paper as an additional function to the three phase active ac/dc voltage source converter for neighboring inductive loads. The main function of this converter is to operate as controlled DC power supply with harmonic free ac-line current. The second function is to compensate for reactive power absorbed by neighboring loads. These two functions improve the system power factor and decrease the additional cost of compensating equipment. The proposed control strategy is based on instantaneous active and reactive power (p-q) theory. The p-q calculations are applied to inductive load current to compensate for reactive power, and to the converter current to compensate for harmonics. The experimental prototype uses a low cost Intel 80C196KC microcontroller to realize the proposed control algorithm. The simulation and experimental results are presented to prove the effectiveness and reliability of the proposed system.