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

•	“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, ITC Great Plains and ITC Interconnection together; and

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

•	“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;

•	“DTE Energy” are references to DTE Energy Company;

•	“Eiffel” are references to Eiffel Investment Pte Ltd, a private limited company duly organized and validly existing under the laws of Singapore that is the GIC subsidiary that is a minority investor in Investment Holdings and successor to Finn Investment Pte Ltd;

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

•	“Fortis” are references to Fortis Inc.;

•	“FortisUS” are references to FortisUS Inc., an indirect subsidiary of Fortis;

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

•	“GIC” are references to GIC Private Limited;

•	“ICC” are references to the Illinois Commerce Commission;

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

•	“ISO” are references to Independent System Operators;

•	“Investment Holdings” are references to ITC Investment Holdings Inc., a majority owned indirect subsidiary of Fortis;

•	“IUB” are references to the Iowa Utilities Board;

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

•	“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;

•	“Merger” are references to the merger with Fortis, whereby ITC Holdings merged with Merger Sub and subsequently became a majority owned indirect subsidiary of Fortis;

•	“Merger Agreement” are references to the agreement and plan of merger between Fortis, FortisUS, Merger Sub and ITC Holdings for the Merger;

•	“Merger Sub” are references to Element Acquisition Sub, Inc., an indirect subsidiary of Fortis that merged into ITC Holdings in the Merger;

•	“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;

•	“MOPSC” are references to the Missouri Public Service Commission;

•	“MPSC” are references to the Michigan Public Service Commission;

•	“MPUC” are references to the Minnesota Public Utilities Commission;

•	“MVPs” are references to multi-value projects, which have been determined by MISO to have regional value while meeting near-term system needs;

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

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

•	“NOLs” are references to net operating loss carryforwards for income taxes;

•	“NYSE” are references to the New York Stock Exchange;

•	“OCC” are references to Oklahoma Corporation Commission;

•	“PSCW” are references to the Public Service Commission of Wisconsin;

•	“RTO” are references to Regional Transmission Organizations;

•	“Shareholders Agreement” are references to the Shareholders’ Agreement, dated as of October 14, 2016 by and among the Company, Investment Holdings, FortisUS, Finn Investment Pte Ltd, and any other person that becomes a shareholder of Investment Holdings pursuant to such agreement; 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.

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•	asset planning;

•	engineering, design and construction;

•	maintenance; and

•	real time operations.

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•	If future cash flows are insufficient, we may not be able to make principal or interest payments on our debt obligations, which could result in the occurrence of an event of default under one or more of those debt instruments.

•	We may need to increase our indebtedness in order to make the capital expenditures and other expenses or investments planned by us.

•

Our indebtedness has the general effect of reducing our flexibility to react to changing business and economic conditions insofar as they affect our financial condition. A substantial portion of the dividends and payments in lieu of taxes we receive from our subsidiaries will be dedicated to the payment of interest on our indebtedness, thereby, reducing the funds available for working capital and capital expenditures.

•

We currently have debt instruments outstanding with short-term maturities or relatively short remaining maturities. Our ability to secure additional financing prior to or after these facilities mature, if needed, may be substantially restricted by the existing level of our indebtedness and the restrictions contained in our debt instruments. Additionally, the interest rates at which we might secure additional financings may be higher than our currently outstanding debt instruments or higher than forecasted at any point in time, which could adversely affect our business, financial condition, results of operations and cash flows.

•	Market conditions could affect our access to capital markets, restrict our ability to secure financing to make the capital expenditures and investments and pay other expenses planned by us which could adversely affect our business, financial condition, cash flows and results of operations.

•	incur additional indebtedness;

•	engage in sale and lease-back transactions;

•	create liens or other encumbrances;

•	enter into mergers, consolidations, liquidations or dissolutions, or sell or otherwise dispose of all or substantially all of our assets;

•	create and acquire subsidiaries; and

•	pay dividends or make distributions on our stock or on the stock or member capital of our subsidiaries.

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•	approximately 3,100 circuit miles of overhead and underground transmission lines rated at voltages of 120 kV to 345 kV;

•	approximately 18,700 transmission towers and poles;

•	station assets, such as transformers and circuit breakers, at 185 stations and substations which either interconnect ITCTransmission’s transmission facilities or connect ITCTransmission’s facilities with generation or distribution facilities owned by others;

•	other transmission equipment necessary to safely operate the system (e.g., monitoring and metering equipment);

•	warehouses and related equipment;

•	associated land held in fee, rights-of-way and easements;

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•	an approximately 188,000 square-foot corporate headquarters facility and operations control room in Novi, Michigan, including furniture, fixtures and office equipment; and

•	an approximately 40,000 square-foot facility in Ann Arbor, Michigan that includes a back-up operations control room.

•	approximately 5,600 circuit miles of overhead transmission lines rated at voltages of 120 kV to 345 kV;

•	approximately 37,000 transmission towers and poles;

•	station assets, such as transformers and circuit breakers, at 104 stations and substations which either interconnect METC’s transmission facilities or connect METC’s facilities with generation or distribution facilities owned by others;

•	other transmission equipment necessary to safely operate the system (e.g., monitoring and metering equipment); and

•	warehouses and related equipment.

