Grid connected static power converters inject parasitic DC currents due to the offset in current sensing, control imperfections, asymmetries in power switches and other secondary effects. Ever growing number of grid connected converters contributes to an increase of DC bias in AC grids, and this brings the cores of distribution transformers closer to saturation and increases their power losses. This paper provides sensitivity analysis of distribution transformers to the DC bias, and considers solutions for detecting and compensating the parasitic DC components in AC grids. Active compensation methods can be advantageously used in suppressing the DC bias at grid connection point of the power converter. The sensing approach proposed in this paper makes use of saturable ferromagnetic cores and a low cost DSP for signal analysis and processing. Proposed algorithm uses distortion of the magnetizing current of a parallel connected saturable core due to the bias. Experimental results demonstrate the capability for detecting and compensating the bias voltages far below 1 mV in 0.4 kV grids. The paper describes the principles of DC bias detection and it provides the guidelines for the proper design of magnetic components. High precision of the proposed DC bias sensing is thoroughly verified on the experimental setup connected to a 0.4 kV grid.