Various residential loads such as inductors, capacitors, transformers, rectifiers, uninterruptible power supplies, electrical machines and fluorescent lights result in power factor deterioration and harmonics. Reactive loads linked to the electrical power systems produce reactive power, which declines the current/power quality and power factor in the main network. Therefore, adequate reactive power is required to provide a stable and reliable electric grid. In this paper, an improved control method is proposed to eliminate harmonic effects of different loads, to provide reactive power compensation and effective reactive power flow with a three-phase shunt active power filter (SAPF). The performance results of the proposed control method is examined and compared with the conventional control under comprehensive case studies such as resistive-capacitive linear load (R-CLL), resistive-inductive linear load (R-ILL), non-linear load (NLL) and highly inductive NLL. With the proposed control method, the SAPF supplies adequate reactive power without being drawn power from the main grid to provide a high power factor. Various case studies indicate that the proposed control method can decrease phase discrepancy between grid current and voltage as well as reduce grid current harmonics. Under the impact of different load groups, approximately 0.99 power factor values have been obtained by the proposed control method, while lower power factor values such as 0.79 and 0.81 have been obtained by the conventional control method. In addition, with the proposed control method, the effect of different harmonic loads has been eliminated and the THB of current harmonics has been reduced below 1.0%.