•	approximately 6,600 circuit miles of transmission lines rated at voltages of 34.5 kV to 345 kV;

•	transmission towers and poles;

•	station assets, such as transformers and circuit breakers, at approximately 276 stations and substations which either interconnect ITC Midwest’s transmission facilities or connect ITC Midwest’s facilities with generation or distribution facilities owned by others;

•	other transmission equipment necessary to safely operate the system (e.g., monitoring and metering equipment);

•	warehouses and related equipment; and

•	associated land held in fee, rights-of-way and easements.

•	approximately 470 miles of transmission lines rated at a voltage of 345 kV;

•	approximately 1,910 transmission towers and poles;

•	station assets, such as transformers and circuit breakers, at 9 stations and substations which either interconnect ITC Great Plains’ transmission facilities or connect ITC Great Plains’ facilities with transmission, generation or distribution facilities owned by others;

•	other transmission equipment necessary to safely operate the system (e.g., monitoring and metering equipment); and

•	associated land held in fee, rights-of-way and easements.

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(a)	During 2016, 2015 and 2014, we recognized an aggregate estimated regulatory liability for the refund and potential refund relating to the rate of return on equity complaints as described in Note 15 to the consolidated

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(b)	During 2015, we recognized a regulatory liability for the refund relating to the formula rate template modifications filing as described in Note 5 to the consolidated financial statements, which resulted in a reduction in operating revenues of $10 million.

(c)	During 2012, we initially recognized the FERC audit refund liability, which resulted in a reduction in operating revenues of $11 million.

(d)

During 2016, we expensed external legal, advisory and financial services fees of $55 million related to the Merger and approximately $41 million due to the accelerated vesting of the share-based awards that occurred at the completion of the Merger. See Note 2 to the consolidated financial statements for further details on the impact of the Merger. The external and internal costs related to the Merger were recorded at ITC Holdings and have not been included as components of revenue requirement at our Regulated Operating Subsidiaries.

(e)	The increase in general and administrative expenses in 2015 was due primarily to higher compensation related expenses, including the development bonuses described below under “Recent Developments — Development Bonuses,” and higher legal and advisory professional service fees for various development initiatives.

(f)

During 2013 and 2012, we expensed external legal, advisory and financial services fees of $43 million and $19 million, respectively, recorded within general and administrative expenses related to a proposed 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. The external and internal costs related to the proposed transaction with Entergy Corporation were recorded at ITC Holdings and were not included as components of revenue requirement at our Regulated Operating Subsidiaries.

(g)	All amounts presented reflect the change in the authoritative guidance issued by the Financial Accounting Standards Board to net all deferred income tax assets and liabilities and present as a single line item within non-current assets or liabilities on the balance sheet. This change was adopted retrospectively by us in 2015.

(h)	All amounts presented reflect the change in authoritative guidance on the presentation of debt issuance costs on the balance sheet. This change was adopted retrospectively by us in 2016. Refer to Notes 3 and 9 of the consolidated financial statements for more information.

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•	Our capital expenditures of $750 million at our Regulated Operating Subsidiaries during the year ended December 31, 2016, resulting primarily from our focus on improving system reliability, increasing system capacity and upgrading the transmission network to support new generating resources;

•	Debt issuances as described in Note 9 to the consolidated financial statements, including commercial paper issued under ITC Holdings’ commercial paper program, and borrowings under our revolving and term loan credit agreements in 2016 and 2015 to fund capital investment at our Regulated Operating Subsidiaries as well as for general corporate purposes;

•	Debt maturing within one year of $235 million and the potentially higher interest rates associated with the additional financing required to repay this debt as discussed in Note 9 to the consolidated financial statements;

•

Recognition of the liability for the refund and potential refund relating to the rate of return on equity (“ROE”) complaints, as described in Note 15 to the consolidated financial statements, which resulted in a total estimated pre-tax reduction of revenue and additional interest of $90 million and $120 million and an estimated after-tax reduction to net income of $55 million and $73 million for the years ended December 31, 2016 and 2015, respectively. On February 14, 2017, our MISO Regulated Operating Subsidiaries provided $119 million to MISO to fund the payment of the refund, including interest, for the initial ROE complaint;

•

Election of bonus depreciation for tax years 2015 and 2016. The total impact from these matters was lower revenues of approximately $20 million and lower net income of approximately $12 million for the year ended December 31, 2016. These matters also resulted in additional net deferred income tax liabilities of approximately $109 million and a corresponding income tax receivable of $12 million as of December 31, 2016, and income tax refunds of $128 million, which were received in August 2016; and

•

As a result of the Merger consummated on October 14, 2016, ITC Holdings became an indirect subsidiary of Fortis as described below under “Recent Developments — The Merger.” For the year ended December 31, 2016, we expensed external legal, advisory and financial services fees related to the Merger of $55 million and certain internal labor and associated costs related to the Merger of approximately $58 million, including approximately $41 million of expense recognized due to the accelerated vesting of the share-based awards described in Note 13 to the consolidated financial statements. These merger-related costs were

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(a)	Consists primarily of in-service property, plant and equipment, net of accumulated depreciation.

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(b)

The weighted average cost of capital for purposes of this illustration is calculated below. The cost of capital for debt is included at a flat interest rate for purposes of this illustration and is not based on our actual cost of capital. The cost of capital rate for equity represents the current maximum allowed MISO ROE rate. See Note 15 to the consolidated financial statements for detail on ROE matters, including pending ROE complaints.

(c)	Represents an approximation of the federal and state income tax expense for purposes of this illustration and is not based on our actual tax expense.

