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The paper proposes an algorithm based on the wavelet transform for the analysis of harmonics in power systems. The algorithm proposed decomposes the voltage/current waveforms into uniform frequency bands corresponding to the odd harmonic components of the signal. First, the selection of the mother wavelet, the sampling frequency and the frequency characteristics of the selected wavelet filter bank are studied. Finally the performance of the method proposed is compared with the results obtained using DFT analysis and the harmonic group concept introduced by the International Electro technical Commission using different test waveforms proposed in standard IEC-61000-4-7.