2.2.0.25falsefalse0203 - Disclosure - Regulatory Matterstruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011
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<div align="left" style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>3. REGULATORY MATTERS</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b>ITC Great Plains</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     In March 2011, we recorded $2.0 million of regulatory assets for development expenses and
pre-construction costs relating to the Kansas <font style="white-space: nowrap">V-Plan</font> Project incurred by ITC Great Plains through
March 31, 2011 that are probable of recovery and recorded a corresponding $2.0 million reduction to
operating expenses, primarily to general and administrative expense. Recovery of the Kansas V-Plan
Project regulatory asset requires FERC authorization upon ITC Great Plains making an additional
filing under Section 205 of the Federal Power Act to demonstrate that the costs to be recovered are
just and reasonable. Subsequent to FERC authorization, ITC Great Plains will include
the Kansas V-Plan Project regulatory asset in its rate base and begin
amortizing it over a ten-year period upon the in-service date of the Kansas V-Plan Project. The
amortization expense will be recovered through ITC Great Plains’ cost-based formula rate template
beginning in that year.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>ITC Midwest Depreciation Study</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     Effective January 1, 2010, the FERC authorized the implementation of the depreciation study
filed by ITC Midwest which revised its depreciation rates. This change in accounting estimate
resulted in lower composite depreciation rates for ITC Midwest primarily due to the revision of
asset service lives and cost of removal values.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     For ratemaking purposes, the impact of ITC Midwest’s revised depreciation rates was initially
reflected in ITC Midwest’s 2010 revenue requirement. The revised depreciation rates resulted in a
reduction of depreciation expense of $1.5 million for the three months ended March 31, 2011 as
compared to the amount of depreciation expense that would have been recognized under the previous
depreciation rates utilized by ITC Midwest. Because of the inclusion of depreciation expense as a
component of net revenue requirement under ITC Midwest’s cost-based formula rate, the offsetting
effect on revenues and expenses from the change in depreciation rates had an immaterial effect on
net income and earnings per share amounts for the three months ended March 31, 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Cost-Based Formula Rates with True-Up Mechanism</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     The transmission rates at our Regulated Operating Subsidiaries are set annually and remain in
effect for a one-year period. Rates are posted on the Open Access Same-Time Information System each
year. By completing their formula rate template on an annual basis, our Regulated Operating
Subsidiaries are able to adjust their transmission rates to 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 FERC-approved formula rates do not require
further action or FERC filings for the calculated joint zone rates to go into effect, although the
rates are subject to legal challenge at the FERC. Our Regulated Operating Subsidiaries will
continue to use the formula rates to calculate their respective annual revenue requirements unless
the FERC determines the rates to be unjust and unreasonable or another mechanism is determined by
the FERC to be just and reasonable.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     Our cost-based formula rate templates 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 requirements. The over- or
under-collection typically results from differences between the projected revenue requirement used
to establish the billing rate and actual revenue requirement at each of our Regulated Operating
Subsidiaries, or from differences between actual and projected monthly peak loads at our MISO
Regulated Operating Subsidiaries. Revenue is recognized for services provided during each reporting
period based on actual revenue requirements calculated using the formula rate templates. 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 reporting period. The true-up amount is reflected in customer bills within two
years under the provisions of the formula rate templates.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     The changes in regulatory assets and liabilities (net) associated with our Regulated Operating
Subsidiaries’ formula rate revenue accruals and deferrals, including accrued interest, were as
follows during the three months ended March 31, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 0px solid #000000"><b>(in thousands)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>ITCTransmission</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>METC</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>ITC Midwest</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>ITC Great Plains</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of December 31, 2010
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(33,054</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(17,236</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">21,388</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">626</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(28,276</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net refunds (collections) of 2009
revenue deferrals and accruals,
including interest
</div></td>
<td> </td>
<td> </td>
<td align="right">953</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,929</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,420</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(157</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,695</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net revenue accruals (deferrals)
for the three months ended March
31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">5,777</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,715</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">823</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,439</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">7,876</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net accrued interest payables for
the three months ended March 31,
2011
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(277</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(143</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(20</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(446</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of March 31, 2011
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(26,601</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(12,735</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">16,785</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(990</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(23,541</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">     Regulatory assets and liabilities associated with our Regulated Operating Subsidiaries’
formula rate revenue accruals and deferrals are recorded in our condensed consolidated statement of
financial position as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 0px solid #000000"><b>(in thousands)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>ITCTransmission</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>METC</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>ITC Midwest</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>ITC Great Plains</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Current assets
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,431</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,557</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">18,843</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">655</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22,486</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-current assets
</div></td>
<td> </td>
<td> </td>
<td align="right">5,777</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,112</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,224</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,013</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,126</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Current liabilities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11,638</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(9,553</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,670</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(191</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(24,052</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-current liabilities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(22,171</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6,851</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,612</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,467</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(34,101</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of March 31, 2011
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(26,601</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(12,735</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">16,785</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(990</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(23,541</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 71
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