10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended September 30, 2014

OR

o 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 (State or Other Jurisdiction of Incorporation or Organization) 32-0058047 (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)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 þ No o

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

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

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

The number of shares of the Registrant’s Common Stock, without par value, outstanding as of October 24, 2014 was 155,734,925.

ITC Holdings Corp.

Form 10-Q for the Quarterly Period Ended September 30, 2014

INDEX

	Page
Part I. Financial Information	4
Item 1. Financial Statements	4
Condensed Consolidated Statements of Financial Position (Unaudited)	4
Condensed Consolidated Statements of Operations (Unaudited)	5
Condensed Consolidated Statements of Comprehensive Income (Unaudited)	6
Condensed Consolidated Statements of Cash Flows (Unaudited)	7
Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	37
Part II. Other Information	38
Item 1. Legal Proceedings	38
Item 1A. Risk Factors	38
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds	38
Item 6. Exhibits	39
Signatures	40
Exhibit Index

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 Grid Development, LLC;

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

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

• “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 an indirect wholly-owned subsidiary of ITC Holdings;

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

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

Other definitions

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

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

• “Entergy Transaction” are references to the transaction whereby the electric transmission business of Entergy Corporation was to be separated and subsequently merged with a wholly-owned subsidiary of ITC Holdings. The proposed transaction was terminated in December 2013;

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

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

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

• “ITC Holdings’ annual report on Form 10-K” are references to the annual report on Form 10-K filed on February 27, 2014;

• “kV” are references to kilovolts (one kilovolt equaling 1,000 volts);

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

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

• “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;

• “MW” are references to megawatts (one megawatt equaling 1,000,000 watts);

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

• “RTO” are references to Regional Transmission Organizations; and

• “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.

EXPLANATORY NOTE

Unless otherwise noted, the share and per share data in this Form 10-Q reflects the three-for-one stock split effective February 28, 2014.

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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 thousands, except share data)	2014		2013
ASSETS
Current assets
Cash and cash equivalents	$	11,596	$	34,275
Accounts receivable	119,363		89,348
Inventory	30,563		31,986
Deferred income taxes	25,359		17,225
Regulatory assets — revenue accruals, including accrued interest	5,623		6,334
Prepaid and other current assets	8,994		12,370
Total current assets	201,498		191,538
Property, plant and equipment (net of accumulated depreciation and amortization of $1,365,379 and $1,330,094, respectively)	5,337,474		4,846,526
Other assets
Goodwill	950,163		950,163
Intangible assets (net of accumulated amortization of $24,088 and $21,616, respectively)	49,198		49,328
Other regulatory assets	185,532		179,068
Deferred financing fees (net of accumulated amortization of $12,702 and $15,261, respectively)	29,363		25,585
Other	54,136		40,035
Total other assets	1,268,392		1,244,179
TOTAL ASSETS	$	6,807,364	$	6,282,243
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	115,857	$	111,145
Accrued payroll	19,649		21,930
Accrued interest	34,888		53,049
Accrued taxes	26,648		29,805
Regulatory liabilities — revenue deferrals, including accrued interest	38,156		33,120
Refundable deposits from generators for transmission network upgrades	19,284		23,283
Debt maturing within one year	200,000		200,000
Other	15,902		27,047
Total current liabilities	470,384		499,379
Accrued pension and postretirement liabilities	59,205		53,704
Deferred income taxes	662,349		562,938
Regulatory liabilities — revenue deferrals, including accrued interest	62,585		36,447
Regulatory liabilities — accrued asset removal costs	67,344		67,571
Refundable deposits from generators for transmission network upgrades	7,004		19,328
Other	21,404		17,032
Long-term debt	3,840,141		3,412,112
Commitments and contingent liabilities (Note 11)
STOCKHOLDERS’ EQUITY
Common stock, without par value, 300,000,000 shares authorized, 155,731,299 and 157,500,795 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively	890,974		1,014,435
Retained earnings	720,036		592,970
Accumulated other comprehensive income	5,938		6,327
Total stockholders’ equity	1,616,948		1,613,732
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,807,364	$	6,282,243

See notes to condensed consolidated financial statements (unaudited).

4

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands, except per share data)	2014			2013			2014			2013
OPERATING REVENUES	$	270,134		$	238,782		$	791,951		$	685,903
OPERATING EXPENSES
Operation and maintenance	29,038			29,725			79,735			83,906
General and administrative	28,812			31,902			87,082			110,767
Depreciation and amortization	31,936			29,802			94,609			87,583
Taxes other than income taxes	19,205			16,728			57,474			49,492
Other operating (income) and expenses — net	(289		)	(197		)	(750		)	(542		)
Total operating expenses	108,702			107,960			318,150			331,206
OPERATING INCOME	161,432			130,822			473,801			354,697
OTHER EXPENSES (INCOME)
Interest expense — net	47,328			44,062			138,491			123,527
Allowance for equity funds used during construction	(4,921		)	(8,290		)	(14,865		)	(25,315		)
Loss on extinguishment of debt	—			—			29,074			—
Other income	(244		)	(786		)	(618		)	(824		)
Other expense	761			2,164			3,696			5,388
Total other expenses (income)	42,924			37,150			155,778			102,776
INCOME BEFORE INCOME TAXES	118,508			93,672			318,023			251,921
INCOME TAX PROVISION	44,635			34,688			120,678			95,352
NET INCOME	$	73,873		$	58,984		$	197,345		$	156,569
Basic earnings per common share	$	0.47		$	0.37		$	1.26		$	1.00
Diluted earnings per common share	$	0.47		$	0.37		$	1.25		$	0.99
Dividends declared per common share	$	0.1625		$	0.1417		$	0.4475		$	0.3933

See notes to condensed consolidated financial statements (unaudited).

5

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	Three months ended					Nine months ended
	September 30,					September 30,
(in thousands)	2014			2013		2014			2013
NET INCOME	$	73,873		$	58,984	$	197,345		$	156,569
OTHER COMPREHENSIVE INCOME (LOSS)
Derivative instruments, net of tax (Note 6)	169			110		(413		)	24,468
Available-for-sale securities, net of tax (Note 6)	(86		)	87		24			87
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX	83			197		(389		)	24,555
TOTAL COMPREHENSIVE INCOME	$	73,956		$	59,181	$	196,956		$	181,124

See notes to condensed consolidated financial statements (unaudited).

6

ITC HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine months ended
	September 30,
(in thousands)	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	197,345		$	156,569
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	94,609			87,583
Recognition, refund and collection of revenue accruals and deferrals — including accrued interest	29,175			30,369
Deferred income tax expense	86,935			69,733
Allowance for equity funds used during construction	(14,865		)	(25,315		)
Loss on extinguishment of debt	29,074			—
Other	15,474			13,113
Changes in assets and liabilities, exclusive of changes shown separately:
Accounts receivable	(24,057		)	(31,115		)
Inventory	1,423			1,075
Prepaid and other current assets	3,377			11,208
Accounts payable	(16,382		)	4,044
Accrued payroll	(1,710		)	(1,707		)
Accrued interest	(18,161		)	(14,538		)
Accrued taxes	(3,156		)	(10,467		)
Other current liabilities	(13,486		)	7,979
Other non-current assets and liabilities, net	(4,694		)	(6,328		)
Net cash provided by operating activities	360,901			292,203
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(549,599		)	(630,485		)
Proceeds from sale of marketable securities	199			42,174
Purchases of marketable securities	(5,490		)	(43,398		)
Other	2,624			(3,340		)
Net cash used in investing activities	(552,266		)	(635,049		)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt	498,664			933,025
Borrowings under revolving credit agreements	1,397,800			890,400
Borrowings under term loan credit agreements	110,000			535,000
Retirement of long-term debt — including debt retirement costs	(248,494		)	(452,000		)
Repayments of revolving credit agreements	(1,319,500		)	(1,004,100		)
Repayments under term loan credit agreements	(39,000		)	(475,000		)
Issuance of common stock	19,666			8,213
Dividends on common and restricted stock	(70,279		)	(61,821		)
Refundable deposits from generators for transmission network upgrades	5,833			26,898
Repayment of refundable deposits from generators for transmission network upgrades	(22,155		)	(30,279		)
Repurchase and retirement of common stock	(108,136		)	(4,508		)
Forward contract of accelerated share repurchase program	(46,000		)	—
Other	(9,713		)	1,535
Net cash provided by financing activities	168,686			367,363
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(22,679		)	24,517
CASH AND CASH EQUIVALENTS — Beginning of period	34,275			26,187
CASH AND CASH EQUIVALENTS — End of period	$	11,596		$	50,704

See notes to condensed consolidated financial statements (unaudited).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.GENERAL

These condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements as of and for the year ended December 31, 2013 included in ITC Holdings’ annual report on Form 10-K for such period.

The accompanying condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Rule 10-01 of Securities and Exchange Commission (“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 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.

Supplementary Cash Flows Information

	Nine months ended
	September 30,
(in thousands)	2014		2013
Supplementary cash flows information:
Interest paid (net of interest capitalized)	$	154,410	$	135,058
Income taxes paid — net	25,744		11,593
Supplementary non-cash investing and financing activities:
Additions to property, plant and equipment (a)	$	92,557	$	74,694
Allowance for equity funds used during construction	14,865		25,315

____________________________

(a) Amounts consist of current liabilities for construction labor and materials that have not been included in investing activities. These amounts have not been paid for as of September 30, 2014 or 2013, respectively, but have been or will be included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid.

2.    RECENT ACCOUNTING PRONOUNCEMENTS

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance requiring entities to apply a new model for recognizing revenue from contracts with customers. The guidance will supersede the current revenue recognition guidance and require entities to evaluate their revenue recognition arrangements using a five step model to determine when a customer obtains control of a transferred good or service. The guidance is effective for annual reporting periods beginning after December 15, 2016 and may be adopted using a full or modified retrospective application. We are currently in the process of evaluating our revenue arrangements under the issued guidance and have not yet determined its impact to our results of operations, cash flows and financial position.

3.    REGULATORY MATTERS

Start-Up, Development and Pre-Construction Regulatory Assets

As of September 30, 2014, we have recorded a total of $14.0 million of regulatory assets for start-up, development and pre-construction expenses, including associated carrying charges, incurred by ITC Great Plains, which include certain costs incurred for the Kansas Electric Transmission Authority (“KETA”) Project and the Kansas V-Plan Project prior to construction. ITC Great Plains made a filing with the FERC under Section 205 of the FPA in May 2013 to recover these start-up, development and pre-construction expenses, including associated carrying charges, in future rates. If FERC authorization is received, ITC Great Plains will include the unamortized balance of the regulatory assets in its rate base and will amortize them over a 10-year period beginning at the later of the project in-service date or the FERC authorization date. The amortization expense will be recovered through ITC Great Plains’ cost-based formula rate template beginning in the period in which amortization begins.

8

Order on Formula Rate Protocols

In 2012, the FERC issued an order initiating a proceeding pursuant to Section 206 of the FPA to determine whether the formula rate protocols under the MISO Tariff are sufficient to ensure just and reasonable rates. Our MISO Regulated Operating Subsidiaries were named in the order. In May 2013, the FERC issued an order that determined the formula rate protocols are insufficient to ensure just and reasonable rates and directed MISO and its member transmission owners (“TOs”) to file revised formula rate protocols. In September 2013, MISO and its TOs, including our MISO Regulated Operating Subsidiaries, filed revised formula rate protocols which will require our MISO Regulated Operating Subsidiaries to provide additional information for certain aspects of the formula rates used to calculate their respective annual revenue requirements. On March 20, 2014, FERC issued an order conditionally accepting MISO and its TOs’ September 2013 filing and required a further compliance filing, which MISO and its TOs made on May 19, 2014. We do not expect the revised formula rate protocols to impact our results of operations, cash flows or financial condition.

FERC Audit Refund

See “FERC Audit Refund” in Note 11 for a discussion of the FERC audit refund.

Rate of Return on Equity and Capital Structure Complaint

See “Rate of Return on Equity and Capital Structure Complaint” in Note 11 for a discussion of the complaint.

Cost-Based Formula Rates with True-Up Mechanism

The transmission rates at our Regulated Operating Subsidiaries are set annually, using the FERC-approved formula rates, and the rates remain in effect for a one-year period. By completing their formula rate templates on an annual basis, our Regulated Operating Subsidiaries are able to adjust their transmission rates to reflect changing operational data and financial performance, including the amount of network load on their transmission systems (for our MISO Regulated Operating Subsidiaries), operating expenses and additions to property, plant and equipment when placed in service, among other items. The FERC-approved formula rates do not require further action or FERC filings for the calculated joint zone rates to go into effect, although the rates are subject to legal challenge at the FERC. Our Regulated Operating Subsidiaries will continue to use formula rates to calculate their respective annual revenue requirements unless the FERC determines the rates to be unjust and unreasonable or another mechanism is determined by the FERC to be just and reasonable.

Our cost-based formula rate templates include a true-up mechanism, whereby our Regulated Operating Subsidiaries compare their actual revenue requirements to their billed revenues for each year to determine any over- or under-collection of revenue requirements. The over- or under-collection typically results from differences between the projected revenue requirement used to establish the billing rate and actual revenue requirement at each of our Regulated Operating Subsidiaries, or from differences between actual and projected monthly peak loads at our MISO Regulated Operating Subsidiaries. Revenue is recognized for services provided during each reporting period based on actual revenue requirements calculated using the formula rate templates. Our Regulated Operating Subsidiaries accrue or defer revenues to the extent that the actual revenue requirement for the reporting period is higher or lower, respectively, than the amounts billed relating to that reporting period. The amount of accrued or deferred revenues is reflected in customer bills within two years under the provisions of the formula rate templates.

The current and non-current regulatory assets are recorded in the condensed consolidated statements of financial position in regulatory assets — revenue accruals, including accrued interest and other non-current assets, respectively. The current and non-current regulatory liabilities are recorded in regulatory liabilities — revenue deferrals, including accrued interest. 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, 2014:

(in thousands)	Total
Balance as of December 31, 2013	$	(60,196	)
Net refund of 2012 revenue deferrals and accruals, including accrued interest	20,445
Net revenue deferral for the nine months ended September 30, 2014	(47,843		)
Net accrued interest payable for the nine months ended September 30, 2014	(1,777		)
Balance as of September 30, 2014	$	(89,371	)

9

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

(in thousands)	Total
Current assets	$	5,623
Non-current assets — other	5,747
Current liabilities	(38,156		)
Non-current liabilities	(62,585		)
Balance as of September 30, 2014	$	(89,371	)

4.    GOODWILL AND INTANGIBLE ASSETS

Goodwill

At September 30, 2014 and December 31, 2013, we had goodwill balances recorded at ITCTransmission, METC and ITC Midwest of $173.4 million, $453.8 million and $323.0 million, respectively, which resulted from the ITCTransmission acquisition, the METC acquisition and ITC Midwest’s asset acquisition, respectively.

Intangible Assets

We have recorded intangible assets as a result of the METC acquisition in 2006. The carrying value of these assets was $35.0 million and $37.2 million (net of accumulated amortization of $23.4 million and $21.2 million) as of September 30, 2014 and December 31, 2013, respectively.

We have also recorded intangible assets for payments and obligations made by 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 the KETA Project and the Kansas V-Plan Project. The carrying amount of these intangible assets was $14.2 million and $12.1 million (net of accumulated amortization of $0.6 million and $0.4 million) as of September 30, 2014 and December 31, 2013, respectively.

During the three months ended September 30, 2014 and 2013, we recognized $0.9 million and $0.8 million, respectively, of amortization expense of our intangible assets and $2.5 million and $2.4 million for the nine months ended September 30, 2014 and 2013, respectively. For each of the next five years, we expect the annual amortization of our intangible assets that have been recorded as of September 30, 2014 to be $3.3 million per year.

5.    DEBT

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. On August 18, 2014, ITC Holdings entered into a 10-year forward starting interest rate swap agreement with a notional amount of $25.0 million. The interest rate swap manages interest rate risk associated with the forecasted future issuance of fixed-rate debt related to the expected refinancing of the maturing ITC Holdings 5.875% Senior Notes, due September 30, 2016. As of September 30, 2014, ITC Holdings had $139.4 million outstanding under the 5.875% Senior Notes subsequent to the cash tender offer described below.

The 10-year term interest rate swap calls for ITC Holdings to receive interest quarterly at a variable rate equal to LIBOR and to pay interest semi-annually at a fixed rate of 3.217% effective for the 10-year period beginning September 30, 2016 after the agreement has been terminated. The agreement includes a mandatory early termination provision and will be terminated no later than the effective date of the interest rate swap of September 30, 2016. The interest rate swap has been determined to be highly effective at offsetting changes in the fair value of the forecasted interest cash flows associated with the expected debt issuance attributable to changes in benchmark interest rates from the trade date of the interest rate swap to the issuance date of the debt obligation. On October 8, 2014, ITC Holdings entered into an additional interest rate swap contract with terms comparable to the interest rate swap described above, consisting of an additional $25.0 million notional amount of a 10-year term interest rate swap with a fixed rate of 3.075%.

As of September 30, 2014, there has been no material ineffectiveness recorded in the condensed consolidated statement of operations. The interest rate swap qualifies for hedge accounting treatment, whereby any gain or loss recognized from the

10

trade date to the effective date for the effective portion of the hedge is recorded net of tax in accumulated other comprehensive income (“AOCI”). This amount will be accumulated and amortized as a component of interest expense over the life of the forecasted debt. As of September 30, 2014, the fair value of the derivative instrument was an asset of $0.1 million recorded to other non-current assets. The interest rate swap does not contain credit-risk-related contingent features. Refer to Note 10 for additional fair value information.

In May 2014, we executed, settled and terminated $150.0 million of 10-year interest rate swaps in conjunction with the Senior Notes issued at ITC Holdings described below. A summary of the terminated interest rate swaps is provided below:

Interest Rate Swaps	Amount		Weighted Average Fixed Rate of Interest Rate Swaps	Comparable Reference Rate of Senior Notes	Loss on Derivative		Settlement Date
(amounts in millions)
10-year interest rate swaps	$	150.0	2.65%	2.53%	$	1.6	May 2014

The interest rate swaps qualified for hedge accounting treatment and the loss of $1.6 million was recognized as of September 30, 2014 for the effective portion of the hedges and recorded net of tax in AOCI. This amount will be amortized as a component of interest expense over the lives of the related debt.

ITC Holdings

On December 20, 2013, ITC Holdings entered into an unsecured, unguaranteed term loan credit agreement, due September 30, 2016, with an initial borrowing capacity of $200.0 million which was borrowed in full as of March 31, 2014. As of September 30, 2014 and December 31, 2013, ITC Holdings had $161.0 million and $140.0 million outstanding under this agreement, respectively. The term loan bears interest at a variable rate, subject to adjustment based on ITC Holdings’ credit rating. The proceeds were used for general corporate purposes, including the repayment of borrowings under the ITC Holdings’ revolving credit agreement. The weighted-average interest rate on the borrowing outstanding under this agreement was 1.3% at September 30, 2014.

In May 2014, ITC Holdings commenced a cash tender offer for any and all of the outstanding $255.0 million ITC Holdings 5.875% Senior Notes due September 30, 2016 and $255.0 million ITC Holdings 6.375% Senior Notes due September 30, 2036, under which $115.6 million of the 5.875% Senior Notes and $54.7 million of the 6.375% Senior Notes were validly tendered on May 30, 2014. All of the Senior Notes validly tendered were subsequently retired with the proceeds from the $400.0 million3.65% Senior Notes described below. ITC Holdings incurred a loss on extinguishment of debt of $29.1 million related to the tender premium and the write-off of deferred debt issuance costs and other expenses.

On June 4, 2014, ITC Holdings issued $400.0 million aggregate principal amount of its 3.65% Senior Notes, due June 15, 2024. The proceeds from the issuance were used for the cash tender offer described above and for general corporate purposes, primarily the repayment of borrowings under the ITC Holdings revolving credit agreement. The ITC Holdings Senior Notes are issued under its indentures. All issuances of ITC Holdings Senior Notes are unsecured.

ITCTransmission

On June 10, 2014, ITCTransmission issued $75.0 million of the total face amount of $100.0 million of 4.27% First Mortgage Bonds, Series F, due June 10, 2044 (“First Mortgage Bonds”). ITCTransmission issued the remaining $25.0 million of First Mortgage Bonds on August 22, 2014. The proceeds from both issuances were used for general corporate purposes, primarily the repayment of borrowings under the ITCTransmission revolving credit agreement. 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 property.

METC

On January 31, 2014, METC entered into an unsecured, unguaranteed term loan credit agreement, under which METC borrowed the maximum of $50.0 million available under the agreement. The proceeds were used for general corporate purposes, primarily the repayment of borrowings under the METC revolving credit agreement. The term loan is scheduled to mature on February 2, 2015 and bears interest at a variable rate, subject to adjustment based on METC’s credit rating. The weighted average interest rate on the borrowing outstanding under the term loan was 1.2% at September 30, 2014.

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ITC Great Plains

In October 2014, ITC Great Plains priced $150.0 million of 4.16% First Mortgage Bonds, Series A, due 2044. The proceeds will be used to repay the $100.0 million borrowed under the ITC Great Plains’ term loan and for general corporate purposes, including the repayment of borrowings under the ITC Great Plains’ revolving credit agreement. ITC Great Plains’ First Mortgage Bonds will be issued under its First Mortgage and Deed of Trust and secured by a first mortgage lien on substantially all of its property.

Revolving Credit Agreements

On March 28, 2014, ITC Holdings and its Regulated Operating Subsidiaries entered into new unsecured, unguaranteed revolving credit agreements maturing in March 2019, which replaced their existing revolving credit agreements. At September 30, 2014, ITC Holdings and its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available:

(amounts in millions)	Total Available Capacity		Outstanding Balance (a)		Unused Capacity		Weighted Average Interest Rate on Outstanding Balance		Commitment Fee Rate (b)
ITC Holdings	$	400.0	$	45.0	$	355.0	1.4%	(c)	0.175	%
ITCTransmission	100.0		2.4		97.6		1.1%	(d)	0.10	%
METC	100.0		41.3		58.7		1.1%	(d)	0.10	%
ITC Midwest	250.0		162.4		87.6		1.2%	(d)	0.10	%
ITC Great Plains	150.0		98.4		51.6		1.2%	(e)	0.125	%
Total	$	1,000.0	$	349.5	$	650.5

____________________________

(a) Included within long-term debt.

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

(c) Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating.

(d) Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating.

(e) Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.125% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.125%, subject to adjustments based on ITC Great Plains' credit rating.

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, selling or otherwise disposing of all or substantially all of our assets and paying dividends. In addition, the covenants require us to meet certain financial ratios, such as maintaining certain debt to capitalization ratios and maintaining certain interest coverage ratios. As of September 30, 2014, we were in compliance with all debt covenants.

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6.     STOCKHOLDERS’ EQUITY

The changes in stockholders’ equity for the nine months endedSeptember 30, 2014 were as follows:

									Accumulated
									Other			Total
	Common Stock					Retained			Comprehensive			Stockholders’
(in thousands, except share and per share data)	Shares		Amount			Earnings			Income			Equity
BALANCE, DECEMBER 31, 2013	157,500,795		$	1,014,435		$	592,970		$	6,327		$	1,613,732
Net income	—		—			197,345			—			197,345
Repurchase and retirement of common stock	(3,018,225	)	(108,136		)	—			—			(108,136		)
Dividends declared on common stock ($0.4475 per share)	—		—			(70,279		)	—			(70,279		)
Stock option exercises	977,491		18,095			—			—			18,095
Shares issued under the Employee Stock Purchase Plan	53,056		1,571			—			—			1,571
Issuance of restricted stock	305,718		—			—			—			—
Forfeiture of restricted stock	(87,536	)	—			—			—			—
Share-based compensation, net of forfeitures	—		11,009			—			—			11,009
Forward contract of accelerated share repurchase program	—		(46,000		)	—			—			(46,000		)
Other comprehensive loss, net of tax	—		—			—			(389		)	(389		)
BALANCE, SEPTEMBER 30, 2014	155,731,299		$	890,974		$	720,036		$	5,938		$	1,616,948

The changes in stockholders’ equity for the nine months endedSeptember 30, 2013 were as follows:

									Accumulated
									Other			Total
	Common Stock					Retained			Comprehensive			Stockholders’
(in thousands, except share and per share data)	Shares		Amount			Earnings			Income (Loss)			Equity
BALANCE, DECEMBER 31, 2012	156,745,542		$	989,334		$	443,569		$	(18,048	)	$	1,414,855
Net income	—		—			156,569			—			156,569
Repurchase and retirement of common stock	(151,164	)	(4,508		)	—			—			(4,508		)
Dividends declared on common stock ($0.3933 per share)	—		—			(61,821		)	—			(61,821		)
Stock option exercises	430,542		6,860			—			—			6,860
Shares issued under the Employee Stock Purchase Plan	57,072		1,353			—			—			1,353
Issuance of restricted stock	365,433		—			—			—			—
Forfeiture of restricted stock	(33,363	)	—			—			—			—
Share-based compensation, net of forfeitures	—		10,670			—			—			10,670
Other comprehensive income, net of tax	—		—			—			24,555			24,555
BALANCE, SEPTEMBER 30, 2013	157,414,062		$	1,003,709		$	538,317		$	6,507		$	1,548,533

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Accumulated Other Comprehensive Income

The following table provides the components of changes in AOCI for the three and nine months ended September 30, 2014 and 2013:

	Three months ended					Nine months ended
	September 30,					September 30,
(in thousands)	2014			2013		2014			2013
Balance at the beginning of period	$	5,855		$	6,310	$	6,327		$	(18,048	)
Derivative instruments
Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net (net of tax of $88 and $71 for the three months ended September 30, 2014 and 2013, respectively, and net of tax of $243 and $90 for the nine months ended September 30, 2014 and 2013, respectively)	122			110		340			139
Reclassification of loss relating to interest rate cash flow hedges from AOCI to loss on extinguishment of debt (net of tax of $83 for the nine months ended September 30, 2014)	—			—		117			—
Gain (loss) on interest rate swaps relating to interest rate cash flow hedges (net of tax of $34 for the three months ended September 30, 2014 and $621 and $15,652 for the nine months ended September 30, 2014 and 2013, respectively)	47			—		(870		)	24,329
Derivative instruments, net of tax	169			110		(413		)	24,468
Available-for-sale securities
Unrealized net gain on available-for-sale securities (net of tax of $63 and $16 for the three and nine months ended September 30, 2014, respectively, and $56 for the three and nine months ended September 30, 2013)	(86		)	87		24			87
Available-for-sale securities, net of tax	(86		)	87		24			87
Total other comprehensive income (loss), net of tax	83			197		(389		)	24,555
Balance at the end of period	$	5,938		$	6,507	$	5,938		$	6,507

Stock Split

In January 2014, we filed an amendment to our Articles of Incorporation, as previously approved by our shareholders, to increase the number of authorized shares of common stock to 300 million shares. On February 6, 2014, our board of directors declared a three-for-one split of our common stock to be accomplished by means of a stock distribution on February 28, 2014 to shareholders of record on February 18, 2014. As a result of the stock split and other issuances and retirements during the nine months ended September 30, 2014, our outstanding shares increased from approximately 52.5 million shares (unadjusted for the three-for-one stock split) as of December 31, 2013 to 155.7 million shares as of September 30, 2014. In addition, all unvested restricted stock awards, outstanding stock option awards and share reserves under our share-based compensation plans as discussed in Note 7 were adjusted under the terms of the respective agreements for this three-for-one split. The share and per share data in this Form 10-Q reflects the three-for-one stock split effective February 28, 2014, unless otherwise noted.

