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We investigate an instantaneous common terminal voltage-controlled harmonics compensator constructed by a shunt active filter with an appropriate series inductance including the line impedance. This compensator can reduce or compensate both the ac line voltage distortion derived from the downstream utility source voltage harmonics and the upstream current harmonics by nonlinear loads at the same time. The control system can be easily constructed without directly detecting the common terminal voltage to be compensated. Therefore, the main circuit configuration and the control system are simple. The harmonics compensation level and the compensation current can be easily adjusted by changing the feedback gain for the sensing inductance voltage drop. In this paper, we describe the basic principle of the control method, the modified control method, the circuit construction by the pulsewidth-modulation-controlled shunt active filter and the control system of the compensator. Then, we show some operating waveforms for the cases of the downstream voltage distortion and the upstream harmonics current from the nonlinear loads by simulation analysis and experiments to verify the feasibility.