The primary objective of this paper is to present the basic terms of Conservative Power Theory (CPT) and its applications for compensating instantaneous power oscillations in three-phase three-wire systems. The reference signals for a three-phase multi-functional grid-tied inverter are derived using the instantaneous power and the instantaneous reactive energy terms defined by CPT, having the oscillating power components defined directly in a-b-c coordinates. The compensation method proposed in this study is validated through simulations based on practical power system modeling. The results presented here show the feasibility and singularities of the proposed method.