Accelerated Share Repurchase Program

On June 19, 2014, ITC Holdings entered into an accelerated share repurchase agreement of up to $150.0 million (minimum of $130.0 million) with JP Morgan Chase (“JP Morgan”) (the “ASR program”), which is part of the Board of Directors authorized share repurchase program for up to $250.0 million approved in April 2014 and expiring in December 2015. Under the ASR program, ITC Holdings paid $150.0 million to JP Morgan and received an initial delivery of 2.9 million shares with a fair market value of $104.0 million, based on the closing market price of $35.80 per share at the commencement of the ASR program. The final number of shares delivered under the ASR program will be based on the volume-weighted average share price of our common stock during the term of the transaction, less an agreed upon discount and adjusted for the initial share delivery. The ASR program is expected to be completed by the end of 2014. As of September 30, 2014, there have been no settlements under the ASR program.

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The $46.0 million unsettled portion of the ASR program meets the criteria to be accounted for as a forward contract indexed to our stock and qualifies as an equity instrument. ITC Holdings recorded the $150.0 million payment as a reduction to common stock, which included the $104.0 million of initial shares repurchased and the unsettled forward contract of $46.0 million as of September 30, 2014. The initial delivery of shares resulted in an immediate reduction to our common stock outstanding used to calculate our earnings per share disclosed in Note 8.

ITC Holdings Sales Agency Financing Agreement

On July 27, 2011, ITC Holdings entered into a Sales Agency Financing Agreement with Deutsche Bank Securities Inc. as sales agent (the “SAFA”). Under the terms of the SAFA, ITC Holdings was able to issue and sell shares of common stock, without par value, from time to time, up to an aggregate sales proceeds amount of $250.0 million. No shares were issued under the SAFA prior to its expiration on July 27, 2014.

7.     SHARE-BASED COMPENSATION

Long-Term Incentive Plan Grants

On May 20, 2014, pursuant to the Second Amended and Restated 2006 Long-Term Incentive Plan (“LTIP”), we granted 652,900 options to purchase shares of our common stock with an exercise price of $36.73 per share, which was the closing price of our common stock on the date of grant. The options vest in three equal annual installments with the first installment vesting on May 20, 2015. In addition, on May 20, 2014, pursuant to the LTIP, we granted 259,014 shares of restricted stock at a fair value of $36.73 per share. Holders of restricted stock have all the rights of a holder of common stock of ITC Holdings, including dividend and voting rights. The restricted stock vests three years after the grant date. The holder of the restricted stock may not sell, transfer or pledge their shares of restricted stock until vesting occurs.

Stock Option Exercises

We issued 977,491 and 499,014 shares of our common stock during the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively, due to the exercise of stock options.

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8.    EARNINGS PER SHARE

We report both basic and diluted earnings per share. Our restricted stock and deferred stock units contain rights to receive nonforfeitable dividends and thus, are participating securities requiring the two-class method of computing earnings per share. A reconciliation of both calculations for the three and nine months ended September 30, 2014 and 2013 is presented in the following table (see additional information below under “Stock Split” for the recast share and per share data for the three and nine months ended September 30, 2013 as a result of the three-for-one stock split):

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands, except share, per share data and percentages)	2014			2013			2014			2013
Numerator:
Net income	$	73,873		$	58,984		$	197,345		$	156,569
Less: dividends declared and paid — common and restricted shares	(25,296		)	(22,299		)	(70,279		)	(61,820		)
Undistributed earnings	48,577			36,685			127,066			94,749
Percentage allocated to common shares (a)	99.2		%	99.1		%	99.2		%	99.0		%
Undistributed earnings — common shares	48,188			36,355			126,049			93,802
Add: dividends declared and paid — common shares	25,100			22,098			69,708			61,240
Numerator for basic and diluted earnings per common share	$	73,288		$	58,453		$	195,757		$	155,042
Denominator:
Basic earnings per common share — weighted average common shares outstanding	154,386,994			155,958,879			155,661,516			155,627,361
Incremental shares for stock options and employee stock purchase plan — weighted average assumed conversion	1,364,896			1,307,394			1,470,041			1,251,432
Diluted earnings per common share — adjusted weighted average shares and assumed conversion	155,751,890			157,266,273			157,131,557			156,878,793
Per common share net income:
Basic	$	0.47		$	0.37		$	1.26		$	1.00
Diluted	$	0.47		$	0.37		$	1.25		$	0.99

____________________________

(a)	Weighted average common shares outstanding	154,386,994		155,958,879		155,661,516		155,627,361
	Weighted average restricted shares (participating securities)	1,230,250		1,428,531		1,295,812		1,498,719
	Total	155,617,244		157,387,410		156,957,328		157,126,080
	Percentage allocated to common shares	99.2	%	99.1	%	99.2	%	99.0	%

The incremental shares for stock options and employee stock purchase plan (“ESPP”) shares are included in the diluted earnings per share calculation using the treasury stock method, unless the effect of including them would be anti-dilutive. The outstanding stock options and ESPP shares and the anti-dilutive stock options and ESPP shares excluded from the diluted earnings per share calculations were as follows:

	2014	2013
Outstanding stock options and ESPP shares (as of September 30)	4,637,551	5,238,300
Anti-dilutive stock options and ESPP shares (for the three and nine months ended September 30)	642,507	916,902

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Stock Split

Below are the effects of the stock split on earnings per share for the three and nine months ended September 30, 2013:

(in thousands, except per share and share data)	Reported		Adjustment			Adjusted
For the three months ended September 30, 2013
Numerator for basic and diluted earnings per common share	$	58,453	$	—		$	58,453
Denominator:
Basic earnings per common share — weighted average common shares	51,986,293		103,972,586			155,958,879
Incremental shares for stock options and employee stock purchase plan	435,798		871,596			1,307,394
Diluted earnings per common share — adjusted weighted average shares and assumed conversion	52,422,091		104,844,182			157,266,273
Per common share net income:
Basic	$	1.12	$	(0.75	)	$	0.37
Diluted	$	1.12	$	(0.75	)	$	0.37
For the nine months ended September 30, 2013
Numerator for basic and diluted earnings per common share	$	155,042	$	—		$	155,042
Denominator:
Basic earnings per common share — weighted average common shares	51,875,787		103,751,574			155,627,361
Incremental shares for stock options and employee stock purchase plan	417,144		834,288			1,251,432
Diluted earnings per common share — adjusted weighted average shares and assumed conversion	52,292,931		104,585,862			156,878,793
Per common share net income:
Basic	$	2.99	$	(1.99	)	$	1.00
Diluted	$	2.96	$	(1.97	)	$	0.99

Below are the effects of the stock split on other disclosures included for earnings per share for the three and nine months ended September 30, 2013:

Percentage Allocated to Common Shares

	Reported		Adjustment		Adjusted
For the three months ended September 30, 2013
Weighted-average common shares outstanding	51,986,293		103,972,586		155,958,879
Weighted-average restricted shares (participating securities)	476,177		952,354		1,428,531
Total	52,462,470		104,924,940		157,387,410
Percentage allocated to common shares	99.1	%	—	%	99.1	%
For the nine months ended September 30, 2013
Weighted-average common shares outstanding	51,875,787		103,751,574		155,627,361
Weighted-average restricted shares (participating securities)	499,573		999,146		1,498,719
Total	52,375,360		104,750,720		157,126,080
Percentage allocated to common shares	99.0	%	—	%	99.0	%

Outstanding and Anti-dilutive Stock Options and ESPP Shares

The outstanding stock options and the ESPP shares as of September 30, 2013 and the anti-dilutive stock options and ESPP shares excluded from the diluted earnings per share calculations for the three and nine months ended September 30, 2013 were as follows:

	Reported		Adjusted
	September 30, 2013	Adjustment	September 30, 2013
Outstanding stock options and ESPP shares	1,746,100	3,492,200	5,238,300
Anti-dilutive stock options and ESPP shares	305,634	611,268	916,902

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Impacts of the Accelerated Share Repurchase Program

The basic shares outstanding as of September 30, 2014 include the impacts of the initial delivery of 2.9 million shares received under the ASR program, as described in Note 6. The forward contract component of the ASR program of $46.0 million is excluded from the diluted earnings per share calculation for the three and nine months ended September 30, 2014 based on the volume-weighted average price calculated as of September 30, 2014, which results in an anti-dilutive impact on earnings per share. The final settlement amount may increase or decrease earnings per share at the settlement date depending upon the volume-weighted average share price of our common stock during the term of the transaction.

9.    RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

Retirement Plan Benefits

We have a qualified 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 qualified retirement plan is to contribute amounts necessary to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974, plus additional amounts as we determine appropriate. During the second quarter of 2014, we contributed $3.8 million to the defined benefit retirement plan. We do not expect to make any additional contributions to this plan in 2014.

We also have two supplemental nonqualified, noncontributory, retirement benefit plans for selected management employees. The plans provide for benefits that supplement those provided by our other retirement plans. We contributed $5.1 million to these supplemental nonqualified, noncontributory, retirement benefit plans during the second quarter of 2014. We do not expect to make any additional contributions to these plans in 2014.

Net pension cost, by component, was as follows for the three and nine months ended September 30, 2014:

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Service cost	$	1,267		$	1,315		$	3,800		$	3,946
Interest cost	901			698			2,703			2,094
Expected return on plan assets	(885		)	(717		)	(2,655		)	(2,151		)
Amortization of prior service credit	(11		)	(10		)	(32		)	(31		)
Amortization of unrecognized loss	386			679			1,158			2,036
Net pension cost	$	1,658		$	1,965		$	4,974		$	5,894

Other Postretirement Benefits

We provide certain postretirement health care, dental, and life insurance benefits for eligible employees. During the second quarter of 2014, we contributed $1.2 million to the postretirement benefit plan. We expect to make an estimated additional contribution of $5.0 million to the postretirement benefit plan in 2014.

Net postretirement cost, by component, was as follows for the three and nine months ended September 30, 2014:

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Service cost	$	1,462		$	1,443		$	4,385		$	4,330
Interest cost	498			390			1,494			1,171
Expected return on plan assets	(341		)	(353		)	(1,022		)	(1,061		)
Amortization of unrecognized loss	—			55			—			165
Net postretirement cost	$	1,619		$	1,535		$	4,857		$	4,605

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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 $0.9 million and $0.7 million for the three months ended September 30, 2014 and 2013, respectively, and $3.0 million and $3.1 million for the nine months ended September 30, 2014 and 2013, respectively.

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, 2014 and the year ended December 31, 2013, there were no transfers between levels.

Our assets measured at fair value subject to the three-tier hierarchy at September 30, 2014, 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 thousands)	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Cash and cash equivalents — cash equivalents	$	12,898	$	—	$	—
Mutual funds — fixed income securities	26,629		—		—
Mutual funds — equity securities	635		—		—
Interest rate swap derivative	—		81		—
Total	$	40,162	$	81	$	—

Our assets measured at fair value subject to the three-tier hierarchy at December 31, 2013, 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 thousands)	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Cash and cash equivalents — cash equivalents	$	19,000	$	—	$	—
Mutual funds — fixed income securities	21,318		—		—
Mutual funds — equity securities	516		—		—
Total	$	40,834	$	—	$	—

As of September 30, 2014 and December 31, 2013, we held certain assets and liabilities that are required to be measured at fair value on a recurring basis. The assets consist of investments recorded within cash and cash equivalents and other long-term assets, including investments held in a trust associated with our supplemental nonqualified, noncontributory, retirement benefit plans for selected management employees. Our cash and cash equivalents consist of money market mutual funds that are administered similar to money market funds recorded at cost plus accrued interest to approximate fair value. Our mutual funds consist primarily of publicly traded mutual funds 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, and losses are recorded in earnings for investment classified as trading securities and other comprehensive income for investments classified as available for sale if fair value falls below recorded cost.

The asset related to the derivative consists of an interest rate swap as discussed in Note 5. The fair value of our interest rate swap derivative as of September 30, 2014 is determined based on a discounted cash flow (“DCF”) method using LIBOR swap rates which are observable at commonly quoted intervals.

19

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, 2014. For additional information on our goodwill and intangible assets, please refer to the notes to the consolidated financial statements as of and for the year ended December 31, 2013 included in our Form 10-K for such period and to Note 4 of this Form 10-Q.

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, was $3,688.3 million and $3,299.0 million at September 30, 2014 and December 31, 2013, 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, excluding revolving and term loan credit agreements, was $3,379.6 million and $3,100.9 million at September 30, 2014 and December 31, 2013, respectively.

Revolving and Term Loan Credit Agreements

At September 30, 2014 and December 31, 2013, we had a consolidated total of $660.5 million and $511.2 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 and special deposits, approximates their fair value due to the short-term nature of these instruments.

11.    COMMITMENTS AND CONTINGENT LIABILITIES

Environmental Matters

Our Regulated Operating Subsidiaries’ operations 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 hazardous materials and of solid and hazardous wastes, and impose obligations to investigate and remediate contamination in certain circumstances. Liabilities to investigate or remediate 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 at properties currently owned or operated by our Regulated Operating Subsidiaries. Such liabilities may arise even where the contamination does not result from noncompliance with applicable environmental laws. Under a number of 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 Regulated Operating Subsidiaries’ 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 Regulated Operating Subsidiaries’ assets and operations also involve the use of materials classified as hazardous, toxic or otherwise dangerous. Many of the properties our Regulated Operating Subsidiaries 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 polychlorinated biphenyls, or PCBs. Our Regulated Operating Subsidiaries’ facilities and equipment are often situated close to or on property owned by others so that, if they are the source of contamination, other’s property may be affected. For example, aboveground and underground transmission lines sometimes traverse properties that our Regulated Operating Subsidiaries do not own, and, at some of our Regulated Operating Subsidiaries’ transmission stations, transmission assets (owned or operated by our

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Regulated Operating Subsidiaries) and distribution assets (owned or operated by our Regulated Operating Subsidiaries’ transmission customer) are commingled.

Some properties in which our Regulated Operating Subsidiaries have an ownership interest or at which they operate are, and others are suspected of being, affected by environmental contamination. Our Regulated Operating Subsidiaries are not aware of any pending or threatened claims against them with respect to environmental contamination, or of any investigation or remediation of contamination at any properties, that entail costs likely to materially affect them. Some facilities and properties are located near environmentally sensitive areas such as wetlands.

Claims have been made or threatened against electric utilities for bodily injury, disease or other damages allegedly related to exposure to electromagnetic fields associated with electric transmission and distribution lines. While our Regulated Operating Subsidiaries do not believe that a causal link between electromagnetic field exposure and injury has been generally established and accepted in the scientific community, if such a relationship is established or accepted, the liabilities and costs imposed on our business could be significant. We are not aware of any pending or threatened claims against our Regulated Operating Subsidiaries for bodily injury, disease or other damages allegedly related to exposure to electromagnetic fields and electric transmission and distribution lines that entail costs likely to have a material adverse effect on our results of operations, financial position or liquidity.

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, 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.

Michigan Sales and Use Tax Audit

The Michigan Department of Treasury conducted a sales and use tax audit of ITCTransmission for the audit period April 1, 2005 through June 30, 2008 and has denied ITCTransmission’s use of the industrial processing exemption from use tax it has taken beginning January 1, 2007. ITCTransmission has certain administrative and judicial appeal rights.

ITCTransmission believes that its utilization of the industrial processing exemption is appropriate and intends to defend itself against the denial of such exemption. However, it is reasonably possible that the assessment of additional use tax could be sustained after all administrative appeals and litigation have been exhausted.

The amount of the potential use tax liability associated with the exemptions taken by ITCTransmission through September 30, 2014 is estimated to be approximately $20.4 million for periods still subject to audit, which includes approximately $3.9 million assessed for the audit period April 1, 2005 through June 30, 2008, including interest. ITCTransmission has not recorded this contingent liability as of September 30, 2014. However, in the event it becomes appropriate to record additional use tax liability relating to this matter, ITCTransmission would record the additional use tax primarily as an increase to the cost of property, plant and equipment, as the majority of purchases for which the exemption was taken relate to equipment purchases associated with capital projects. METC has also taken the industrial processing exemption, estimated to be approximately $10.5 million for periods still subject to audit; however, METC has not recorded any contingent liabilities as of September 30, 2014 associated with this matter. These higher use tax expenses would be included as components of net revenue requirements and resulting rates.

FERC Audit Refund

The FERC issued an order that identified certain findings and recommendations of certain staff of the FERC relating to specific aspects of the accounting treatment for the acquisition of the transmission assets of IP&L by ITC Midwest that requires adjustments to the MISO Regulated Operating Subsidiaries’ respective annual revenue requirement calculations and corresponding refunds. ITC Midwest, ITCTransmission and METC recorded an aggregate regulatory liability for the refund and related interest of $13.1 million as of December 31, 2013. The amounts are being refunded through the cost-based formula rates in 2014 and as of September 30, 2014, the remaining regulatory liability and related interest was $3.3 million.

ITC Midwest Project Commitment

In the Minnesota regulatory proceeding to approve ITC Midwest’s December 2007 acquisition of the transmission assets of IP&L, ITC Midwest agreed to build a certain project in Iowa, the 345 kV Salem-Hazelton line, and made a commitment to use commercially reasonable best efforts to complete the project prior to December 31, 2011. In the event ITC Midwest is

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found to have failed to meet this commitment, the allowed 12.38% rate of return on the actual equity portion of its capital structure would be reduced to 10.39% until such time as ITC Midwest completes the project, and ITC Midwest would refund with interest any amounts collected since the close date of the transaction that exceeded what would have been collected if the 10.39% return on equity (“ROE”) had been used. Certain regulatory approvals were needed from the Iowa Utilities Board (“IUB”) before construction of the project could commence, but due to the IUB’s case schedule, these approvals were not received until the second quarter of 2011. As a result of the delay in the receipt of the necessary regulatory approvals, the project was not completed by December 31, 2011. We have notified the Minnesota Public Utilities Commission that the Salem-Hazleton line was placed into service on April 25, 2013, and requested confirmation from the commission that ITC Midwest has satisfied its commitment and that no refund is due as a result of the project not being completed by December 31, 2011. We believe we used commercially reasonable best efforts to meet the December 31, 2011 deadline, and therefore, we believe the likelihood of any material effect on the financial statements from this matter is remote.

Rate of Return on Equity and Capital Structure Complaint

On November 12, 2013, 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 (the “joint complainants”) filed a complaint with the FERC under Section 206 of the FPA, requesting that the FERC find the regional base rate ROE for all MISO TOs, including ITCTransmission, METC and ITC Midwest (currently set at 12.38%) to be unjust and unreasonable. The joint complainants are seeking a FERC order reducing the base regional ROE used in our formula transmission rate to 9.15%. The complaint also alleged that the rates of any MISO TO using a capital structure with greater than 50% for the equity component are likewise not just and reasonable (ITCTransmission, METC and ITC Midwest use their actual capital structures, which FERC has approved at a target of 60% equity). In addition, the complaint alleged the ROE adders currently approved for certain ITC operating companies, including adders currently utilized by ITCTransmission for being a member of an RTO and adders utilized by ITCTransmission and METC for being an independent transmission owner, are no longer just and reasonable, and sought to have them eliminated.

On January 6, 2014, ITCTransmission, METC and ITC Midwest filed responses with the FERC to the Section 206 complaint (jointly with other MISO TOs and through a separate supplemental response), defending the use of the current regional base ROE, the use of current capital structures, and the approved ROE adders for RTO membership and independence. The responses seek dismissal of the complaint, or a denial of it on merits, with prejudice, as the joint complainants failed to meet their burden under Section 206 of the FPA to show that the current regional base ROE, approved capital structures and ROE adders approved for ITCTransmission and METC are no longer just and reasonable.

On June 19, 2014, in a separate but related Section 206 complaint against certain ISO New England TOs, FERC adopted a new method for establishing ROEs for electric transmission utilities. The new method is based on a two-step process and uses both short-term and long-term growth projections in establishing ROEs, whereas the previous method used only short-term growth projections. Under this new method, FERC also reiterated its policy of capping the overall ROE, including adders, at the high end of the zone of reasonableness set by the two-step DCF methodology. The new method presented in the ISO New England ROE case will also be used in resolving the MISO ROE case.

On October 16, 2014, the FERC set the MISO TO’s base ROE for hearing and denied all other aspects of the complaint, finding that the joint complainants failed to show that the use of actual or FERC-approved capital structures that include more than 50% equity is unjust and unreasonable. FERC also denied the request to terminate ITCTransmission’s and METC’s ROE incentive adders detailed above. The order reiterates that any TO’s total ROE is limited by the high end of the zone of reasonableness and the TO’s ability to implement the full amount of previously granted ROE adders may be affected by the outcome of the hearing. FERC also set the effective date for potential refunds as November 12, 2013.

It is reasonably possible that the refund exposure for a potential reduction to the ROEs of our MISO Regulated Operating Subsidiaries could result in a material impact on our results of operations, cash flows and financial condition. The range of potential impact of this matter to our consolidated results of operations, cash flows and financial condition is not estimable due to the uncertainty of the calculation of an authorized ROE along with the zone of reasonableness, which is directly affected by the newly adopted two-step DCF methodology. The ROEs to be established would be dependent on the appropriate proxy group and assumptions for short and long-term growth rates at the time the ROE is ultimately determined. As of September 30, 2014, our MISO Regulated Operating Subsidiaries had a total of approximately $2.6 billion of equity in their capital structures for ratemaking purposes. Based on this level of aggregate equity, we estimate that each 10 basis point reduction in the authorized ROE would reduce annual consolidated net income by approximately $2.6 million.

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12.    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 thousands)	2014			2013			2014			2013
Regulated Operating Subsidiaries	$	270,062		$	238,857		$	792,058		$	686,128
ITC Holdings and other	254			152			438			455
Intercompany eliminations	(182		)	(227		)	(545		)	(680		)
Total Operating Revenues	$	270,134		$	238,782		$	791,951		$	685,903

	Three months ended						Nine months ended
INCOME BEFORE INCOME TAXES:	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Regulated Operating Subsidiaries	$	151,758		$	131,939		$	440,537		$	376,398
ITC Holdings and other	(33,250		)	(38,267		)	(122,514		)	(124,477		)
Total Income Before Income Taxes	$	118,508		$	93,672		$	318,023		$	251,921

	Three months ended						Nine months ended
NET INCOME:	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Regulated Operating Subsidiaries	$	93,015		$	82,291		$	269,865		$	234,168
ITC Holdings and other	73,873			58,984			197,345			156,569
Intercompany eliminations	(93,015		)	(82,291		)	(269,865		)	(234,168		)
Total Net Income	$	73,873		$	58,984		$	197,345		$	156,569

TOTAL ASSETS:	September 30,			December 31,
(in thousands)	2014			2013
Regulated Operating Subsidiaries	$	6,715,197		$	6,174,888
ITC Holdings and other	3,850,785			3,619,759
Reconciliations / Intercompany eliminations (a)	(3,758,618		)	(3,512,404		)
Total Assets	$	6,807,364		$	6,282,243

____________________________

(a) Reconciliation of total assets results primarily from differences in the netting of deferred tax assets and liabilities at our Regulated Operating Subsidiaries 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 and the outlook for our business and the electric transmission industry 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,” “projects,” “likely” and similar phrases. These forward-looking statements are based upon assumptions our management believes are reasonable. Such forward-looking statements are subject to 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 risks and uncertainties listed in Item 1A Risk Factors of our Form 10-K for the fiscal year ended December 31, 2013, and the following:

• Certain elements of our Regulated Operating Subsidiaries’ formula rates can be and have been 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. We have also made certain commitments to federal and state regulators with respect to, among other things, our rates in connection with acquisitions that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

• Our Regulated Operating Subsidiaries’ actual capital expenditures may be lower than planned, which would decrease rate base and therefore our revenues and earnings compared to our current expectations. In addition, we expect to invest in strategic development opportunities to improve the efficiency and reliability of the transmission grid, but we cannot assure you that we will be able to initiate or complete any of these investments.

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

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

• 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 collection of our revenues would be delayed.

• 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 Regulated Operating Subsidiaries’ assets are located is subject to easements, mineral rights and other similar encumbrances. As a result, our Regulated Operating Subsidiaries must comply with the provisions of various easements, mineral rights and other similar encumbrances, which may adversely impact their ability to complete construction projects in a timely manner.

• Our Regulated Operating Subsidiaries contract with third parties to provide services for certain aspects of their businesses. If any of these agreements are terminated, our Regulated Operating Subsidiaries 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 Regulated Operating Subsidiaries’ operations or the imposition of civil or criminal penalties.

• Our Regulated Operating Subsidiaries are subject to environmental regulations and to laws that can give rise to substantial liabilities from environmental contamination.

• Our Regulated Operating Subsidiaries 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, cyber 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.

• 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 pay dividends and fulfill our other 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.

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

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

• Provisions in our Articles of Incorporation and bylaws, Michigan corporate law and our debt agreements may impede efforts by our shareholders to change the direction or management of our company.

• Provisions in our Articles of Incorporation restrict market participants from voting or owning 5% or more of the outstanding shares of our capital stock.

Because our forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different and any or all of our forward-looking statements may turn out to be wrong. 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

Through our Regulated Operating Subsidiaries, we 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 operate, maintain and invest in transmission infrastructure in order to enhance system integrity and reliability, to reduce transmission constraints and to upgrade the transmission networks to support new generating resources interconnecting to our transmission systems. We are also pursuing development projects not within our existing systems, which likewise are intended to improve overall grid reliability, reduce transmission constraints and facilitate interconnections of new generating resources, as well as enhance competitive wholesale electricity markets.

As electric transmission utilities with rates regulated by the FERC, our Regulated Operating Subsidiaries earn revenues through tariff rates charged 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. The rates charged by our Regulated Operating Subsidiaries are established using cost-based formula rate templates as discussed in Note 3 to the condensed consolidated financial statements under “— Cost-Based Formula Rates with True-Up Mechanism.”

