<p>This study proposes a new control method for a power compensation system based on a single-phase three-level back-to-back converter structure. The goal is to improve the control accuracy and responsiveness of power and reactive power compensation. The proposed source current-based compensation method, which controls the receiving current from the source side, is compared against the conventional load-side power-based compensation method that controls the receiving power from the load side. In addition, the structure of the proposed source-current-based compensation method is expressed as an equivalent circuit, and its responsiveness is compared. Both methods are experimentally evaluated by measuring source-side active and reactive power under steady-state conditions. The source current-based compensation method demonstrated superior performance in both power balancing and reactive power control compared to the load power-based compensation method. The imbalance rate of the three-phase current was 128% before compensation, decreased to 2.1% with the load power-based compensation method, and was further reduced to 0.6% with the proposed source current-based compensation method, corresponding to approximately 28.6% of the imbalance observed in the conventional method. In addition, the reactive power of the M-phase decreased from 506 Var to −22 Var, which is approximately 4.4% of that obtained with the conventional method, indicating a significant reduction in reactive power. Consequently, the proposed control strategy achieves superior performance in power balancing and reactive power control under unbalanced load conditions.</p>