Reactive power charges are a penalty applied to the bills of businesses on half-hourly meters whose equipment draws excessive amounts of reactive power from the local grid
This guide explains what reactive power is, how the penalty charge is calculated, how it appears on a bill, and how to reduce it.
What is a reactive power charge?
A reactive power charge is a fee for businesses whose equipment draws excessive reactive power from the grid. It can apply to sites with half-hourly meters (MPAN profile class of 00 and 05 – 08).
Reactive power is the energy that equipment such as motors, compressors, and some lighting needs to create magnetic fields. It flows back and forth on the network without doing useful work, but it still adds load to the local electricity network that the local Distribution Network Operator (DNO) must manage.
A reactive power charge applies when a site’s reactive energy consumption exceeds a threshold set by the DNO in any half hour period. Only the reactive energy above this threshold is charged, added up across every half hour of the billing period.
The charge per unit of reactive power drawn is set by the DNO, and is separate from standard business electricity prices. Suppliers collect it through business electricity bills, and pass it on to the DNO.
What is reactive power?
Every site connected to the grid draws both active and reactive power, which together make up the total power the network has to supply. The relationship between them is called the power factor, and determines whether a site faces reactive power charges.
Understanding each type of power and how to quantify their relationship is key to reactive power charges:
Active power (kW)
Active power is the power that does useful work, converting electricity into light, heat, motion or processing, measured in kilowatts (kW).
Active power used over time is active energy, in kilowatt hours (kWh), which is what appears on the bill as part of the total business energy consumption.
Reactive power (kVAr)
Reactive power is the power that equipment such as motors, compressors, transformers and some lighting needs to create the magnetic fields they rely on to operate.
This energy does not result in a useful application (light, heat, motion, etc.), but instead flows back and forth between the site and the grid with each cycle, producing no useful output.
Even so, the network still has to carry it, which takes up capacity in its cables and transformers, and increases energy losses. Reactive power is measured in kilovolt-amperes reactive (kVAr), and reactive energy over time in kVArh.
Apparent power (kVA)
Apparent power is the total power the network supplies, combining active and reactive power. It is measured in kilovolt-amperes (kVA), and is the figure used for a site’s maximum demand and capacity charges.
Because active and reactive power don’t peak at the same time, you can’t simply add them. Instead, they combine as follows:
Apparent power (kVA) = √(Active power (kW)² + Reactive power (kVAr)²)
Power factor
Power factor is the ratio of active power to apparent power, showing how much of the power a site draws is doing useful work:
Power factor = Active power (kW) ÷ Apparent power (kVA)
A power factor of 1.0 means all the power drawn is useful, while the lower it falls, the larger the share of reactive power. Sites with a power factor below 0.95 draw enough reactive power to trigger reactive power charges.
Why is there a reactive charge on my electricity bill?
A reactive power charge appears on a bill when a site’s power factor drops below 0.95 in any half-hour of the billing period. In practical terms, that happens when reactive energy (kVArh) is more than about 33% of active energy (kWh) in that half-hour.
Why a 0.95 power factor means 33% reactive energy
A threshold power factor of 0.95 is equivalent to 33% reactive energy because active and reactive power combine using the apparent power formula, rather than simply adding up.
Reactive energy that corresponds to 33% of the active energy only adds around 5% to the total power drawn, reducing the power factor from 1.0 to 0.95.
The threshold is tested every half hour, so even a site with an average power factor above 0.95 will still be charged for each half hour when it falls below.
What causes a business to exceed this reactive power threshold?
A low power factor usually comes down to the type of equipment on site and how it is used:
- Motors and compressors: Machinery, pumps, fans, refrigeration and air conditioning all draw reactive power, so sites that rely heavily on them are the most likely to be charged.
- Lightly loaded equipment: Motors and transformers running well below their rated load draw a disproportionately high share of reactive power, which is why charges can appear during quieter periods, such as overnight.
- Older lighting: Fluorescent and discharge lighting with older control gear draws reactive power, adding to the total across large premises.
Which businesses can be charged for reactive power?
Reactive power charges apply to businesses with half-hourly metered electricity supplies, typically larger sites such as factories, warehouses and supermarkets, whose power factor falls below 0.95 in any half hour.
A half-hourly metered supply can usually be identified by an MPAN profile class of 00 or 05-08.
How are reactive power charges calculated?
Reactive power charges are calculated from the half-hourly active and reactive energy recorded by the site’s meter.
The calculation involves three steps:
1. Calculate the excess for each half hour
For each half hour within the billing period, the reactive energy allowed without charge is 33% of the active energy used.
The excess is calculated as:
Excess reactive energy (kVArh) = kVArh − (0.33 × kWh)
- kVArh: The reactive energy recorded in the half hour.
- kWh: The active energy recorded in the same half hour.
- 0.33: The reactive allowance (equivalent to a power factor of 0.95).
2. Sum the chargeable half hours only
Half-hourly periods with negative results do not have a charge because the site stayed within its allowance, so only the periods with positive excess reactive energy need to be summed.
Total excess reactive energy (kVArh) = Σ Excess reactive energy of chargeable half hours
For example, a 30-day monthly billing period contains 1,440 half hours (48 per day). If the site records an excess of 12 kVArh in 440 of those half hours, its total excess for the month is 440 × 12 = 5,280 kVArh.
The half hours with a negative result, like the −8 kVArh above, count as zero and don’t reduce this total.
