ITC Holdings Corporation
02/12/2026 | Press release | Distributed by Public on 02/12/2026 05:13
Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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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, forecasted capital expenditures, dividend payments, growth opportunities, the outlook for our business and the electric transmission industry, and expectations with respect to various legal and regulatory proceedings based upon information available at the time such statements are made. All statements, other than statements of historical fact, included in this report are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Wherever possible, we have identified these forward-looking statements by words such as "will," "may," "anticipates," "believes," "intends," "estimates," "expects," "forecasted," "projects," "likely," "could," "might," "target," "would," "plan," "potential," "continue," "should," "predict," "seeks," and the negative of these terms, and similar phrases. These forward-looking statements are based upon assumptions our management believes are reasonable. Such forward-looking statements are based on estimates and assumptions and are subject to significant risks and uncertainties which could cause our actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including, among others, the risks and uncertainties listed in this report under "Item 1A. Risk Factors" and in our other reports filed with the SEC from time to time.
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.
Statement on Prior Period Comparisons
This section of this Form 10-K generally discusses the financial condition, changes in financial condition and results of operations for the years ended December 31, 2025 and 2024 and provides year-to-year comparisons between the years ended December 31, 2025 and 2024. Discussions of such information for the year ended December 31, 2023 and year-to-year comparisons between the years ended December 31, 2024 and 2023 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7. of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Overview
ITC Holdings and our Regulated Operating Subsidiaries provide safe and reliable electric transmission service to connect consumers to cost-effective energy resources. Our Regulated Operating Subsidiaries
continue to make investments in a modernized grid to maintain reliability and accommodate future demands as lifestyles and the economy become increasingly dependent on electricity.
Our business consists primarily of the electric transmission operations of our Regulated Operating Subsidiaries. Through our Regulated Operating Subsidiaries, we own, operate, maintain and invest in high-voltage transmission systems in Michigan's Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri, Kansas, Oklahoma and Wisconsin that transmit electricity from generating stations to local distribution facilities connected to our transmission systems.
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.
Our Regulated Operating Subsidiaries earn revenues for the use of their electric transmission systems by their customers, which include investor-owned utilities, municipalities, cooperatives, power marketers and alternative energy suppliers. As independent transmission companies, our Regulated Operating Subsidiaries are subject to rate regulation only by the FERC, and our cost-based rates are discussed below under "- Cost-Based Formula Rates with True-Up Mechanism" as well as in Note 6 to the consolidated financial statements.
Significant matters that influenced our financial condition, results of operations and cash flows for the year ended December 31, 2025 or that may affect future results include:
•Our capital expenditures of $1.3 billion at our Regulated Operating Subsidiaries during the year ended December 31, 2025, as described below under "- Capital Investment and Operating Results Trends;"
•Debt activity, including derivatives, as described in Note 9 to the consolidated financial statements;
•The October 2024 Order and appeal proceedings as described in Note 17 to the consolidated financial statements; and
•NOPRs previously issued by the FERC proposing changes to transmission incentives policy, as described in Note 6 to the consolidated financial statements.
Recent Developments
Iowa Courts' Rulings on Right of First Refusal and First Tranche of MISO's LRTP
In 2020, the State of Iowa enacted a state law that granted incumbent Iowa electric TOs, including ITC Midwest, a ROFR to construct, own and maintain certain electric transmission assets in the state. On October 14, 2020, LS Power Midcontinent, LLC and Southwest Transmission, LLC sued the IUC and several individual defendants, seeking a judgment that the ROFR provisions violated the Iowa Constitution and requesting a temporary injunction of the ROFR until the case was resolved. The case was dismissed in district court based on the plaintiffs' lack of standing in the case and the court of appeals later affirmed the district court's ruling.
Following appeal, on March 24, 2023, the Iowa Supreme Court issued an opinion that the plaintiffs have standing to challenge the ROFR provision, thereby vacating the decision of the court of appeals, reversing the district court's judgment and remanding the case to the Iowa District Court for Polk County to determine the merits regarding the constitutionality of the ROFR statute. As part of this opinion, the Iowa Supreme Court also issued a temporary injunction staying the enforcement of the ROFR. However, ITC Midwest had already exercised its right to construct certain electric transmission projects approved and awarded by MISO, as the decision for assignment of the first tranche of LRTP projects in Iowa was finalized by MISO on July 25, 2022. MISO is the only entity charged with determining what projects are to be competitively bid pursuant to its tariff.
On December 4, 2023, the Iowa District Court for Polk County issued a decision finding that the manner in which Iowa's ROFR statute was passed is unconstitutional. The court did not make any determination on the merits of the ROFR itself. The district court issued a permanent injunction preventing ITC Midwest and others from taking further action to construct the first tranche of Iowa's LRTP projects in reliance on the ROFR. However, the district court ordered that the injunction does not prohibit ITC Midwest from seeking approval from the IUC to construct projects included in the first tranche of LRTP, so long as the approval is unrelated to a claim under the ROFR statute. ITC Midwest filed for reconsideration of the district court's decision with respect
to the scope of the injunction. On March 19, 2024, the district court issued an order denying all motions for reconsideration of its decision. ITC Midwest appealed this order on April 17, 2024.
