UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended	~~September~~June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-32576

ITC HOLDINGS CORP.

(Exact Name of Registrant as Specified in Its Charter)


Michigan						32-0058047
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

27175 Energy Way

Novi, MI 48377

(Address of Principal Executive Offices, Including Zip Code)

(248) 946-3000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☑

* The registrant is a voluntary filer and has not been subject to the filing requirements under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the preceding 12 months.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

☐

☑

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

All shares of outstanding common stock of ITC Holdings Corp. are held by its parent company, ITC Investment Holdings Inc., which is an indirect majority owned subsidiary of Fortis Inc. There were 224,203,112 shares of common stock, no par value, outstanding as of ~~October 27, 2022.~~August 1, 2023.

Table of Contents

ITC Holdings Corp.

Form 10-Q for the Quarterly Period Ended ~~September~~June 30, ~~2022~~2023

INDEX

Table of Contents

DEFINITIONS

Unless otherwise noted or the context requires, all references in this report to:

ITC Holdings Corp. and its subsidiaries

•“ITC Great Plains” are references to ITC Great Plains, LLC, a wholly-owned subsidiary of ITC Holdings;

•“ITC Holdings” are references to ITC Holdings Corp. and not any of its subsidiaries;

•“ITC ~~Interconnection” are references to ITC Interconnection LLC, a wholly-owned subsidiary of ITC Holdings;~~

•~~“ITC~~ Midwest” are references to ITC Midwest LLC, a wholly-owned subsidiary of ITC Holdings;

•“ITCTransmission” are references to International Transmission Company, a wholly-owned subsidiary of ITC Holdings;

•“METC” are references to Michigan Electric Transmission Company, LLC, a wholly-owned subsidiary of ~~MTH;~~Michigan Transco Holdings, LLC;

•“MISO Regulated Operating Subsidiaries” are references to ITCTransmission, METC and ITC Midwest together;

•“~~MTH” are references to Michigan Transco Holdings, LLC, the sole member of METC and a wholly-owned subsidiary of ITC Holdings;~~

•“Regulated Operating Subsidiaries” are references primarily to ITCTransmission, METC, ITC Midwest, and ITC Great Plains ~~and ITC Interconnection~~ together; and

•“Company,” “we,” “our” and “us” are references to ITC Holdings together with all of its subsidiaries.

Other definitions

•“AFUDC” are references to an allowance for funds used during construction;

•“ALJ” are references to an administrative law judge;

•“AOCI” are references to accumulated other comprehensive income or (loss);

•“Consumers Energy” are references to Consumers Energy Company, a wholly-owned subsidiary of CMS Energy Corporation;

•“~~COVID-19” are references to the Coronavirus disease that the World Health Organization declared a pandemic in March 2020;~~

•“D.C. Circuit Court” are references to the U.S. Court of Appeals for the District of Columbia Circuit;

•~~“DCF” are references to discounted cash flow;~~

•“DTE Electric” are references to DTE Electric Company, a wholly-owned subsidiary of DTE Energy Company;

•“Exchange Act” are references to the Securities Exchange Act of 1934, as amended;

•“FASB” are references to the Financial Accounting Standards Board;

•“FERC” are references to the Federal Energy Regulatory Commission;

•“Formula Rate” are references to a FERC-approved formula template used to calculate an annual revenue requirement;

•“Fortis” are references to Fortis Inc.;

•“FPA” are references to the Federal Power Act;

•“GAAP” are references to accounting principles generally accepted in the United States of America;

•“GIC” are references to GIC Private Limited;

~~Table of Contents~~

•“Initial Complaint” are references to a November 2013 complaint to the FERC under Section 206 of the FPA regarding the base ROE;

•“IP&L” are references to Interstate Power and Light Company, an Alliant Energy Corporation subsidiary;

•“ITC Investment Holdings” are references to ITC Investment Holdings Inc., a majority owned indirect subsidiary of Fortis in which GIC has an indirect, passive, non-voting minority ownership interest;

•“kW” are references to kilowatts (one kilowatt equaling 1,000 watts);

•“LIBOR” are references to the London Interbank Offered Rate;

Table of Contents

•“May 2020 Order” are references to an order issued by the FERC on May 21, 2020 regarding MISO ROE Complaints;

•“MISO” are references to the Midcontinent Independent System Operator, Inc., a FERC-approved RTO which oversees the operation of the bulk power transmission system for a substantial portion of the Midwestern United States and Manitoba, Canada, and of which ITCTransmission, METC and ITC Midwest are members;

•“MISO ROE Complaints” are references to the Initial Complaint and the Second Complaint;

•“NERC” are references to the North American Electric Reliability Corporation;

•“NOPR” are references to a Notice of Proposed Rulemaking issued by the FERC;

•“~~November 2019 Order” are references to an order issued by the FERC on November 21, 2019 regarding MISO ROE Complaints;~~

•“PBU” are references to a performance-based unit;

•“PCBs” are references to polychlorinated biphenyls;

•“Revolving Credit Agreement” are references to the unsecured, unguaranteed revolving credit agreement entered into by ITC Holdings, ITCTransmission, METC, ITC Midwest and ITC Great Plains dated as of April 14, 2023;

•“ROE” are references to return on equity;

•“ROFR” are references to right of first refusal;

•“RTO” are references to Regional Transmission Organizations;

•“SBU” are references to a service-based unit;

•“SEC” are references to the Securities and Exchange Commission;

•“Second Complaint” are references to an additional complaint filed on February 12, 2015 with the FERC under Section 206 of the FPA regarding the base ROE;

•“~~September 2016 Order” are references to an order issued by the FERC on September 28, 2016 regarding the Initial Complaint;~~

•“SOFR” are references to ~~the~~ Secured Overnight Financing Rate;

•“SPP” are references to Southwest Power Pool, Inc., a FERC-approved RTO which oversees the operation of the bulk power transmission system for a substantial portion of the South Central United States, and of which ITC Great Plains is a member;

•“TO” are references to transmission owner; and

•“USD” are references to the United States dollar.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)


		September 30,		December 31,			June 30,		December 31,
(In millions of USD, except share data)	(In millions of USD, except share data)	2022		2021		(In millions of USD, except share data)	2023		2022
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	3	$	5	Cash and cash equivalents	$	296	$	4
Accounts receivable	Accounts receivable	160		128		Accounts receivable	171		139
Inventory	Inventory	52		45		Inventory	60		55
Regulatory assets	Regulatory assets	14		21		Regulatory assets	21		12

Prepaid and other current assets	Prepaid and other current assets	19		18		Prepaid and other current assets	21		19
Total current assets	Total current assets	248		217		Total current assets	569		229
Property, plant and equipment (net of accumulated depreciation and amortization of $2,348 and $2,199, respectively)		10,471		9,961
Property, plant and equipment (net of accumulated depreciation and amortization of $2,479 and $2,382, respectively)						Property, plant and equipment (net of accumulated depreciation and amortization of $2,479 and $2,382, respectively)	10,962		10,637
Other assets	Other assets					Other assets
Goodwill	Goodwill	950		950		Goodwill	950		950
Intangible assets (net of accumulated amortization of $51 and $49, respectively)		24		26

Regulatory assets	Regulatory assets	175		190		Regulatory assets	200		181

Other assets	Other assets	91		101		Other assets	133		134
Total other assets	Total other assets	1,240		1,267		Total other assets	1,283		1,265
TOTAL ASSETS	TOTAL ASSETS	$	11,959	$	11,445	TOTAL ASSETS	$	12,814	$	12,131
LIABILITIES AND STOCKHOLDER’S EQUITY	LIABILITIES AND STOCKHOLDER’S EQUITY					LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	106	$	127	Accounts payable	$	96	$	112
Accrued compensation	Accrued compensation	51		72		Accrued compensation	49		59
Accrued interest	Accrued interest	68		56		Accrued interest	68		69
Accrued taxes	Accrued taxes	36		64		Accrued taxes	78		72
Regulatory liabilities	Regulatory liabilities	20		14		Regulatory liabilities	31		22
Refundable deposits and advances for construction	Refundable deposits and advances for construction	60		44		Refundable deposits and advances for construction	44		26
Debt maturing within one year	Debt maturing within one year	384		654		Debt maturing within one year	400		384
Other current liabilities	Other current liabilities	14		16		Other current liabilities	12		15
Total current liabilities	Total current liabilities	739		1,047		Total current liabilities	778		759
Accrued pension and postretirement liabilities	Accrued pension and postretirement liabilities	51		52		Accrued pension and postretirement liabilities	41		41
Deferred income taxes	Deferred income taxes	1,267		1,161		Deferred income taxes	1,364		1,303
Regulatory liabilities	Regulatory liabilities	681		619		Regulatory liabilities	662		676
Refundable deposits	Refundable deposits	4		28		Refundable deposits	37		29
Other liabilities	Other liabilities	41		55		Other liabilities	35		44
Long-term debt	Long-term debt	6,544		6,009		Long-term debt	7,133		6,607
Commitments and contingent liabilities (Notes 4 and 12)
Commitments and contingent liabilities (Notes 4 and 11)						Commitments and contingent liabilities (Notes 4 and 11)
TOTAL LIABILITIES	TOTAL LIABILITIES	9,327		8,971		TOTAL LIABILITIES	10,050		9,459
STOCKHOLDER’S EQUITY	STOCKHOLDER’S EQUITY					STOCKHOLDER’S EQUITY
Common stock, without par value, 235,000,000 shares authorized, 224,203,112 shares issued and outstanding at September 30, 2022 and December 31, 2021		892		892
Common stock, without par value, 235,000,000 shares authorized, 224,203,112 shares issued and outstanding at June 30, 2023 and December 31, 2022						Common stock, without par value, 235,000,000 shares authorized, 224,203,112 shares issued and outstanding at June 30, 2023 and December 31, 2022	892		892
Retained earnings	Retained earnings	1,713		1,584		Retained earnings	1,843		1,753
Accumulated other comprehensive income (loss)		27		(2)
Accumulated other comprehensive income						Accumulated other comprehensive income	29		27
Total stockholder’s equity	Total stockholder’s equity	2,632		2,474		Total stockholder’s equity	2,764		2,672
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	11,959	$	11,445	TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	12,814	$	12,131

See notes to condensed consolidated interim financial statements (unaudited).

Table of Contents

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


		Three months ended				Nine months ended					Three months ended				Six months ended
		September 30,				September 30,					June 30,				June 30,
(In millions of USD)	(In millions of USD)	2022		2021		2022		2021		(In millions of USD)	2023		2022		2023		2022
OPERATING REVENUES	OPERATING REVENUES									OPERATING REVENUES
Transmission and other services	Transmission and other services	$	435	$	397	$	1,149	$	1,042	Transmission and other services	$	393	$	387	$	739	$	714
Formula Rate true-up	Formula Rate true-up	(69)		(57)		(51)		(24)		Formula Rate true-up	(6)		(20)		31		18
Total operating revenues	Total operating revenues	366		340		1,098		1,018		Total operating revenues	387		367		770		732
OPERATING EXPENSES	OPERATING EXPENSES									OPERATING EXPENSES
Operation and maintenance	Operation and maintenance	29		30		83		82		Operation and maintenance	30		27		57		54
General and administrative	General and administrative	18		30		77		94		General and administrative	26		26		60		59
Depreciation and amortization	Depreciation and amortization	74		58		220		172		Depreciation and amortization	76		74		151		146
Taxes other than income taxes	Taxes other than income taxes	31		30		104		100		Taxes other than income taxes	37		37		75		73
Other operating expenses (income), net		—		(1)		—		—
Other operating (income) expenses, net										Other operating (income) expenses, net	(1)		—		(1)		—
Total operating expenses	Total operating expenses	152		147		484		448		Total operating expenses	168		164		342		332
OPERATING INCOME	OPERATING INCOME	214		193		614		570		OPERATING INCOME	219		203		428		400
OTHER EXPENSES (INCOME)	OTHER EXPENSES (INCOME)									OTHER EXPENSES (INCOME)
Interest expense, net	Interest expense, net	68		62		198		187		Interest expense, net	78		66		152		130
Allowance for equity funds used during construction	Allowance for equity funds used during construction	(10)		(8)		(27)		(22)		Allowance for equity funds used during construction	(11)		(8)		(22)		(17)
Other expenses (income), net		1		(1)		4		(4)
Other (income) expenses, net										Other (income) expenses, net	(3)		1		(5)		3
Total other expenses (income)	Total other expenses (income)	59		53		175		161		Total other expenses (income)	64		59		125		116
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	155		140		439		409		INCOME BEFORE INCOME TAXES	155		144		303		284
INCOME TAX PROVISION	INCOME TAX PROVISION	44		35		111		102		INCOME TAX PROVISION	37		33		73		67
NET INCOME	NET INCOME	111		105		328		307		NET INCOME	118		111		230		217
OTHER COMPREHENSIVE INCOME	OTHER COMPREHENSIVE INCOME									OTHER COMPREHENSIVE INCOME
Derivative instruments, net of tax (Note 9)		6		2		29		4
Derivative instruments, net of tax (Note 8)										Derivative instruments, net of tax (Note 8)	2		7		2		23
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX	TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX	6		2		29		4		TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX	2		7		2		23
TOTAL COMPREHENSIVE INCOME	TOTAL COMPREHENSIVE INCOME	$	117	$	107	$	357	$	311	TOTAL COMPREHENSIVE INCOME	$	120	$	118	$	232	$	240

See notes to condensed consolidated interim financial statements (unaudited).

Table of Contents

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY (UNAUDITED)

Accumulated
Other Total
Retained Comprehensive Stockholder’s
(In millions of USD) Common Stock Earnings (Loss) Income Equity
BALANCE, DECEMBER 31, 2020 $ 892 $ 1,410 $ (8) $ 2,294
Net income — 100 — 100
Dividends to ITC Investment Holdings Inc. — (58) — (58)
Other comprehensive income, net of tax (Note 9) — — 1 1
BALANCE, MARCH 31, 2021 892 1,452 (7) 2,337
Net income — 102 — 102
Dividends to ITC Investment Holdings Inc. — (57) — (57)
Other comprehensive income, net of tax (Note 9) — — 1 1
BALANCE, JUNE 30, 2021 892 1,497 (6) 2,383
Net income — 105 — 105
Dividends to ITC Investment Holdings Inc. — (59) — (59)
Other comprehensive income, net of tax (Note 9) — — 2 2
BALANCE, SEPTEMBER 30, 2021 $ 892 $ 1,543 $ (4) $ 2,431
BALANCE, DECEMBER 31, 2021 $ 892 $ 1,584 $ (2) $ 2,474
Net income — 106 — 106
Dividends to ITC Investment Holdings Inc. — (64) — (64)
Other comprehensive income, net of tax (Note 9) — — 16 16
BALANCE, MARCH 31, 2022 892 1,626 14 2,532
Net income — 111 — 111
Dividends to ITC Investment Holdings Inc. — (64) — (64)
Other comprehensive income, net of tax (Note 9) — — 7 7
BALANCE, JUNE 30, 2022 892 1,673 21 2,586
Net income — 111 — 111
Dividends to ITC Investment Holdings Inc. — (71) — (71)
Other comprehensive income, net of tax (Note 9) — — 6 6
BALANCE, SEPTEMBER 30, 2022 $ 892 $ 1,713 $ 27 $ 2,632


					Accumulated
					Other		Total
			Retained		Comprehensive		Stockholder’s
(In millions of USD)	Common Stock		Earnings		(Loss) Income		Equity
BALANCE, DECEMBER 31, 2021	$	892	$	1,584	$	(2)	$	2,474
Net income	—		106		—		106
Dividends to ITC Investment Holdings	—		(64)		—		(64)
Other comprehensive income, net of tax (Note 8)	—		—		16		16
BALANCE, MARCH 31, 2022	892		1,626		14		2,532
Net income	—		111		—		111
Dividends to ITC Investment Holdings	—		(64)		—		(64)
Other comprehensive income, net of tax (Note 8)	—		—		7		7
BALANCE, JUNE 30, 2022	$	892	$	1,673	$	21	$	2,586





BALANCE, DECEMBER 31, 2022	$	892	$	1,753	$	27	$	2,672

Net income	—		112		—		112
Dividends to ITC Investment Holdings	—		(70)		—		(70)


BALANCE, MARCH 31, 2023	892		1,795		27		2,714
Net income	—		118		—		118
Dividends to ITC Investment Holdings	—		(70)		—		(70)
Other comprehensive income, net of tax (Note 8)	—		—		2		2
BALANCE, JUNE 30, 2023	$	892	$	1,843	$	29	$	2,764

See notes to condensed consolidated interim financial statements (unaudited).

