How does power factor affect the electricity bill for a home?

This is a complex topic to explain. I will try to keep it simple.

Certain loads connected to the AC supply are inductive in nature. Inductive loads react with AC (called inductive reactance) They oppose a change in current and since AC is always changing they cause the current to lag behind the voltage by some amount of electrical degrees. This is called inductive reactance.

Loads like motors and gas discharge lamps like fluro’s, mercury vapour lamps and sodium vapour lamps are inductive due to the ballast or chokes used in the circuit. Between all these they form by far the great majority of electrical loads connected to the grid. Particularly motors. The waveforms produced looks a bit like the one circled in red pen where the current is lagging behind the voltage. The ideal is circled in blue pen.

This causes problems for the power metering because the meters do not measure the amount of energy use accurately. the watt/ hour meters will read less tan they would normally.

The out of phase relationship can be represented by a vector diagram and a right angle triangle shown below. A very poor power factor will show a large angle and the power factor is the cosine of that angle. It is between 0 and 1 lagging.

A poor power factor doe not affect the home electricity bill much because most loads that produce a poor power factor have inbuilt power factor correction already fitted or are relatively small loads compared to industrial loads.

Large industrial installations often have power factor problems because they have many large electric motors. So they may need to use one of various methods to correct this.

Capacitors have the opposite effect to AC and so they are often used to correct the power factor to a reasonable or acceptable power factor that is determined by the supply authority..