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.

We derive nearly all of our revenues from providing electric transmission service over our Regulated Operating Subsidiaries’ transmission systems to investor-owned utilities such as DTE Electric, Consumers Energy and IP&L, and to other entities such as alternative electricity suppliers, power marketers and other wholesale customers that provide electricity to end-use consumers and from transaction-based capacity reservations on our transmission systems.

Significant recent matters that influenced our financial position, results of operations and cash flows for the nine months ended September 30, 2014 or may affect future results include:

• Our capital investment of $598.9 million at our Regulated Operating Subsidiaries for the nine months ended September 30, 2014, resulting primarily from our focus on improving system reliability, increasing system capacity and upgrading the transmission network to support new generating resources;

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• Debt issuances as described in Note 5 to the condensed consolidated financial statements and borrowings under our revolving and term loan credit agreements in 2014 and 2013 to fund capital investment at our Regulated Operating Subsidiaries and for general corporate purposes, resulting in higher interest expense;

• Loss on extinguishment of debt of $29.1 million related to the tender of $115.6 million of the 5.875% ITC Holdings Senior Notes and $54.7 million of the 6.375% ITC Holdings Senior Notes as described in Note 5 to the condensed consolidated financial statements;

• Debt maturing within one year of $200.0 million as of September 30, 2014 and the interest rates associated with the additional financing required;

• The rate of return on equity (“ROE”) and capital structure complaint filed against all MISO Transmission Owners (“TOs”) including our MISO Regulated Operating Subsidiaries as described in Note 11 to the condensed consolidated financial statements; and

• The accelerated share repurchase program (“ASR program”) entered in June 2014 for up to $150.0 million which is part of the Board of Directors authorized share repurchase program of up to $250.0 million authorized in April 2014 and expiring in December 2015 as described in Note 6 to the condensed consolidated financial statements.

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

Capital Project Updates and Other Recent Developments

ITC Great Plains

Kansas V-Plan Project

The Kansas V-Plan Project is a 200-mile long transmission line that will run between Spearville and Wichita, Kansas. ITC Great Plains is responsible for constructing an approximately 120-mile portion of the project from Spearville to Medicine Lodge, Kansas. ITC Great Plains commenced construction during 2012, and through September 30, 2014, ITC Great Plains has invested $296.6 million in the Kansas V-Plan Project. We estimate that ITC Great Plains will invest a total of approximately $300 million in its portion of the project, which is currently anticipated to be completed by the end of 2014.

Regulatory Assets

As of September 30, 2014, we have recorded a total of $14.0 million of regulatory assets for start-up, development and pre-construction expenses, including associated carrying charges, incurred by ITC Great Plains, which include certain costs incurred for the Kansas Electric Transmission Authority (“KETA”) and the Kansas V-Plan Projects prior to construction. Based on ITC Great Plains’ FERC application under which authority to recognize these regulatory assets was sought and the related FERC order granting such authority, ITC Great Plains made a filing with the FERC under Section 205 of the FPA in May 2013 to recover these start-up, development and pre-construction expenses, including associated carrying charges, in future rates as discussed in Note 3 of the condensed consolidated financial statements.

Development Bonuses

We recognized general and administrative expenses of $0.3 million and $2.5 million during the three and nine months ended September 30, 2014, respectively, and $0.9 million and $3.0 million during the three and nine months ended September 30, 2013, respectively, for bonuses for certain development projects, including the successful completion of certain milestones relating to projects at ITC Great Plains. It is reasonably possible that future development-related bonuses may be authorized and awarded for these or other development projects.

Multi-Value Projects

2011 MISO Multi-Value Projects

In 2011, MISO implemented its Multi-Value Project (“MVP”) cost allocation methodology. In December 2011, MISO approved a portfolio of MVPs which includes portions of four MVPs that we will construct, own and operate. The four MVPs are located in south central Minnesota, northern and southeast Iowa, southwest Wisconsin, and northeast Missouri and will be constructed by ITC Midwest. We currently estimate we will invest approximately $800 million in our portions of the MVPs from 2014 through 2018.

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Thumb Loop Project

The Thumb Loop Project, an additional MVP, is located in ITCTransmission’s region and consists of a 140-mile, double-circuit 345 kV transmission line and related substations that will serve as the backbone of the transmission system needed to accommodate future wind development projects in the Michigan counties of Tuscola, Huron, Sanilac and St. Clair. In September 2013, Phase 1 of the Thumb Loop project, consisting of approximately 62 miles, was placed into service. Phase 2, consisting of approximately 20 miles, was placed into service in May 2014. Through September 30, 2014, ITCTransmission has invested $436.8 million in the Thumb Loop Project. We estimate ITCTransmission will invest a total of approximately $510 million in the project, which is currently anticipated to be completed in 2015.

Rate of Return on Equity and Capital Structure Complaint

In November 2013, certain parties filed a joint complaint with the FERC under Section 206 of the FPA, requesting that the FERC find the regional base rate ROE for all MISO TOs, including ITCTransmission, METC and ITC Midwest to be unjust and unreasonable. The joint complainants are seeking a FERC order reducing the regional base ROE rate used in our formula transmission rate from 12.38% to 9.15%, reducing the equity component of our capital structure from the FERC approved 60% to 50% and terminating the ROE adders currently approved for certain ITC operating companies, including adders currently utilized by ITCTransmission and METC.

We believe that the current ROE encourages transmission investment and offsets the burdens associated with maintaining the independent transmission business model and RTO membership. ITCTransmission, METC and ITC Midwest filed responses during the first quarter of 2014, separately and together with other MISO TOs, that seek dismissal of the complaint for its failure to satisfy the requirements of FPA Section 206 and the FERC’s accompanying Rules, or denial of the complaint on the merits, with prejudice.

On October 16, 2014, the FERC set the MISO Transmission Owners’ base ROE for hearing and denied all other aspects of the complaint, finding that the joint complainants failed to show that the use of actual or FERC-approved capital structures that include more than 50% equity is unjust and unreasonable. FERC also denied the request to terminate ITCTransmission’s and METC’s ROE incentive adders detailed above. The order reiterates that any TO’s total ROE is limited by the high end of the zone of reasonableness and the TO’s ability to implement the full amount of previously granted ROE adders may be affected by the outcome of the hearing. FERC also set the effective date for potential refunds as November 12, 2013.

It is reasonably possible that the refund exposure for a potential reduction to the ROEs of our MISO Regulated Operating Subsidiaries could result in a material impact on our results of operations, cash flows, and financial condition. The range of potential impact of this matter is not estimable due to the uncertainty of the calculation of an authorized ROE along with the zone of reasonableness, which is directly affected by the newly adopted two-step discounted cash flow methodology. The ROE to be established would be dependent on the appropriate proxy group and assumptions for short and long-term growth rates at the time the ROE is ultimately determined. As of September 30, 2014, our MISO Regulated Operating Subsidiaries had a total of approximately $2.6 billion of equity in their capital structures for ratemaking purposes. Based on this level of aggregate equity, we estimate that each 10 basis point reduction in the authorized ROE would reduce annual consolidated net income by approximately $2.6 million. See further discussion in Note 11 to the condensed consolidated financial statements.

Stock Split

On February 6, 2014, our board of directors declared a three-for-one split of our common stock to be accomplished by means of a stock distribution. The additional shares were distributed on February 28, 2014, to the shareholders of record on February 18, 2014. See further discussion in Note 6 to the condensed consolidated financial statements.

Accelerated Share Repurchase Program

On June 19, 2014, ITC Holdings entered into an accelerated share repurchase agreement of up to $150.0 million (minimum of $130.0 million) with JP Morgan Chase (“JP Morgan”), which is part of the Board of Directors authorized share repurchase program for up to $250.0 million approved in April 2014 and expiring in December 2015. Under the ASR program, ITC Holdings paid $150.0 million to JP Morgan and received an initial delivery of 2.9 million shares with a fair market value of $104.0 million based on the closing market price of $35.80 per share at the commencement of the ASR program. The final number of shares delivered under the ASR program will be based on the volume-weighted average share price of our common stock during the term of the transaction. As of September 30, 2014, there have been no settlements under the ASR program. The ASR program is expected to be completed by the end of 2014. See further discussion in Note 6 and Note 8 to the condensed consolidated financial statements.

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Cost-Based Formula Rates with True-Up Mechanism

Our Regulated Operating Subsidiaries calculate their revenue requirements using cost-based formula rate templates and are effective without the need to file rate cases with the FERC, although the rates are subject to legal challenge at the FERC. Under these formula rate templates, our Regulated Operating Subsidiaries recover expenses and earn a return on and recover investments in property, plant and equipment on a current rather than a lagging basis. The formula rate templates utilize 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 cost-based formula rate templates include a true-up mechanism, whereby our Regulated Operating Subsidiaries compare their actual revenue requirements to their billed revenues for each year to determine any over- or under-collection of revenue. 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.

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 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. For example, to the extent that amounts billed are less than the revenue requirement for a reporting period, a revenue accrual is recorded for the difference. To the extent that amounts billed are more than the revenue requirement for a reporting period, a revenue deferral is recorded for the difference. 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 affected by many variables, but is generally impacted by weather and economic conditions and is seasonally shaped with higher load in the summer months when cooling demand is higher.

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The following table sets forth the monthly peak loads during the last three calendar years.

Monthly Peak Load (in MW) (a)

	2014			2013			2012
	ITCTransmission	METC	ITC Midwest	ITCTransmission	METC	ITC Midwest	ITCTransmission	METC	ITC Midwest
January	7,730	6,310	2,998	7,593	6,215	2,801	7,264	6,145	2,789
February	7,379	6,228	2,875	7,141	5,846	2,693	6,919	5,754	2,592
March	7,221	6,065	2,783	6,817	5,552	2,587	6,941	5,708	2,443
April	6,439	5,531	2,410	6,566	5,321	2,451	6,403	5,259	2,296
May	8,200	6,130	2,828	8,956	6,490	2,646	8,947	6,459	2,700
June	10,069	7,463	3,015	10,335	7,643	3,099	11,652	8,738	3,388
July	10,353	7,861	3,310	11,694	8,987	3,573	12,180	9,354	3,636
August	10,554	7,338	3,223	10,158	7,809	3,509	11,081	8,508	3,445
September	11,021	7,346	3,226	11,046	8,171	3,447	9,094	7,349	3,443
October				7,562	5,485	2,675	6,566	5,429	2,539
November				7,017	5,947	2,702	7,022	5,829	2,631
December				7,651	6,206	2,920	7,230	5,928	2,645
Total	78,966	60,272	26,668	102,536	79,672	35,103	101,299	80,460	34,547

____________________________

(a) Our MISO Regulated Operating Subsidiaries are each part of a joint rate zone. The load data presented is for all TOs in the respective joint rate zone and is used for billing network revenues. Each of our MISO Regulated Operating Subsidiaries makes up the most significant portion of the rates or revenue requirement billed to network load within their respective joint rate zone.

Capital Investment and Operating Results Trends

We expect a general trend of increases in revenues and earnings for our Regulated Operating Subsidiaries over the long term. The primary factor that is expected to continue to increase our actual revenue requirements in future years is our anticipated capital investment in excess of depreciation as a result of 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. In addition, our capital investment efforts relating to development initiatives are based on establishing an ongoing pipeline of projects that will position us for long-term growth. 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 to improve system accessibility for all generation resources. The FERC requires adoption of certain reliability standards and may take enforcement actions against violators, including fines of up to $1.0 million per day. The NERC was assigned the responsibility of developing and enforcing these mandatory reliability standards. We continually assess our transmission systems against standards established by the NERC, as well as the standards of applicable regional entities under the NERC that have been delegated certain authority for the purpose of proposing and enforcing reliability standards. We believe 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.

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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) rebuild existing property, plant and equipment; (2) upgrade the system to address demographic changes that have impacted transmission load and the changing role that transmission plays in meeting the needs of the wholesale market, including accommodating the siting of new generation or to increase import capacity to meet changes in peak electrical demand; (3) relieve congestion in the transmission systems; and (4) achieve state and federal policy goals, such as renewable generation portfolio standards. The following table shows our expected and actual capital investment for each of the Regulated Operating Subsidiaries and our development initiatives:

			Actual Capital		Forecasted Capital
	Long-term Capital		Investment for the		Investment for the
(in millions)	Investment Program		nine months ended		year ending
Source of Investment	2014-2018		September 30, 2014 (a)		December 31, 2014
ITCTransmission (b)	$	647	$	190.9	$255 — 265
METC	546		94.3		130 — 145
ITC Midwest (c)	1,991		195.2		280 — 295
ITC Great Plains	194		118.5		120 — 130
Development	1,122		—		—
Total	$	4,500	$	598.9	$785 — 835

____________________________

(a) Capital investment amounts differ from cash expenditures for property, plant and equipment included in our condensed consolidated statements of cash flows due in part to differences in construction costs incurred compared to cash paid during that period, as well as payments for major equipment inventory that are included in cash expenditures but not included in capital investment until transferred to construction work in progress, among other factors.

(b) ITCTransmission’s investment program includes the Thumb Loop Project that is under construction.

(c) ITC Midwest’s investment program includes the 2011 MISO MVPs as discussed above under “Capital Project Updates and Other Recent Developments”.

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 and variances between estimated and actual costs of construction contracts awarded. 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, the generator’s potential failure to meet the various criteria of Attachment FF of the MISO tariff for the project to qualify as a refundable network upgrade, 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 thousands)	2014			2013			(decrease)			(decrease)		2014			2013			(decrease)			(decrease)
OPERATING REVENUES	$	270,134		$	238,782		$	31,352		13.1	%	$	791,951		$	685,903		$	106,048		15.5	%
OPERATING EXPENSES
Operation and maintenance	29,038			29,725			(687		)	(2.3	)%	79,735			83,906			(4,171		)	(5.0	)%
General and administrative	28,812			31,902			(3,090		)	(9.7	)%	87,082			110,767			(23,685		)	(21.4	)%
Depreciation and amortization	31,936			29,802			2,134			7.2	%	94,609			87,583			7,026			8.0	%
Taxes other than income taxes	19,205			16,728			2,477			14.8	%	57,474			49,492			7,982			16.1	%
Other operating (income) and expenses — net	(289		)	(197		)	(92		)	46.7	%	(750		)	(542		)	(208		)	38.4	%
Total operating expenses	108,702			107,960			742			0.7	%	318,150			331,206			(13,056		)	(3.9	)%
OPERATING INCOME	161,432			130,822			30,610			23.4	%	473,801			354,697			119,104			33.6	%
OTHER EXPENSES (INCOME)
Interest expense	47,328			44,062			3,266			7.4	%	138,491			123,527			14,964			12.1	%
Allowance for equity funds used during construction	(4,921		)	(8,290		)	3,369			(40.6	)%	(14,865		)	(25,315		)	10,450			(41.3	)%
Loss on extinguishment of debt	—			—			—			n/a		29,074			—			29,074			n/a
Other income	(244		)	(786		)	542			(69.0	)%	(618		)	(824		)	206			(25.0	)%
Other expense	761			2,164			(1,403		)	(64.8	)%	3,696			5,388			(1,692		)	(31.4	)%
Total other expenses (income)	42,924			37,150			5,774			15.5	%	155,778			102,776			53,002			51.6	%
INCOME BEFORE INCOME TAXES	118,508			93,672			24,836			26.5	%	318,023			251,921			66,102			26.2	%
INCOME TAX PROVISION	44,635			34,688			9,947			28.7	%	120,678			95,352			25,326			26.6	%
NET INCOME	$	73,873		$	58,984		$	14,889		25.2	%	$	197,345		$	156,569		$	40,776		26.0	%

Operating Revenues

Three months ended September 30, 2014 compared to three months ended September 30, 2013

The following table sets forth the components of and changes in operating revenues:

												Percentage
	2014				2013				Increase			increase
(in thousands)	Amount		Percentage		Amount		Percentage		(decrease)			(decrease)
Network revenues	$	191,112	70.7	%	$	185,165	77.5	%	$	5,947		3.2	%
Regional cost sharing revenues	70,198		26.0	%	44,676		18.7	%	25,522			57.1	%
Point-to-point	4,192		1.6	%	4,684		2.0	%	(492		)	(10.5	)%
Scheduling, control and dispatch	3,146		1.2	%	2,962		1.2	%	184			6.2	%
Other	1,486		0.5	%	1,295		0.6	%	191			14.7	%
Total	$	270,134	100.0	%	$	238,782	100.0	%	$	31,352		13.1	%

Network revenues increased due primarily to higher net revenue requirements at our Regulated Operating Subsidiaries during the three months ended September 30, 2014 as compared to the same period in 2013. Higher net revenue requirements were due primarily to higher rate bases associated with higher balances of property, plant and equipment in-service.

Regional cost sharing revenues increased due primarily to additional capital projects that have been identified by MISO as eligible for regional cost sharing and these projects being placed in-service. We expect to continue to receive regional cost sharing revenues and the amounts could increase in the near future, including revenues associated with projects that have been or are expected to be approved for regional cost sharing.

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Nine months ended September 30, 2014 compared to nine months ended September 30, 2013

The following table sets forth the components of and changes in operating revenues:

											Percentage
	2014				2013				Increase		increase
(in thousands)	Amount		Percentage		Amount		Percentage		(decrease)		(decrease)
Network revenues	$	566,188	71.5	%	$	534,330	77.9	%	$	31,858	6.0	%
Regional cost sharing revenues	193,451		24.4	%	122,470		17.9	%	70,981		58.0	%
Point-to-point	13,829		1.7	%	13,108		1.9	%	721		5.5	%
Scheduling, control and dispatch	9,539		1.2	%	9,084		1.3	%	455		5.0	%
Other	8,944		1.2	%	6,911		1.0	%	2,033		29.4	%
Total	$	791,951	100.0	%	$	685,903	100.0	%	$	106,048	15.5	%

Network revenues increased due primarily to higher net revenue requirements at our Regulated Operating Subsidiaries during the nine months ended September 30, 2014 as compared to the same period in 2013. Higher net revenue requirements were due primarily to higher rate bases associated with higher balances of property, plant and equipment in-service.

Regional cost sharing revenues increased due primarily to additional capital projects that have been identified by MISO as eligible for regional cost sharing and these projects being placed in-service.

Operating revenues for the nine months ended September 30, 2014 include the network, regional cost sharing and scheduling, control and dispatch revenue accruals and deferrals as calculated below:

								ITC			ITC Great			Total net revenue
Line	Item	ITCTransmission			METC			Midwest			Plains			deferral
	(in thousands)
1	Estimated net revenue requirement (network revenues recognized) (a)	$	178,502		$	152,726		$	230,827		$	4,133
2	Network revenues billed (b)	197,933			167,085			238,443			4,438
3	Network revenue deferrals (line 1 — line 2)	(19,431		)	(14,359		)	(7,616		)	(305		)
4	Regional cost sharing revenue accruals (deferrals) (c)	4,203			(7,000		)	(773		)	(1,934		)
5	Scheduling, control and dispatch revenue accruals (deferrals) (c)	181			(215		)	(594		)	—
6	Total net revenue deferral (line 3 + line 4)	$	(15,047	)	$	(21,574	)	$	(8,983	)	$	(2,239	)	$	(47,843	)

____________________________

(a) The calculation of net revenue requirement for our Regulated Operating Subsidiaries is described in our Form 10-K for the year ended December 31, 2013 under “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations — Cost-Based Formula Rates with True-Up Mechanism — Revenue Requirement Calculation.” The amount is estimated for each reporting period until such time as FERC Form No. 1’s are completed for our Regulated Operating Subsidiaries.

(b) Network revenues billed at our MISO Regulated Operating Subsidiaries are calculated based on the joint zone monthly network peak load multiplied by their effective monthly network rates for 2014 of $2.305 per kW/month, $2.781 per kW/month and $8.795 per kW/month applicable to ITCTransmission, METC and ITC Midwest, respectively, adjusted for the actual number of days in the month net of amounts recovered or refunded associated with our MISO Regulated Operating Subsidiaries 2012 true-up adjustments. The network rates for 2014 include amounts for the collection and refund of the 2012 network revenue accruals and deferrals and related accrued interest as well as the FERC audit refund and related interest, as discussed in Note 11 to the condensed consolidated financial statements under “FERC Audit Refund.” Our rates at ITC Great Plains are billed ratably each month based on its annual projected net revenue requirement of $58.1 million for 2014 and include amounts for the collection and refund of the 2012 revenue accruals and deferrals and related accrued interest. On August 29, 2014, ITCTransmission's projected network rate of $2.412 per kW/month, METC's projected network rate of $2.723 per kW/month and ITC Midwest's projected network rate of $9.265 per kW/month, in each case for the period from January 1, 2015 through December 31, 2015, were posted by MISO. ITC Great Plains' projected revenue requirement of $80.4 million for the period from January 1, 2015 through December 31, 2015 was posted by SPP on August 29, 2014.

(c) These revenues are subject to a separate true-up mechanism whereby our Regulated Operating Subsidiaries accrue or defer revenues for any over- or under-recovery. The revenue accruals and deferrals are included in these revenue amounts.

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Operating Expenses

Operation and maintenance expenses

Three months ended September 30, 2014 compared tothree months ended September 30, 2013

Operation and maintenance expenses decreased primarily due to lower vegetation management requirements of $2.3 million, partially offset by higher substation and tower painting expenses of $1.4 million.

Nine months ended September 30, 2014 compared to nine months ended September 30, 2013

Operation and maintenance expenses decreased primarily due to lower vegetation management requirements of $4.3 million.

General and administrative expenses

Three months ended September 30, 2014 compared to three months ended September 30, 2013

General and administrative expenses decreased $7.2 million due to legal, advisory and financial services fees incurred in the prior period relating to the terminated Entergy Transaction. The decrease was partially offset by higher professional services such as legal, advisory and financial services fees primarily for various development initiatives of $3.7 million unrelated to the Entergy Transaction.

Nine months ended September 30, 2014 compared to nine months ended September 30, 2013

General and administrative expenses decreased $34.6 million due to legal, advisory and financial services fees incurred in the prior period relating to the terminated Entergy Transaction. The decrease was partially offset by higher professional services such as legal, advisory and financial services fees primarily for various development initiatives of $7.1 million unrelated to the Entergy Transaction in addition to $2.1 million of higher compensation expenses primarily due to personnel additions.

Depreciation and amortization expenses

Three and nine months ended September 30, 2014compared to three and nine months ended September 30, 2013

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

Taxes other than income taxes

Three and nine months ended September 30, 2014compared to three and nine months ended September 30, 2013

Taxes other than income taxes increased due to higher property tax expenses due primarily to our Regulated Operating Subsidiaries’ 2013 capital additions, which are included in the assessments for 2014 personal property taxes.

Other Expenses (Income)

Three and nine months ended September 30, 2014compared to three and nine months ended September 30, 2013

Interest Expense

Interest expense increased primarily due to interest associated with the higher debt balances and long-term debt issuances at ITC Holdings and the Regulated Operating Subsidiaries which were used for refinancing of current debt maturities and general corporate purposes as described in Note 5 to the condensed consolidated financial statements.

Allowance for Equity Funds Used During Construction

Allowance for Equity Funds Used During Construction (“AFUDC equity”) decreased due primarily to lower balances of construction work in progress during the period.

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Loss on Extinguishment of Debt

The loss on extinguishment of debt related to the tender of $115.6 million of the 5.875% ITC Holdings Senior Notes and $54.7 million of the 6.375% ITC Holdings Senior Notes as described in Note 5 to the condensed consolidated financial statements.

Income Tax Provision

Three months ended September 30, 2014 compared to three months ended September 30, 2013

Our effective tax rates for the three months ended September 30, 2014 and 2013 were 37.7% and 37.0%, respectively. Our effective tax rate in both periods exceeded our 35% statutory federal income tax rate due primarily to state income taxes, partially offset by the tax effects of AFUDC equity which reduced the effective tax rate. The amount of income tax expense relating to AFUDC equity was recognized as a regulatory asset and not included in the income tax provision. We recorded a state income tax provision of $4.3 million (net of federal deductibility) during the three months ended September 30, 2014, compared to a state income tax provision of $3.4 million (net of federal deductibility) for the three months ended September 30, 2013.

Nine months ended September 30, 2014 compared to nine months ended September 30, 2013

Our effective tax rates for the nine months ended September 30, 2014 and 2013 were 37.9% and 37.8%, respectively. Our effective tax rate in both periods exceeded our 35% statutory federal income tax rate due primarily to state income taxes, partially offset by the tax effects of AFUDC equity which reduced the effective tax rate. The amount of income tax expense relating to AFUDC equity was recognized as a regulatory asset and not included in the income tax provision. We recorded a state income tax provision of $12.2 million (net of federal deductibility) during the nine months ended September 30, 2014, compared to a state income tax provision of $8.8 million (net of federal deductibility) for the nine months ended September 30, 2013.

In addition to the items noted above, our effective tax rate exceeded our 35% statutory federal income tax rate for the nine months ended September 30, 2014 due to the previously assumed non-deductibility of certain costs incurred to facilitate the now canceled Entergy Transaction.

LIQUIDITY AND CAPITAL RESOURCES

We expect to fund our future capital requirements with cash from operations, our existing cash and cash equivalents and amounts available under our revolving credit agreements (described in Note 5 to the condensed consolidated financial statements). In addition, we may from time to time secure debt and equity 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 or equity 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 transmission projects which will continue to result in the incurrence of development expenses and could result in significant capital expenditures.

• Fund working capital requirements.

• Fund our debt service requirements, including principal repayments and periodic interest payments. We expect our interest payments to increase each year as a result of additional debt we expect to incur to fund our capital expenditures and for general corporate purposes.

• Fund contributions to our retirement plans, as described in Note 9 to the condensed consolidated financial statements. We expect to make an estimated additional contribution of approximately $5.0 million to these plans in 2014. The impact of the growth in the number of participants in our retirement benefit plans and changes in the requirements of the Pension Protection Act may require contributions to our retirement plans to be higher than we have experienced in the past.

• Fund our authorized share repurchase program as described in Note 6 to the condensed consolidated financial statements.

