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Phase is a term that applies to alternating current or AC.

The voltage of the supply goes through a cycle where it increases from zero to a peak value, then runs back to zero and out to a negative peak value, and then back to zero. It does that 50 or 60 times (cycles) each second.

When a load is connected, current flows and the current also goes through the cycle of variations, exactly the same number each second. If the current keeps exactly in step with the voltage that is good and the voltage and current are 'in phase', but if the current is out of step it is 'out of phase'.

The problem with out-of-phase currents is that there is a short period in each cycle when power flows the wrong way, back into the supply, so the overall power for a given amount of current is less than it should be. Instead of the power being voltage times current, it is voltage times current times a power factor that is less than 1.

The power factor is the cosine of the phase difference between the voltage and the current. If the current is 90 degrees (one quarter of a cycle) out of phase, as it would be if the load was a capacitor, the power factor is cos 90 degrees, or zero, so no power flows even though current flows. But that current still produces power loss in the supply wiring, so the electric companies dislike loads with a poor power factor because they have no revenue for that lost power.

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