10-Q

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 30, 2019

OR

☐ 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 ☑

*(Note: The registrant filed a registration statement on Form S-4 that was declared effective by the Securities and Exchange Commission on May 18, 2018 and between that date and December 31, 2018, the registrant was subject to the filing requirements under Section 15(d) of the Securities Exchange Act of 1934. At January 1, 2019 there were less than 300 holders of the securities registered pursuant to the Form S-4 and at that time the registrant was no longer subject to the filing requirements under Section 15(d) of the Securities Exchange Act of 1934.)

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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, indicated 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 31, 2019.

ITC Holdings Corp.

Form 10-Q for the Quarterly Period Ended September 30, 2019

INDEX

	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	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	36
Item 4. Controls and Procedures	37
Part II. Other Information	37
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	38
Item 6. Exhibits	38
Signatures	39

2

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;

• “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 to ITCTransmission, METC, ITC Midwest, 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

• “2017 Omnibus Plan” are references to the Company’s February 27, 2017 long-term equity incentive plan as amended July 10, 2017;

• “ADIT” are references to accumulated deferred income tax;

• “AFUDC” are references to an allowance for the cost of equity and borrowings 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;

• “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;

• “ESPP” are references to the Fortis Amended and Restated 2012 Employee Share Purchase Plan;

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

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

• “Fortis” are references to Fortis Inc.;

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

• “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;

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

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

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

• “IRS” are references to the Internal Revenue Service;

• “ISO” are references to Independent System Operators;

• “KCC” are references to the Kansas Corporation Commission;

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

• “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;

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

• “November 2018 Order” are references to an order issued by the FERC on November 15, 2018 regarding MISO base ROE complaints;

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

• “PCBs” are references to polychlorinated biphenyls;

• “ROE” are references to return on equity;

• “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 ROE;

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

• “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;

• “TCJA” are references to the Tax Cuts and Jobs Act of 2017, a comprehensive tax reform bill enacted on December 22, 2017; and

• “TO” are references to transmission owners.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

	September 30,		December 31,
(in millions, except share data)	2019		2018
ASSETS
Current assets
Cash and cash equivalents	$	4	$	6
Accounts receivable	130		102
Inventory	34		32
Regulatory assets	13		12
Income tax receivable	—		1
Prepaid and other current assets	13		11
Total current assets	194		164
Property, plant and equipment (net of accumulated depreciation and amortization of $1,903 and $1,779, respectively)	8,461		7,910
Other assets
Goodwill	950		950
Intangible assets (net of accumulated amortization of $41 and $39, respectively)	34		38
Regulatory assets	214		200
Other assets	72		67
Total other assets	1,270		1,255
TOTAL ASSETS	$	9,925	$	9,329
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Accounts payable	$	103	$	106
Accrued compensation	52		30
Accrued interest	58		50
Accrued taxes	44		64
Regulatory liabilities	202		178
Refundable deposits and advances for construction	19		33
Debt maturing within one year	242		—
Other current liabilities	12		11
Total current liabilities	732		472
Accrued pension and postretirement liabilities	68		68
Deferred income taxes	817		721
Regulatory liabilities	604		640
Refundable deposits	24		13
Other liabilities	42		26
Long-term debt	5,515		5,338
Commitments and contingent liabilities (Notes 5 and 14)
STOCKHOLDER’S EQUITY
Common stock, without par value, 235,000,000 shares authorized, 224,203,112 shares issued and outstanding at September 30, 2019 and December 31, 2018	892		892
Retained earnings	1,227		1,155
Accumulated other comprehensive income	4		4
Total stockholder’s equity	2,123		2,051
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	9,925	$	9,329

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

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ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	Three months ended						Nine months ended
	September 30,						September 30,
(in millions)	2019			2018			2019			2018
OPERATING REVENUES
Transmission and other services	$	354		$	350		$	931		$	932
Formula rate true-up	(33		)	(55		)	17			(68		)
Total operating revenues	321			295			948			864
OPERATING EXPENSES
Operation and maintenance	31			29			88			80
General and administrative	35			32			111			91
Depreciation and amortization	51			45			149			133
Taxes other than income taxes	30			27			89			82
Other operating (income) and expenses, net	—			(1		)	—			(2		)
Total operating expenses	147			132			437			384
OPERATING INCOME	174			163			511			480
OTHER EXPENSES (INCOME)
Interest expense, net	60			56			183			167
Allowance for equity funds used during construction	(7		)	(8		)	(23		)	(26		)
Other (income) and expenses, net	—			—			(1		)	2
Total other expenses (income)	53			48			159			143
INCOME BEFORE INCOME TAXES	121			115			352			337
INCOME TAX PROVISION	23			26			83			87
NET INCOME	98			89			269			250
OTHER COMPREHENSIVE INCOME
Derivative instruments, net of tax (Note 11)	(1		)	—			—			2
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX	(1		)	—			—			2
TOTAL COMPREHENSIVE INCOME	$	97		$	89		$	269		$	252

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

6

ITC HOLDINGS CORP. AND SUBSIDIARIES

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

						Accumulated
						Other			Total
			Retained			Comprehensive			Stockholder’s
(in millions)	Common Stock		Earnings			Income (Loss)			Equity
BALANCE, DECEMBER 31, 2017	$	892	$	1,026		$	2		$	1,920
Opening balance reclassification	—		(1		)	1			—
Net income	—		82			—			82
Dividends to ITC Investment Holdings Inc.	—		(50		)	—			(50		)
BALANCE, MARCH 31, 2018	892		1,057			3			1,952
Net income	—		79			—			79
Dividends to ITC Investment Holdings Inc.	—		(50		)	—			(50		)
Other comprehensive income, net of tax (Note 11)	—		—			1			1
BALANCE, JUNE 30, 2018	892		1,086			4			1,982
Net income	—		89			—			89
Dividends to ITC Investment Holdings Inc.	—		(50		)	—			(50		)
BALANCE, SEPTEMBER 30, 2018	$	892	$	1,125		$	4		$	2,021
BALANCE, DECEMBER 31, 2018	$	892	$	1,155		$	4		$	2,051
Net income	—		84			—			84
Dividends to ITC Investment Holdings Inc.	—		(72		)	—			(72		)
BALANCE, MARCH 31, 2019	892		1,167			4			2,063
Net income	—		87			—			87
Dividends to ITC Investment Holdings Inc.	—		(73		)	—			(73		)
Other comprehensive income, net of tax (Note 11)	—		—			1			1
BALANCE, JUNE 30, 2019	892		1,181			5			2,078
Net income	—		98			—			98
Dividends to ITC Investment Holdings Inc.	—		(52		)	—			(52		)
Other comprehensive income, net of tax (Note 11)	—		—			(1		)	(1		)
BALANCE, SEPTEMBER 30, 2019	$	892	$	1,227		$	4		$	2,123

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

7

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine months ended
	September 30,
(in millions)	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	269		$	250
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	149			133
Recognition, refund and collection of revenue accruals and deferrals — including accrued interest	(27		)	54
Deferred income tax expense	82			86
Allowance for equity funds used during construction	(23		)	(26		)
Share-based compensation	24			3
Other	7			3
Changes in assets and liabilities, exclusive of changes shown separately:
Accounts receivable	(20		)	(10		)
Income tax receivable	1			13
Accounts payable	(6		)	4
Accrued interest	8			(6		)
Accrued taxes	(19		)	(19		)
Other current and non-current assets and liabilities, net	5			9
Net cash provided by operating activities	450			494
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(682		)	(556		)
Contributions in aid of construction	5			23
Other	1			—
Net cash used in investing activities	(676		)	(533		)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt	175			225
Borrowings under revolving credit agreements	787			588
Borrowings under term loan credit agreements	200			—
Net issuance of commercial paper	243			—
Retirement of long-term debt — including extinguishment of debt costs	(203		)	(100		)
Repayments of revolving credit agreements	(786		)	(518		)
Repayment of term loan credit agreement	—			(50		)
Dividends to ITC Investment Holdings Inc.	(197		)	(150		)
Other	3			(2		)
Net cash provided by (used in) financing activities	222			(7		)
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(4		)	(46		)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	10			68
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$	6		$	22

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

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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. Through our Regulated Operating Subsidiaries, we own and operate high-voltage systems in Michigan’s Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma that transmit electricity from generating stations to local distribution facilities connected to our systems. ITC Holdings is a wholly-owned subsidiary of Investment Holdings.

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, 2018 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.    RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Pronouncements

Accounting for Leases

Effective January 1, 2019, we adopted accounting guidance that requires lessees to recognize a right-of-use asset and lease liability for most leases, along with additional quantitative and qualitative disclosures. We elected to apply transition relief which permitted us to adopt the new guidance on a modified retrospective basis at the adoption date (i.e., January 1, 2019) as opposed to at the beginning of the earliest period presented in the financial statements (i.e., January 1, 2017). Therefore, while we began applying the new guidance as of January 1, 2019, prior period comparative financial statements and disclosures will continue to be presented under previous lease accounting guidance.

In connection with our adoption of the new guidance, we elected various practical expedients and made certain accounting policy elections, including:

• a “package of three” practical expedients that must be taken together and allows us to not reassess:

• whether any expired or existing contract is a lease or contains a lease,

• the lease classification of any expired or existing leases, and

• the initial direct costs for any existing leases;

• a practical expedient that permits entities to not evaluate existing land easements at adoption that were not previously accounted for as leases; and

• an accounting policy election to not apply the recognition requirements to short-term leases (i.e., leases with terms of 12 months or less).

Our leasing activities primarily relate to office facilities, but we also have limited leasing activity relating to equipment and storage facilities. As of January 1, 2019, adoption of the guidance resulted in recognition of right-of-use lease assets of $3 million, current lease liabilities of $1 million, and non-current lease liabilities of $2 million. The adoption of this guidance did not have any impact on retained earnings or net income. We also added disclosures as a result of our adoption of the guidance; refer to Note 7 for more information on our leasing activities.

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Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued authoritative guidance to make targeted improvements to hedge accounting to better align with an entity’s risk management objectives and to reduce the complexity of hedge accounting. Among other changes, the new guidance simplifies hedge accounting by (a) allowing more time for entities to complete initial quantitative hedge effectiveness assessments, (b) enabling entities to elect to perform subsequent effectiveness assessments qualitatively, (c) eliminating the concept of recognizing periodic hedge ineffectiveness for cash flow hedges, (d) requiring the change in fair value of a derivative to be recorded in the same consolidated statements of comprehensive income line item as the earnings effect of the hedged item, and (e) permitting additional hedge strategies to qualify for hedge accounting. In addition, the guidance modifies existing disclosure requirements and adds new disclosure requirements. We adopted the guidance as of January 1, 2019; however, adoption of the accounting standard did not have a material impact on our financial statements or disclosures.

Recently Issued Pronouncements

We have considered all new accounting pronouncements issued by the FASB and concluded the following accounting guidance, which has not yet been adopted by us, may, subject to further evaluation, have a material impact on our consolidated financial statements.

Pension and Other Postretirement Plan Disclosures

In August 2018, the FASB issued authoritative guidance modifying the disclosure requirements for defined benefit pension and other postretirement plans. The new guidance requires disclosures including (a) the weighted average interest credit rates used for cash balance pension plans, (b) a narrative description of the reasons for significant gains and losses affecting the benefit obligation for the period, and (c) an explanation of other significant changes in the benefit obligation or plan assets. In addition, the guidance removes currently required disclosures including, among others, the requirement for public entities to disclose the effects of a one-percentage-point change on the assumed health care costs and the effect of the change in rates on service cost, interest cost, and the benefit obligation for postretirement health care benefits. The new guidance, which is effective for fiscal years ending after December 15, 2020 with early adoption permitted, is required to be adopted on a retrospective basis. We plan to early adopt this guidance in the 2019 annual consolidated financial statements.

Accounting for Cloud Computing Arrangements

In August 2018, the FASB issued authoritative guidance to address the accounting for implementation costs incurred in a cloud computing agreement that is a service contract. The new standard aligns the accounting for implementation costs incurred in a cloud computing arrangement as a service contract with existing guidance on capitalizing costs associated with developing or obtaining internal-use software. In addition, the new guidance requires entities to expense capitalized implementation costs of a cloud computing arrangement that is a service contract over the term of the agreement and to present the expense in the same income statement line item as the hosting fees. The guidance is effective for fiscal years beginning after December 15, 2019 with early adoption permitted. We are still evaluating the impact of the new guidance on our financial statements, including disclosures. We have elected not to early adopt.

3.    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 operating 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

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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 fluctuations of actual load, the unbilled revenue amount generally increases during the spring and summer and decreases during the fall and winter. See Note 4 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 for the three months ended September 30, 2019 and 2018 were $1 million and less than $1 million, respectively. Total other services revenue for the nine months ended September 30, 2019 and 2018 were $5 million and $3 million, respectively.

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 5 for more information on our Formula Rates.

4.    ACCOUNTS RECEIVABLE

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

	September 30,		December 31,
(in millions)	2019		2018
Trade accounts receivable	$	3	$	2
Unbilled accounts receivable	112		92
Due from affiliates	1		1
Other	14		7
Total accounts receivable	$	130	$	102

5.    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 14 for detail on ROE matters for our MISO Regulated Operating Subsidiaries and “Incentive Adders for Transmission Rates” discussed in Note 5 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

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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 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.

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 months ended September 30, 2019:

(in millions)	Total
Net regulatory liabilities as of December 31, 2018	$	(52	)
Net refund of 2017 revenue deferrals and accruals, including accrued interest	12
Net revenue accrual for the nine months ended September 30, 2019	17
Net accrued interest payable for the nine months ended September 30, 2019	(2		)
Net regulatory liabilities as of September 30, 2019	$	(25	)

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 at September 30, 2019 and December 31, 2018 as follows:

	September 30,			December 31,
(in millions)	2019			2018
Current regulatory assets	$	13		$	12
Non-current regulatory assets	27			12
Current regulatory liabilities	(45		)	(27		)
Non-current regulatory liabilities	(20		)	(49		)
Net regulatory liabilities	$	(25	)	$	(52	)

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.

MISO Regulated Operating Subsidiaries

Effective for the period following the September 2016 Order, the authorized ROE used by ITCTransmission, METC and ITC Midwest were 11.35%, 11.35%, and 11.32%, respectively. These were inclusive of adders at ITCTransmission, METC and ITC Midwest of 150 basis points, 150 basis points and 100 basis points, respectively, subject to the maximum ROE limitation in the September 2016 Order of 11.35%. The adders at each of ITCTransmission and METC included a 100 basis point adder for independent transmission ownership and a 50 basis point adder for RTO participation. The adders at ITC Midwest included a 50 basis point adder for independent transmission ownership and a 50 basis point adder for RTO participation.

On April 20, 2018, Consumers Energy, IP&L, Midwest Municipal Transmission Group, Missouri River Energy Services, Southern Minnesota Municipal Power Agency and WPPI Energy filed a complaint with the FERC under section 206 of the FPA, challenging the adders for independent transmission ownership that are included in transmission rates charged by the MISO Regulated Operating Subsidiaries. The adders for independent transmission ownership allowed up to 50 basis points or 100 basis points to be added to the MISO Regulated Operating Subsidiaries’ authorized ROE, subject to any ROE cap established by the FERC. On October 18, 2018, the FERC issued an order granting the complaint in part, setting revised adders for independent transmission ownership for each of the MISO Regulated Operating Subsidiaries to 25 basis points, and requiring the MISO Regulated Operating Subsidiaries to include the revised adders, effective April 20, 2018, in their Formula Rates. In addition, the order directed the MISO Regulated Operating Subsidiaries to provide refunds, with interest, for the period from April 20, 2018 through October 18, 2018. The MISO Regulated Operating Subsidiaries began reflecting the 25 basis point adder for independent transmission ownership in transmission rates in November 2018. Refunds of $7 million were primarily made in the fourth quarter of 2018 and were completed in the first quarter of 2019. The MISO Regulated Operating Subsidiaries sought rehearing of the FERC’s October 18, 2018 order, and on July 18, 2019, the FERC denied the

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rehearing request. On September 11, 2019, the MISO Regulated Operating Subsidiaries filed an appeal of the FERC’s order in the D.C. Circuit Court. We do not expect the final resolution of this proceeding to have a material adverse impact on our consolidated results of operations, cash flows or financial condition.

Based on the October 18, 2018 FERC order, the authorized ROE for the MISO Regulated Operating Subsidiaries has been revised to 11.07% (10.32% base ROE with a 25 basis point adder for independent transmission ownership and a 50 basis point adder for RTO participation). See Note 14 for information regarding the ROE complaints.

ITC Great Plains

On June 11, 2019, KCC filed a complaint with the FERC under section 206 of the FPA, challenging the ROE adder for independent transmission ownership that is included in the transmission rate charged by ITC Great Plains. The complaint argues that because ITC Great Plains is similarly situated to our MISO Regulated Operating Subsidiaries with respect to ownership by Fortis and GIC, the same rationale by which the FERC lowered the MISO Regulated Operating Subsidiaries adders for independent transmission ownership, as discussed above, also applies to ITC Great Plains. The adder for independent transmission ownership allows up to 100 basis points to be added to the ITC Great Plains authorized ROE, subject to any ROE cap established by the FERC. ITC Great Plains filed an answer to the complaint on July 1, 2019 asking the FERC to deny the complaint since KCC showed no evidence that ITC Great Plains’ independence or the benefits it provides as an independent TO has been compromised or reduced as a result of the Fortis and GIC acquisition. We do not expect the resolution of this proceeding to have a material adverse impact on our consolidated results of operations, cash flows or financial position.

The authorized ROE used by ITC Great Plains is 12.16% and is composed of a base ROE of 10.66% with a 100 basis point adder for independent transmission ownership and a 50 basis point adder for RTO participation.

Calculation of Accumulated Deferred Income Tax Balances in Projected Formula Rates

On June 21, 2018, the FERC issued an order initiating a proceeding and paper hearings, pursuant to Section 206 of the FPA, to examine the methodology used by a group of TOs, including ITCTransmission and ITC Midwest, for calculating balances of ADIT in forward-looking Formula Rates. The FERC previously concluded that the two-step averaging methodology for ADIT is no longer necessary to comply with IRS normalization rules in light of IRS guidance issued in 2017. On August 27, 2018, our MISO Regulated Operating Subsidiaries submitted a filing with the FERC under Section 205 of the FPA to eliminate the use of the two-step averaging methodology in the calculation of ADIT balances for the projected test year and modify the manner by which they calculate average ADIT balances in their annual transmission Formula Rate true-up calculation, subject to receiving guidance from the IRS to respond to the FERC order. On April 10, 2019, our MISO Regulated Operating Subsidiaries received formal guidance from the IRS, which we believe is consistent with the filings that have been made to date in these proceedings.

