This paper presents a new transformer, i.e., the Custom Power Active Transformer (CPAT) - which integrates shunt and series equivalent circuits within the transformer's magnetic structure. Thus, it provides power system services using a single transformer. The CPAT equipped with a power converter can be utilized in distribution systems to control grid-current and load-voltage waveforms while operating as a step-up or step-down transformer between the grid and load. Moreover, it can provide other services that any typical shunt-series compensation arrangement provides. Design and analysis of a single-phase CPAT is presented showing the effect of coupling between windings and transformer parameters affecting CPAT operation. In this paper, control of the CPAT in a Unified Power Quality Controller (UPQC) application is investigated to attenuate grid-current and load-voltage harmonics as well as compensate for reactive power requirements and attenuate grid inrush current. Through simulation and experimental implementation, the merits and performance of the CPAT were validated.