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In addition to the expected capital requirements above, any adverse determinations relating to the contingencies described in Note 11 to the condensed consolidated 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 to fund capital investments. ITC Holdings’ sources of cash are dividends and other payments received by us from our Regulated Operating Subsidiaries and any other subsidiaries we may have in addition to the proceeds raised from the sale of our debt and equity securities. Each of our Regulated Operating Subsidiaries, however, 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 revolving and term loan credit agreements and our cash and cash equivalents as needed to meet our short-term cash requirements. As described in Note 5 to the condensed consolidated financial statements, we entered into new revolving credit agreements in March 2014 at ITC Holdings and its Regulated Operating Subsidiaries totaling $1.0 billion, an increase of $275.0 million from the prior revolving credit agreements. During the three months ended September 30, 2014, we completed financings as described below. As of September 30, 2014, we had consolidated indebtedness under our revolving and term loan credit agreements of $660.5 million, with unused capacity under the revolving credit agreements of $650.5 million. See Note 5 to the condensed consolidated financial statements for a detailed discussion of these agreements and for a discussion of other debt issuances during 2014.

On August 22, 2014, ITCTransmission issued the remaining $25.0 million of the total face amount of $100.0 million of 4.27% First Mortgage Bonds, Series F, due June 10, 2044. The proceeds from the issuance were used for general corporate purposes, primarily the repayment of borrowings under the ITCTransmission revolving credit agreement. See Note 5 to the condensed consolidated financial statements for further discussion.

As of September 30, 2014, we had approximately $200.0 million of debt maturing within one year, which may be refinanced with long-term debt. 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 in the event we experience difficulties in accessing capital. We expect to be able to obtain such additional financing for both our short and long-term requirements 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 an indication of future stock performance or 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. Our current credit ratings are displayed in the following table. An explanation of these ratings may be obtained from the respective rating agency.

Issuer	Issuance	Standard and Poor’s Ratings Services (a)	Moody’s Investor Service, Inc. (b)
ITC Holdings	Senior Unsecured Notes	BBB+	Baa2
ITCTransmission	First Mortgage Bonds	A	A1
METC	Senior Secured Notes	A	A1
ITC Midwest	First Mortgage Bonds	A	A1
ITC Great Plains (c)	First Mortgage Bonds	A	A1

____________________________

(a) On December 6, 2013, Standard and Poor’s Ratings Services (“Standard and Poor’s”) upgraded the senior unsecured credit rating of ITC Holdings and reaffirmed the secured credit ratings of ITCTransmission, METC and ITC Midwest. On October 7, 2014, Standard and Poor’s issued a secured credit rating for ITC Great Plains. All of the ratings have a stable outlook.

(b) On April 15, 2014, Moody’s Investor Service, Inc. (“Moody’s”) reaffirmed the credit ratings for ITC Holdings and the MISO Regulated Operating Subsidiaries and on October 8, 2014, issued a secured credit rating for ITC Great Plains. All of the ratings have a stable outlook.

(c) ITC Great Plains also has an unsecured debt rating of A- and A3 from Standard and Poor’s and Moody’s, respectively.

Covenants

Our debt instruments include senior notes, secured notes, first mortgage bonds, unsecured revolving and term loan credit agreements containing numerous financial and operating covenants that place significant restrictions, which are described in

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Note 5 to the condensed consolidated financial statements and in our Form 10-K for the fiscal year ended December 31, 2013. As of September 30, 2014, we were in compliance with all debt covenants. 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 would increase.

Cash Flows From Operating Activities

Net cash provided by operating activities was $360.9 million and $292.2 million for the nine months ended September 30, 2014 and 2013, respectively. The increase in cash provided by operating activities was due primarily to an increase in cash received from operating revenues of $103.3 million during the nine months ended September 30, 2014 compared to the same period in 2013. The increase was partially offset by higher interest payments (net of interest capitalized) of $19.4 million and higher income taxes paid of $14.2 million.

Cash Flows From Investing Activities

Net cash used in investing activities was $552.3 million and $635.0 million for the nine months ended September 30, 2014 and 2013, respectively. The decrease in cash used in investing activities was due primarily to the timing of payments for investments in property, plant and equipment during the nine months ended September 30, 2014 compared to the same period in 2013.

Cash Flows From Financing Activities

Net cash provided by financing activities was $168.7 million and $367.4 million for the nine months ended September 30, 2014 and 2013, respectively. The decrease in cash provided by financing activities was due primarily to a decrease in long-term debt issuances of $434.4 million and the payment of $150.0 million for the ASR program during the nine months ended September 30, 2014 compared to the same period in 2013. These decreases were partially offset by a net increase of $203.0 million in amounts outstanding under our revolving and term loan credit agreements and a decrease in payments of $203.5 million to retire long-term debt. See Note 5 to the condensed consolidated financial statements for detail on the issuance and retirements of long-term debt.

CONTRACTUAL OBLIGATIONS

Our contractual obligations are described in our Form 10-K for the year ended December 31, 2013. As of September 30, 2014, there have been no material changes to that information since December 31, 2013, other than the items listed below and described in Note 5 to the condensed consolidated financial statements:

• Amounts borrowed under our unsecured, unguaranteed revolving credit agreements;

• Additional amounts borrowed under the ITC Holdings unsecured, unguaranteed term loan credit agreement, which were primarily used to repay outstanding revolving credit borrowings;

• The $50.0 million borrowed under the METC unsecured, unguaranteed term loan credit agreement entered into in January 2014, due February 2015, which was primarily used to repay outstanding revolving credit borrowings;

• The issuance of $400.0 million aggregate principal amount of ITC Holdings 3.65% Senior Notes, due June 2024, in May 2014, proceeds of which were primarily used to fund its obligations in the cash tender offer described in Note 5 to the condensed consolidated financial statements and to repay outstanding revolving credit borrowings;

• The issuance of $100.0 million aggregate principal amount of ITCTransmission 4.27% First Mortgage Bonds, Series F, due June 2044, proceeds of which were primarily used to repay outstanding revolving credit borrowings; and

• The $115.6 million of the 5.875% ITC Holdings Senior Notes and $54.7 million of the 6.375% ITC Holdings Senior Notes validly tendered on May 30, 2014, which were subsequently retired.

CRITICAL ACCOUNTING POLICIES

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these condensed consolidated financial statements requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. The application of these policies necessarily involves judgments regarding future events. These estimates and judgments, in and of themselves, could

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materially impact the condensed consolidated 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” in our Form 10-K for the fiscal year ended December 31, 2013 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, 2014.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 to the condensed consolidated 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, was $3,688.3 million at September 30, 2014. The total book value of our consolidated long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements, was $3,379.6 million at September 30, 2014. 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, at September 30, 2014. An increase in interest rates of 10% (from 5.0% to 5.5%, for example) at September 30, 2014 would decrease the fair value of debt by $130.7 million, and a decrease in interest rates of 10% at September 30, 2014 would increase the fair value of debt by $141.3 million at that date.

Revolving and Term Loan Credit Agreements

At September 30, 2014, we had a consolidated total of $660.5 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, 2014 would increase or decrease the total interest expense by $0.8 million, respectively, for an annual period on a constant borrowing level of $660.5 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. The interest rate swap contract held as of September 30, 2014 manages interest rate risk associated with the forecasted future issuance of fixed-rate debt related to the expected refinancing of the maturing ITC Holdings 5.875% Senior Notes, due September 30, 2016. As of September 30, 2014, ITC Holdings had $139.4 million outstanding under the 5.875% Senior Notes subsequent to the cash tender offer described in Note 5.

Other

As described in our Form 10-K for the fiscal year ended December 31, 2013, 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, 2014.

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

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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, 2014 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 11 to the condensed consolidated financial statements for a description of recent developments in the rate of return on equity and capital structure complaint filed against all MISO TOs including our MISO Regulated Operating Subsidiaries.

ITEM 1A. RISK FACTORS

For information regarding risk factors affecting us, see “Item 1A Risk Factors” of our Form 10-K for the fiscal year ended December 31, 2013. There have been no material changes to the risk factors set forth therein.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth the repurchases of common stock for the quarter ended September 30, 2014:

Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (b)
July 2014	1,147	$	35.89	—	$	146.0
August 2014	1,751	35.98		—	146.0
September 2014	2,151	37.05		—	146.0
Total	5,049	$	36.42	—

____________________________

(a) Shares acquired were delivered to us by employees as payment of tax withholding obligations due to us upon the vesting of restricted stock.

(b) In April 2014, our board of directors authorized a share repurchase program for up to $250.0 million of common stock, which expires in December 2015. Pursuant to such authorization, on June 20, 2014, ITC Holdings entered into an accelerated share repurchase agreement with JP Morgan of up to $150.0 million (minimum of $130.0 million), under which ITC Holdings was delivered a specified number of shares based on the closing market price of $35.80 per share at the commencement of the ASR program. The final number of shares delivered under the ASR program will be based on the volume-weighted average share price of our common stock during the term of the transaction. On June 19, 2014, ITC Holdings paid $150.0 million to JP Morgan and received an initial delivery of 2,905,028 shares with a fair market value of $104.0 million.

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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
10.137	Employment Agreement between ITC Holdings Corp. and Rejji P. Hayes, effective as of December 21, 2012
10.138	Employment Agreement between ITC Holdings Corp. and Rejji P. Hayes, effective as of October 27, 2014 (filed with Registrants Form 8-K on October 29, 2014)
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
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Database
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

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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 30, 2014

ITC HOLDINGS CORP.
By:	/s/ Joseph L. Welch
	Joseph L. Welch
	President and Chief Executive Officer (duly authorized officer)
By:	/s/ Rejji P. Hayes
	Rejji P. Hayes
	Senior Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)

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EX-10.137

EXHIBIT 10.137

EMPLOYMENT AGREEMENT

Rejji P. Hayes

This EMPLOYMENT AGREEMENT (the “Agreement”) is dated as of December 21, 2012 (the “Effective Date”) by and between ITC Holdings Corp. (the “Company”) and Rejji P. Hayes (the “Executive”).

WHEREAS, the Executive and the Company desire to enter into an agreement embodying the terms of the Executive’s employment with the Company.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuable consideration, and intending to be legally bound hereby, the parties agree as follows:

1.Term of Employment. Subject to the provisions of Section 7 of this Agreement, Executive shall be employed by the Company, International Transmission Company and any of their subsidiaries and/or affiliates that the Board of Directors of the Company (the “Board”) shall designate (collectively, the “Employer”) for an initial period commencing on the Effective Date and ending on December 21, 2014 on the terms and subject to the conditions set forth in this Agreement; provided, however, that such period of employment shall automatically be extended for successive one‑year periods unless the Employer or Executive, at least thirty (30) days prior to the end of any such period, provides written notice to the other party of the intent not to extend such period of employment for any additional one-year period. For purposes of this Agreement, the term “Employment Term” shall mean the period of time during which Executive is employed by Employer under this Agreement.

2.Position.

a.During the Employment Term, Executive shall serve as the Employer’s Vice President. In such position, Executive shall have such duties and authority as the Chief Executive Officer of the Employer (the “Chief Executive Officer”) determines from time to time. If requested, Executive shall also serve as a member of the Board without additional compensation.

b.During the Employment Term, Executive will devote Executive’s full business time and best efforts to the performance of Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services either directly or indirectly, without the prior written consent of the Chief Executive Officer; provided that nothing herein shall preclude Executive, subject to the prior approval of the Chief Executive Officer,from accepting appointment to or continue to serve on any board of directors or trustees of any business corporation or any charitable organization; provided in each case, and in the aggregate, that such activities do not conflict or interfere with the performance of Executive’s duties hereunder or conflict with Section 8 of this Agreement.

3.Base Salary. During the Employment Term, the Employer shall pay Executive a base salary at the annual rate of $220,000.00, payable in regular installments in accordance with the Employer’s normal payroll practices. Executive’s base salary shall be reviewed annually by the Chief Executive Officer and Executive shall be entitled to such increases in Executive’s base salary, if any, as may be determined from time to time in the sole discretion of the Chief Executive Officer. Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as the “Base Salary”.

4.Annual Bonus. During the Employment Term, Executive shall be eligible to earn an annual bonus award in respect of each fiscal year of Employer (an “Annual Bonus”), payable upon the Employer’s achievement of certain performance targets established by the Board and after application of any multipliers approved by the Board, pursuant to the terms of an incentive compensation plan established by the Board (the “Incentive Plan”). Executive’s target Annual Bonus for each fiscal year of Employer shall be that percentage of the Executive’s Base Salary as the Board may establish from time to time (the “Target Bonus”), but shall generally be forty percent (40%) of Executive’s Base Salary, plus any multipliers approved by the Board. The foregoing notwithstanding, any Annual Bonus to which Executive is entitled shall be paid no later than two and a half (2-1/2) months after the later of the end of the fiscal or calendar year in which such Annual Bonus is no longer subject to a substantial risk of forfeiture (as defined under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and Internal Revenue Service (“IRS”) guidance issued thereunder).

5.Employee Benefits and Perquisites; Business Expenses.

a.Employee Benefits. During the Employment Term, Executive shall be entitled to participate in the Employer’s employee benefit and retirement plans (the “ITC Plans”) as in effect from time to time as determined by the Board, which provide certain benefits (collectively the “Employee Benefits”) to Executive, including the following plans: (i) welfare benefit plans (including active medical, life, disability, flexible spending accounts and other related welfare plans); (ii) fringe benefit plans (including education assistance and adoption assistance); (iii) retiree welfare benefit plans (medical and life insurance); (iv) qualified and non-qualified defined benefit and defined contribution plans; and (v) vacation plans (except that there shall be limitations set on the amount of vacation that Executive may carry forward from any given calendar year to the next).

b.Perquisites. During the Employment Term, Executive shall also be entitled to receive such perquisites as are generally provided to executives of the Employer from time to time, as determined by the Board (or a compensation committee thereof).

c.Business Expenses. During the Employment Term, reasonable business expenses incurred by Executive in the performance of Executive’s duties hereunder shall be reimbursed by the Employer in accordance with the Employer’s policies; provided that such reimbursement shall in any event occur no later than ninety (90) days after the date on which an eligible business expense is incurred.

6.Equity Participation. Executive’s equity participation in the Company has been or will be documented pursuant to some or all of the 2003 Stock Purchase and Option Plan for Key Employees of the Company and its Subsidiaries and the associated Management Stockholder’s Agreement, the Second Amended and Restated ITC Holdings Corp. 2006 Long Term Incentive Plan and the associated Amendment to Management Stockholder’s Agreement, and in one or more Stock Option, Restricted Stock Award and Sale Participation Agreements associated therewith, each as executed by the Executive, the Company, and its shareholders, as applicable (such documents, collectively, the “Equity Documents”). The Company and Executive each acknowledges that the terms and conditions of the aforementioned documents govern Executive’s acquisition, vesting, holding, sale or other disposition of Executive’s equity in the Company, and Executive’s and the Company’s rights with respect thereto.

7.Termination. Executive’s employment hereunder may be terminated by either party at any time and for any reason, subject to the applicable provisions of this Section 7; provided that Executive will be required to give the Employer at least 30 days advance written notice of any resignation of Executive’s employment; and provided, further, that the Employer will be required to give Executive at least ten (10) business days advance notice of a termination of Executive’s employment by the Employer without Cause (other than in the event of Executive’s Disability) (the “Employer Notice Period”), unless the Employer provides Executive with a payment equal to the Base Salary that would otherwise be payable in respect of any portion of the Employer Notice Period which the Employer elects to waive. Notwithstanding any other provision of this Agreement (and except as may otherwise be provided in the Equity Documents), the provisions of this Section 7 shall exclusively govern Executive’s rights upon termination of employment with the Employer.

a.By the Employer For Cause or By Executive Resignation Without Good Reason.

(i) Executive’s employment hereunder may be terminated by the Employer for Cause (as defined below) and shall terminate automatically upon Executive’s resignation without Good Reason.

(ii) For purposes of this Agreement, “Cause” shall mean (A) Executive’s continued failure substantially to perform Executive’s duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness) for a period of 10 days following written notice by the Employer to Executive of such failure, (B) dishonesty in the performance of Executive’s duties hereunder, (C) Executive’s conviction of, or plea of nolocontendere to a crime constituting (x) a felony under the laws of the United States or any state thereof or (y) a misdemeanor involving moral turpitude, (D) Executive’s willful malfeasance or willful misconduct in connection with Executive’s duties hereunder or any act or omission which is injurious to the financial condition or business reputation of the Employer or affiliates or (E) Executive’s breach of the provisions of Sections 8 or 9 of this Agreement.

(iii) If Executive’s employment is terminated by the Employer for Cause or if Executive resigns without Good Reason (other than due to a Disability, as such term is defined below), Executive shall be entitled to receive:

(A)any Base Salary earned through the date of termination, payable at such time(s) as the Base Salary would otherwise be payable in accordance with the normal payroll practices of the Employer;

(B)any Annual Bonus earned but unpaid as of the date of termination for any previously completed fiscal year, payable in a lump sum at such time as such

Annual Bonus would normally be paid under the Incentive Plan as provided in Section 4 hereof;

(C)reimbursement for any unreimbursed business expenses properly incurred by Executive through the date of termination, payable at such time(s) and in accordance with the Employer’s policy prior to the date of Executive’s termination; provided that such reimbursement shall in any event occur no later than ninety (90) days after the date on which an eligible business expense is incurred; and

(D)such Employee Benefits, if any, as to which Executive may be entitled under the applicable ITC Plans upon termination of employment hereunder.

The payments and benefits described in clauses (A) through (D) hereof are referred to, collectively, as the “Accrued Rights”.

Following such termination of Executive’s employment by the Employer for Cause or resignation by Executive without Good Reason, except as set forth in this Section 7(a)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.

b.Disability or Death.

(i) Executive’s employment hereunder shall terminate upon Executive’s death, and may be terminated by the Employer if Executive experiences a “Disability” (as such term shall be defined from time to time under Code Section 409A). Any question as to the existence of the Disability of Executive as to which Executive and the Employer cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Employer. If Executive and the Employer cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Employer and Executive shall be final and conclusive for all purposes of the Agreement.

(ii) Upon termination of Executive’s employment hereunder for Disability or death, Executive, Executive’s then spouse, or Executive’s estate (as the case may be), shall be entitled to receive:

(A)the Accrued Rights; and

(B)a pro rata portion of the Target Bonus (calculated based on the number of days Executive was employed hereunder during the calendar year in which the date of such termination of employment occurs, relative to the applicable full calendar year), payable in a lump sum within fifteen (15) business days after the date of such termination of employment.

Following Executive’s termination of employment due to death or Disability, except as set forth in this Section 7(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.

c.By the Employer Without Cause or by Executive Resignation for Good Reason.

(i) Executive’s employment hereunder may be terminated (A) by the Employer without Cause (which shall not include Executive’s termination of employment due to death or Disability), or (B) or by Executive for Good Reason (as defined below).

(ii) For purposes of this Agreement, “Good Reason” shall mean (A) a greater than 10% reduction in the total value of Executive’s Base Salary, Target Bonus, and Employee Benefits, or (B) Executive’s job responsibility and authority are substantially diminished; and provided, further, that “Good Reason” shall cease to exist for an event unless:

(C)no later than the 60^th day following the initial existence of such Good Reason condition, Executive has given the Employer written notice thereof ;

(D)the Employer is afforded a period of thirty (30) days to remedy the condition; and

(E)in the absence of any such remedy, the Executive terminates employment within one hundred eighty (180) days following the end of the cure period described in (D) above.

(iii) If Executive’s employment is terminated by the Employer without Cause (other than by reason of Executive’s death or Disability) or by Executive for Good Reason, subject to Executive’s execution of a release of all claims against Employer as provided in Section 7(e)(ii), Executive shall be entitled to receive:

(A)the Accrued Rights;

(B)a pro rata portion of the Target Bonus (calculated based on the number of days Executive was employed hereunder during the calendar year in which the date of such termination of employment occurs, relative to the applicable full calendar year), payable based upon the Employer’s actual achievement of the performance targets for such year as determined under and at the time that such an Annual Bonus (if any) would normally be paid as set forth in Section 4 hereof;

(C)one or both of the following series of payments:

(I) continued payment in substantially equal installments and in accordance with the normal payroll practices of Employer, for a period of one (1) year following the date of termination of Executive’s employment hereunder, of Executive’s annual rate of Base Salary as in effect immediately prior to such termination; and

(II) in the event that Executive’s employment is terminated hereunder within a period beginning six (6) months before and ending two (2) years after a Change in Control occurs, Executive shall receive the following additional amounts: (x) continued payment in substantially equal installments and in accordance with

the normal payroll practices of Employer, for a period of one (1) year following the first anniversary of the date of termination of Executive’s employment hereunder, of Executive’s annual rate of Base Salary as in effect immediately prior to such termination; and (y) an amount equal to two (2) times the average of each of the Annual Bonuses that were payable to Executive (including any portion of any such Annual Bonus the receipt of which Executive elected to defer) for the three fiscal years immediately preceding the fiscal year in which Executive’s employment terminates, payable in substantially equal installments and in accordance with the normal payroll practices of Employer, over the period during which the Executive’s Base Salary will continue to be paid pursuant to the foregoing provisions of this Section 7(c)(iii)(C) (or, if applicable, over the remaining period during which such Base Salary payments will be made, in the event the Executive’s termination occurs within the six (6) month period before any such Change in Control occurs, beginning with the first payment due thirty (30) days after the Change in Control occurs);

(D)continued provision of those applicable Employee Benefits that are medical, dental and vision benefits which are required to be made available by the Employer pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”); provided that all applicable COBRA coverage rules must be followed by Executive in order to continue such coverage(s) (including Executive’s timely payment of the entire applicable COBRA premium to the Plan Administrator), or the coverage(s) will be terminated. The Employer agrees to reimburse Executive for a portion of his applicable COBRA premium costs during that period ending on the earlier of (I) the date Executive is eligible (even if he does not enroll) for coverage under another employer-sponsored group health plan in connection with other employment obtained after Executive’s termination hereunder; or (II) twelve (12) months after the date of termination of Executive’s employment hereunder. The Employer’s COBRA reimbursement amount shall be paid to Executive each payroll period (in accordance with the normal payroll practices of Employer, but subject to any applicable limitations on payments to a “specified employee” within the meaning of Code Section 409A, as set forth below) as a taxable amount equal to the sum of (III) the Employer’s portion of the premium payments due with respect to other executives with the same coverage(s) for such payroll period, plus (IV) such additional amount as is required to pay any income and/or payroll taxes due on the sum of the premium payment and the additional tax gross-up payment (as determined by the Employer’s independent accountants, assuming that the Executive pays income taxes at the highest applicable marginal rates for the calendar year in which such payments are to be made); and

(E)outplacement services of a duration of up to two (2) years from the date of termination (or until such earlier date on which Executive obtains other employment), and at a level commensurate with Executive’s former position with the Employer, and by a provider as determined by the Employer in good faith.

The foregoing notwithstanding, in the event Executive is a “specified employee” within the meaning of Code Section 409A and in accordance with the involuntary “separation pay plan” exception under the

Code Section 409A regulations, the total of all amounts paid to Executive pursuant to Sections 7(c)(iii)(C) and (D) hereof (and any other amount payable pursuant to this Section 7(c)(iii) that constitutes a payment under a “nonqualified deferred compensation plan” within the meaning of Code Section 409A) within the first six (6) months following such termination pursuant to this subsection shall not exceed two times the lesser of (I) the sum of the Executive’s annualized compensation based upon the annual rate of pay for services provided to the Employer for the calendar year preceding the calendar year in which the termination occurs (adjusted for any increase during that year that was expected to continue indefinitely, if the Executive had not terminated), or (II) the Code Section 401(a)(17) limit on compensation for the calendar year in which the Executive terminates. To the extent a portion of any such amount exceeds such limitation, the payment shall not commence until the first business day following the date that is six months after the date of termination of Executive’s employment hereunder (the period during which such payments may be limited under Code Section 409A, the “409A Period”), at which time Employer shall (III) pay to Executive, in one lump sum, an amount equal to all such amounts that would otherwise have been payable during the 409A Period, and (IV) thereafter continue to pay the remaining unpaid portion of any such amounts in accordance with the normal payroll practices of Employer, at the time or through the end of the period(s) otherwise provided above in this subsection.

Following Executive’s termination of employment by the Employer without Cause (other than by reason of Executive’s death or Disability) or by Executive for Good Reason, except as set forth in this Section 7(c)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.

d.Notice of Termination. Any purported termination of employment by the Employer or by Executive (other than due to Executive’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 12(h) hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.

e.Board/Committee Resignation; Execution of Release of all Claims.

(i) Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from the Board (and any committees thereof) and the board of directors (and any committees thereof) of any of the Company’s affiliates.

(ii) Upon termination of Executive’s employment for any reason, Executive agrees to execute a release (the “Release”) of all claims against the Company, its subsidiaries, affiliates, shareholders, directors, officers, employees, and agents, substantially in a form to be provided to Executive by Employer at such time. Notwithstanding anything set forth in this Agreement to the contrary, upon termination of Executive’s employment for any reason, Executive shall not receive any payments or benefits to which Executive may be entitled hereunder (other than those which by law cannot be subject to the execution of a release): (A) if Executive does not execute or otherwise revokes such Release; or (B) in the event Executive does execute the Release, until eight (8) days after the date Executive executes such Release (or until such other later date after which applicable law may provide that Executive cannot revoke such Release). Subject to the foregoing, if by no later than forty-five (45) days after the date of termination of Executive’s employment for any reason hereunder, Executive has (C) not executed or has otherwise revoked such Release, or (D) Executive has executed the Release but the applicable revocation period referred to in the preceding sentence has not lapsed, then Executive shall in

either case totally forfeit all payments and benefits to which Executive may be entitled under this Agreement (other than those which by law cannot be subject to the execution of a release), but this Agreement shall otherwise remain in full force and effect. In the event that prior to the end of such forty-five (45) day period, Executive has properly executed such Release, has not revoked the Release, and the applicable revocation period for the Release has lapsed, the payments and benefits due to Executive hereunder shall commence being paid or provided with the next scheduled payment date following the end of such revocation period; provided all payments that would otherwise have become due prior to such date shall be accumulated and paid when the first payment is made hereunder. The foregoing notwithstanding, in the event the forty-five (45) day period referred to in this subsection begins in one taxable year of the Executive and ends in a second taxable year, any payments and benefits due to Executive hereunder (to the extent required to be restricted under Code Section 409A and IRS guidance issued thereunder) shall commence being paid or provided with the first scheduled payment date on or after the beginning of such second taxable year.

8.Non-Competition.

a.Executive acknowledges and recognizes the highly competitive nature of the businesses of the Employer and its affiliates and accordingly agrees as follows:

(i) During the Employment Term and for a period of one year following the date Executive ceases to be employed by the Employer (in either case, the “Restricted Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Employer, the business of any customer or prospective customer:

(A)with whom Executive had personal contact or dealings on behalf of the Employer during the one-year period preceding Executive’s termination of employment;

(B)with whom employees reporting to Executive have had personal contact or dealings on behalf of the Employer during the one year immediately preceding Executive’s termination of employment; or

(C)for whom Executive had direct or indirect responsibility during the one year immediately preceding Executive’s termination of employment.

