Transcript November 20, 2003

ITCTransmission’s
Presentation to
PJM Industrial Coalition
John Anderson
Anne Jinks
Tom Wrenbeck
September 13, 2006
Agenda
 Who We Are: ITC Holdings,
ITCTransmission
 How ITCTransmission is
Improving the Transmission
System
 The Value of Independence
2
Who We Are: ITC Holdings,
ITCTransmission
3
ITC Holdings – Building the Future
*
* Contingent on FERC approval
and closing of the acquisition
 ITC Holdings is the first fully independent transmission company in the
U.S. and only publicly traded company engaged exclusively in the
transmission of electricity.
 Pursuing Energy Policy Act and the Federal Energy Regulatory
Commission (FERC) objectives to Increase investment in transmission.
infrastructure and scope and size of stand alone transmission companies.
 Expanding the business model based on independence.
4
Expanding Model Based on Independence
Service Territory Map
 On May 12, 2006, ITC Holdings
announced that it had signed a
definitive agreement to purchase the
Michigan Electric Transmission
Company (METC).
 Once the transaction is complete,
ITC Holdings will own the two
primary transmission companies in
Michigan, covering most of
Michigan’s lower peninsula.
 Largest independent transmission
company (1) and 10th largest
transmission company overall in the
U.S. in terms of transmission load
served. (1)
 METC and ITCTransmission are
members of Midwest Independent
Transmission System Operator
(MISO).
(1) Based on annual electric retail sales in the service territory as found in “Edison Electric Institute Profile: Rankings of Shareholder-Owned
Electric Companies”, April 2005 and assuming completion of METC acquisition.
5
ITCTransmission/METC Comparison
Founded
March 2003
May 2002
Novi
Ann Arbor
12,745 MW
9,841 MW
Service Area
Southeastern Michigan
Lower Peninsula of Michigan
Square Miles
7,600
18,800
More than 2,700
Approximately 5,400
155
80
16,000+
43,000+
16
21
Membership
Midwest ISO
Midwest ISO
2005 Ratebase
$613 million
$396 million
150+
90+
Headquarters
System Peak Load
Total Transmission Miles
Stations – Owned and/or
Housing 120kV > Equipment
Transmission Structures
Interconnections
Employees
6
What Is Our Business?
We Serve as the Conduit Between Generation and End-Use Customers
 ITCTransmission, subsidiary of ITC Holdings, operates contiguous, fullyregulated, high-voltage systems that transmit electricity to local electricity
distribution facilities from generating stations throughout Michigan and
surrounding areas.
 First independently owned and operated U.S. electricity transmission company.
— In June 2001, ITCTransmission was split from Detroit Edison and became a separate
legal entity under DTE Energy.
— In February 2003, ITCTransmission became independent through acquisition by ITC
Holdings Corp.
— On July 26, 2005, ITCTransmission’s parent company, ITC Holdings Corp., became a
publicly traded company – “ITC” on the NYSE.
7
Transmission is Our Only Business
 ITCTransmission focuses on ownership, operation, maintenance,
and construction of transmission facilities as a single line of
business.
 There is no internal competition for capital – it is dedicated for prudent
transmission investment.
 Transmission is a small part of overall electric bill (5-7% (1) ) but makes or
breaks reliability.
 Transmission enables competition within more costly segments, especially
generation.
— Competition can reduce costs on the supply side.
— Congestion attributable to inadequate capacity can be very expensive and impact
environment when efficient generation cannot be used.
— Failures, when local, affect much more load and/or industry
— Cascading failures are extremely costly.
 Because of our singular business focus, we are aligned with
customers.
 Customers benefit from transmission investment by:
— Improved reliability
— Reduced congestion
— Increased access to generation.
(1) Source: EIA Annual Energy Outlook 2005
8
Company Achievements – A Series of Firsts
 ITCTransmission was the first to gain conditional FERC approval
for innovative rate structure.
 ITCTransmission was the first to gain conditional FERC approval
for a capital gains tax recovery mechanism.
 ITCTransmission was the first to gain FERC approval for operation
of an independent transmission company under a Regional
Transmission Organization (RTO).
 ITCTransmission is the first truly independent transmission
company.
 ITC Holdings Corp. is the first independent transmission business
to go public.
9
How ITCTransmission is Improving the
Transmission System
10
Industry Background
Transmission investment has lagged while the transmission
system continues to be put under increasing stress.
Underinvestment
Demand Growth
Decline in
transmission
investment
Growth in electricity
consumption
From 1975-2000, transmission
investment has fallen by
$2.5 billion per year (1)
Annual demand has doubled
since 1980
Outage Costs
 Estimated costs from August
2003 blackout: $4 - $10 billion
 Estimated annual lost
production costs to U.S. (2)
businesses:
— $46 billion in power
outages
— $6.7 billion in power
quality issues
Estimated investment required to
modernize the grid:
$50 - $100 Billion (3)
Sources:
(1) Edison Electric Institute ( EEI) 2000; figures are quoted in 1997 dollars.
(2) Electric Power Research Institute (EPRI).
(3) Recent Department of Energy (DOE) study regarding cost of power interruptions to US electricity customers.
