In this paper a spectral decomposition-based method for interharmonic computation is proposed for power systems where the fundamental frequency fluctuates significantly. In the proposed method, the frequency domain components of the voltage waveform are obtained by Kalman filtering. Both the system fundamental frequency and the correct spectrum of the voltage waveform, and hence the exact interharrnonics are obtained. The proposed method is tested with both simulated and field data obtained from different electric arc furnace (EAF) plants, where the system frequency deviates continuously due to the fluctuating load demands. Since the interharmonic frequencies are obtained by using Kalman filtering, no leakage effect of the OFT-based methods is involved in case of frequency deviations, which is an important advantage of the proposed method. (C) 2010 Elsevier B.V. All rights reserved.