(ii) During the Restricted Period, Executive will not directly or indirectly:

(A)engage in any business that competes with the business of the Employer or its affiliates (including, without limitation, businesses which the Employer or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in any geographical area that is within 100 miles of any geographical area where the Employer or its affiliates manufactures, produces, sells, leases, rents, licenses or otherwise provides its products or services (a “Competitive Business”);

(B)enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

(C)acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or

(D)interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Employer or any of its affiliates and customers, clients, suppliers, partners, members or investors of the Employer or its affiliates.

(iii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Employer or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (A) is not a controlling person of, or a member of a group which controls, such person and (B) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

(iv) During the Restricted Period, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

(A)solicit or encourage any employee of the Employer or its affiliates to leave the employment of the Employer or its affiliates; or

(B)hire any such employee who was employed by the Employer or its affiliates as of the date of Executive’s termination of employment with the Employer or who left the employment of the Employer or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Employer.

(v) During the Restricted Period, Executive will not, directly or indirectly, solicit or encourage to cease to work with the Employer or its affiliates any consultant then under contract with the Employer or its affiliates.

(vi) Employer may, in its sole discretion, extend the Restricted Period (and thereby the non-competition provisions of this Section 8) by one additional year and, in consideration thereof, will provide Executive with continued payment in substantially equal installments and in accordance with the normal payroll practices of the Employer, for a period of one (1) year following the first anniversary of the date of termination of Executive’s employment hereunder, of Executive’s annual rate of Base Salary as in effect immediately prior to such termination. In the event Employer elects to exercise its discretion to extend the Restricted Period as provided above, the Employer will notify Executive to this effect, by no later than six (6) months after the date of termination of Executive’s employment hereunder. The foregoing notwithstanding, such extension of the Restricted Period will not result in any similar extension of any other payments or benefits due to Executive under this Agreement.

b.It is expressly understood and agreed that although Executive and the Employer consider the restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially

determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

9.Confidentiality.

a.Executive will not at any time (whether during or after Executive’s employment with the Employer) (i) retain or use for the benefit, purposes or account of Executive or any other Person; or (ii) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Employer (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information --including without limitation rates, trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals -- concerning the past, current or future business, activities and operations of the Employer, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Employer on a confidential basis (“Confidential Information”) without the prior written authorization of the Board.

b.“Confidential Information” shall not include any information that is (i) generally known to the industry or the public other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties; (ii) made legitimately available to Executive by a third party without breach of any confidentiality obligation; or (iii) required by law to be disclosed; provided that Executive shall give prompt written notice to the Employer of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Employer to obtain a protective order or similar treatment.

c.Except as required by law, Executive will not disclose to anyone, other than Executive’s immediate family and legal or financial advisors, the existence or contents of this Agreement; provided that Executive may disclose to any prospective future employer the provisions of Sections 8 and 9 of this Agreement provided they agree to maintain the confidentiality of such terms.

d.Upon termination of Executive’s employment with the Employer for any reason, Executive shall (i) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Employer, its subsidiaries or affiliates; (ii) immediately destroy, delete, or return to the Employer, at the Employer’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not the Employer’s property) that contain Confidential Information or otherwise relate to the business of the Employer, its affiliates and subsidiaries, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information; and (iii) notify and fully cooperate with the Employer regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.

e.Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Employer any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Executive hereby indemnifies, holds harmless and agrees to defend the Employer and its officers, directors, partners, employees, agents and representatives from any breach of the foregoing covenant. Executive shall comply with all relevant policies and guidelines of the Employer, including regarding the protection of confidential information and intellectual property and potential conflicts of interest. Executive acknowledges that the Employer may amend any such policies and guidelines from time to time, and that Executive remains at all times bound by their most current version. Notwithstanding anything set forth herein, the Company hereby represents and warrants that the Company shall not employ the provisions of this Section 9 in a manner that would interfere with Executive’s ability to obtain or retain any future employment that would not or does not otherwise violate Section 8 of this Agreement.

f.The provisions of this Section 9 shall survive the termination of Executive’s employment for any reason.

10.Specific Performance. Executive acknowledges and agrees that the Employer’s remedies at law for a breach or threatened breach of any of the provisions of Section 8 or Section 9 would be inadequate and the Employer would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Employer, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

11.Arbitration. Except as provided in Section 10, any other dispute arising out of or asserting breach of this Agreement, or any statutory or common law claim by Executive relating to Executive’s employment under this Agreement or the termination thereof (including any tort or discrimination claim), shall be exclusively resolved by binding statutory arbitration in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association. Such arbitration process shall take place within 100 miles of the Detroit, Michigan metropolitan area. A court of competent jurisdiction may enter judgment upon the arbitrator’s award. In the event of any such dispute, all reasonable fees and disbursements of counsel incurred by Executive shall be reimbursed by Employer within a reasonable period of time following receipt from Executive (or Executive’s counsel) of a final bill invoicing all such fees and disbursements, solongas the arbitrator does not determine that such dispute was based on claims made by Executive that were frivolous or in bad faith.

12.Miscellaneous.

a.Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without regard to conflicts of laws principles thereof.

b.Entire Agreement/Amendments. Except with respect to the matters contained in the Equity Documents, this Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Employer. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.

c.No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

d.Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.

e.Assignment. This Agreement, and all of Executive’s rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. This Agreement may be assigned by the Employer to a person or entity that is an affiliate or a successor in interest to substantially all of the business operations of the Employer. Upon such assignment, the rights and obligations of the Employer hereunder shall become the rights and obligations of such affiliate or successor person or entity.

f.Set Off; No Mitigation. The Employer’s obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Employer or its affiliates; provided, that no such set-off in excess of $5,000 shall be made against any amount payable to Executive pursuant to Sections 7(c)(iii)(C) or (D) hereof (or any other amount that constitutes a payment under a “nonqualified deferred compensation plan” within the meaning of Code Section 409A). Executive shall not be required to mitigate the amount of any payment provided for pursuant to this Agreement by seeking other employment or otherwise and the amount of any payment provided for pursuant to this Agreement shall not be reduced by any compensation earned as a result of Executive’s other employment or otherwise.

g.Successors; Binding Agreement. This Agreement shall inure to the benefit of and be binding upon the Company, its subsidiaries and affiliates, and the Executive and any personal or legal representatives, executors, administrators, successors, assigns, heirs, distributees, devisees and legatees. Further, the Company will require any successor (whether, direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company and any successor to its business and/or assets which is required by this Section 12(g) to assume and agree to perform this Agreement or which otherwise assumes and agrees to perform this Agreement; provided, however, in the event that any successor, as described above, agrees to assume this Agreement in accordance with the preceding sentence, as of the date such successor so assumes this Agreement, the Company shall cease to be liable for any of the obligations contained in this Agreement.

h.Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

If to the Employer:

ITC Holdings Corp.

27175 Energy Way

Novi, Michigan 48377

Attention: General Counsel

With a copy to:

Dykema Gossett PLLC

400 Renaissance Center

Suite 2300

Detroit, Michigan 48243-1668

Attention: Mark A. Metz, Esq.

If to Executive:

To the most recent address of Executive set forth in the personnel records of the Employer.

i.Executive Representation. Executive hereby represents to the Employer that the execution and delivery of this Agreement by Executive and the Employer and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

j.Prior Agreements. This Agreement supercedes all prior agreements and understandings (including, without limitation, any verbal agreements, offer letters or summaries of principal terms pertaining to the employment of Executive by the Employer) between Executive and the Employer and/or its affiliates regarding the terms and conditions of Executive’s employment with the Employer and/or its affiliates; provided, however, that the Equity Documents shall govern the terms and conditions of Executive’s equity holdings in the Company.

k.Cooperation. Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) that relates to events occurring during Executive’s employment hereunder. This provision shall survive any termination of this Agreement.

l.Taxes.

(i) Withholding Taxes. The Employer may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation, with respect to any compensation or benefits payable or provided to Executive by Employer pursuant to this Agreement or any other plan, arrangement or agreement with the Employer.

(ii) 409A Compliance and Penalties. All payments under this Agreement are intended to be exempt from or in compliance with Code Section 409A, and the provisions of this Agreement are to be construed and administered accordingly. Further, for all purposes under this Agreement: (A) references to “termination” of employment (or variations thereof), shall be synonymous with the meaning given to the term “separation from service” as provided under Code Section 409A, and IRS guidance issued

thereunder; (B) no payment, reimbursement or benefit provided to Executive in one calendar year hereunder shall affect the provision of any such payment, reimbursement or benefit in any other calendar year; and (C) the timing of payments and the provision of benefits under this Agreement that are contingent on Executive executing and not revoking the Release as provided in Section 7(e)(ii), are intended to satisfy the requirements of IRS Notices 2010-6 and 2010-80.

Notwithstanding any other provision of this Agreement (other than Section 12(l)(iii) below), while Executive acknowledges that Employer may take actions hereunder as are required to comply with or to minimize any potential interest charges and/or additional taxes as may be imposed by Code Section 409A (the “409A Penalties”) with respect to any payment or benefit due to Executive under this Agreement (including a delay in payment until the first business day following the end of the 409A Period, in the event Executive is a “specified employee” within the meaning of Code Section 409A, as described in and consistent with the provisions of Section 7(c)(iii)), the parties hereby confirm that all such payments and benefits due to Executive will in fact be made or provided (except as provided in Section 12(l)(iii) below) at the earliest time at which it is determined either that no 409A Penalties are applicable, or that such 409A Penalties will apply without exception. Further, if at any time it is determined that any payment or benefit due to Executive under this Agreement may be subject to any 409A Penalties, the Employer shall (D) be permitted to modify the provision of such payment or benefit if such modification would reasonably be expected to eliminate or minimize such 409A Penalties, solongas such modification does not adversely affect, in any material respect, the economic benefit to Executive of such payment or benefit (or otherwise result in additional 409A Penalties), or (E) to the extent that the course of action proposed in clause (D) cannot be effected, within fifteen (15) days after the date of such determination (but no later than the end of the calendar year following the year in which the Executive remits the 409A Penalties involved; or such other earliest date on which such amount can be paid as may be permitted under Code Section 409A) pay to Executive an additional amount equal to such 409A Penalties, along with such additional amount as is required to pay any income and/or payroll taxes due on the 409A Penalties and the additional tax gross-up payment (as determined by the Employer’s independent accountants, assuming that the Executive pays income taxes at the highest applicable marginal rates for the calendar year in which the tax gross-up payment is to be made).

(iii) Parachute Taxes.In the event that the Executive shall become entitled to payments and/or benefits provided by this Agreement or any other amounts in the “nature of compensation” (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Employer, any person whose actions result in a change of ownership or effective control covered by Code Section 280G(b)(2) or any person affiliated with any Employer or such person) as a result of such change in ownership or effective control (collectively the “Employer Payments”), and such Employer Payments would be subject to the tax (the “Excise Tax”) imposed by Code Section 4999 (and any similar tax that may hereafter be imposed by any taxing authority), then notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement with the Employer, the Employer shall pay and/or provide to the Executive only that portion of the Employer Payments which are in total equal to one dollar less than the amount of the Employer Payments that would subject the Executive to the Excise Tax. If the Employer Payments must be reduced pursuant to the preceding sentence, Employer Payments shall be reduced in the following order: (A) any amounts payable to the Executive pursuant to Section 7(c)(iii)(C); (B) any other cash amounts payable to the Executive; (C) the value as parachute payments of the acceleration of vesting of any stock options; (D) the value as parachute payments of the acceleration of vesting of any restricted stock; (E) the value as parachute payments of the acceleration of vesting of any equity interest not covered by (C) or (D) above; and (F) the value as parachute payments of any other benefits received.

The Employer’s independent accountants, at the Employer’s expense, shall determine whether any of the Employer Payments are “parachute payments” within the meaning of Code Section 280G(b)(2) that would be subject to the Excise Tax, the projected amount of such Excise Tax and any other determinations required in the preceding paragraph. The determination of the accountants shall be final and binding upon the Employer and the Executive; provided, that in the event any initial determination under this subsection is subsequently modified by the Employer’s accountants or the IRS, Executive and Employer agree to reasonably cooperate to resolve any matter related thereto.

In all cases, Executive shall be solely responsible for timely payment of any Excise Tax finally determined by the IRS to be due and payable with respect to the Employer Payments (as reduced, if applicable). Executive shall also promptly deliver to the Company copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the Excise Tax covered by this subsection.

m.Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

n.Definition of “Change in Control.” For purposes of this Agreement, “Change in Control” means the occurrence of any of the following events:

(i) If any one person, or more than one person acting as a group (as defined in Code Section 409A and IRS guidance issued thereunder), acquires ownership of common stock of the Company that, together with stock held by such person or group, constitutes more than fifty (50) percent of the total fair market value or total voting power of the common stock of the Company. However, if any one person or more than one person acting as a group, is considered to own more than fifty (50) percent of the total fair market value or total voting power of the common stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Control, or to cause a change in the effective control of the Company (within the meaning of Code Section 409A and IRS guidance issued thereunder). An increase in the percentage of common stock of the Company owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property shall be treated as an acquisition of stock for purposes of this subsection. This paragraph applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction;

(ii) If any one person, or more than one person acting as a group (as determined in accordance with Code Section 409A and IRS guidance thereunder), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of common stock of the Company possessing thirty-five (35) percent or more of the total voting power of the common stock of the Company;

(iii) If a majority of members on the Company’s Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board prior to the date of the appointment or election (provided that for purposes of this paragraph, the term Company refers solely to the “relevant corporation,” as defined in Code Section 409A and IRS guidance issued thereunder, for which no other corporation is a majority shareholder); or

(iv) If there is a change in the ownership of a substantial portion of the Company’s assets, which shall occur on the date that any one person, or more than one person acting as a

group (within the meaning of Code Section 409A and IRS guidance issued thereunder) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than forty (40) percent of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

[Signatures on next page]

SIGNATURE PAGE TO EMPLOYEMNT AGREEMENT

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of this 20^th day of December, 2012, effective as of December 21, 2012.

ITC HOLDINGS CORP.:EXECUTIVE:

By: /s/ Joseph L. Welch/s/ Rejji P. Hayes

Its: Chairman, President & CEO            Name: Rejji P. Hayes

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, Joseph L. Welch, certify that:

1. I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2014 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 30, 2014

/s/ Joseph L. Welch

Joseph L. Welch

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, Rejji P. Hayes, certify that:

1. I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2014 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 30, 2014

/s/ Rejji P. Hayes

Rejji P. Hayes

Senior Vice President, Chief Financial Officer and Treasurer

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, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Joseph L. Welch, President and Chief Executive Officer of the Registrant, and Rejji P. Hayes, Senior Vice President, Chief Financial Officer and Treasurer 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 30, 2014

/s/ Joseph L. Welch

Joseph L. Welch

President and Chief Executive Officer

/s/ Rejji P. Hayes

Rejji P. Hayes

Senior Vice President, Chief Financial Officer and Treasurer

XML

EARNINGS PER SHARE Schedule of Basic and Diluted Earnings Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Numerator:
NET INCOME	$ 73,873		$ 58,984		$ 197,345		$ 156,569
Dividends declared and paid	25,296		22,299		70,279		61,820
Undistributed earnings	48,577		36,685		127,066		94,749
Percentage allocated to common shares	99.20%	[1]	99.10%	[1]	99.20%	[1]	99.00%	[1]
Numerator for basic and diluted earnings per common share	73,288		58,453		195,757		155,042
Denominator:
Basic earnings per common share — weighted average common shares outstanding	154,386,994		155,958,879		155,661,516		155,627,361
Incremental shares for stock options and employee stock purchase plan — weighted average assumed conversion	1,364,896		1,307,394		1,470,041		1,251,432
Diluted earnings per common share — adjusted weighted average shares and assumed conversion	155,751,890		157,266,273		157,131,557		156,878,793
Per common share net income:
Basic	$ 0.47		$ 0.37		$ 1.26		$ 1.00
Diluted	$ 0.47		$ 0.37		$ 1.25		$ 0.99
Percentage allocated to common shares:
Weighted average restricted shares (participating securities)	1,230,250		1,428,531		1,295,812		1,498,719
Denominator for Percentage Allocated to Common Shares - Total Weighted-Average Shares Outstanding	155,617,244		157,387,410		156,957,328		157,126,080
Common Stock
Numerator:
Dividends declared and paid	25,100		22,098		69,708		61,240
Undistributed earnings	$ 48,188		$ 36,355		$ 126,049		$ 93,802

[1] Weighted average common shares outstanding154,386,994 155,958,879 155,661,516 155,627,361Weighted average restricted shares (participating securities)1,230,250 1,428,531 1,295,812 1,498,719 Total155,617,244 157,387,410 156,957,328 157,126,080 Percentage allocated to common shares99.2% 99.1% 99.2% 99.0%

XML

COMMITMENTS AND CONTINGENT LIABILITIES (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
ITCTransmission
Commitments and Contingent Liabilities
Rate of return on equity	12.38%
ITCTransmission | Rate of Return on Equity and Capital Structure Complaint
Commitments and Contingent Liabilities
Reduced rate of return on equity	9.15%
Complaint capital structure, equity percentage	50.00%
FERC approved capital structure, equity percentage	60.00%
ITCTransmission | Sales and Use Tax Audit
Commitments and Contingent Liabilities
Potential liability	$ 20,400,000
Recorded contingent liability	0
ITCTransmission | Sales and Use Tax Audit | Audit Period
Commitments and Contingent Liabilities
Potential liability	3,900,000
METC
Commitments and Contingent Liabilities
Rate of return on equity	12.38%
METC | Rate of Return on Equity and Capital Structure Complaint
Commitments and Contingent Liabilities
Reduced rate of return on equity	9.15%
Complaint capital structure, equity percentage	50.00%
FERC approved capital structure, equity percentage	60.00%
METC | Sales and Use Tax Audit
Commitments and Contingent Liabilities
Potential liability	10,500,000
Recorded contingent liability	0
MISO Operating Subsidiaries
Commitments and Contingent Liabilities
Equity in capital structure for ratemaking purposes	2,600,000,000
Effect on net income from 10 basis point reduction in the authorized base return on equity	2,600,000
MISO Operating Subsidiaries | FERC Audit Refund and Related Interest
Commitments and Contingent Liabilities
Aggregate regulatory liability	$ 3,300,000	$ 13,100,000
ITC Midwest
Commitments and Contingent Liabilities
Rate of return on equity	12.38%
Reduced rate of return on equity	10.39%
ITC Midwest | Rate of Return on Equity and Capital Structure Complaint
Commitments and Contingent Liabilities
Reduced rate of return on equity	9.15%
Complaint capital structure, equity percentage	50.00%
FERC approved capital structure, equity percentage	60.00%

XML

DEBT Schedule of Revolving Credit Agreements (Details) (USD $)	9 Months Ended
	Sep. 30, 2014
Line of Credit Facility
Total available capacity	$ 1,000,000,000
Outstanding balance	349,500,000	[1]
Unused capacity	650,500,000
ITC Holdings
Line of Credit Facility
Total available capacity	400,000,000
Outstanding balance	45,000,000	[1]
Unused capacity	355,000,000
Weighted average interest rate	1.40%	[2]
Commitment fee rate	0.175%	[3]
Interest rate description	Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating.
ITCTransmission
Line of Credit Facility
Total available capacity	100,000,000
Outstanding balance	2,400,000	[1]
Unused capacity	97,600,000
Weighted average interest rate	1.10%	[4]
Commitment fee rate	0.10%	[3]
Interest rate description	Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating.
METC
Line of Credit Facility
Total available capacity	100,000,000
Outstanding balance	41,300,000	[1]
Unused capacity	58,700,000
Weighted average interest rate	1.10%	[4]
Commitment fee rate	0.10%	[3]
Interest rate description	Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating.
ITC Midwest
Line of Credit Facility
Total available capacity	250,000,000
Outstanding balance	162,400,000	[1]
Unused capacity	87,600,000
Weighted average interest rate	1.20%	[4]
Commitment fee rate	0.10%	[3]
Interest rate description	Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating.
ITC Great Plains
Line of Credit Facility
Total available capacity	150,000,000
Outstanding balance	98,400,000	[1]
Unused capacity	$ 51,600,000
Weighted average interest rate	1.20%	[5]
Commitment fee rate	0.125%	[3]
Interest rate description	Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.125% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.125%, subject to adjustments based on ITC Great Plains' credit rating.

[1] Included within long-term debt.

[2] Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating.

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

[4] Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating.

[5] Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.125% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.125%, subject to adjustments based on ITC Great Plains' credit rating.

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Assets Measured at Fair Value Subject to Three-Tier Hierarchy

Our assets measured at fair value subject to the three-tier hierarchy at September 30, 2014, 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 thousands)	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Cash and cash equivalents — cash equivalents	$	12,898	$	—	$	—
Mutual funds — fixed income securities	26,629		—		—
Mutual funds — equity securities	635		—		—
Interest rate swap derivative	—		81		—
Total	$	40,162	$	81	$	—

Our assets measured at fair value subject to the three-tier hierarchy at December 31, 2013, 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 thousands)	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Cash and cash equivalents — cash equivalents	$	19,000	$	—	$	—
Mutual funds — fixed income securities	21,318		—		—
Mutual funds — equity securities	516		—		—
Total	$	40,834	$	—	$	—

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RETIREMENT BENEFITS AND ASSETS HELD IN TRUST Schedule of Net Defined Benefit Cost Components (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Defined Benefit Plans
Defined Benefit Plan Disclosure
Service cost	$ 1,267	$ 1,315	$ 3,800	$ 3,946
Interest cost	901	698	2,703	2,094
Expected return on plan assets	(885)	(717)	(2,655)	(2,151)
Amortization of prior service credit	(11)	(10)	(32)	(31)
Amortization of unrecognized loss	386	679	1,158	2,036
Net cost	1,658	1,965	4,974	5,894
Other Postretirement Benefits Plan
Defined Benefit Plan Disclosure
Service cost	1,462	1,443	4,385	4,330
Interest cost	498	390	1,494	1,171
Expected return on plan assets	(341)	(353)	(1,022)	(1,061)
Amortization of unrecognized loss	0	55	0	165
Net cost	$ 1,619	$ 1,535	$ 4,857	$ 4,605

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STOCKHOLDERS' EQUITY Additional Information (Details) (USD $)	0 Months Ended
	Jun. 19, 2014	Sep. 30, 2014	Apr. 30, 2014	Jan. 31, 2014	Dec. 31, 2013	Jul. 27, 2014 Sales Agency Financing Agreement	Jul. 27, 2011 Sales Agency Financing Agreement	Dec. 31, 2013 Reported
Stock Issuance Arrangements
Common stock, shares authorized		300,000,000		300,000,000	300,000,000
Common stock, shares outstanding		155,731,299			157,500,795			52,500,000
Accelerated share repurchase agreement, maximum amount	$ 150,000,000
Accelerated share repurchase agreement, minimum amount	130,000,000
Share repurchase program, authorized amount			250,000,000
Accelerated share repurchase agreement, cash payment	150,000,000
Accelerated share repurchase agreement, initial share delivery and retirement	2,900,000
Accelerated share repurchase agreement, fair market value of initial delivery	104,000,000
Accelerated share repurchase agreement, share price of initial share delivery	$ 35.80
Settlements under ASR program		0
Accelerated share repurchase agreement, unsettled amount	46,000,000
Common stock, par value		$ 0			$ 0		$ 0.0
Common stock, issuable aggregate value							$ 250,000,000
Shares issued		155,731,299			157,500,795	0

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SEGMENT INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013	Sep. 30, 2014		Sep. 30, 2013	Dec. 31, 2013
OPERATING REVENUES:
Operating revenues	$ 270,134		$ 238,782	$ 791,951		$ 685,903
INCOME BEFORE INCOME TAXES:
Income before income taxes	118,508		93,672	318,023		251,921
NET INCOME:
NET INCOME	73,873		58,984	197,345		156,569
TOTAL ASSETS:
Assets	6,807,364			6,807,364			6,282,243
Regulated Operating Subsidiaries
OPERATING REVENUES:
Operating revenues	270,062		238,857	792,058		686,128
INCOME BEFORE INCOME TAXES:
Income before income taxes	151,758		131,939	440,537		376,398
NET INCOME:
NET INCOME	93,015		82,291	269,865		234,168
TOTAL ASSETS:
Assets	6,715,197			6,715,197			6,174,888
ITC Holdings and other
OPERATING REVENUES:
Operating revenues	254		152	438		455
INCOME BEFORE INCOME TAXES:
Income before income taxes	33,250		38,267	122,514		124,477
NET INCOME:
NET INCOME	73,873		58,984	197,345		156,569
TOTAL ASSETS:
Assets	3,850,785			3,850,785			3,619,759
Intercompany eliminations
OPERATING REVENUES:
Operating revenues	182		227	545		680
NET INCOME:
NET INCOME	93,015		82,291	269,865		234,168
Reconciliations / Intercompany Eliminations
TOTAL ASSETS:
Assets	$ 3,758,618	[1]		$ 3,758,618	[1]		$ 3,512,404	[1]

[1] Reconciliation of total assets results primarily from differences in the netting of deferred tax assets and liabilities at our Regulated Operating Subsidiaries as compared to the classification in our condensed consolidated statements of financial position.

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REGULATORY MATTERS

9 Months Ended

Sep. 30, 2014

Regulated Operations [Abstract]

REGULATORY MATTERS

REGULATORY MATTERS

Start-Up, Development and Pre-Construction Regulatory Assets

As of September 30, 2014, we have recorded a total of $14.0 million of regulatory assets for start-up, development and pre-construction expenses, including associated carrying charges, incurred by ITC Great Plains, which include certain costs incurred for the Kansas Electric Transmission Authority (“KETA”) Project and the Kansas V-Plan Project prior to construction. ITC Great Plains made a filing with the FERC under Section 205 of the FPA in May 2013 to recover these start-up, development and pre-construction expenses, including associated carrying charges, in future rates. If FERC authorization is received, ITC Great Plains will include the unamortized balance of the regulatory assets in its rate base and will amortize them over a 10-year period beginning at the later of the project in-service date or the FERC authorization date. The amortization expense will be recovered through ITC Great Plains’ cost-based formula rate template beginning in the period in which amortization begins.

Order on Formula Rate Protocols

In 2012, the FERC issued an order initiating a proceeding pursuant to Section 206 of the FPA to determine whether the formula rate protocols under the MISO Tariff are sufficient to ensure just and reasonable rates. Our MISO Regulated Operating Subsidiaries were named in the order. In May 2013, the FERC issued an order that determined the formula rate protocols are insufficient to ensure just and reasonable rates and directed MISO and its member transmission owners (“TOs”) to file revised formula rate protocols. In September 2013, MISO and its TOs, including our MISO Regulated Operating Subsidiaries, filed revised formula rate protocols which will require our MISO Regulated Operating Subsidiaries to provide additional information for certain aspects of the formula rates used to calculate their respective annual revenue requirements. On March 20, 2014, FERC issued an order conditionally accepting MISO and its TOs’ September 2013 filing and required a further compliance filing, which MISO and its TOs made on May 19, 2014. We do not expect the revised formula rate protocols to impact our results of operations, cash flows or financial condition.

