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Distributed AC power systems with large percentage of constant power loads (CPL) are susceptible to potential voltage stability problems under abnormal operating conditions. The design of the control system of the CPL can greatly influence the power system stability. Regulated converters with high bandwidth control systems can act as CPLs, exhibiting a negative incremental resistance in a wide frequency range. This article first investigates the effect that a large share of CPLs will have on the voltage stability of distributed AC systems during voltage dips. The influence of introducing reactive current control by active rectifiers on the CPL instability, and the resulting contribution to the overall voltage stability is investigated and evaluated. Results of time domain simulations show how the design and tuning of the converter control structure greatly affects the stability of the system. The critical clearing time of the system is selected as a measure of the transient stability limit for investigating and comparing the cases of CPLs with and without reactive current control. The increased transient stability limit observed is enabled by reactive current control capability of the power converter with minor modifications on the control strategy. Centralized reactive compensation by a STATCOM is used as reference to compare with distributed compensation by the CPLs. Results shows that required distributed injection of reactive current is lower compared to the rating of a centralized STATCOM.