To avoid the miss-operation by magnetizing inrush current, the second harmonic component is commonly used for blocking the operation of percentage differential relays. However, we have plans to introduce 1, 000kV transmission lines and underground 500kV lines and forecast that the second harmonic component in fault current is increased together with the capacitance in power system. This paper describes a new method to discriminate internal faults from inrush current by the sum of active power flowing into transformers from each terminal. Inrush current flows by the saturation of iron core and instantaneous power flows in and out according to the big change of energy in magnetic field. But the average power is almost zero for energizing. On the other hand, an internal fault with arc discharge consumes large power. Therefore, by watching the average power or the integral of instantaneous power during one period, internal faults can be discriminated from inrush current. To check the performance of this method, actual inrush current and voltage waveforms of 500/154kV transformer are accurately measured by digital equipment. The usefulness of this method is confirmed by applying it for these data.