On July 5, 2024, the Iowa Supreme Court granted a motion filed by ITC Midwest requesting a stay of the injunction issued by the district court while the district court's orders are appealed. LS Power Midcontinent, LLC and Southwest Transmission, LLC requested quorum review of the stay of the injunction. On August 7, 2024, the Iowa Supreme Court vacated the stay and reinstated the injunction. On May 30, 2025, the Iowa Supreme Court issued an order denying ITC Midwest's appeal and affirming the permanent injunction.
On May 28, 2024, MISO confirmed commencement of a variance analysis process on the grounds that there was an inability to construct a portion of the first tranche of MISO's LRTP projects in Iowa due to the injunction imposed by the district court order. On August 29, 2024, MISO publicly posted the conclusion of the variance analysis whereby its Competitive Transmission Executive Committee, which maintains authority to oversee and implement variance analyses pursuant to the MISO tariff, reaffirmed MISO's assignment of ownership and construction responsibility for the portion of the first tranche of MISO's LRTP projects in Iowa to ITC Midwest and MidAmerican Energy Company. The results of MISO's variance analysis process allow ITC Midwest to move forward with development of its portion of the first tranche of MISO's LRTP projects in Iowa. On June 27, 2025, ITC Midwest filed a supplemental brief in response to a June 5, 2025 letter from the IUC requesting ITC Midwest to identify the basis upon which the IUC should proceed consistent with the Iowa Supreme Court's May 30, 2025 decision. On July 22, 2025, in a hearing related to one of the projects assigned to ITC Midwest in Iowa in the first tranche of MISO's LRTP, the IUC recognized MISO's variance analysis as the proper remedy to the injunction which allows the continued development of these projects in Iowa.
Cost-Based Formula Rates with True-Up Mechanism
Our Regulated Operating Subsidiaries calculate their respective revenue requirements using a cost-based formula based on company specific financial information. The calculation of projected revenue requirement for a future period, generally a calendar year, is used to establish the transmission rate used for billing purposes. The calculation of actual revenue requirements for a historic period is used to calculate the amount of revenues recognized in that period and determine the over- or under-collection for that period. See "Cost-Based Formula Rates with True-Up Mechanism" in Note 6 to the consolidated financial statements for further discussion of our Formula Rates and see "Rate of Return on Equity Complaints" in Note 17 to the consolidated financial statements for detail on MISO ROE Complaints.
Illustrative Example of Formula Rate Setting
The Formula Rate setting example shown below is for illustrative purposes only and is not based on our actual financial data.
| Line | Item | Instructions | Amount | ||||||||
| 1 | Rate base (a) | $ | 1,000,000 | ||||||||
| 2 | Multiply by 13-month weighted average cost of capital (b) | 8.44 | % | ||||||||
| 3 | Authorized return on rate base | (Line 1 x Line 2) | $ | 84,400 | |||||||
| 4 | Recoverable operating expenses (including depreciation and amortization) | $ | 150,000 | ||||||||
| 5 | Income taxes (c) | 37,500 | |||||||||
| 6 | Gross revenue requirement | (Line 3 + Line 4 + Line 5) | $ | 271,900 | |||||||
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(a)Consists primarily of in-service property, plant and equipment, net of accumulated depreciation.
(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 per the October 2024 Order. See Note 17 to the consolidated financial statements for detail on ROE matters.
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Weighted
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Average
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Percentage of
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Cost of
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Total Capitalization
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Cost of Capital
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Capital
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| Debt | 40.00% |
5.00% =
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2.00 | % | |||||||||||||
| Equity | 60.00% |
10.73% =
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6.44 | % | |||||||||||||
| 100.00% | 8.44 | % | |||||||||||||||
(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.
Revenue Accruals and Deferrals - Effects of Monthly Network Peak Loads
For our MISO Regulated Operating Subsidiaries, monthly network 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 network peak loads experienced as compared to those forecasted in establishing the annual network transmission rate. Under their cost-based Formula Rates that contain a true-up mechanism, our MISO Regulated Operating Subsidiaries accrue or defer revenues to the extent that their actual revenue requirement for the reporting period is higher or lower, respectively, than the amounts billed relating to that reporting period. These revenue accruals and deferrals are recorded to the consolidated statements of financial position within regulatory assets or regulatory liabilities, respectively. See Note 6 to the consolidated financial statements for additional information on our Formula Rates. Although monthly network peak loads do not impact operating revenues recognized, network load affects the timing of our cash flows from transmission service. The monthly network peak load of our MISO Regulated Operating Subsidiaries is generally impacted by weather, economic conditions and other significant factors and is seasonally shaped with higher load in the summer months when cooling demand is higher. We are unable to predict the possible future impacts of weather, economic conditions and other factors on monthly network peak loads at our MISO Regulated Operating Subsidiaries.
