Utilities typically penalize for both lagging and leading power factors, with charges based on cumulative KVAR hours or peak VAR demand. When a capacitor bank is used for power factor correction, it can lead to issues if the system becomes overcorrected, resulting in a leading power factor, which may cause local stability problems and increased wear on equipment. While utilities may not directly penalize for excessive capacitance, they may investigate if it causes issues for neighboring customers. The optimal power factor correction is around 0.85, and while a perfect power factor of 1.0 is not problematic, excessive leading power factors can lead to operational challenges. Overall, maintaining an appropriate balance in reactive power is crucial for system efficiency and stability.