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In this paper, a novel practical principle of series hybrid active power filter based on the fundamental magnetic flux compensation (FMFC) of a series transformer is proposed. In the active power filter, the fundamental current component of power utility is detected and tracked to produce a fundamental compensation current, which is injected into the secondary winding. According to the law of superposition, when the injected fundamental current and the fundamental current component of the power utility satisfy the FMFC, the series transformer can really exhibit very low impedance to fundamental and naturally magnetizing impedance to harmonics. As a result, the series hybrid active power filter with FMFC really acts as a "harmonic isolator". The current control scheme and fundamental detecting method are analyzed. The validity of the novel principle and excellent filtering characteristics are verified by the experimental results of the two kinds of typical harmonic-producing loads.