With the increasing applications of power electronic technology in the industry, there has been rise in power quality issues. The compensator used for the purpose of mitigating the voltage sags and current harmonics is OPEN Unified Power Quality Conditioner, which has some considerable advantages for this particular application. The OPEN UPQC consists of a series active filter and shunt active filter which are parted unlike UPQC. The series active filter compensates for the voltage sags and shunt active filter compensates for the harmonics continuously. For the control of OPEN UPQC, the reference signals are generated from a unique algorithm which works on the principle of enhanced Phase Locked Loop [P.L.L] and nonlinear adaptive filter. The uniqueness of the algorithm is that the same algorithm can be used for extraction of reference signals for both shunt and series active filters. The generation of gate pulses for both the filters, the hysteresis controller is used, which is simple and economical, compared to other controllers.