Different from the traditional ac power theory which considers power use within loads, this dissertation introduces a new framework for the analysis of the power exchanges at the Point of Common Coupling (PCC) between two power systems, where only measurements of instantaneous voltage and current are available. The dissertation clarifies the long-disputed concept of reactive power. Reactive power is strictly related to the energy that is stored in and restored from reactive elements (i.e., energy stored/restored in electric and magnetic fields). The total (or combined) reactive power exchanged is computed from the average instantaneous reactive powers. Therefore, there are no physical meaning problems and the analysis is applicable to all circuits (linear and nonlinear). It is demonstrated that the total reactive power is not always calculable from voltage and current measurements at the PCC. Instead only the power exchanges (transferred and bouncing, regardless of their active or reactive nature) and the fixed reactive compensation capacitive/inductive can be computed in all circumstances. Examples are presented for illustration and validation.