What Is a Reactive Power Charge on a Commercial Energy Bill?
A reactive power charge bills a business directly for the reactive (non-working) current its equipment draws, metered in kVAR or kVARh and shown as its own line item — separate from the kWh usage charge and the kW demand charge. It's a commercial and industrial billing structure almost never seen on a residential bill, and it's the same underlying issue a power factor charge addresses, just billed as a direct quantity instead of as a penalty multiplier on demand.
Reactive power vs. power factor: two ways utilities bill the same problem
Every business drawing alternating current pulls two kinds of power: real power (kW), which does the actual work — running motors, lighting, compressors — and reactive power (kVAR), which inductive equipment needs to sustain its magnetic fields but which does no useful work itself. Utilities have to size their wires, transformers, and generation capacity to deliver both, even though only the real power turns into anything a customer can use. Depending on the utility's tariff, that extra cost gets recovered one of two ways: as a reactive power charge, billed directly per kVAR or kVARh, or as a power factor charge, which instead penalizes the demand charge once a calculated power factor ratio falls below a threshold. Some utilities use one method, some the other, and a few use a version of both — so the label on a specific bill depends entirely on how that utility's rate tariff is written, not on anything different about the business itself.
How reactive power shows up as its own line item
On bills that meter it directly, look for a line item labeled kVAR, kVARh, or "reactive demand," usually appearing alongside — but priced separately from — the kW demand charge and kWh usage charge. Some tariffs only start billing reactive power once it exceeds a set percentage of real power (effectively the same threshold idea as a power factor cutoff, just expressed differently), while others meter and bill kVARh continuously as a standard part of the rate structure for larger commercial and industrial accounts.
What causes reactive power draw
- Large induction motors — HVAC compressors, pumps, conveyors, industrial machinery — especially older or lightly loaded units.
- Transformers, particularly when running well under their rated capacity.
- Older lighting ballasts and certain types of arc or discharge lighting.
- Variable frequency drives and other equipment with switching power supplies, depending on design.
How businesses reduce a reactive power charge
The standard fix is the same one used for power factor correction: installing capacitor banks, either centrally at the facility's main service or locally at individual large motors, to supply reactive power on-site instead of drawing it from the utility's system. Because the charge (or the equivalent power factor penalty) recurs every billing period, correction equipment often pays for itself within a few years for a facility with enough inductive load to trigger the charge regularly — and it's worth confirming with an electrician or the utility's own rate tariff which exact metric (kVAR, kVARh, or power factor ratio) is actually driving the charge before investing, since the sizing of the fix depends on which one applies.
What this means for a business
Because reactive power charges apply almost exclusively to commercial and industrial rate classes with three-phase service, this is a charge that residential bill readers will essentially never encounter — which also means it's easy for a business to overlook if nobody on staff is specifically checking for it. A facility with a lot of older motor or HVAC equipment is the most likely candidate to see a meaningful reactive power or power factor charge, and because the fix is a one-time capital project rather than a behavior change, it's worth flagging to whoever manages facilities or capital budgeting rather than treating it as a routine utility cost to just pay every month.
Frequently asked questions
What is the difference between a reactive power charge and a power factor charge?
They bill the same underlying problem — inefficient, non-working current — in two different ways. A reactive power charge is a direct line item priced per kVAR or kVARh of reactive power recorded. A power factor charge instead applies a penalty or multiplier to the demand charge once a facility's calculated power factor drops below a threshold. Which method a bill uses depends entirely on the utility's tariff.
Do residential electric bills have reactive power charges?
Essentially never. Reactive power charges apply almost exclusively to commercial and industrial accounts with three-phase service and meters capable of measuring kVAR, since residential equipment rarely draws enough reactive power for a utility to bother metering and billing for it separately.
How is reactive power measured and billed?
Utilities that bill reactive power directly typically meter it in kVAR (a demand-style measurement, similar to kW) or kVARh (a consumption-style measurement over the billing period, similar to kWh), and apply a per-unit rate to whichever of those the meter records above a threshold set in the rate tariff.
See this on your own bill
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