On December 20, 2018, the FERC issued an order that ITCTransmission and ITC Midwest make a compliance filing to implement the changes to their Formula Rate templates and formally instituted a proceeding against METC pursuant to Section 206 of the FPA to implement the changes. On May 16, 2019, the FERC issued an order accepting in part and rejecting in part ITCTransmission’s and ITC Midwest’s January 22, 2019 compliance filing and ordered them to make another compliance filing within 30 days of the date of the order. Specifically, the FERC accepted the portion of the compliance filing that removed the two-step averaging methodology, but rejected the compliance filing insofar as it carried proration to the Formula Rate true-up calculation because the FERC found that was beyond the scope of its previous orders in the docket. Additionally, on May 16, 2019, the FERC issued an order rejecting the January 22, 2019 METC filing pursuant to Section 205 of the FPA as it requested a retroactive effective date and ordered METC to make a compliance filing in the proceeding pursuant to Section 206 of the FPA within 30 days of the date of the order. The FERC noted in the METC order that the compliance filing should only remove the two-step averaging methodology and should not carry proration to the calculation of the Formula Rate true-up. On June 17, 2019, our MISO Regulated Operating Subsidiaries made compliance filings consistent with the FERC orders, and on August 21, 2019, the FERC issued orders accepting those compliance filings. On October 1, 2019, our MISO Regulated Operating Subsidiaries, along with other MISO TOs, submitted a filing with the FERC pursuant to Section 205 of the FPA to carry proration to the calculation of the Formula Rate true-up. We do not expect the resolution of these proceedings to have a material adverse impact on our consolidated results of operations, cash flows or financial condition.

Rate of Return on Equity Complaints

See “Rate of Return on Equity Complaints” in Note 14 for a discussion of the ROE complaints.

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6.    GOODWILL AND INTANGIBLE ASSETS

Goodwill

At September 30, 2019 and December 31, 2018, we had goodwill balances recorded at ITCTransmission, METC and ITC Midwest of $173 million, $454 million and $323 million, respectively, which resulted from the ITCTransmission and METC acquisitions and ITC Midwest’s acquisition of the IP&L transmission assets, respectively.

Intangible Assets

We have recorded intangible assets as a result of the METC acquisition in 2006. The carrying value of these assets was $20 million and $22 million (net of accumulated amortization of $39 million and $37 million) as of September 30, 2019 and December 31, 2018, respectively.

We have also recorded intangible assets for payments made by and obligations of ITC Great Plains to certain TOs to acquire rights, which are required under the SPP tariff to designate ITC Great Plains to build, own and operate projects within the SPP region, including regional cost sharing projects in Kansas. The carrying amount of these intangible assets was $14 million (net of accumulated amortization of $2 million) at both September 30, 2019 and December 31, 2018.

We recognized $1 million of amortization expense of our intangible assets during the three months ended September 30, 2019 and 2018, respectively, and recognized $2 million and $3 million of amortization expense of our intangible assets during the nine months ended September 30, 2019 and 2018, respectively. For the balance of intangible assets recorded as of September 30, 2019, we expect the annual amortization of these assets to be $3 million per year for each of the next five years.

7.    LEASES

We enter into operating leases where we are the lessee, primarily for office facilities, equipment, and storage facilities. When a contract contains a lease such that it conveys the right to control the use of an identified asset for a period of time in exchange for consideration, we measure the right-of-use assets and lease liabilities at the present value of future lease payments. We calculate the present value using our incremental borrowing rate, which is a secured interest rate based on the remaining lease term. Our lease payments are substantially all fixed and in some cases escalate according to schedule. Our office facility leases may have lease components and non-lease components which are accounted for as a single lease component. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated statements of financial position. We recognize expenses related to our operating lease obligations on a straight-line basis over the term of the lease. Operating lease costs for the three and nine months ended September 30, 2019 were less than $1 million and $1 million, respectively.

The following table shows the undiscounted future minimum lease payments under our operating leases at September 30, 2019 reconciled to the corresponding discounted lease liabilities presented in our condensed consolidated interim financial statements:

Future Minimum Lease Payments	(in millions)
2019 (excluding nine months ended 9/30/2019)	$	—
2020	1
2021	1
2022	—
2023	1
2024 and beyond	—
Total lease payments	3
Difference between undiscounted cash flows and discounted cash flows	—
Present value of lease liabilities	3
Less: Current operating lease liabilities	(1		)
Noncurrent operating lease liabilities	$	2

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Leases are presented in the condensed consolidated statements of financial position as follows:

(in millions)	Classification	September 30, 2019
Operating Lease Assets	Other assets	$	3
Current Operating Lease Liabilities	Other current liabilities	1
Noncurrent Operating Lease Liabilities	Other liabilities	2

Disclosures Related to Periods Prior to Adoption of the New Lease Guidance

Operating lease costs for the three and nine months ended September 30, 2018 were less than $1 million and $1 million, respectively. Undiscounted future minimum lease payments under the operating leases at December 31, 2018 were as follows:

Future Minimum Lease Payments	(in millions)
2019	$	1
2020	1
2021	1
2022	—
2023 and thereafter	1
Total minimum lease payments	$	4

Supplementary Lease Information

	September 30, 2019
Weighted-average remaining lease term (years)	4.5
Weighted-average discount rate	4.3	%

8.    DEBT

ITC Holdings

Term Loan Credit Agreement

On June 12, 2019, ITC Holdings entered into an unsecured, unguaranteed $400 million term loan credit agreement with a maturity date of June 11, 2021, under which ITC Holdings borrowed $200 million. The proceeds were used for the early redemption of the $200 million 5.50% Senior Notes due January 15, 2020. ITC Holdings has the ability to draw upon the remaining $200 million under the term loan credit agreement by March 12, 2020. The weighted-average interest rate on the borrowing outstanding under this agreement was 2.8% at September 30, 2019.

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. As of September 30, 2019, ITC Holdings had $242 million of commercial paper, net of discount of $1 million, issued and outstanding under the program, with a weighted-average interest rate of 2.3% and weighted average remaining days to maturity of 42 days. The amount outstanding as of September 30, 2019 was classified as debt maturing within one year in the condensed consolidated statements of financial position. As of December 31, 2018, ITC Holdings did not have any commercial paper outstanding.

ITCTransmission

First Mortgage Bonds

On August 28, 2019, ITCTransmission issued $75 million aggregate principal amount of 3.30% First Mortgage Bonds, due August 28, 2049. The proceeds were used to repay existing indebtedness under the revolving credit agreement and will also be used to partially fund capital expenditures and for general corporate purposes. 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.

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METC

Senior Secured Notes

On January 15, 2019, METC issued $50 million of 4.55% Senior Secured Notes, due January 15, 2049. On July 10, 2019, METC issued an additional $50 million of Senior Secured Notes at 4.65% with terms and conditions identical to those of the 4.55% Senior Secured Notes, except the interest rate which includes a 10 basis point premium and the due date which is 30 years from the date of the issuance. The proceeds from both issuances 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.

Derivative Instruments and Hedging Activities

We may 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. The interest rate swaps manage interest rate risk associated with the refinancing of the $400 million term loan at ITC Holdings with a maturity date of June 11, 2021. As of September 30, 2019, ITC Holdings had $200 million outstanding under the term loan described above. At September 30, 2019, ITC Holdings had the following interest rate swaps:

Interest Rate Swaps (in millions, except percentages)	Notional Amount		Weighted Average Fixed Rate		Original Term	Effective Date
July 2019 swap	$	50	1.816	%	5 years	November 2020
August 2019 swap	50		1.488	%	5 years	November 2020
Total	$	100

The 5-year term interest rate swaps call for ITC Holdings to receive interest quarterly at a variable rate equal to LIBOR and to pay interest semi-annually at various fixed rates effective for the 5-year period beginning November 15, 2020. The agreements include a mandatory early termination provision and will be terminated no later than the effective date of the interest rate swaps of November 15, 2020. The interest rate swaps have been determined to be highly effective at offsetting changes in the forecasted interest cash flows associated with the debt issuance, resulting from changes in benchmark interest rates from the trade date of the interest rate swaps to the issuance date of the debt obligation. In October 2019, ITC Holdings entered into two 5-year interest rate swap contracts with notional amounts of $50 million and fixed rates of 1.280% and 1.296%, respectively. These additional interest rate swaps also manage interest rate risk associated with the refinancing of the $400 million term loan at ITC Holdings and have terms comparable to the swaps described above.

The interest rate swaps qualify for cash flow hedge accounting treatment, whereby any gain or loss recognized from the trade date to the effective date is recorded net of tax in AOCI. This amount will be accumulated and amortized as a component of interest expense over the first five years of the forecasted debt. As of September 30, 2019, the fair value of the derivative instruments was a liability of $1 million. The interest rate swaps do not contain credit-risk-related contingent features. Refer to Note 10 for additional fair value information.

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Revolving Credit Agreements

At September 30, 2019, ITC Holdings and certain of its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available:

(in millions)	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	%
ITCTransmission	100		10		90			3.0%	0.10	%
METC	100		53		47			3.0%	0.10	%
ITC Midwest	225		111		114			3.0%	0.10	%
ITC Great Plains	75		35		40			3.0%	0.10	%
Total	$	900	$	209	$	691

____________________________

(a) Included within long-term debt.

(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 $157 million as of September 30, 2019.

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 30, 2019, we were not in violation of any debt covenant.

9.    RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

Pension Plan Benefits

We have a qualified defined benefit pension plan (“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 or use our available funding balance as necessary to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974 or as we deem appropriate. During the nine months ended September 30, 2019, we contributed $4 million to the retirement plan. We do not expect to make any additional contributions to this plan in 2019.

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. During the nine months ended September 30, 2019 , we contributed $1 million to the supplemental benefit plans. We do not expect to make any additional contributions to these plans in 2019.

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

	Three months ended						Nine months ended
	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Service cost	$	1		$	1		$	5		$	5
Interest cost	2			1			4			3
Expected return on plan assets	(2		)	(1		)	(4		)	(3		)
Amortization of unrecognized loss	1			1			1			1
Net pension cost	$	2		$	2		$	6		$	6

The components of net pension cost other than the service cost component are included in Other (income) and expenses, 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, 2019, we contributed $7 million to the postretirement benefit plan. We expect to make additional contributions of $2 million to the postretirement benefit plan during the fourth quarter of 2019.

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

	Three months ended						Nine months ended
	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Service cost	$	2		$	3		$	7		$	8
Interest cost	1			—			3			2
Expected return on plan assets	(1		)	(1		)	(3		)	(3		)
Net postretirement cost	$	2		$	2		$	7		$	7

The components of net postretirement cost other than the service cost component are included in Other (income) and expenses, 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 for each of the three months ended September 30, 2019 and 2018 and $4 million for each of the nine months ended September 30, 2019 and 2018.

10.    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 months ended September 30, 2019 and the year ended December 31, 2018, there were no transfers between levels.

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Our assets and liabilities measured at fair value subject to the three-tier hierarchy at September 30, 2019, 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)	(Level 1)		(Level 2)			(Level 3)
Financial assets measured on a recurring basis:
Cash equivalents	$	1	$	—		$	—
Mutual funds — fixed income securities	50		—			—
Mutual funds — equity securities	7		—			—
Financial liabilities measured on a recurring basis:
Interest rate swap derivatives	—		(1		)	—
Total	$	58	$	(1	)	$	—

Our assets measured at fair value subject to the three-tier hierarchy at December 31, 2018, 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)	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Cash equivalents	$	1	$	—	$	—
Mutual funds — fixed income securities	49		—		—
Mutual funds — equity securities	5		—		—
Total	$	55	$	—	$	—

As of September 30, 2019 and December 31, 2018, 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 described in Note 9. 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 earnings.

The liabilities related to derivatives consist of interest rate swaps discussed in Note 8. The fair value of our interest rate swap derivatives is determined based on a DCF method using LIBOR swap rates, which are observable at commonly quoted intervals.

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 nine months ended September 30, 2019 and 2018. See Note 6 for additional information on our goodwill and intangible assets.

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 and term loan credit agreements and commercial paper, was $5,767 million and $5,186 million at September 30, 2019 and December 31, 2018, 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 and term loan credit agreements and commercial paper, was $5,106 million and $5,130 million at September 30, 2019 and December 31, 2018, respectively.

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Revolving and Term Loan Credit Agreements

At September 30, 2019 and December 31, 2018, we had a consolidated total of $409 million and $208 million, respectively, outstanding under our revolving and term loan credit agreements, which are variable rate loans. The fair value of these loans approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. These fair values represent Level 2 under the three-tier hierarchy described above.

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.

11.    STOCKHOLDER'S EQUITY

Accumulated Other Comprehensive Income

The following table provides the components of changes in AOCI:

	Three months ended					Nine months ended
	September 30,					September 30,
(in millions)	2019			2018		2019			2018
Balance at the beginning of period	$	5		$	4	$	4		$	2
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 the nine months ended September 30, 2019 and 2018) (a)	—			—		1			1
Reclassification of deferred tax effects on interest rate cash flow hedges stranded in AOCI, subject to the TCJA, into retained earnings	—			—		—			1
Loss on interest rate swaps relating to interest rate cash flow hedges (net of tax of less than $1 for the three and nine months ended September 30, 2019)	(1		)	—		(1		)	—
Total other comprehensive income, net of tax	(1		)	—		—			2
Balance at the end of period	$	4		$	4	$	4		$	4

____________________________

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

The amount of net loss relating to interest rate cash flow hedges to be reclassified from AOCI to earnings for the 12-month period ending September 30, 2020 is expected to be approximately $1 million (net of tax of less than $1 million). The reclassification is reported in Interest expense, net in the condensed consolidated statements of comprehensive income on a pre-tax basis.

12. SHARE-BASED COMPENSATION AND EMPLOYEE SHARE PURCHASE PLAN

2017 Omnibus Plan

On March 6, 2019, pursuant to the 2017 Omnibus Plan, we granted 348,904 PBUs and 270,505 SBUs. Each PBU and SBU granted will be valued based on one share of Fortis common stock traded on the Toronto Stock Exchange, converted to U.S. dollars and settled only in cash. The awards vest on the date specified in a particular grant agreement, provided the service and performance criteria, as applicable, are satisfied. The PBUs and SBUs earn dividend equivalents which are also re-measured consistent with the target award and settled in cash at the end of the vesting period. The granted awards and related dividend equivalents have no shareholder rights.

The aggregate fair value of all tranches of PBUs and SBUs as of September 30, 2019 was $51 million and $32 million, respectively. At September 30, 2019, the total unrecognized compensation cost related to the PBUs and SBUs was $22 million and $13 million, respectively.

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Employee Share Purchase Plan

We have an ESPP plan which enables ITC employees to purchase shares of Fortis common stock. Our cost of the plan is based on the value of our contribution, as additional compensation to a participating employee, equal to 10% of an employee’s contribution up to a maximum annual contribution of 1% of an employee’s base pay and an amount equal to 10% of all dividends paid on the Fortis shares allocated to an employee’s ESPP account. The cost of ITC Holdings’ contribution for each of the three and nine months ended September 30, 2019 and 2018 was less than $1 million.

13.    RELATED PARTY TRANSACTIONS

Intercompany 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 intercompany receivables from Fortis and such subsidiaries of $1 million and less than $1 million at September 30, 2019 and December 31, 2018, respectively, and intercompany payables to Fortis and such subsidiaries of less than $1 million at both September 30, 2019 and December 31, 2018.

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 30, 2019 and 2018 for ITC Holdings was $2 million and for each of the nine months ended September 30, 2019 and 2018 was $8 million and $6 million, respectively. Related party billings for services to Fortis and other subsidiaries, recorded as an offset to general and administrative expenses for ITC Holdings, were $1 million for each of the three and nine months ended September 30, 2019 and less than $1 million for each of the three and nine months ended September 30, 2018.

Dividends

During the nine months ended September 30, 2019 and 2018, we paid dividends of $197 million and $150 million, respectively, to Investment Holdings. We also paid dividends of $53 million to Investment Holdings in October 2019.

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 Investment Holdings. Additionally, we record income taxes based on our separate company tax position and make or receive tax-related payments with Investment Holdings. We did not make or receive any tax-related payments during the nine months ended September 30, 2019.

14.    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, establish standards for the management, treatment, storage, transportation and disposal of solid and hazardous wastes and hazardous materials, 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 results of operations, financial position or liquidity.

Our assets and operations also involve the use of materials classified as hazardous, toxic or otherwise dangerous. Many 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 aboveground 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. Our facilities and equipment are often situated on or near property owned by others so that, if they are the source of contamination, others’ property may be affected. For example, aboveground

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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 us with respect to environmental contamination relating to these properties, or of any investigation or remediation of contamination at these properties, that entail costs likely to materially affect us. Some facilities and properties are located near environmentally sensitive areas such as wetlands.

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 have been 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.

A summary of the two complaints is as follows:

Complaint	15-Month Refund Period of Complaint (Beginning as of Complaint Filing Date)	Original Base ROE Authorized by the FERC at Time of Complaint Filing Date (a)	Base ROE Subsequently Authorized by the FERC for the Initial Complaint Period and also effective for the period from September 28, 2016 to current (a)	Reserve (Pre-Tax and Including Interest) as of September 30, 2019 (in millions)
Initial	11/12/2013 - 2/11/2015	12.38%	10.32%	$	—	(b)
Second	2/12/2015 - 5/11/2016	12.38%	N/A	157

____________________________

(a) The ROE collected through the MISO Regulated Operating Subsidiaries’ rates during the period November 12, 2013 through September 27, 2016, a portion of which was later refunded to customers for the period of the Initial Complaint, consisted of a base ROE of 12.38% plus applicable incentive adders.

(b) In 2017, $118 million, including interest, was refunded to customers of our MISO Regulated Operating Subsidiaries for the Initial Complaint based on the refund liability associated with the September 2016 Order.

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.

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. 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. The September 2016 Order required all MISO TOs, including our MISO Regulated Operating Subsidiaries, to provide refunds, which were completed in 2017. 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.

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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. On September 29, 2017, certain MISO TO’s, including our MISO Regulated Operating Subsidiaries, filed a motion for the FERC to dismiss the Second Complaint. We had recorded an aggregate estimated current regulatory liability in the condensed consolidated statements of financial position of $157 million and $151 million as of September 30, 2019 and December 31, 2018, respectively, for the Second Complaint.

