An analysis based on the power signature concept for detecting oscillation in power system is proposed. The proposed analysis will separate the power due to various loads and the power due to imposed oscillation. Three-phase instantaneous power is based on pq theory where in this domain we can easily distinguish between average power, oscillating power due to nonlinear load, and the new imposed power due to oscillation in power system. The extracted part due to oscillation in power system will be useful for active oscillation damper by using power electronics device. In order to extract the power components, this paper also proposes a new method of interharmonics extraction based on adaptive notch filter. By using this method we can easily separate the components of fundamental, harmonics, and interharmonics parts.