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

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•	Fund capital expenditures at our Regulated Operating Subsidiaries. Our plans with regard to property, plant and equipment investments are described in detail above under “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Investment and Operating Results Trends.”

•	Fund business development expenses and related capital expenditures. We are pursuing development activities for transmission projects that 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, which are further described in detail below under “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations.” We expect our interest payments to increase each year as a result of additional debt expected to be incurred to fund our capital expenditures and for general corporate purposes.

•	Fund any refund obligation in connection with the return on equity complaints.

•	Fund contributions to our retirement benefit plans, as described in Note 11 to the consolidated financial statements. We expect to contribute up to $12 million to these plans in 2017.

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(a)

On June 8, 2015, Standard and Poor’s Ratings Services (“Standard and Poor’s”) assigned a short-term issuer credit rating to ITC Holdings, which applies to the commercial paper program discussed in Note 9 to the consolidated financial statements. Additionally, on October 18, 2016, Standard and Poor’s reaffirmed the senior unsecured credit rating of ITC Holdings and the secured credit ratings of our MISO Regulated Operating Subsidiaries and ITC Great Plains as well as revised the outlook of the issuer credit ratings of these particular entities to stable from negative, subsequent to the completion of the Merger. Refer to Note 2 to the consolidated financial statements for details on the Merger.

(b)

On June 9, 2015, Moody’s Investor Service, Inc. (“Moody’s”) assigned a short-term commercial paper rating to ITC Holdings, which applies to the commercial paper program discussed in Note 9 to the consolidated financial statements. Additionally, on April 15, 2016, Moody’s reaffirmed the credit ratings for the associated debt for ITC Holdings, ITCTransmission, ITC Midwest and ITC Great Plains. On April 26, 2016, Moody’s assigned a senior secured rating to METC’s 3.90% Senior Secured Note issuance described in Note 9 to the consolidated financial statements. All of the credit ratings have a stable outlook.

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•	Changes in existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances, hazardous and solid wastes and other environmental matters.

•	Changes in existing federal income tax laws or Internal Revenue Service (“IRS”) regulations.

•	Identification and evaluation of lawsuits or complaints in which we may be or have been named as a defendant.

•	Resolution or progression of existing matters through the legislative process, the courts, the FERC, the NERC, the IRS or the Environmental Protection Agency.

•	Completion of certain milestones relating to development initiatives.

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(a)	Amount for the year ended December 31, 2016 does not include the income tax refund of $128 million received from the Internal Revenue Service (“IRS”) in August 2016, which resulted from the election of bonus depreciation as described in Note 5.

(b)	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 December 31, 2016, 2015 or 2014, 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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(a)	Refer to discussion of revenue accruals in Note 5 under “Cost-Based Formula Rates with True-Up Mechanism.” Our Regulated Operating Subsidiaries do not earn a return on the balance of these regulatory assets, but do accrue interest carrying costs, which are subject to rate recovery along with the principal amount of the revenue accrual.

(b)	Refer to discussion of ITCTransmission regional cost allocation recovery in Note 5 under “ITCTransmission Regional Cost Allocation Refund.”

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(a)	Refer to discussion of revenue deferrals in Note 5 under “Cost-Based Formula Rates with True-Up Mechanism.” Our Regulated Operating Subsidiaries accrue interest on the true-up amounts which will be refunded through rates along with the principal amount of revenue deferrals in future periods.

(b)	Refer to discussion of the refund in Note 5 under “MISO Formula Rate Template Modifications Filing.”

(c)	Refer to discussion of the estimated refund and potential refund in Note 15 under “Rate of Return on Equity Complaints.”

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(a)	As of December 31, 2016 and 2015, there was $235 million and $395 million, respectively, of debt included within debt maturing within one year that is classified as a current liability in the consolidated statements of financial position.

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(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)

ITC Holdings’ revolving credit agreement may be used for general corporate purposes, including to repay commercial paper issued pursuant to the commercial paper program described above, if necessary. While outstanding commercial paper does not reduce available capacity under ITC Holdings’ revolving credit agreement, the unused capacity under this agreement adjusted for the commercial paper outstanding was $182 million as of December 31, 2016.

(d)	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 1.00% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating.

(e)	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 1.00% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating.

(a)	Amount relates to a federal income tax benefit for excess tax deductions generated in 2016 as a result of adopting the new accounting guidance associated with share-based payments as described in Note 3.

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(a)	Amount for the year ended December 31, 2016 primarily relates to the cash benefit that resulted from the election of bonus depreciation as described in Note 5.

(b)	During the fourth quarter of 2016, we recognized total income tax benefits of $27 million for excess tax deductions for the year ended December 31, 2016 as a result of adopting the new accounting guidance associated with share-based payments as described in Note 3.

(c)	Amount for the year ended December 31, 2016 includes utilization of $126 million of net operating losses, primarily resulting from the election of bonus depreciation as described in Note 5.

(a)	Described in Note 6.

(b)	During the fourth quarter of 2016, we recorded a deferred tax asset of $9 million for state income tax net operating losses, related to excess tax benefits generated in periods prior to 2016 that had not been previously recognized in the consolidated statements of financial position, upon adoption of the accounting guidance associated with share-based payments as described in Note 3.

(c)	Includes net revenue accruals and deferrals, including accrued interest, of $1 million as of December 31, 2016 and 2015.

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(a)	The prior year discount rate assumptions have been presented to conform to current year weighted average presentation.

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(a)	The prior year discount rate assumptions have been presented to conform to current year weighted average presentation.