FERC Audit Refund

See “FERC Audit Refund” in Note 11 for a discussion of the FERC audit refund.

Rate of Return on Equity and Capital Structure Complaint

See “Rate of Return on Equity and Capital Structure Complaint” in Note 11 for a discussion of the complaint.

Cost-Based Formula Rates with True-Up Mechanism

The transmission rates at our Regulated Operating Subsidiaries are set annually, using the FERC-approved formula rates, and the rates remain in effect for a one-year period. By completing their formula rate templates on an annual basis, our Regulated Operating Subsidiaries are able to adjust their transmission rates to reflect changing operational data and financial performance, including the amount of network load on their transmission systems (for our MISO Regulated Operating Subsidiaries), operating expenses and additions to property, plant and equipment when placed in service, among other items. The FERC-approved formula rates do not require further action or FERC filings for the calculated joint zone rates to go into effect, although the rates are subject to legal challenge at the FERC. Our Regulated Operating Subsidiaries will continue to use formula rates to calculate their respective annual revenue requirements unless the FERC determines the rates to be unjust and unreasonable or another mechanism is determined by the FERC to be just and reasonable.

Our cost-based formula rate templates include a true-up mechanism, whereby our Regulated Operating Subsidiaries compare their actual revenue requirements to their billed revenues for each year to determine any over- or under-collection of revenue requirements. The over- or under-collection typically results from differences between the projected revenue requirement used to establish the billing rate and actual revenue requirement at each of our Regulated Operating Subsidiaries, or from differences between actual and projected monthly peak loads at our MISO Regulated Operating Subsidiaries. Revenue is recognized for services provided during each reporting period based on actual revenue requirements calculated using the formula rate templates. Our Regulated Operating Subsidiaries accrue or defer revenues to the extent that the actual revenue requirement for the reporting period is higher or lower, respectively, than the amounts billed relating to that reporting period. The amount of accrued or deferred revenues is reflected in customer bills within two years under the provisions of the formula rate templates.

The current and non-current regulatory assets are recorded in the condensed consolidated statements of financial position in regulatory assets — revenue accruals, including accrued interest and other non-current assets, respectively. The current and non-current regulatory liabilities are recorded in regulatory liabilities — revenue deferrals, including accrued interest. 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, 2014:

(in thousands)	Total
Balance as of December 31, 2013	$	(60,196	)
Net refund of 2012 revenue deferrals and accruals, including accrued interest	20,445
Net revenue deferral for the nine months ended September 30, 2014	(47,843		)
Net accrued interest payable for the nine months ended September 30, 2014	(1,777		)
Balance as of September 30, 2014	$	(89,371	)

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

(in thousands)	Total
Current assets	$	5,623
Non-current assets — other	5,747
Current liabilities	(38,156		)
Non-current liabilities	(62,585		)
Balance as of September 30, 2014	$	(89,371	)

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RETIREMENT BENEFITS AND ASSETS HELD IN TRUST Additional Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended								9 Months Ended
	Jun. 30, 2014 Retirement Plan	Dec. 31, 2014 Retirement Plan Expectation	Jun. 30, 2014 Supplemental Retirement Benefit Plans	Dec. 31, 2014 Supplemental Retirement Benefit Plans Expectation	Jun. 30, 2014 Other Postretirement Benefits Plan	Dec. 31, 2014 Other Postretirement Benefits Plan Expectation	Sep. 30, 2014 Defined Contribution Plan	Sep. 30, 2013 Defined Contribution Plan	Sep. 30, 2014 Defined Contribution Plan	Sep. 30, 2013 Defined Contribution Plan
Retirement Benefits Disclosure
Employer contributions	$ 3.8		$ 5.1		$ 1.2
Expected additional current year contribution		0		0		5.0
Plan cost							$ 0.9	$ 0.7	$ 3.0	$ 3.1

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REGULATORY MATTERS Schedule of Regulatory Assets and Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Revenue Accruals and Deferrals
Current assets	$ 5,623	$ 6,334
Non-current assets — other	5,747
Current liabilities	(38,156)	(33,120)
Non-current liabilities	(62,585)	(36,447)
Ending balance	$ (89,371)	$ (60,196)

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REGULATORY MATTERS Net Changes in Regulatory Assets and Liabilities (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Revenue Accruals and Deferrals
Beginning balance	$ (60,196)
Net refund of 2012 revenue deferrals and accruals, including accrued interest	20,445
Net revenue deferral for the nine months ended September 30, 2014	(47,843)
Net accrued interest payable for the nine months ended September 30, 2014	(1,777)
Ending balance	$ (89,371)

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FAIR VALUE MEASUREMENTS Assets Measured at Fair Value Subject to Three-Tier Hierarchy (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring Basis
Fair value, level transfers	$ 0	$ 0
Recurring Basis | Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring Basis
Total	40,162,000	40,834,000
Recurring Basis | Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) | Cash Equivalents
Fair Value, Assets and Liabilities Measured on Recurring Basis
Cash and cash equivalents	12,898,000	19,000,000
Recurring Basis | Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed Income Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis
Mutual funds	26,629,000	21,318,000
Recurring Basis | Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis
Mutual funds	635,000	516,000
Recurring Basis | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis
Total	81,000
Recurring Basis | Fair Value, Inputs, Level 2 [Member] | Interest Rate Swap
Fair Value, Assets and Liabilities Measured on Recurring Basis
Interest rate swap	$ 81,000

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REGULATORY MATTERS Additional Information (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Regulatory Assets
Transmission rate, applicable period	1 year
Revenue true-up amount reflected in customer bill, period of recognition	2 years
ITC Great Plains | Start-up, Development and Pre-construction Expenses, Including Associated Carrying Charges
Regulatory Assets
Regulatory assets	$ 14.0
Amortization period (in years)	10

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GOODWILL AND INTANGIBLE ASSETS (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Goodwill and Intangible Assets
Goodwill	$ 950,163,000		$ 950,163,000		$ 950,163,000
Intangible assets	49,198,000		49,198,000		49,328,000
Accumulated amortization	24,088,000		24,088,000		21,616,000
Amortization expense	900,000	800,000	2,500,000	2,400,000
Expected amortization expense, year one	3,300,000		3,300,000
Expected amortization expense, year two	3,300,000		3,300,000
Expected amortization expense, year three	3,300,000		3,300,000
Expected amortization expense, year four	3,300,000		3,300,000
Expected amortization expense, year five	3,300,000		3,300,000
ITCTransmission
Goodwill and Intangible Assets
Goodwill	173,400,000		173,400,000		173,400,000
METC
Goodwill and Intangible Assets
Goodwill	453,800,000		453,800,000		453,800,000
Intangible assets	35,000,000		35,000,000		37,200,000
Accumulated amortization	23,400,000		23,400,000		21,200,000
ITC Midwest
Goodwill and Intangible Assets
Goodwill	323,000,000		323,000,000		323,000,000
ITC Great Plains
Goodwill and Intangible Assets
Intangible assets	14,200,000		14,200,000		12,100,000
Accumulated amortization	$ 600,000		$ 600,000		$ 400,000

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RECENT ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2014

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance requiring entities to apply a new model for recognizing revenue from contracts with customers. The guidance will supersede the current revenue recognition guidance and require entities to evaluate their revenue recognition arrangements using a five step model to determine when a customer obtains control of a transferred good or service. The guidance is effective for annual reporting periods beginning after December 15, 2016 and may be adopted using a full or modified retrospective application. We are currently in the process of evaluating our revenue arrangements under the issued guidance and have not yet determined its impact to our results of operations, cash flows and financial position.

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DEBT Interest Rate Swap Agreements (Details) (USD $)			0 Months Ended		1 Months Ended	9 Months Ended	0 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2014 Interest Rate Swap	Aug. 18, 2014 Interest Rate Swap	May 31, 2014 Interest Rate Swap	Sep. 30, 2014 Interest Rate Swap	Oct. 08, 2014 Interest Rate Swap Subsequent Event	Sep. 30, 2014 ITC Holdings Senior Notes, Due September 30, 2016 Unsecured Debt
Derivative [Line Items]
Term of contract				10 years	10 years		10 years
Notional amount				$ 25,000,000	$ 150,000,000		$ 25,000,000
Long-term debt	3,379,600,000	3,100,900,000						139,400,000
Fixed interest rate				3.217%			3.075%
Ineffectiveness recorded in the condensed consolidated statement of operations			0
Interest rate swap			100,000			100,000
Weighted average fixed rate					2.65%
Comparable reference rate					2.53%
Loss on derivative						$ 1,600,000

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EARNINGS PER SHARE Stock Split (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Earnings Per Share, Basic and Diluted, by Common Class
Numerator for basic and diluted earnings per common share	$ 73,288		$ 58,453		$ 195,757		$ 155,042
Denominator:
Basic earnings per common share — weighted average common shares	154,386,994		155,958,879		155,661,516		155,627,361
Incremental shares for stock options and employee stock purchase plan	1,364,896		1,307,394		1,470,041		1,251,432
Diluted earnings per common share — adjusted weighted average shares and assumed conversion	155,751,890		157,266,273		157,131,557		156,878,793
Per common share net income:
Basic	$ 0.47		$ 0.37		$ 1.26		$ 1.00
Diluted	$ 0.47		$ 0.37		$ 1.25		$ 0.99
Percentage allocated to common shares:
Weighted average restricted shares (participating securities)	1,230,250		1,428,531		1,295,812		1,498,719
Denominator for percentage allocated to common shares - total weighted-average shares outstanding	155,617,244		157,387,410		156,957,328		157,126,080
Percentage allocated to common shares	99.20%	[1]	99.10%	[1]	99.20%	[1]	99.00%	[1]
Outstanding stock options and ESPP shares	4,637,551		5,238,300		4,637,551		5,238,300
Anti-dilutive stock options and ESPP shares	642,507		916,902		642,507		916,902
Reported
Earnings Per Share, Basic and Diluted, by Common Class
Numerator for basic and diluted earnings per common share			58,453				155,042
Denominator:
Basic earnings per common share — weighted average common shares			51,986,293				51,875,787
Incremental shares for stock options and employee stock purchase plan			435,798				417,144
Diluted earnings per common share — adjusted weighted average shares and assumed conversion			52,422,091				52,292,931
Per common share net income:
Basic			$ 1.12				$ 2.99
Diluted			$ 1.12				$ 2.96
Percentage allocated to common shares:
Weighted average restricted shares (participating securities)			476,177				499,573
Denominator for percentage allocated to common shares - total weighted-average shares outstanding			52,462,470				52,375,360
Percentage allocated to common shares			99.10%				99.00%
Outstanding stock options and ESPP shares			1,746,100				1,746,100
Anti-dilutive stock options and ESPP shares			305,634				305,634
Adjustment
Earnings Per Share, Basic and Diluted, by Common Class
Numerator for basic and diluted earnings per common share			$ 0				$ 0
Denominator:
Basic earnings per common share — weighted average common shares			103,972,586				103,751,574
Incremental shares for stock options and employee stock purchase plan			871,596				834,288
Diluted earnings per common share — adjusted weighted average shares and assumed conversion			104,844,182				104,585,862
Per common share net income:
Basic			$ (0.75)				$ (1.99)
Diluted			$ (0.75)				$ (1.97)
Percentage allocated to common shares:
Weighted average restricted shares (participating securities)			952,354				999,146
Denominator for percentage allocated to common shares - total weighted-average shares outstanding			104,924,940				104,750,720
Percentage allocated to common shares			0.00%				0.00%
Outstanding stock options and ESPP shares			3,492,200				3,492,200
Anti-dilutive stock options and ESPP shares			611,268				611,268

[1] Weighted average common shares outstanding154,386,994 155,958,879 155,661,516 155,627,361Weighted average restricted shares (participating securities)1,230,250 1,428,531 1,295,812 1,498,719 Total155,617,244 157,387,410 156,957,328 157,126,080 Percentage allocated to common shares99.2% 99.1% 99.2% 99.0%

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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Current assets
Cash and cash equivalents	$ 11,596	$ 34,275
Accounts receivable	119,363	89,348
Inventory	30,563	31,986
Deferred income taxes	25,359	17,225
Regulatory assets — revenue accruals, including accrued interest	5,623	6,334
Prepaid and other current assets	8,994	12,370
Total current assets	201,498	191,538
Property, plant and equipment (net of accumulated depreciation and amortization of $1,365,379 and $1,330,094, respectively)	5,337,474	4,846,526
Other assets
Goodwill	950,163	950,163
Intangible assets (net of accumulated amortization of $24,088 and $21,616, respectively)	49,198	49,328
Other regulatory assets	185,532	179,068
Deferred financing fees (net of accumulated amortization of $12,702 and $15,261, respectively)	29,363	25,585
Other	54,136	40,035
Total other assets	1,268,392	1,244,179
TOTAL ASSETS	6,807,364	6,282,243
Current liabilities
Accounts payable	115,857	111,145
Accrued payroll	19,649	21,930
Accrued interest	34,888	53,049
Accrued taxes	26,648	29,805
Regulatory liabilities — revenue deferrals, including accrued interest	38,156	33,120
Refundable deposits from generators for transmission network upgrades	19,284	23,283
Debt maturing within one year	200,000	200,000
Other	15,902	27,047
Total current liabilities	470,384	499,379
Accrued pension and postretirement liabilities	59,205	53,704
Deferred income taxes	662,349	562,938
Regulatory liabilities — revenue deferrals, including accrued interest	62,585	36,447
Regulatory liabilities — accrued asset removal costs	67,344	67,571
Refundable deposits from generators for transmission network upgrades	7,004	19,328
Other	21,404	17,032
Long-term debt	3,840,141	3,412,112
Commitments and contingent liabilities (Note 11)
STOCKHOLDERS’ EQUITY
Common stock, without par value, 300,000,000 shares authorized, 155,731,299 and 157,500,795 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively	890,974	1,014,435
Retained earnings	720,036	592,970
Accumulated other comprehensive income	5,938	6,327
Total stockholders’ equity	1,616,948	1,613,732
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 6,807,364	$ 6,282,243

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FAIR VALUE MEASUREMENTS Additional Information (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Fair Value Disclosures [Abstract]
Fair value of long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements	$ 3,688.3	$ 3,299.0
Book value of long-term debt and debt maturing within one year, excluding revolving and term loan credit agreements	3,379.6	3,100.9
Book value of revolving credit agreements and term loan credit agreements	$ 660.5	$ 511.2

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME	$ 197,345	$ 156,569
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	94,609	87,583
Recognition, refund and collection of revenue accruals and deferrals — including accrued interest	29,175	30,369
Deferred income tax expense	86,935	69,733
Allowance for equity funds used during construction	(14,865)	(25,315)
Loss on extinguishment of debt	29,074	0
Other	15,474	13,113
Changes in assets and liabilities, exclusive of changes shown separately:
Accounts receivable	(24,057)	(31,115)
Inventory	1,423	1,075
Prepaid and other current assets	3,377	11,208
Accounts payable	(16,382)	4,044
Accrued payroll	(1,710)	(1,707)
Accrued interest	(18,161)	(14,538)
Accrued taxes	(3,156)	(10,467)
Other current liabilities	(13,486)	7,979
Other non-current assets and liabilities, net	(4,694)	(6,328)
Net cash provided by operating activities	360,901	292,203
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(549,599)	(630,485)
Proceeds from sale of marketable securities	199	42,174
Purchases of marketable securities	(5,490)	(43,398)
Other	2,624	(3,340)
Net cash used in investing activities	(552,266)	(635,049)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt	498,664	933,025
Borrowings under revolving credit agreements	1,397,800	890,400
Borrowings under term loan credit agreements	110,000	535,000
Retirement of long-term debt — including debt retirement costs	(248,494)	(452,000)
Repayments of revolving credit agreements	(1,319,500)	(1,004,100)
Repayments under term loan credit agreements	(39,000)	(475,000)
Issuance of common stock	19,666	8,213
Dividends on common and restricted stock	(70,279)	(61,821)
Refundable deposits from generators for transmission network upgrades	5,833	26,898
Repayment of refundable deposits from generators for transmission network upgrades	(22,155)	(30,279)
Repurchase and retirement of common stock	(108,136)	(4,508)
Forward contract of accelerated share repurchase program	(46,000)	0
Other	(9,713)	1,535
Net cash provided by financing activities	168,686	367,363
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(22,679)	24,517
CASH AND CASH EQUIVALENTS — Beginning of period	34,275	26,187
CASH AND CASH EQUIVALENTS — End of period	$ 11,596	$ 50,704

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STOCKHOLDERS' EQUITY Changes in Stockholders' Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Beginning balance, shares			157,500,795
Beginning balance			$ 1,613,732
NET INCOME	73,873	58,984	197,345	156,569
Stock option exercises, shares			977,491		499,014
Other comprehensive income (loss), net of tax	83	197	(389)	24,555
Ending balance, shares	155,731,299		155,731,299		157,500,795
Ending balance	1,616,948		1,616,948		1,613,732
Parenthetical Disclosures
Dividends declared per common share	$ 0.1625	$ 0.1417	$ 0.4475	$ 0.3933
Common Stock
Beginning balance, shares			157,500,795	156,745,542	156,745,542
Beginning balance			1,014,435	989,334	989,334
Repurchase and retirement of common stock, shares			(3,018,225)	(151,164)
Repurchase and retirement of common stock			(108,136)	(4,508)
Stock option exercises, shares			977,491	430,542
Stock option exercises			18,095	6,860
Shares issued under the Employee Stock Purchase Plan, shares			53,056	57,072
Shares issued under the Employee Stock Purchase Plan			1,571	1,353
Issuance of restricted stock, shares			305,718	365,433
Forfeiture of restricted stock, shares			(87,536)	(33,363)
Share-based compensation, net of forfeitures			11,009	10,670
Forward contract of accelerated share repurchase program			(46,000)
Ending balance, shares	155,731,299	157,414,062	155,731,299	157,414,062
Ending balance	890,974	1,003,709	890,974	1,003,709
Retained Earnings
Beginning balance			592,970	443,569	443,569
NET INCOME			197,345	156,569
Dividends declared on common stock			(70,279)	(61,821)
Ending balance	720,036	538,317	720,036	538,317
Accumulated Other Comprehensive Income (Loss)
Beginning balance			6,327	(18,048)	(18,048)
Other comprehensive income (loss), net of tax			(389)	24,555
Ending balance	5,938	6,507	5,938	6,507
Total Stockholders' Equity
Beginning balance			1,613,732	1,414,855	1,414,855
NET INCOME			197,345	156,569
Repurchase and retirement of common stock			(108,136)	(4,508)
Dividends declared on common stock			(70,279)	(61,821)
Stock option exercises			18,095	6,860
Shares issued under the Employee Stock Purchase Plan			1,571	1,353
Share-based compensation, net of forfeitures			11,009	10,670
Forward contract of accelerated share repurchase program			(46,000)
Other comprehensive income (loss), net of tax			(389)	24,555
Ending balance	$ 1,616,948	$ 1,548,533	$ 1,616,948	$ 1,548,533

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STOCKHOLDERS' EQUITY (Tables)

9 Months Ended

Sep. 30, 2014

Equity [Abstract]

Changes in Stockholders' Equity

The changes in stockholders’ equity for the nine months endedSeptember 30, 2014 were as follows:

									Accumulated
									Other			Total
	Common Stock					Retained			Comprehensive			Stockholders’
(in thousands, except share and per share data)	Shares		Amount			Earnings			Income			Equity
BALANCE, DECEMBER 31, 2013	157,500,795		$	1,014,435		$	592,970		$	6,327		$	1,613,732
Net income	—		—			197,345			—			197,345
Repurchase and retirement of common stock	(3,018,225	)	(108,136		)	—			—			(108,136		)
Dividends declared on common stock ($0.4475 per share)	—		—			(70,279		)	—			(70,279		)
Stock option exercises	977,491		18,095			—			—			18,095
Shares issued under the Employee Stock Purchase Plan	53,056		1,571			—			—			1,571
Issuance of restricted stock	305,718		—			—			—			—
Forfeiture of restricted stock	(87,536	)	—			—			—			—
Share-based compensation, net of forfeitures	—		11,009			—			—			11,009
Forward contract of accelerated share repurchase program	—		(46,000		)	—			—			(46,000		)
Other comprehensive loss, net of tax	—		—			—			(389		)	(389		)
BALANCE, SEPTEMBER 30, 2014	155,731,299		$	890,974		$	720,036		$	5,938		$	1,616,948

The changes in stockholders’ equity for the nine months endedSeptember 30, 2013 were as follows:

									Accumulated
									Other			Total
	Common Stock					Retained			Comprehensive			Stockholders’
(in thousands, except share and per share data)	Shares		Amount			Earnings			Income (Loss)			Equity
BALANCE, DECEMBER 31, 2012	156,745,542		$	989,334		$	443,569		$	(18,048	)	$	1,414,855
Net income	—		—			156,569			—			156,569
Repurchase and retirement of common stock	(151,164	)	(4,508		)	—			—			(4,508		)
Dividends declared on common stock ($0.3933 per share)	—		—			(61,821		)	—			(61,821		)
Stock option exercises	430,542		6,860			—			—			6,860
Shares issued under the Employee Stock Purchase Plan	57,072		1,353			—			—			1,353
Issuance of restricted stock	365,433		—			—			—			—
Forfeiture of restricted stock	(33,363	)	—			—			—			—
Share-based compensation, net of forfeitures	—		10,670			—			—			10,670
Other comprehensive income, net of tax	—		—			—			24,555			24,555
BALANCE, SEPTEMBER 30, 2013	157,414,062		$	1,003,709		$	538,317		$	6,507		$	1,548,533

Changes in Accumulated Other Comprehensive Income

The following table provides the components of changes in AOCI for the three and nine months ended September 30, 2014 and 2013:

	Three months ended					Nine months ended
	September 30,					September 30,
(in thousands)	2014			2013		2014			2013
Balance at the beginning of period	$	5,855		$	6,310	$	6,327		$	(18,048	)
Derivative instruments
Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net (net of tax of $88 and $71 for the three months ended September 30, 2014 and 2013, respectively, and net of tax of $243 and $90 for the nine months ended September 30, 2014 and 2013, respectively)	122			110		340			139
Reclassification of loss relating to interest rate cash flow hedges from AOCI to loss on extinguishment of debt (net of tax of $83 for the nine months ended September 30, 2014)	—			—		117			—
Gain (loss) on interest rate swaps relating to interest rate cash flow hedges (net of tax of $34 for the three months ended September 30, 2014 and $621 and $15,652 for the nine months ended September 30, 2014 and 2013, respectively)	47			—		(870		)	24,329
Derivative instruments, net of tax	169			110		(413		)	24,468
Available-for-sale securities
Unrealized net gain on available-for-sale securities (net of tax of $63 and $16 for the three and nine months ended September 30, 2014, respectively, and $56 for the three and nine months ended September 30, 2013)	(86		)	87		24			87
Available-for-sale securities, net of tax	(86		)	87		24			87
Total other comprehensive income (loss), net of tax	83			197		(389		)	24,555
Balance at the end of period	$	5,938		$	6,507	$	5,938		$	6,507

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STOCKHOLDERS' EQUITY Changes in Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Equity [Abstract]
Balance at the beginning of period	$ 5,855	$ 6,310	$ 6,327	$ (18,048)
Derivative instruments
Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net (net of tax of $88 and $71 for the three months ended September 30, 2014 and 2013, respectively, and net of tax of $243 and $90 for the nine months ended September 30, 2014 and 2013, respectively)	122	110	340	139
Reclassification of loss relating to interest rate cash flow hedges from AOCI to loss on extinguishment of debt (net of tax of $83 for the nine months ended September 30, 2014)	0	0	117	0
Gain (loss) on interest rate swaps relating to interest rate cash flow hedges (net of tax of $34 for the three months ended September 30, 2014 and $621 and $15,652 for the nine months ended September 30, 2014 and 2013, respectively)	47	0	(870)	24,329
Derivative instruments, net of tax	169	110	(413)	24,468
Available-for-sale securities
Unrealized net gain on available-for-sale securities (net of tax of $63 and $16 for the three and nine months ended September 30, 2014, respectively, and $56 for the three and nine months ended September 30, 2013)	(86)	87	24	87
Available-for-sale securities, net of tax	(86)	87	24	87
Total other comprehensive income (loss), net of tax	83	197	(389)	24,555
Balance at the end of period	5,938	6,507	5,938	6,507
Parenthetical Disclosures
Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense, tax	88	71	243	90
Reclassification of loss relating to interest rate cash flow hedges from AOCI to loss on extinguishment of debt, tax			83
Gain (loss) on interest rate swaps relating to interest rate cash flow hedges, tax	34		621	15,652
Unrealized net gain on available-for-sale securities, tax	$ 63	$ 56	$ 16	$ 56

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RETIREMENT BENEFITS AND ASSETS HELD IN TRUST (Tables)

9 Months Ended

Sep. 30, 2014

Defined Benefit Plans

Defined Benefit Plan Disclosure

Schedule of Net Defined Benefit Cost Components

Net pension cost, by component, was as follows for the three and nine months ended September 30, 2014:

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Service cost	$	1,267		$	1,315		$	3,800		$	3,946
Interest cost	901			698			2,703			2,094
Expected return on plan assets	(885		)	(717		)	(2,655		)	(2,151		)
Amortization of prior service credit	(11		)	(10		)	(32		)	(31		)
Amortization of unrecognized loss	386			679			1,158			2,036
Net pension cost	$	1,658		$	1,965		$	4,974		$	5,894

Other Postretirement Benefits Plan

Defined Benefit Plan Disclosure

Schedule of Net Defined Benefit Cost Components

Net postretirement cost, by component, was as follows for the three and nine months ended September 30, 2014:

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Service cost	$	1,462		$	1,443		$	4,385		$	4,330
Interest cost	498			390			1,494			1,171
Expected return on plan assets	(341		)	(353		)	(1,022		)	(1,061		)
Amortization of unrecognized loss	—			55			—			165
Net postretirement cost	$	1,619		$	1,535		$	4,857		$	4,605

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GENERAL

9 Months Ended

Sep. 30, 2014

GENERAL [Abstract]

GENERAL

GENERAL

These condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements as of and for the year ended December 31, 2013 included in ITC Holdings’ annual report on Form 10-K for such period.