Capital Investment and Operating Results Trends
We expect a long-term upward trend in rate base resulting from our anticipated capital investment, in excess of depreciation and any acquisition premiums, from our Regulated Operating Subsidiaries' long-term capital investment programs to improve reliability, increase system capacity and upgrade the transmission network to support new generating resources. Investments in property, plant and equipment, when placed in-service upon completion of a capital project, are added to the rate base of our Regulated Operating Subsidiaries. We expect increases in rate base to result in a corresponding long-term upward trend in revenues and earnings. Our revenues and earnings may be impacted by future increases or decreases to our rates for ROE incentive adders and base ROE. As of December 31, 2025, we estimate that each 10 basis point change in the
authorized ROE would impact annual consolidated net income by approximately $7 million. See Note 6 and Note 17 to the consolidated financial statements for additional information related to matters that have impacted base ROE and may impact future rates.
Our Regulated Operating Subsidiaries incur significant costs to invest in their transmission systems and maintain the assets on their systems. While we have been impacted by increases in inflation and supply chain disruptions, these challenges have not had a material impact on our current or forecasted capital expenditures. We work closely with our suppliers to manage costs and deliveries of required materials and supplies and attempt to ensure that our asset and inventory purchases adequately support our construction and maintenance activities. In response to these challenges, we have increased levels of certain materials and supplies inventories over time to help reduce risks related to global supply chain constraints. We continue to monitor and evaluate the potential impacts of these macroeconomic trends on our forecasted capital expenditures and maintenance activities. Recently announced changes and proposed changes to the U.S. global trade policy, along with potential international retaliatory measures, have resulted in volatility in global markets and uncertainty around short- and long-term economic impacts in the United States, including concerns over tariffs and their potential impacts on the cost of goods, inflation, recession and slowing growth. As such, we continue to monitor and evaluate the potential impacts of these changes and measures, including the imposition of tariffs and ongoing legal challenges to such tariffs, on our business and operations. It is not currently possible to predict the impact of any changes or proposed changes to the U.S. global trade policy, or any international retaliatory measures, on our forecasted capital expenditures for the years 2026 through 2030 or our long-term financial condition, results of operations and cash flows. However, we did not experience a significant impact to our financial condition, results of operations and cash flows during the year ended December 31, 2025 and we do not currently expect a significant financial impact in 2026.
We are also monitoring and evaluating the potential impact of various executive orders issued by the U.S. government on our business, including potential impacts to our financial condition, results of operations and cash flows. On October 1, 2025, FERC issued a final rule to comply with the executive order entitled "Zero-Based Regulatory Budgeting to Unleash American Energy," which establishes a sunset date for certain regulations. We do not expect a significant impact from the final rule.
Our Regulated Operating Subsidiaries strive for high reliability of their systems and improvement in system accessibility for all generation resources. The FERC requires compliance with certain reliability standards and may take enforcement actions against violators, including the imposition of substantial fines. NERC is responsible for developing and enforcing these mandatory reliability standards. We continually assess our transmission systems against standards established by NERC, as well as the standards of applicable regional entities under NERC that have been delegated certain authority for the purpose of proposing and enforcing reliability standards. We believe that we meet the applicable standards in all material respects, although further investment in our transmission systems and an increase in maintenance activities will likely be needed to maintain compliance, improve reliability and address any new standards that may be promulgated.
We also assess our transmission systems against our own planning criteria that are filed annually with the FERC. Based on our planning studies, we see needs to make capital investments to: (1) maintain and replace our current transmission infrastructure to enhance system reliability and accommodate load growth; (2) expand access to electricity markets to reduce the overall cost of delivered energy to customers and provide access to competitive markets for economic development; (3) interconnect new generation resources; and (4) upgrade physical and technological grid security to protect critical infrastructure.
In addition to future investments identified through our planning studies, MISO continues to identify capital investment needs through its LRTP initiative. The objective of this initiative is to ensure grid reliability while integrating the different operating characteristics of new generation resources and increase resiliency of the grid during severe weather events. The MISO LRTP will result in additional capital investments across MISO's Midwest subregion, including investments for our MISO Regulated Operating Subsidiaries. On December 12, 2024, MISO's board of directors approved a portfolio of the second tranche of 24 LRTP projects ("Tranche 2.1") with estimated total associated transmission costs of approximately $22 billion. Based on the MISO portfolio of Tranche 2.1 projects, we expect a range of $3.7 billion to $4.2 billion of additional capital investments for our MISO Regulated Operating Subsidiaries. At this time, this range includes the estimate of future capital investments for projects from the Tranche 2.1 portfolio that are not subject to a competitive bidding process. We currently anticipate that the majority of our investments for the Tranche 2.1 portfolio will occur beyond our five-
year plan for forecasted capital expenditures for the years 2026 through 2030. On July 30, 2025, certain state regulatory commissions in the MISO region filed a complaint at the FERC challenging the manner in which MISO developed the Tranche 2.1 portfolio and the designation of projects in the portfolio as multi-value projects. We are monitoring developments in the complaint proceedings; however, we are unable to determine the possible impacts to capital expenditures for Tranche 2.1 projects at this time.
