What are reactive power charges?

Most businesses never see a reactive power charge on their bill. Those that do are usually running equipment, often motors, older lighting or certain industrial processes, that draws current inefficiently from the network. This guide explains what reactive power is, why it gets charged separately, and what you can do about it, using the definitions and requirements set out by Ofgem and the distribution network operators that actually apply the charge.

What is reactive power?

Reactive power is the part of the electricity drawn by some equipment that sustains magnetic and electric fields, rather than doing useful work directly. Electrical engineers describe three related quantities:

• Active power (kW): the power that actually does useful work, driving a motor, heating an element, lighting a bulb.
• Reactive power (kVAr): power that certain equipment, particularly anything with a coil or winding such as a motor, transformer or older fluorescent fitting, needs to establish and maintain its magnetic field, without directly doing useful work.
• Apparent power (kVA): the combined effect of both, which is what your connection and the network supplying it actually has to be sized to carry.

These three are usually visualised as a triangle, where kW and kVAr are the two shorter sides and kVA is the longest side (the hypotenuse). Your capacity charge is based on kVA, the apparent power your connection can handle, which is why reactive power matters even though it never does useful work in your business.

What is power factor?

Power factor is the ratio between the active power you actually use and the apparent power your connection has to supply to deliver it. A power factor of 1.0 (or unity) means all the apparent power drawn is doing useful work, with no reactive component at all, which is the ideal but rarely achieved in practice. A lower power factor means a larger share of your apparent power is reactive, so your connection is working harder, in capacity terms, than the useful energy you are getting out of it would suggest.

As a simple illustration of the relationship: at a power factor of 0.95, basic trigonometry (the reactive-to-active ratio is the tangent of the angle whose cosine is your power factor) works out to reactive power being roughly a third of active power. At a power factor of 0.8, reactive power is roughly three-quarters of active power. This is a mathematical property of how power factor is defined, not a rate set by any distributor, but it shows why even a modest-looking drop in power factor can mean a large increase in the reactive power your connection is carrying.

A worked example of the kW, kVAr and kVA relationship

This is an illustration only, using made-up figures to show the arithmetic, not a real site. Say a workshop’s equipment draws 100kW of active power (the useful work) at a power factor of 0.8. Using the ratio above, that implies roughly 75kVAr of reactive power, and the combined apparent power, kVA, works out to about 125kVA (found using the triangle relationship, kVA squared equals kW squared plus kVAr squared). If the same workshop improved its power factor to 0.95 through correction equipment, the same 100kW of useful work would need only around 33kVAr of reactive power, bringing its apparent power down to about 105kVA. That lower kVA figure could, in turn, allow a lower agreed capacity, since less apparent power is needed to deliver the same useful output.

Who is actually likely to see a reactive power charge?

In practice, mostly businesses on half-hourly metering with a significant amount of motor-driven or older equipment. Reactive power is typically only measured and charged where a site has a half-hourly meter, because that is what allows a distributor to see reactive and active energy separately in each 30-minute period. Many smaller businesses on standard, non-half-hourly meters are unlikely to see a reactive power charge at all, simply because it is not separately measured on their connection type. Larger sites, and any site required to have half-hourly metering regardless of size, are more likely to be exposed to this charge if their equipment has a poor power factor.

How do you check your own power factor?

Ask your supplier or check your bill for a reactive power or kVArh line. If your site is half-hourly metered, your supplier or meter operator can usually provide a breakdown of your active and reactive energy for recent periods, which lets you calculate your actual power factor and see whether it is consistently above or below your distributor’s threshold. Some smart or advanced meters also display or report this directly. If you cannot see this information on your bill, ask your supplier directly rather than assuming you are, or are not, being charged.

Does on-site generation affect your power factor?

Equipment that generates or stores electricity on site, such as solar inverters, battery storage systems or backup generators, can also affect the power factor seen at your connection, depending on how it is configured. This is a specialist consideration for anyone installing this kind of equipment, and is normally addressed as part of the design and connection process with your installer and your distribution network operator. Our guide to commercial solar panels covers the connection process for on-site generation in more detail.

What power factor do you need to maintain?