The accompanying condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Rule 10-01 of Securities and Exchange Commission (“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 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.

Supplementary Cash Flows Information

	Nine months ended
	September 30,
(in thousands)	2014		2013
Supplementary cash flows information:
Interest paid (net of interest capitalized)	$	154,410	$	135,058
Income taxes paid — net	25,744		11,593
Supplementary non-cash investing and financing activities:
Additions to property, plant and equipment (a)	$	92,557	$	74,694
Allowance for equity funds used during construction	14,865		25,315

____________________________

(a) Amounts consist of current liabilities for construction labor and materials that have not been included in investing activities. These amounts have not been paid for as of September 30, 2014 or 2013, respectively, but have been or will be included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid.

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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Property, plant and equipment, accumulated depreciation and amortization	$ 1,365,379	$ 1,330,094
Intangible assets, accumulated amortization	24,088	21,616
Deferred financing fees, accumulated amortization	$ 12,702	$ 15,261
Common stock, par value	$ 0	$ 0
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	155,731,299	157,500,795
Common stock, shares outstanding	155,731,299	157,500,795

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COMMITMENTS AND CONTINGENT LIABILITIES

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENT LIABILITIES

COMMITMENTS AND CONTINGENT LIABILITIES

Environmental Matters

Our Regulated Operating Subsidiaries’ operations 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 hazardous materials and of solid and hazardous wastes, and impose obligations to investigate and remediate contamination in certain circumstances. Liabilities to investigate or remediate 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 at properties currently owned or operated by our Regulated Operating Subsidiaries. Such liabilities may arise even where the contamination does not result from noncompliance with applicable environmental laws. Under a number of 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 Regulated Operating Subsidiaries’ 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 Regulated Operating Subsidiaries’ assets and operations also involve the use of materials classified as hazardous, toxic or otherwise dangerous. Many of the properties our Regulated Operating Subsidiaries 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 polychlorinated biphenyls, or PCBs. Our Regulated Operating Subsidiaries’ facilities and equipment are often situated close to or on property owned by others so that, if they are the source of contamination, other’s property may be affected. For example, aboveground and underground transmission lines sometimes traverse properties that our Regulated Operating Subsidiaries do not own, and, at some of our Regulated Operating Subsidiaries’ transmission stations, transmission assets (owned or operated by our Regulated Operating Subsidiaries) and distribution assets (owned or operated by our Regulated Operating Subsidiaries’ transmission customer) are commingled.

Some properties in which our Regulated Operating Subsidiaries have an ownership interest or at which they operate are, and others are suspected of being, affected by environmental contamination. Our Regulated Operating Subsidiaries are not aware of any pending or threatened claims against them with respect to environmental contamination, or of any investigation or remediation of contamination at any properties, that entail costs likely to materially affect them. Some facilities and properties are located near environmentally sensitive areas such as wetlands.

Claims have been made or threatened against electric utilities for bodily injury, disease or other damages allegedly related to exposure to electromagnetic fields associated with electric transmission and distribution lines. While our Regulated Operating Subsidiaries do not believe that a causal link between electromagnetic field exposure and injury has been generally established and accepted in the scientific community, if such a relationship is established or accepted, the liabilities and costs imposed on our business could be significant. We are not aware of any pending or threatened claims against our Regulated Operating Subsidiaries for bodily injury, disease or other damages allegedly related to exposure to electromagnetic fields and electric transmission and distribution lines that entail costs likely to have a material adverse effect on our results of operations, financial position or liquidity.

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, 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.

Michigan Sales and Use Tax Audit

The Michigan Department of Treasury conducted a sales and use tax audit of ITCTransmission for the audit period April 1, 2005 through June 30, 2008 and has denied ITCTransmission’s use of the industrial processing exemption from use tax it has taken beginning January 1, 2007. ITCTransmission has certain administrative and judicial appeal rights.

ITCTransmission believes that its utilization of the industrial processing exemption is appropriate and intends to defend itself against the denial of such exemption. However, it is reasonably possible that the assessment of additional use tax could be sustained after all administrative appeals and litigation have been exhausted.

The amount of the potential use tax liability associated with the exemptions taken by ITCTransmission through September 30, 2014 is estimated to be approximately $20.4 million for periods still subject to audit, which includes approximately $3.9 million assessed for the audit period April 1, 2005 through June 30, 2008, including interest. ITCTransmission has not recorded this contingent liability as of September 30, 2014. However, in the event it becomes appropriate to record additional use tax liability relating to this matter, ITCTransmission would record the additional use tax primarily as an increase to the cost of property, plant and equipment, as the majority of purchases for which the exemption was taken relate to equipment purchases associated with capital projects. METC has also taken the industrial processing exemption, estimated to be approximately $10.5 million for periods still subject to audit; however, METC has not recorded any contingent liabilities as of September 30, 2014 associated with this matter. These higher use tax expenses would be included as components of net revenue requirements and resulting rates.

FERC Audit Refund

The FERC issued an order that identified certain findings and recommendations of certain staff of the FERC relating to specific aspects of the accounting treatment for the acquisition of the transmission assets of IP&L by ITC Midwest that requires adjustments to the MISO Regulated Operating Subsidiaries’ respective annual revenue requirement calculations and corresponding refunds. ITC Midwest, ITCTransmission and METC recorded an aggregate regulatory liability for the refund and related interest of $13.1 million as of December 31, 2013. The amounts are being refunded through the cost-based formula rates in 2014 and as of September 30, 2014, the remaining regulatory liability and related interest was $3.3 million.

ITC Midwest Project Commitment

In the Minnesota regulatory proceeding to approve ITC Midwest’s December 2007 acquisition of the transmission assets of IP&L, ITC Midwest agreed to build a certain project in Iowa, the 345 kV Salem-Hazelton line, and made a commitment to use commercially reasonable best efforts to complete the project prior to December 31, 2011. In the event ITC Midwest is found to have failed to meet this commitment, the allowed 12.38% rate of return on the actual equity portion of its capital structure would be reduced to 10.39% until such time as ITC Midwest completes the project, and ITC Midwest would refund with interest any amounts collected since the close date of the transaction that exceeded what would have been collected if the 10.39% return on equity (“ROE”) had been used. Certain regulatory approvals were needed from the Iowa Utilities Board (“IUB”) before construction of the project could commence, but due to the IUB’s case schedule, these approvals were not received until the second quarter of 2011. As a result of the delay in the receipt of the necessary regulatory approvals, the project was not completed by December 31, 2011. We have notified the Minnesota Public Utilities Commission that the Salem-Hazleton line was placed into service on April 25, 2013, and requested confirmation from the commission that ITC Midwest has satisfied its commitment and that no refund is due as a result of the project not being completed by December 31, 2011. We believe we used commercially reasonable best efforts to meet the December 31, 2011 deadline, and therefore, we believe the likelihood of any material effect on the financial statements from this matter is remote.

Rate of Return on Equity and Capital Structure Complaint

On November 12, 2013, 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 (the “joint complainants”) filed a complaint with the FERC under Section 206 of the FPA, requesting that the FERC find the regional base rate ROE for all MISO TOs, including ITCTransmission, METC and ITC Midwest (currently set at 12.38%) to be unjust and unreasonable. The joint complainants are seeking a FERC order reducing the base regional ROE used in our formula transmission rate to 9.15%. The complaint also alleged that the rates of any MISO TO using a capital structure with greater than 50% for the equity component are likewise not just and reasonable (ITCTransmission, METC and ITC Midwest use their actual capital structures, which FERC has approved at a target of 60% equity). In addition, the complaint alleged the ROE adders currently approved for certain ITC operating companies, including adders currently utilized by ITCTransmission for being a member of an RTO and adders utilized by ITCTransmission and METC for being an independent transmission owner, are no longer just and reasonable, and sought to have them eliminated.

On January 6, 2014, ITCTransmission, METC and ITC Midwest filed responses with the FERC to the Section 206 complaint (jointly with other MISO TOs and through a separate supplemental response), defending the use of the current regional base ROE, the use of current capital structures, and the approved ROE adders for RTO membership and independence. The responses seek dismissal of the complaint, or a denial of it on merits, with prejudice, as the joint complainants failed to meet their burden under Section 206 of the FPA to show that the current regional base ROE, approved capital structures and ROE adders approved for ITCTransmission and METC are no longer just and reasonable.

On June 19, 2014, in a separate but related Section 206 complaint against certain ISO New England TOs, FERC adopted a new method for establishing ROEs for electric transmission utilities. The new method is based on a two-step process and uses both short-term and long-term growth projections in establishing ROEs, whereas the previous method used only short-term growth projections. Under this new method, FERC also reiterated its policy of capping the overall ROE, including adders, at the high end of the zone of reasonableness set by the two-step DCF methodology. The new method presented in the ISO New England ROE case will also be used in resolving the MISO ROE case.

On October 16, 2014, the FERC set the MISO TO’s base ROE for hearing and denied all other aspects of the complaint, finding that the joint complainants failed to show that the use of actual or FERC-approved capital structures that include more than 50% equity is unjust and unreasonable. FERC also denied the request to terminate ITCTransmission’s and METC’s ROE incentive adders detailed above. The order reiterates that any TO’s total ROE is limited by the high end of the zone of reasonableness and the TO’s ability to implement the full amount of previously granted ROE adders may be affected by the outcome of the hearing. FERC also set the effective date for potential refunds as November 12, 2013.

It is reasonably possible that the refund exposure for a potential reduction to the ROEs of our MISO Regulated Operating Subsidiaries could result in a material impact on our results of operations, cash flows and financial condition. The range of potential impact of this matter to our consolidated results of operations, cash flows and financial condition is not estimable due to the uncertainty of the calculation of an authorized ROE along with the zone of reasonableness, which is directly affected by the newly adopted two-step DCF methodology. The ROEs to be established would be dependent on the appropriate proxy group and assumptions for short and long-term growth rates at the time the ROE is ultimately determined. As of September 30, 2014, our MISO Regulated Operating Subsidiaries had a total of approximately $2.6 billion of equity in their capital structures for ratemaking purposes. Based on this level of aggregate equity, we estimate that each 10 basis point reduction in the authorized ROE would reduce annual consolidated net income by approximately $2.6 million.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Oct. 24, 2014
Entity Information [Line Items]
Entity Registrant Name	ITC HOLDINGS CORP.
Entity Central Index Key	0001317630
Trading Symbol	ITC
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		155,734,925

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SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2014

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 thousands)	2014			2013			2014			2013
Regulated Operating Subsidiaries	$	270,062		$	238,857		$	792,058		$	686,128
ITC Holdings and other	254			152			438			455
Intercompany eliminations	(182		)	(227		)	(545		)	(680		)
Total Operating Revenues	$	270,134		$	238,782		$	791,951		$	685,903

	Three months ended						Nine months ended
INCOME BEFORE INCOME TAXES:	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Regulated Operating Subsidiaries	$	151,758		$	131,939		$	440,537		$	376,398
ITC Holdings and other	(33,250		)	(38,267		)	(122,514		)	(124,477		)
Total Income Before Income Taxes	$	118,508		$	93,672		$	318,023		$	251,921

	Three months ended						Nine months ended
NET INCOME:	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Regulated Operating Subsidiaries	$	93,015		$	82,291		$	269,865		$	234,168
ITC Holdings and other	73,873			58,984			197,345			156,569
Intercompany eliminations	(93,015		)	(82,291		)	(269,865		)	(234,168		)
Total Net Income	$	73,873		$	58,984		$	197,345		$	156,569

TOTAL ASSETS:	September 30,			December 31,
(in thousands)	2014			2013
Regulated Operating Subsidiaries	$	6,715,197		$	6,174,888
ITC Holdings and other	3,850,785			3,619,759
Reconciliations / Intercompany eliminations (a)	(3,758,618		)	(3,512,404		)
Total Assets	$	6,807,364		$	6,282,243

____________________________

(a) Reconciliation of total assets results primarily from differences in the netting of deferred tax assets and liabilities at our Regulated Operating Subsidiaries 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 Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
OPERATING REVENUES	$ 270,134	$ 238,782	$ 791,951	$ 685,903
OPERATING EXPENSES
Operation and maintenance	29,038	29,725	79,735	83,906
General and administrative	28,812	31,902	87,082	110,767
Depreciation and amortization	31,936	29,802	94,609	87,583
Taxes other than income taxes	19,205	16,728	57,474	49,492
Other operating (income) and expenses — net	(289)	(197)	(750)	(542)
Total operating expenses	108,702	107,960	318,150	331,206
OPERATING INCOME	161,432	130,822	473,801	354,697
OTHER EXPENSES (INCOME)
Interest expense — net	47,328	44,062	138,491	123,527
Allowance for equity funds used during construction	(4,921)	(8,290)	(14,865)	(25,315)
Loss on extinguishment of debt	0	0	29,074	0
Other income	(244)	(786)	(618)	(824)
Other expense	761	2,164	3,696	5,388
Total other expenses (income)	42,924	37,150	155,778	102,776
INCOME BEFORE INCOME TAXES	118,508	93,672	318,023	251,921
INCOME TAX PROVISION	44,635	34,688	120,678	95,352
NET INCOME	$ 73,873	$ 58,984	$ 197,345	$ 156,569
Basic earnings per common share	$ 0.47	$ 0.37	$ 1.26	$ 1.00
Diluted earnings per common share	$ 0.47	$ 0.37	$ 1.25	$ 0.99
Dividends declared per common share	$ 0.1625	$ 0.1417	$ 0.4475	$ 0.3933

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STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2014

Equity [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

The changes in stockholders’ equity for the nine months endedSeptember 30, 2014 were as follows:

									Accumulated
									Other			Total
	Common Stock					Retained			Comprehensive			Stockholders’
(in thousands, except share and per share data)	Shares		Amount			Earnings			Income			Equity
BALANCE, DECEMBER 31, 2013	157,500,795		$	1,014,435		$	592,970		$	6,327		$	1,613,732
Net income	—		—			197,345			—			197,345
Repurchase and retirement of common stock	(3,018,225	)	(108,136		)	—			—			(108,136		)
Dividends declared on common stock ($0.4475 per share)	—		—			(70,279		)	—			(70,279		)
Stock option exercises	977,491		18,095			—			—			18,095
Shares issued under the Employee Stock Purchase Plan	53,056		1,571			—			—			1,571
Issuance of restricted stock	305,718		—			—			—			—
Forfeiture of restricted stock	(87,536	)	—			—			—			—
Share-based compensation, net of forfeitures	—		11,009			—			—			11,009
Forward contract of accelerated share repurchase program	—		(46,000		)	—			—			(46,000		)
Other comprehensive loss, net of tax	—		—			—			(389		)	(389		)
BALANCE, SEPTEMBER 30, 2014	155,731,299		$	890,974		$	720,036		$	5,938		$	1,616,948

The changes in stockholders’ equity for the nine months endedSeptember 30, 2013 were as follows:

									Accumulated
									Other			Total
	Common Stock					Retained			Comprehensive			Stockholders’
(in thousands, except share and per share data)	Shares		Amount			Earnings			Income (Loss)			Equity
BALANCE, DECEMBER 31, 2012	156,745,542		$	989,334		$	443,569		$	(18,048	)	$	1,414,855
Net income	—		—			156,569			—			156,569
Repurchase and retirement of common stock	(151,164	)	(4,508		)	—			—			(4,508		)
Dividends declared on common stock ($0.3933 per share)	—		—			(61,821		)	—			(61,821		)
Stock option exercises	430,542		6,860			—			—			6,860
Shares issued under the Employee Stock Purchase Plan	57,072		1,353			—			—			1,353
Issuance of restricted stock	365,433		—			—			—			—
Forfeiture of restricted stock	(33,363	)	—			—			—			—
Share-based compensation, net of forfeitures	—		10,670			—			—			10,670
Other comprehensive income, net of tax	—		—			—			24,555			24,555
BALANCE, SEPTEMBER 30, 2013	157,414,062		$	1,003,709		$	538,317		$	6,507		$	1,548,533

Accumulated Other Comprehensive Income

The following table provides the components of changes in AOCI for the three and nine months ended September 30, 2014 and 2013:

	Three months ended					Nine months ended
	September 30,					September 30,
(in thousands)	2014			2013		2014			2013
Balance at the beginning of period	$	5,855		$	6,310	$	6,327		$	(18,048	)
Derivative instruments
Reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense — net (net of tax of $88 and $71 for the three months ended September 30, 2014 and 2013, respectively, and net of tax of $243 and $90 for the nine months ended September 30, 2014 and 2013, respectively)	122			110		340			139
Reclassification of loss relating to interest rate cash flow hedges from AOCI to loss on extinguishment of debt (net of tax of $83 for the nine months ended September 30, 2014)	—			—		117			—
Gain (loss) on interest rate swaps relating to interest rate cash flow hedges (net of tax of $34 for the three months ended September 30, 2014 and $621 and $15,652 for the nine months ended September 30, 2014 and 2013, respectively)	47			—		(870		)	24,329
Derivative instruments, net of tax	169			110		(413		)	24,468
Available-for-sale securities
Unrealized net gain on available-for-sale securities (net of tax of $63 and $16 for the three and nine months ended September 30, 2014, respectively, and $56 for the three and nine months ended September 30, 2013)	(86		)	87		24			87
Available-for-sale securities, net of tax	(86		)	87		24			87
Total other comprehensive income (loss), net of tax	83			197		(389		)	24,555
Balance at the end of period	$	5,938		$	6,507	$	5,938		$	6,507

Stock Split

In January 2014, we filed an amendment to our Articles of Incorporation, as previously approved by our shareholders, to increase the number of authorized shares of common stock to 300 million shares. On February 6, 2014, our board of directors declared a three-for-one split of our common stock to be accomplished by means of a stock distribution on February 28, 2014 to shareholders of record on February 18, 2014. As a result of the stock split and other issuances and retirements during the nine months ended September 30, 2014, our outstanding shares increased from approximately 52.5 million shares (unadjusted for the three-for-one stock split) as of December 31, 2013 to 155.7 million shares as of September 30, 2014. In addition, all unvested restricted stock awards, outstanding stock option awards and share reserves under our share-based compensation plans as discussed in Note 7 were adjusted under the terms of the respective agreements for this three-for-one split. The share and per share data in this Form 10-Q reflects the three-for-one stock split effective February 28, 2014, unless otherwise noted.

Accelerated Share Repurchase Program

On June 19, 2014, ITC Holdings entered into an accelerated share repurchase agreement of up to $150.0 million (minimum of $130.0 million) with JP Morgan Chase (“JP Morgan”) (the “ASR program”), which is part of the Board of Directors authorized share repurchase program for up to $250.0 million approved in April 2014 and expiring in December 2015. Under the ASR program, ITC Holdings paid $150.0 million to JP Morgan and received an initial delivery of 2.9 million shares with a fair market value of $104.0 million, based on the closing market price of $35.80 per share at the commencement of the ASR program. The final number of shares delivered under the ASR program will be based on the volume-weighted average share price of our common stock during the term of the transaction, less an agreed upon discount and adjusted for the initial share delivery. The ASR program is expected to be completed by the end of 2014. As of September 30, 2014, there have been no settlements under the ASR program.

The $46.0 million unsettled portion of the ASR program meets the criteria to be accounted for as a forward contract indexed to our stock and qualifies as an equity instrument. ITC Holdings recorded the $150.0 million payment as a reduction to common stock, which included the $104.0 million of initial shares repurchased and the unsettled forward contract of $46.0 million as of September 30, 2014. The initial delivery of shares resulted in an immediate reduction to our common stock outstanding used to calculate our earnings per share disclosed in Note 8.

ITC Holdings Sales Agency Financing Agreement

On July 27, 2011, ITC Holdings entered into a Sales Agency Financing Agreement with Deutsche Bank Securities Inc. as sales agent (the “SAFA”). Under the terms of the SAFA, ITC Holdings was able to issue and sell shares of common stock, without par value, from time to time, up to an aggregate sales proceeds amount of $250.0 million. No shares were issued under the SAFA prior to its expiration on July 27, 2014.

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DEBT

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

DEBT

DEBT

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. On August 18, 2014, ITC Holdings entered into a 10-year forward starting interest rate swap agreement with a notional amount of $25.0 million. The interest rate swap manages interest rate risk associated with the forecasted future issuance of fixed-rate debt related to the expected refinancing of the maturing ITC Holdings 5.875% Senior Notes, due September 30, 2016. As of September 30, 2014, ITC Holdings had $139.4 million outstanding under the 5.875% Senior Notes subsequent to the cash tender offer described below.

The 10-year term interest rate swap calls for ITC Holdings to receive interest quarterly at a variable rate equal to LIBOR and to pay interest semi-annually at a fixed rate of 3.217% effective for the 10-year period beginning September 30, 2016 after the agreement has been terminated. The agreement includes a mandatory early termination provision and will be terminated no later than the effective date of the interest rate swap of September 30, 2016. The interest rate swap has been determined to be highly effective at offsetting changes in the fair value of the forecasted interest cash flows associated with the expected debt issuance attributable to changes in benchmark interest rates from the trade date of the interest rate swap to the issuance date of the debt obligation. On October 8, 2014, ITC Holdings entered into an additional interest rate swap contract with terms comparable to the interest rate swap described above, consisting of an additional $25.0 million notional amount of a 10-year term interest rate swap with a fixed rate of 3.075%.

As of September 30, 2014, there has been no material ineffectiveness recorded in the condensed consolidated statement of operations. The interest rate swap qualifies for hedge accounting treatment, whereby any gain or loss recognized from the trade date to the effective date for the effective portion of the hedge is recorded net of tax in accumulated other comprehensive income (“AOCI”). This amount will be accumulated and amortized as a component of interest expense over the life of the forecasted debt. As of September 30, 2014, the fair value of the derivative instrument was an asset of $0.1 million recorded to other non-current assets. The interest rate swap does not contain credit-risk-related contingent features. Refer to Note 10 for additional fair value information.

In May 2014, we executed, settled and terminated $150.0 million of 10-year interest rate swaps in conjunction with the Senior Notes issued at ITC Holdings described below. A summary of the terminated interest rate swaps is provided below:

Interest Rate Swaps	Amount		Weighted Average Fixed Rate of Interest Rate Swaps	Comparable Reference Rate of Senior Notes	Loss on Derivative		Settlement Date
(amounts in millions)
10-year interest rate swaps	$	150.0	2.65%	2.53%	$	1.6	May 2014

The interest rate swaps qualified for hedge accounting treatment and the loss of $1.6 million was recognized as of September 30, 2014 for the effective portion of the hedges and recorded net of tax in AOCI. This amount will be amortized as a component of interest expense over the lives of the related debt.

ITC Holdings

On December 20, 2013, ITC Holdings entered into an unsecured, unguaranteed term loan credit agreement, due September 30, 2016, with an initial borrowing capacity of $200.0 million which was borrowed in full as of March 31, 2014. As of September 30, 2014 and December 31, 2013, ITC Holdings had $161.0 million and $140.0 million outstanding under this agreement, respectively. The term loan bears interest at a variable rate, subject to adjustment based on ITC Holdings’ credit rating. The proceeds were used for general corporate purposes, including the repayment of borrowings under the ITC Holdings’ revolving credit agreement. The weighted-average interest rate on the borrowing outstanding under this agreement was 1.3% at September 30, 2014.

In May 2014, ITC Holdings commenced a cash tender offer for any and all of the outstanding $255.0 million ITC Holdings 5.875% Senior Notes due September 30, 2016 and $255.0 million ITC Holdings 6.375% Senior Notes due September 30, 2036, under which $115.6 million of the 5.875% Senior Notes and $54.7 million of the 6.375% Senior Notes were validly tendered on May 30, 2014. All of the Senior Notes validly tendered were subsequently retired with the proceeds from the $400.0 million3.65% Senior Notes described below. ITC Holdings incurred a loss on extinguishment of debt of $29.1 million related to the tender premium and the write-off of deferred debt issuance costs and other expenses.

On June 4, 2014, ITC Holdings issued $400.0 million aggregate principal amount of its 3.65% Senior Notes, due June 15, 2024. The proceeds from the issuance were used for the cash tender offer described above and for general corporate purposes, primarily the repayment of borrowings under the ITC Holdings revolving credit agreement. The ITC Holdings Senior Notes are issued under its indentures. All issuances of ITC Holdings Senior Notes are unsecured.

ITCTransmission

On June 10, 2014, ITCTransmission issued $75.0 million of the total face amount of $100.0 million of 4.27% First Mortgage Bonds, Series F, due June 10, 2044 (“First Mortgage Bonds”). ITCTransmission issued the remaining $25.0 million of First Mortgage Bonds on August 22, 2014. The proceeds from both issuances were used for general corporate purposes, primarily the repayment of borrowings under the ITCTransmission revolving credit agreement. 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 property.

METC

On January 31, 2014, METC entered into an unsecured, unguaranteed term loan credit agreement, under which METC borrowed the maximum of $50.0 million available under the agreement. The proceeds were used for general corporate purposes, primarily the repayment of borrowings under the METC revolving credit agreement. The term loan is scheduled to mature on February 2, 2015 and bears interest at a variable rate, subject to adjustment based on METC’s credit rating. The weighted average interest rate on the borrowing outstanding under the term loan was 1.2% at September 30, 2014.

ITC Great Plains

In October 2014, ITC Great Plains priced $150.0 million of 4.16% First Mortgage Bonds, Series A, due 2044. The proceeds will be used to repay the $100.0 million borrowed under the ITC Great Plains’ term loan and for general corporate purposes, including the repayment of borrowings under the ITC Great Plains’ revolving credit agreement. ITC Great Plains’ First Mortgage Bonds will be issued under its First Mortgage and Deed of Trust and secured by a first mortgage lien on substantially all of its property.

Revolving Credit Agreements

On March 28, 2014, ITC Holdings and its Regulated Operating Subsidiaries entered into new unsecured, unguaranteed revolving credit agreements maturing in March 2019, which replaced their existing revolving credit agreements. At September 30, 2014, ITC Holdings and its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available:

(amounts in millions)	Total Available Capacity		Outstanding Balance (a)		Unused Capacity		Weighted Average Interest Rate on Outstanding Balance		Commitment Fee Rate (b)
ITC Holdings	$	400.0	$	45.0	$	355.0	1.4%	(c)	0.175	%
ITCTransmission	100.0		2.4		97.6		1.1%	(d)	0.10	%
METC	100.0		41.3		58.7		1.1%	(d)	0.10	%
ITC Midwest	250.0		162.4		87.6		1.2%	(d)	0.10	%
ITC Great Plains	150.0		98.4		51.6		1.2%	(e)	0.125	%
Total	$	1,000.0	$	349.5	$	650.5

____________________________

(a) Included within long-term debt.

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

(c) Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating.

(d) Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating.

