The utility supplies power to its consumers measured in KVA. The power factor shows how efficiently this power is used by the consumers. In this sense, the power factor is a measure of efficiency of usage of KVA power by the consumers.
All utility billing is done in kWhr. The power factor is indicative of the leading or lagging of the current vector from the voltage vector due to the nature of the circuit, eg. capacitive or inductive load. The concurrent measurement of voltage and current over time results in the actual 'work' performed and mathematically the power factor, or cos(phi) will make that adjustment in the formula. It is called POWER factor and not EFFICIENCY factor because it expresses the difference between the appearent or phantom power and the actual power that produces useable work. Power factor is inherent nature of a circuit element, and 'correcting' it will not produce 'more' work, it simply makes more phantom power available as useable power. It also helps to reduce voltage drop and it is a favored 'magical' power of snake-oil enrgy booster gadget salesman.
Efficiency is the expression of conversion losses from one form of energy to another and inclusive of all losses that it takes to convert. The simplest example is electric motors, where the electrical energy input and the mechanical energy output on the shaft differs. [h=3]Primary and Secondary Resistance Losses[/h]The electrical power lost in the primary rotor and secondary stator winding resistance are also called copper losses. The copper loss varies with the load in proportion to the current squared - and can be expressed as
Pcl = R I2 (3)
where
Pcl = stator winding - copper loss (W)
R = resistance (Ω)
I = current (Amp)
[h=3]Iron Losses[/h]These losses are the result of magnetic energy dissipated when when the motors magnetic field is applied to the stator core.
[h=3]Stray Losses[/h]Stray losses are the losses that remains after primary copper and secondary losses, iron losses and mechanical losses. The largest contribution to the stray losses is harmonic energies generated when the motor operates under load. These energies are dissipated as currents in the copper windings, harmonic flux components in the iron parts, leakage in the laminate core.
[h=3]Mechanical Losses[/h]Mechanical losses includes friction in the motor bearings and the fan for air cooling.