Most power system loads and delivery apparatus are inductive in nature and therefore operate at a lagging power factor. Applying capacitor banks to a customer will result in a power factor correction and other benefits such as VAR support, increased voltage, reduced power losses, and reduced billing charges. Also there can be power quality problems as a result of adding capacitor banks. The most common are harmonics. This paper provides an in depth analysis on the power factor correction and harmonics reduction of capacitor bank installed at a customer. The EDSA program was used as a simulation tool for the case study.