The following table shows our actual and expected capital expenditures at our Regulated Operating Subsidiaries:
| Actual Capital | Forecasted | |||||||||||||
| Expenditures for the | Capital | |||||||||||||
| Year Ended | Expenditures | |||||||||||||
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December 31, 2025
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2026 - 2030 | ||||||||||||
| Expenditures for property, plant and equipment (a) | $ | 1,315 | $ | 7,291 | ||||||||||
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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 exclude non-cash additions to property, plant and equipment for the AFUDC equity as well as accrued liabilities for construction, labor and materials that have not yet been paid.
Our five-year forecasted capital expenditure plan for the years 2026 through 2030 results in a forecasted 25% increase in our plan for capital expenditures compared to the previous plan that was developed for the years 2025 through 2029. The increase is primarily driven by the addition to the plan of expenditures for the first tranche of MISO's LRTP projects, the incorporation of capital expenditures for projects not subject to a competitive bidding process in Tranche 2.1 of MISO's LRTP, capital expenditures not included in the previous plan for customer and generator interconnection projects and other base capital expenditures considered necessary to our business.
Our long-term growth plan includes ongoing investments in our current regulated transmission systems and the identification of incremental strategic projects primarily located in and around our service territories. In addition, evolving technologies such as data centers, with increasing energy demand and load capacity requirements, will require electric transmission systems to adapt to future demands at a scale and pace beyond the historical trends of development. Excluding other factors that may impact network transmission rates, load increases driven by economic development and new customer interconnections are expected to put downward pressure on future rates.
Our capital expenditure forecast is subject to continuing review and modification. Investments in property, plant and equipment could be lower than expected due to a variety of factors, as discussed in "Item 1A. Risk Factors."
Significant Components of Results of Operations
Revenues
We derive nearly all of our revenues from providing transmission, scheduling, control and dispatch services and other related services over our Regulated Operating Subsidiaries' transmission systems to DTE Electric, Consumers Energy, IP&L and other entities, such as alternative energy suppliers, power marketers and other wholesale customers that provide electricity to end-use consumers, as well as from transaction-based capacity reservations on our transmission systems. MISO and SPP are responsible for billing and collecting the majority of transmission service revenues. As the billing agents for our MISO Regulated Operating Subsidiaries and ITC Great Plains, MISO and SPP collect fees for the use of our transmission systems, invoicing DTE Electric, Consumers Energy, IP&L and other customers on a monthly basis.
Network Revenues are generated from network customers for their use of our electric transmission systems and are based on the actual revenue requirements as a result of our accounting under our cost-based Formula Rates that contain a true-up mechanism. See Note 6 to the consolidated financial statements for a discussion of revenue recognition relating to network revenues.
Network revenues from ITC Great Plains include the annual revenue requirements specific to projects that are charged exclusively within one pricing zone within SPP or are classified as direct assigned network upgrades under the SPP tariff and contain a true-up mechanism.
Regional Cost Sharing Revenues are generated from transmission customers throughout RTO regions for their use of our MISO Regulated Operating Subsidiaries' network upgrade projects that are eligible for regional cost sharing under provisions of the MISO tariff. Additionally, certain projects at ITC Great Plains are eligible for recovery through a region-wide charge under provisions of the SPP tariff. Regional cost sharing revenues are treated as a reduction to the net network revenue requirement under our cost-based Formula Rates.
Point-to-Point Revenues consist of revenues generated from a type of transmission service for which the customer pays for transmission capacity reserved along a specified path between two points on an hourly, daily, weekly or monthly basis. Point-to-point revenues also include other components pursuant to schedules under the MISO and SPP transmission tariffs. Point-to-point revenues are treated as a revenue credit to network or regional customers and are a reduction to gross revenue requirement when calculating net revenue requirement under our cost-based Formula Rates.
Scheduling, Control and Dispatch Revenues are allocated to our MISO Regulated Operating Subsidiaries by MISO as compensation for the services performed in operating the transmission system. Such services include monitoring of reliability data, current and next day analysis, implementation of emergency procedures and outage coordination and switching.
Other Revenuesconsist of rental revenues, easement revenues, revenues relating to utilization of jointly owned assets under our transmission ownership and operating agreements and amounts from providing ancillary services to customers. The majority of other revenues are treated as a revenue credit and taken as a reduction to gross revenue requirement when calculating net revenue requirement under our cost-based Formula Rates.
Operating Expenses
Operation and Maintenance Expenses consist primarily of the costs for contractors that operate and maintain our transmission systems as well as our personnel involved in operation and maintenance activities.
Operation expenses include activities related to control area operations, which involve balancing loads and generation and transmission system operations activities, including monitoring the status of our transmission lines and stations. Rental expenses relating to land easements, including METC's Easement Agreement, are also recorded within operation expenses.
Maintenance expenses include preventive or planned activities, such as vegetation management, tower painting and equipment inspections, as well as reactive maintenance for equipment failures.
General and Administrative Expenses consist primarily of costs for personnel in our legal, information technology, finance, regulatory, human resources, community relations and communication and other support functions, general office expenses and fees for professional services. Professional services are principally composed of outside legal, consulting, audit and information technology services.
