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Power factor is the real power (watts) divided by apparent power (the vector sum of real and reactive power). Reactive elements (things that have inductance or capacitance) cause phase shifts between voltage applied to them and current passing through them. This phase shift is a result of these elements holding power, then releasing it. Since these elements are not actually using power, this does not show up on your electric bill (unless you are billed on VARs as well as watts). Although they don't use real power, these reactive elements do cause "extra" current to flow, which the power company must supply. If this current is excessive (so you have a very low power factor) the power company must install oversized equipment to meet your demand; this means an added expense for them, with no payback on your electric bill. This is why power companies will often require a certain power factor be met, or bill you extra per kWh of use.

Note power factor is a result of the load, not the other way around (a better question might be what is the a load's effect on power factor).

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