Abstract: In a three-phase, four-wire electrical distribution system, a zig-zag transformer and at least one Cascade Multilevel Modular Inverter (CMMI) is coupled between the distribution system and the neutral. A controller modulates the states of the H-bridges in the CMMI to build an AC waveform. The voltage is chosen by the controller in order to control an equivalent impedance that draws an appropriate neutral current through the transformer. This neutral current is generally chosen to cancel the neutral current sensed in the line. The chosen neutral current may be based on a remotely sensed imbalance, rather than on a local value, determined by the power utility as a critical load point in the system. The desired injection current is then translated by the controller into a desired zero-sequence reactive impedance, based on measurement of the local terminal voltage, allowing the controller to regulate the current without generating or consuming real power.