Table of Contents

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


		Nine months ended					Six months ended
		September 30,					June 30,
(In millions of USD)	(In millions of USD)	2022		2021		(In millions of USD)	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net income	Net income	$	328	$	307	Net income	$	230	$	217
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	Depreciation and amortization expense	220		172		Depreciation and amortization expense	151		146
Recognition, refund and collection of revenue accruals and deferrals — including accrued interest	Recognition, refund and collection of revenue accruals and deferrals — including accrued interest	58		56		Recognition, refund and collection of revenue accruals and deferrals — including accrued interest	(35)		(14)
Deferred income tax expense	Deferred income tax expense	103		102		Deferred income tax expense	47		62
Allowance for equity funds used during construction	Allowance for equity funds used during construction	(27)		(22)		Allowance for equity funds used during construction	(22)		(17)
Share-based compensation	Share-based compensation	7		21		Share-based compensation	9		11
Other	Other	56		3		Other	9		10
Changes in assets and liabilities, exclusive of changes shown separately:	Changes in assets and liabilities, exclusive of changes shown separately:					Changes in assets and liabilities, exclusive of changes shown separately:
Accounts receivable	Accounts receivable	(29)		(24)		Accounts receivable	(31)		(54)

Accounts payable	Accounts payable	6		19		Accounts payable	2		13
Accrued compensation	Accrued compensation	(19)		(7)		Accrued compensation	(10)		(18)
Accrued interest		11		13

Accrued taxes	Accrued taxes	(29)		(26)		Accrued taxes	7		12
Net refund settlements and adjustments related to return on equity complaints		—		(6)

Other current and non-current assets and liabilities, net	Other current and non-current assets and liabilities, net	(28)		(16)		Other current and non-current assets and liabilities, net	(24)		(19)
Net cash provided by operating activities	Net cash provided by operating activities	657		592		Net cash provided by operating activities	333		349
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	Expenditures for property, plant and equipment	(719)		(626)		Expenditures for property, plant and equipment	(445)		(479)
Contributions in aid of construction		3		4

Other	Other	3		—		Other	(10)		3
Net cash used in investing activities	Net cash used in investing activities	(713)		(622)		Net cash used in investing activities	(455)		(476)
CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt		825		75
Issuance of long-term debt, net						Issuance of long-term debt, net	799		225
Borrowings under revolving credit agreements	Borrowings under revolving credit agreements	783		852		Borrowings under revolving credit agreements	570		454

Net (repayment) issuance of commercial paper	Net (repayment) issuance of commercial paper	(21)		113		Net (repayment) issuance of commercial paper	(134)		129
Repayment of long-term debt	Repayment of long-term debt	(500)		—		Repayment of long-term debt	(250)		—
Repayments of revolving credit agreements	Repayments of revolving credit agreements	(819)		(811)		Repayments of revolving credit agreements	(440)		(534)

Dividends to ITC Investment Holdings Inc.		(199)		(174)
Dividends to ITC Investment Holdings						Dividends to ITC Investment Holdings	(140)		(128)
Refundable deposits from generators for transmission network upgrades	Refundable deposits from generators for transmission network upgrades	—		14		Refundable deposits from generators for transmission network upgrades	34		—
Repayment of refundable deposits from generators for transmission network upgrades	Repayment of refundable deposits from generators for transmission network upgrades	(8)		(38)		Repayment of refundable deposits from generators for transmission network upgrades	(15)		(4)

Other	Other	(7)		(1)		Other	(9)		(2)
Net cash provided by financing activities	Net cash provided by financing activities	54		30		Net cash provided by financing activities	415		140
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(2)		—
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH						NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	293		13
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	7		6		CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	6		7
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$	5	$	6	CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$	299	$	20

See notes to condensed consolidated interim financial statements (unaudited).

Table of Contents

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

1. GENERAL

ITC Holdings and its subsidiaries are engaged in the transmission of electricity in the United States. ITC Holdings is a wholly-owned subsidiary of ITC Investment Holdings. Fortis owns a majority indirect equity interest in ITC Investment Holdings, with GIC holding an indirect, passive, non-voting equity interest of 19.9%. Through our Regulated Operating Subsidiaries, we own, operate, maintain and invest in high-voltage ~~electric~~ transmission systems in Michigan’s Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri, Kansas, Oklahoma and ~~Oklahoma~~Wisconsin that transmit electricity from generating stations to local distribution facilities connected to our transmission systems.

Basis of Presentation

These condensed consolidated interim financial statements should be read in conjunction with the notes to the consolidated financial statements as of and for the year ended December 31, ~~2021~~2022 included in ITC Holdings’ annual report on Form 10-K for such period.

The accompanying condensed consolidated interim financial statements have been prepared using GAAP and with the instructions to Form 10-Q and Rule 10-01 of SEC Regulation S-X as they apply to interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These accounting principles require us to use estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from our estimates.

The condensed consolidated interim financial statements are unaudited but, in our opinion, include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim period. The interim financial results are not necessarily indicative of results that may be expected for any other interim period or the fiscal year.

2. REVENUE

Our total revenues are comprised of revenues which arise from three classifications including transmission services, other services, and Formula Rate true-up. As other services revenue is immaterial, it is presented in combination with transmission services on the condensed consolidated statements of comprehensive income.

Transmission Services

Through our Regulated Operating Subsidiaries, we generate nearly all our revenue from providing electric transmission services over our transmission systems. As independent transmission companies, our transmission services are provided and revenues are received based on our tariffs, as approved by the FERC. The transmission revenue requirements at our Regulated Operating Subsidiaries are set annually using Formula Rates and remain in effect for a one-year period. By updating the inputs to the formula and resulting rates on an annual basis, the revenues at our Regulated Operating Subsidiaries reflect changing operational data and financial performance, including the amount of network load on their transmission systems (for our MISO Regulated Operating Subsidiaries), operating expenses and additions to property, plant and equipment when placed in service, among other items.

We recognize revenue for transmission services over time as transmission services are provided to customers (generally using an output measure of progress based on transmission load delivered). Customers simultaneously receive and consume the benefits provided by the Regulated Operating Subsidiaries’ services. We recognize revenue in the amount to which we have the right to invoice because we have a right to consideration in an amount that corresponds directly with the value to the customer of performance completed to date. As billing agents, MISO and SPP independently bill our customers on a monthly basis and collect fees for the use of our transmission systems. No component of the transaction price is allocated to unsatisfied performance obligations.

Transmission service revenue includes an estimate for unbilled revenues from service that has been provided but not billed by the end of an accounting period. Unbilled revenues are dependent upon a number of factors that require management’s judgment including estimates of transmission network load (for the MISO Regulated Operating Subsidiaries) and preliminary information provided by billing agents. Due to the seasonal

~~Table of Contents~~

fluctuations of actual load, the unbilled revenue amount generally increases during the spring and summer and decreases during the fall and winter. See Note 3 for information on changes in unbilled accounts receivable.

Other Services

Other services revenue consists of rental revenues, easement revenues and amounts from providing ancillary services. A portion of other services revenue is treated as a revenue credit and reduces gross revenue requirement when calculating net revenue requirement under our Formula Rates. Total other services revenue

Table of Contents

for each of the three months ended ~~September~~June 30, 2023 and 2022 was $1 million. Total other services revenue for the six months ended June 30, 2023 and ~~2021 were~~2022 was $3 million and $2 million, respectively. ~~Total other services revenue for each of the nine months ended September 30, 2022 and 2021 were $5 million.~~

Formula Rate True-Up

The true-up mechanism under our Formula Rates is considered an alternative revenue program of a rate-regulated utility given it permits our Regulated Operating Subsidiaries to adjust future rates in response to past activities or completed events in order to collect our actual revenue requirements under our Formula Rates. In accordance with our accounting policy, only the current year origination of the true-up is reported as a Formula Rate true-up. See “Cost-Based Formula Rates with True-Up Mechanism” in Note 4 for more information on our Formula Rates.

3. ACCOUNTS RECEIVABLE

The following table presents the components of accounts receivable on the condensed consolidated statements of financial position:


		September 30,		December 31,			June 30,		December 31,
(In millions of USD)	(In millions of USD)	2022		2021		(In millions of USD)	2023		2022
Trade accounts receivable	Trade accounts receivable	$	2	$	3	Trade accounts receivable	$	2	$	2
Unbilled accounts receivable	Unbilled accounts receivable	135		116		Unbilled accounts receivable	155		124

Other (a)	Other (a)	23		9		Other (a)	14		13
Total accounts receivable	Total accounts receivable	$	160	$	128	Total accounts receivable	$	171	$	139

____________________________

(a)Includes amounts due from affiliates, see “Related Party Receivables and Payables” in Note 1110 for additional information.

4. REGULATORY MATTERS

Cost-Based Formula Rates with True-Up Mechanism

The transmission revenue requirements at our Regulated Operating Subsidiaries are set annually using Formula Rates and remain in effect for a one-year period. By updating the inputs to the formula and resulting rates on an annual basis, the revenues at our Regulated Operating Subsidiaries reflect changing operational data and financial performance, including the amount of network load on their transmission systems (for our MISO Regulated Operating Subsidiaries), operating expenses and additions to property, plant and equipment when placed in service, among other items. The formula used to derive the rates does not require further action or FERC filings each year, although the formula inputs remain subject to legal challenge at the FERC. Our Regulated Operating Subsidiaries will continue to use the formula to calculate their respective annual revenue requirements unless the FERC determines the resulting rates to be unjust and unreasonable and another mechanism is determined by the FERC to be just and reasonable. See “Rate of Return on Equity Complaints” in Note 1211 for detail on ROE matters for our MISO Regulated Operating Subsidiaries and “ROE and Incentive Adders for Transmission Rates” and “Capital Structure Complaint” discussed herein.

The cost-based Formula Rates at our Regulated Operating Subsidiaries include a true-up mechanism that compares the actual revenue requirements of our Regulated Operating Subsidiaries to their billed revenues for each year to determine any over- or under-collection of revenue requirements. Revenue is recognized for services provided during each reporting period based on actual revenue requirements calculated using the formula. Our Regulated Operating Subsidiaries accrue or defer revenues to the extent that the actual revenue requirement for the reporting period is higher or lower, respectively, than the amounts billed relating to that

~~Table of Contents~~

reporting period. The amount of accrued or deferred revenues is reflected in future revenue requirements and thus flows through to customer bills within two years under the provisions of our Formula Rates.

Table of Contents

The net changes in regulatory assets and liabilities associated with our Regulated Operating Subsidiaries’ Formula Rate revenue accruals and deferrals, including accrued interest, were as follows during the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:


(In millions of USD)	Total
Net regulatory liabilities as of December 31, ~~2021~~2022	$	~~(2)~~(20)
Net ~~collection~~refund of ~~2020~~2021 revenue deferrals and accruals, including accrued interest	~~(6)~~6
Net revenue ~~deferral,~~accrual, including accrued interest	~~(51)~~30
Net accrued interest payable	(1)
Net regulatory ~~liabilities~~assets as of ~~September~~June 30, ~~2022~~2023	$	~~(60)~~15

Regulatory assets and liabilities associated with our Regulated Operating Subsidiaries’ Formula Rate revenue accruals and deferrals, including accrued interest, are recorded in the condensed consolidated statements of financial position as follows:


		September 30,		December 31,			June 30,		December 31,
(In millions of USD)	(In millions of USD)	2022		2021		(In millions of USD)	2023		2022
Current regulatory assets	Current regulatory assets	$	14	$	20	Current regulatory assets	$	21	$	12
Non-current regulatory assets	Non-current regulatory assets	12		10		Non-current regulatory assets	45		29
Current regulatory liabilities	Current regulatory liabilities	(20)		(13)		Current regulatory liabilities	(31)		(22)
Non-current regulatory liabilities	Non-current regulatory liabilities	(66)		(19)		Non-current regulatory liabilities	(20)		(39)
Net regulatory liabilities		$	(60)	$	(2)
Net regulatory assets (liabilities)						Net regulatory assets (liabilities)	$	15	$	(20)

ROE and Incentive Adders for Transmission Rates

The FERC has authorized the use of ROE incentives, or adders, that can be applied to the rates of TOs when certain conditions are met. Our MISO Regulated Operating Subsidiaries and ITC Great Plains utilize ROE adders related to independent transmission ownership and RTO participation. The FERC issued a NOPR on March 20, 2020, and ~~issued~~ a supplemental NOPR on April 15, 2021, proposing to update its transmission incentives ~~policy.~~policy to remove incentives for independent transmission ownership and RTO participation and to grant incentives for certain transmission projects. As of ~~September~~June 30, ~~2022,~~2023, no final determination had been made on these NOPRs and we cannot predict whether this will have a material impact on us.

MISO Regulated Operating Subsidiaries

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the authorized ROE used by the MISO Regulated Operating Subsidiaries was 10.77% and is composed of a base ROE of 10.02% with a 25 basis point adder for independent transmission ownership and a 50 basis point adder for RTO participation. See “Rate of Return on Equity Complaints” in Note 1211 for a discussion of the MISO ROE Complaints.

ITC Great Plains

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the authorized ROE used by ITC Great Plains was 11.41% and is composed of a base ROE of 10.66% with a 25 basis point adder for independent transmission ownership and a 50 basis point adder for RTO participation.

