Power Factor Penalty in Maharashtra: What kVAh Billing Replaced It With
If you are on kVAh billing, there is no power factor penalty on your bill any more, and no incentive either. Both were withdrawn. What replaced them is harsher: at an average power factor of 0.85 you are billed 17.6% more units than you actually consume, every month, with no line item to appeal.
If your meter has not been converted yet, the old penalty and incentive structure still applies to you. Which of those two you are on is decided by your meter, not your load.
Which regime you are actually on
This is where most of what is written about MSEDCL power factor goes wrong. There are two regimes running at the same time.
Consumer | Billing | Power factor incentive and penalty |
All HT | kVAh since 1 April 2020 | Withdrawn |
LT above 20 kW, meter converted | kVAh from 1 April 2025 | Withdrawn |
LT above 20 kW, meter not yet converted | kWh continues | Old structure continues |
LT 20 kW and below | kWh | Not applicable |
The Commission was explicit about the third row:
Until such modification of kVAh metering and billing for such LT consumers with load above 20 kW, the billing on kWh basis alongwith existing structure of PF incentive and penalty for power factor shall continue for such consumers.
So a factory two roads apart from another, on the same tariff and the same load, can be on different billing regimes this month purely because one meter was swapped and the other was not.
The conversion was not finished when the order was passed. MSEDCL reported 72,450 live LT industrial consumers above 20 kW, of which 56,356 had the required meters installed and 16,094 did not. Across all LT categories above 20 kW the figures were 132,600 consumers, 97,150 meters installed and 35,450 outstanding, with completion targeted for May 2025.
Why the old scheme went
MSEDCL asked for it. Its case was that kVAh billing already accounts for power factor, so a separate incentive and penalty is redundant, and it requested the Commission to approve its proposal while allowing the withdrawal of power factor incentives and penalties for these consumers. The Commission approved the proposal.
Industry pushed back hard a year later, arguing that kVAh billing removes the reward for maintaining good power factor and discourages investment in capacitors. The Commission rejected the challenge in March 2026, on the ground that kVAh billing had been directed in stages since 2018 and a deliberate policy decision is not an error open to review.
The premise of the objection was wrong anyway, and the arithmetic below is why.
What kVAh billing does to your units
Average power factor over a billing period is just active energy divided by apparent energy. Turn that around and your billed units are your consumed units divided by your power factor.
Average power factor | Billed kVAh per 1,000 kWh consumed | Premium |
0.80 | 1,250 | 25.0% |
0.85 | 1,176 | 17.6% |
0.90 | 1,111 | 11.1% |
0.95 | 1,053 | 5.3% |
0.98 | 1,020 | 2.0% |
0.99 | 1,010 | 1.0% |
1.00 | 1,000 | 0% |
The old incentive paid a percentage off the bill for running above 0.95. This is not a percentage off a bill. It is a permanent surcharge on every unit, and at 0.85 it is larger than any rebate the withdrawn scheme ever paid.
The number the tariff was built on
Buried in the order is a line that decides whether you are winning or losing on this.
When the Commission set the LT energy charges in rupees per kVAh, it had no kVAh metered data for LT consumers and no category-wise power factor to work from. So it assumed one. The LT kVAh energy charges, and the wheeling charges alongside them, were determined assuming a power factor of 0.95.
That makes 0.95 the break-even, not a target. Run at 0.85 and you pay about 11.8% more than the tariff was designed to collect from you. Run at 0.99 and you pay about 4% less. The consumers sitting below 0.95 are quietly subsidising the ones above it.
There is a second place the same logic appears. For converting sanctioned load in kW into contract demand in kVA, the order applies a power factor of 0.80.
What correcting power factor is now worth
Take an LT industrial consumer above 20 kW on the FY 2026-27 tariff, where energy and wheeling together come to Rs 9.19 per kVAh, drawing 50,000 kWh a month.
Billed units | Monthly energy cost | |
At 0.85 power factor | 58,824 kVAh | Rs 5,40,588 |
At 0.99 power factor | 50,505 kVAh | Rs 4,64,141 |
That is Rs 76,447 a month, or about Rs 9.17 lakh a year, on energy alone.
The demand charge moves too. Demand is billed in kVA at Rs 420 per kVA per month. A 100 kW peak at 0.85 records about 118 kVA; at 0.99 it records about 101 kVA. That is roughly Rs 6,990 a month, another Rs 84,000 a year, assuming power factor at the time of peak matches the average.