Depreciation and Amortization Expenses consist primarily of depreciation of property, plant and equipment using the straight-line method of accounting. Additionally, this consists of amortization of various regulatory assets.
Taxes Other than Income Taxes consist primarily of property taxes and payroll taxes.
Other Items of Income or Expense
Interest Expense consists primarily of interest on debt at ITC Holdings and our Regulated Operating Subsidiaries. Additionally, the amortization of debt financing expenses are recorded to interest expense. An allowance for borrowed funds used during construction is included in property, plant and equipment accounts and treated as a reduction to interest expense. The amortization of gains and losses on settled and terminated derivative financial instruments is recorded to interest expense.
Allowance for Equity Funds Used During Construction ("AFUDC equity") is recorded as an item of other income and is included in property, plant and equipment accounts. The allowance represents a ROE at our Regulated Operating Subsidiaries used for construction purposes in accordance with the FERC regulations.
The capitalization rate applied to the construction work in progress balance is based on the proportion of equity to total capital (which currently includes equity and long-term debt) and the authorized ROE for our Regulated Operating Subsidiaries.
Income Tax Provision
Income tax provision consists of current and deferred federal and state income taxes.
Results of Operations
| Year Ended | Percentage | ||||||||||||||||||||||
| December 31, | Increase | Increase | |||||||||||||||||||||
| (In millions of USD) | 2025 | 2024 | (Decrease) | (Decrease) | |||||||||||||||||||
| OPERATING REVENUES | |||||||||||||||||||||||
| Transmission and other services | $ | 1,775 | $ | 1,613 | $ | 162 | 10 | % | |||||||||||||||
| Formula Rate true-up | 11 | 12 | (1) | (8) | % | ||||||||||||||||||
| Total operating revenues | 1,786 | 1,625 | 161 | 10 | % | ||||||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||||||
| Operation and maintenance | 116 | 111 | 5 | 5 | % | ||||||||||||||||||
| General and administrative | 153 | 121 | 32 | 26 | % | ||||||||||||||||||
| Depreciation and amortization | 349 | 326 | 23 | 7 | % | ||||||||||||||||||
| Taxes other than income taxes | 181 | 154 | 27 | 18 | % | ||||||||||||||||||
| Other operating expenses (income), net | - | (1) | 1 | 100 | % | ||||||||||||||||||
| Total operating expenses | 799 | 711 | 88 | 12 | % | ||||||||||||||||||
| OPERATING INCOME | 987 | 914 | 73 | 8 | % | ||||||||||||||||||
| OTHER EXPENSES (INCOME) | |||||||||||||||||||||||
| Interest expense, net | 364 | 348 | 16 | 5 | % | ||||||||||||||||||
| Allowance for equity funds used during construction | (44) | (44) | - | - | % | ||||||||||||||||||
| Other expenses (income), net | (11) | (22) | 11 | 50 | % | ||||||||||||||||||
| Total other expenses (income) | 309 | 282 | 27 | 10 | % | ||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 678 | 632 | 46 | 7 | % | ||||||||||||||||||
| INCOME TAX PROVISION | 159 | 148 | 11 | 7 | % | ||||||||||||||||||
| NET INCOME | $ | 519 | $ | 484 | $ | 35 | 7 | % | |||||||||||||||
Operating Revenues
The following table sets forth the components of and changes in operating revenues for the years ended December 31, 2025 and 2024, which included revenue accruals and deferrals as described in Note 6 to the consolidated financial statements:
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2025
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2024
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Increase | Increase | ||||||||||||||||||||||||||||||||
| (In millions of USD) | Amount | Percentage | Amount | Percentage | (Decrease) | (Decrease) | |||||||||||||||||||||||||||||
| Network revenues (a) | $ | 1,273 | 71 | % | $ | 1,175 | 72 | % | $ | 98 | 8 | % | |||||||||||||||||||||||
| Regional cost sharing revenues (a) | 438 | 24 | % | 402 | 25 | % | 36 | 9 | % | ||||||||||||||||||||||||||
| Point-to-point | 29 | 2 | % | 21 | 1 | % | 8 | 38 | % | ||||||||||||||||||||||||||
| Scheduling, control and dispatch (a) | 16 | 1 | % | 18 | 1 | % | (2) | (11) | % | ||||||||||||||||||||||||||
| October 2024 Order refund accrual | - | - | % | (21) | (1) | % | 21 | 100 | % | ||||||||||||||||||||||||||
| Other | 30 | 2 | % | 30 | 2 | % | - | - | % | ||||||||||||||||||||||||||
| Total | $ | 1,786 | 100 | % | $ | 1,625 | 100 | % | $ | 161 | 10 | % | |||||||||||||||||||||||
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(a)Includes a portion of Formula Rate true-up revenue.
Operating revenues for the year ended December 31, 2025 increased compared to the year ended December 31, 2024 primarily due to higher rate base associated with higher balances of property, plant and equipment and resulting return. Other contributors included increased recoverable operating expenses and no recognition of the liability for the refund related to the October 2024 Order in the year ended December 31, 2025.