Capital Structure Complaint

On May 10, 2022, the Iowa Coalition for Affordable Transmission, including IP&L, filed a complaint with the FERC under Section 206 of the FPA. Specifically, the complaint ~~alleges~~alleged that ITC Midwest does not meet the FERC’s three-part test for authorizing the use of a utility’s actual capital structure for ratemaking purposes which requires that ITC Midwest 1) issue its own debt without guarantees, 2) have its own credit rating, and 3) have a capital structure within the range of capital structures previously approved by the Commission. The Iowa Coalition for Affordable Transmission asked the FERC to reduce ITC Midwest’s equity component from 60% to 53%. ~~Responsive pleadings have been~~On November 2, 2022, the FERC issued an order denying the complaint. On December 2, 2022, the Iowa Coalition for Affordable Transmission filed ~~by parties to~~a request for rehearing with the FERC. On March 16, 2023, the FERC confirmed the previous order denying the complaint ~~proceeding, including ITC Midwest. As of September 30, 2022, ITC Midwest has not recorded any liability related~~and we consider the matter to ~~the complaint. The timing and outcome of this proceeding remains uncertain.~~be closed.

Table of Contents

~~Depreciation Rate Filings~~

During 2021, our MISO Regulated Operating Subsidiaries filed revised depreciation rates for their assets which were approved by the FERC in December 2021. The overall depreciation expense at our MISO Regulated Operating Subsidiaries increased beginning on January 1, 2022, which will result in higher revenue as the increase in depreciation expense flows through to customer bills.

5. DEBT

ITC Holdings

Senior Unsecured Notes

On ~~September 22, 2022,~~June 1, 2023, ITC Holdings completed ~~the~~a private offering of ~~$600~~Senior Notes totaling $800 million, which included $500 million aggregate principal amount of unsecured 5.40% Senior Notes, due June 1, 2033, and an additional $300 million aggregate principal amount issued of its existing unsecured 4.95% Senior Notes, due September 22, 2027. The issuance increased the total aggregate principal amount issued of the 4.95% Senior Notes to $900 million. The 5.40% and the 4.95% Senior Notes are redeemable prior to March 1, 2033 and August 22, 2027, respectively, in whole or in part and at the option of ITC Holdings, by paying an applicable make whole premium. The total net proceeds from ~~this~~the offering, after discount and costs related to the ~~issuance,~~issuances, were used to ~~repay the $500~~redeem in full $250 million aggregate principal amount of ITC Holdings ~~2.70%~~4.05% Senior Notes, due ~~November 15, 2022 and~~July 1, 2023, to repay ~~$89 million~~indebtedness outstanding under ~~ITC Holdings’~~the commercial paper program ~~with remaining proceeds to be used~~and for general corporate purposes. The 4.95% and 5.40% Senior Notes were issued under ITC Holdings’ indenture, dated April 18, 2013, between ITC Holdings and Computershare Trust Company, N.A., as successor to Wells Fargo Bank, National Association, as trustee, as supplemented from time to time, including by the Sixth and Seventh Supplemental ~~Indenture,~~Indentures, dated as of September 22, ~~2022.~~2022 and June 1, 2023, respectively.

Commercial Paper Program

ITC Holdings has an ongoing commercial paper program for the issuance and sale of unsecured commercial paper in an aggregate amount not to exceed $400 million outstanding at any one time. ~~Borrowings under~~At June 30, 2023, ITC ~~Holdings’ $400 million revolving credit facility may be used to repay the notes~~Holdings did not have any commercial paper issued and outstanding under the ~~commercial paper program, if necessary. As of September 30,~~program. At December 31, 2022, ITC Holdings had $134 million of commercial paper issued and outstanding. Amounts outstanding ~~under the program, with a weighted-average interest rate of 3.34% and weighted-average remaining days to maturity of 20 days. The amount outstanding as of September 30, 2022 was~~are classified as debt maturing within one year in the condensed consolidated statements of financial position. ~~As of December 31, 2021 ITC Holdings had $155 million of~~The Company’s Revolving Credit Agreement may be used to repay commercial paper issued ~~and outstanding.~~pursuant to the commercial paper program.

~~ITCTransmission~~

~~First Mortgage Bonds~~Revolving Credit Agreement

On ~~January~~April 14, ~~2022,~~2023, ITC Holdings, ITCTransmission, ~~issued $130 million~~METC, ITC Midwest and ITC Great Plains entered into the Revolving Credit Agreement. In connection with the closing of the Revolving Credit Agreement, the borrowers used funds borrowed under the Revolving Credit Agreement to replace and refinance in full, the previous revolving credit agreements. The Revolving Credit Agreement established an unguaranteed, unsecured revolving credit facility under which the borrowers may borrow an aggregate principal amount of ~~2.93% First Mortgage Bonds, Series J, due January~~$1 billion (subject to certain borrowing sublimits for each of the borrowers as set forth in the Revolving Credit Agreement). The Revolving Credit Agreement has a maturity date of April 14, ~~2052. The proceeds were used to repay existing indebtedness under~~2028 and the revolving credit agreement and intercompany loan agreement and will also be used to partially fund capital expenditures and for general corporate purposes. ITCTransmission also issued an additional $20 million of aggregate principal amount of 2.93% First Mortgage Bonds, Series I, due January 14, 2052, the proceeds of which are expected to fund or refinance a portfolio of eligible renewable energy projectsinterest rate is based on a calculation that references either SOFR or a comparable benchmark as further outlined in the green bond framework established by ITC Holdings. All of ITCTransmission’s First Mortgage Bonds are issued under its First Mortgage and Deed of Trust and secured by a first mortgage lien on substantially all of its real property and tangible personal property.

~~METC~~

~~Senior Secured Notes~~

On May 10, 2022, METC issued $75 million of 3.05% Series B Senior Secured Notes due May 10, 2052. The proceeds from the Series B Senior Secured Notes were used to repay borrowings under the METC revolving credit agreement, to partially fund capital expenditures and for general corporate purposes. All of METC’s Senior Secured Notes are issued under its first mortgage indenture and secured by a first mortgage lien on substantially all of its real property and tangible personal property.Revolving Credit Agreement.

Table of Contents

At June 30, 2023, ITC ~~Midwest~~Holdings and certain of its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available:

~~First Mortgage Bonds~~


(In millions of USD, except percentages)	Total Available Capacity (a)		Outstanding Balance (b)		Unused Capacity		Weighted Average Interest Rate on Outstanding Balance (c)		Commitment Fee Rate (d)
ITC Holdings	$	400	$	—	$	400	—	%	0.175	%
ITCTransmission	175		98		77		6.14	%	0.100	%
METC	175		88		87		6.14	%	0.100	%
ITC Midwest	225		132		93		6.14	%	0.100	%
ITC Great Plains	25		20		5		6.14	%	0.100	%
Total	$	1,000	$	338	$	662

~~On October 12, 2022, ITC Midwest issued an~~____________________________

(a)Represents the current borrowing sublimit. Individual sublimits may be adjusted, subject to certain maximum individual sublimits and the aggregate limit under the Revolving Credit Agreement.

(b)Included within long-term debt in the condensed consolidated statements of ~~$75 million~~financial position.

(c)Interest charged on borrowings depends on the variable rate structure we elected at the time of 3.87% First Mortgage Bonds Series K, due October 12, 2027 and an aggregate of $75 million of 4.53% First Mortgage Bonds Series L, due October 12, 2052. The proceeds are expected to fund or refinance a portfolio of eligible renewable energy projectseach borrowing.

(d)Calculation based on the ~~green bond framework established by ITC Holdings. ITC Midwest’s First Mortgage Bonds were issued under its First Mortgage and Deed of Trust and secured by a first mortgage lien~~average daily unused commitments, subject to adjustment based on ~~substantially all of its real property and tangible personal property.~~the borrower’s credit rating.

Derivative Instruments and Hedging Activities

~~In September 2022, we terminated $450~~During the second quarter of 2023, ITC Holdings entered into and settled 10-year U.S. Treasury rate lock contracts with notional amounts totaling $500 million and a weighted-average forward rate yield of ~~5-year interest rate swap~~3.46%. The contracts ~~that managed~~were used to manage interest rate risk associated with the $500 million issuance of unsecured 5.40% Senior Notes at ITC Holdings ~~4.95% Senior Notes, due September 22, 2027. A summary~~on June 1, 2023. The comparable reference rate used to determine the gain on settlement of the ~~terminated interest rate swaps is provided below:~~

Interest Rate Swaps
(in millions of USD, except percentages) Notional Amount Weighted Average Fixed Rate of Interest Rate Swaps Comparable Reference Rate of Notes Benchmark Rate Gain on Derivatives Settlement Date
5-year interest rate swaps $ 375 1.471% 3.441% LIBOR $ 33 September 2022
5-year interest rate swaps 75 1.540% 3.162% SOFR 6 September 2022
Total $ 450 $ 39

treasury locks was 3.57%. The ~~interest rate swaps~~treasury locks qualified for cash flow hedge accounting treatment and the cumulative pre-tax gain of ~~$39~~$4 million was ~~recognized through September 2022 and~~ recorded net of tax in AOCI. This amount is being amortized as a component of interest expense over the term of the related debt. The ~~swap~~ settlement payment was recognized within cash flows from operating activities in the condensed consolidated statements of cash flows. At September 30, 2022, ITC Holdings did not have any interest rate swaps outstanding. ITC Holdings had interest rate swaps outstanding with a total notional amount of $375 million at December 31, 2021.

~~Revolving Credit Agreements~~

~~At September 30, 2022, ITC Holdings and certain of its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available:~~

(In millions of USD, except percentages) Total
Available
Capacity Outstanding
Balance (a) Unused
Capacity Weighted Average
Interest Rate on
Outstanding Balance (b) Commitment
Fee Rate (c)
ITC Holdings $ 400 $ — $ 400 (d) —% 0.175 %
ITC Transmission 100 51 49 4.13% 0.10 %
METC 100 16 84 4.13% 0.10 %
ITC Midwest 225 202 23 4.13% 0.10 %
ITC Great Plains 75 24 51 4.13% 0.10 %
Total $ 900 $ 293 $ 607

~~____________________________~~

~~(a)Included within long-term debt in the condensed consolidated statements of financial position.~~

~~(b)Interest charged on borrowings depends on the variable rate structure we elected at the time of each borrowing.~~

~~(c)Calculation based on the average daily unused commitments, subject to adjustment based on the borrower’s credit rating.~~

~~(d)~~ITC Holdings’ revolving credit agreement may be used for general corporate purposes, including to repay commercial paper issued pursuant to the commercial paper program described above, if necessary. While outstanding commercial paper does not reduce available capacity under ITC Holdings’ revolving credit agreement, the unused capacity under this agreement adjusted for the commercial paper outstanding was $266 million as of September 30, 2022.

~~Table of Contents~~

~~6. INCOME TAXES~~

On March 1, 2022, the governor of Iowa signed an act into law that contains provisions to reduce Iowa’s corporate tax rates if a certain threshold of the state’s annual net corporate income tax receipts is met. Adjustments to reduce the corporate income tax rate are calculated annually after the end of each fiscal year and may continue until the rate is 5.5%.

For the state’s fiscal year ended June 30, 2022, net corporate income tax receipts exceeded the prescribed threshold. On September 27, 2022, the Iowa Department of Revenue certified a reduction in the top corporate income tax rate from 9.8% to 8.4%, effective January 1, 2023. We have revalued certain deferred tax balances and net operating losses impacted by the change in the future Iowa corporate income tax rate. As a result, deferred income tax expense of $7 million was recorded during the three months ended September 30, 2022. In addition, a regulatory liability of $22 million was established as of September 30, 2022 to offset deferred taxes associated with rate base at ITC Midwest.

7.6. RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

Pension Plan Benefits

We have a qualified defined benefit pension plan (the “retirement plan”) for eligible employees, comprised of a traditional final average pay plan and a cash balance plan. The traditional final average pay plan is noncontributory, covers select employees, and provides retirement benefits based on years of benefit service, average final compensation and age at retirement. The cash balance plan is also noncontributory, covers substantially all employees and provides retirement benefits based on eligible compensation and interest credits. Our funding practice for the retirement plan is generally to fund the annual net pension cost, though we may ~~contribute additional amounts~~adjust our funding as necessary ~~to meet the minimum~~based on consideration of federal funding requirements, the funded status of the ~~Employee Retirement Income Security Act of 1974 or~~plan, and other considerations as we deem appropriate. ~~During the nine months ended September 30, 2022, we contributed $3 million to the retirement plan. We do not expect to make additional contributions to this plan in 2022.~~

We also have two supplemental nonqualified, noncontributory, defined benefit pension plans for selected management employees (the “supplemental benefit plans” and, collectively with the retirement plan, the “pension plans”). The supplemental benefit plans provide for benefits that supplement those provided by the retirement plan. ~~We do not expect to contribute to the supplemental benefit plans in 2022.~~

Table of Contents

Net periodic benefit cost for the pension plans, by component, was as follows:


		Three months ended				Nine months ended					Three months ended				Six months ended
		September 30,				September 30,					June 30,				June 30,
(In millions of USD)	(In millions of USD)	2022		2021		2022		2021		(In millions of USD)	2023		2022		2023		2022
Service cost	Service cost	$	2	$	2	$	6	$	7	Service cost	$	2	$	2	$	4	$	4
Interest cost	Interest cost	1		1		3		2		Interest cost	1		1		3		2
Expected return on plan assets	Expected return on plan assets	(2)		(1)		(5)		(4)		Expected return on plan assets	(1)		(2)		(3)		(3)

Amortization of unrecognized loss		1		—		1		1

Net pension cost	Net pension cost	$	2	$	2	$	5	$	6	Net pension cost	$	2	$	1	$	4	$	3

The components of net pension cost other than the service cost component are included in ~~Other~~other (income) expenses, ~~(income),~~ net in the condensed consolidated statements of comprehensive income.

Other Postretirement Benefits

We provide certain postretirement health care, dental and life insurance benefits for eligible ~~employees. During the nine months ended September 30, 2022, we contributed $5 million to the postretirement~~employees (the “postretirement benefit ~~plan. We expect to make additional contributions of $2 million to the postretirement benefit plan during the fourth quarter of 2022.~~

~~Table of Contents~~

plan”).

Net postretirement benefit plan cost, by component, was as follows:


		Three months ended				Nine months ended					Three months ended				Six months ended
		September 30,				September 30,					June 30,				June 30,
(In millions of USD)	(In millions of USD)	2022		2021		2022		2021		(In millions of USD)	2023		2022		2023		2022
Service cost	Service cost	$	2	$	3	$	8	$	8	Service cost	$	2	$	3	$	4	$	6
Interest cost	Interest cost	1		—		3		2		Interest cost	1		1		2		2
Expected return on plan assets	Expected return on plan assets	(2)		(1)		(5)		(4)		Expected return on plan assets	(1)		(1)		(3)		(3)
Amortization of unrecognized gain	Amortization of unrecognized gain	—		—		(1)		—		Amortization of unrecognized gain	(1)		(1)		(2)		(1)
Net postretirement cost	Net postretirement cost	$	1	$	2	$	5	$	6	Net postretirement cost	$	1	$	2	$	1	$	4

The components of net postretirement cost other than the service cost component are included in ~~Other~~other (income) expenses, ~~(income),~~ net in the condensed consolidated statements of comprehensive income.

Defined Contribution Plan

We also sponsor a defined contribution retirement savings plan. Participation in this plan is available to substantially all employees. We match employee contributions up to certain predefined limits based upon eligible compensation and the employee’s contribution rate. The cost of this plan was $1 million and $2 million for ~~each of~~ the three months ended ~~September~~June 30, 2023 and 2022, respectively, and ~~2021, and $6~~$4 million and $5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

8.7. FAIR VALUE MEASUREMENTS

The measurement of fair value is based on a three-tier hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. For the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and the year ended December 31, ~~2021,~~2022, there were no transfers between levels.

