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This paper presents the application of S-transform and rule based system for diagnosing power quality problems which are related to voltage disturbances. Such voltage disturbances can be caused by permanent or non permanent faults. A permanent fault causes permanent damage and power interruption to the customers whereas a non permanent fault can be categorized as either transient or incipient faults. For transient faults originating from lightning, a distribution network can be immediately restored as the faults will be cleared after the auto reclosers operated. Incipient faults are usually characterized by intermittent faults. To develop an automatic power quality diagnosis method, the S-transform is used to analyse and extract features of voltage disturbances recorded from the power quality monitoring system. The rule based classifier is then used identify whether the disturbances are caused by permanent, non permanent, transient or incipient faults. Test results proved that the proposed power quality diagnosis method can provide accurate diagnosis of voltage disturbances.