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Out-of-step blocking function in distance relays is required to distinguish between a power swing and a fault. Speedy and reliable detection of symmetrical faults during power swings presents a challenge. This paper introduces wavelet transform to reliably and quickly detect power swings as well as detect any fault during a power swing. The total number of dyadic wavelet levels of voltage/current waveforms and the choice of particular levels for such detection are carefully studied. A logic block based on the wavelet transform is developed. The output of this block is combined with the output of the conventional digital distance relay to achieve desired performance during power swings. This integrated relay is extensively tested on a simulated system using PSCAD/ EMTDCreg software.