In electrical engineering the load factor is defined as the average load divided by the peak load in a specified time period.[1]

$f_{Load} = \frac{\text{Average load}}{ \text{Maximum load in given time period}}$

It can be derived from the load profile of the specific device or system of devices. Its value is always less than one because maximum demand is always more than average demand since we will not connect all the loads at a time and that to we will not operate its full capacity. A high load factor means power usage is relatively constant. Low load factor shows that occasionally a high demand is set. To service that peak, capacity is sitting idle for long periods, thereby imposing higher costs on the system. Electrical rates are designed so that customers with high load factor are charged less overall per kWh. This process along with others is called load balancing or peak shaving.

The load factor is closely related to and often confused with the demand factor.

$f_{Demand} = \frac{ \text{Maximum load in given time period}}{\text{Maximum possible load}}$

The major difference to note is that the denominator in the demand factor is fixed depending on the system. Because of this, the demand factor cannot be derived from the load profile but needs the addition of the full load of the system in question.