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Commercial & Industrial Energy GuideTNB RP4 tariff, 2026

Power Factor & kVARh Penalty: Why TNB Charges You Extra (And How to Stop It) — 2026 Guide

If your power factor drops below 0.85, TNB charges for reactive energy (kVARh) at the rate shown on your bill. A factory with a low PF can overpay thousands of ringgit a month. Learn the exact math, fix options, and how solar can deliver a double win on your electricity bill.

0.85

Min PF Required

0.85

Minimum Power Factor

0.95+

Target PF

6–18 mo

Payback Period (indicative, site-dependent)

By Chandra Rau, CEO, Trexon Energy • SEDA-registered solar installer (RPVSP)•14 min read•Based on the TNB RP4 tariff schedule (1 July 2025)

What Is Power Factor?

Power factor (PF) is the ratio of real power (kW) to apparent power (kVA). It measures how efficiently your electrical system converts supplied power into useful work. A PF of 1.0 means 100% efficiency — every volt-ampere is doing useful work. A PF of 0.75 means 25% of supplied current is "wasted" as reactive power (kVAR) that generates heat and overloads your wiring.

The Power Triangle: kW, kVA, kVAR

Think of a beer glass: kVA is the full glass, kW is the beer (useful), kVAR is the foam (wasted). A high power factor means more beer, less foam.

kW (Real Power)kVAR (Reactive)kVA (Apparent)PF = cos θ
PF = kW / kVA

Power factor is always between 0 and 1

kVAR = sqrt(kVA^2 - kW^2)

Reactive power — wasted, penalised by TNB

kW = kVA x PF

Higher PF = lower kVA for the same kW load

TNB's Power Factor Requirement: 0.85 Minimum

Under TNB's supply conditions for medium and high voltage commercial and industrial tariffs, you must maintain a monthly average power factor of at least 0.85 lagging. Fall below this threshold and TNB bills you for the reactive energy (kVARh) consumed, at the rate shown on your TNB bill.

Rate on your TNB bill

Reactive energy penalty rate

0.85 minimum PF required

Applies to MV and HV tariffs

Target 0.95+ to eliminate penalty

Recommended target for factories

TNB Power Factor Scale

0.85
0.50Penalty ZoneSafe Zone1.00

Interactive kVARh Penalty Calculator

Enter your monthly kWh consumption and current power factor to see your exact kVARh penalty — and your savings if corrected to 0.95.

kWh/month

Below 0.85 — penalty applies

PF 0.30Current: 0.75PF 1.00
Penalty Zone| 0.85 |Safe Zone

Monthly kVARh (Reactive Energy)

44,096

kVARh/month

Monthly kVARh Penalty

RM 288

per month

Annual Penalty

RM 3,461

per year

Savings if PF Corrected to 0.95

RM 288

per month

Uses the rate you enter (the default is only an example; use the kVARh rate on your TNB bill). Applies to medium and high voltage tariff consumers when PF < 0.85.

Common Causes of Low Power Factor

Most industrial and commercial sites suffer from low power factor due to inductive loads. Understanding the culprits is the first step to fixing them.

Induction Motors

The most common cause of low PF in Malaysian factories. Induction motors draw reactive magnetising current to create their rotating magnetic field. A lightly loaded motor is far worse — a 75kW motor running at 20% load can drag PF down to 0.40. This affects conveyor belts, compressors, fans, and pumps.

PF drops to 0.60–0.80

Fluorescent & HID Lighting

Older fluorescent tube lights with magnetic ballasts and high-intensity discharge (HID) lamps (metal halide, sodium vapour) have inherently low power factor, typically 0.50–0.70. Large commercial buildings and warehouses with legacy lighting systems often see PF penalties from this alone. LED retrofits fix this.

PF drops to 0.50–0.70

AC Compressors (HVAC)

Air conditioning compressors — especially large chiller plants in shopping malls, hotels, and office buildings — are major reactive power consumers. A 200-ton chiller with poorly maintained capacitors and an aging compressor motor can have PF as low as 0.65. This is the dominant cause of low PF in commercial buildings.

PF drops to 0.65–0.80

Transformers (No-Load Losses)

Distribution transformers draw magnetising reactive current even at no load. This is particularly significant when factories have oversized transformers running at low utilisation (below 30%). The reactive current from the transformer core magnetisation directly reduces your site power factor.

PF drops to 0.85–0.92

Welding Equipment & Arc Furnaces

Electric arc welding, induction heating, and arc furnaces generate significant reactive power due to their pulsating and non-linear load characteristics. Steel fabrication plants, shipyards, and heavy engineering workshops are particularly affected. These loads also introduce harmonics that can cause additional issues for capacitor banks.

PF drops to 0.60–0.75

5 Solutions to Fix Low Power Factor

These solutions are ranked by cost-effectiveness. PF correction to 0.95+ can have an estimated payback of about 6–18 months, depending on the site.

Most Popular

1. Automatic Capacitor Banks (APFC)

Automatic Power Factor Correction (APFC) panels use capacitor steps that switch in and out automatically based on real-time reactive demand measurement. This is the most widely deployed PF correction solution in Malaysia. Install at your main distribution board (MDB) or sub-distribution boards near major inductive loads. Capacitors inject leading reactive current (kVAR) that cancels out the lagging reactive current from motors — instantly improving PF.

