The use of inefficient household appliances and their poor power quality results in energy wastage in residential buildings. These appliances also force the power system to operate at low power factor which results in an ineffective energy utilization. This paper reports the energy consumption pattern of mostly used household appliances individually and collectively over a year. Their power quality parameters are measured through experimentation to calculate the reactive energy consumed by household appliances. This paper also proposes the reactive energy tariffs to enhance the awareness among domestic consumers to make efficient use of household appliances. Currently the reactive power management is being dealt for only the industrial consumer by imposing low power factor penalty. This research estimated that Lahore Electric Supply Company (LESCO) can generate a revenue of almost 150 million US dollars in one year from household consumers by applying three part tariff scheme on reactive energy. By improving the power factor it is estimated that an energy conservation of 1.1 × 10⁹ kWh per annum is also possible. Thus the proposed tariff for reactive energy encourages the domestic consumers to get involved actively in energy conservation while enabling the energy utilities to transfer more active energy to consumers without the expansion of the distribution network.