Table of Contents

Our assets ~~are~~ measured at fair value subject to the three-tier hierarchy at ~~September~~June 30, 2023, were as follows:


	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In millions of USD)	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:

Mutual funds — fixed income securities	$	44	$	—	$	—
Mutual funds — equity securities	13		—		—



Total	$	57	$	—	$	—

Our assets measured at fair value subject to the three-tier hierarchy at December 31, 2022, were as follows:


	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In millions of USD)	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:

Mutual funds — fixed income securities	$	44	$	—	$	—
Mutual funds — equity securities	11		—		—



Total	$	55	$	—	$	—

~~Our assets measured at fair value subject to the three-tier hierarchy at December 31, 2021, were as follows:~~

Fair Value Measurements at Reporting Date Using
Quoted Prices in
Active Markets for
Identical Assets Significant
Other Observable
Inputs Significant
Unobservable
Inputs
(In millions of USD) (Level 1) (Level 2) (Level 3)
Financial assets measured on a recurring basis:
Mutual funds — fixed income securities $ 51 $ — $ —
Mutual funds — equity securities 12 — —
Interest rate swap derivatives — 2 —
Total $ 63 $ 2 $ —

~~Table of Contents~~

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we held certain assets that are required to be measured at fair value on a recurring basis. The assets ~~included in the table~~ consist of investments recorded within cash and cash equivalents and other long-term assets, including investments held in a trust associated with our supplemental benefit plans as described in Note 76 and certain deferred compensation plan investments. The mutual funds we own are publicly traded and are recorded at fair value based on observable trades for identical securities in an active market. Changes in the observed trading prices and liquidity of money market funds are monitored as additional support for determining fair value. Gains and losses for all mutual fund investments are recorded in other ~~income and expense.~~

As of December 31, 2021, the assets related to derivatives consisted of interest rate swaps as discussed in Note 5. The fair value of our interest rate swap derivatives is determined based on a DCF method using benchmark interest rates of LIBOR or SOFR swap rates, which are observable at commonly quoted intervals.(income) expenses, net.

We also held non-financial assets that are required to be measured at fair value on a non-recurring basis. These consist of goodwill and intangible assets. We did not record any impairment charges on long-lived assets and no other significant events occurred requiring non-financial assets and liabilities to be measured at fair value (subsequent to initial recognition) during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

Fair Value of Financial Assets and Liabilities

Fixed Rate Debt

Based on the borrowing rates obtained from third party lending institutions currently available for bank loans with similar terms and average maturities from active markets, the fair value of our consolidated long-term debt and debt maturing within one year, excluding revolving credit agreements and commercial paper, was ~~$5,648~~$6,437 million and ~~$6,995~~$5,849 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. These fair values represent Level 2 under the three-tier hierarchy described above. The total book value of our consolidated long-term debt and debt maturing within one year, net of discount and deferred financing fees and excluding revolving credit agreements and commercial paper, was ~~$6,501~~$7,195 million and ~~$6,179~~$6,649 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Revolving Credit Agreements

Table of Contents

Other Financial Instruments

The carrying value of other financial instruments included in current assets and current liabilities, including cash and cash equivalents, special deposits and commercial paper, approximates their fair value due to the short-term nature of these instruments.

~~Table of Contents~~

9.8. STOCKHOLDER'S EQUITY

Accumulated Other Comprehensive Income (Loss)

The following table provides the components of changes in AOCI:


		Three months ended				Nine months ended					Three months ended				Six months ended
		September 30,				September 30,					June 30,				June 30,
(In millions of USD)	(In millions of USD)	2022		2021		2022		2021		(In millions of USD)	2023		2022		2023		2022
Balance at the beginning of period	Balance at the beginning of period	$	21	$	(6)	$	(2)	$	(8)	Balance at the beginning of period	$	27	$	14	$	27	$	(2)
Derivative instruments	Derivative instruments									Derivative instruments
Reclassification of net loss relating to interest rate cash flow hedges from AOCI to earnings (net of tax of less than $1 for each of the three months ended September 30, 2022 and 2021 and $1 for each of the nine months ended September 30, 2022 and 2021) (a)		2		1		3		3
Reclassification of net (gain) loss relating to interest rate cash flow hedges from AOCI to earnings (net of tax of $1 for the six months ended June 30, 2022) (a)										Reclassification of net (gain) loss relating to interest rate cash flow hedges from AOCI to earnings (net of tax of $1 for the six months ended June 30, 2022) (a)	(1)		—		(1)		1

Gain on interest rate swaps relating to interest rate cash flow hedges (net of tax of $2 and less than $1 for the three months ended September 30, 2022 and 2021, respectively, and $11 and less than $1 for the nine months ended September 30, 2022 and 2021, respectively)		4		1		26		1
Gain on interest rate swaps relating to interest rate cash flow hedges (net of tax of $1, $3, $1 and $9 for the three and six months ended June 30, 2023 and 2022, respectively)										Gain on interest rate swaps relating to interest rate cash flow hedges (net of tax of $1, $3, $1 and $9 for the three and six months ended June 30, 2023 and 2022, respectively)	3		7		3		22

Total other comprehensive income, net of tax	Total other comprehensive income, net of tax	6		2		29		4		Total other comprehensive income, net of tax	2		7		2		23
Balance at the end of period	Balance at the end of period	$	27	$	(4)	$	27	$	(4)	Balance at the end of period	$	29	$	21	$	29	$	21

____________________________

(a)The reclassification of the net (gain)/loss relating to interest rate cash flow hedges is reported in interest expense, net on a pre-tax basis.

The amount of net gain relating to interest rate cash flow hedges to be reclassified from AOCI to earnings for the 12-month period ending ~~September~~June 30, ~~2023~~2024 is expected to be approximately $1$2 million (net of tax of ~~less than~~ $1 million). The reclassification is reported in ~~Interest~~interest expense, net in the condensed consolidated statements of comprehensive income on a pre-tax basis.

~~10.~~9. SHARE-BASED COMPENSATION

~~Long-Term Incentive Plans~~

In the first quarter of ~~2022, 253,476~~2023, 305,882 PBUs and ~~197,926~~242,671 SBUs were granted pursuant to our long-term incentive plans. Generally, each PBU and SBU granted is valued based on one share of Fortis common stock traded on the Toronto Stock Exchange, converted to U.S. ~~dollars~~dollars. All PBUs and ~~settled only in cash. However,~~ SBUs granted to the executives may settle in cash, 100% Fortis common stock, or 50% cash and 50% Fortis common stock depending on executives’ settlement elections and whether certain share ownership requirements are met. The awards are classified as liability awards and generally vest on the ~~date specified in a particular~~third January 1st following the grant ~~agreement,~~date, provided the service and performance criteria, as applicable, are ~~satisfied. The PBUs~~satisfied, and ~~SBUs earn dividend equivalents which~~will generally be settled during the same quarter. However, certain awards may vest over a shorter period or on the grant date if certain retirement eligibility criteria are ~~also re-measured and settled consistent with the target award at the end of the vesting period. The granted awards and related dividend equivalents have no shareholder rights.~~met.

The aggregate fair value of all outstanding PBUs and SBUs as of ~~September~~June 30, ~~2022~~2023 was ~~$47~~$40 million and ~~$26~~$28 million, respectively. At ~~September~~June 30, ~~2022,~~2023, the total unrecognized compensation cost related to the PBUs and SBUs was ~~$15~~$16 million and ~~$10~~$13 million, respectively.

~~11.~~10. RELATED PARTY TRANSACTIONS

Related Party Receivables and Payables

ITC Holdings may incur charges from Fortis and other subsidiaries of Fortis that are not subsidiaries of ITC Holdings for general corporate expenses incurred. In addition, ITC Holdings may perform additional services for, or receive additional services from, Fortis and such subsidiaries. These transactions are in the normal course of business and payments for these services are settled through accounts receivable and accounts payable, as necessary. We had receivables from Fortis and such subsidiaries of ~~$10 million and $2~~$1 million at ~~September~~June 30, 2023 and December

1716

Table of Contents

~~2022~~31, 2022. At June 30, 2023 and December 31, ~~2021, respectively. At September 30,~~ 2022 ~~and December 31, 2021~~ we had payables to Fortis and such subsidiaries of ~~less than~~$4 million and $1 ~~million.~~million, respectively.

Related party charges for corporate expenses from Fortis and such subsidiaries are recorded in general and administrative expenses in the condensed consolidated statements of comprehensive income. Such expense for each of the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 for ITC Holdings was $3 million, and for each of the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021~~ was ~~$10 million and $8 million, respectively.~~$7 million. Related party charges for services to Fortis and other subsidiaries, recorded as an offset to general and administrative expenses for ITC Holdings, were $1 million and ~~less than $1~~$2 million for the three months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively, ~~and $5 million~~ and $2 million and $4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Dividends

During the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, we paid dividends of ~~$199~~$140 million and ~~$174~~$128 million, respectively, to ITC Investment Holdings. We also paid dividends of ~~$75~~$70 million to ITC Investment Holdings in ~~October 2022.~~July 2023.

Intercompany Tax Sharing Agreement

We are organized as a corporation for tax purposes and subject to a tax sharing agreement as a wholly-owned subsidiary of ITC Investment Holdings. WeAdditionally, we record income taxes based on our separate company tax position and make or receive tax-related payments with ITC Investment Holdings. During the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 we paid $8$25 million and $5 million, respectively, to ITC Investment Holdings associated with our income tax position. ~~During~~At June 30, 2023, we had recorded net income taxes payable of $1 million in accrued taxes in the ~~nine months ended September 30, 2021 we did not make or receive any tax-related payments with ITC Investment Holdings.~~condensed consolidated statements of financial position.

~~12.~~11. COMMITMENTS AND CONTINGENT LIABILITIES

Environmental Matters

We are subject to federal, state and local environmental laws and regulations, which impose limitations on the discharge of pollutants into the environment, require reporting of emissions from certain equipment, establish standards for the management, treatment, storage, transportation and disposal of hazardous materials and of solid and hazardous wastes, and impose obligations to investigate and remediate contamination in certain circumstances. Liabilities relating to investigation and remediation of contamination, as well as other liabilities concerning hazardous materials or contamination, such as claims for personal injury or property damage, may arise at many locations, including formerly owned or operated properties and sites where wastes have been treated or disposed of, as well as properties currently owned or operated by us. Such liabilities may arise even where the contamination does not result from noncompliance with applicable environmental laws. Under some environmental laws, such liabilities may also be joint and several, meaning that a party can be held responsible for more than its share of the liability involved, or even the entire share. Although environmental requirements generally have become more stringent and compliance with those requirements more expensive, we are not aware of any specific developments that would increase our costs for such compliance in a manner that would be expected to have a material adverse effect on our financial condition, results of operations or liquidity.

Our assets and operations also involve the use of materials classified as hazardous, toxic or otherwise dangerous. Some of the properties that we own or operate have been used for many years and include older facilities and equipment that may be more likely than newer ones to contain or be made from such materials. Some of these properties include above ground or underground storage tanks and associated piping. Some of them also include large electrical equipment filled with mineral oil, which may contain or previously have contained PCBs. Some of our facilities and electrical equipment may also contain asbestos containing materials. Our facilities and equipment are often situated close to or on property owned by others so that, if they are the source of contamination, the property of others may be affected. For example, above ground and underground transmission lines sometimes traverse properties that we do not own and transmission assets that we own or operate are sometimes commingled at our transmission stations with distribution assets owned or operated by our transmission customers.

Some properties in which we have an ownership interest or at which we operate are, or are suspected of being, affected by environmental contamination. We are not aware of any pending or threatened claims against

~~Table of Contents~~

us with respect to environmental contamination relating to these properties, or of any investigation or

Table of Contents

remediation of contamination at these properties, that entail costs likely to materially affect us. Some facilities and properties are located near environmentally sensitive areas, including wetlands and habitat for threatened and endangered species.

Litigation

We are involved in certain legal proceedings before various courts, governmental agencies and mediation panels concerning matters arising in the ordinary course of business. These proceedings include certain contract disputes, eminent domain and vegetation management activities, regulatory matters and pending judicial matters. We cannot predict the final disposition of such proceedings. We regularly review legal matters and record provisions for claims that are considered probable of loss.

Rate of Return on Equity Complaints

Two complaints were filed with the FERC by combinations of consumer advocates, consumer groups, municipal parties and other parties challenging the base ROE in MISO. The complaints were filed with the FERC under Section 206 of the FPA requesting that the FERC find the MISO regional base ROE rate (the “base ROE”) for all MISO TO’s, including our MISO Regulated Operating Subsidiaries, to no longer be just and reasonable.

Initial Complaint

On November 12, 2013, the Association of Businesses Advocating Tariff Equity, Coalition of MISO Transmission Customers, Illinois Industrial Energy Consumers, Indiana Industrial Energy Consumers, Inc., Minnesota Large Industrial Group and Wisconsin Industrial Energy Group (collectively, the “complainants”) filed the Initial Complaint with the FERC. The complainants sought a FERC order to reduce the base ROE used in the formula transmission rates for our MISO Regulated Operating Subsidiaries to 9.15%, reducing the equity component of our capital structure and terminating the ROE adders approved for certain Regulated Operating Subsidiaries. The FERC set the base ROE for hearing and settlement procedures, while denying all other aspects of the Initial Complaint. The ROE collected through the MISO Regulated Operating Subsidiaries’ rates during the period November 12, 2013 through September 27, 2016 consisted of a base ROE of 12.38% plus applicable incentive adders.

On September 28, 2016, the FERC issued the September 2016 Order that set the base ROE at 10.32%, with a maximum ROE of 11.35%, effective for the period from November 12, 2013 through February 11, 2015 based on a two-step DCF methodology adopted in previous complaint matters for other utilities. The September 2016 Order required our MISO Regulated Operating Subsidiaries to provide refunds, including interest, which were completed in 2017. Additionally, the base ROE established by the September 2016 Order was to be used prospectively from the date of that order until a new approved base ROE was established by the FERC. On October 28, 2016, the MISO TOs, including our MISO Regulated Operating Subsidiaries, filed a request with the FERC for rehearing of the September 2016 Order regarding the short-term growth projections in the two-step DCF analysis. Additional impacts to the base ROE for the period of the Initial Complaint and the related accrued refund liabilities resulted from the November 2019 Order and May 2020 Order issued by the FERC, as discussed below.

Second Complaint

On February 12, 2015, the Second Complaint was filed with the FERC by Arkansas Electric Cooperative Corporation, Mississippi Delta Energy Agency, Clarksdale Public Utilities Commission, Public Service Commission of Yazoo City and Hoosier Energy Rural Electric Cooperative, Inc., seeking a FERC order to reduce the base ROE used in the formula transmission rates of our MISO Regulated Operating Subsidiaries to 8.67%, with an effective date of February 12, 2015.

