A rotary type frequency converter using two sets of adjustable speed generators/motors is expected to be applied at the interconnections between 50 Hz and 60 Hz power systems in Japan. The rotary type frequency converter can work not only as a power interchanger, but also as a power system stabilizer by effectively utilizing energy stored in rotors. In this paper, we investigate how the rotary type frequency converter affects power system dynamics. Since shaft torsional oscillation and slow response due to mechanical connections are inevitable and may lead to instability in power systems, we also present some countermeasures and control schemes to handle such inherent problems, and to improve the performance of power system dynamics. Control performance and effectiveness is examined for a test model system by digital transient simulation.