The recognition of the obligations associated with the complaints resulted in the following impacts:

	Three months ended				Nine months ended
	September 30,				September 30,
(in millions)	2019		2018		2019		2018
Revenue increase	$	—	$	—	$	—	$	(1	)
Interest expense increase	2		2		6		5
Estimated net income reduction	2		1		5		3

Prior to the filing of the MISO ROE complaints, complaints were filed with the FERC regarding the regional base ROE rate for ISO New England TOs. In resolving these complaints, the FERC adopted a methodology for establishing base ROE rates based on a two-step DCF analysis. This methodology provided the precedent for the FERC ruling on the Initial Complaint and the ALJ initial decision on the Second Complaint for our MISO Regulated Operating Subsidiaries. In April 2017, the D.C. Circuit Court vacated the precedent-setting FERC orders that established and applied the two-step DCF methodology for the determination of base ROE. The court remanded the orders to the FERC for further justification of its establishment of the new base ROE for the ISO New England TOs. On October 16, 2018, in the New England matters, the FERC issued an order on remand which proposes a new methodology for 1) determining when an existing ROE is no longer just and reasonable; and 2) setting a new just and reasonable ROE if an existing ROE has been found not to be just and reasonable. The FERC established a paper hearing on how the proposed new methodology should apply to the ISO New England TOs ROE complaint proceedings. The FERC issued a similar order, the November 2018 Order, in the MISO TO base ROE complaint proceedings establishing a paper hearing on the application of the proposed new methodology to the proceedings pending before the FERC involving the MISO TOs’ ROE, including our MISO Regulated Operating Subsidiaries. Briefs and reply briefs in the New England proceedings were filed on January 11, 2019 and March 8, 2019, respectively. Briefs and reply briefs in the MISO proceedings were filed on February 13, 2019 and April 10, 2019, respectively.

The November 2018 Order included illustrative calculations for the ROE that may be established for the Initial Complaint, using the FERC's proposed methodology with financial data from the proceedings related to that complaint. If the results of these illustrative calculations are confirmed in a final FERC order, then the application of the base ROE and the maximum ROE would not have a significant adverse impact on our financial condition, results of operations and cash flows.

Although the November 2018 Order provided illustrative calculations, the FERC stated that these calculations are merely preliminary. The FERC’s preliminary calculations are not binding and could change, as significant changes to the methodology by the FERC are possible, as a result of the paper hearing process. Until there is more certainty around the ultimate resolution of these matters, we cannot reasonably update an estimated range of gain or loss for any of the complaint proceedings or estimate a range of gain or loss for the period subsequent to the end of the Second Complaint refund period. The November 2018 Order and our response to the order through briefs and reply briefs filed on February 13, 2019 and April 10, 2019, respectively, do not provide a reasonable basis for a change to the reserve or recognized ROEs for any of the complaint refund periods nor all subsequent periods, and we believe that the risk of additional material loss beyond amounts already accrued is remote.

Our MISO Regulated Operating Subsidiaries currently record revenues at the base ROE of 10.32% established in the September 2016 Order on the Initial Complaint plus applicable incentive adders. See Note 5 for a summary of incentive adders for transmission rates.

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As of September 30, 2019, 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.

Development Projects

We are pursuing strategic development projects that may result in payments to developers that are contingent on the projects reaching certain milestones indicating that the projects are financially viable. We believe it is reasonably possible that we will be required to make these contingent development payments up to a maximum amount of $120 million for the period from 2020 through 2023. In the event it becomes probable that we will make these payments, we would recognize the liability and the corresponding intangible asset or expense as appropriate.

15.    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,
(in millions)	2019		2018		2018		2017
Cash and cash equivalents	$	4	$	18	$	6	$	66
Restricted cash included in:
Other non-current assets	2		4		4		2
Total cash, cash equivalents and restricted cash	$	6	$	22	$	10	$	68

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.

Supplementary Cash Flows Information

	Nine months ended
	September 30,
(in millions)	2019		2018
Supplementary cash flows information:
Interest paid (net of interest capitalized)	$	162	$	164
Income tax refunds received	1		13
Supplementary non-cash investing and financing activities:
Additions to property, plant and equipment and other long-lived assets (a)	103		102
Allowance for equity funds used during construction	23		26
Right-of-use assets obtained in exchange for new operating lease liabilities	4		—

____________________________

(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 30, 2019 or 2018, respectively, but will be or have been included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid.

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16.    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
OPERATING REVENUES:	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Regulated Operating Subsidiaries	$	329		$	302		$	970		$	886
Intercompany eliminations	(8		)	(7		)	(22		)	(22		)
Total Operating Revenues	$	321		$	295		$	948		$	864

	Three months ended						Nine months ended
INCOME (LOSS) BEFORE INCOME TAXES:	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Regulated Operating Subsidiaries	$	159		$	151		$	465		$	441
ITC Holdings and other	(38		)	(36		)	(113		)	(104		)
Total Income Before Income Taxes	$	121		$	115		$	352		$	337

	Three months ended						Nine months ended
NET INCOME:	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Regulated Operating Subsidiaries	$	124		$	112		$	350		$	327
ITC Holdings and other	98			89			269			250
Intercompany eliminations	(124		)	(112		)	(350		)	(327		)
Total Net Income	$	98		$	89		$	269		$	250

TOTAL ASSETS:	September 30,			December 31,
(in millions)	2019			2018
Regulated Operating Subsidiaries	$	9,827		$	9,224
ITC Holdings and other	5,295			4,977
Reconciliations / Intercompany eliminations (a)	(5,197		)	(4,872		)
Total Assets	$	9,925		$	9,329

____________________________

(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.

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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 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 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, 2018:

• 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 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 expect to incur expenses related to the pursuit of development 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.

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

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

• 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 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.

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• Acts of war, terrorist attacks, natural disasters, severe weather 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.

• 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

ITC Holdings and its subsidiaries are engaged in the transmission of electricity in the United States. ITC Holdings is a wholly-owned subsidiary of Investment Holdings. Through our Regulated Operating Subsidiaries, we own and operate high-voltage systems in Michigan’s Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma that transmit electricity from generating stations to local distribution facilities connected to our systems. Our business strategy is to own, operate, maintain and invest in transmission infrastructure in order to enhance system integrity and reliability, reduce transmission constraints and support new generating resources to interconnect to our transmission systems. We also are pursuing development projects outside our existing systems.

As electric transmission utilities with rates regulated by the FERC, our Regulated Operating Subsidiaries earn revenues for the use of their electric transmission systems by our 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 in Note 5 to the condensed consolidated interim financial statements.

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.

Significant recent matters that influenced our financial position, results of operations and cash flows for the nine months ended September 30, 2019 or that may affect future results include:

• Our capital expenditures of $682 million at our Regulated Operating Subsidiaries during the nine months ended September 30, 2019 as described below under “ — Capital Investment and Operating Results Trends,” resulting primarily from our focus on improving system reliability, increasing system capacity and upgrading the transmission network to support new generating resources, which includes an asset acquisition from Consumers Energy of $76 million, of which $34 million is an acquisition premium that is excluded from rate base;

• Debt issuances and repayments as described in Note 8 to the condensed consolidated interim financial statements, including issuance of Senior Secured Notes by METC, First Mortgage Bonds by ITCTransmission and borrowings under our revolving and term loan credit agreements and commercial paper program to fund capital investment at our Regulated Operating Subsidiaries as well as for general corporate purposes;

• An estimated current regulatory liability for our MISO Regulated Operating Subsidiaries of $157 million as of September 30, 2019 for the potential refund relating to the Second Complaint, as described in Note 14 to the condensed consolidated interim financial statements; and

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• Two notices of inquiry issued by the FERC on March 21, 2019 seeking comments on (1) whether and how policies concerning the determination of the base ROE for electric utilities should be modified, and (2) its electric transmission incentives policy.

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

Recent Developments

Rate of Return on Equity Complaints

Two complaints have been filed with the FERC by combinations of consumer advocates, consumer groups, municipal parties and other parties challenging the base ROEs in MISO. See Note 14 to the condensed consolidated interim financial statements for a summary of the complaints and related proceedings.

In 2017, $118 million, including interest, was refunded to customers of our MISO Regulated Operating Subsidiaries for the Initial Complaint based on the refund liability associated with the September 2016 Order. As of September 30, 2019 we had recorded an aggregate estimated current regulatory liability in the condensed consolidated statements of financial position of $157 million for the Second Complaint. The recognition of the obligations associated with the complaints resulted in the following impacts:

	Three months ended				Nine months ended
	September 30,				September 30,
(in millions)	2019		2018		2019		2018
Revenue increase	$	—	$	—	$	—	$	(1	)
Interest expense increase	2		2		6		5
Estimated net income reduction	2		1		5		3

Prior to the filing of the MISO ROE complaints, complaints were filed with the FERC regarding the regional base ROE rate for ISO New England TOs. In resolving these complaints, the FERC adopted a methodology for establishing base ROE rates based on a two-step DCF analysis. This methodology provided the precedent for the FERC ruling on the Initial Complaint and the ALJ initial decision on the Second Complaint for our MISO Regulated Operating Subsidiaries. In April 2017, the D.C. Circuit Court vacated the precedent-setting FERC orders that established and applied the two-step DCF methodology for the determination of base ROE. The court remanded the orders to the FERC for further justification of its establishment of the new base ROE for the ISO New England TOs. On October 16, 2018, in the New England matters, the FERC issued an order on remand which proposes a new methodology for 1) determining when an existing ROE is no longer just and reasonable; and 2) setting a new just and reasonable ROE if an existing ROE has been found not to be just and reasonable. The FERC established a paper hearing on how the proposed new methodology should apply to the ISO New England TOs ROE complaint proceedings. The FERC issued a similar order, the November 2018 Order, in the MISO TO base ROE complaint proceedings establishing a paper hearing on the application of the proposed new methodology to the proceedings pending before the FERC involving the MISO TOs’ ROE, including our MISO Regulated Operating Subsidiaries. Briefs and reply briefs in the New England proceedings were filed on January 11, 2019 and March 8, 2019, respectively. Briefs and reply briefs in the MISO proceedings were filed on February 13, 2019 and April 10, 2019, respectively.

The November 2018 Order included illustrative calculations for the ROE that may be established for the Initial Complaint, using the FERC's proposed methodology with financial data from the proceedings related to that complaint. If the results of these illustrative calculations are confirmed in a final FERC order, then the application of the base ROE and the maximum ROE would not have a significant adverse impact on our financial condition, results of operations and cash flows.

Although the November 2018 Order provided illustrative calculations, the FERC stated that these calculations are merely preliminary. The FERC’s preliminary calculations are not binding and could change, as significant changes to the methodology by the FERC are possible, as a result of the paper hearing process. Until there is more certainty around the ultimate resolution of these matters, we cannot reasonably update an estimated range of gain or loss for any of the complaint proceedings or estimate a range of gain or loss for the period subsequent to the end of the Second Complaint refund period. The November 2018 Order and our response to the order through briefs and reply briefs filed on February 13, 2019 and April 10, 2019, respectively, do not provide a reasonable basis for a change to the reserve or recognized ROEs for any of the complaint refund periods nor all subsequent periods, and we believe that the risk of additional material loss beyond amounts already accrued is remote. On March 21, 2019, the FERC issued a notice of inquiry seeking comments on whether and how policies concerning

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the determination of the base ROE for electric utilities should be modified, which is still pending. The FERC’s consideration of responses to this notice of inquiry may impact our future base ROE.

Our MISO Regulated Operating Subsidiaries currently record revenues at the base ROE of 10.32% established in the September 2016 Order on the Initial Complaint plus applicable incentive adders. See Note 5 to the condensed consolidated interim financial statements for a summary of incentive adders for transmission rates.

As of September 30, 2019, 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.

Challenges to Incentive Adders for Transmission Rates

On March 21, 2019, the FERC issued a notice of inquiry seeking comments on its electric transmission incentives policy, which is still pending. The FERC’s consideration of responses to this inquiry may impact the incentive adders that our Regulated Operating Subsidiaries are authorized to apply to their base ROEs. See Note 5 to the condensed consolidated interim financial statements for a summary of incentive adders for transmission rates.

MISO Regulated Operating Subsidiaries

On April 20, 2018, Consumers Energy, IP&L, Midwest Municipal Transmission Group, Missouri River Energy Services, Southern Minnesota Municipal Power Agency and WPPI Energy filed a complaint with the FERC under section 206 of the FPA, challenging the adders for independent transmission ownership that are included in transmission rates charged by the MISO Regulated Operating Subsidiaries. The adders for independent transmission ownership allowed up to 50 basis points or 100 basis points to be added to the MISO Regulated Operating Subsidiaries’ authorized ROE, subject to any ROE cap established by the FERC. On October 18, 2018, the FERC issued an order granting the complaint in part, setting revised adders for independent transmission ownership for each of the MISO Regulated Operating Subsidiaries to 25 basis points, and requiring the MISO Regulated Operating Subsidiaries to include the revised adders, effective April 20, 2018, in their Formula Rates. In addition, the order directed the MISO Regulated Operating Subsidiaries to provide refunds, with interest, for the period from April 20, 2018 through October 18, 2018. The MISO Regulated Operating Subsidiaries began reflecting the 25 basis point adder for independent transmission ownership in transmission rates in November 2018. Refunds of $7 million were primarily made in the fourth quarter of 2018 and were completed in the first quarter of 2019. The MISO Regulated Operating Subsidiaries sought rehearing of the FERC’s October 18, 2018 order, and on July 18, 2019, the FERC denied the rehearing request. On September 11, 2019, the MISO Regulated Operating Subsidiaries filed an appeal of the FERC’s order in the D.C. Circuit Court. We do not expect the final resolution of this proceeding to have a material adverse impact on our consolidated results of operations, cash flows or financial condition.

ITC Great Plains

On June 11, 2019, KCC filed a complaint with the FERC under section 206 of the FPA, challenging the ROE adder for independent transmission ownership that is included in the transmission rate charged by ITC Great Plains. The complaint argues that because ITC Great Plains is similarly situated to our MISO Regulated Operating Subsidiaries with respect to ownership by Fortis and GIC, the same rationale by which the FERC lowered the MISO Regulated Operating Subsidiaries adders for independent transmission ownership, as discussed above, also applies to ITC Great Plains. The adder for independent transmission ownership allows up to 100 basis points to be added to the ITC Great Plains authorized ROE, subject to any ROE cap established by the FERC. ITC Great Plains filed an answer to the complaint on July 1, 2019 asking the FERC to deny the complaint since KCC showed no evidence that ITC Great Plains’ independence or the benefits it provides as an independent TO has been compromised or reduced as a result of the Fortis and GIC acquisition. We do not expect the resolution of this proceeding to have a material adverse impact on our consolidated results of operations, cash flows or financial position.

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 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.

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Under these Formula Rates, our Regulated Operating Subsidiaries recover expenses and earn a 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 differences between actual and projected monthly 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 allowed returns.

See “Cost-Based Formula Rates with True-Up Mechanism” in Note 5 to the condensed consolidated interim financial statements for further discussion of our Formula Rates and see “Rate of Return on Equity Complaints” in Note 14 to the condensed consolidated interim financial statements for detail on ROE matters.

Revenue Accruals and Deferrals — Effects of Monthly Peak Loads

For our MISO Regulated Operating Subsidiaries, monthly 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 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 peak loads do not impact operating revenues recognized, network load affects the timing of our cash flows from transmission service. The monthly peak load of our MISO Regulated Operating Subsidiaries is generally impacted by weather and economic conditions and seasonally shaped with higher load in the summer months when cooling demand is higher.

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 revenues and earnings, subject to the impact of any rate changes and required refunds resulting from the resolution of the ROE complaints as described in Note 14 to the condensed consolidated interim financial statements.

The primary factor that is expected to continue to increase our revenues and earnings in future years is increased rate base that would result 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.

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 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 the current transmission infrastructure; (2) enhance system integrity and reliability and accommodate load growth; (3) upgrade physical and technological grid security; and (4) develop and build regional transmission infrastructure, including additional transmission

30

facilities that will provide interconnection opportunities for generating facilities. The following table shows our actual and expected capital expenditures at our Regulated Operating Subsidiaries:

	Actual Capital		Forecasted
	Expenditures for the		Capital
	Nine Months Ended		Expenditures
(in millions)	September 30, 2019		2020 — 2024
Expenditures for property, plant and equipment (a)	$	682	$	3,746

____________________________

(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 AFDUC equity as well as accrued liabilities for construction, labor and materials that have not yet been paid.

We are pursuing development projects that could result in a significant amount of capital investment, but we are not able to estimate the amounts we ultimately expect to invest or the timing of such investments. Our capital investment efforts relating to development initiatives are based on establishing an ongoing pipeline of projects that would position us for long-term growth. Refer to “Item 1 Business — Development of Business” in our Form 10-K for the year ended December 31, 2018 for a discussion of our development activities.

Investments in property, plant and equipment could vary due to, among other things, the impact of actual loads, forecasted loads, regional economic conditions, weather conditions, union strikes, labor shortages, material and equipment prices and availability, our ability to obtain any necessary financing for such expenditures, limitations on the amount of construction that can be undertaken on our systems at any one time, regulatory approvals for reasons relating to rate construct, environmental, siting, regional planning, cost recovery or other issues or as a result of legal proceedings, variances between estimated and actual costs of construction contracts awarded and the potential for greater competition for new development projects. 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.

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RESULTS OF OPERATIONS

Results of Operations and Variances

	Three months ended									Percentage		Nine months ended									Percentage
	September 30,						Increase			increase		September 30,						Increase			increase
(in millions)	2019			2018			(decrease)			(decrease)		2019			2018			(decrease)			(decrease)
OPERATING REVENUES
Transmission and other services	$	354		$	350		$	4		1	%	$	931		$	932		$	(1	)	—	%
Formula Rate true-up	(33		)	(55		)	22			(40	)%	17			(68		)	85			(125	)%
Total operating revenues	321			295			26			9	%	948			864			84			10	%
OPERATING EXPENSES
Operation and maintenance	31			29			2			7	%	88			80			8			10	%
General and administrative	35			32			3			9	%	111			91			20			22	%
Depreciation and amortization	51			45			6			13	%	149			133			16			12	%
Taxes other than income taxes	30			27			3			11	%	89			82			7			9	%
Other operating (income) and expenses, net	—			(1		)	1			(100	)%	—			(2		)	2			(100	)%
Total operating expenses	147			132			15			11	%	437			384			53			14	%
OPERATING INCOME	174			163			11			7	%	511			480			31			7	%
OTHER EXPENSES (INCOME)
Interest expense, net	60			56			4			7	%	183			167			16			10	%
Allowance for equity funds used during construction	(7		)	(8		)	1			(13	)%	(23		)	(26		)	3			(12	)%
Other (income) and expenses, net	—			—			—			—	%	(1		)	2			(3		)	(150	)%
Total other expenses (income)	53			48			5			10	%	159			143			16			11	%
INCOME BEFORE INCOME TAXES	121			115			6			5	%	352			337			15			5	%
INCOME TAX PROVISION	23			26			(3		)	(12	)%	83			87			(4		)	(5	)%
NET INCOME	$	98		$	89		$	9		10	%	$	269		$	250		$	19		8	%

Operating Revenues

Three and nine months ended September 30, 2019 compared to three and nine months ended September 30, 2018

The following table sets forth the components of and changes in operating revenues for the three months ended September 30, 2019 and 2018 which included revenue accruals and deferrals as described in Note 5 to the condensed consolidated interim financial statements:

												Percentage
	2019				2018				Increase			increase
(in millions)	Amount		Percentage		Amount		Percentage		(decrease)			(decrease)
Network revenues (a)	$	214	67	%	$	198	67	%	$	16		8	%
Regional cost sharing revenues (a)	96		30	%	86		29	%	10			12	%
Point-to-point	3		1	%	3		1	%	—			—	%
Scheduling, control and dispatch (a)	5		1	%	3		1	%	2			67	%
Other	3		1	%	5		2	%	(2		)	(40	)%
Total	$	321	100	%	$	295	100	%	$	26		9	%

____________________________

(a) Includes a portion of the Formula Rate true-up of $(33) million and $(55) million for the three months ended September 30, 2019 and 2018, respectively.

