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This paper describes the use of on-line impedance estimation for power quality improvement. The impedance measurement technique can be embedded into the normal operation of an active shunt filter, to provide regular updates to the estimate of the supply impedance to source. In this work, the supply impedance estimates are then use in conjunction with the measurement of supply voltage, to generate the reference currents for the active shunt filter. Experimental results show both the accuracy of the impedance measurement, and the effective operation of the active filter in reducing the voltage distortion at the point of connection.