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Electric arc furnace (EAF) is one of the largest non-linear loads in power systems. It is highly time-varying which leads to low-frequency voltage fluctuations in the system, called flicker. Static VAr compensator (SVC) is always used in EAF plants to compensate the reactive power and reduce voltage fluctuations. The reactive power calculation unit is one of the most important units in SVC control system. Since SVC can only compensate the fundamental component, the calculated reactive power should not be sensitive to other harmonics. On the other hand, since the reactive power changes every half cycle, its calculation should be fast enough to track the changes. Hence, a calculation method with minimum delay and lowest harmonic sensitivity should be utilised to achieve an effective compensation. Among different already proposed methods for calculation of reactive power, differential method has the lowest delay. However, it is very sensitive to harmonics. In this study, Kalman filter is used to extract the fundamental components of voltage and current with a little delay and then they are used as inputs for the differential method. The proposed method is evaluated using some simulation signals and practical records from several EAFs in Mobarekeh steel company in Esfahan – Iran. [ABSTRACT FROM AUTHOR]