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The following table sets forth the components of and changes in operating revenues for the nine months ended September 30, 2019 and 2018 which included revenue accruals and deferrals as described in Note 5 to the condensed consolidated interim financial statements:

												Percentage
	2019				2018				Increase			increase
(in millions)	Amount		Percentage		Amount		Percentage		(decrease)			(decrease)
Network revenues (a)	$	630	67	%	$	577	67	%	$	53		9	%
Regional cost sharing revenues (a)	279		29	%	247		29	%	32			13	%
Point-to-point	9		1	%	10		1	%	(1		)	(10	)%
Scheduling, control and dispatch (a)	12		1	%	11		1	%	1			9	%
Other	18		2	%	19		2	%	(1		)	(5	)%
Total	$	948	100	%	$	864	100	%	$	84		10	%

____________________________

(a) Includes a portion of the Formula Rate true-up of $17 million and $(68) million for the nine months ended September 30, 2019 and 2018, respectively.

Network revenues increased primarily due to higher net network revenue requirements at our Regulated Operating Subsidiaries, partially offset by an increase in revenue credits resulting from higher regional cost sharing revenue requirements, during the three and nine months ended September 30, 2019 as compared to the same period in 2018. Higher net network revenue requirements were due primarily to a higher rate base associated with higher balances of property, plant and equipment in-service.

Regional cost sharing revenues increased primarily due to additional capital projects eligible for regional cost sharing and these projects being placed into service, in addition to higher accumulated investment for existing regional cost sharing projects for the three and nine months ended September 30, 2019 as compared to the same period in 2018.

Operating Expenses

Operation and maintenance expenses

Nine months ended September 30, 2019 compared to nine months ended September 30, 2018

Operation and maintenance expenses increased primarily due to higher expenses associated with substation maintenance activities and vegetation management requirements, as well as an increase in vehicle and equipment expenses.

General and administrative expenses

Three and nine months ended September 30, 2019 compared to three and nine months ended September 30, 2018

General and administrative expenses increased due to higher compensation-related expenses primarily due to additional share-based compensation expenses and personnel additions. This increase was partially offset by lower professional services, such as legal and advisory service fees, related to various development initiatives.

Depreciation and amortization expense

Three and nine months ended September 30, 2019 compared to three and nine months ended September 30, 2018

Depreciation and amortization expenses increased primarily due to a higher depreciable base resulting from property, plant and equipment in-service additions.

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Other Expenses (Income)

Interest expense, net

Three and nine months ended September 30, 2019 compared to three and nine months ended September 30, 2018

Interest expense, net increased primarily due to long-term debt issuances subsequent to September 30, 2018 which resulted in overall higher carrying balances of long-term debt. In addition, we recorded accelerated interest as a result of the make-whole premium associated with the early redemption of long-term debt.

Income Tax Provision

Three months ended September 30, 2019 compared to three months ended September 30, 2018

Our effective tax rates for the three months ended September 30, 2019 and 2018 were 19% and 23%, respectively. Our effective tax rate for the three months ended September 30, 2019 is below our 21% statutory federal income tax rate primarily due to state income tax benefits and AFUDC equity during the period. The amount of income tax expense relating to AFUDC equity was recognized as a regulatory asset and is not included in the income tax provision.

Nine months ended September 30, 2019 compared to nine months ended September 30, 2018

Our effective tax rates for the nine months ended September 30, 2019 and 2018 were 24% and 26%, respectively. Our effective tax rate for the nine months ended September 30, 2019 exceeded our 21% statutory federal income tax rate primarily due to state income taxes, partially offset by AFUDC equity. During the nine months ended September 30, 2018, Iowa enacted a reduction in corporate statutory income tax rates from 12.0% to 9.8%, effective January 1, 2021. Based upon the future change in rate, we revalued the Iowa NOL at ITC Holdings. As a result, additional income tax expense was recorded in 2018. The amount of income tax expense relating to AFUDC equity was recognized as a regulatory asset and is not included in the income tax provision.

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 and term loan credit agreements (the terms of which are described in Note 8 to the condensed consolidated interim financial statements). In addition, we may from time to time secure debt funding in the capital markets, 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 business development expenses and related capital expenditures. We are pursuing development activities for projects that will continue to result in the incurrence of development expenses and could result in significant capital expenditures incremental to our current plan. Refer to Note 14 to the condensed consolidated interim financial statements for a discussion of contingent payments related to development projects.

• Fund working capital requirements.

• Fund our debt service requirements, including principal repayments and periodic interest payments, which are further described in detail below under “— Contractual Obligations.”

• Fund any refund obligation in connection with the Second Complaint.

In addition to the expected capital requirements above, any adverse determinations or settlements relating to the regulatory matters or contingencies described in Notes 5 and 14 to the condensed consolidated interim financial statements would result in additional capital requirements.

We believe that we have sufficient capital resources to meet our currently anticipated short-term needs. We rely on both internal and external sources of liquidity to provide working capital and fund capital investments. 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,

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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 and term loan credit agreements as well as our cash and cash equivalents as needed to meet our short-term cash requirements. As of September 30, 2019, we had consolidated indebtedness under our revolving and term loan credit agreements of $409 million, with unused capacity under our revolving credit agreements of $691 million and unused capacity under the term loan credit agreement of $200 million. Additionally, ITC Holdings had $242 million of commercial paper issued and outstanding, net of discount, as of September 30, 2019, with the ability to issue an additional $157 million under the commercial paper program. See Note 8 to the condensed consolidated interim financial statements for a detailed discussion of the commercial paper program, our revolving and term loan credit agreements and other debt activity during 2019.

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 reasonably satisfactory to us due to our strong credit ratings and our historical ability to obtain financing.

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. On September 26, 2019, S&P revised the ratings of senior unsecured notes at ITC Holdings from A- to BBB+, reflecting expected increases in the ratio of debt at our Regulated Operating Subsidiaries relative to amounts at ITC Holdings. All other ratings were reaffirmed and the outlook remains unchanged. Additional information related to our credit ratings and 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, 2018.

Covenants

Our debt instruments contain numerous financial and operating covenants that place significant restrictions on certain transactions as well as require us to meet certain financial ratios, which are described in Note 8 to the condensed consolidated interim financial statements. As of September 30, 2019, 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 may increase.

Cash Flows From Operating Activities

Net cash provided by operating activities was $450 million and $494 million for the nine months ended September 30, 2019 and 2018, respectively. The decrease in cash provided by operating activities was primarily due to lower receipts from operating revenues of $17 million, lower tax refunds received of $12 million, higher property tax payments of $6 million and an increase in payments for operation and maintenance expenses during the nine months ended September 30, 2019 compared to the same period in 2018.

Cash Flows From Investing Activities

Net cash used in investing activities was $676 million and $533 million for the nine months ended September 30, 2019 and 2018, respectively. The increase in cash used in investing activities was primarily due to an increase in capital expenditures of $126 million, including the asset acquisition of $76 million from Consumer’s Energy, and a decrease in contributions received in aid of construction of $18 million during the nine months ended September 30, 2019 compared to the same period in 2018.

Cash Flows From Financing Activities

Net cash provided by financing activities was $222 million for the nine months ended September 30, 2019 and net cash used in financing activities was $7 million for the nine months ended September 30, 2018. The increase in cash provided by financing activities was primarily due to an increase in net borrowings under our revolving and term loan credit agreements of $181 million and an increase in net issuances of commercial paper of $243 million during the nine months ended September 30, 2019 compared to the same period in 2018. These increases were partially offset by a decrease in issuances of long-term debt of $50 million, an increase in retirement of long-term debt of $103 million and an increase in dividend payments of $47 million during the nine months ended September 30, 2019 compared to the same period in 2018. See Note 8 to the condensed

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consolidated interim financial statements for detail on the issuances and a description of our revolving credit agreements and our commercial paper program.

CONTRACTUAL OBLIGATIONS

Our contractual obligations are described in our Form 10-K for the year ended December 31, 2018. There have been no material changes to that information since December 31, 2018, other than the items listed below and described in Note 8 to the condensed consolidated interim financial statements:

• Changes in amounts borrowed under our unsecured, unguaranteed revolving credit agreements;

• Changes in commercial paper issued under the commercial paper program for ITC Holdings;

• The issuance of $75 million of 3.30% First Mortgage Bonds, Series H, due August 28, 2049, by ITCTransmission;

• The issuance of $50 million of 4.55% Senior Secured Notes, due January 15, 2049, by METC; and an additional $50 million of 4.65% Senior Secured Notes, due July 10, 2049, with terms and conditions identical to those of the 4.55% Senior Secured Notes, except the interest rate which includes a 10 basis point premium and the due date which is 30 years from the date of the issuance; and

• The borrowing of $200 million under the unsecured, unguaranteed term loan credit agreement due June 11, 2021 by ITC Holdings, the proceeds of which were used for the early redemption of the $200 million 5.50% Senior Notes due January 15, 2020.

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.

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 year ended December 31, 2018 are considered by management to be the most important to an understanding of the consolidated 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 months ended September 30, 2019.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 to the condensed consolidated interim financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET 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 and term loan credit agreements and commercial paper was $5,767 million at September 30, 2019. 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 and term loan credit agreements and commercial paper, was $5,106 million at September 30, 2019. We performed an analysis calculating the impact of changes in interest rates on the fair value of long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements and commercial paper at September 30, 2019. An increase in interest rates of 10% (from 5.0% to 5.5%, for example) at September 30, 2019 would decrease the fair value of debt by $211 million, and a decrease in interest rates of 10% at September 30, 2019 would increase the fair value of debt by $226 million at that date.

Revolving and Term Loan Credit Agreements

At September 30, 2019, we had a consolidated total of $409 million outstanding under our revolving and term loan credit agreements, which are variable rate loans and fair value approximates book value. A 10% increase or decrease in borrowing rates under the revolving and term loan credit agreements compared to the weighted average rates in effect at September 30,

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2019 would increase or decrease interest expense by $1 million for an annual period with a constant borrowing level of $409 million.

Commercial Paper

At September 30, 2019, ITC Holdings had $242 million 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 interest rates for commercial paper would increase or decrease interest expense by less than $1 million for an annual period with a continuous level of commercial paper outstanding of $242 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.

As of September 30, 2019, we held 5-year interest rate swap contracts with a notional amount of $100 million, which manages interest rate risk associated with the refinancing of the $400 million term loan at ITC Holdings with a maturity date of June 11, 2021. As of September 30, 2019, ITC Holdings had $200 million outstanding under the term loan credit agreement. See Note 8 to the condensed consolidated interim financial statements for further discussion on these interest rate swaps.

Other

As described in our Form 10-K for the year ended December 31, 2018, we are subject to commodity price risk from market price fluctuations, and to credit risk primarily with DTE Electric, Consumers Energy and IP&L, our primary customers. There have been no material changes in these risks during the nine months ended September 30, 2019.

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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), is 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 30, 2019 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 14 to the condensed consolidated interim financial statements for a description of recent developments in the ROE complaints filed against all MISO TOs, including our MISO Regulated Operating Subsidiaries.

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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, 2018. There have been no material changes to the risk factors set forth therein.

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
10.193	Eighth Supplemental Indenture, dated as of August 14, 2019, between International Transmission Company and The Bank of New York Mellon Company, N.A. (as successor to BNY Midwest Trust Company), as trustee (filed with Registrant’s Form 8-K on August 28, 2019)
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 30, 2019, formatted in Inline XBRL

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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 31, 2019

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)

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EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Linda H. Apsey, certify that:

1. I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2019 of ITC Holdings Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: October 31, 2019

/s/ Linda H. Apsey

Linda H. Apsey

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gretchen L. Holloway, certify that:

1. I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2019 of ITC Holdings Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: October 31, 2019

/s/ Gretchen L. Holloway

Gretchen L. Holloway

Senior Vice President and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ITC Holdings Corp. (the “Registrant”) on Form 10-Q for the quarterly period ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Linda H. Apsey, President and Chief Executive Officer of the Registrant, and Gretchen L. Holloway, Senior Vice President and Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: October 31, 2019

/s/ Linda H. Apsey

Linda H. Apsey

President and Chief Executive Officer

/s/ Gretchen L. Holloway

Gretchen L. Holloway
Senior Vice President and Chief Financial Officer

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SEGMENT INFORMATION (Details) - USD ($) $ in Millions		3 Months Ended						9 Months Ended
		Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
OPERATING REVENUES:
Operating revenues		$ 321			$ 295			$ 948	$ 864
INCOME (LOSS) BEFORE INCOME TAXES:
Income before income taxes		121			115			352	337
NET INCOME:
NET INCOME		98	$ 87	$ 84	89	$ 79	$ 82	269	250
TOTAL ASSETS:
Assets		9,925						9,925		$ 9,329
Regulated Operating Subsidiaries
OPERATING REVENUES:
Operating revenues		329			302			970	886
INCOME (LOSS) BEFORE INCOME TAXES:
Income before income taxes		159			151			465	441
NET INCOME:
NET INCOME		124			112			350	327
TOTAL ASSETS:
Assets		9,827						9,827		9,224
ITC Holdings and other
INCOME (LOSS) BEFORE INCOME TAXES:
Income before income taxes		(38)			(36)			(113)	(104)
NET INCOME:
NET INCOME		98			89			269	250
TOTAL ASSETS:
Assets		5,295						5,295		4,977
Intercompany eliminations
OPERATING REVENUES:
Operating revenues		(8)			(7)			(22)	(22)
NET INCOME:
NET INCOME		(124)			$ (112)			(350)	$ (327)
TOTAL ASSETS:
Assets	[1]	$ (5,197)						$ (5,197)		$ (4,872)

[1] 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

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RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended						9 Months Ended
	Oct. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Intercompany receivables (less than $1 million)		$ 1						$ 1		$ 1
Intercompany payables (less than $1 million)		1						1		$ 1
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party		2			$ 2			8	$ 6
Related Party Transaction, Other Revenues from Transactions with Related Party (less than $1 million)		1			1			1	1
Payments of Dividends		$ 52	$ 73	$ 72	$ 50	$ 50	$ 50	$ 197	$ 150
Subsequent Event
Payments of Dividends	$ 53

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Assets and Liabilities at Fair Value Subject to Three-Tier Hierarchy

Our assets and liabilities measured at fair value subject to the three-tier hierarchy at September 30, 2019, 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)	(Level 1)		(Level 2)			(Level 3)
Financial assets measured on a recurring basis:
Cash equivalents	$	1	$	—		$	—
Mutual funds — fixed income securities	50		—			—
Mutual funds — equity securities	7		—			—
Financial liabilities measured on a recurring basis:
Interest rate swap derivatives	—		(1		)	—
Total	$	58	$	(1	)	$	—

Our assets measured at fair value subject to the three-tier hierarchy at December 31, 2018, 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)	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Cash equivalents	$	1	$	—	$	—
Mutual funds — fixed income securities	49		—		—
Mutual funds — equity securities	5		—		—
Total	$	55	$	—	$	—

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SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Schedule of Financial Information by Reportable Segment

The following tables show our financial information by reportable segment:

	Three months ended						Nine months ended
OPERATING REVENUES:	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Regulated Operating Subsidiaries	$	329		$	302		$	970		$	886
Intercompany eliminations	(8		)	(7		)	(22		)	(22		)
Total Operating Revenues	$	321		$	295		$	948		$	864

	Three months ended						Nine months ended
INCOME (LOSS) BEFORE INCOME TAXES:	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Regulated Operating Subsidiaries	$	159		$	151		$	465		$	441
ITC Holdings and other	(38		)	(36		)	(113		)	(104		)
Total Income Before Income Taxes	$	121		$	115		$	352		$	337

	Three months ended						Nine months ended
NET INCOME:	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Regulated Operating Subsidiaries	$	124		$	112		$	350		$	327
ITC Holdings and other	98			89			269			250
Intercompany eliminations	(124		)	(112		)	(350		)	(327		)
Total Net Income	$	98		$	89		$	269		$	250

TOTAL ASSETS:	September 30,			December 31,
(in millions)	2019			2018
Regulated Operating Subsidiaries	$	9,827		$	9,224
ITC Holdings and other	5,295			4,977
Reconciliations / Intercompany eliminations (a)	(5,197		)	(4,872		)
Total Assets	$	9,925		$	9,329

____________________________

(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.

^[1]

[1] 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

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Document Fiscal Year Focus			2019
OPERATING REVENUES
Transmission and other services	$ 354	$ 350	$ 931	$ 932
Formula rate true-up	(33)	(55)	17	(68)
Total operating revenues	321	295	948	864
OPERATING EXPENSES
Operation and maintenance	31	29	88	80
General and administrative	35	32	111	91
Depreciation and amortization	51	45	149	133
Taxes other than income taxes	30	27	89	82
Other operating (income) and expenses, net	0	(1)	0	(2)
Total operating expenses	147	132	437	384
OPERATING INCOME	174	163	511	480
OTHER EXPENSES (INCOME)
Interest expense, net	60	56	183	167
Allowance for equity funds used during construction	(7)	(8)	(23)	(26)
Other (income) and expenses, net	0	0	1	(2)
Total other expenses (income)	53	48	159	143
INCOME BEFORE INCOME TAXES	121	115	352	337
INCOME TAX PROVISION	23	26	83	87
NET INCOME	98	89	269	250
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax	(1)	0	0	2
Total other comprehensive income, net of tax	(1)	0	0	2
Comprehensive Income (Loss), Net of Tax, Attributable to Parent	$ 97	$ 89	$ 269	$ 252

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DEBT

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

DEBT

DEBT

ITC Holdings

Term Loan Credit Agreement

On June 12, 2019, ITC Holdings entered into an unsecured, unguaranteed $400 million term loan credit agreement with a maturity date of June 11, 2021, under which ITC Holdings borrowed $200 million. The proceeds were used for the early redemption of the $200 million 5.50% Senior Notes due January 15, 2020. ITC Holdings has the ability to draw upon the remaining $200 million under the term loan credit agreement by March 12, 2020. The weighted-average interest rate on the borrowing outstanding under this agreement was 2.8% at September 30, 2019.

