This paper presents an analysis of the main operating conditions that may lead to inappropriate differential protection operation. These conditions were simulated using the Alternative Transients Program (ATP) and the model of a real system. The saturable transformer was the main component of the ATP/EMTP simulations. The saturation and hysteresis effects are represented by a non-linear model of the magnetizing inductance. The results of several ATP/EMTP simulations of normal and fault conditions were converted into COMTRADE format files. These files were used to verify the performance of relays in low-voltage laboratory tests, using various relay settings.