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A dynamic voltage restorer (DVR) to compensate deep voltage sags and harmonics is proposed. The DVR consists of shunt and series converters connected back-to-back through a DC-to-DC step up converter. The presence of the DC-to-DC step converter permits the DVR to compensate deep voltage sags for long duration. The series converter is connected to the supply side whereas the shunt converter is connected to the load side. With this configuration, there is no need for large DC capacitors. A design procedure for the components of the DVR is presented under a voltage sag condition. The control system of the proposed DVR is based on hysteresis voltage control. Besides voltage sag compensation, the capability of compensating load voltage harmonics has been added to the DVR to increase the power quality benefits to the load with almost negligible effect on the sag compensation capability. The proposed DVR is modelled and simulated using SIMULINK/MATLAB environment. Time domain simulations are used to verify the operation of the DVR with linear and non-linear loads.