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In this paper, a static series compensator for voltage sag mitigation is proposed, which has the capability to supply nonlinear loads. The control system, based on isolation of harmonic components of the load current, compensates for the effect of current harmonics circulating on the filter reactor. The latter would reduce the compensation capability of the device and introduce harmonic frequencies in the load voltage. The system also has the capability to filter out harmonic components in the supply voltage. Simulation results, obtained by using actual voltage sag recordings, are presented.