This paper presents a new modification of the least-squares Prony's method for power-quality analysis in terms of estimation of harmonics and interharmonics in an electric power signal. The so-called reduced Prony's method can be competitive, in some specific case, to the Fourier transformation method and the classical LS Prony's method. The modification constitutes in a specific selection of a constant frequency vector in a Fourier-like manner leading to a remarkable reduction of the computational burden and enabling online real-time computations. In addition, a sampling frequency and an analysis window length can be selected to provide the numerical stability of the new algorithm.