Operating Expenses
General and administrative
General and administrative expense increased during the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to an increase in share based compensation. Other factors included increased salaries caused by a higher employee count.
Taxes other than income taxes
Taxes other than income taxes increased during the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to an increase in property taxes as a result of expiring state tax exemptions in Kansas and additional plant in service.
Other Expenses (Income)
Other expenses (income), net
Other expenses (income), net decreased for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to a decrease in interest income.
Liquidity and Capital Resources
We expect to maintain our approach of funding our future capital requirements with cash provided by operations at our Regulated Operating Subsidiaries, future issuances under our commercial paper program and amounts available under our revolving credit agreement (the terms of which are described in Note 9 to the consolidated financial statements). In addition, we may secure fixed debt funding in the capital markets, although we can provide no assurance that we will be able to obtain financing on favorable terms or at all. As market conditions warrant, we may also from time to time repurchase debt securities issued by us in the open market, in privately negotiated transactions, by tender offer or otherwise. We expect that our capital requirements will arise principally from our need to:
•Fund capital expenditures (including purchase obligations as described in Note 17 to the consolidated financial statements) 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 our debt service requirements, including principal repayments and periodic interest payments, which are further described below.
•Fund working capital requirements.
In addition to the expected capital requirements above, any adverse determinations or settlements relating to the regulatory matters or contingencies described in Notes 6 and 17 to the consolidated financial statements would result in additional capital requirements.
We believe that we have sufficient capital resources to meet our currently anticipated short-term (within twelve months) needs. However, we rely on both internal and external sources of liquidity to provide working capital and fund capital investments. An extended period of economic disruption could impact our ability to access the capital markets requiring us to seek alternative forms of financing which could negatively impact our liquidity and capital resources. Additionally, we will continue to monitor and assess interest rates and the lending environment to inform our funding strategy, including the utilization of various types of debt instruments.
ITC Holdings' sources of cash are dividends and other payments received by us from our Regulated Operating Subsidiaries and any of our other subsidiaries as well as the proceeds raised from the sale of our debt securities. Each of our Regulated Operating Subsidiaries, while wholly-owned by ITC Holdings, is legally distinct from ITC Holdings and has no obligation, contingent or otherwise, to make funds available to ITC Holdings.
To address our short-term (within twelve months) cash requirements, we expect to utilize cash provided by operations at our Regulated Operating Subsidiaries, future issuances under our commercial paper program, amounts available under our revolving credit agreement and long-term debt financing, as needed. As of December 31, 2025, we had consolidated indebtedness under our revolving credit agreement of $589 million, with unused capacity of $411 million. Additionally, ITC Holdings had $237 million of commercial paper issued and outstanding as of December 31, 2025, with the ability to issue an additional $163 million under the commercial paper program. In 2025, we paid $33 million of interest and commitment fees under our revolving credit agreement and commercial paper program. See Note 9 to the consolidated financial statements for a detailed discussion of the commercial paper program and our revolving credit agreement.
To address our future long-term capital requirements, we expect that we will need to obtain additional long-term debt financing. As of December 31, 2025, we had various notes and bonds outstanding with terms, including fixed interest rate and principal payment terms, specific to each borrowing. Maturity dates for these long-term debt issuances range from 2026 to 2055. Total future interest payment obligations associated with these existing fixed-rate, long-term debt obligations were $4.0 billion as of December 31, 2025, with expected interest payment obligations of $329 million due within the next twelve months. Certain of our capital projects could be delayed if we experience difficulties in accessing capital. We expect to be able to obtain such additional financing, as needed, in amounts and upon terms that will be acceptable to us due to our strong credit ratings and our historical ability to obtain financing.
METC has a contractual obligation through December 31, 2050 for an Easement Agreement for transmission purposes and rights-of-way, leasehold interests, fee interests and licenses associated with the land over which the transmission lines cross. The cost for use of the rights-of-way is $10 million per year. See Note 17 to the consolidated financial statements for additional details related to the easement.
We have certain obligations including contingent liabilities and other current and long-term liabilities, that have uncertainty regarding the timing and any amount of future cash flows necessary to settle these obligations. Such items include:
•long-term incentive awards;
•pension and other postretirement obligations;
•regulatory liabilities related to asset removal costs and refundable income taxes; and
•liabilities to refund deposits from generators for transmission network upgrades.
