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Smart microgrids offer a new challenging domain for power theories and compensation techniques, because they include a variety of intermittent power sources, which can have dynamic impact on power flow, voltage regulation, and distribution losses. When operating in the islanded mode, low-voltage smart microgrids can also exhibit considerable variation of amplitude and frequency of the voltage supplied to the loads, thus affecting power quality and network stability. Due to limited power capability in smart microgrids, the voltage distortion can also get worse, affecting measurement accuracy, and possibly causing tripping of protections. In such context, a reconsideration of power theories is required, since they form the basis for supply and load characterization, and accountability. A revision of control techniques for harmonic and reactive compensators is also required, because they operate in a strongly interconnected environment and must perform cooperatively to face system dynamics, ensure power quality, and limit distribution losses. This paper shows that the conservative power theory provides a suitable background to cope with smart microgrids characterization needs, and a platform for the development of cooperative control techniques for distributed switching power processors and static reactive compensators.