11
ITCTransmission Strengths
 Follow a stringent planning process to identify and implement
projects that provide the maximum value to our customers.
 Focus is on the need for reliable and cost effective infrastructure for end use
electrical customers
 Focus on bigger picture and the interactions between transmission and other power
supply segments
 Invest in preventative maintenance.
 Strategic contracting agreements with construction and
maintenance contractors and equipment providers.
 Forward thinking union relationships.
 New rules to promote efficiency
 Full support of apprentice program
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Improved Maintenance
 ITCTransmission’s
maintenance methodology
is simple: invest in
prevention.
 ITCTransmission has realized
approximately 30% increased
efficiency improvements in
maintenance costs.
 In 2004, ITCTransmission spent
$21.4 million on maintenance,
effectively saving $6.4 million
due to increased efficiency.
 Based on 2004 benchmarking
data, ITCTransmission achieved
best-in-class status for “Ratio of
Preventative Maintenance vs.
Corrective Maintenance”.
Prior
Ownership
1998-2002
2003
2004
2005
Thru
July
2006
Breaker Inspections
40
28
82
96
34
Bus Inspections
22
6
51
81
36
Relay Complete
Periodic
Maintenance
35
10
176
354
136
Tower Inspections
952
857
1,441
1,442
1673
Tower Painting
134
147
1,095
3,500
0
Infrared Inspections
55
153
153
154
81
Transformer DGA
43
43
71
62
46
80%
$12M
Activity
Line Clearance /
Corridor Mowing
Field O&M Expense
95%
95%
105%
100%
(3 yr.
cycle)
$15.5 M
$22.1 M
$21.4 M
$96 M
13
Maintenance Activities
Physical Inspections
1,441 towers inspected vs. prior 5year annual average of 952
Helicopter Inspections Conducted in
Spring & Fall – 1,620 miles of
transmission lines inspected in 2004
14
Maintenance Activities

Vegetation Management
510 miles of transmission line corridors were cleared.
Activities included cutting, trimming, hydro-axing and herbicide.
Before
After
15
Maintenance Activities
 High resolution fly-over
photography identifies minute
details:
 Worn conductor material;
 Loose, missing bolts or pins; and
 Cracked insulators.
 Using thermography,
ITCTransmission can identify
“hot spots” on our system that
may cause potential problems
or failures.
16
Stakeholder Initiatives
Industrial Customer Substation Routine Inspections
 Inspection of all connected equipment performed using thermographic imaging. Ability
to identify faulty equipment which helps prevent outages at key industrial substations.
No routine inspections performed previously.
Industrial Customer Specific Projects
 Facilitated interconnect for major auto manufacturer in 2003.
 Facilitated interconnect for large oil refinery plant expansion in 2005.
Customer Outreach
 Quarterly Partners in Business meetings
— Open forum to communicate company and industry activities.
 Individual quarterly meetings with large industrial customers to discuss reliability and
other issues.
— Review of performance data to identify potential weak areas on the system and address in a timely
manner.
17
Reinvestment in the Grid
 ITCTransmission has
reinvested to improve
the transmission
system.
$140
$120
$100
Investments in Property,
Plant & Equipment
Depreciation
$80
 2003 – $41 million (1)
 2004 – $81.5 million
$160
$60
(1)
 2005 – $117.8 million (1)
 Projected 2006 –
approximately $145 million (2)
$40
$20
$-
2003
2004
(ten months)
2005
2006
(projected)
 In addition to reliability benefits provided by our capital
projects, it is estimated that the 2004 – 2005 capital
improvements provide economic savings of approximately
$100 million to customers. This is in excess of the annual
carrying cost of these projects.
Sources:
(1) ITCTransmission Form 10-K for the year ended December 31, 2005.
(2) ITCTransmission Form 10-Q for the quarterly period ended June 30, 2006. Actual amount may vary based on
various factors including weather, the amount of work that cam be completed at any one time, material and labor
conditions, siting, and other issues.
18
Top Quartile System Performance
 ITCTransmission delivers top quartile performance in key
reliability measures
— Goal is best-in-class system performance.
Average Circuit Momentary Outages
0.70
0.8
0.7
Average Circuit Sustained Outages
0.6
0.49
0.5
0.6
0.4
0.4
0.38
0.5
0.3
0.28
0.23
0.23
0.3
0.2
0.2
0.1
0.1
0
0
ITC
Quartile 1
Mean
Source:
2006 SGS Transmission Reliability Benchmarking Study
ITC
Quartile 1
Mean
19
The Value of Independence
20
Benefits of Independence
 Benefits of Independence
 Increased customer focus
— Increased reliability
— Reduce congestion
— Lower overall cost of delivered energy.
 Enhances non-discriminatory access
— ITCTransmission operates without favoring one market participant over
another and has no incentive to do so and is not influenced to do so.
 Share no interest in the generation and distribution services
— Singular focus on transmission
 Better positioned to make needed transmission investment
 Employees prohibited from having any financial interest in a market
participant.
21
Summary
 The independent transmission company business model
promotes grid reinvestment and superior benefits to
customers.
 Proven, successful business model
 First publicly traded
 Significant reinvestment in grid
 Increased reliability
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