Credit Ratings
Credit ratings by nationally recognized statistical rating agencies are an important component of our liquidity profile. Credit ratings relate to our ability to issue debt securities and the cost to borrow money and should not
be viewed as a recommendation to buy, sell or hold securities. Ratings are subject to revision or withdrawal at any time and each rating should be evaluated independently of any other rating. An explanation of these ratings may be obtained from the respective rating agency. Our credit ratings as of December 31, 2025, were as follows:
| S&P Global Ratings | Moody's Investor Service, Inc. | |||||||||||||||||||||||||
| Rating (a) | Outlook (b) | Rating | Outlook | |||||||||||||||||||||||
| ITC Holdings | ||||||||||||||||||||||||||
| Senior Unsecured Notes | BBB+ | Stable | Baa2 | Stable | ||||||||||||||||||||||
| Commercial Paper | A-2 | Stable | Prime-2 | Stable | ||||||||||||||||||||||
| ITCTransmission | ||||||||||||||||||||||||||
| First Mortgage Bonds | A+ | Stable | A1 | Stable | ||||||||||||||||||||||
| METC | ||||||||||||||||||||||||||
| Senior Secured Notes | A+ | Stable | A1 | Stable | ||||||||||||||||||||||
| ITC Midwest | ||||||||||||||||||||||||||
| First Mortgage Bonds | A+ | Stable | A1 | Stable | ||||||||||||||||||||||
| ITC Great Plains | ||||||||||||||||||||||||||
| First Mortgage Bonds | A+ | Stable | A1 | Stable | ||||||||||||||||||||||
____________________________
(a)On March 3, 2025, S&P Global increased the First Mortgage Bonds and Senior Secured Notes ratings for each of our Regulated Operating Subsidiaries from A to A+.
(b)On November 6, 2025, S&P Global reaffirmed the ratings on ITC Holdings for each of our Regulated Operating Subsidiaries and revised all outlooks from negative to stable.
Covenants
Our debt instruments contain numerous financial and operating covenants that place significant restrictions on certain transactions, such as incurring additional indebtedness, engaging in sale and lease-back transactions, creating liens or other encumbrances, entering into mergers, consolidations, liquidations or dissolutions, creating or acquiring subsidiaries and selling or otherwise disposing of all or substantially all of our assets. In addition, the covenants require us to meet certain financial ratios, such as maintaining certain debt to capitalization ratios and certain funds from operations to debt levels. As of December 31, 2025, we were not in violation of any debt covenant. In the event of a downgrade in our credit ratings, none of the covenants would be directly impacted, although the borrowing costs under our revolving credit agreement may increase.
Cash Flows
| Year Ended | Percentage | ||||||||||||||||||||||
| December 31, | Increase | Increase | |||||||||||||||||||||
| (In millions of USD) |
2025
|
2024
|
(Decrease) | (Decrease) | |||||||||||||||||||
| Cash Flows provided by (used in): | |||||||||||||||||||||||
| Operating activities | $ | 896 | $ | 838 | $ | 58 | 7 | % | |||||||||||||||
| Investing activities | (1,320) | (1,076) | 244 | 23 | % | ||||||||||||||||||
| Financing activities | 436 | (68) | 504 | 741 | % | ||||||||||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 12 | $ | (306) | |||||||||||||||||||
Cash Flows From Operating Activities
Net cash provided by operating activities increased primarily due to an increase in cash received from operating revenues of $131 million, a decrease in income taxes paid of $4 million and a decrease due to the settlement of interest rate swaps paid of $3 million during the year ended December 31, 2025 compared to the year ended December 31, 2024. This increase was partially offset by an increase in interest paid of $30 million, an increase in property taxes paid of $18 million, and an increase in ROE refunds, excluding interest, related to
the October 2024 Order of $16 million, and a decrease in interest income of $9 million during the year ended December 31, 2025 compared to the year ended December 31, 2024.
Cash Flows From Investing Activities
Net cash used in investing activities increased primarily due to an increase in capital expenditures during the year ended December 31, 2025 compared to the year ended December 31, 2024.
Cash Flows From Financing Activities
Net cash provided by financing activities increased primarily due to a decrease in repayments of long-term debt of $525 million, an increase in net borrowings under our revolving credit agreement of $406 million, an increase in net issuances of commercial paper of $237 million, a decrease in dividend payments of $194 million, and a increase in net refundable deposits received from generators for transmission network upgrades of $21 million during the year ended December 31, 2025 compared to the year ended December 31, 2024. This increase was partially offset by a decrease in issuances of long-term debt of $884 million during the year ended December 31, 2025 compared to the year ended December 31, 2024.
Critical Accounting Estimates
The consolidated financial statements are prepared in accordance with GAAP. The preparation of these 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 requires judgments regarding future events.
These estimates and judgments, in and of themselves, could materially impact the 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 following accounting policies are the most significant to the portrayal of our financial condition and results of operations and/or that require management's most difficult, subjective or complex judgments.
Regulation
Our Regulated Operating Subsidiaries are subject to rate regulation by the FERC. As a result, we apply accounting principles in accordance with the standards set forth by the FASB for accounting for the effects of certain types of regulation. Use of this accounting guidance results in differences in the application of GAAP between regulated and non-regulated businesses and requires the recording of regulatory assets and liabilities for certain transactions that would have been treated as expense or revenue in non-regulated businesses. As described in Note 7 to the consolidated financial statements, we had regulatory assets and liabilities of $225 million and $782 million, respectively, as of December 31, 2025. Future changes in the regulatory and competitive environments could result in discontinuing the application of the accounting standards for the effects of certain types of regulations. If we were to discontinue the application of this guidance on the operations of our Regulated Operating Subsidiaries, we may be required to record losses relating to certain regulatory assets or gains relating to certain regulatory liabilities. We also may be required to record losses of $14 million relating to intangible assets at December 31, 2025 that are included in other assets on the consolidated statements of financial position.
