In the paper a new numerical algorithm for fault distance calculation and fault analysis is presented. The algorithm improves up to date solutions with regard to the fault location, adaptive autoreclosure, detailed disturbance records analysis, and fault data management. It is based on two terminal line currents and voltages acquisition. For this purposes the synchronized sampling of all analogue input variables is assumed. The algorithm presented is derived in spectral domain and based on the application of the Discrete Fourier Transform. In the paper the electrical arc is considered as a source of higher harmonics. These are included in the complete fault model, which was starting point for the development of the new algorithm. One of sophisticated algorithm features is its ability to determine both the arc and the fault resistance. The algorithm is tested through computer based simulation of an overhead line connected to two active networks.