Abstract: An active power quality conditioner for compensating reactive power and harmonic distortion in power systems. A pulse width modulated (PWM) inverter (70) for each phase is controlled to produce a harmonic distortion compensation signal that is coupled to an inductor. The inductor is connected in series between a stepped-wave inverter (84) and one phase of the power line. A current produced by the stepped-wave inverter compensates for the reactance of a load coupled to the power line. The PWM inverter operates at a frequency that is substantially greater than the fundamental frequency of the power line and is not exposed to the full power line voltage; it can be constructed using components of relatively low power and voltage rating. In contrast, the stepped-wave inverter, which is decoupled from the PWM inverter, operates at the fundamental frequency and is subjected to most of the stress. Both shunt coupled and series coupled compensators are described.