In variable-speed drives systems, diode rectifiers and thyristor rectifiers are often used as the front-end circuit for AC-DC conversion. The advantages of the conventional rectifier are its simplicity and high reliability. The drawbacks include the harmonic current distortion and the lack of regeneration capability. In recent years, industries adopt the transistor-based active front-end (AFE) technologies to accomplish high power factor operation and re-generation capability. However, the cost of AFE is much higher than the conventional diode/thyristor front-end. Besides, the AFE is often less reliable than the diode/thyristor front-end under utility transients. In this paper, an IGBT-based auxiliary converter (AXC) system is proposed. The AXC operates as a shunt active filter to compensate the harmonic current of the rectifier when the load consumes power. When the dc load re-generates, the AXC system can channel the re-generation energy back into the utility system. The combination of the diode rectifier and the AXC can accomplish unity power factor operation and regeneration, but it also causes circulating current between the AXC and the rectifier, which leads to higher operational losses and higher noise level. The mechanism of the circulating current is analyzed in this paper, and solutions are also presented. Computer simulation and field test results are presented to validate the performance of the proposed AXC system.