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(a)	Amount for the year ended December 31, 2016 includes the expense recognized due to the accelerated vesting of the share-based awards upon completion of the Merger as described above.

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(a)	Includes reclassification of net loss relating to interest rate cash flow hedges from AOCI to interest expense, net of tax, of less than $1 million for the years ended December 31, 2015 and 2014.

(b)	Includes unrealized gains and losses on available-for-sale securities, net of tax, of less than $1 million for the years ended December 31, 2016, 2015 and 2014.

(a)	Amount represents our investment in jointly held plant, which has been reduced by the ownership interest amounts of other parties.

(b)

ITCTransmission has joint ownership in two 345 kV transmission lines with a municipal power agency that has a 50.4% ownership interest in the transmission lines. The municipal power agency’s ownership portion entitles them to approximately 234 MW of network transmission service from the ITCTransmission system. An Ownership and Operating Agreement with the municipal power agency provides ITCTransmission with authority for construction of capital improvements and for the operation and management of the transmission lines. The

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(c)

METC has joint sharing of several assets within various substations with Consumers Energy, other municipal distribution systems and other generators. The rights, responsibilities and obligations for these jointly owned assets are documented in the Amended and Restated Distribution — Transmission Interconnection Agreement with Consumers Energy and in numerous interconnection facilities agreements with various municipalities and other generators. In addition, other municipal power agencies and cooperatives have an ownership interest in several METC 345 kV transmission lines. This ownership entitles these municipal power agencies and cooperatives to approximately 608 MW of network transmission service from the METC transmission system. As of December 31, 2016, METC’s ownership percentages for jointly owned substation facilities and lines ranged from 6.3% to 92.0% and 1.0% to 41.9%, respectively.

(d)

ITC Midwest has joint sharing of several substations and transmission lines with various parties. As of December 31, 2016, ITC Midwest had net investments in jointly owned substation assets under construction and jointly shared transmission lines of $2 million and $1 million, respectively. ITC Midwest’s ownership percentages for jointly owned substation facilities and lines ranged from 28.0% to 80.0% and 11.0% to 80.0%, respectively, as of December 31, 2016.

(e)

In 2014, ITC Great Plains entered into a joint ownership agreement with an electric cooperative that has a 49.0% ownership interest in a transmission project. ITC Great Plains will construct and operate the project and the electric cooperative will be responsible for their ownership percentage of capital and operation and maintenance costs. As of December 31, 2016, ITC Great Plains’ ownership percentage in the project was 51.0%.

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(a)	Includes an effect on net income of $27 million, $28 million and $3 million for the year ended December 31, 2016, 2015 and 2014, respectively, for revenue initially recognized in 2015, 2014 and 2013.

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(a)	Amounts include the results of operations and capital expenditures from ITC Interconnection for the period June 1, 2016 through December 31, 2016.

(b)	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 consolidated statements of financial position.

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(c)	All amounts presented reflect the change in authoritative guidance on the presentation of debt issuance costs on the balance sheet. This change was adopted retrospectively by us in 2016. Refer to Notes 3 for more information.

(d)	All amounts presented reflect the change in the authoritative guidance issued by FASB to net all deferred income tax assets and liabilities and present as a single line item within non-current assets or liabilities on the balance sheet. This change was adopted retrospectively by us in 2015.

(a)

During the years ended December 31, 2016 and 2015, we recognized an aggregate estimated regulatory liability for the refund and potential refunds relating to the ROE complaints as described in Note 15, which resulted in a reduction in operating revenues and operating income of $80 million and $115 million and an estimated $55 million and $73 million reduction to net income for the years ended December 31, 2016 and 2015, respectively.

(b)	During the third and fourth quarters of 2015, we recognized an aggregate regulatory liability for the refund relating to the formula rate template modifications filing as described in Note 5, which resulted in a reduction in operating revenues and operating income of $10 million and an estimated $6 million reduction to net income for the year ended December 31, 2015.

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ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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Base salary increases. As a result of our annual review process and in light of the Merger Agreement, our NEOs serving as such at the time did not receive a regular base salary increase in 2016. However, Ms. Blair received a promotional base salary increase in connection with her appointment to President and Chief Executive Officer and Ms. Holloway received a regular base salary increase early in the year prior to becoming the interim Chief Financial Officer in November, based on market data and performance and other factors.

•

Annual cash incentive bonuses. Except with respect to Mr. Welch, our former Chief Executive Officer, we paid annual corporate performance bonuses for 2016 in two parts as a result of the closing of the Merger. Upon closing and in accordance with the Merger Agreement, a prorated portion of the annual bonus through the closing of the Merger was paid out at 200% of the “target bonus levels” to our NEOs except for Ms. Mason Soneral and Mr. Hayes, who each reached an agreement with the Company for part of their 2016 annual bonus to be paid in the ordinary course in accordance with their respective employment agreement and the Company’s past practices based on actual 2016 performance. The prorated balance, representing the period after the Merger through the end of the year, was paid out based on actual performance. Mr. Welch’s annual corporate performance bonus and an additional cash bonus of $250,000 that he was awarded in May 2016 were paid in full in connection with his retirement from the Company and the October 2016 letter agreement amending his employment agreement. See

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•	Milestone bonuses. We made a final project-related bonus payment in January 2016 related to the successful completion of the Kansas V-Plan transmission project. This project was critical to our ability to provide reliable service to our customers and deliver value to our shareholders.