On June 30, 2016, the presiding ALJ issued an initial decision that recommended a base ROE of 9.70% for the refund period from February 12, 2015 through May 11, 2016, with a maximum ROE of 10.68%, which also would be applicable going forward from the date of a final FERC order. The Second Complaint was dismissed as a result of an order issued by the FERC on November 21, 2019 ~~Order~~ and the dismissal of the complaint was reaffirmed in the May 2020 ~~Order, as discussed below.~~Order.

FERC Orders

~~Table~~Since the filing of ~~Contents~~

~~November 2019 Order~~

Onthe Initial Complaint, the FERC has issued separate orders in these proceedings on September 28, 2016, November 21, 2019 ~~the FERC issued an order~~and May 21, 2020. These orders resulted in ~~the MISO ROE Complaints which applied a methodology~~multiple revisions to ~~the Initial Complaint period that used two financial models to determine the base ROE. The FERC determined that~~ the base ROE ~~for the Initial Complaint should be 9.88%~~ and ~~the top of the range of reasonableness for that period should be 12.24% and that this base ROE should apply during the first~~ refund period of November 12, 2013 to February 11, 2015 and from the date of the September 2016 Order prospectively. In the November 2019 Order, the FERC also dismissed the Second Complaint. Therefore, based on the November 2019 Order, for the Second Complaint refund period from February 12, 2015 to May 11, 2016, no refund is due. As a result, in 2019, we reversed the aggregate estimated current liability we had previously recorded for the Second Complaint. In addition, for the period from May 12, 2016 to September 27, 2016, no refund is due because no complaint had been filed for that period. The FERC ordered refunds to be made in accordance with the November 2019 Order.settlements. The MISO TOs, ~~including~~along with our MISO Regulated Operating Subsidiaries, and ~~several~~ other various parties ~~filed~~have challenged certain aspects of these orders through requests for ~~rehearing of~~rehearing. In the November 2019 Order. The MISO TOs asserted that the methodology applied by the FERC in the November 2019 Order does not allow the MISO TOs to earn a reasonable rate of return on their investment, as required by precedent. On January 21, 2020, the FERC issued an order granting rehearing of the November 2019 Order for further consideration.

~~May 2020 Order~~

~~On May 21, 2020, the FERC issued an order on rehearing of the November 2019 Order. In this~~most recent order, the FERC ~~revised its November 2019 Order~~determined that a methodology ~~finding that~~using three financial models should be used to determine the base ~~ROE, among other revisions.~~ROE. By applying the new methodology, the FERC determined that the base ROE for the Initial Complaint should be 10.02% and the top of the range of reasonableness for that period should be 12.62%. The FERC determined that this base ROE should apply during the first refund period of November 12, 2013 to February 11, 2015 and from the date of the order issued by the FERC on September 28, 2016 ~~Order~~ prospectively. The FERC ordered refunds to be made in accordance with the May 2020 Order. Refund settlements were finalized by March 31, 2022 and, during the ~~three~~six months ended ~~March 31, 2022. In the May 2020 Order, the FERC also reaffirmed its decision to dismiss the Second Complaint and its finding that no refunds would be ordered on the Second Complaint.~~June 30, 2022, we received net settlement payments of less than $1 million owed from customers.

Table of Contents

August 2022 D.C. Circuit Court Decision

On August 9, 2022, in response to appeals of the FERC's orders on the MISO ROE Complaints, the D.C. Circuit Court issued an opinion that rejected the FERC’s use of a risk premium model in the methodology used to determine the revised base ROE for MISO TOs. The D.C. Circuit Court decision vacated the FERC’s orders on the MISO ROE Complaints, dismissed the remaining outstanding appeals of these orders and remanded the matter to the FERC for further proceedings.

~~Financial Statement Impacts~~

As of December 31, 2021, we had recorded an aggregate current regulatory asset and liability of $1 million and less than $1 million, respectively, in the consolidated statements of financial position. These impacts reflect amounts owed from or due to customers under the terms outlined in the May 2020 Order and the November 2019 Order on the Initial Complaint and the periods subsequent to the September 2016 Order. During the nine months ended September 30, 2022 and 2021, we received net settlement payments of less than $1 million and $6 million, respectively, owed from customers related to this matter. As of September 30, 2022, there are no remaining regulatory assets or liabilities recorded related to this matter.

It is possible that the base ROE established in the May 2020 Order may be revised and that we could be required to provide additional material refunds upon resolution of the proceedings. We are ~~determining next steps in response to the August 2022 D.C. Circuit Court decision and~~ awaiting action by the FERC in these proceedings to provide further insight into possible changes to our base ROE and the periods for which a revised ROE applies. We cannot predict whether these proceedings will have a material impact, or estimate the possible impact, on our financial condition, results of operations or cash flows.

See Note 4 for a summary of our base ROE and incentive adders for transmission rates. As of ~~September~~June 30, ~~2022,~~2023, our MISO Regulated Operating Subsidiaries had a total of approximately $5 billion of equity in their collective capital structures for ratemaking purposes. Based on this level of aggregate equity, we estimate that each 10 basis point change in the authorized ROE would impact annual consolidated net income by approximately $5 million.

~~Table of Contents~~

~~13.~~12. SUPPLEMENTAL FINANCIAL INFORMATION

Reconciliation of Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the condensed consolidated statements of financial position that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows:


		September 30,				December 31,					June 30,				December 31,
(In millions of USD)	(In millions of USD)	2022		2021		2021		2020		(In millions of USD)	2023		2022		2022		2021
Cash and cash equivalents	Cash and cash equivalents	$	3	$	3	$	5	$	4	Cash and cash equivalents	$	296	$	18	$	4	$	5
Restricted cash included in:	Restricted cash included in:									Restricted cash included in:
Other non-current assets	Other non-current assets	2		3		2		2		Other non-current assets	3		2		2		2
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	5	$	6	$	7	$	6	Total cash, cash equivalents and restricted cash	$	299	$	20	$	6	$	7

The increase in cash and cash equivalents as of June 30, 2023 was primarily a result of the June 1, 2023 issuance of $800 million of Senior Notes at ITC Holdings. We expect to utilize the unused net proceeds of cash and cash equivalents from this issuance to fund short-term (within twelve months) capital requirements. See Note 5 for additional information on the June 1, 2023 debt issuance at ITC Holdings, including the initial uses of net proceeds therefrom. Restricted cash included in other non-current assets primarily represents cash on deposit to pay for vegetation management, land easements and land purchases for the purpose of transmission line construction as well as amounts liquidated to make benefit payments related to our supplemental benefit plans.

Table of Contents

Supplementary Cash Flows Information


		Nine months ended					Six months ended
		September 30,					June 30,
(In millions of USD)	(In millions of USD)	2022		2021		(In millions of USD)	2023		2022
Supplementary cash flows information:	Supplementary cash flows information:					Supplementary cash flows information:

Interest paid (net of interest capitalized)	Interest paid (net of interest capitalized)	$	178	$	165	Interest paid (net of interest capitalized)	$	149	$	121
Income taxes paid	Income taxes paid	8		—		Income taxes paid	25		5

Supplementary non-cash investing and financing activities:	Supplementary non-cash investing and financing activities:					Supplementary non-cash investing and financing activities:
Additions to property, plant and equipment and other long-lived assets (a)	Additions to property, plant and equipment and other long-lived assets (a)	109		108		Additions to property, plant and equipment and other long-lived assets (a)	90		124

Allowance for equity funds used during construction	Allowance for equity funds used during construction	27		22		Allowance for equity funds used during construction	22		17

Other	Other	1		—		Other	1		1

____________________________

(a)Amounts consist of current and accrued liabilities for construction, labor, materials and other costs that have not been included in investing activities. These amounts have not been paid for as of ~~September~~June 30, ~~2022~~2023 or ~~2021,~~2022, respectively, but will be or have been included as a cash outflow from investing activities for expenditures for property, plant and equipment or repayments of contributions in aid of construction when paid.

~~14.~~13. SEGMENT INFORMATION

We identify reportable segments based on the criteria set forth by the FASB regarding disclosures about segments of an enterprise, including the regulatory environment of our subsidiaries and the business activities performed to earn revenues and incur expenses. The following tables show our financial information by reportable segment:


		Three months ended				Nine months ended					Three months ended				Six months ended
OPERATING REVENUES:	OPERATING REVENUES:	September 30,				September 30,				OPERATING REVENUES:	June 30,				June 30,
(In millions of USD)	(In millions of USD)	2022		2021		2022		2021		(In millions of USD)	2023		2022		2023		2022
Regulated Operating Subsidiaries	Regulated Operating Subsidiaries	$	376	$	349	$	1,126	$	1,045	Regulated Operating Subsidiaries	$	396	$	376	$	788	$	750

Intercompany eliminations	Intercompany eliminations	(10)		(9)		(28)		(27)		Intercompany eliminations	(9)		(9)		(18)		(18)
Total operating revenues	Total operating revenues	$	366	$	340	$	1,098	$	1,018	Total operating revenues	$	387	$	367	$	770	$	732


	Three months ended				Six months ended
INCOME (LOSS) BEFORE INCOME TAXES:	June 30,				June 30,
(In millions of USD)	2023		2022		2023		2022
Regulated Operating Subsidiaries	$	194	$	184	$	384	$	364
ITC Holdings and other	(39)		(40)		(81)		(80)
Total income before income taxes	$	155	$	144	$	303	$	284


	Three months ended				Six months ended
NET INCOME:	June 30,				June 30,
(In millions of USD)	2023		2022		2023		2022
Regulated Operating Subsidiaries	$	146	$	138	$	290	$	273
ITC Holdings and other	118		111		230		217
Intercompany eliminations	(146)		(138)		(290)		(273)
Total net income	$	118	$	111	$	230	$	217

2120

Table of Contents

Three months ended Nine months ended
INCOME (LOSS) BEFORE INCOME TAXES: September 30, September 30,
(In millions of USD) 2022 2021 2022 2021
Regulated Operating Subsidiaries $ 185 $ 178 $ 549 $ 522
ITC Holdings and other (30) (38) (110) (113)
Total income before income taxes $ 155 $ 140 $ 439 $ 409

Three months ended Nine months ended
NET INCOME: September 30, September 30,
(In millions of USD) 2022 2021 2022 2021
Regulated Operating Subsidiaries $ 142 $ 131 $ 415 $ 385
ITC Holdings and other 111 105 328 307
Intercompany eliminations (142) (131) (415) (385)
Total net income $ 111 $ 105 $ 328 $ 307


TOTAL ASSETS:	TOTAL ASSETS:	September 30,		December 31,		TOTAL ASSETS:	June 30,		December 31,
(In millions of USD)	(In millions of USD)	2022		2021		(In millions of USD)	2023		2022
Regulated Operating Subsidiaries	Regulated Operating Subsidiaries	$	11,838	$	11,317	Regulated Operating Subsidiaries	$	12,407	$	12,005
ITC Holdings and other	ITC Holdings and other	6,299		6,134		ITC Holdings and other	6,848		6,378
Reconciliations / intercompany eliminations (a)	Reconciliations / intercompany eliminations (a)	(6,178)		(6,006)		Reconciliations / intercompany eliminations (a)	(6,441)		(6,252)
Total assets	Total assets	$	11,959	$	11,445	Total assets	$	12,814	$	12,131

____________________________

(a)Reconciliation of total assets results primarily from differences in the netting of deferred tax assets and liabilities in our segments as compared to the classification in our condensed consolidated statements of financial position.

2221

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF~~Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995

Our reports, filings and other public announcements contain certain statements that describe our management’s beliefs concerning future business conditions, plans and prospects, growth opportunities, the outlook for our business and the electric transmission industry, and expectations with respect to various legal and regulatory proceedings based upon information currently available. Such statements are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Wherever possible, we have identified these forward-looking statements by words such as “will,” “may,” “anticipates,” “believes,” “intends,” “estimates,” “expects,” “forecasted,” “projects,” “likely” and similar phrases. These forward-looking statements are based upon assumptions our management believes are reasonable. Such forward-looking statements are based on estimates and assumptions and are subject to significant risks and uncertainties which could cause our actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including, among others, the following risks and uncertainties listed in “Item 1A Risk Factors” of our Form 10-K for the year ended December 31, ~~2021,~~2022, as modified herein:

•Certain elements of our Regulated Operating Subsidiaries’ Formula Rates have been and can be challenged, which could result in lowered rates and/or refunds of amounts previously collected and thus may have an adverse effect on our business, financial condition, results of operations and cash flows.

•Our actual capital investment may be lower than planned, which would cause a lower than anticipated rate base and would therefore result in lower revenues, earnings and associated cash flows compared to our current expectations. In addition, we may incur expenses related to the pursuit of strategic investment opportunities, which may be higher than forecasted.

•The regulations to which we are subject may limit our ability to raise capital and/or pursue acquisitions, development opportunities or other transactions or may subject us to liabilities.

•Changes in energy laws, regulations or policies could impact our business, financial condition, results of operations and cash flows.

•The widespread outbreak of an illness or other communicable disease, including the COVID-19 pandemic, or any other public health crisis, could have a material adverse impact on our business, financial condition, results of operations, cash flows and credit metrics.

•Each of our MISO Regulated Operating Subsidiaries depends on its primary customer for a substantial portion of its revenues, and any material failure by those primary customers to make payments for transmission services could have a material adverse effect on our business, financial condition, results of operations and cash flows.

•A significant amount of the land on which our assets are located is subject to easements, mineral rights and other similar encumbrances. As a result, we must comply with the provisions of various easements, mineral rights and other similar encumbrances, which may adversely impact our ability to complete construction projects in a timely manner.

•We contract with third parties to provide services for certain aspects of our business. If any of these agreements are terminated, we may face a shortage of labor or replacement contractors to provide the services formerly provided by these third parties.

•Hazards associated with high-voltage electricity transmission may result in suspension of our operations, costly litigation or the imposition of civil or criminal penalties.

•We are subject to environmental regulations and to laws that can give rise to substantial liabilities from environmental contamination.

•If amounts billed for transmission service for our Regulated Operating Subsidiaries’ transmission systems are lower than expected, or our actual revenue requirements are higher than expected, the timing of actual collection of our total revenues would be delayed.

•We are subject to various regulatory requirements, including reliability standards; contract filing requirements; reporting, recordkeeping and accounting requirements; and transaction approval

~~Table of Contents~~

requirements. Violations of these requirements, whether intentional or unintentional, may result in penalties that, under some circumstances, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Table of Contents

•The widespread outbreak of an illness or other communicable disease, or any other public health crisis, could have a material adverse impact on our business, financial condition, results of operations, cash flows and credit metrics.

•Acts of war, terrorist attacks and other catastrophic events may have a material adverse effect on our business, financial condition, results of operations and cash flows.

•A cyber-attack or incident could have a material adverse effect on our business, financial condition, results of operations and cash flows.

•Effects of climate change, including natural disasters, severe weather and other related phenomena, and the regulatory and legislative developments related to climate change, may have a material adverse effect on our business, financial condition, results of operations and cash flows.

•Changes in tax laws or regulations may negatively affect our financial condition, results of operations, net income, cash flows and credit metrics.

•Advances in technology may negatively impact our business, financial condition, results of operations and cash flows.

•ITC Holdings is a holding company with no operations, and unless we receive dividends or other payments from our subsidiaries, we may be unable to fulfill our cash obligations.

