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Power factor is the fraction of amps actually used to do work.

Power factor applies within an electrical power system and is represented by a number between zero and one. You can have a high or low power factor that is determined by the fraction of amps the system actually uses to do its work. A system with a high power factor (a value approaching 1, which is desirable), means that most, or all of the power drawn into your electrical system is actually being used to do work. If your electrical power system has a low power factor, it means that only some of the total power is being used. The portion of the total power that is not being used is nonworking or “reactive” power and is ultimately "returned" to the electrical system. As the fraction of reactive (nonworking) power goes up, more and more total power is needed to do the same amount of work. When your power factor is low, the number of amps needed increases substantially, but the electrical energy (kWh) and demand (kW) do not change much, so you will likely not see any change in your energy consumption.

Power factor applies for both residential and commercial electrical power systems. It is not uncommon for large industrial and commercial users to have a low power factor, and electric utilities will usually charge a higher cost or fee for the low power factor.

For more information about power factor, including a more complete explanation, check out this resource from the U.S. Department of Energy.