(e) Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.125% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.125%, subject to adjustments based on ITC Great Plains' credit rating.

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, selling or otherwise disposing of all or substantially all of our assets and paying dividends. In addition, the covenants require us to meet certain financial ratios, such as maintaining certain debt to capitalization ratios and maintaining certain interest coverage ratios. As of September 30, 2014, we were in compliance with all debt covenants.

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2014

Earnings Per Share, Basic and Diluted, by Common Class

Schedule of Basic and Diluted Earnings Per Common Share

A reconciliation of both calculations for the three and nine months ended September 30, 2014 and 2013 is presented in the following table (see additional information below under “Stock Split” for the recast share and per share data for the three and nine months ended September 30, 2013 as a result of the three-for-one stock split):

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands, except share, per share data and percentages)	2014			2013			2014			2013
Numerator:
Net income	$	73,873		$	58,984		$	197,345		$	156,569
Less: dividends declared and paid — common and restricted shares	(25,296		)	(22,299		)	(70,279		)	(61,820		)
Undistributed earnings	48,577			36,685			127,066			94,749
Percentage allocated to common shares (a)	99.2		%	99.1		%	99.2		%	99.0		%
Undistributed earnings — common shares	48,188			36,355			126,049			93,802
Add: dividends declared and paid — common shares	25,100			22,098			69,708			61,240
Numerator for basic and diluted earnings per common share	$	73,288		$	58,453		$	195,757		$	155,042
Denominator:
Basic earnings per common share — weighted average common shares outstanding	154,386,994			155,958,879			155,661,516			155,627,361
Incremental shares for stock options and employee stock purchase plan — weighted average assumed conversion	1,364,896			1,307,394			1,470,041			1,251,432
Diluted earnings per common share — adjusted weighted average shares and assumed conversion	155,751,890			157,266,273			157,131,557			156,878,793
Per common share net income:
Basic	$	0.47		$	0.37		$	1.26		$	1.00
Diluted	$	0.47		$	0.37		$	1.25		$	0.99

____________________________

(a)	Weighted average common shares outstanding	154,386,994		155,958,879		155,661,516		155,627,361
	Weighted average restricted shares (participating securities)	1,230,250		1,428,531		1,295,812		1,498,719
	Total	155,617,244		157,387,410		156,957,328		157,126,080
	Percentage allocated to common shares	99.2	%	99.1	%	99.2	%	99.0	%

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The outstanding stock options and ESPP shares and the anti-dilutive stock options and ESPP shares excluded from the diluted earnings per share calculations were as follows:

	2014	2013
Outstanding stock options and ESPP shares (as of September 30)	4,637,551	5,238,300
Anti-dilutive stock options and ESPP shares (for the three and nine months ended September 30)	642,507	916,902

Effects of Stock Split

Earnings Per Share, Basic and Diluted, by Common Class

Schedule of Basic and Diluted Earnings Per Common Share

Below are the effects of the stock split on earnings per share for the three and nine months ended September 30, 2013:

(in thousands, except per share and share data)	Reported		Adjustment			Adjusted
For the three months ended September 30, 2013
Numerator for basic and diluted earnings per common share	$	58,453	$	—		$	58,453
Denominator:
Basic earnings per common share — weighted average common shares	51,986,293		103,972,586			155,958,879
Incremental shares for stock options and employee stock purchase plan	435,798		871,596			1,307,394
Diluted earnings per common share — adjusted weighted average shares and assumed conversion	52,422,091		104,844,182			157,266,273
Per common share net income:
Basic	$	1.12	$	(0.75	)	$	0.37
Diluted	$	1.12	$	(0.75	)	$	0.37
For the nine months ended September 30, 2013
Numerator for basic and diluted earnings per common share	$	155,042	$	—		$	155,042
Denominator:
Basic earnings per common share — weighted average common shares	51,875,787		103,751,574			155,627,361
Incremental shares for stock options and employee stock purchase plan	417,144		834,288			1,251,432
Diluted earnings per common share — adjusted weighted average shares and assumed conversion	52,292,931		104,585,862			156,878,793
Per common share net income:
Basic	$	2.99	$	(1.99	)	$	1.00
Diluted	$	2.96	$	(1.97	)	$	0.99

Below are the effects of the stock split on other disclosures included for earnings per share for the three and nine months ended September 30, 2013:

Percentage Allocated to Common Shares

	Reported		Adjustment		Adjusted
For the three months ended September 30, 2013
Weighted-average common shares outstanding	51,986,293		103,972,586		155,958,879
Weighted-average restricted shares (participating securities)	476,177		952,354		1,428,531
Total	52,462,470		104,924,940		157,387,410
Percentage allocated to common shares	99.1	%	—	%	99.1	%
For the nine months ended September 30, 2013
Weighted-average common shares outstanding	51,875,787		103,751,574		155,627,361
Weighted-average restricted shares (participating securities)	499,573		999,146		1,498,719
Total	52,375,360		104,750,720		157,126,080
Percentage allocated to common shares	99.0	%	—	%	99.0	%

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The outstanding stock options and the ESPP shares as of September 30, 2013 and the anti-dilutive stock options and ESPP shares excluded from the diluted earnings per share calculations for the three and nine months ended September 30, 2013 were as follows:

	Reported		Adjusted
	September 30, 2013	Adjustment	September 30, 2013
Outstanding stock options and ESPP shares	1,746,100	3,492,200	5,238,300
Anti-dilutive stock options and ESPP shares	305,634	611,268	916,902

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GENERAL (Tables)

9 Months Ended

Sep. 30, 2014

GENERAL [Abstract]

Supplementary Cash Flows Information

	Nine months ended
	September 30,
(in thousands)	2014		2013
Supplementary cash flows information:
Interest paid (net of interest capitalized)	$	154,410	$	135,058
Income taxes paid — net	25,744		11,593
Supplementary non-cash investing and financing activities:
Additions to property, plant and equipment (a)	$	92,557	$	74,694
Allowance for equity funds used during construction	14,865		25,315

____________________________

(a) Amounts consist of current liabilities for construction labor and materials that have not been included in investing activities. These amounts have not been paid for as of September 30, 2014 or 2013, respectively, but have been or will be included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid.

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RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

9 Months Ended

Sep. 30, 2014

Compensation and Retirement Disclosure [Abstract]

RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

RETIREMENT BENEFITS AND ASSETS HELD IN TRUST

Retirement Plan Benefits

We have a qualified 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 qualified retirement plan is to contribute amounts necessary to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974, plus additional amounts as we determine appropriate. During the second quarter of 2014, we contributed $3.8 million to the defined benefit retirement plan. We do not expect to make any additional contributions to this plan in 2014.

We also have two supplemental nonqualified, noncontributory, retirement benefit plans for selected management employees. The plans provide for benefits that supplement those provided by our other retirement plans. We contributed $5.1 million to these supplemental nonqualified, noncontributory, retirement benefit plans during the second quarter of 2014. We do not expect to make any additional contributions to these plans in 2014.

Net pension cost, by component, was as follows for the three and nine months ended September 30, 2014:

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Service cost	$	1,267		$	1,315		$	3,800		$	3,946
Interest cost	901			698			2,703			2,094
Expected return on plan assets	(885		)	(717		)	(2,655		)	(2,151		)
Amortization of prior service credit	(11		)	(10		)	(32		)	(31		)
Amortization of unrecognized loss	386			679			1,158			2,036
Net pension cost	$	1,658		$	1,965		$	4,974		$	5,894

Other Postretirement Benefits

We provide certain postretirement health care, dental, and life insurance benefits for eligible employees. During the second quarter of 2014, we contributed $1.2 million to the postretirement benefit plan. We expect to make an estimated additional contribution of $5.0 million to the postretirement benefit plan in 2014.

Net postretirement cost, by component, was as follows for the three and nine months ended September 30, 2014:

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Service cost	$	1,462		$	1,443		$	4,385		$	4,330
Interest cost	498			390			1,494			1,171
Expected return on plan assets	(341		)	(353		)	(1,022		)	(1,061		)
Amortization of unrecognized loss	—			55			—			165
Net postretirement cost	$	1,619		$	1,535		$	4,857		$	4,605

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 $0.9 million and $0.7 million for the three months ended September 30, 2014 and 2013, respectively, and $3.0 million and $3.1 million for the nine months ended September 30, 2014 and 2013, respectively.

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SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

Long-Term Incentive Plan Grants

On May 20, 2014, pursuant to the Second Amended and Restated 2006 Long-Term Incentive Plan (“LTIP”), we granted 652,900 options to purchase shares of our common stock with an exercise price of $36.73 per share, which was the closing price of our common stock on the date of grant. The options vest in three equal annual installments with the first installment vesting on May 20, 2015. In addition, on May 20, 2014, pursuant to the LTIP, we granted 259,014 shares of restricted stock at a fair value of $36.73 per share. Holders of restricted stock have all the rights of a holder of common stock of ITC Holdings, including dividend and voting rights. The restricted stock vests three years after the grant date. The holder of the restricted stock may not sell, transfer or pledge their shares of restricted stock until vesting occurs.

Stock Option Exercises

We issued 977,491 and 499,014 shares of our common stock during the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively, due to the exercise of stock options.

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2014

Earnings Per Share, Basic and Diluted [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

We report both basic and diluted earnings per share. Our restricted stock and deferred stock units contain rights to receive nonforfeitable dividends and thus, are participating securities requiring the two-class method of computing earnings per share. A reconciliation of both calculations for the three and nine months ended September 30, 2014 and 2013 is presented in the following table (see additional information below under “Stock Split” for the recast share and per share data for the three and nine months ended September 30, 2013 as a result of the three-for-one stock split):

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands, except share, per share data and percentages)	2014			2013			2014			2013
Numerator:
Net income	$	73,873		$	58,984		$	197,345		$	156,569
Less: dividends declared and paid — common and restricted shares	(25,296		)	(22,299		)	(70,279		)	(61,820		)
Undistributed earnings	48,577			36,685			127,066			94,749
Percentage allocated to common shares (a)	99.2		%	99.1		%	99.2		%	99.0		%
Undistributed earnings — common shares	48,188			36,355			126,049			93,802
Add: dividends declared and paid — common shares	25,100			22,098			69,708			61,240
Numerator for basic and diluted earnings per common share	$	73,288		$	58,453		$	195,757		$	155,042
Denominator:
Basic earnings per common share — weighted average common shares outstanding	154,386,994			155,958,879			155,661,516			155,627,361
Incremental shares for stock options and employee stock purchase plan — weighted average assumed conversion	1,364,896			1,307,394			1,470,041			1,251,432
Diluted earnings per common share — adjusted weighted average shares and assumed conversion	155,751,890			157,266,273			157,131,557			156,878,793
Per common share net income:
Basic	$	0.47		$	0.37		$	1.26		$	1.00
Diluted	$	0.47		$	0.37		$	1.25		$	0.99

____________________________

(a)	Weighted average common shares outstanding	154,386,994		155,958,879		155,661,516		155,627,361
	Weighted average restricted shares (participating securities)	1,230,250		1,428,531		1,295,812		1,498,719
	Total	155,617,244		157,387,410		156,957,328		157,126,080
	Percentage allocated to common shares	99.2	%	99.1	%	99.2	%	99.0	%

The incremental shares for stock options and employee stock purchase plan (“ESPP”) shares are included in the diluted earnings per share calculation using the treasury stock method, unless the effect of including them would be anti-dilutive. The outstanding stock options and ESPP shares and the anti-dilutive stock options and ESPP shares excluded from the diluted earnings per share calculations were as follows:

	2014	2013
Outstanding stock options and ESPP shares (as of September 30)	4,637,551	5,238,300
Anti-dilutive stock options and ESPP shares (for the three and nine months ended September 30)	642,507	916,902

Stock Split

Below are the effects of the stock split on earnings per share for the three and nine months ended September 30, 2013:

(in thousands, except per share and share data)	Reported		Adjustment			Adjusted
For the three months ended September 30, 2013
Numerator for basic and diluted earnings per common share	$	58,453	$	—		$	58,453
Denominator:
Basic earnings per common share — weighted average common shares	51,986,293		103,972,586			155,958,879
Incremental shares for stock options and employee stock purchase plan	435,798		871,596			1,307,394
Diluted earnings per common share — adjusted weighted average shares and assumed conversion	52,422,091		104,844,182			157,266,273
Per common share net income:
Basic	$	1.12	$	(0.75	)	$	0.37
Diluted	$	1.12	$	(0.75	)	$	0.37
For the nine months ended September 30, 2013
Numerator for basic and diluted earnings per common share	$	155,042	$	—		$	155,042
Denominator:
Basic earnings per common share — weighted average common shares	51,875,787		103,751,574			155,627,361
Incremental shares for stock options and employee stock purchase plan	417,144		834,288			1,251,432
Diluted earnings per common share — adjusted weighted average shares and assumed conversion	52,292,931		104,585,862			156,878,793
Per common share net income:
Basic	$	2.99	$	(1.99	)	$	1.00
Diluted	$	2.96	$	(1.97	)	$	0.99

Below are the effects of the stock split on other disclosures included for earnings per share for the three and nine months ended September 30, 2013:

Percentage Allocated to Common Shares

	Reported		Adjustment		Adjusted
For the three months ended September 30, 2013
Weighted-average common shares outstanding	51,986,293		103,972,586		155,958,879
Weighted-average restricted shares (participating securities)	476,177		952,354		1,428,531
Total	52,462,470		104,924,940		157,387,410
Percentage allocated to common shares	99.1	%	—	%	99.1	%
For the nine months ended September 30, 2013
Weighted-average common shares outstanding	51,875,787		103,751,574		155,627,361
Weighted-average restricted shares (participating securities)	499,573		999,146		1,498,719
Total	52,375,360		104,750,720		157,126,080
Percentage allocated to common shares	99.0	%	—	%	99.0	%

Outstanding and Anti-dilutive Stock Options and ESPP Shares

The outstanding stock options and the ESPP shares as of September 30, 2013 and the anti-dilutive stock options and ESPP shares excluded from the diluted earnings per share calculations for the three and nine months ended September 30, 2013 were as follows:

	Reported		Adjusted
	September 30, 2013	Adjustment	September 30, 2013
Outstanding stock options and ESPP shares	1,746,100	3,492,200	5,238,300
Anti-dilutive stock options and ESPP shares	305,634	611,268	916,902

Impacts of the Accelerated Share Repurchase Program

The basic shares outstanding as of September 30, 2014 include the impacts of the initial delivery of 2.9 million shares received under the ASR program, as described in Note 6. The forward contract component of the ASR program of $46.0 million is excluded from the diluted earnings per share calculation for the three and nine months ended September 30, 2014 based on the volume-weighted average price calculated as of September 30, 2014, which results in an anti-dilutive impact on earnings per share. The final settlement amount may increase or decrease earnings per share at the settlement date depending upon the volume-weighted average share price of our common stock during the term of the transaction.

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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2014

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, 2014 and the year ended December 31, 2013, there were no transfers between levels.

Our assets measured at fair value subject to the three-tier hierarchy at September 30, 2014, 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 thousands)	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Cash and cash equivalents — cash equivalents	$	12,898	$	—	$	—
Mutual funds — fixed income securities	26,629		—		—
Mutual funds — equity securities	635		—		—
Interest rate swap derivative	—		81		—
Total	$	40,162	$	81	$	—

Our assets measured at fair value subject to the three-tier hierarchy at December 31, 2013, 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 thousands)	(Level 1)		(Level 2)		(Level 3)
Financial assets measured on a recurring basis:
Cash and cash equivalents — cash equivalents	$	19,000	$	—	$	—
Mutual funds — fixed income securities	21,318		—		—
Mutual funds — equity securities	516		—		—
Total	$	40,834	$	—	$	—

As of September 30, 2014 and December 31, 2013, we held certain assets and liabilities that are required to be measured at fair value on a recurring basis. The assets consist of investments recorded within cash and cash equivalents and other long-term assets, including investments held in a trust associated with our supplemental nonqualified, noncontributory, retirement benefit plans for selected management employees. Our cash and cash equivalents consist of money market mutual funds that are administered similar to money market funds recorded at cost plus accrued interest to approximate fair value. Our mutual funds consist primarily of publicly traded mutual funds 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, and losses are recorded in earnings for investment classified as trading securities and other comprehensive income for investments classified as available for sale if fair value falls below recorded cost.

The asset related to the derivative consists of an interest rate swap as discussed in Note 5. The fair value of our interest rate swap derivative as of September 30, 2014 is determined based on a discounted cash flow (“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, 2014. For additional information on our goodwill and intangible assets, please refer to the notes to the consolidated financial statements as of and for the year ended December 31, 2013 included in our Form 10-K for such period and to Note 4 of this Form 10-Q.

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, was $3,688.3 million and $3,299.0 million at September 30, 2014 and December 31, 2013, 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, excluding revolving and term loan credit agreements, was $3,379.6 million and $3,100.9 million at September 30, 2014 and December 31, 2013, respectively.

Revolving and Term Loan Credit Agreements

At September 30, 2014 and December 31, 2013, we had a consolidated total of $660.5 million and $511.2 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 and special deposits, approximates their fair value due to the short-term nature of these instruments.

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DEBT Additional Information (Details) (USD $)	3 Months Ended		9 Months Ended																						0 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 ITC Holdings		Sep. 30, 2014 ITC Holdings Term Loan Credit Agreement, Due September 30, 2016 Unsecured Debt	Mar. 31, 2014 ITC Holdings Term Loan Credit Agreement, Due September 30, 2016 Unsecured Debt	Dec. 31, 2013 ITC Holdings Term Loan Credit Agreement, Due September 30, 2016 Unsecured Debt	Dec. 20, 2013 ITC Holdings Term Loan Credit Agreement, Due September 30, 2016 Unsecured Debt	May 30, 2014 ITC Holdings Senior Notes, Due September 30, 2016 Unsecured Debt	May 30, 2014 ITC Holdings Senior Notes, Due September 30, 2036 Unsecured Debt	Jun. 04, 2014 ITC Holdings Senior Notes, Due June 15, 2024 Unsecured Debt	Sep. 30, 2014 ITCTransmission		Jun. 10, 2014 ITCTransmission First Mortgage Bonds, Series F, Due June 10, 2044 Secured Debt	Jun. 10, 2014 ITCTransmission First Mortgage Bonds, Series F, Due June 10, 2044 Secured Debt Tranche One	Aug. 22, 2014 ITCTransmission First Mortgage Bonds, Series F, Due June 10, 2044 Secured Debt Tranche Two	Sep. 30, 2014 METC		Sep. 30, 2014 METC Term Loan Credit Agreement, Due February 2, 2015 Unsecured Debt	Jan. 31, 2014 METC Term Loan Credit Agreement, Due February 2, 2015 Unsecured Debt	Sep. 30, 2014 ITC Great Plains		Oct. 31, 2014 ITC Great Plains First Mortgage Bonds, Series A, Due November 26, 2044 Expectation	Oct. 31, 2014 ITC Great Plains First Mortgage Bonds, Series A, Due November 26, 2044 Secured Debt Subsequent Event
Debt Instrument
Other long-term debt							$ 161,000,000	$ 200,000,000	$ 140,000,000												$ 50,000,000
Weighted average interest rate					1.40%	[1]	1.30%							1.10%	[2]				1.10%	[2]	1.20%		1.20%	[3]
Principal amount											255,000,000	255,000,000	400,000,000			100,000,000.0	75,000,000	25,000,000.0								150,000,000.0
Amount of validly tendered debt											115,600,000	54,700,000
Interest rate													3.65%			4.27%										4.16%
Loss on extinguishment of debt	0	0	29,074,000	0
Other long-term debt, maximum borrowing capacity										200,000,000												50,000,000
Repayment of debt																									$ 100,000,000

[1] Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating.

[2] Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating.

[3] Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.125% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.125%, subject to adjustments based on ITC Great Plains' credit rating.

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DEBT (Tables)

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

Schedule of Interest Rate Swap Arrangements

A summary of the terminated interest rate swaps is provided below:

Interest Rate Swaps	Amount		Weighted Average Fixed Rate of Interest Rate Swaps	Comparable Reference Rate of Senior Notes	Loss on Derivative		Settlement Date
(amounts in millions)
10-year interest rate swaps	$	150.0	2.65%	2.53%	$	1.6	May 2014

Schedule of Revolving Credit Agreements

At September 30, 2014, ITC Holdings and its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available:

(amounts in millions)	Total Available Capacity		Outstanding Balance (a)		Unused Capacity		Weighted Average Interest Rate on Outstanding Balance		Commitment Fee Rate (b)
ITC Holdings	$	400.0	$	45.0	$	355.0	1.4%	(c)	0.175	%
ITCTransmission	100.0		2.4		97.6		1.1%	(d)	0.10	%
METC	100.0		41.3		58.7		1.1%	(d)	0.10	%
ITC Midwest	250.0		162.4		87.6		1.2%	(d)	0.10	%
ITC Great Plains	150.0		98.4		51.6		1.2%	(e)	0.125	%
Total	$	1,000.0	$	349.5	$	650.5

____________________________

(a) Included within long-term debt.

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

(c) Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating.

(d) Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating.

(e) Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.125% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1% above the one month LIBOR, plus an applicable margin of 0.125%, subject to adjustments based on ITC Great Plains' credit rating.

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SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2014

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 thousands)	2014			2013			2014			2013
Regulated Operating Subsidiaries	$	270,062		$	238,857		$	792,058		$	686,128
ITC Holdings and other	254			152			438			455
Intercompany eliminations	(182		)	(227		)	(545		)	(680		)
Total Operating Revenues	$	270,134		$	238,782		$	791,951		$	685,903

	Three months ended						Nine months ended
INCOME BEFORE INCOME TAXES:	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Regulated Operating Subsidiaries	$	151,758		$	131,939		$	440,537		$	376,398
ITC Holdings and other	(33,250		)	(38,267		)	(122,514		)	(124,477		)
Total Income Before Income Taxes	$	118,508		$	93,672		$	318,023		$	251,921

	Three months ended						Nine months ended
NET INCOME:	September 30,						September 30,
(in thousands)	2014			2013			2014			2013
Regulated Operating Subsidiaries	$	93,015		$	82,291		$	269,865		$	234,168
ITC Holdings and other	73,873			58,984			197,345			156,569
Intercompany eliminations	(93,015		)	(82,291		)	(269,865		)	(234,168		)
Total Net Income	$	73,873		$	58,984		$	197,345		$	156,569

TOTAL ASSETS:	September 30,			December 31,
(in thousands)	2014			2013
Regulated Operating Subsidiaries	$	6,715,197		$	6,174,888
ITC Holdings and other	3,850,785			3,619,759
Reconciliations / Intercompany eliminations (a)	(3,758,618		)	(3,512,404		)
Total Assets	$	6,807,364		$	6,282,243

____________________________

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

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EARNINGS PER SHARE Additional Information (Details) (USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended	3 Months Ended		9 Months Ended
	Jun. 19, 2014	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Earnings Per Share, Basic and Diluted [Abstract]
Outstanding stock options and ESPP shares		4,637,551	5,238,300	4,637,551	5,238,300
Anti-dilutive stock options and ESPP shares		642,507	916,902	642,507	916,902
Accelerated share repurchase agreement, initial share delivery and retirement	2,900,000
Accelerated share repurchase agreement, unsettled amount	$ 46.0

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
NET INCOME	$ 73,873	$ 58,984	$ 197,345	$ 156,569
OTHER COMPREHENSIVE INCOME (LOSS)
Derivative instruments, net of tax (Note 6)	169	110	(413)	24,468
Available-for-sale securities, net of tax (Note 6)	(86)	87	24	87
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX	83	197	(389)	24,555
TOTAL COMPREHENSIVE INCOME	$ 73,956	$ 59,181	$ 196,956	$ 181,124

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GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

Goodwill

At September 30, 2014 and December 31, 2013, we had goodwill balances recorded at ITCTransmission, METC and ITC Midwest of $173.4 million, $453.8 million and $323.0 million, respectively, which resulted from the ITCTransmission acquisition, the METC acquisition and ITC Midwest’s asset acquisition, respectively.

Intangible Assets

We have recorded intangible assets as a result of the METC acquisition in 2006. The carrying value of these assets was $35.0 million and $37.2 million (net of accumulated amortization of $23.4 million and $21.2 million) as of September 30, 2014 and December 31, 2013, respectively.

We have also recorded intangible assets for payments and obligations made by 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 the KETA Project and the Kansas V-Plan Project. The carrying amount of these intangible assets was $14.2 million and $12.1 million (net of accumulated amortization of $0.6 million and $0.4 million) as of September 30, 2014 and December 31, 2013, respectively.

During the three months ended September 30, 2014 and 2013, we recognized $0.9 million and $0.8 million, respectively, of amortization expense of our intangible assets and $2.5 million and $2.4 million for the nine months ended September 30, 2014 and 2013, respectively. For each of the next five years, we expect the annual amortization of our intangible assets that have been recorded as of September 30, 2014 to be $3.3 million per year.

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GENERAL (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014		Sep. 30, 2013
Supplementary cash flows information:
Interest paid (net of interest capitalized)			$ 154,410		$ 135,058
Income taxes paid — net			25,744		11,593
Supplementary non-cash investing and financing activities:
Additions to property, plant and equipment			92,557	[1]	74,694	[1]
Allowance for equity funds used during construction	$ 4,921	$ 8,290	$ 14,865		$ 25,315

[1] Amounts consist of current liabilities for construction labor and materials that have not been included in investing activities. These amounts have not been paid for as of September 30, 2014 or 2013, respectively, but have been or will be included as a cash outflow from investing activities for expenditures for property, plant and equipment when paid.

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SHARE-BASED COMPENSATION (Details) (USD $)	0 Months Ended	9 Months Ended	12 Months Ended
	May 20, 2014	Sep. 30, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award
Granted options	652,900
Granted options, exercised price	$ 36.73
Exercised options		977,491	499,014
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award
Vesting rights	three equal annual installments
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award
Vesting rights	three years after the grant date
Granted restricted stock	259,014
Granted restricted stock, fair value	$ 36.73

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REGULATORY MATTERS (Tables)

9 Months Ended

Sep. 30, 2014

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, 2014:

(in thousands)	Total
Balance as of December 31, 2013	$	(60,196	)
Net refund of 2012 revenue deferrals and accruals, including accrued interest	20,445
Net revenue deferral for the nine months ended September 30, 2014	(47,843		)
Net accrued interest payable for the nine months ended September 30, 2014	(1,777		)
Balance as of September 30, 2014	$	(89,371	)

Schedule of Regulatory Assets and Liabilities

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

(in thousands)	Total
Current assets	$	5,623
Non-current assets — other	5,747
Current liabilities	(38,156		)
Non-current liabilities	(62,585		)
Balance as of September 30, 2014	$	(89,371	)