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The shunt active power filter has proved to be a useful device to eliminate harmonic currents and to compensate reactive power for linear/nonlinear loads. This paper presents a novel approach to determine reference compensation currents of the three-phase shunt active power filter (APF) under distorted and/or imbalanced source voltages in steady state. The proposed approach is compared with three reviewed shunt APF reference compensation strategies. Results obtained by simulations with Matlab and Simulink show that the proposed approach is more effective than the reviewed approaches on compensating reactive power and harmonic/neutral currents of the load, even if the source voltages are severely distorted and imbalanced. In addition, the proposed approach yields a simpler design of the shunt APF controller.