Grid frequency variation causes phase angle deviation in current with respect to voltage. This is sensed at the phase-locked loop in the controller. In past studies the effect of grid frequency variation is neglected while designing the controller for power quality restoration. When modern grids are connected to large numbers of non-linear loads and various types of distributed generation (DG), it results in continuous variation in grid frequency. Thus it is necessary to consider the grid frequency variation for effective power quality restoration. However, tuning of conventional PI controller gains considering frequency variation is very difficult. Thus it is necessary to develop an adaptive intelligent nonlinear controller to tackle the effects of frequency variation, voltage distortion and non-linear load simultaneously. This paper presents the importance of considering the effects of the frequency variation, grid voltage distortion and non-linear load, while designing and deploying a controller for power quality restoration. The proposed controller supplies power to local load as well as transferring surplus power to the grid from DG along with the additional benefit of improving grid power quality. A DG with an ANFIS optimized PI current controller for power quality enhancement is proposed. The method is economical as it requires no additional hardware. Results are compared with PI, PI-RC and fuzzy current controllers to validate the effectiveness of the proposed controller.