Unified Power Quality Conditioner (UPQC) for harmonic elimination and simultaneous compensation of voltage and current, which improves the power quality offered for other harmonic sensitive loads. UPQC consist of combined series active power filter that compensates voltage harmonics of the power supply, and shunt active power filter that compensates harmonic currents of a non-linear load. In this paper a new control algorithm for the UPQC system is optimized and simplified without transformer voltage, load and filter current measurement, so that system performance is improved. The proposed control technique has been evaluated and tested under dynamical and steady state load conditions using PSIM software. The laboratory prototype experimental results for shunt active filter part are given.