Contractors and industry

Why correct power factor?

Power factor is the measure of how efficiently your business uses its electricity supply. It’s the ratio of real power (kW) to apparent power (kVA).

A low power factor means your business is not using its electricity supply as efficiently as it could be. You may be paying a higher capacity charge than is necessary and thereby paying more for your electricity.

It also means you may not be meeting your user obligations under the Service and Installation Rules of NSW (section 1.10.11) which states it is mandatory for electricity users to maintain a power factor of at least 90% (or a factor of 0.9).

Correct Power Factor

The benefits of correcting power factor?

There are many business benefits associated with correcting power factor. Some of these benefits are listed below.

  • manage your supply more effectively to help lower your electricity costs
  • installing power factor correction equipment is a capital investment for your business, thereby increasing total invested capital
  • depending on the size of your business, small businesses may be eligible to claim an immediate tax deduction for the purchase of a power factor correction asset. Refer to for more information
  • the typical payback period for power factor correction equipment is as little as 1-3 years, making it a very desirable investment option for your business with net cash flow benefits after payback
  • free up spare electrical capacity for any future expansions at your site.

How to assess your power factor?

We encourage customers to have their power factor correction assessed by their electrical service provider. Visit how to get started where you will find guidelines to help you on your way.