Introduction. A significant proportion of earth faults in medium voltage networks represents a short-lived and transient process. Problem. In such cases, earth fault protection that responds to steady-state current and voltage is not able to operate properly. Purpose. To develop earth faults protection selective algorithm using transient components, that occur in zero-sequence currents and voltage in the fault process. Method. A mathematical model of the power supply system was applied to study the transient components of currents and voltage of zero sequence in compensated electrical networks with phase-to-earth faults, and a those model also is used to test the operation of the developed protection algorithm. The results showed that, the reactive power for transient components, of the frequency greater by 4-6 times, than fundamental frequency, which are extracted from the current and voltage of zero sequence by wavelet transform in compensated electrical networks on the damaged feeder, is positive regardless of the degree of compensation of the capacitive current. That may be the basis of the principle of directional protection. Originality. Phase-to-earth fault selective protection algorithm has been developed. In that algorithm, first derivatives of currents and voltages of zero sequence are found, to reduce the influence of aperiodic components. And then, by using of the wavelet transform with Morlet mother function, an orthogonal components are extracted from them. Reactive power is calculated for transient component. If that reactive power excess of threshold, the relay will make a decision. The reliability of the developed protection algorithm is confirmed by the results of mathematical modelling and verification of the test sample at the laboratory stand and by means of field signals that were recorded by digital loggers at the substations. References 10, figures 5.