This paper analyzes the problem of transformer differential protection. Fir
st, we review the concept of transformer differential protection. We then a
nalyze magnetizing inrush, overexcitation, and current transformer (CT) sat
uration phenomena as possible causes of relay misoperation. Finally, we sum
marize the existing methods for discriminating internal faults from inrush
and overexcitation conditions. In Part II of the paper, we propose a new ap
proach for transformer differential protection and describe the relay that
is based on this approach.