The invention discloses a capacity regulating transformer and a power transformation operation method. The capacity regulating transformer comprises a high-voltage winding, a low-voltage winding and abalance winding, wherein the high-voltage winding, the low-voltage winding and the balance winding are arranged with the same axis; and the balance winding adopts a connecting mode of d. By virtue ofthe capacity regulating transformer, the technical problem of poor energy saving effect of the transformer caused by poor imbalance load tolerance capacity of the capacity regulating transformer in alow-capacity gear in the prior art is solved.