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When a fault occurs on a section or a component in a given power system, if one or more protective relays (PRs) and/or circuit breakers (CBs) associated do not work properly, or in other words, a malfunction or malfunctions happen with these PRs and/or CBs, the outage area could be extended. As a result, the complexity of the fault diagnosis could be greatly increased. The existing analytic models for power system fault diagnosis do not systematically address the possible malfunctions of PRs and/or CBs, and hence may lead to incorrect diagnosis results if such malfunctions do occur. Given this background, based on the existing analytic models, an effort is made to develop a new analytic model to well take into account of the possible malfunctions of PRs and/or CBs, and further to improve the accuracy of fault diagnosis results. The developed model does not only estimate the faulted section(s), but also identify the malfunctioned PRs and/or CBs as well as the missing and/or false alarms. A software system is developed for practical applications, and realistic fault scenarios from an actual power system are served for demonstrating the correctness of the presented model and the efficiency of the developed software system.