Power systems suffer from harmonic distortion and extra ohmic losses associated with them. Moreover, all harmonic frequencies are mostly assumed to have the same effect on the system losses. However, the frequency‐dependency of the resistances should be taken into account, so that the apparent power and the power factor have to considerably reflect power losses under non‐sinusoidal conditions. In this study, the difference between unweighted and weighted non‐sinusoidal losses is addressed. A new harmonic‐adjusted total harmonic distortion (THD) definition is proposed for both voltage and current. Besides, a new formula that relates the proposed harmonic‐adjusted THD and a generalised harmonic derating factor definition of the frequency‐dependent losses of the power transmission and distribution equipment is derived. An optimal C ‐type passive filter design for harmonic mitigation and power factor correction based on the minimisation of the proposed harmonic‐adjusted THD for a balanced non‐sinusoidal system is introduced. A comparative study of the proposed filter design based on the new harmonic‐adjusted definition, and a conventional filter design based on standard THD definition, is presented.