An AC arc fault detection module includes a current detecting section having at least one output and being structured to determine whether at least one signal based on a current measured from an AC phase line exceeds at least one corresponding predetermined threshold level and cause the at least one output to indicate that the threshold has been exceeded. The module also includes a processing device structured to: (i) receive the at least one output, (ii) determine whether an arc fault in the AC electrical system has occurred based on at least the at least one output, (iii) determine an estimation of background noise based on at least one signal indicative of a current on the AC phase line, and (iv) adjust the at least one corresponding predetermined threshold level based on the estimation of background noise.