Investment

RM15,000–50,000

PF Savings

Eliminate the kVARh penalty

Payback

6–18 months

2. Variable Speed Drives (VSD/VFD)

Variable Speed Drives on pumps, fans, compressors, and conveyor belts reduce reactive power consumption by matching motor speed to actual load demand. A VSD-equipped motor at 80% speed consumes roughly 50% of the reactive power of a full-speed motor. VSD also prevents the catastrophic PF drop that occurs when motors run lightly loaded. Modern VSDs have built-in power factor correction.

Investment

RM5,000–20,000 per motor

PF Savings

PF improvement to 0.90–0.98 + 20–40% motor energy savings

Payback

18–36 months

3. Active Harmonic Filters (AHF)

For facilities with significant non-linear loads (VFDs, UPS systems, LED drivers, welding equipment, arc furnaces), passive capacitor banks can fail or resonate dangerously. Active Harmonic Filters measure the harmonic distortion in real time and inject counter-harmonics to cancel them — simultaneously correcting power factor. AHF is the correct solution for electronics manufacturing, data centres, and heavy welding operations.

Investment

RM30,000–150,000

PF Savings

PF correction + harmonic mitigation (protects equipment)

Payback

24–48 months

4. Solar Inverter VAR Support

Modern grid-tied solar inverters (Huawei SUN2000, SMA Tripower, Sungrow SG series) can be configured to inject reactive power (leading kVAR) to offset lagging loads on-site. This VAR support functionality is available on inverters above 30kW and can improve site PF by 0.05–0.15 during solar generation hours (7am–6pm). It does not fully replace a dedicated APFC panel but provides a meaningful supplementary correction at zero additional hardware cost.

Investment

RM0 extra (part of solar system)

PF Savings

PF improvement 0.05–0.15 during daylight hours

Payback

Immediate (no extra cost)

5. LED Lighting Retrofit

Replace fluorescent and HID lighting with quality LED fixtures that include built-in power factor correction (PF above 0.95). A 10,000sqm warehouse with 400 fluorescent fittings can reduce reactive load by 30–50kVAR through a full LED retrofit. LED fixtures also consume 50–70% less active power (kW), which reduces both your kWh bill and your maximum demand simultaneously.

Investment

RM20,000–100,000 (depending on scale)

PF Savings

PF improvement + 50–70% lighting energy savings

Payback

18–30 months

Power Factor + Solar: The Double Win

Fixing power factor and installing solar together creates a compounding savings effect. Higher PF removes the kVARh penalty and reduces the kVA and current your supply has to carry. At the same time, solar reduces the kWh you buy, and adding BESS can cut the kW maximum demand (MD) charge. Together they tackle your bill from several directions.

Eliminate kVARh Penalty

PF correction stops the reactive energy penalty charge completely.

Lower kVA and Losses

Higher PF means lower kVA and current for the same kW — cutting losses and freeing supply capacity. TNB's MD charge is based on kW, so PF correction mainly removes the PF penalty.

Solar Cuts kWh Bill

Solar generation offsets your daytime energy consumption directly.

Inverter VAR Support

Modern grid-tied inverters (Huawei SUN2000, SMA Tripower) can inject leading reactive power to further improve site PF.

Real-world example: A Selangor factory with 200kVA transformer demand at PF 0.75 draws 150kW real power. After APFC correction to PF 0.95, the same 150kW real power only requires 158kVA apparent demand — reducing transformer loading by 21% and cutting wiring losses.

How to Read Power Factor on Your TNB Bill

Your monthly TNB bill (for medium voltage tariffs) contains the information needed to calculate your actual power factor and penalty charges. Here is what to look for:

TENAGA NASIONAL BERHAD — Monthly StatementMedium Voltage General
Active Energy (kWh)

Your main consumption

48,500 kWh
Reactive Energy (kVARh)

LOOK HERE — if non-zero, PF may be below 0.85

30,188 kVARh
Maximum Demand (kW)

Highest 30-min peak this month

185 kW
MD Charge @ RM89.27/kW

185 x RM89.27

RM 16,515
Reactive Charge (illustrative rate)

Your kVARh penalty — AVOIDABLE

RM 664

Calculate your actual PF from bill data:

PF = kWh / sqrt(kWh^2 + kVARh^2) = 48500 / sqrt(48500^2 + 30188^2) ≈ 0.85

Your actual PF = kWh / sqrt(kWh^2 + kVARh^2). If kVARh/kWh ratio > 0.62, you are below 0.85 PF and paying penalties.

kWh (Active Energy) — the main energy line

kVARh (Reactive Energy) — the penalty trigger line

Max Demand (kW) — your peak demand reading

Reactive Charge — the penalty line (rate x kVARh)

Stop Paying TNB kVARh Penalties Today

Book an RM500 commercial site survey, fully credited to your project when you proceed. We measure your site PF, calculate your exact penalty exposure, and recommend the most cost-effective correction solution — capacitor bank sizing included.

+60 12-770 7249|RM500 commercial site survey (fully credited to your project when you proceed) • No obligation

Frequently Asked Questions

Factory electrical room with a capacitor bank and switchboard