We believe that currently available facts support the continued applicability of the standards for accounting for the effects of certain types of regulation and that all regulatory assets and liabilities are recoverable or refundable under our current rate environment.
Revenue Recognition under Cost-Based Formula Rates with True-Up Mechanism
Our Regulated Operating Subsidiaries recover expenses and earn an authorized return on and recover investments in property, plant and equipment on a current basis, under their forward-looking cost-based Formula Rates with a true-up mechanism.
Under their Formula Rates, our Regulated Operating Subsidiaries use forecasted expenses, property, plant and equipment, point-to-point revenues and other items for the upcoming calendar year to establish their projected revenue requirement and for the MISO Regulated Operating Subsidiaries, their component of the billed network rates for service on their systems from January 1 to December 31 of that year. Our Formula Rates include a true-up mechanism, whereby our Regulated Operating Subsidiaries compare their actual
revenue requirements to their billed revenues for each year to determine any over- or under-collection of revenue. The over- or under-collection typically results from differences between the projected revenue requirement used as the basis for billing and actual revenue requirement at each of our Regulated Operating Subsidiaries, or from differences between actual and projected monthly network peak loads at our MISO Regulated Operating Subsidiaries.
See Note 3 to the consolidated financial statements for a description of the policy for revenue recognition at our Regulated Operating Subsidiaries under their Formula Rates and Note 7 to the consolidated financial statements for the regulatory assets and liabilities recorded at our Regulated Operating Subsidiaries as a result of the Formula Rate revenue accruals and deferrals.
Contingent Obligations
See Note 3 to the consolidated financial statements for a description of the policy for estimating contingent obligations. The adequacy of liabilities recorded for contingent obligations can be significantly affected by external events or conditions that can be unpredictable; thus, the ultimate outcome of such matters could materially affect our consolidated financial statements. These events or conditions include, without limitation, the following:
•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 and state income tax laws;
•Identification and evaluation of lawsuits or complaints in which we may be or have been named as a defendant; and
•Resolution or progression of existing matters through the legislative process, the courts, the FERC, the NERC or the Environmental Protection Agency.
Pension and Postretirement Benefit Plan Assumptions
We sponsor certain retirement benefits for our employees, which include retirement pension plans and certain postretirement health care, dental and life insurance benefits. Our periodic costs and obligations associated with these plans are developed from actuarial valuations derived from a number of assumptions. Key assumptions include:
•Discount rates used to determine obligations - Benefit obligations, service cost and interest cost are determined by separately discounting projected benefit payments using a yield curve of high-quality corporate bonds. As of December 31, 2025, the weighted average single equivalent discount rate for the benefit obligation was 5.34% and 5.72% for our pension and postretirement benefit plans, respectively.
•Expected long-term returns on plan assets - In determining our long-term rate of return on plan assets, we consider the current and expected asset allocations, as well as historical and expected long-term rates of return on those types of asset classes. For the year ended December 31, 2025, we assumed that our pension and postretirement benefit plans' assets would generate weighted average long-term rates of return of 7.00% and 5.20%, respectively.
•Rate of salary increases - As of December 31, 2025, we used an annual rate of salary increases of 4.50% to determine our pension and postretirement plan obligations.
•Mortality - The Pri-2012 mortality table projected forward generationally from 2012 with the MP-2020 mortality improvement scale was used to determine pension and postretirement plan obligations as of December 31, 2025.
•Rate of increase in health care costs - We used a health care cost trend rate of 6.75% for 2026 grading down to a 5.00% ultimate rate in 2033 in valuing our postretirement benefit obligation as of December 31, 2025. These rates are based on a review of recent and expected future experience.
The below table displays the effect on our costs and obligation of a 1% change to certain pension and postretirement benefit plan assumptions as of December 31, 2025:
| Effect on Costs | Effect on Obligation | |||||||||||||||||||||||||
| (In millions of USD) | 1% Increase | 1% Decrease | 1% Increase | 1% Decrease | ||||||||||||||||||||||
| Change to Pension Plans | ||||||||||||||||||||||||||
| Discount rate | $ | (1) | $ | - | $ | (13) | $ | 16 | ||||||||||||||||||
| Long-term rate of return on plan assets | (1) | 1 | N/A | N/A | ||||||||||||||||||||||
| Change to Postretirement Plan | ||||||||||||||||||||||||||
| Discount rate | (3) | 4 | (17) | 21 | ||||||||||||||||||||||
| Long-term rate of return on plan assets | (2) | 2 | N/A | N/A | ||||||||||||||||||||||
| Health care cost trend rate | 4 | (4) | 19 | (15) | ||||||||||||||||||||||
See Note 11 to the consolidated financial statements for further details regarding our pension and postretirement benefit plan costs and obligations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a material effect on our financial condition.
Recent Accounting Pronouncements
See Note 2 to the consolidated financial statements for information related to recently issued and adopted FASB guidance.
ITC Holdings Corporation published this content on February 12, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 12, 2026 at 11:13 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]