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. As of September 30, 2019, ITC Holdings had $242 million of commercial paper, net of discount of $1 million, issued and outstanding under the program, with a weighted-average interest rate of 2.3% and weighted average remaining days to maturity of 42 days. The amount outstanding as of September 30, 2019 was classified as debt maturing within one year in the condensed consolidated statements of financial position. As of December 31, 2018, ITC Holdings did not have any commercial paper outstanding.

ITCTransmission

First Mortgage Bonds

On August 28, 2019, ITCTransmission issued $75 million aggregate principal amount of 3.30% First Mortgage Bonds, due August 28, 2049. The proceeds were used to repay existing indebtedness under the revolving credit agreement and will also be used to partially fund capital expenditures and for general corporate purposes. 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 January 15, 2019, METC issued $50 million of 4.55% Senior Secured Notes, due January 15, 2049. On July 10, 2019, METC issued an additional $50 million of Senior Secured Notes at 4.65% with terms and conditions identical to those of the 4.55% Senior Secured Notes, except the interest rate which includes a 10 basis point premium and the due date which is 30 years from the date of the issuance. The proceeds from both issuances 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.

Derivative Instruments and Hedging Activities

We may 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. The interest rate swaps manage interest rate risk associated with the refinancing of the $400 million term loan at ITC Holdings with a maturity date of June 11, 2021. As of September 30, 2019, ITC Holdings had $200 million outstanding under the term loan described above. At September 30, 2019, ITC Holdings had the following interest rate swaps:

Interest Rate Swaps (in millions, except percentages)	Notional Amount		Weighted Average Fixed Rate		Original Term	Effective Date
July 2019 swap	$	50	1.816	%	5 years	November 2020
August 2019 swap	50		1.488	%	5 years	November 2020
Total	$	100

The 5-year term interest rate swaps call for ITC Holdings to receive interest quarterly at a variable rate equal to LIBOR and to pay interest semi-annually at various fixed rates effective for the 5-year period beginning November 15, 2020. The agreements include a mandatory early termination provision and will be terminated no later than the effective date of the interest rate swaps of November 15, 2020. The interest rate swaps have been determined to be highly effective at offsetting changes in the forecasted interest cash flows associated with the debt issuance, resulting from changes in benchmark interest rates from the trade date of the interest rate swaps to the issuance date of the debt obligation. In October 2019, ITC Holdings entered into two 5-year interest rate swap contracts with notional amounts of $50 million and fixed rates of 1.280% and 1.296%, respectively. These additional interest rate swaps also manage interest rate risk associated with the refinancing of the $400 million term loan at ITC Holdings and have terms comparable to the swaps described above.

The interest rate swaps qualify for cash flow hedge accounting treatment, whereby any gain or loss recognized from the trade date to the effective date is recorded net of tax in AOCI. This amount will be accumulated and amortized as a component of interest expense over the first five years of the forecasted debt. As of September 30, 2019, the fair value of the derivative instruments was a liability of $1 million. The interest rate swaps do not contain credit-risk-related contingent features. Refer to Note 10 for additional fair value information.

Revolving Credit Agreements

At September 30, 2019, ITC Holdings and certain of its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available:

(in millions)	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	%
ITCTransmission	100		10		90			3.0%	0.10	%
METC	100		53		47			3.0%	0.10	%
ITC Midwest	225		111		114			3.0%	0.10	%
ITC Great Plains	75		35		40			3.0%	0.10	%
Total	$	900	$	209	$	691

____________________________

(a) Included within long-term debt.

(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 $157 million as of September 30, 2019.

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 30, 2019, we were not in violation of any debt covenant.

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ACCOUNTS RECEIVABLE

9 Months Ended

Sep. 30, 2019

Receivables [Abstract]

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE

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

	September 30,		December 31,
(in millions)	2019		2018
Trade accounts receivable	$	3	$	2
Unbilled accounts receivable	112		92
Due from affiliates	1		1
Other	14		7
Total accounts receivable	$	130	$	102

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SHARE-BASED COMPENSATION AND EMPLOYEE SHARE PURCHASE PLAN

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION AND EMPLOYEE SHARE PURCHASE PLAN

SHARE-BASED COMPENSATION AND EMPLOYEE SHARE PURCHASE PLAN

2017 Omnibus Plan

On March 6, 2019, pursuant to the 2017 Omnibus Plan, we granted 348,904 PBUs and 270,505 SBUs. Each PBU and SBU granted will be valued based on one share of Fortis common stock traded on the Toronto Stock Exchange, converted to U.S. dollars and settled only in cash. The awards vest on the date specified in a particular grant agreement, provided the service and performance criteria, as applicable, are satisfied. The PBUs and SBUs earn dividend equivalents which are also re-measured consistent with the target award and settled in cash at the end of the vesting period. The granted awards and related dividend equivalents have no shareholder rights.

The aggregate fair value of all tranches of PBUs and SBUs as of September 30, 2019 was $51 million and $32 million, respectively. At September 30, 2019, the total unrecognized compensation cost related to the PBUs and SBUs was $22 million and $13 million, respectively.

Employee Share Purchase Plan

We have an ESPP plan which enables ITC employees to purchase shares of Fortis common stock. Our cost of the plan is based on the value of our contribution, as additional compensation to a participating employee, equal to 10% of an employee’s contribution up to a maximum annual contribution of 1% of an employee’s base pay and an amount equal to 10% of all dividends paid on the Fortis shares allocated to an employee’s ESPP account. The cost of ITC Holdings’ contribution for each of the three and nine months ended September 30, 2019 and 2018 was less than $1 million.

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GENERAL

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

GENERAL

GENERAL

ITC Holdings and its subsidiaries are engaged in the transmission of electricity in the United States. Through our Regulated Operating Subsidiaries, we own and operate high-voltage systems in Michigan’s Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma that transmit electricity from generating stations to local distribution facilities connected to our systems. ITC Holdings is a wholly-owned subsidiary of Investment Holdings.

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, 2018 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.

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ACCOUNTS RECEIVABLE (Tables)

9 Months Ended

Sep. 30, 2019

Receivables [Abstract]

Components of accounts receivable

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

	September 30,		December 31,
(in millions)	2019		2018
Trade accounts receivable	$	3	$	2
Unbilled accounts receivable	112		92
Due from affiliates	1		1
Other	14		7
Total accounts receivable	$	130	$	102

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SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

SEGMENT INFORMATION

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
OPERATING REVENUES:	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Regulated Operating Subsidiaries	$	329		$	302		$	970		$	886
Intercompany eliminations	(8		)	(7		)	(22		)	(22		)
Total Operating Revenues	$	321		$	295		$	948		$	864

	Three months ended						Nine months ended
INCOME (LOSS) BEFORE INCOME TAXES:	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Regulated Operating Subsidiaries	$	159		$	151		$	465		$	441
ITC Holdings and other	(38		)	(36		)	(113		)	(104		)
Total Income Before Income Taxes	$	121		$	115		$	352		$	337

	Three months ended						Nine months ended
NET INCOME:	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Regulated Operating Subsidiaries	$	124		$	112		$	350		$	327
ITC Holdings and other	98			89			269			250
Intercompany eliminations	(124		)	(112		)	(350		)	(327		)
Total Net Income	$	98		$	89		$	269		$	250

TOTAL ASSETS:	September 30,			December 31,
(in millions)	2019			2018
Regulated Operating Subsidiaries	$	9,827		$	9,224
ITC Holdings and other	5,295			4,977
Reconciliations / Intercompany eliminations (a)	(5,197		)	(4,872		)
Total Assets	$	9,925		$	9,329

____________________________

(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.

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REGULATORY MATTERS Schedule of Regulatory Assets and Liabilities (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Schedule of Regulatory Assets and Liabilities [Line Items]
Current regulatory assets	$ 13	$ 12
Non-current regulatory assets	214	200
Current regulatory liabilities	(202)	(178)
Non-current regulatory liabilities	(604)	(640)
Net regulatory liabilities	(25)	(52)
Revenue Deferrals, Including Accrued Interest
Schedule of Regulatory Assets and Liabilities [Line Items]
Current regulatory liabilities	(45)	(27)
Non-current regulatory liabilities	(20)	(49)
Revenue Accruals, Including Accrued Interest
Schedule of Regulatory Assets and Liabilities [Line Items]
Current regulatory assets	13	12
Non-current regulatory assets	$ 27	$ 12

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DEBT (Details) - USD ($) $ in Millions	1 Months Ended		9 Months Ended
	Aug. 31, 2019	Jul. 31, 2019	Sep. 30, 2019	Oct. 08, 2019	Oct. 03, 2019	Aug. 28, 2019	Aug. 05, 2019	Jul. 25, 2019	Jul. 10, 2019	Jun. 12, 2019	Jan. 15, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Debt maturing within one year			$ 242									$ 0
Commercial Paper Program, Maximum Authorized Amount Outstanding			$ 400
Debt, Weighted Average Interest Rate			2.80%
Commercial Paper			$ 242
Debt Instrument, Unamortized Discount, Current			$ 1
Short-term Debt, Weighted Average Interest Rate, at Point in Time			2.30%
Short-Term Debt, Weighted Average Days to Maturity			42 days
Derivative, Notional Amount			$ 100
ITC Holdings Corp. [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Remaining Borrowing Capacity Adjusted for Commercial Paper Outstanding			157
ITC Holdings Corp. [Member] | Unsecured Debt [Member] | Term Loan Credit Agreement, Due June 11, 2021 [Domain]
Debt Instrument [Line Items]
Principal amount										$ 400
Other Long-term Debt										200
Debt Instrument, Unused Borrowing Capacity, Amount										$ 200
ITC Holdings Corp. [Member] | Unsecured Debt [Member] | Senior Notes due January 15, 2020 [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross			$ 200
Interest Rate			5.50%
ITCTransmission [Member] | Secured Debt | Senior Secured Notes, due January 15, 2049 [Member]
Debt Instrument [Line Items]
Principal amount						$ 75
Interest Rate						3.30%
METC LLC [Member] | Secured Debt
Debt Instrument [Line Items]
Principal amount									$ 50
Interest Rate									4.65%
METC LLC [Member] | Secured Debt | Senior Secured Notes, due January 15, 2049 [Member]
Debt Instrument [Line Items]
Principal amount											$ 50
Interest Rate											4.55%
Subsequent Event
Debt Instrument [Line Items]
Derivative, Notional Amount				$ 50	$ 50
Derivative, Fixed Interest Rate				1.296%	1.28%
Interest Rate Swap [Member]
Debt Instrument [Line Items]
Derivative, Notional Amount							$ 50	$ 50
Derivative, Fixed Interest Rate							1.488%	1.816%
Derivative, Term of Contract	5 years	5 years
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Interest Rate Swap [Member]
Debt Instrument [Line Items]
Derivative Liability, Fair Value, Gross Liability			$ 1

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REVENUE (Policies)

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue Recognition, Policy

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 operating 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 fluctuations of actual load, the unbilled revenue amount generally increases during the spring and summer and decreases during the fall and winter. See Note 4 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 for the three months ended September 30, 2019 and 2018 were $1 million and less than $1 million, respectively. Total other services revenue for the nine months ended September 30, 2019 and 2018 were $5 million and $3 million, respectively.

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 5 for more information on our Formula Rates.

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SUPPLEMENTAL FINANCIAL INFORMATION

9 Months Ended

Sep. 30, 2019

Supplemental Cash Flow Elements [Abstract]

SUPPLEMENTAL FINANCIAL INFORMATION

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,
(in millions)	2019		2018		2018		2017
Cash and cash equivalents	$	4	$	18	$	6	$	66
Restricted cash included in:
Other non-current assets	2		4		4		2
Total cash, cash equivalents and restricted cash	$	6	$	22	$	10	$	68

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.

Supplementary Cash Flows Information

	Nine months ended
	September 30,
(in millions)	2019		2018
Supplementary cash flows information:
Interest paid (net of interest capitalized)	$	162	$	164
Income tax refunds received	1		13
Supplementary non-cash investing and financing activities:
Additions to property, plant and equipment and other long-lived assets (a)	103		102
Allowance for equity funds used during construction	23		26
Right-of-use assets obtained in exchange for new operating lease liabilities	4		—

____________________________

(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 30, 2019 or 2018, respectively, but will be or have been included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid.

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REGULATORY MATTERS (Details) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Jun. 11, 2019	Oct. 18, 2018	Apr. 20, 2018	Sep. 30, 2016	Sep. 28, 2016	Feb. 12, 2015	Nov. 12, 2013
Regulatory Liabilities [Line Items]
Transmission Rate, Applicable Period			1 year
Revenue true-up amount reflected in customer bill, period of recognition			2 years
Revenue (increase) decrease	$ (321)	$ (295)	$ (948)	$ (864)
Current regulatory liability	$ 202		$ 202		$ 178
ITCTransmission [Member]
Regulatory Liabilities [Line Items]
Rate Of Return On Equity										11.35%		12.38%	12.38%
Combined Incentive Adders										150
Incentive Adder for Independent Transmission Ownership										100
Basis Point Incentive Adder for RTO Participation										50
METC LLC [Member]
Regulatory Liabilities [Line Items]
Rate Of Return On Equity										11.35%			12.38%
Combined Incentive Adders										150
Revised Rate Of Return On Equity									11.07%
ITC Midwest LLC [Member]
Regulatory Liabilities [Line Items]
Rate Of Return On Equity										11.32%			12.38%
Combined Incentive Adders										100
Incentive Adder for Independent Transmission Ownership										50
Basis Point Incentive Adder for RTO Participation										50
Revised Rate Of Return On Equity									11.07%
MISO Operating Subsidiaries
Regulatory Liabilities [Line Items]
Incentive Adder for Independent Transmission Ownership	10		10					25
Basis Point Incentive Adder for RTO Participation								50
Revised Rate Of Return On Equity								11.07%
ITC Great Plains
Regulatory Liabilities [Line Items]
Incentive Adder for Independent Transmission Ownership	100		100				100
Basis Point Incentive Adder for RTO Participation	50		50
Revised Rate Of Return On Equity	12.16%		12.16%
Minimum | MISO Operating Subsidiaries
Regulatory Liabilities [Line Items]
Incentive Adder for Independent Transmission Ownership									50
Revised Rate Of Return On Equity								10.32%
Minimum | ITC Great Plains
Regulatory Liabilities [Line Items]
Revised Rate Of Return On Equity	10.66%		10.66%
Maximum | MISO Operating Subsidiaries
Regulatory Liabilities [Line Items]
Incentive Adder for Independent Transmission Ownership									100
Rate of Return on Equity and Capital Structure Initial Complaint [Member]
Regulatory Liabilities [Line Items]
Required customer refund paid					$ 7	$ 118
FERC Order [Member] | Rate of Return on Equity and Capital Structure Initial Complaint [Member] | Minimum
Regulatory Liabilities [Line Items]
Revised Rate Of Return On Equity											10.32%
FERC Order [Member] | Rate of Return on Equity and Capital Structure Initial Complaint [Member] | Maximum
Regulatory Liabilities [Line Items]
Revised Rate Of Return On Equity											11.35%

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RETIREMENT BENEFITS AND ASSETS HELD IN TRUST Schedule of Net Defined Benefit Cost Components (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Pension plans - retirement plan
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Contributions by Employer	$ 4
Pension plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	1	$ 1	$ 5	$ 5
Interest cost	2	1	4	3
Expected return on plan assets	(2)	(1)	(4)	(3)
Net cost	2	2	6	6
Defined Benefit Plan, Amortization of Gain (Loss)	(1)	(1)	(1)	(1)
Other Postretirement Benefits Plan
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Contributions by Employer	7
Service cost	2	3	7	8
Interest cost	1	0	3	2
Expected return on plan assets	(1)	(1)	(3)	(3)
Net cost	$ 2	$ 2	$ 7	$ 7

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SUPPLEMENTAL FINANCIAL INFORMATION Supplemental Cash Flows (Details) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Supplemental Cash Flow Elements [Abstract]
Interest paid (net of interest capitalized)				$ 162	$ 164
Income tax refunds received				1	13
Additions to property, plant and equipment and other long-lived assets	[1]			103	102
Allowance for equity funds used during construction		$ 7	$ 8	23	26
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability				$ 4	$ 0

[1] 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 30, 2019 or 2018, respectively, but will be or have been included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid.

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SHARE-BASED COMPENSATION AND EMPLOYEE SHARE PURCHASE PLAN (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employer Match Contribution			10.00%
Maximum Annual Contribution Percentage of Pay			1.00%
Percent of Dividends Payable			10.00%
2017 Omnibus Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted Award Vesting Rights			The granted awards and related dividend equivalents have no shareholder rights.
2017 Omnibus Plan | Performance Share Units (PSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted			348,904
Aggregate fair value of PBUs or SBUs	$ 51		$ 51
Total unrecognized compensation cost	22		$ 22
2017 Omnibus Plan | Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted			270,505
Aggregate fair value of PBUs or SBUs	32		$ 32
Total unrecognized compensation cost	13		13
Employee Share Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation Expense (less than $1 million)	$ 1	$ 1	$ 1	$ 1

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STOCKHOLDER'S EQUITY (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Changes in Accumulated Other Comprehensive Income

The following table provides the components of changes in AOCI:

	Three months ended					Nine months ended
	September 30,					September 30,
(in millions)	2019			2018		2019			2018
Balance at the beginning of period	$	5		$	4	$	4		$	2
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 the nine months ended September 30, 2019 and 2018) (a)	—			—		1			1
Reclassification of deferred tax effects on interest rate cash flow hedges stranded in AOCI, subject to the TCJA, into retained earnings	—			—		—			1
Loss on interest rate swaps relating to interest rate cash flow hedges (net of tax of less than $1 for the three and nine months ended September 30, 2019)	(1		)	—		(1		)	—
Total other comprehensive income, net of tax	(1		)	—		—			2
Balance at the end of period	$	4		$	4	$	4		$	4

____________________________

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

^[1]

[1] The reclassification of the net loss relating to interest rate cash flow hedges is reported in interest expense on a pre-tax basis.