•We have a considerable amount of debt and our reliance on debt financing may limit our ability to fulfill our debt obligations and/or to obtain additional financing.

•Adverse changes in our credit ratings may negatively affect us.

•Certain provisions in our debt instruments limit our financial and operating flexibility.

Forward-looking statements speak only as of the date made and can be affected by assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this report will be important in determining future results. Consequently, we cannot assure you that our expectations or forecasts expressed in such forward-looking statements will be achieved. Except as required by law, we undertake no obligation to publicly update any of our forward-looking or other statements, whether as a result of new information, future events or otherwise.

~~OVERVIEW~~Overview

ITC Holdings provides safe and reliable electric transmission service to connect consumers to more sustainable and cost-effective energy resources. ITC Holdings continues to make investments in a modernized grid to maintain reliability and accommodate future demands as our economy and lifestyles become increasingly dependent on electricity.

Our business consists primarily of the electric transmission operations of our Regulated Operating Subsidiaries. Through our Regulated Operating Subsidiaries, we own and operate high-voltage ~~electric~~ transmission systems in Michigan’s Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri, Kansas, Oklahoma and ~~Oklahoma~~Wisconsin that transmit electricity from generating stations to local distribution facilities connected to our transmission systems.

Our Regulated Operating Subsidiaries’ primary operating responsibilities include maintaining, improving and expanding their transmission systems to meet their customers’ ongoing needs, scheduling outages on system elements to allow for maintenance and construction, maintaining appropriate system voltages and monitoring flows over transmission lines and other facilities to ensure physical limits are not exceeded.

Our Regulated Operating Subsidiaries earn revenues for the use of their electric transmission systems by their customers, which include investor-owned utilities, municipalities, cooperatives, power marketers and alternative energy suppliers. As independent transmission companies, our Regulated Operating Subsidiaries are subject to rate regulation only by the FERC, and our cost-based rates are discussed below under “ — Cost-Based Formula Rates with True-Up Mechanism” as well as in Note 4 to the condensed consolidated interim financial statements.

2423

Table of Contents

Significant recent matters that influenced our financial condition, results of operations and cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 or that may affect future results include:

•Our capital expenditures of ~~$719~~$445 million at our Regulated Operating Subsidiaries during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, as described below under “ — Capital Investment and Operating Results Trends;”

•Debt issuances, borrowings and repayments, changes to debt agreements and ~~interest rate swaps,~~treasury locks as described in Note 5 to the condensed consolidated interim financial statements;

•The ~~FERC orders and~~Iowa Supreme Court ruling on ROFR proceedings, as described below under “ — Recent Developments;”

•The D.C. Circuit Court decision related to the MISO ROE Complaints, as described in Note 1211 to the condensed consolidated interim financial statements;

•NOPRs previously issued by the FERC proposing changes to transmission incentives policy (as described in Note 4 to the condensed consolidated interim financial statements), regional transmission planning and cost allocation; and

•~~Issuance of a NOPR~~The final rule issued by the FERC on ~~March 20, 2020 and issuance of a supplemental NOPR on April 15, 2021, that include a proposal~~July 28, 2023 proposing changes to ~~update the transmission incentives policy, as described below under “ — Recent Developments.”~~

~~These items are discussed in more detail throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

~~Recent Developments~~

~~August 2022 D.C. Circuit Court Decision~~

~~On August 9, 2022, in response~~generator interconnection procedures, which is being assessed for impacts to ~~appeals of the FERC's orders on the MISO ROE Complaints, the D.C. Circuit Court issued an opinion that rejected the FERC’s use of a risk premium model in the methodology used~~our business but is not expected to determine the revised base ROE for MISO TOs. The D.C. Circuit Court decision vacated the FERC’s orders on the MISO ROE Complaints, dismissed the remaining outstanding appeals of these orders and remanded the matter to the FERC for further proceedings. We cannot predict whether these proceedings will have a ~~material impact, or estimate the possible~~significant impact on our financial condition, results of operations or cash flows. ~~See Note 12~~

Recent Developments

Iowa Supreme Court Ruling on Right of First Refusal

In 2020, the State of Iowa enacted Iowa Code section 478.16, which grants incumbent Iowa electric transmission owners, including ITC Midwest, a ROFR to construct, own and maintain certain electric transmission assets in the ~~condensed consolidated interim financial statements for additional information~~state. On October 14, 2020, LS Power Midcontinent, LLC and Southwest Transmission, LLC sued the Iowa Utilities Board and several individual defendants, seeking a judgment that the ROFR provisions violated the Iowa Constitution and requesting a temporary injunction of the ROFR until the case was resolved. The case was dismissed in district court based on the ~~MISO ROE Complaints.~~

~~Inflation Reduction Act~~plaintiffs’ lack of ~~2022~~

~~In August 2022,~~standing in the ~~President~~case and the court of appeals later affirmed the United States of America signed into law the Inflation Reduction Act of 2022, which enacted a number of changes to federal tax law. These changes include the introduction of a new 15% corporate minimum tax on applicable corporations, including ITC Holdings, effective for tax years beginning after December 31, 2022. Enactment of the new law has not impacted our financial condition, results of operations or cash flows for the period ended September 30, 2022, and at this time we do not expect a material impact on our future results due to the implementation of the corporate minimum tax or any other aspect of the act.

~~Iowa State Tax Rate Change~~district court’s ruling.

On March ~~1, 2022,~~24, 2023, the ~~governor of~~ Iowa ~~signed~~Supreme Court issued an ~~act into law~~opinion that ~~contains provisions~~the plaintiffs have standing to ~~reduce Iowa’s corporate tax rates if a certain threshold~~challenge the ROFR provision, thereby vacating the decision of the ~~state’s annual net corporate income tax receipts is met. Adjustments~~court of appeals, reversing the district court’s judgment and remanding the case to ~~reduce~~ the ~~corporate income tax rate are calculated annually after~~Polk County District Court to determine the ~~end~~merits regarding the constitutionality of ~~each fiscal year and may continue until~~ the ~~rate is 5.5%.~~

~~For the state’s fiscal year ended June 30, 2022, net corporate income tax receipts exceeded the prescribed threshold. On September 27, 2022,~~ROFR statute. As part of this opinion, the Iowa Department of Revenue certified a reduction in the top corporate income tax rate from 9.8% to 8.4%, effective January 1, 2023. We have revalued certain deferred tax balances and net operating losses impacted by the change in the future Iowa corporate income tax rate. As a result, deferred income tax expense of $7 million was recorded during the three months ended September 30, 2022. In addition, a regulatory liability of $22 million was established as of September 30, 2022 to offset deferred taxes associated with rate base at ITC Midwest.

~~Incentive Adders for Transmission Rates~~

~~The FERC issued a NOPR on March 20, 2020, and issued a supplemental NOPR on April 15, 2021, proposing to update its transmission incentives policy. Among other things, the rulemaking proposals would:~~

~~Table of Contents~~

•~~grant incentives to transmission projects based upon benefits to customers ensuring reliability and reducing the cost of delivered power by reducing transmission congestion, and~~

•~~eliminate the ROE adders for independent transmission ownership and for RTO participation.~~

The outcome of this proposal may impact the incentive adders that our Regulated Operating Subsidiaries are authorized to apply to their base ROEs on a prospective basis. As of September 30, 2022, our MISO Regulated Operating Subsidiaries had a total of approximately $5 billion of equity in their collective capital structures for ratemaking purposes. Based on this level of aggregate equity, we estimate that each 10 basis point change in the authorized ROE would impact annual consolidated net income by approximately $5 million. For ITC Great Plains, each 10 basis point change in authorized ROE would impact annual consolidated net income by less than $1 million.

~~FERC NOPRs on Transmission Planning, Cost Allocation and Generator Interconnection~~

In response to the FERC’s July 2021 advance NOPR on transmission planning, cost allocation and generator interconnection, multiple NOPRs were issued by the FERC during the three months ended June 30, 2022. The FERC issued a NOPR on April 21, 2022 addressing regional transmission planning and cost allocation. The proposal requires transmission planning regions to conduct long-term, scenario-based transmission planning and adopt enhanced transparency measures; provide a formal role for states in developing the cost allocation for projects; and reinstate federal rights of first refusal under certain circumstances. The FERCSupreme Court also issued a ~~NOPR on June 16,~~temporary injunction staying the enforcement of the ROFR. However, ITC Midwest has already exercised its right to construct certain electric transmission projects approved and awarded by MISO, including projects approved by MISO in 2022 ~~proposing reforms to its generator interconnection procedures~~as part of the first tranche of MISO’s long-range transmission plan. We do not believe that a determination in these proceedings will impact projects that are already approved and generator interconnection agreements to address interconnection queue backlogs, provide certainty and prevent undue discrimination for new technologies. The time frame for submission of comments and reply comments onunder development, but the ~~April 2022 NOPR was completed in the third quarter of 2022 and we are awaiting further action~~pending determination from the ~~FERC as we assess the~~district court could impact ~~of this NOPR to our business. Comments on the June 2022 NOPR are due in the fourth quarter of 2022.~~future projects.

Capital Structure Complaint

Cost-Based Formula Rates with True-Up Mechanism

Our Regulated Operating Subsidiaries calculate their revenue requirements using cost-based Formula Rates that are effective without the need to file rate cases with the FERC, although the rates are subject to legal challenge at the FERC. Under their cost-based formula, each of our Regulated Operating Subsidiaries separately calculates a revenue requirement based on financial information specific to each company. The

Table of Contents

calculation of projected revenue requirement for a future period is used to establish the transmission rate used for billing purposes. The calculation of actual revenue requirements for a historic period is used to calculate the amount of revenues recognized in that period and determine the over-or under-collection for that period.

Under these Formula Rates, our Regulated Operating Subsidiaries recover expenses and earn an authorized return on and recover investments in property, plant and equipment on a current basis. The Formula Rates for a given year reflect forecasted expenses, property, plant and equipment, point-to-point revenues, network load at our MISO Regulated Operating Subsidiaries and other items for the upcoming calendar year to establish projected revenue requirements for each of our Regulated Operating Subsidiaries that are used as the basis for billing for service on their systems from January 1 to December 31 of that year. Our Formula Rates include a true-up mechanism, whereby our Regulated Operating Subsidiaries compare their actual revenue requirements to their billed revenues for each year to determine any over- or under-collection of revenue. The over- or under-collection typically results from differences between the projected revenue requirement used as the basis for billing and actual revenue requirement at each of our Regulated Operating Subsidiaries, or from

~~Table of Contents~~

differences between actual and projected monthly network peak loads at our MISO Regulated Operating Subsidiaries. In the event billed revenues in a given year are more or less than actual revenue requirements, which are calculated primarily using information from that year’s FERC Form No. 1, our Regulated Operating Subsidiaries will refund or collect additional revenues, with interest, within a two-year period such that customers pay only the amounts that correspond to actual revenue requirements for that given period. This annual true-up ensures that our Regulated Operating Subsidiaries recover their allowed costs and earn their authorized returns.

See “Cost-Based Formula Rates with True-Up Mechanism” in Note 4 to the condensed consolidated interim financial statements for further discussion of our Formula Rates and see “Rate of Return on Equity Complaints” in Note 1211 to the condensed consolidated interim financial statements for detail on ROE matters.

Revenue Accruals and Deferrals — Effects of Monthly Network Peak Loads

For our MISO Regulated Operating Subsidiaries, monthly network peak loads are used for billing network revenues, which currently is the largest component of our operating revenues. One of the primary factors that impacts the revenue accruals and deferrals at our MISO Regulated Operating Subsidiaries is actual monthly network peak loads experienced as compared to those forecasted in establishing the annual network transmission rate. Under their cost-based Formula Rates that contain a true-up mechanism, our MISO Regulated Operating Subsidiaries accrue or defer revenues to the extent that their actual revenue requirement for the reporting period is higher or lower, respectively, than the amounts billed relating to that reporting period. Although monthly network peak loads do not impact operating revenues recognized, network load affects the timing of our cash flows from transmission service. The monthly network peak load of our MISO Regulated Operating Subsidiaries is generally impacted by weather, economic conditions and other significant factors, and is seasonally shaped with higher load in the summer months when cooling demand is higher. We are unable to predict the possible future impacts of weather, economic conditions and other factors on monthly network peak loads at our MISO Regulated Operating Subsidiaries.

ITC Great Plains does not receive revenue based on a peak load or a dollar amount per kW each month. Therefore, peak load does not have a seasonal effect on operating cash flows. The SPP tariff applicable to ITC Great Plains is billed ratably each month based on its annual projected revenue requirement posted annually by SPP.

Capital Investment and Operating Results Trends

We expect a long-term upward trend in rate base resulting from our anticipated capital investment, in excess of depreciation and any acquisition premiums, from our Regulated Operating Subsidiaries’ long-term capital investment programs to improve reliability, increase system capacity and upgrade the transmission network to support new generating resources. Investments in property, plant and equipment, when placed in-service upon completion of a capital project, are added to the rate base of our Regulated Operating Subsidiaries. We expect increases in rate base to result in a corresponding long-term upward trend in revenues and earnings. Our revenues and earnings may be impacted by future increases or decreases to our rates for incentive adders and base ROE. As of June 30, 2023, our Regulated Operating Subsidiaries had a total of approximately $5 billion of equity in their collective capital structures for ratemaking purposes. Based on this level of aggregate equity, we estimate that each 10 basis point change in the authorized ROE would impact annual consolidated net income

Table of Contents

by approximately $5 million. See Note 4 and Note 1211 to the condensed consolidated interim financial statements for additional information related to matters that may impact future rates for incentive adders and base ROE.

~~During 2021, our MISO~~Our Regulated Operating Subsidiaries ~~filed revised depreciation rates for~~incur significant costs to invest in their transmission systems and maintain the assets ~~which were approved~~on their systems. While we have been impacted by recent increases in inflation and supply chain disruptions, these challenges have not had a material impact on our current or forecasted capital expenditures. We work closely with our suppliers to manage costs and deliveries of required materials and supplies and attempt to ensure that our asset and inventory purchases adequately support our construction and maintenance activities. In response to these challenges, we have increased levels of certain materials and supplies inventories over time to help reduce risks related to global supply chain constraints. We continue to evaluate and monitor the ~~FERC in December 2021. The overall depreciation expense at~~potential impacts of these macroeconomic trends on our MISO Regulated Operating Subsidiaries increased beginning on January 1, 2022. This increase is expected to result in higher revenue from customers in the near term due to an overall increase in the rates at which we record depreciation expense. For the threeforecasted capital expenditures and nine months ended September 30, 2022, there was an increase in depreciation expense of approximately $8 million and $24 million, respectively, resulting from our MISO Regulated Operating Subsidiaries’ new depreciation rates.maintenance activities.

Our Regulated Operating Subsidiaries strive for high reliability of their systems and improvement in system accessibility for all generation resources. The FERC requires compliance with certain reliability standards and may take enforcement actions against violators, including the imposition of substantial fines. NERC is responsible for developing and enforcing these mandatory reliability standards. We continually assess our transmission systems against standards established by NERC, as well as the standards of applicable regional entities under NERC that have been delegated certain authority for the purpose of proposing and enforcing reliability standards. We believe that we meet the applicable standards in all material respects, although further

~~Table of Contents~~

investment in our transmission systems and an increase in maintenance activities will likely be needed to maintain compliance, improve reliability and address any new standards that may be promulgated.

