A method for dynamically controlling induction machine regenerating energy flow and direct current bus voltage for an adjustable frequency drive system comprising a direct current bus (V bus) and an inverter inputting the direct current bus, said inverter including a plurality of control inputs and a plurality of alternating current outputs, said method comprising: sensing a direct current voltage (V actual) of said direct current bus (V bus); sensing (14,16,18) a plurality of alternating currents (I a,I b,I c) at the alternating current outputs of said inverter; transforming said sensed alternating currents (I a,I b,I c) to a stationary current vector (I q,I d); inputting a set voltage value and a set frequency value (f) and converting the set voltage value and the set frequency value (f) to a stationary voltage vector (V q,V d) and an angle (θ); transforming the angle (θ) and said stationary current vector (I q,I d) to a rotating current vector (I D, I Q) including a torque producing current component (I Q) and a flux producing current component (I D); determining a generating mode of said induction machine when said torque producing current component (I Q) reverses polarity; limiting (72,54,56,58) the direct current voltage (V actual) of said direct current bus (V bus) at a predetermined threshold (V threshold) responsive to said generating mode of said induction machine; and converting the stationary voltage vector (V q,V d) and the angle (θ) to pulse width modulated control signals for the control inputs of said inverter; characterized by: determining a voltage difference between the direct current voltage (V actual) of said direct current bus (V bus) and the predetermined threshold (V threshold); employing a compensation modulator to compensate the voltage difference and provide a compensated voltage difference; applying the voltage difference to a first algorithm having a first gain and a first output quantity in the generating mode; applying the compensated voltage difference to second and third algorithms (56,58) having second and third gains (G2,G3) and second and third output quantities (68,76), respectively, in the generating mode; providing an intermediate frequency from the set frequency value (f) and the first output quantity; adding the second output quantity to the intermediate frequency to provide a change frequency value; employing the third output quantity as a change voltage value (dV); calculating the voltage value as the sum of the set voltage value and the change voltage value (dV), and calculating the frequency value as the sum of the set frequency value (f) and the change frequency value (df). sensing a direct current voltage (V actual) of said direct current bus (V bus); sensing (14,16,18) a plurality of alternating currents (I a,I b,I c) at the alternating current outputs of said inverter; transforming said sensed alternating currents (I a,I b,I c) to a stationary current vector (I q,I d); inputting a set voltage value and a set frequency value (f) and converting the set voltage value and the set frequency value (f) to a stationary voltage vector (V q,V d) and an angle (θ); transforming the angle (θ) and said stationary current vector (I q,I d) to a rotating current vector (I D, I Q) including a torque producing current component (I Q) and a flux producing current component (I D); determining a generating mode of said induction machine when said torque producing current component (I Q) reverses polarity; limiting (72,54,56,58) the direct current voltage (V actual) of said direct current bus (V bus) at a predetermined threshold (V threshold) responsive to said generating mode of said induction machine; and converting the stationary voltage vector (V q,V d) and the angle (θ) to pulse width modulated control signals for the control inputs of said inverter; determining a voltage difference between the direct current voltage (V actual) of said direct current bus (V bus) and the predetermined threshold (V threshold); employing a compensation modulator to compensate the voltage difference and provide a compensated voltage difference; applying the voltage difference to a first algorithm having a first gain and a first output quantity in the generating mode; applying the compensated voltage difference to second and third algorithms (56,58) having second and third gains (G2,G3) and second and third output quantities (68,76), respectively, in the generating mode; providing an intermediate frequency from the set frequency value (f) and the first output quantity; adding the second output quantity to the intermediate frequency to provide a change frequency value; employing the third output quantity as a change voltage value (dV); calculating the voltage value as the sum of the set voltage value and the change voltage value (dV), and calculating the frequency value as the sum of the set frequency value (f) and the change frequency value (df).