3. Apply the reactive power rate
Finally, the reactive power rate that is set by the DNO, which varies by region and connection voltage, is applied. This is typically a fraction of a pence per kVArh:
Reactive power charge (£)= total excess kVArh × reactive power rate (p/kVArh) ÷ 100
For example, at a rate of 0.2p per kVArh, the site’s 5,280 kVArh of excess reactive energy gives a reactive power charge of £10.56 for the month.
How to check a reactive power charge on your electricity bill
Checking a reactive power charge involves confirming the volume charged, the rate applied, and whether the site’s power factor genuinely dropped below the threshold. Here is how to check step by step:
- Find the reactive power line: Look for a charge labelled “reactive power”, “excess reactive power” or similar, showing a volume in kVArh and a rate in pence per kVArh.
- Check the rate: Compare it with the reactive power rate in the DNO’s published charging statement for the site’s region and tariff, identified by the DUoS Tariff ID or Line Loss Factor Class (LLFC) on the bill.
- Review the half-hourly data: An energy monitoring system shows the site’s kWh, kVArh and power factor for every half hour, making it easy to see when the threshold was exceeded. Without one, the data can be requested from the supplier.
- Recalculate the excess: Apply the calculation above to each half hour, counting only the positive results, and compare the total with the volume on the bill.
- Check for estimated readings: Confirm the data is recorded rather than estimated, since estimated reactive readings can overstate the charge.
If discrepancies are found, raise them with the supplier, providing the recalculated figures and the half-hourly data used, so it can review and correct the bill if needed.
For businesses that would rather not check bills themselves, our bureau service validates every bill against the site’s actual data, and raises any errors with the supplier on the business’s behalf.
Can changing suppliers remove reactive power charges?
No, because the charge is set by the local DNO, not the supplier, so it applies to whichever supplier the business uses. The only way to reduce it is to improve the site’s power factor.
What causes reactive power charges to increase?
An increase in reactive power charges means something has changed at the site, or in how it’s charged. The most common reasons are:
- New or additional equipment: Adding motors, compressors, refrigeration, or air conditioning increases the reactive energy drawn, pushing reactive power consumption over the threshold more often.
- Failed or degraded correction equipment: Power factor correction units wear out over time, and a blown fuse or faulty capacitor can stop them working without any obvious sign until the charge rises.
- Lower site activity: Reduced production or occupancy leaves motors and transformers running lightly loaded, which increases their share of reactive power relative to active energy.
- Longer operating hours: Running equipment for more hours, or overnight, increases the number of half hours in which the allowance can be exceeded.
- Seasonal demand: Air conditioning and refrigeration working harder in summer can raise reactive energy for several months at a time.
- A higher DNO rate: DNOs update their charges every April, so the same excess volume can cost more from one year to the next.
How can a business reduce reactive power charges?
Reducing reactive power charges means lowering the reactive energy a site draws relative to its active energy, so that as few half hours as possible exceed the allowance.
While quick actions such as switching off idle equipment can have an immediate effect, the most effective approach is systematic and based on the site’s own data:
1. Get visibility of reactive power
The first step is to gather more information than the usage and charges shown on the bill.
The site’s half-hourly meter data, available from the business energy supplier, is the starting point. It shows the active and reactive energy for the whole site in every half hour, revealing when the allowance is exceeded and how often.
Sub-metering major equipment, such as motors, compressors and refrigeration, then shows which items are responsible, while an energy management system brings this data together and flags when the power factor drops.
This allows improvements to be targeted where they will have the greatest effect.
2. Reduce reactive power at source
Using these insights, the next step is to address the sources of excess reactive power:
- Switch off idle equipment: Excess recorded outside operating hours usually points to motors and transformers left running with little or no load, which draw a high share of reactive power.
- Size equipment to the load: Where sub-metering shows equipment consistently running well below its capacity, replacing it with appropriately sized units improves its power factor.
- Upgrade older equipment: Where specific motors or older fluorescent lighting are identified as major contributors, replacing them with modern, efficient alternatives reduces reactive power at source.
3. Install power factor correction
Where excess reactive power remains, power factor correction equipment, such as capacitor banks, can be installed. It provides the reactive power the site’s equipment needs locally, so less has to be drawn from the grid.
It can be installed centrally to serve the whole site, or locally at the most problematic equipment. Sites with varying demand are typically better suited to automatic systems than fixed units.
A specialist is needed to size this equipment, as over-correction can cause electrical problems of its own.
4. Maintain and review correction equipment
Correction equipment deteriorates over time, and a fault can stop it working without any obvious sign.
Ongoing monitoring through the energy management system confirms the improvement is being maintained, with regular inspections identifying problems early.
The equipment should also be reviewed whenever the site’s load changes significantly, such as after new machinery is installed or activity is reduced.
Is power factor correction worth installing?
It depends on how much the site is currently paying because of its low power factor, compared with the cost of installing and maintaining the equipment.
Reactive power charges on their own are often modest, since they’re typically a fraction of a pence per kVArh.
The case for correction usually becomes stronger once the maximum demand savings are included, since a lower kVA figure can reduce excess capacity charges and may allow the site to reduce its Maximum Import Capacity.
Use our capacity charge analysis service to get an expert review.
Correction is generally most worthwhile for sites with a consistently low power factor, heavy motor or refrigeration loads and recurring excess capacity charges.
For sites with a power factor already close to 0.95, or with only occasional excess, the savings rarely justify the cost.
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