It's part of a tuned circuit designed to give a peak response at the power system's fundamental frequency and suppress response at harmonic frequencies. There's some explanatory notes in the IEE book "Power System Protection Systems & Methods" - luckily Google has it as a preview to save you buying it! Here's the Link.
If David Beach happens to be reading this, this is a book which is worth adding to the FAQ.
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If we learn from our mistakes I'm getting a great education!