This document describes a seven-level cascaded multilevel DSTATCOM system for compensating reactive power and harmonics. It uses a cascaded H-bridge multilevel inverter with either phase shifted PWM or level shifted PWM modulation techniques. Simulation results show the system is able to compensate load current harmonics and reactive power, reducing the total harmonic distortion of source currents from 36.89% to 4.37% with a seven-level inverter using phase shifted PWM. The DSTATCOM provides unity power factor correction at the point of common coupling.