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Requirements to avoid current-transformer (CT) saturation result in impractically large CTs. The paper describes the design, evaluation and implementation of a compensating algorithm for the distorted secondary current of the CT caused by saturation. The algorithm can compensate the distorted current irrespective of the level of the remanent flux and is suitable for use with measurement-type CTs for protection. A second-difference function detects when a CT first starts to saturate. At the start of first saturation, the negative value of the second-difference function corresponds to the magnetising current; which is used in conjunction with the magnetisation curve to obtain the core flux. This value is then used as an initial flux to calculate the core flux. The magnetising current is determined by inserting the calculated core flux into the magnetisation curve and added to the secondary current. The resultant compensated current is equal to the secondary referred primary current. Test results indicate that the algorithm can compensate accurately the severely distorted currents caused by the small size of measurement CTs and is not affected by the remanent flux. The paper concludes by describing the experimental test results on a small CT using a prototype compensation system based on a digital signal processor. [ABSTRACT FROM AUTHOR]