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The main fault in distribution networks is single-phase-to-ground fault (PTGF). when PTGF happens in spark catcher grounded system, the fault will be eliminated by making spark catcher grounded directly to avoid the generation of arc over-voltage. But if a transformer internal grounding fault (TIGF)occurs in networks(such as turn-to-ground fault), spark catcher action makes both ends of the fault windings grounded which results to transformer internal winding short and further leads to the transformer burning. So how to discriminate line faults from transformer internal faults becomes a crucial issue waiting to be solved urgently in small current neutral grounding system. In this paper the zero sequence current (ZSC) distribution and negative sequence current (NSC) distribution are analyzed respectively in above two situations. The PTGF and TIGF can be discriminated accurately. A new spark catcher controlling method based on ZSC distribution and NSC distribution is proposed in this paper.