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RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Millions	Sep. 30, 2019	Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle
Operating Lease, Right-of-Use Asset		$ 3
Operating Lease, Liability, Current	$ 1	1
Operating Lease, Liability, Noncurrent	$ 2	$ 2

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STOCKHOLDER'S EQUITY

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

STOCKHOLDER'S EQUITY

STOCKHOLDER'S EQUITY

Accumulated Other Comprehensive Income

The following table provides the components of changes in AOCI:

	Three months ended					Nine months ended
	September 30,					September 30,
(in millions)	2019			2018		2019			2018
Balance at the beginning of period	$	5		$	4	$	4		$	2
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 the nine months ended September 30, 2019 and 2018) (a)	—			—		1			1
Reclassification of deferred tax effects on interest rate cash flow hedges stranded in AOCI, subject to the TCJA, into retained earnings	—			—		—			1
Loss on interest rate swaps relating to interest rate cash flow hedges (net of tax of less than $1 for the three and nine months ended September 30, 2019)	(1		)	—		(1		)	—
Total other comprehensive income, net of tax	(1		)	—		—			2
Balance at the end of period	$	4		$	4	$	4		$	4

____________________________

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

The amount of net loss relating to interest rate cash flow hedges to be reclassified from AOCI to earnings for the 12-month period ending September 30, 2020 is expected to be approximately $1 million (net of tax of less than $1 million). The reclassification is reported in Interest expense, net in the condensed consolidated statements of comprehensive income on a pre-tax basis.

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RECENT ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Pronouncements

Accounting for Leases

Effective January 1, 2019, we adopted accounting guidance that requires lessees to recognize a right-of-use asset and lease liability for most leases, along with additional quantitative and qualitative disclosures. We elected to apply transition relief which permitted us to adopt the new guidance on a modified retrospective basis at the adoption date (i.e., January 1, 2019) as opposed to at the beginning of the earliest period presented in the financial statements (i.e., January 1, 2017). Therefore, while we began applying the new guidance as of January 1, 2019, prior period comparative financial statements and disclosures will continue to be presented under previous lease accounting guidance.

In connection with our adoption of the new guidance, we elected various practical expedients and made certain accounting policy elections, including:

• a “package of three” practical expedients that must be taken together and allows us to not reassess:

• whether any expired or existing contract is a lease or contains a lease,

• the lease classification of any expired or existing leases, and

• the initial direct costs for any existing leases;

• a practical expedient that permits entities to not evaluate existing land easements at adoption that were not previously accounted for as leases; and

• an accounting policy election to not apply the recognition requirements to short-term leases (i.e., leases with terms of 12 months or less).

Our leasing activities primarily relate to office facilities, but we also have limited leasing activity relating to equipment and storage facilities. As of January 1, 2019, adoption of the guidance resulted in recognition of right-of-use lease assets of $3 million, current lease liabilities of $1 million, and non-current lease liabilities of $2 million. The adoption of this guidance did not have any impact on retained earnings or net income. We also added disclosures as a result of our adoption of the guidance; refer to Note 7 for more information on our leasing activities.

Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued authoritative guidance to make targeted improvements to hedge accounting to better align with an entity’s risk management objectives and to reduce the complexity of hedge accounting. Among other changes, the new guidance simplifies hedge accounting by (a) allowing more time for entities to complete initial quantitative hedge effectiveness assessments, (b) enabling entities to elect to perform subsequent effectiveness assessments qualitatively, (c) eliminating the concept of recognizing periodic hedge ineffectiveness for cash flow hedges, (d) requiring the change in fair value of a derivative to be recorded in the same consolidated statements of comprehensive income line item as the earnings effect of the hedged item, and (e) permitting additional hedge strategies to qualify for hedge accounting. In addition, the guidance modifies existing disclosure requirements and adds new disclosure requirements. We adopted the guidance as of January 1, 2019; however, adoption of the accounting standard did not have a material impact on our financial statements or disclosures.

Recently Issued Pronouncements

We have considered all new accounting pronouncements issued by the FASB and concluded the following accounting guidance, which has not yet been adopted by us, may, subject to further evaluation, have a material impact on our consolidated financial statements.

Pension and Other Postretirement Plan Disclosures

In August 2018, the FASB issued authoritative guidance modifying the disclosure requirements for defined benefit pension and other postretirement plans. The new guidance requires disclosures including (a) the weighted average interest credit rates used for cash balance pension plans, (b) a narrative description of the reasons for significant gains and losses affecting the benefit obligation for the period, and (c) an explanation of other significant changes in the benefit obligation or plan assets. In addition, the guidance removes currently required disclosures including, among others, the requirement for public entities to disclose the effects of a one-percentage-point change on the assumed health care costs and the effect of the change in rates on service cost, interest cost, and the benefit obligation for postretirement health care benefits. The new guidance, which is effective for fiscal years ending after December 15, 2020 with early adoption permitted, is required to be adopted on a retrospective basis. We plan to early adopt this guidance in the 2019 annual consolidated financial statements.

Accounting for Cloud Computing Arrangements

In August 2018, the FASB issued authoritative guidance to address the accounting for implementation costs incurred in a cloud computing agreement that is a service contract. The new standard aligns the accounting for implementation costs incurred in a cloud computing arrangement as a service contract with existing guidance on capitalizing costs associated with developing or obtaining internal-use software. In addition, the new guidance requires entities to expense capitalized implementation costs of a cloud computing arrangement that is a service contract over the term of the agreement and to present the expense in the same income statement line item as the hosting fees. The guidance is effective for fiscal years beginning after December 15, 2019 with early adoption permitted. We are still evaluating the impact of the new guidance on our financial statements, including disclosures. We have elected not to early adopt.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Millions	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Total other expenses (income)	$ (53)			$ (48)			$ (159)	$ (143)
Total operating expenses	147			132			437	384
NET INCOME	98	$ 87	$ 84	89	$ 79	$ 82	269	250
OTHER COMPREHENSIVE INCOME
Derivative instruments, net of tax (Note 11)	(1)	$ 1		0	$ 1		0	2
TOTAL COMPREHENSIVE INCOME	$ 97			$ 89			$ 269	$ 252

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GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

Goodwill

At September 30, 2019 and December 31, 2018, we had goodwill balances recorded at ITCTransmission, METC and ITC Midwest of $173 million, $454 million and $323 million, respectively, which resulted from the ITCTransmission and METC acquisitions and ITC Midwest’s acquisition of the IP&L transmission assets, respectively.

Intangible Assets

We have recorded intangible assets as a result of the METC acquisition in 2006. The carrying value of these assets was $20 million and $22 million (net of accumulated amortization of $39 million and $37 million) as of September 30, 2019 and December 31, 2018, respectively.

We have also recorded intangible assets for payments made by and obligations of ITC Great Plains to certain TOs to acquire rights, which are required under the SPP tariff to designate ITC Great Plains to build, own and operate projects within the SPP region, including regional cost sharing projects in Kansas. The carrying amount of these intangible assets was $14 million (net of accumulated amortization of $2 million) at both September 30, 2019 and December 31, 2018.

We recognized $1 million of amortization expense of our intangible assets during the three months ended September 30, 2019 and 2018, respectively, and recognized $2 million and $3 million of amortization expense of our intangible assets during the nine months ended September 30, 2019 and 2018, respectively. For the balance of intangible assets recorded as of September 30, 2019, we expect the annual amortization of these assets to be $3 million per year for each of the next five years.

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REVENUE

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

REVENUE

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 operating 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 fluctuations of actual load, the unbilled revenue amount generally increases during the spring and summer and decreases during the fall and winter. See Note 4 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 for the three months ended September 30, 2019 and 2018 were $1 million and less than $1 million, respectively. Total other services revenue for the nine months ended September 30, 2019 and 2018 were $5 million and $3 million, respectively.

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 5 for more information on our Formula Rates.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Oct. 31, 2019
Entity Information [Line Items]
Document Type	10-Q
Document Transition Report	false
Entity File Number	001-32576
Entity Registrant Name	ITC HOLDINGS CORP.
Entity Incorporation, State or Country Code	MI
Entity Tax Identification Number	32-0058047
Entity Address, Address Line One	27175 Energy Way
Entity Address, City or Town	Novi
Entity Address, State or Province	MI
Entity Address, Postal Zip Code	48377
City Area Code	248
Local Phone Number	946-3000
Entity Current Reporting Status	No
Entity Interactive Data Current	Yes
Entity Central Index Key	0001317630
Current Fiscal Year End Date	--12-31
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Common Stock, Shares Outstanding	true
Amendment Flag	false
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		224,203,112

XML

GENERAL (Policies)

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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, 2018 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.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Intercompany 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 intercompany receivables from Fortis and such subsidiaries of $1 million and less than $1 million at September 30, 2019 and December 31, 2018, respectively, and intercompany payables to Fortis and such subsidiaries of less than $1 million at both September 30, 2019 and December 31, 2018.

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 30, 2019 and 2018 for ITC Holdings was $2 million and for each of the nine months ended September 30, 2019 and 2018 was $8 million and $6 million, respectively. Related party billings for services to Fortis and other subsidiaries, recorded as an offset to general and administrative expenses for ITC Holdings, were $1 million for each of the three and nine months ended September 30, 2019 and less than $1 million for each of the three and nine months ended September 30, 2018.

Dividends

During the nine months ended September 30, 2019 and 2018, we paid dividends of $197 million and $150 million, respectively, to Investment Holdings. We also paid dividends of $53 million to Investment Holdings in October 2019.

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 Investment Holdings. Additionally, we record income taxes based on our separate company tax position and make or receive tax-related payments with Investment Holdings. We did not make or receive any tax-related payments during the nine months ended September 30, 2019.

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LEASES (Tables)

9 Months Ended

Sep. 30, 2019

Sep. 30, 2018

Leases [Abstract]

Operating Lease Weighted Average [Table Text Block]

Supplementary Lease Information

	September 30, 2019
Weighted-average remaining lease term (years)	4.5
Weighted-average discount rate	4.3	%

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

The following table shows the undiscounted future minimum lease payments under our operating leases at September 30, 2019 reconciled to the corresponding discounted lease liabilities presented in our condensed consolidated interim financial statements:

Future Minimum Lease Payments	(in millions)
2019 (excluding nine months ended 9/30/2019)	$	—
2020	1
2021	1
2022	—
2023	1
2024 and beyond	—
Total lease payments	3
Difference between undiscounted cash flows and discounted cash flows	—
Present value of lease liabilities	3
Less: Current operating lease liabilities	(1		)
Noncurrent operating lease liabilities	$	2

Operating lease costs for the three and nine months ended September 30, 2018 were less than $1 million and $1 million, respectively. Undiscounted future minimum lease payments under the operating leases at December 31, 2018 were as follows:

Future Minimum Lease Payments	(in millions)
2019	$	1
2020	1
2021	1
2022	—
2023 and thereafter	1
Total minimum lease payments	$	4

lease classification [Table Text Block]

Leases are presented in the condensed consolidated statements of financial position as follows:

(in millions)	Classification	September 30, 2019
Operating Lease Assets	Other assets	$	3
Current Operating Lease Liabilities	Other current liabilities	1
Noncurrent Operating Lease Liabilities	Other liabilities	2

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FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value Subject to Three-Tier Hierarchy (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Cash equivalents		$ 1
Total - assets	$ 58	55
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair Value, Net Asset (Liability)	(1)
Mutual fund - fixed income securities [Member] | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Mutual funds	50	49
Mutual fund - equity securities [Member] | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Mutual funds	7	$ 5
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Cash equivalents	1
Interest Rate Swap [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Derivative Liability, Fair Value, Gross Liability	$ (1)

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REGULATORY MATTERS Net Changes in Regulatory Assets and Liabilities (Details) $ in Millions	9 Months Ended
	Sep. 30, 2019 USD ($)
Revenue Accruals and Deferrals
Net regulatory liabilities as of December 31, 2018	$ (52)
Net refund of 2017 revenue deferrals and accruals, including accrued interest	12
Net revenue accrual for the nine months ended September 30, 2019	17
Net accrued interest payable for the nine months ended September 30, 2019	(2)
Net regulatory liabilities	$ (25)

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DEBT Schedule of Revolving Credit Agreements (Details) $ in Millions	9 Months Ended
	Sep. 30, 2019 USD ($)
Line of Credit Facility [Line Items]
Total available capacity	$ 900
Outstanding Balance	209	[1]
Unused Capacity	691
ITC Holdings Corp. [Member]
Line of Credit Facility [Line Items]
Total available capacity	400
Outstanding Balance	0	[1]
Unused Capacity	$ 400
Debt, Weighted Average Interest Rate		[2]
Commitment Fee Rate	0.175%	[3]
ITCTransmission [Member]
Line of Credit Facility [Line Items]
Total available capacity	$ 100
Outstanding Balance	10	[1]
Unused Capacity	$ 90
Debt, Weighted Average Interest Rate	3.00%	[2]
Commitment Fee Rate	0.10%	[3]
METC LLC [Member]
Line of Credit Facility [Line Items]
Total available capacity	$ 100
Outstanding Balance	53	[1]
Unused Capacity	$ 47
Debt, Weighted Average Interest Rate	3.00%	[2]
Commitment Fee Rate	0.10%	[3]
ITC Midwest LLC [Member]
Line of Credit Facility [Line Items]
Total available capacity	$ 225
Outstanding Balance	111	[1]
Unused Capacity	$ 114
Debt, Weighted Average Interest Rate	3.00%	[2]
Commitment Fee Rate	0.10%	[3]
ITC Great Plains
Line of Credit Facility [Line Items]
Total available capacity	$ 75
Outstanding Balance	35	[1]
Unused Capacity	$ 40
Debt, Weighted Average Interest Rate	3.00%	[2]
Commitment Fee Rate	0.10%	[3]

[1] Included within long-term debt.

[2] Interest charged on borrowings depends on the variable rate structure we elected at the time of each borrowing.

[3] Calculation based on the average daily unused commitments, subject to adjustment based on the borrower’s credit rating.

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COMMITMENTS AND CONTINGENT LIABILITIES (Details) $ in Millions	3 Months Ended						9 Months Ended		12 Months Ended		51 Months Ended
	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Mar. 31, 2018 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2022 USD ($)	Oct. 18, 2018	Apr. 20, 2018	Sep. 30, 2016	Sep. 28, 2016	Jun. 30, 2016	Feb. 12, 2015	Nov. 12, 2013
Commitments and Contingent Liabilities [Line Items]
Current regulatory liability	$ 202						$ 202		$ 178
Revenue (increase) decrease	(321)			$ (295)			(948)	$ (864)
Interest expense increase	60			56			183	167
Estimated net income reduction	(98)	$ (87)	$ (84)	(89)	$ (79)	$ (82)	(269)	(250)
Estimated Potential Refund Related to Return on Equity Complaints
Commitments and Contingent Liabilities [Line Items]
Current regulatory liability	157						157		151
Rate of Return on Equity and Capital Structure Initial Complaint [Member]
Commitments and Contingent Liabilities [Line Items]
Required customer refund paid									7	$ 118
Estimated potential refund									0
Rate of Return on Equity and Capital Structure Initial Complaint [Member] | FERC Order [Member] | Minimum
Commitments and Contingent Liabilities [Line Items]
Revised Rate Of Return On Equity															10.32%
Rate of Return on Equity and Capital Structure Initial Complaint [Member] | FERC Order [Member] | Maximum
Commitments and Contingent Liabilities [Line Items]
Revised Rate Of Return On Equity															11.35%
Rate of Return on Equity and Capital Structure Second Complaint | Estimated Potential Refund Related to Return on Equity Complaints
Commitments and Contingent Liabilities [Line Items]
Current regulatory liability									$ 157
Rate of Return on Equity and Capital Structure Second Complaint | Presiding Administrative Law Judge Initial Decision | Minimum
Commitments and Contingent Liabilities [Line Items]
Recommended rate of return on equity																9.70%
Rate of Return on Equity and Capital Structure Second Complaint | Presiding Administrative Law Judge Initial Decision | Maximum
Commitments and Contingent Liabilities [Line Items]
Recommended rate of return on equity																10.68%
Rate of Return on Equity and Capital Structure Complaints | Impact from Recognition of Liability
Commitments and Contingent Liabilities [Line Items]
Revenue (increase) decrease	0			0			0	(1)
Interest expense increase	2			2			6	5
Estimated net income reduction	2			$ 1			5	$ 3
ITCTransmission [Member]
Commitments and Contingent Liabilities [Line Items]
Rate Of Return On Equity														11.35%			12.38%	12.38%
Basis Point Incentive Adder for RTO Participation														50
Incentive Adder for Independent Transmission Ownership														100
ITCTransmission [Member] | Rate of Return on Equity and Capital Structure Initial Complaint [Member]
Commitments and Contingent Liabilities [Line Items]
Reduced rate of return on equity																		9.15%
ITCTransmission [Member] | Rate of Return on Equity and Capital Structure Second Complaint
Commitments and Contingent Liabilities [Line Items]
Reduced rate of return on equity																	8.67%
METC LLC [Member]
Commitments and Contingent Liabilities [Line Items]
Rate Of Return On Equity														11.35%				12.38%
Revised Rate Of Return On Equity													11.07%
METC LLC [Member] | Rate of Return on Equity and Capital Structure Initial Complaint [Member]
Commitments and Contingent Liabilities [Line Items]
Reduced rate of return on equity																		9.15%
METC LLC [Member] | Rate of Return on Equity and Capital Structure Second Complaint
Commitments and Contingent Liabilities [Line Items]
Reduced rate of return on equity																	8.67%
ITC Midwest LLC [Member]
Commitments and Contingent Liabilities [Line Items]
Rate Of Return On Equity														11.32%				12.38%
Revised Rate Of Return On Equity													11.07%
Basis Point Incentive Adder for RTO Participation														50
Incentive Adder for Independent Transmission Ownership														50
ITC Midwest LLC [Member] | Rate of Return on Equity and Capital Structure Initial Complaint [Member]
Commitments and Contingent Liabilities [Line Items]
Reduced rate of return on equity																		9.15%
ITC Midwest LLC [Member] | Rate of Return on Equity and Capital Structure Second Complaint
Commitments and Contingent Liabilities [Line Items]
Reduced rate of return on equity																	8.67%
MISO Operating Subsidiaries
Commitments and Contingent Liabilities [Line Items]
Revised Rate Of Return On Equity												11.07%
Equity in capital structure for ratemaking purposes	5,000						5,000
Effect on net income from 10 basis point reduction in the authorized base return on equity	$ 5						$ 5
Basis Point Incentive Adder for RTO Participation												50
Incentive Adder for Independent Transmission Ownership	10						10					25
MISO Operating Subsidiaries | Minimum
Commitments and Contingent Liabilities [Line Items]
Revised Rate Of Return On Equity												10.32%
Incentive Adder for Independent Transmission Ownership													50
MISO Operating Subsidiaries | Maximum
Commitments and Contingent Liabilities [Line Items]
Incentive Adder for Independent Transmission Ownership													100
Forecast [Member]
Commitments and Contingent Liabilities [Line Items]
Future Development Payments, Reasonably Possible Estimate											$ 120

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FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Fair Value Disclosures [Abstract]
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	$ 0	$ 0
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	0	0
Fair Value, Liabilities, Level 1 to Level 2 Transfers, Amount	0	0
Fair Value, Liabilities, Level 2 to Level 1 Transfers, Amount	0	0
Fair value of long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements and commercial paper	5,767	5,186
Book value of long-term debt and debt maturing within one year, net of discount and deferred financing fees and excluding revolving and term loan credit agreements and commercial paper	5,106	5,130
Book value of revolving credit and term loan credit agreements	$ 409	$ 208

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Document Fiscal Year Focus	2019
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME	$ 269	$ 250
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	149	133
Recognition, refund and collection of revenue accruals and deferrals — including accrued interest	(27)	54
Deferred income tax expense	82	86
Allowance for equity funds used during construction	(23)	(26)
Employee Benefits and Share-based Compensation	24	3
Other	7	3
Changes in assets and liabilities, exclusive of changes shown separately:
Accounts receivable	(20)	(10)
Income tax receivable	1	13
Accounts payable	(6)	4
Accrued interest	8	(6)
Accrued taxes	(19)	(19)
Other current and non-current assets and liabilities, net	5	9
Net cash provided by operating activities	450	494
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(682)	(556)
Contributions in aid of construction	5	23
Other	1	0
Net cash used in investing activities	(676)	(533)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt	175	225
Borrowings under revolving credit agreements	787	588
Borrowings under term loan credit agreements	200	0
Net issuance of commercial paper	243	0
Retirement of long-term debt — including extinguishment of debt costs	(203)	(100)
Repayments of revolving credit agreements	(786)	(518)
Repayment of term loan credit agreement	0	50
Dividends to ITC Investment Holdings Inc.	(197)	(150)
Other	3	(2)
Net cash provided by (used in) financing activities	222	(7)
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(4)	(46)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	10	68
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$ 6	$ 22

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RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

9 Months Ended

Sep. 30, 2019

Retirement Benefits [Abstract]

RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

Pension Plan Benefits

We have a qualified defined benefit pension plan (“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 or use our available funding balance as necessary to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974 or as we deem appropriate. During the nine months ended September 30, 2019, we contributed $4 million to the retirement plan. We do not expect to make any additional contributions to this plan in 2019.

