Power factor is the ratio between the kW and the kVA drawn by an electrical load where the kW is the actual load power and the kVA is the apparent load power.

Simply, it is a measure of how efficiently the load current is being converted into useful work output and more particularly is a good indicator of the effect of the load current on the efficiency of the supply system. When the power factor falls below a set figure, the electricity supply companies charge a premium on the kW being consumed, or, charge for the whole supply as kVA by adding reactive power charges (kVar) to the bill.