may pay for 30GB of data every month, but only use 20GB of data. Yet, you’ll be billed the full $49 you’ve committed to. In this case, we would aim to reduce your charges by a third and only pay for the 20GB, or $32.


Your power factor charge can be impacted by not only your energy use, but also the rhythm of how you use your energy throughout the day. If you have lots of peak loads (spikes of kW usage) unevenly spread throughout the operational day, your power factor will be poor. This means your network distributor is supplying you with access to more power than you’ll need. And you’ll pay a charge for that privilege.

If your load is spread more evenly, your power factor is good. This means your network distributor can supply you with access to enough power, but not too much.

Achieving a good power factor is where your Choice Energy consultant can help you take back control.

How Choice Energy can save you money with Power Factor Correction

Power factor correction is an important part of your overall energy solution. We’ll review your recent bill and assess your power factor at each site. We’ll then help you take control of your electricity supply by installing and showing you how to use power factor correction equipment.

You can install power factor correction equipment to manage the extra reactive power you may need, putting the control of your energy back in your hands. Your Choice Energy consultant will show you how to use the equipment to optimise your energy efficiency and pay less for demand charges.

Improve your power factor. Use less, pay less.

At a time when everyone could use a little help to save a dollar, Choice Energy helped our business find a new Energy retailer at the same cost, without incurring the annual increase proposed by our old energy retailer.
Included was independent metering to be able to verify bills easily and the process also helped us get a demand reset as part of a solution that delivers our business a saving of over $20,000. These guys can handle everything… Great job Choice Energy.

— David Maillard, Financial Controller, Beaconsfield Home Timber & Hardware

Beaconsfield Home Timber and Hardware 2

Frequently Asked Questions about Power Factor Correction

What could be influencing my power factor?

There are many energy demanding areas of a site, office or factory that are necessary to the functioning of your business. From obvious high energy needs, like machinery and refrigeration, through to the easily forgotten parts like heating and cooling, it is all making an impact on not only your energy bills, but also how your demand ebbs and flows throughout the day.

If running your business sees high peaks and valleys, having a professional consultation from Choice Energy to discuss power factor correction could be an essential step to optimising your energy bills. Start the conversation here.

When can I expect a return on investment with Power Factor Correction?

Power factor correction often sees a ROI in 18 - 30 months, making it a mid-term solution for using and paying less for energy. When combined with short and long term solutions, it’s a game changer for businesses looking to reduce their energy spend, which is why we offer a full spectrum of energy management solutions.

Can I correct my own power factor?

Like many things when it comes to power and electricity, power factor correction is best left to the experts. Working with Choice Energy means you can sit back and focus on your business while we do what we do best.

Once assessed and collated, we can make recommendations or communicate on your behalf to ensure your energy usage and charge is optimised.

Get Started

Take power back and reduce your energy costs. Provide us with a snapshot of your business and energy needs and we'll be in touch.