In this paper, a new reactive power and harmonic compensation procedure based on the variable forgetting factor-recursive least squares (VFF-RLS) estimator and new phase-locked loop is proposed. For this purpose, the fundamental harmonic component of load current is estimated with VFF-RLS. Independence on order and amplitude of harmonics, fast dynamic and high accuracy are the remarkable features of the designed estimator. As in the case of load changes, the sag/swell and phase jump in grid voltage, optimal compensation is performed in less than half a cycle with a low total harmonic distortion value. In addition, to compensate for an infected power system by varied frequency, a second-order general integrator-frequency-locked loop (SOGI-FLL) control system based on wavelet transform (WT) has been proposed. This phase detector can track the reference phase of a grid in the best manner in the presence of frequency variations. The effectiveness of the proposed method in a single-phase power system has been validated using both simulation and experimental results.