Round numbers: about Rs 10 lakh a year for a mid-sized LT factory, against an APFC panel that costs a fraction of it. The payback question that used to be arguable under the old rebate is no longer arguable.
Overcorrection costs you as well
Apparent energy is built from the active and the reactive component, and a capacitor bank left switched in through low load does not remove reactive flow so much as push it the other way. A plant that corrects well at full production and runs leading at night and over weekends gives back part of what it gained.
This is the case for automatic correction that follows the load rather than a fixed bank sized for the day shift, and it is the reason to look at recorded power factor at 3 am and on a Sunday, not only during a production run.
Harmonics are the other half of it. Variable frequency drives, welding sets and rectifiers distort the current waveform, and capacitors can resonate with that distortion rather than absorb it. A plant that has added drives since its capacitor bank was sized should have the bank checked against the current harmonic profile before anyone adds more capacitance.
The incentive that did survive
One rebate is worth knowing about because it is new and it is not a power factor scheme.
Consumers who consume above their own three-year baseline get Rs 0.75 per kVAh on the incremental consumption. It applies to LT industry including powerlooms, LT commercial and LT public services, and to the HT equivalents. The baseline is the three-year average monthly consumption from FY 2022-23 to FY 2024-25, the entitlement is settled annually each March with no carry-forward, and the order sets it to run for the first three years of the control period subject to review.
For a plant that is expanding, that is a real number against the cost of the additional load.
How to check your own bill
Look at the unit of consumption. If it reads kVAh, you are on the new regime and there is no power factor line to find. If it reads kWh and your load is above 20 kW, your meter has not been converted yet.
Find the power factor figure. The Commission directed MSEDCL to display power factor on bills specifically so consumers can see it.
If you are on kVAh, divide kWh by kVAh for the month if both are shown. That ratio is your average power factor, and the gap between it and 1.00 is what you are paying for.
Compare against 0.95, not against 0.90. The old penalty threshold is irrelevant now; the tariff's design assumption is the line that matters.
Check the figure across a full month including nights and weekends before sizing any correction.
Frequently asked questions
Is there still a power factor penalty in MSEDCL bills?
Not for consumers on kVAh billing. MSEDCL requested the withdrawal of power factor incentives and penalties when it proposed kVAh billing for LT consumers above 20 kW, and the Commission approved that proposal. HT consumers have been on kVAh billing since 1 April 2020. Consumers above 20 kW whose meters have not yet been converted continue on kWh billing with the old incentive and penalty structure until they are.
What is kVAh billing?
Billing on apparent energy rather than active energy. Apparent energy includes the reactive component, so poor power factor raises the number of units you are charged for without raising the useful work done. Average power factor over the period is active energy divided by apparent energy.
How much does poor power factor cost under kVAh billing?
At 0.85 you are billed 17.6% more units than you consume. At 0.90 it is 11.1%, and at 0.95 it is 5.3%. On a 50,000 kWh a month LT industrial connection at FY 2026-27 rates, moving from 0.85 to 0.99 saves roughly Rs 76,000 a month on energy charges before the reduction in demand charges.
Is an APFC panel still worth installing under kVAh billing?
More so than before. Under the old scheme correction earned a percentage rebate above 0.95. Under kVAh billing every point of power factor improvement reduces the units you are billed for directly, and it reduces recorded kVA demand at the same time.
What power factor should a factory target in Maharashtra?
The LT kVAh energy and wheeling charges were set assuming a power factor of 0.95, which makes that the break-even rather than a goal. Running near 0.99 is where the economics land, provided the correction follows the load and the plant does not drift into leading power factor at low load.
Why does my bill show kWh when my neighbour's shows kVAh?
Because kVAh billing for LT consumers above 20 kW depends on meter conversion, which was still incomplete when the order was passed. MSEDCL reported 35,450 LT connections above 20 kW still awaiting conversion, against 97,150 already done.
About Grade Electricals
Grade Electricals has worked on industrial LV and HV installations in Mumbai since 2004, including APFC panels, capacitor banks and the maintenance and testing that keeps them correcting properly once they are in. If you want the recorded power factor on your own connection read against the current tariff before you spend anything, write to enquiry@gradeelectricals.com. Tariff figures on this page are checked against the MERC order each April.
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