This paper dealt the implementation of a Leaky-Momentum Control Algorithm (LMA) for controlling a voltage source converter (VSC) to enhance the power quality of a three-phase self-excited induction generator (SEIG) used in a distributed generating system. This LMA technique operates the VSC to regulate voltage and frequency of SEIG within a permissible limit. The LMA control is implemented to reduce the higher demand of reactive power, harmonics distortions and balancing of loads under different operating conditions. During the electrical and mechanical dynamical conditions, the LMA technique is maintaining a constant voltage and frequency at point of common coupling (PCC). The proposed technique is a modified control technique of basic Leaky and Momentum Algorithms. This control has removed the drawbacks of Leaky and momentum algorithms. Moreover, it is observed that LMA performs better when there are uncertainties in input conditions. The whole system comprising SEIG, nonlinear load, voltage source converter and battery storage system is made in MATLAB /SIMULINK. It has shown promising performance under both dynamical state and steady state of the system.