A system includes an excitation system 24 configured to regulate one or more outputs of a power generating system. The excitation system includes data processing circuitry configured to obtain an electrical voltage measurement and an electrical current measurement associated with the power generating system, a transformer failure detection system configured to detect an abnormality associated with the electrical voltage and electrical current measurements as an indication of a possible transformer failure, and a failure detection deactivation system 46 configured to deactivate the transformer failure detection system based at least in part on whether the abnormality comprises one of a first condition or a second condition.