I have a Craftsman 125 psi 1.5 hp 3 gallon air compressor. When I plug it in and turn on I see a blue arc come from somewhere. How do I fix this?

if shuts down at 20 psi regulator is set wrong
it runs but only builds 20 psi, compressor is probably worn out

If it's new I would return it. However that model number 16638 is for a Huffy Bicycle.

If your compressor is oil-less type, most likely pressure is leaking past piston ring. To verify, remove cover to expose bottom of cylinder (unplug compressor and let out all air). With flashlight, examine the upper-most part of the cylinder (turn motor by hand till piston is at top of stroke). If top of cylinder is scratched, then pressure is leaking past.
For many years now, stores are in a race to have more HP and PSI to attract customers. Customer is really the loser because components used to make the units can not handle the higher pressure. Normally small 115v compressors are set to cut out at 125psi and larger two stage units will cut out at 160psi. Small compressor set to 200psi makes for short lived compressor. Could be compared to driving your car at 100mph all day every day. Longest life is attained when unit is being used at about 60 to 75 % of capacity.
To allow your compressor to reach cutout pressure and keep working for a while, lower cutout to 120psi (pressure switch may be adjustable). To restore to 200psi, replace cylinder/ ring.
If your compressor is oil type, suspect leaking reed valves.

check and see if the inlet valve is plugged this is a thin metal valve at the top of the cylinder if this is not the problem then check to see if the unloader valve is held open by some form of debris and a nother problem could be your piston sleeve has a small hole or crack in it I hope that i have helped

my ace air compressor which is 26 gallon 5 hp will not get over 60psi what is wrong with it please?

your motor overheated from too low a voltage if theres a manual reset try this,also replace the two motor start and run capacitors on the motor body

yes buddy simple to do unscrew bolt on pump unit underneith or on front at bottom let it drain replace plug and fill till it is 1/2w way on sight glass or upto line on dipstick some on ebay
http://cgi.ebay.co.uk/Sealey-CPO1S-Compressor-Oil-1ltr_W0QQitemZ140344576982QQcmdZViewItemQQptZUK_Air_Tools_and_Compressors?hash=item20ad304bd6&_trksid=p3286.c0.m14

this is probably an "oilless" compressor, it has "piston" with a thin ring of leatherlike material acting as a piston ring, the "cylinder" is an aluminum sleeve - what usually happens is the cylinder gets scratched from dirt or just wear or the leather ring deteriorates, that's why it will go only so far - the only fix for this is to replace the cylinder and the piston

Yes,but if the max is 125 you don't want to increase it above 110 and set off the pressure relief valve.