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. During the nine months ended September 30, 2019 , we contributed $1 million to the supplemental benefit plans. We do not expect to make any additional contributions to these plans in 2019.

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

	Three months ended						Nine months ended
	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Service cost	$	1		$	1		$	5		$	5
Interest cost	2			1			4			3
Expected return on plan assets	(2		)	(1		)	(4		)	(3		)
Amortization of unrecognized loss	1			1			1			1
Net pension cost	$	2		$	2		$	6		$	6

The components of net pension cost other than the service cost component are included in Other (income) and expenses, 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, 2019, we contributed $7 million to the postretirement benefit plan. We expect to make additional contributions of $2 million to the postretirement benefit plan during the fourth quarter of 2019.

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

	Three months ended						Nine months ended
	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Service cost	$	2		$	3		$	7		$	8
Interest cost	1			—			3			2
Expected return on plan assets	(1		)	(1		)	(3		)	(3		)
Net postretirement cost	$	2		$	2		$	7		$	7

The components of net postretirement cost other than the service cost component are included in Other (income) and expenses, 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 for each of the three months ended September 30, 2019 and 2018 and $4 million for each of the nine months ended September 30, 2019 and 2018.

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LEASES (Notes)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Lessee, Operating Lease, Disclosure [Table Text Block]

LEASES

We enter into operating leases where we are the lessee, primarily for office facilities, equipment, and storage facilities. When a contract contains a lease such that it conveys the right to control the use of an identified asset for a period of time in exchange for consideration, we measure the right-of-use assets and lease liabilities at the present value of future lease payments. We calculate the present value using our incremental borrowing rate, which is a secured interest rate based on the remaining lease term. Our lease payments are substantially all fixed and in some cases escalate according to schedule. Our office facility leases may have lease components and non-lease components which are accounted for as a single lease component. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated statements of financial position. We recognize expenses related to our operating lease obligations on a straight-line basis over the term of the lease. Operating lease costs for the three and nine months ended September 30, 2019 were less than $1 million and $1 million, respectively.

The following table shows the undiscounted future minimum lease payments under our operating leases at September 30, 2019 reconciled to the corresponding discounted lease liabilities presented in our condensed consolidated interim financial statements:

Future Minimum Lease Payments	(in millions)
2019 (excluding nine months ended 9/30/2019)	$	—
2020	1
2021	1
2022	—
2023	1
2024 and beyond	—
Total lease payments	3
Difference between undiscounted cash flows and discounted cash flows	—
Present value of lease liabilities	3
Less: Current operating lease liabilities	(1		)
Noncurrent operating lease liabilities	$	2

Leases are presented in the condensed consolidated statements of financial position as follows:

(in millions)	Classification	September 30, 2019
Operating Lease Assets	Other assets	$	3
Current Operating Lease Liabilities	Other current liabilities	1
Noncurrent Operating Lease Liabilities	Other liabilities	2

Disclosures Related to Periods Prior to Adoption of the New Lease Guidance

Operating lease costs for the three and nine months ended September 30, 2018 were less than $1 million and $1 million, respectively. Undiscounted future minimum lease payments under the operating leases at December 31, 2018 were as follows:

Future Minimum Lease Payments	(in millions)
2019	$	1
2020	1
2021	1
2022	—
2023 and thereafter	1
Total minimum lease payments	$	4

Supplementary Lease Information

	September 30, 2019
Weighted-average remaining lease term (years)	4.5
Weighted-average discount rate	4.3	%

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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) (Parentheticals) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Property, plant and equipment, accumulated depreciation and amortization	$ 1,903	$ 1,779
Intangible assets, accumulated amortization	$ 41	$ 39
Common stock, without par value	$ 0	$ 0
Common stock, shares authorized	235,000,000	235,000,000
Common stock, shares issued	224,203,112	224,203,112
Common stock, shares outstanding	224,203,112	224,203,112

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ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable	$ 130	$ 102
Unbilled accounts receivable	112	92
Due from Affiliate, Current	1	1
Other	14	7
Trade accounts receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable	$ 3	$ 2

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RETIREMENT BENEFITS AND ASSETS HELD IN TRUST (Tables)

9 Months Ended

Sep. 30, 2019

Pension plans

Defined Benefit Plan Disclosure [Line Items]

Net Defined Benefit Cost Components

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

	Three months ended						Nine months ended
	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Service cost	$	1		$	1		$	5		$	5
Interest cost	2			1			4			3
Expected return on plan assets	(2		)	(1		)	(4		)	(3		)
Amortization of unrecognized loss	1			1			1			1
Net pension cost	$	2		$	2		$	6		$	6

Other Postretirement Benefits Plan

Defined Benefit Plan Disclosure [Line Items]

Net Defined Benefit Cost Components

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

	Three months ended						Nine months ended
	September 30,						September 30,
(in millions)	2019			2018			2019			2018
Service cost	$	2		$	3		$	7		$	8
Interest cost	1			—			3			2
Expected return on plan assets	(1		)	(1		)	(3		)	(3		)
Net postretirement cost	$	2		$	2		$	7		$	7

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SUPPLEMENTAL FINANCIAL INFORMATION (Tables)

9 Months Ended

Sep. 30, 2019

Supplemental Cash Flow Elements [Abstract]

Restrictions on Cash and Cash Equivalents

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,
(in millions)	2019		2018		2018		2017
Cash and cash equivalents	$	4	$	18	$	6	$	66
Restricted cash included in:
Other non-current assets	2		4		4		2
Total cash, cash equivalents and restricted cash	$	6	$	22	$	10	$	68

Supplementary Cash Flow Information

Supplementary Cash Flows Information

	Nine months ended
	September 30,
(in millions)	2019		2018
Supplementary cash flows information:
Interest paid (net of interest capitalized)	$	162	$	164
Income tax refunds received	1		13
Supplementary non-cash investing and financing activities:
Additions to property, plant and equipment and other long-lived assets (a)	103		102
Allowance for equity funds used during construction	23		26
Right-of-use assets obtained in exchange for new operating lease liabilities	4		—

____________________________

(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 30, 2019 or 2018, respectively, but will be or have been included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid.

^[1]

[1] 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 30, 2019 or 2018, respectively, but will be or have been included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid.

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SUPPLEMENTAL FINANCIAL INFORMATION Restricted cash reconciliation (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Dec. 31, 2017
Supplemental Cash Flow Elements [Abstract]
Cash and cash equivalents	$ 4	$ 6	$ 18	$ 66
Restricted Cash, included in other non-current assets	2	4	4	2
Cash, Cash Equivalents and Restricted Cash	$ 6	$ 10	$ 22	$ 68

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STOCKHOLDER'S EQUITY (Details) - USD ($) $ in Millions		3 Months Ended				9 Months Ended		12 Months Ended
		Sep. 30, 2019	Jun. 30, 2019	Sep. 30, 2018	Jun. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2020
Document Fiscal Year Focus						2019
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Net of Tax	[1]					$ 1	$ 1
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax		$ (1)		$ 0		0	2
Balance at the beginning of period		5		4		4	2	$ 5
Reclassification Aof net loss relating to interest rate cash flow hedges from AOCI to earnings, Tax of less than $1 million		0		0		1	1
Interest Rate Cash Flow Hedge Gain (Loss) Reclassified to Earnings, Net		(1)				(1)
Other Comprehensive Income (Loss), Derivative, Excluded Component, Increase (Decrease), Adjustments, before Tax		(1)					2
Total other comprehensive income, net of tax		(1)	$ 1	0	$ 1	0	2
Balance at the end of period		4	$ 5	4	$ 4	$ 4	4
Other Comprehensive Income (Loss), Gain (Loss) on Derivatives Qualifying as Hedges, Tax		$ (1)
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Tax							0
Forecast [Member]
Other Comprehensive Loss, reclassification adjustment from AOCI to earnings, pretax								1
Other Comprehensive Loss, reclassification adjustment from AOCI to earnings, Tax of less than $1 million								$ 1
Accounting Standards Update 2018-02 [Member]
Reclassification of deferred tax effects on interest rate cash flow hedges stranded in AOCI, subject to the TCJA, into retained earnings				$ 0			$ 1

[1] The reclassification of the net loss relating to interest rate cash flow hedges is reported in interest expense on a pre-tax basis.

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED) - USD ($) $ in Millions	Total	Common Stock [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]
Stockholders' Equity Attributable to Parent	$ 1,920	$ 892	$ 1,026	$ 2
Opening balance adjustment | Accounting Standards Update 2018-02 [Member]			(1)	1
NET INCOME	82		82
Dividends to ITC Investment Holdings Inc.	(50)		(50)
Opening balance adjustment | Accounting Standards Update 2018-02 [Member]	(1)
NET INCOME	250
Dividends to ITC Investment Holdings Inc.	(150)
Total other comprehensive income, net of tax	2
Stockholders' Equity Attributable to Parent	1,952	892	1,057	3
NET INCOME	79		79
Dividends to ITC Investment Holdings Inc.	(50)		(50)
Total other comprehensive income, net of tax	1			1
Stockholders' Equity Attributable to Parent	1,982	892	1,086	4
Opening balance adjustment | Accounting Standards Update 2018-02 [Member]	0
NET INCOME	89		89
Dividends to ITC Investment Holdings Inc.	(50)		(50)
Total other comprehensive income, net of tax	0
Stockholders' Equity Attributable to Parent	2,021	892	1,125	4
Stockholders' Equity Attributable to Parent	2,051	892	1,155	4
NET INCOME	84		84
Dividends to ITC Investment Holdings Inc.	(72)		72
NET INCOME	269
Dividends to ITC Investment Holdings Inc.	(197)
Total other comprehensive income, net of tax	0
Stockholders' Equity Attributable to Parent	2,063	892	1,167	4
NET INCOME	87		87
Dividends to ITC Investment Holdings Inc.	(73)		(73)
Total other comprehensive income, net of tax	1			1
Stockholders' Equity Attributable to Parent	2,078	892	1,181	5
NET INCOME	98		98
Dividends to ITC Investment Holdings Inc.	(52)		(52)
Total other comprehensive income, net of tax	(1)			(1)
Stockholders' Equity Attributable to Parent	$ 2,123	$ 892	$ 1,227	$ 4

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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

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 months ended September 30, 2019 and the year ended December 31, 2018, there were no transfers between levels.

Our assets and liabilities measured at fair value subject to the three-tier hierarchy at September 30, 2019, 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)	(Level 1)		(Level 2)			(Level 3)
Financial assets measured on a recurring basis:
Cash equivalents	$	1	$	—		$	—
Mutual funds — fixed income securities	50		—			—
Mutual funds — equity securities	7		—			—
Financial liabilities measured on a recurring basis:
Interest rate swap derivatives	—		(1		)	—
Total	$	58	$	(1	)	$	—

Our assets measured at fair value subject to the three-tier hierarchy at December 31, 2018, 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)	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Cash equivalents	$	1	$	—	$	—
Mutual funds — fixed income securities	49		—		—
Mutual funds — equity securities	5		—		—
Total	$	55	$	—	$	—

As of September 30, 2019 and December 31, 2018, 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 described in Note 9. 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 earnings.

The liabilities related to derivatives consist of interest rate swaps discussed in Note 8. The fair value of our interest rate swap derivatives is determined based on a DCF method using LIBOR swap rates, which are observable at commonly quoted intervals.

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 nine months ended September 30, 2019 and 2018. See Note 6 for additional information on our goodwill and intangible assets.

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 and term loan credit agreements and commercial paper, was $5,767 million and $5,186 million at September 30, 2019 and December 31, 2018, 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 and term loan credit agreements and commercial paper, was $5,106 million and $5,130 million at September 30, 2019 and December 31, 2018, respectively.

Revolving and Term Loan Credit Agreements

At September 30, 2019 and December 31, 2018, we had a consolidated total of $409 million and $208 million, respectively, outstanding under our revolving and term loan credit agreements, which are variable rate loans. The fair value of these loans approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. These fair values represent Level 2 under the three-tier hierarchy described above.

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.

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REGULATORY MATTERS

9 Months Ended

Sep. 30, 2019

Regulated Operations [Abstract]

REGULATORY MATTERS

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 14 for detail on ROE matters for our MISO Regulated Operating Subsidiaries and “Incentive Adders for Transmission Rates” discussed in Note 5 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 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.

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 months ended September 30, 2019:

(in millions)	Total
Net regulatory liabilities as of December 31, 2018	$	(52	)
Net refund of 2017 revenue deferrals and accruals, including accrued interest	12
Net revenue accrual for the nine months ended September 30, 2019	17
Net accrued interest payable for the nine months ended September 30, 2019	(2		)
Net regulatory liabilities as of September 30, 2019	$	(25	)

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 at September 30, 2019 and December 31, 2018 as follows:

	September 30,			December 31,
(in millions)	2019			2018
Current regulatory assets	$	13		$	12
Non-current regulatory assets	27			12
Current regulatory liabilities	(45		)	(27		)
Non-current regulatory liabilities	(20		)	(49		)
Net regulatory liabilities	$	(25	)	$	(52	)

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.

MISO Regulated Operating Subsidiaries

Effective for the period following the September 2016 Order, the authorized ROE used by ITCTransmission, METC and ITC Midwest were 11.35%, 11.35%, and 11.32%, respectively. These were inclusive of adders at ITCTransmission, METC and ITC Midwest of 150 basis points, 150 basis points and 100 basis points, respectively, subject to the maximum ROE limitation in the September 2016 Order of 11.35%. The adders at each of ITCTransmission and METC included a 100 basis point adder for independent transmission ownership and a 50 basis point adder for RTO participation. The adders at ITC Midwest included a 50 basis point adder for independent transmission ownership and a 50 basis point adder for RTO participation.

On April 20, 2018, Consumers Energy, IP&L, Midwest Municipal Transmission Group, Missouri River Energy Services, Southern Minnesota Municipal Power Agency and WPPI Energy filed a complaint with the FERC under section 206 of the FPA, challenging the adders for independent transmission ownership that are included in transmission rates charged by the MISO Regulated Operating Subsidiaries. The adders for independent transmission ownership allowed up to 50 basis points or 100 basis points to be added to the MISO Regulated Operating Subsidiaries’ authorized ROE, subject to any ROE cap established by the FERC. On October 18, 2018, the FERC issued an order granting the complaint in part, setting revised adders for independent transmission ownership for each of the MISO Regulated Operating Subsidiaries to 25 basis points, and requiring the MISO Regulated Operating Subsidiaries to include the revised adders, effective April 20, 2018, in their Formula Rates. In addition, the order directed the MISO Regulated Operating Subsidiaries to provide refunds, with interest, for the period from April 20, 2018 through October 18, 2018. The MISO Regulated Operating Subsidiaries began reflecting the 25 basis point adder for independent transmission ownership in transmission rates in November 2018. Refunds of $7 million were primarily made in the fourth quarter of 2018 and were completed in the first quarter of 2019. The MISO Regulated Operating Subsidiaries sought rehearing of the FERC’s October 18, 2018 order, and on July 18, 2019, the FERC denied the

rehearing request. On September 11, 2019, the MISO Regulated Operating Subsidiaries filed an appeal of the FERC’s order in the D.C. Circuit Court. We do not expect the final resolution of this proceeding to have a material adverse impact on our consolidated results of operations, cash flows or financial condition.

Based on the October 18, 2018 FERC order, the authorized ROE for the MISO Regulated Operating Subsidiaries has been revised to 11.07% (10.32% base ROE with a 25 basis point adder for independent transmission ownership and a 50 basis point adder for RTO participation). See Note 14 for information regarding the ROE complaints.

ITC Great Plains

On June 11, 2019, KCC filed a complaint with the FERC under section 206 of the FPA, challenging the ROE adder for independent transmission ownership that is included in the transmission rate charged by ITC Great Plains. The complaint argues that because ITC Great Plains is similarly situated to our MISO Regulated Operating Subsidiaries with respect to ownership by Fortis and GIC, the same rationale by which the FERC lowered the MISO Regulated Operating Subsidiaries adders for independent transmission ownership, as discussed above, also applies to ITC Great Plains. The adder for independent transmission ownership allows up to 100 basis points to be added to the ITC Great Plains authorized ROE, subject to any ROE cap established by the FERC. ITC Great Plains filed an answer to the complaint on July 1, 2019 asking the FERC to deny the complaint since KCC showed no evidence that ITC Great Plains’ independence or the benefits it provides as an independent TO has been compromised or reduced as a result of the Fortis and GIC acquisition. We do not expect the resolution of this proceeding to have a material adverse impact on our consolidated results of operations, cash flows or financial position.

The authorized ROE used by ITC Great Plains is 12.16% and is composed of a base ROE of 10.66% with a 100 basis point adder for independent transmission ownership and a 50 basis point adder for RTO participation.