We also assess our transmission systems against our own planning criteria that are filed annually with the FERC. Based on our planning studies, we see needs to make capital investments to: (1) maintain and replace our current transmission infrastructure to enhance system reliability and accommodate load growth; (2) interconnect new renewable generation resources; (3) upgrade physical and technological grid security to protect critical infrastructure; and (4) expand access to electricity markets to reduce the overall cost of delivered energy to customers. While we have been impacted by recent increases in inflation and supply chain disruptions, these challenges have not had a material impact on our current or forecasted capital expenditures. However, we continue to evaluate and monitor the potential impacts of these macroeconomic trends on our forecasted capital expenditures. The following table shows our actual and expected capital expenditures at our Regulated Operating Subsidiaries:

Actual Capital

Forecasted

Actual Capital

Forecasted

Expenditures for the

Capital

Expenditures for the

Capital

Nine Months Ended

Expenditures

Six Months Ended

Expenditures

(In millions of USD)

September 30, 2022

2023 — 2027

(In millions of USD)

June 30, 2023

2023 — 2027

Expenditures for property, plant and equipment (a)

719

4,475

Expenditures for property, plant and equipment (a)

445

4,475

____________________________

(a)Amounts represent the cash payments to acquire or construct property, plant and equipment, as presented in the condensed consolidated statements of cash flows. These amounts exclude non-cash additions to property, plant and equipment for the AFUDC equity as well as accrued liabilities for construction, labor and materials that have not yet been paid.

Our long-term growth plan includes ongoing investments in our current regulated transmission systems and the identification of incremental strategic projects primarily located in and around our service territories. Refer to “Item 1 Business — Development of Business” in our Form 10-K for the year ended December 31, ~~2021~~2022 for additional information.

During the nine months ended September 30, 2022, MISO advanced its long-range transmission plan, announcing the first tranche of projects across the MISO Midwest subregion comprised of 18 transmission projects with total associated transmission costs estimated at approximately $10 billion. The first tranche of projects was approved by MISO’s board of directors in July 2022. Six of these projects run through our MISO Regulated Operating Subsidiaries’ service territories, including Michigan and Iowa, where right of first refusal provisions exist for incumbent transmission owners. Other projects within this portfolio may be subject to competitive bidding, depending on their location. Based on this preliminary information, we currently estimate transmission investments of approximately $1.4 billion to $1.8 billion through 2030 associated with these projects, with approximately $700 million associated with these projects in the 2023 – 2027 capital plan.

Investments in property, plant and equipment could be lower than expected due to a variety of factors, as discussed in “Item 1A Risk Factors” of our Form 10-K for the year ended December 31, ~~2021~~2022 and incorporating any modifications included herein. In addition, investments in transmission network upgrades for generator interconnection projects could change from prior estimates significantly due to changes in the MISO queue for generation projects and other factors beyond our control.

2826

Table of Contents

~~RESULTS OF OPERATIONS~~

Results of Operations ~~and Variances~~


		Three months ended						Percentage		Nine months ended						Percentage			Three months ended						Percentage		Six months ended						Percentage
		September 30,				Increase		increase		September 30,				Increase		increase			June 30,				Increase		increase		June 30,				Increase		increase
(In millions of USD)	(In millions of USD)	2022		2021		(decrease)		(decrease)		2022		2021		(decrease)		(decrease)		(In millions of USD)	2023		2022		(decrease)		(decrease)		2023		2022		(decrease)		(decrease)
OPERATING REVENUES	OPERATING REVENUES																	OPERATING REVENUES
Transmission and other services	Transmission and other services	$	435	$	397	$	38	10	%	$	1,149	$	1,042	$	107	10	%	Transmission and other services	$	393	$	387	$	6	2	%	$	739	$	714	$	25	4	%
Formula Rate true-up	Formula Rate true-up	(69)		(57)		(12)		21	%	(51)		(24)		(27)		113	%	Formula Rate true-up	(6)		(20)		14		(70)	%	31		18		13		72	%
Total operating revenues	Total operating revenues	366		340		26		8	%	1,098		1,018		80		8	%	Total operating revenues	387		367		20		5	%	770		732		38		5	%
OPERATING EXPENSES	OPERATING EXPENSES																	OPERATING EXPENSES
Operation and maintenance	Operation and maintenance	29		30		(1)		(3)	%	83		82		1		1	%	Operation and maintenance	30		27		3		11	%	57		54		3		6	%
General and administrative	General and administrative	18		30		(12)		(40)	%	77		94		(17)		(18)	%	General and administrative	26		26		—		—	%	60		59		1		2	%
Depreciation and amortization	Depreciation and amortization	74		58		16		28	%	220		172		48		28	%	Depreciation and amortization	76		74		2		3	%	151		146		5		3	%
Taxes other than income taxes	Taxes other than income taxes	31		30		1		3	%	104		100		4		4	%	Taxes other than income taxes	37		37		—		—	%	75		73		2		3	%
Other operating expenses (income), net		—		(1)		1		(100)	%	—		—		—		n/a
Other operating (income) expense, net																		Other operating (income) expense, net	(1)		—		(1)		n/a		(1)		—		(1)		n/a
Total operating expenses	Total operating expenses	152		147		5		3	%	484		448		36		8	%	Total operating expenses	168		164		4		2	%	342		332		10		3	%
OPERATING INCOME	OPERATING INCOME	214		193		21		11	%	614		570		44		8	%	OPERATING INCOME	219		203		16		8	%	428		400		28		7	%
OTHER EXPENSES (INCOME)	OTHER EXPENSES (INCOME)																	OTHER EXPENSES (INCOME)
Interest expense, net	Interest expense, net	68		62		6		10	%	198		187		11		6	%	Interest expense, net	78		66		12		18	%	152		130		22		17	%
Allowance for equity funds used during construction	Allowance for equity funds used during construction	(10)		(8)		(2)		25	%	(27)		(22)		(5)		23	%	Allowance for equity funds used during construction	(11)		(8)		(3)		38	%	(22)		(17)		(5)		29	%
Other expenses (income), net		1		(1)		2		(200)	%	4		(4)		8		(200)	%
Other (income) expenses, net																		Other (income) expenses, net	(3)		1		(4)		(400)	%	(5)		3		(8)		(267)	%
Total other expenses (income)	Total other expenses (income)	59		53		6		11	%	175		161		14		9	%	Total other expenses (income)	64		59		5		9	%	125		116		9		8	%
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	155		140		15		11	%	439		409		30		7	%	INCOME BEFORE INCOME TAXES	155		144		11		8	%	303		284		19		7	%
INCOME TAX PROVISION	INCOME TAX PROVISION	44		35		9		26	%	111		102		9		9	%	INCOME TAX PROVISION	37		33		4		12	%	73		67		6		9	%
NET INCOME	NET INCOME	$	111	$	105	$	6	6	%	$	328	$	307	$	21	7	%	NET INCOME	$	118	$	111	$	7	6	%	$	230	$	217	$	13	6	%

Operating Revenues

The following table sets forth the components of and changes in operating revenues for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 which included revenue accruals and deferrals, as described in Note 4 to the condensed consolidated interim financial statements:


												Percentage													Percentage
		2022				2021				Increase		increase			2023				2022				Increase		increase
(In millions of USD)	(In millions of USD)	Amount		Percentage		Amount		Percentage		(decrease)		(decrease)		(In millions of USD)	Amount		Percentage		Amount		Percentage		(decrease)		(decrease)
Network revenues (a)	Network revenues (a)	$	255	70	%	$	236	69	%	$	19	8	%	Network revenues (a)	$	268	69	%	$	252	69	%	$	16	6	%
Regional cost sharing revenues (a)	Regional cost sharing revenues (a)	93		25	%	90		27	%	3		3	%	Regional cost sharing revenues (a)	96		25	%	94		26	%	2		2	%
Point-to-point	Point-to-point	6		2	%	4		1	%	2		50	%	Point-to-point	5		1	%	5		1	%	—		—	%
Scheduling, control and dispatch (a)	Scheduling, control and dispatch (a)	4		1	%	4		1	%	—		—	%	Scheduling, control and dispatch (a)	5		1	%	5		1	%	—		—	%
Other	Other	8		2	%	6		2	%	2		33	%	Other	13		4	%	11		3	%	2		18	%

Total	Total	$	366	100	%	$	340	100	%	$	26	8	%	Total	$	387	100	%	$	367	100	%	$	20	5	%

____________________________

(a)Includes a portion of the Formula Rate true-up of ~~$(69)~~$(6) million and ~~$(57)~~$(20) million for the three months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

Operating revenues for the three months ended September 30, 2022 increased, compared to the same period in 2021, primarily due to higher recoverable depreciation expense due to revised depreciation rates, which became effective January 1, 2022, as well as a higher rate base associated with higher balances of property, plant and equipment in service and resulting return.

2927

Table of Contents

The following table sets forth the components of and changes in operating revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022, which included revenue accruals and deferrals, as described in Note 4 to the condensed consolidated interim financial statements:


												Percentage													Percentage
		2022				2021				Increase		increase			2023				2022				Increase		increase
(In millions of USD)	(In millions of USD)	Amount		Percentage		Amount		Percentage		(decrease)		(decrease)		(In millions of USD)	Amount		Percentage		Amount		Percentage		(decrease)		(decrease)
Network revenues (a)	Network revenues (a)	$	762	70	%	$	699	69	%	$	63	9	%	Network revenues (a)	$	539	70	%	$	507	70	%	$	32	6	%
Regional cost sharing revenues (a)	Regional cost sharing revenues (a)	282		26	%	271		27	%	11		4	%	Regional cost sharing revenues (a)	192		25	%	189		26	%	3		2	%
Point-to-point	Point-to-point	16		1	%	13		1	%	3		23	%	Point-to-point	10		1	%	10		1	%	—		—	%
Scheduling, control and dispatch (a)	Scheduling, control and dispatch (a)	14		1	%	15		1	%	(1)		(7)	%	Scheduling, control and dispatch (a)	10		1	%	10		1	%	—		—	%
Other	Other	24		2	%	20		2	%	4		20	%	Other	19		3	%	16		2	%	3		19	%

Total	Total	$	1,098	100	%	$	1,018	100	%	$	80	8	%	Total	$	770	100	%	$	732	100	%	$	38	5	%

~~____________________________~~___________________________

(a)Includes a portion of the Formula Rate true-up of ~~$(51)~~$31 million and ~~$(24)~~$18 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Operating revenues for the ~~nine~~three and six months ended ~~September~~June 30, ~~2022~~2023 increased, compared to the same ~~period~~periods in ~~2021,~~2022, primarily due to ~~higher recoverable depreciation expense due to revised depreciation rates, which became effective January 1, 2022, as well as~~ a higher rate base associated with higher balances of property, plant and equipment in service and resulting return.

~~Operating Expenses~~

~~General and administrative expense~~

General and administrative expenses for both the three and nine months ended September 30, 2022 decreased when compared to the same periods in 2021, primarily due to lower compensation-related expenses as of a result of a decrease in share-based compensation expense.

~~Depreciation and amortization expense~~

Depreciation and amortization expenses increased due to a combination of updated depreciation rates at our MISO Regulated Operating Subsidiaries, which became effective January 1, 2022, and a higher depreciable base resulting from property, plant and equipment in-service additions during the three and nine months ended September 30, 2022 compared to the same periods in 2021.

Other Expenses (Income)

Interest expense, net

Interest expense, net increased as compared to the same periods in ~~2021~~2022 due ~~primarily~~ to higher interest rates on long-term debt issuances, ~~that occurred in the three and nine months ended September 30, 2022, as well as rising interest rates on~~ commercial paper and our revolving credit ~~agreements.~~agreements and higher overall debt balances. See Note 5 to the condensed consolidated interim financial statements for ~~further discussion.~~additional information.

Allowance for equity funds used during construction

AFUDC equity increased due primarily to higher balances of construction work in progress eligible for AFUDC equity ~~during~~for the ~~three and nine~~six months ended ~~September~~June 30, ~~2022 as~~2023, compared to the same ~~periods of 2021.~~period in 2022.

Other (income) expenses, ~~(income),~~ net

Other (income) expenses, ~~for the three and nine months ended September 30, 2022 increased, compared to the same periods in 2021,~~net decreased primarily due to losses on certain investments associated with our supplemental benefit ~~plans.~~

~~Income Tax Provision~~

~~The income tax provision~~plans that occurred in the six months ended June 30, 2022 and did not recur for the ~~three and nine~~same period in 2023. Additionally, during the six months ended ~~September~~June 30, ~~2022 increased~~2023, we earned interest income on the unused net proceeds of cash and cash equivalents from the issuance of $800 million of Senior Notes at ITC Holdings, as ~~compared to the same periods~~discussed further in ~~2021 primarily due to the remeasurement of state deferred tax and net operating loss~~

~~Table of Contents~~

~~balances related to the reduction of the Iowa corporate income tax rate from 9.8% to 8.4% in September. For additional details, see~~ Note 65 to the condensed consolidated interim financial ~~statements.~~statements, including with respect to the initial uses of net proceeds therefrom.

~~LIQUIDITY AND CAPITAL RESOURCES~~Liquidity and Capital Resources

We expect to maintain our approach of funding our future capital requirements with cash from operations at our Regulated Operating Subsidiaries, our existing cash and cash equivalents, future issuances under our commercial paper program and amounts available under our ~~revolving credit agreements~~Revolving Credit Agreement (the terms of which are described in Note 5 to the condensed consolidated interim financial statements). In addition, we may from time to time secure debt funding in the capital markets (including debt to finance or refinance portfolios of eligible projects based on the green bond framework established by ITC Holdings), although we can provide no assurance that we will be able to obtain financing on favorable terms or at all. As market conditions warrant, we may also from time to time repurchase debt securities issued by us in the open market, in privately negotiated transactions, by tender offer or otherwise. We expect that our capital requirements will arise principally from our need to:

•Fund capital expenditures at our Regulated Operating Subsidiaries. Our plans with regard to property, plant and equipment investments are described in detail above under “ — Capital Investment and Operating Results Trends.”

•Fund our debt service requirements, including principal repayments and periodic interest payments.

Table of Contents

•Fund working capital requirements.

In addition to the expected capital requirements above, any adverse determinations or settlements relating to the regulatory matters or contingencies described in Notes 4 and 1211 to the condensed consolidated interim financial statements would result in additional capital requirements. Our contractual obligations are described in our Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no material changes to that information since December 31, ~~2021,~~2022, other than the items described in Note 5 to the condensed consolidated interim financial statements.

We believe that we have sufficient capital resources to meet our currently anticipated short-term (within twelve months) needs. However, we rely on both internal and external sources of liquidity to provide working capital and fund capital investments. An extended period of economic disruption could impact our ability to access the capital markets requiring us to seek alternative forms of financing which could negatively impact our liquidity and capital resources. ITC Holdings’ sources of cash are dividends and other payments received by us from our Regulated Operating Subsidiaries and any of our other subsidiaries as well as the proceeds raised from the sale of our debt securities. Each of our Regulated Operating Subsidiaries, while wholly-owned by ITC Holdings, is legally distinct from ITC Holdings and has no obligation, contingent or otherwise, to make funds available to us.

