The latest generation of AC-fed traction drives, employing high-speed switching devices, is able to control the reactive power drawn from the overhead line by each equipment. If the conditions at each locomotive or train could be fed back to a central control point, it is possible for a centrally located controller to calculate optimal values for the reactive power in each drive and to send those commands back to the individual equipment. In this thesis, AC railway power flows are optimised in real time and the results are used to achieve some particular system objective via control of the PWM equipment as mobile reactive power compensators. The system voltage profile and the total power losses can be improved while the overall power factor at the feeder substation is also made nearer to unity. For off-line simulation purposes, high execution speeds and low storage requirements are not generally significant with the latest computer hardware. However, this real-time control employs on-line optimising controllers, which need embedded power solvers running many times faster than real time. Thus, a fast and efficient algorithm for AC railway power flow calculation was developed. The proposed scheme is compared to a conventional reactive power compensation, e.g. SVC, and found to be less expensive to implement. Several test cases for AC electric railway systems are examined. The centralised area control system leads to the best improvement where an existing fleet of diode or thyristor phase-angle controlled locomotives is partially replaced with PWM ones, compared to that obtained without compensation or to classical track-side Var compensation methods. From these results, the potential for PWM locomotives to improve overall system performance is confirmed.