•	Long-term equity incentives. We granted long-term equity incentive awards to our NEOs in May 2016. Total award values were determined as a percentage of base salary and delivered 100% in the form of restricted stock. While options and performance-based shares had been awarded in recent years, the Committee granted only restricted stock in 2016 in accordance with the Merger Agreement.

•	Retention bonuses. In accordance with the Merger Agreement, we entered into retention award agreements with certain NEOs. 30% of these awards were paid upon closing of the Merger with the remaining 70% payable on the first anniversary of closing provided the NEO remains employed with the Company.

•	Performing best-in-class utility operations;

•	Improving reliability, reducing congestion, and facilitating access to generation resources; and

•	Utilizing our experience and skills to seek and identify opportunities to invest in needed transmission and to optimize the value of those investments.

•	Provide for flexibility in pay practices to recognize our unique position and growth proposition;

•	Use a market-based pay program aligned with pay-for-performance objectives;

•	Leverage incentives, where possible, and align long-term incentive awards with improvements in our financial performance and shareholder value;

•	Provide benefits through flexible, cost-effective plans while taking into account business needs and affordability; and

•	Provide other non-monetary awards to recognize and incentivize performance.

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•	Base Salary — provides sufficient competitive pay to attract and retain experienced and successful executives.

•	Bonus Compensation — encourages and rewards contributions to our corporate performance goals.

•	Long Term Incentives — encourages equity ownership, rewards building long-term shareholder value and helps retain NEOs.

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(1)	Net Income was risk-adjusted. Targets were adjusted for any potential impacts associated with changes to the MISO ROE refund estimate (and associated interest expense) assumed in the budget, amounts recognized for actual or probable rate refunds (including interest expense) as a result of Section 205 or 206

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(2)	Total Shareholder Return was compared to the Dow Jones Utility Average Index companies. Total Shareholder Return must be positive for the year and must exceed the 50th percentile of the Dow Jones Utility Average Companies before there would be any payout for meeting this goal, as illustrated below:

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Any bonus or other incentive-based or equity-based compensation received, earned or recognized by the officer from the Company during the 12-month period following the first public issuance or filing with the SEC of the financial document embodying such financial reporting requirement in excess of the amount that would have been received, earned or recognized if the restated financial results had been released instead; and

•	Any profits realized by the officer from the sale of securities of the Company during that 12-month period.

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(1)	The compensation amounts reported in this column include the $20,000 lump sum cash payments made to Ms. Blair, Mr. Jipping and Mr. Oginsky in 2014.

(2)

The compensation amounts reported in this column include, (a) awards under the Special Bonus Plan, (b) bonuses paid in connection with project milestones, efforts related to the proposed Entergy transaction and completion of the Merger, (c) retention bonuses and (d) a discretionary cash bonus made to Mr. Welch in 2016. Bonuses under the Special Bonus Plan, were awarded at the sole discretion of the Committee and were equal to per share dividend amounts paid by the Company multiplied by the number of options granted in 2003 and 2005. These options were exercised and the Special Bonus Plan expired in 2015. In each year, the NEOs, except for Mr. Hayes, received certain project-related bonuses in recognition of the successful completion of various transmission development milestones. In 2014, while Mr. Hayes served in his prior position as our Vice President Finance and Treasurer, he received a cash bonus in recognition of the integral role he played in the Company’s pursuit of the transmission business of Entergy Corporation. On May 19, 2016, the Committee approved a discretionary cash bonus to Mr. Welch in the amount of $250,000 which was to be paid at the same time as the payment of the 2016 annual corporate performance bonus. This amount was included in the payment made pursuant to Mr. Welch’s October 2016 letter agreement. These bonuses are set forth in the following table under Other Bonuses. Mr. Hayes and Ms. Mason Soneral received $300,000 each since the Merger was closed before December 31, 2016. In 2014 and 2016, Mr. Welch received a bonus pursuant to his Retention Compensation Agreement. In 2016, all of the NEOs (other than Mr. Welch) received 30% of their retention award due to the closing of the Merger. See “Compensation

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(3)

The amounts reported in these columns represent the fair value of stock option, performance share and restricted stock awards granted to the NEOs under the 2015 LTIP and the 2006 LTIP, excluding any forfeiture reserves recorded for these awards. Restricted stock awards are recorded at fair value at the date of grant, which is equivalent to the share price on that date. In accordance with Financial Accounting Standards Board Accounting Standards Codification 718, or ASC 718, the fair value of the performance share awards with the three-year relative TSR metric was determined using a Monte Carlo simulation valuation model and the fair value of the performance shares with the three-year Diluted EPS Growth metric was based on the share price on the date of grant. The grant date present value of the stock options was determined in accordance with ASC 718 using a Black-Scholes option pricing model and the following assumptions:

(4)	The amounts reported in this column include cash awards tied to the achievement of annual Company performance goals under our bonus plan in effect for each of 2016, 2015 and 2014. For information regarding the corporate goals for 2016, see “Compensation Discussion and Analysis — Key Components of Our NEO Compensation Program — Bonus Compensation".

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(a)

To address cutback language in their employment agreements that could have caused them to be treated differently than the other NEOs, the employment agreements with Ms. Mason Soneral and Mr. Hayes were amended to have their annual bonus for 2016 (with the exception of the total shareholder return component which was paid out pursuant to the terms of the Merger Agreement) payable in the ordinary course in accordance with their respective employment agreement and the Company’s past practices based on actual 2016 performance. Because Mr. Hayes resigned from his position with the Company as of November 25, 2016, the Company was not required to pay to him the post-Merger portion of the annual corporate performance bonus in February 2017 to which he would otherwise have been entitled.