We expect to continue to utilize our commercial paper program and ~~revolving credit agreements~~Revolving Credit Agreement as well as our cash and cash equivalents as needed to meet our short-term (within twelve months) cash requirements. As of ~~September~~June 30, ~~2022,~~2023, we had consolidated indebtedness under our ~~revolving credit agreements~~Revolving Credit Agreement of ~~$293~~$338 million, with unused capacity under our ~~revolving credit agreements~~Revolving Credit Agreement of ~~$607~~$662 million. Additionally, ITC Holdings ~~had $134 million of~~did not have any commercial paper issued and outstanding ~~net of discount,~~ as of ~~September~~June 30, ~~2022, with~~2023, but has the ability to issue an ~~additional $266~~aggregate amount not to exceed $400 million outstanding at any one time under the commercial paper program. As of June 30, 2023, we had a balance of cash and cash equivalents of $296 million, compared to a balance of $4 million as of December 31, 2022. The increase in cash and cash equivalents was primarily a result of the June 1, 2023 issuance of $800 million of Senior Notes at ITC Holdings. We expect to utilize the unused net proceeds of cash and cash equivalents from this issuance to fund short-term (within twelve months) capital requirements. See Note 5 to the condensed consolidated interim financial statements for a detailed discussion of the June 1, 2023 debt issuance at ITC Holdings, including the initial uses of net proceeds therefrom, the commercial paper program and our revolving credit agreements.

To address our long-term capital requirements, we expect that we will need to obtain additional debt financing. Certain of our capital projects could be delayed if we experience difficulties in accessing capital. We expect to be able to obtain such additional financing as needed, in amounts and upon terms that will be acceptable to us due to our strong credit ratings and our historical ability to obtain financing. ~~While rising~~Rising interest rates have resulted in higher coupon rates on recent long-term debt issuances and higher weighted average interest rates on commercial paper and borrowings under our revolving credit ~~agreements, the~~agreements. The increase in interest rates, combined with higher long-term debt balances due to additional issuances of long-term debt, has ~~not had a material impact on~~resulted in an increase to interest expense, net of $12 million and $22 million for the three and ~~nine~~six months ended ~~September~~June 30, 2023, respectively, compared to the same periods in 2022. There remains uncertainty surrounding expectations of future interest rate fluctuations.

~~We have exposure~~On April 14, 2023, we entered into the Revolving Credit Agreement, as described in Note 5 to ~~LIBOR through~~ the condensed consolidated interim financial statements, that replaced the previous revolving credit agreements of ITC Holdings and certain of our Regulated Operating Subsidiaries. ~~Certain tenors of LIBOR began being phased out beginning~~Under the Revolving Credit Agreement, the interest rate is based on a calculation that references either SOFR or a comparable benchmark as further outlined in ~~late 2021,~~

~~Table of Contents~~

~~with full discontinuation planned for mid-2023. We believe~~ the ~~rate selected~~Revolving Credit Agreement and, as ~~the preferred alternative~~a result, we no longer have exposure to LIBOR ~~will be an acceptable replacement rate when LIBOR is fully discontinued and such replacement will not have a material impact on our future liquidity and capital resources.~~that existed under the previous revolving credit agreements.

Credit Ratings

Credit ratings by nationally recognized statistical rating agencies are an important component of our liquidity profile. Credit ratings relate to our ability to issue debt securities and the cost to borrow money, and should not be viewed as a recommendation to buy, sell or hold securities. Ratings are subject to revision or withdrawal at any time and each rating should be evaluated independently of any other rating. An explanation of these ratings may be obtained from the respective rating agency. Additional information related to our credit ratings and

Table of Contents

outlook reported by rating agencies is included in “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operation — Credit Rating” of our Form 10-K for the year ended December 31, ~~2021.~~2022.

Covenants

Our debt instruments contain numerous financial and operating covenants that place significant restrictions on certain transactions, such as incurring additional indebtedness, engaging in sale and lease-back transactions, creating liens or other encumbrances, entering into mergers, consolidations, liquidations or dissolutions, creating or acquiring subsidiaries and selling or otherwise disposing of all or substantially all of our assets. In addition, the covenants require us to meet certain financial ratios, such as maintaining certain debt to capitalization ratios and certain funds from operations to debt levels. As of ~~September~~June 30, ~~2022,~~2023, we were not in violation of any debt covenant. In the event of a downgrade in our credit ratings, none of the covenants would be directly impacted, although the borrowing costs under our ~~revolving credit agreements~~Revolving Credit Agreement may increase.

Cash Flows


	Six months ended						Percentage
	June 30,				Increase		increase
(In millions of USD)	2023		2022		(decrease)		(decrease)
Cash flows provided by (used in):
Operating activities	$	333	$	349	$	(16)	(5)	%
Investing activities	(455)		(476)		(21)		4	%
Financing activities	415		140		275		196	%
Net increase in cash, cash equivalents and restricted cash	$	293	$	13

Cash Flows From Operating Activities

Net cash provided by operating activities ~~was $657~~decreased primarily due to an increase in interest paid of $28 million and ~~$592~~an increase in income taxes paid of $20 million ~~for~~and other working capital activity during the ~~nine~~six months ended ~~September~~June 30, ~~2022 and 2021, respectively. The increase~~2023 compared to the same period in ~~cash provided~~2022. This decrease was partially offset by ~~operating activities was primarily due to~~ an increase in cash received from operating revenues of ~~$77~~$30 million and an increase in settlement of interest rate swaps of $39 million compared to the same period in 2021. This increase was partially offset by lower net receipts related to the MISO ROE Complaints of $6 million, including interest, received from customers, an increasea decrease in payments pursuant to our long-term incentive plans of ~~$10~~$12 million ~~an increase in property tax payments of $8 million and increases in income taxes and interest paid~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022.

Cash Flows From Investing Activities

Net cash used in investing activities ~~was $713 million and $622 million for the nine months ended September 30, 2022 and 2021, respectively, with the increase~~decreased primarily due to ~~an increase~~a decrease in capital expenditures.

Cash Flows From Financing Activities

Net cash provided by financing activities ~~was $54 million and $30 million for the nine months ended September 30, 2022 and 2021, respectively. The increase in cash provided by financing activities was~~increased primarily due to an increase in issuances of ~~long term~~long-term debt, net of ~~$750~~discount, of $574 million, an increase in net borrowings under our revolving credit agreements of $210 million and ~~a decrease~~an increase in net ~~repayments of~~ refundable deposits for transmission network upgrades of ~~$16~~$23 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022. This increase was partially offset by an increase in net repayments ~~under our revolving credit agreements~~ of ~~$77~~commercial paper of $263 million, ~~repayment~~an increase in repayments of long-term debt of ~~$500 million, an increase in net repayments of commercial paper of $134~~$250 million and an increase in dividend payments of ~~$25~~$12 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022.

~~CRITICAL ACCOUNTING POLICIES AND ESTIMATES~~Critical Accounting Policies and Estimates

Our condensed consolidated interim financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated interim financial statements requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. The application of these policies requires judgment regarding future events.

These estimates and judgments, in and of themselves, could materially impact the condensed consolidated interim financial statements and disclosures based on varying assumptions, as future events rarely develop exactly as forecasted, and even the best estimates routinely require adjustment.

~~Table of Contents~~

The accounting policies discussed in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” of our Form 10-K for the

Table of Contents

year ended December 31, ~~2021~~2022 are considered by management to be the most important to an understanding of the condensed consolidated interim financial statements because of their significance to the portrayal of our financial condition and results of operations or because their application places the most significant demands on management’s judgment and estimates about the effect of matters that are inherently uncertain. There have been no material changes to that information during the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

~~RECENT ACCOUNTING PRONOUNCEMENTS~~Recent Accounting Pronouncements

We have considered all new accounting pronouncements issued by the FASB and determined that it is not likely that any of the recently issued accounting guidance will have a material impact on our condensed consolidated interim financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Fixed Rate Debt

Based on the borrowing rates currently available for bank loans with similar terms and average maturities, the fair value of our consolidated long-term debt and debt maturing within one year, excluding revolving credit agreements and commercial paper, was ~~$5,648~~$6,437 million and ~~$6,995~~$5,849 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The total book value of our consolidated long-term debt and debt maturing within one year, net of discount and deferred financing fees and excluding revolving credit agreements and commercial paper, was ~~$6,501~~$7,195 million and ~~$6,179~~$6,649 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. An increase in interest rates of 10% (from 5.0% to 5.5%, for example) at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 would decrease the fair value of debt by ~~$269~~$289 million and ~~$217~~$270 million, respectively, and a decrease in interest rates of 10% at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 would increase the fair value of debt by ~~$296~~$315 million and ~~$231~~$297 million, ~~respectively.~~respectively, at that date.

Revolving Credit Agreements

At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we had a consolidated total of ~~$293~~$338 million and ~~$329~~$208 million, respectively, outstanding under our revolving credit agreements, which are variable rate loans and fair value approximates book value. A 10% increase or decrease in borrowing rates under the revolving credit agreements compared to the weighted average rates in effect at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 would increase or decrease annual interest expense by $2 million and $1 million, ~~and less than $1 million, respectively.~~respectively, at borrowing levels consistent with amounts outstanding at the end of each of the respective periods. See Note 5 to the condensed consolidated interim financial statements for changes to our revolving credit agreements since December 31, 2022.

Commercial Paper

At ~~September~~June 30, ~~2022~~2023, ITC Holdings did not have any commercial paper issued and outstanding under the program. At December 31, ~~2021,~~2022, ITC Holdings had $134 million ~~and $155 million, respectively,~~ of commercial paper issued and outstanding, net of discount, under the commercial paper program. Due to the short-term nature of these financial instruments, the carrying value approximates fair value. A 10% increase or decrease in annual interest rates for commercial paper compared to the weighted average interest rates in effect at December 31, 2022 would increase or decrease annual interest expense by ~~less than~~ $1 ~~million.~~

~~Derivative Instruments and Hedging Activities~~

We use derivative financial instruments, including interest rate swap contracts, to manage our exposure to fluctuations in interest rates. The use of these financial instruments mitigates exposure to these risks and the variability of our operating results. We are not a party to leveraged derivatives and do not enter into derivative financial instruments for trading or speculative purposes.

In September 2022, we terminated $450 million of 5-year interest rate swap contracts that managed interest rate risk associated with the ITC Holdings 4.95% Senior Notes, due September 22, 2027 as described in Note 5 to the condensed consolidated interim financial statements. At September 30, 2022, ITC Holdings did not have any interest rate swaps outstanding. ITC Holdings had interest rate swaps outstanding with a total notional amount of $375 million, at ~~December 31, 2021.~~levels consistent with amounts issued and outstanding at the end of the period.

Other

As described in our Form 10-K for the year ended December 31, ~~2021,~~2022, we are subject to commodity price risk from market price fluctuations, and to credit risk primarily with DTE Electric, Consumers Energy and IP&L,

~~Table of Contents~~

our primary customers. There have been no material changes in these risks during the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that material information required to be disclosed in our reports that we file or submit under the Exchange Act, is

Table of Contents

recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, with a company have been detected.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective, at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended ~~September~~June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 1211 to the condensed consolidated interim financial statements for a description of the ROE complaints filed against all MISO TOs, including our MISO Regulated Operating Subsidiaries. See Note 4 to the condensed consolidated interim financial statements for a description of the capital structure complaint filed against ITC Midwest.

ITEM 1A. RISK FACTORS

For information regarding risk factors affecting us, see “Item 1A Risk Factors” of our Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no material changes to the risk factors set forth therein.

3432

Table of Contents

ITEM 6. EXHIBITS

The following exhibits are filed as part of this report (unless otherwise noted to be previously filed, and therefore incorporated herein by reference). Our SEC file number is 001-32576.


Exhibit No.						Description of Document












~~4.56~~4.58						Sixth Supplemental Indenture, dated as of September 22, 2022, between the Company and ~~Computersha~~reComputershare Trust Company,~~, N~~.A .(as N.A. (as successor to Wells Fargo Bank, National ~~Association~~)Association), as trustee (~~with F~~o r ~~m of 4.950% Notes due 2027)~~ ~~(filed with~~(incorporated by reference from Exhibit 4.2 to the ~~Company's~~Company’s Form 8-K filed on September 22, 2022).

~~4.57~~4.59						T ~~welfth~~Seventh Supplemental Indenture, dated as of ~~August 2, 2022,~~June 1, 2023, between ~~ITC Midwest LLC~~the Company and ~~The Bank of New York Mello~~n Computershare Trust Company, N.A.(as (as successor to ~~The~~Wells Fargo Bank, of ~~New York Trust Company,~~ N ~~.A.)~~National Association), as trustee ~~(filed with~~(incorporated by reference from Exhibit 4.2 to the ~~Company's~~Company’s Form 8-K filed on ~~October~~12 ~~, 2022)~~June 1, 2023).

31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document

101.SCH						Inline XBRL Taxonomy Extension Schema

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF						Inline XBRL Taxonomy Extension Definition Database

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase

104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in Inline XBRL and contained in Exhibit 101

3533

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: ~~October 27, 2022~~August 1, 2023



ITC HOLDINGS CORP.


By:			/s/ Linda H. Apsey
			Linda H. Apsey
			President and Chief Executive Officer (duly authorized officer)


By:			/s/ Gretchen L. Holloway
			Gretchen L. Holloway
			Senior Vice President and Chief Financial Officer (principal financial and accounting officer)

3634


			Page
Part I. Financial Information			5
Item 1. Financial Statements			5
Condensed Consolidated Statements of Financial Position (Unaudited)			5
Condensed Consolidated Statements of Comprehensive Income (Unaudited)			6
Condensed Consolidated Statements of Changes in Stockholder’s Equity (Unaudited)			7
Condensed Consolidated Statements of Cash Flows (Unaudited)			8
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2322
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3331
Item 4. Controls and Procedures			3431
Part II. Other Information			3432
Item 1. Legal Proceedings			3432
Item 1A. Risk Factors			3432
Item 6. Exhibits			3533
Signatures			3634


Interest Rate Swaps (in millions of USD, except percentages)	Notional Amount		Weighted Average Fixed Rate of Interest Rate Swaps	Comparable Reference Rate of Notes	Benchmark Rate	Gain on Derivatives		Settlement Date
5-year interest rate swaps	$	375	1.471%	3.441%	LIBOR	$	33	September 2022
5-year interest rate swaps	75		1.540%	3.162%	SOFR	6		September 2022
Total	$	450				$	39


(In millions of USD, except percentages)	Total Available Capacity		Outstanding Balance (a)		Unused Capacity			Weighted Average Interest Rate on Outstanding Balance (b)	Commitment Fee Rate (c)
ITC Holdings	$	400	$	—	$	400	(d)	—%	0.175	%
ITC Transmission	100		51		49			4.13%	0.10	%
METC	100		16		84			4.13%	0.10	%
ITC Midwest	225		202		23			4.13%	0.10	%
ITC Great Plains	75		24		51			4.13%	0.10	%
Total	$	900	$	293	$	607