Many distributors set a minimum, commonly 0.95. UK Power Networks’ own connection conditions state that electricity flow at the connection point should be “at or as near to unity power factor as practicable, but in any case no less than 0.95 power factor,” specifying that equipment should operate within a power factor range of 0.95 lead to 0.95 lag. Ofgem has separately worked with the industry on “a common approach to reactive power charging,” reflecting the fact that this is a shared, if not identical, standard across distributors rather than one company’s invention.

Because each of the 14 regional distribution network operators publishes its own charging statement, the exact threshold, measurement method and rate applied for falling below it can vary by region. If reactive power charges appear on your bill, your supplier or DNO can confirm the specific threshold and rate that applies to your connection.

How is a reactive power charge calculated and billed?

Distributors that charge for reactive power typically measure it in kilovolt-amperes reactive hours (kVArh), the reactive equivalent of a kWh, over the same half-hourly periods used for your normal consumption. A common design, consistent with the industry-wide approach Ofgem worked on, is to charge only for reactive energy drawn beyond the amount implied by the minimum power factor, so that staying at or above the threshold (such as 0.95) avoids the charge altogether, while falling below it brings a charge proportional to how far below you are.

This is billed as part of your Distribution Use of System (DUoS) charges, alongside your normal unit rate and capacity charge. Our non-commodity costs guide covers DUoS and the other network charges that sit alongside it.

What causes a poor power factor?

Certain types of equipment are more likely to pull your power factor down:

Equipment type	Why it affects power factor
Induction motors (pumps, fans, compressors, conveyors)	Draw reactive current to maintain their magnetic field, especially when lightly loaded
Older fluorescent and discharge lighting with magnetic ballasts	The ballast itself draws reactive current
Welding equipment	Often has a low power factor by design
Some variable-speed drives and other power electronics	Can introduce reactive and harmonic effects depending on design
Transformers, especially when lightly loaded	Always draw some reactive current to maintain their field

A single small motor is unlikely to cause a problem. A site with many motors, older equipment, or machinery that spends a lot of time running well below its rated load is more likely to see its power factor drift down, which is why reactive power charges tend to concentrate in manufacturing, food processing, and other sites with heavy fixed machinery.

How can you improve your power factor?

Power factor correction equipment, usually capacitor banks sized to your site’s load, offsets the reactive current drawn by your equipment, bringing your overall power factor back up. This is specialist electrical work: correction equipment has to be sized and installed correctly for your specific load, and getting it wrong can create other problems, such as over-correction, so it should be specified and installed by a qualified electrical engineer or contractor rather than treated as an off-the-shelf purchase.

Before investing in correction equipment, it is worth confirming, through your bill or your supplier, whether you are actually being charged for reactive power and by how much, so you can weigh the cost of correction against the charge it would remove. Our guide to reducing business energy costs covers this alongside other equipment-related savings.

A lower-cost first step, before any capital spend, is simply reviewing how your equipment is used. Motors and transformers tend to have their worst power factor when lightly loaded relative to their rating, so switching off equipment that is running but doing little useful work, or right-sizing new equipment rather than over-specifying it, can improve your overall power factor without buying anything. This will not fix a genuinely poor power factor caused by a site’s fixed machinery, but it is worth ruling out before commissioning correction equipment.

How does this differ from a capacity charge?

They are related but not the same. Your capacity charge is for the maximum apparent power, in kVA, that your connection is agreed to handle, charged whether or not you use all of it. A reactive power charge is about how efficiently you use that capacity: two businesses with identical agreed capacity can have very different reactive power charges depending on their equipment and power factor. Improving your power factor can also reduce how much kVA capacity you actually need, which is worth reviewing together with your agreed capacity rather than in isolation.

What this means for your bill

If reactive power charges are not on your bill, they are unlikely to be relevant to you. If they are, they point to a specific, fixable cause, usually particular equipment on your site, rather than a general market cost like wholesale prices or the Climate Change Levy. Unlike those market-wide costs, this is one of the few charges on a business energy bill that a site can often reduce directly, through equipment choices rather than through switching supplier or contract type. Reviewing your equipment and your power factor with a qualified electrician is the most direct way to address it.

When you are ready to see how your overall usage translates into a quote, you can compare business energy quotes with us.

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