(b)	In connection with Mr. Welch’s retirement, he received all of his 2016 annual corporate performance bonus in 2016.

(5)

All amounts reported in this column pertain to the tax-qualified defined benefit pension plan and two supplemental nonqualified, noncontributory retirement plans maintained by the Company. None of the income on nonqualified deferred compensation was above-market or preferential. Variations in the amounts from year to year reflect an additional year of service and pay changes used in the accrued benefit, as well as changes in assumptions on which the benefits are calculated, for which the formula has not been materially revised. The discount rate used for the present value of accumulated benefits was 4.05% in 2014, 4.44% in 2015 and 4.15% in 2016 causing the amounts to fluctuate down from 2014 to 2015 and back up in 2016. Mr. Welch’s change in pension value increased most significantly due to the year over year change in his MSBP benefit which increased due to an additional 15 months of service and higher average final compensation, along with one less year of discounting as he retired during 2016.

(6)

All Other Compensation includes amounts for auto allowance, financial, estate and legal planning, income tax return preparation, annual physical, club memberships, event tickets, personal liability insurance, home security system, personal use of company aircraft and for other benefits such as Company contributions on behalf of the NEOs pursuant to the matching component of the Savings and Investment Plan, as well as any reimbursements for income taxes related to the inclusion of the value of the payment by the Company of these perquisites and payments associated with Mr. Welch’s retirement. Perquisites have been valued for purposes of these tables on the basis of the aggregate incremental cost to the Company. The incremental cost of the personal use of the Company aircraft was determined based upon the Company’s expenses incurred in connection with the actual costs of maintenance, landing, parking, crew and catering and estimated fuel costs relating to Mr. Welch’s hours of use of the plane. Fuel expense was determined by calculating the average fuel cost for the month and the average amount of fuel used per hour. Mr. Welch received a lump sum severance payment of $1,300,000, made pursuant to his October 2016 letter agreement in exchange for, among other items, transition services, waiving his potential right to receive certain post-retirement severance payments under the employment agreement and a general release of any claims

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(7)	Ms. Blair became President and Chief Executive Officer in November 2016.

(8)	Ms. Holloway became Vice President, Interim Chief Financial Officer and Treasurer in October 2016. In accordance with SEC rules, we have excluded Ms. Holloway’s compensation for 2014 and 2015 as she was not an executive officer in those years.

(9)	Mr. Oginsky was named Executive Vice President and Chief Administrative Officer in May 2016.

(10)	Ms. Mason Soneral became Senior Vice President and General Counsel in February 2015. In accordance with SEC rules, we have excluded Ms. Mason Soneral’s compensation for 2014 as she was not an executive officer in that year.

(11)	Mr. Welch retired from the Company in November 2016. Mr. Welch remains a director and serves as Chairman of the Company’s Board of Directors.

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(12)	In May 2016, Mr. Hayes was named Executive Vice President and Chief Financial Officer. Mr. Hayes left the Company in November 2016.

(1)

The amount shown in Column (d) represents the potential payout for the annual corporate performance bonus based on “target bonus levels” and assumes maximum achievement of all bonus goals other than the TSR goal and no achievement of the TSR goal. The amount payable assuming maximum achievement of all goals is set forth in column (e). Actual dollar amounts paid are disclosed and reported in the Summary Compensation Table as Non-Equity Incentive Plan Compensation. For more information regarding the annual corporate performance bonuses, see “Compensation Discussion and Analysis — Key Components of Our NEO Compensation Program — Bonus Compensation — Annual Corporate Performance Bonus.”

(2)	Grant Date Fair Value consists of restricted stock awarded under the 2015 LTIP, recorded at fair value at the date of grant, which was $43.95 per share.

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(1)	Equals the stock price on the NYSE on the exercise date minus the option exercise price multiplied by the number of shares acquired on exercise.

(2)	Equals the stock price on the NYSE on the vesting date multiplied by the number of shares acquired on vesting.

(3)	The table below reflects the amounts paid to cash out outstanding equity awards in accordance with the Merger Agreement. All unvested options, restricted shares and performance shares became vested immediately prior to the effective time of the Merger pursuant to the Merger Agreement. Options were cashed out at the difference between $45.72 (the cash value of the Merger consideration paid to

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(4)

To address cutback language in the employment agreements of Ms. Mason Soneral and Mr. Hayes, the agreements were amended, pursuant to which a portion of their performance shares were canceled. Ms. Mason Soneral’s amendment provided that she will receive total retention payments of $162,399 payable in five equal installments to be paid on the first payroll date following the first day of each fiscal quarter beginning January 1, 2017, contingent on her continued service to the Company or its affiliates on each applicable payment date. Mr. Hayes’ agreement contained a similar provision but his right to such payments was forfeited upon his resignation from the Company.

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(1)	Credited service is estimated as of December 31, 2016 and represents the service reflected in the determination of benefits. For determining vesting, service with DTE Energy is counted for all plans shown in the table except for the ESRP, as explained below.

