Asymmetry of three-phase loads causes deterioration in the power factor and power quality of a circuit. Waveform distortion aggravates these unfavourable effects even more. A method of improving the power factor and the loading symmetry in a three-phase unbalanced circuit under nonsinusoidal conditions is presented. The method discussed is based on the source current orthogonal decomposition into the active, scattered, unbalanced, and reactive components, recently developed for three-phase asymmetrical systems. The paper shows that this current decomposition provides the fundamentals for the design of passive compensators which can effectively reduce the unbalanced and reactive components of the source current under nonsinusoidal conditions.