On 12/31/2009 11:05, Mike Granby wrote:

The best way to think of it is that a load with a low power factor
will move a lot of electricity back-and-forth in the power lines
without actually consuming the energy. You get billed for the amount
of power the load uses, but a higher amount if moving back-and-forth,
and being disipated as heat in the power lines, transformers and so
on. So, there's a real cost to the electricity company, but it doens't
show on the meter. That's why larger industrial users with poor power
factors will be charged for it, and why some install local capacitors
to act as reservoirs to restrict the back-and-forth to their own
premises, thereby avoiding all the waste in the power transmission
system.

The power companies install capacitors to introduce capacitive reactance
to bring the PF closer to unity in the upstream transmission lines.