A power factor test measures dielectric losses in a transformer’s insulation system. It applies an AC voltage to windings, bushings, and insulation interfaces, then calculates the ratio of real power (losses) to apparent power. A lower power factor indicates healthy insulation with minimal leakage currents, while higher values suggest moisture ingress, thermal degradation, or contamination. Utilities run this test during commissioning and periodic maintenance to trend insulation aging and predict failures. It is considered a key diagnostic alongside DGA, tan delta, and insulation-resistance measurements.