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(2)

The “Present Value of Accumulated Benefit” is the estimated lump-sum equivalent value measured as of December 31, 2016 (the “measurement date” used for financial accounting purposes) of the benefit that was earned as of that date. Certain benefits are payable as an annuity only, not as a lump sum, and/or may not be payable for several years in the future. The values reflected are based on several assumptions. The date at which the present values were estimated was December 31, 2016. The rate at which future expected benefit payments were discounted in calculating present values was 4.15%, the same rate used for fiscal year-end 2016 financial accounting disclosure of the Qualified Plan. The future annual earnings rate on account balances under the cash balance and ESRP shift components of the Qualified Plan, and for ESRP benefits, was assumed to be 2.35% for 2017 and 4.5% thereafter.

◦	Ms. Blair:        Age 58

◦	Ms. Holloway    Age 58

◦	Mr. Jipping:        Age 58

◦	Mr. Oginsky        Age 58

◦	Ms. Mason Soneral    Age 58

◦	Mr. Welch:        Actual retirement was November 1, 2016

◦	Mr. Hayes        Age 58 for the qualified plan and June 1, 2017 for the ESRP

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(1)	None of this amount is reported in the Summary Compensation Table, as none of it is above-market or preferential.

•

Cause means: a NEO’s continued failure substantially to perform his or her duties (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 Company to the NEO of such failure; dishonesty in the performance of the NEO’s duties; a NEO’s conviction of, or plea of nolo contender to, a crime constituting a felony or misdemeanor involving moral turpitude; willful malfeasance or willful misconduct in connection with a NEO’s duties; any act or omission

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•	Good reason means: a greater than 10% reduction in the total value of the NEO’s base salary, target bonus, and employee benefits; or if the NEO’s responsibilities and authority are substantially diminished.

•	any accrued but unpaid compensation and benefits. The benefits include:

◦	Ms. Blair: cash balance and ESRP shift under the Qualified Plan and vested portion of ESRP balance;

◦	Mr. Jipping: annual benefit under the traditional component of the Qualified Plan and vested portion of ESRP balance; and

◦	Mr. Oginsky, Ms. Mason Soneral and Ms. Holloway: cash balance under the Qualified Plan and vested portion of ESRP balance

•	continued payment of the NEO’s then-current base salary for two years (one year for Ms. Holloway);

•

if the termination is within six months before or two years after a “Change of Control” (as defined in the employment agreements), payment of an amount equal to two times the average of the annual bonuses, that were payable to the NEO for the three fiscal years immediately preceding the fiscal year in which his or her employment terminates, payable in equal installments over the period in which continued base salary payments are made and for Ms. Holloway, continued payment of base salary for an additional year;

•	a pro rata portion of the annual bonus for the year of termination, based upon the Company’s actual achievement of the performance targets for such year as determined under the annual bonus plan and paid at the time that such bonus would normally be paid;

•

eligibility to continue coverage under our active medical, dental and vision plans subject to applicable COBRA rules; if such coverage is elected, we will reimburse the NEO for the shorter of 18 months (12 months for Ms. Holloway), or until the NEO becomes eligible for coverage under another employer-sponsored group plan, in an amount equal to our periodic cost of such coverage for other executives, plus a tax gross-up amount;

•	outplacement services for up to two years; and

•

for Ms. Blair, deemed satisfaction of the eligibility requirements of our Postretirement Welfare Plan for purposes of participation therein; and for Messrs. Jipping and Oginsky, participation in our Postretirement Welfare Plan only if, by the end of their specified severance period, they have achieved the necessary age and service credit otherwise necessary to meet the eligibility requirements. In addition, if we terminate our Postretirement Welfare Plan and, by application of the provisions described in the prior sentence, any of these NEOs would otherwise be entitled to retiree welfare benefits, we will establish other coverage for the NEO or the NEO will receive a cash payment equal to our cost of providing such benefits, in order to assist the NEO in obtaining other retiree welfare benefits.

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(1)

Reflects pro rata annual bonus payment made in connection with the Merger for the period through October 14, 2016. Remaining annual bonus payments were made at the time that normal annual bonus payments are made and are not included in this table. Ms. Mason Soneral’s and Mr. Hayes’ annual bonus (with the exception of the total shareholder return component which was paid out pursuant to the terms of the Merger Agreement) was payable in the ordinary course in accordance with their respective employment agreement and the Company’s past practices based on actual 2016 performance. See “Employment Agreement Amendments — Mason Soneral and Hayes”. Mr. Welch’s amount represents the full amount of his annual corporate performance bonus.

(2)	For all but Mr. Hayes, includes 100% of retention bonus, 30% of which was paid in 2016 and the remainder of which is due one year after closing subject to the NEO’s continued employment. For Mr. Hayes, the amount shown is the portion he received prior to his resignation. Table also includes $300,000 bonuses paid in 2016 to

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(3)	Reflects the cash value paid for outstanding stock options and previously unvested restricted stock awards. The per share amount of the Merger consideration used for purposes of determining the payment amount was $45.72.

(4)	Reflects the cash value paid to holders of previously unvested performance share awards in connection with the Merger. Performance shares vested at 181.25% of target in accordance with the Merger Agreement, together with related dividend equivalents. The per share amount of Merger consideration used for purposes of determining the payment amount was $45.72.

(5)	Reflects the value of the accelerated vesting ESRP account balance in connection with the Merger.

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(1)

All scenarios include the value of severance. Table reflect the remaining 70% of the May 2016 retention program awards under the applicable qualified termination scenarios. There was no outstanding equity as of December 31, 2016. For Ms. Blair, the value of the Postretirement Welfare Plan is additionally included where applicable. The Pension Benefits Table assumes that none of the executives are terminated prior to retirement age and that benefits are paid once retirement commences (age 58 is assumed). All other accrued pension benefits, outside of present value reductions outlined in footnotes (4) and (6), and additional pension benefits upon death, have not been included in these termination scenarios but can be found in the Pension Benefits Table.