Calculation of Accumulated Deferred Income Tax Balances in Projected Formula Rates

On June 21, 2018, the FERC issued an order initiating a proceeding and paper hearings, pursuant to Section 206 of the FPA, to examine the methodology used by a group of TOs, including ITCTransmission and ITC Midwest, for calculating balances of ADIT in forward-looking Formula Rates. The FERC previously concluded that the two-step averaging methodology for ADIT is no longer necessary to comply with IRS normalization rules in light of IRS guidance issued in 2017. On August 27, 2018, our MISO Regulated Operating Subsidiaries submitted a filing with the FERC under Section 205 of the FPA to eliminate the use of the two-step averaging methodology in the calculation of ADIT balances for the projected test year and modify the manner by which they calculate average ADIT balances in their annual transmission Formula Rate true-up calculation, subject to receiving guidance from the IRS to respond to the FERC order. On April 10, 2019, our MISO Regulated Operating Subsidiaries received formal guidance from the IRS, which we believe is consistent with the filings that have been made to date in these proceedings.

On December 20, 2018, the FERC issued an order that ITCTransmission and ITC Midwest make a compliance filing to implement the changes to their Formula Rate templates and formally instituted a proceeding against METC pursuant to Section 206 of the FPA to implement the changes. On May 16, 2019, the FERC issued an order accepting in part and rejecting in part ITCTransmission’s and ITC Midwest’s January 22, 2019 compliance filing and ordered them to make another compliance filing within 30 days of the date of the order. Specifically, the FERC accepted the portion of the compliance filing that removed the two-step averaging methodology, but rejected the compliance filing insofar as it carried proration to the Formula Rate true-up calculation because the FERC found that was beyond the scope of its previous orders in the docket. Additionally, on May 16, 2019, the FERC issued an order rejecting the January 22, 2019 METC filing pursuant to Section 205 of the FPA as it requested a retroactive effective date and ordered METC to make a compliance filing in the proceeding pursuant to Section 206 of the FPA within 30 days of the date of the order. The FERC noted in the METC order that the compliance filing should only remove the two-step averaging methodology and should not carry proration to the calculation of the Formula Rate true-up. On June 17, 2019, our MISO Regulated Operating Subsidiaries made compliance filings consistent with the FERC orders, and on August 21, 2019, the FERC issued orders accepting those compliance filings. On October 1, 2019, our MISO Regulated Operating Subsidiaries, along with other MISO TOs, submitted a filing with the FERC pursuant to Section 205 of the FPA to carry proration to the calculation of the Formula Rate true-up. We do not expect the resolution of these proceedings to have a material adverse impact on our consolidated results of operations, cash flows or financial condition.

Rate of Return on Equity Complaints

See “Rate of Return on Equity Complaints” in Note 14 for a discussion of the ROE complaints.

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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 4	$ 6
Accounts receivable	130	102
Inventory	34	32
Regulatory assets	13	12
Income tax receivable	0	1
Prepaid and other current assets	13	11
Total current assets	194	164
Property, plant and equipment (net of accumulated depreciation and amortization of $1,903 and $1,779, respectively)	8,461	7,910
Other assets
Goodwill	950	950
Intangible assets (net of accumulated amortization of $41 and $39, respectively)	34	38
Regulatory assets	214	200
Other assets	72	67
Total other assets	1,270	1,255
TOTAL ASSETS	9,925	9,329
Current liabilities
Accounts payable	103	106
Accrued compensation	52	30
Accrued interest	58	50
Accrued taxes	44	64
Regulatory liabilities	202	178
Refundable deposits and advances for construction	19	33
Debt maturing within one year	242	0
Other current liabilities	12	11
Total current liabilities	732	472
Accrued pension and postretirement liabilities	68	68
Deferred income taxes	817	721
Regulatory liabilities	604	640
Refundable deposits	24	13
Other liabilities	42	26
Long-term debt	5,515	5,338
Commitments and contingent liabilities (Notes 5 and 14)
STOCKHOLDER’S EQUITY
Common stock, without par value, 235,000,000 shares authorized, 224,203,112 shares issued and outstanding at September 30, 2019 and December 31, 2018	892	892
Retained earnings	1,227	1,155
Accumulated other comprehensive income	4	4
Total stockholder’s equity	2,123	2,051
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$ 9,925	$ 9,329

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DEBT (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of Revolving Credit Agreements

At September 30, 2019, ITC Holdings and certain of its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available:

(in millions)	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	%
ITCTransmission	100		10		90			3.0%	0.10	%
METC	100		53		47			3.0%	0.10	%
ITC Midwest	225		111		114			3.0%	0.10	%
ITC Great Plains	75		35		40			3.0%	0.10	%
Total	$	900	$	209	$	691

____________________________

(a) Included within long-term debt.

(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 $157 million as of September 30, 2019.

^{[1],[2],[3],[4]}

Schedule of Interest Rate Derivatives [Table Text Block]

The interest rate swaps manage interest rate risk associated with the refinancing of the $400 million term loan at ITC Holdings with a maturity date of June 11, 2021. As of September 30, 2019, ITC Holdings had $200 million outstanding under the term loan described above. At September 30, 2019, ITC Holdings had the following interest rate swaps:

Interest Rate Swaps (in millions, except percentages)	Notional Amount		Weighted Average Fixed Rate		Original Term	Effective Date
July 2019 swap	$	50	1.816	%	5 years	November 2020
August 2019 swap	50		1.488	%	5 years	November 2020
Total	$	100

[1] Calculation based on the average daily unused commitments, subject to adjustment based on the borrower’s credit rating.

[2] 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 $157 million as of September 30, 2019.

[3] Included within long-term debt.

[4] Interest charged on borrowings depends on the variable rate structure we elected at the time of each borrowing.

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COMMITMENTS AND CONTINGENT LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of Impacts from the Initial and Second ROE Complaints

The recognition of the obligations associated with the complaints resulted in the following impacts:

	Three months ended				Nine months ended
	September 30,				September 30,
(in millions)	2019		2018		2019		2018
Revenue increase	$	—	$	—	$	—	$	(1	)
Interest expense increase	2		2		6		5
Estimated net income reduction	2		1		5		3

Schedule of Loss Contingencies by Contingency [Table Text Block]

A summary of the two complaints is as follows:

Complaint	15-Month Refund Period of Complaint (Beginning as of Complaint Filing Date)	Original Base ROE Authorized by the FERC at Time of Complaint Filing Date (a)	Base ROE Subsequently Authorized by the FERC for the Initial Complaint Period and also effective for the period from September 28, 2016 to current (a)	Reserve (Pre-Tax and Including Interest) as of September 30, 2019 (in millions)
Initial	11/12/2013 - 2/11/2015	12.38%	10.32%	$	—	(b)
Second	2/12/2015 - 5/11/2016	12.38%	N/A	157

____________________________

(a) The ROE collected through the MISO Regulated Operating Subsidiaries’ rates during the period November 12, 2013 through September 27, 2016, a portion of which was later refunded to customers for the period of the Initial Complaint, consisted of a base ROE of 12.38% plus applicable incentive adders.

(b)

In 2017, $118 million, including interest, was refunded to customers of our MISO Regulated Operating Subsidiaries for the Initial Complaint based on the refund liability associated with the September 2016 Order.

^[1],[2]

[1] (a) The ROE collected through the MISO Regulated Operating Subsidiaries’ rates during the period November 12, 2013 through September 27, 2016, a portion of which was later refunded to customers for the period of the Initial Complaint, consisted of a base ROE of 12.38% plus applicable incentive adders.

[2] (b) In 2017, $118 million, including interest, was refunded to customers of our MISO Regulated Operating Subsidiaries for the Initial Complaint based on the refund liability associated with the September 2016 Order.

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REVENUE (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation of Revenue [Line Items]
Transmission Rate, Applicable Period			1 year
Transmission and other services	$ 354	$ 350	$ 931	$ 932
Other services
Disaggregation of Revenue [Line Items]
Transmission and other services	$ 1	$ 1	$ 5	$ 3

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REGULATORY MATTERS (Tables)

9 Months Ended

Sep. 30, 2019

Regulated Operations [Abstract]

Net Changes in Regulatory Assets and Liabilities

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 months ended September 30, 2019:

(in millions)	Total
Net regulatory liabilities as of December 31, 2018	$	(52	)
Net refund of 2017 revenue deferrals and accruals, including accrued interest	12
Net revenue accrual for the nine months ended September 30, 2019	17
Net accrued interest payable for the nine months ended September 30, 2019	(2		)
Net regulatory liabilities as of September 30, 2019	$	(25	)

Schedule of Regulatory Assets and Liabilities

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 at September 30, 2019 and December 31, 2018 as follows:

	September 30,			December 31,
(in millions)	2019			2018
Current regulatory assets	$	13		$	12
Non-current regulatory assets	27			12
Current regulatory liabilities	(45		)	(27		)
Non-current regulatory liabilities	(20		)	(49		)
Net regulatory liabilities	$	(25	)	$	(52	)

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RECENT ACCOUNTING PRONOUNCEMENTS (Policies)

9 Months Ended

Sep. 30, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Lessee, Leases

Accounting for Leases

Effective January 1, 2019, we adopted accounting guidance that requires lessees to recognize a right-of-use asset and lease liability for most leases, along with additional quantitative and qualitative disclosures. We elected to apply transition relief which permitted us to adopt the new guidance on a modified retrospective basis at the adoption date (i.e., January 1, 2019) as opposed to at the beginning of the earliest period presented in the financial statements (i.e., January 1, 2017). Therefore, while we began applying the new guidance as of January 1, 2019, prior period comparative financial statements and disclosures will continue to be presented under previous lease accounting guidance.

In connection with our adoption of the new guidance, we elected various practical expedients and made certain accounting policy elections, including:

• a “package of three” practical expedients that must be taken together and allows us to not reassess:

• whether any expired or existing contract is a lease or contains a lease,

• the lease classification of any expired or existing leases, and

• the initial direct costs for any existing leases;

• a practical expedient that permits entities to not evaluate existing land easements at adoption that were not previously accounted for as leases; and

• an accounting policy election to not apply the recognition requirements to short-term leases (i.e., leases with terms of 12 months or less).

Our leasing activities primarily relate to office facilities, but we also have limited leasing activity relating to equipment and storage facilities. As of January 1, 2019, adoption of the guidance resulted in recognition of right-of-use lease assets of $3 million, current lease liabilities of $1 million, and non-current lease liabilities of $2 million. The adoption of this guidance did not have any impact on retained earnings or net income. We also added disclosures as a result of our adoption of the guidance; refer to Note 7 for more information on our leasing activities.

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COMMITMENTS AND CONTINGENT LIABILITIES

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENT LIABILITIES

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, establish standards for the management, treatment, storage, transportation and disposal of solid and hazardous wastes and hazardous materials, 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 results of operations, financial position or liquidity.

Our assets and operations also involve the use of materials classified as hazardous, toxic or otherwise dangerous. Many 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 aboveground 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. Our facilities and equipment are often situated on or near property owned by others so that, if they are the source of contamination, others’ property may be affected. For example, aboveground

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 us with respect to environmental contamination relating to these properties, or of any investigation or remediation of contamination at these properties, that entail costs likely to materially affect us. Some facilities and properties are located near environmentally sensitive areas such as wetlands.

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 have been 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.

A summary of the two complaints is as follows:

Complaint	15-Month Refund Period of Complaint (Beginning as of Complaint Filing Date)	Original Base ROE Authorized by the FERC at Time of Complaint Filing Date (a)	Base ROE Subsequently Authorized by the FERC for the Initial Complaint Period and also effective for the period from September 28, 2016 to current (a)	Reserve (Pre-Tax and Including Interest) as of September 30, 2019 (in millions)
Initial	11/12/2013 - 2/11/2015	12.38%	10.32%	$	—	(b)
Second	2/12/2015 - 5/11/2016	12.38%	N/A	157

____________________________

(a) The ROE collected through the MISO Regulated Operating Subsidiaries’ rates during the period November 12, 2013 through September 27, 2016, a portion of which was later refunded to customers for the period of the Initial Complaint, consisted of a base ROE of 12.38% plus applicable incentive adders.

(b) In 2017, $118 million, including interest, was refunded to customers of our MISO Regulated Operating Subsidiaries for the Initial Complaint based on the refund liability associated with the September 2016 Order.

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.

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. 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. The September 2016 Order required all MISO TOs, including our MISO Regulated Operating Subsidiaries, to provide refunds, which were completed in 2017. 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.

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. On September 29, 2017, certain MISO TO’s, including our MISO Regulated Operating Subsidiaries, filed a motion for the FERC to dismiss the Second Complaint. We had recorded an aggregate estimated current regulatory liability in the condensed consolidated statements of financial position of $157 million and $151 million as of September 30, 2019 and December 31, 2018, respectively, for the Second Complaint.

The recognition of the obligations associated with the complaints resulted in the following impacts:

	Three months ended				Nine months ended
	September 30,				September 30,
(in millions)	2019		2018		2019		2018
Revenue increase	$	—	$	—	$	—	$	(1	)
Interest expense increase	2		2		6		5
Estimated net income reduction	2		1		5		3

Prior to the filing of the MISO ROE complaints, complaints were filed with the FERC regarding the regional base ROE rate for ISO New England TOs. In resolving these complaints, the FERC adopted a methodology for establishing base ROE rates based on a two-step DCF analysis. This methodology provided the precedent for the FERC ruling on the Initial Complaint and the ALJ initial decision on the Second Complaint for our MISO Regulated Operating Subsidiaries. In April 2017, the D.C. Circuit Court vacated the precedent-setting FERC orders that established and applied the two-step DCF methodology for the determination of base ROE. The court remanded the orders to the FERC for further justification of its establishment of the new base ROE for the ISO New England TOs. On October 16, 2018, in the New England matters, the FERC issued an order on remand which proposes a new methodology for 1) determining when an existing ROE is no longer just and reasonable; and 2) setting a new just and reasonable ROE if an existing ROE has been found not to be just and reasonable. The FERC established a paper hearing on how the proposed new methodology should apply to the ISO New England TOs ROE complaint proceedings. The FERC issued a similar order, the November 2018 Order, in the MISO TO base ROE complaint proceedings establishing a paper hearing on the application of the proposed new methodology to the proceedings pending before the FERC involving the MISO TOs’ ROE, including our MISO Regulated Operating Subsidiaries. Briefs and reply briefs in the New England proceedings were filed on January 11, 2019 and March 8, 2019, respectively. Briefs and reply briefs in the MISO proceedings were filed on February 13, 2019 and April 10, 2019, respectively.

The November 2018 Order included illustrative calculations for the ROE that may be established for the Initial Complaint, using the FERC's proposed methodology with financial data from the proceedings related to that complaint. If the results of these illustrative calculations are confirmed in a final FERC order, then the application of the base ROE and the maximum ROE would not have a significant adverse impact on our financial condition, results of operations and cash flows.

Although the November 2018 Order provided illustrative calculations, the FERC stated that these calculations are merely preliminary. The FERC’s preliminary calculations are not binding and could change, as significant changes to the methodology by the FERC are possible, as a result of the paper hearing process. Until there is more certainty around the ultimate resolution of these matters, we cannot reasonably update an estimated range of gain or loss for any of the complaint proceedings or estimate a range of gain or loss for the period subsequent to the end of the Second Complaint refund period. The November 2018 Order and our response to the order through briefs and reply briefs filed on February 13, 2019 and April 10, 2019, respectively, do not provide a reasonable basis for a change to the reserve or recognized ROEs for any of the complaint refund periods nor all subsequent periods, and we believe that the risk of additional material loss beyond amounts already accrued is remote.

Our MISO Regulated Operating Subsidiaries currently record revenues at the base ROE of 10.32% established in the September 2016 Order on the Initial Complaint plus applicable incentive adders. See Note 5 for a summary of incentive adders for transmission rates.

As of September 30, 2019, 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.

Development Projects

We are pursuing strategic development projects that may result in payments to developers that are contingent on the projects reaching certain milestones indicating that the projects are financially viable. We believe it is reasonably possible that we will be required to make these contingent development payments up to a maximum amount of $120 million for the period from 2020 through 2023. In the event it becomes probable that we will make these payments, we would recognize the liability and the corresponding intangible asset or expense as appropriate.

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LEASES LEASES (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2020	Jan. 01, 2019	Dec. 31, 2018
Lessee, Lease, Description [Line Items]
Operating Lease, Weighted Average Remaining Lease Term	4 years 6 months		4 years 6 months
Operating Leases, Future Minimum Payments Due	$ 3		$ 3
Operating Lease, Liability	3		3
Operating Lease, Cost	1	$ 1	1	$ 1
Operating Lease, Liability, Current	(1)		(1)						$ (1)
Operating Lease, Liability, Noncurrent	$ 2		$ 2						$ 2
Operating Lease, Weighted Average Discount Rate, Percent	4.30%		4.30%
ITC Holdings Corp. [Member]
Lessee, Lease, Description [Line Items]
Operating Leases, Future Minimum Payments Due	$ 1		$ 1							$ 4
Forecast [Member]
Lessee, Lease, Description [Line Items]
Operating Leases, Future Minimum Payments Due					$ 1	$ 0	$ 1	$ 1
Forecast [Member] | ITC Holdings Corp. [Member]
Lessee, Lease, Description [Line Items]
Operating Leases, Future Minimum Payments Due					$ 1	$ 0	$ 1	$ 1

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GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Goodwill and Intangible Assets [Line Items]
Goodwill	$ 950		$ 950		$ 950
Intangible assets					0
Accumulated amortization	41		41		39
Other intangible assets					1
Amortization expense	1	$ 1	2	$ 3
Expected amortization expense, year one	3		3
Expected amortization expense, year two	3		3
Expected amortization expense, year three	3		3
Expected amortization expense, year four	3		3
Expected amortization expense, year five	3		3
ITCTransmission [Member]
Goodwill and Intangible Assets [Line Items]
Goodwill	173		173		173
METC LLC [Member]
Goodwill and Intangible Assets [Line Items]
Goodwill	454		454		454
Intangible assets	20		20		22
Accumulated amortization	39		39		37
ITC Midwest LLC [Member]
Goodwill and Intangible Assets [Line Items]
Goodwill	323		323		323
ITC Great Plains
Goodwill and Intangible Assets [Line Items]
Intangible assets	14		14		14
Accumulated amortization	$ 2		$ 2		$ 2

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RETIREMENT BENEFITS AND ASSETS HELD IN TRUST (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Defined Benefit Plan Disclosure [Line Items]
Document Fiscal Year Focus			2019
Defined Contribution Plan, Cost	$ 1	$ 1	$ 4	$ 4
Pension plans - retirement plan
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Contributions by Employer	4
Pension plans - supplemental benefit plans
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Contributions by Employer	1
Pension plans
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Amortization of Gain (Loss)	(1)	$ (1)	(1)	$ (1)
Other Postretirement Benefits Plan
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Contributions by Employer	7
Expected Future Employer Contributions, Remainder of Fiscal Year	$ 2		$ 2