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This paper presents a method for operating cascaded multilevel inverters when one or more power cells are damaged. The method is based on the use of additional switches in the power circuit to bypass the faulty cell. To control the cells, the angle of phase shifting in the carrier signals is modified according to the number of operating cells, to minimize the load voltage distortion, when the inverter operates in failure mode. The reference signals of the pulsewidth-modulation modulators are also modified to increase the output voltage. Simulation and experimental results show the effectiveness of this method, which significantly increases the reliability of the drive.