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(2)	Upon any termination of employment, benefits that are accrued but unpaid prior to that event are paid. These benefits are assumed to be $0 in the above table.

(3)

Change in control values include severance amounts reflecting cutbacks to safe harbor value where this is greater than if an excise tax had been paid. Ms. Mason Soneral would be subject to an excise tax at the assumed change in control date; therefore, a cutback in the amount of $97,635 has been reflected. The rate at which future expected benefit payments were discounted in calculating the Postretirement Welfare Plan present values was 4.28%, the same rate used for fiscal year-end 2016 accounting disclosure of the Postretirement Welfare Plan.

(4)

In the event of Mr. Jipping’s termination for death (pre-retirement), his spouse would receive half the 50% joint and survivor annuity under the traditional component of the Qualified Plan, also reduced to reflect a 90% early retirement factor that would apply at age 58 since Mr. Jipping does not have 30 years of service as of December 31, 2016. Under termination for death (pre-retirement), Ms. Blair’s, Ms. Mason Soneral’s, Ms. Holloway’s, and Mr. Oginsky’s Qualified Plan benefits are payable immediately to the surviving spouse (if any) and ESRP benefits are payable to a designated beneficiary or estate. The above termination scenarios do not reflect the reduction in present value of death benefits ($383,208 for Ms. Blair, $666,800 for Mr. Jipping, $29,326 for Mr. Oginsky, $14,487 for Ms. Mason Soneral, and $8,140 for Ms. Holloway) compared to present value in the Pension Benefits Table.

(5)	The value of the Postretirement Welfare Plan benefit is included in involuntary termination not for cause and change in control scenarios since Ms. Blair's employment agreement includes a provision for deemed satisfaction of the eligibility requirements when terminated under these scenarios. It is assumed she would commence her Postretirement Welfare Benefits at age 58.

(6)

The Pension Benefits Table assumes that Mr. Jipping would not be terminated before retirement age and no early retirement reduction was applied. In all termination scenarios, however, a 90% early retirement factor would apply at age 58 because Mr. Jipping has less than 30 years of service as of December 31, 2016. The above table does not reflect the reduction in the present value ($119,001 except for death) due to applying the 90% early retirement factor.

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(1)	Messrs. Evenden, Laurito and Perry were appointed to the Board on October 14, 2016. Ms. O’Leary and Messrs. Ernst, Franklin, Lopez, Stephens, G. Bennett Stewart and Lee Stewart left the Board on October 14, 2016 with the closing of the Merger. Messrs. Ernst and Stephens were reappointed to the Board, effective January 1, 2017.

(2)	Includes annual Board retainer and committee chairmanship retainer, as well as a lead director fee (for Mr. Lee Stewart only).

(3)

Aggregate grant date fair value is computed in accordance with ASC 718. Awards of restricted stock are made quarterly prior to the Merger and recorded at fair value at the date of grant. The values for Ms. O’Leary and Messrs. Ernst, Franklin, Jepsen, Lopez, Stephens, Bennett Stewart and Lee Stewart awards were $63,669 (equivalent to 487 shares at $43.57 per share, 453 shares at $46.82 per share and 457 shares at $46.48 per share). There were no outstanding stock awards as of December 31, 2016.

(4)	The fees payable to Mr. Evenden are made directly to Betchworth Investment Pte. Ltd.

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ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

•	each of our current directors;

•	each of the persons named in the Summary Compensation Table under Item 11; and

•	all current directors and executive officers as a group.

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(1)	The amount shown in the table does not include 534,064 shares beneficially owned by the spouse of Mr. Welch. Mr. Welch has no voting or dispositive power with respect to, and disclaims ownership of such shares.

(2)	Includes 4,234 shares owned by the spouse of Mr. Ernst.

(3)	Includes 28,715 shares owned by the spouse and children of Mr. Perry.

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(1)	Audit fees were for professional services rendered for the audit of our consolidated financial statements and internal controls and reviews of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Deloitte in connection with statutory and regulatory filing engagements.

(2)

Audit-related fees were for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include due diligence support relating to merger and acquisition activity and the audit of our employee benefit plans and accounting consultations. The fees also include amounts for the services provided in connection with our securities offerings and accounting consultations and audits in connection with acquisitions.

(3)	Tax fees were professional services for federal and state tax compliance, tax advice and tax planning, including services to support merger and acquisition activity.

(4)	All other fees were for services other than the services reported above. These services included subscriptions to the Deloitte Accounting Research Tool and attendance at the Deloitte Power and Utilities Seminar.

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(a)	Amount for the year ended December 31, 2016 does not include the income tax refund of $128 million received from the Internal Revenue Service in August 2016, which resulted from the election of bonus depreciation as described in Note 5 to the consolidated financial statements.

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(a)	Includes ITCTransmission, MTH, ITC Midwest and other subsidiaries.

(b)

The net income tax payments were pursuant to intercompany tax sharing arrangements, and the total of these tax payments is presented as a net cash outflow or inflow from operating activities in the condensed parent company statements of cash flows. Other reconciling items between the parent company and the consolidated tax liabilities are presented as deferred and other income taxes in the adjustments to reconcile net income to net cash provided by operating activities.

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