This thesis presents a novel active power conditioner, which has active and reactive power compensation functions, applied in micro-grid operation and control. In this study, the simulation micro-grids assumes consisting of a number of distributed genertaors. We apply the active power conditioner to connect two micro-grids. The active and reactive power compensation sceme is based on the droop control method and the hysteresis loop is added to reduce the number of count of switching. We also analyze the stability of the proposed controller and droop control compensation scheme. Finally,we discuss more microgrids compensation.Analysis how to allocate compensation ratio to achieve frequency variation is minimized.The performance evaluation of assumed micro-grid and the control schemes are conducted with a popular software package, MATLAB/Simulink. Some engineering insights from simulation results are obtained in this Thesis.