ITC Holdings Corp.

International Directory of Company Histories, Volume 75 (2004) by Ed Dinger

ITC Holdings Corp.

ITC Holdings Corp.

39500 Orchard Hill Place, Suite 200 Novi, Michigan 48375 U.S.A. Telephone: (248) 374-7100 Fax: (248) 374-7140 Web site: http://www.itc-holdings.com

Public Company Incorporated: 2002 Employees: 118 Sales: $126.4 million (2004) Stock Exchanges: New York Ticker Symbol: ITC NAIC: 221121 Electric Bulk Power Transmission and Control

ITC Holdings Corp. (ITC) is a Michigan-based public company whose wholly owned subsidiary, International Transmission Company, is recognized as the first independent electricity transmission company in the United States. International Transmission's fully regulated, high-voltage system links generating stations in Michigan and neighboring areas to local distribution points, serving a population of nearly five million people in 13 southeastern Michigan counties, including the Detroit metropolitan area. Following a 2005 initial public offering of stock, ITC shares are traded on the New York Stock Exchange. ITC hopes to expand beyond Michigan by acquiring other Midwest electricity transmission systems.

Tracing Roots Back to the 1800s Invention of Electric Light

The transmission system that formed the backbone of International Transmission was once part of Detroit Edison. After Thomas Edison successfully introduced electric lighting in 1879, electric companies cropped up all over the country to provide street lighting as well as commercial and residential service. Even in the sleepy town of Detroit, years before the automobile industry transformed it into a thriving metropolis, a number of competing electric companies were launched and jockeyed for position. During the final 15 years of the 1800s, two companies emerged in the market: Edison Illuminating Company of Detroit, founded in 1886 to serve businesses and homes, and Peninsular Electric Light Company, established in 1891 to focus on street lighting. In January 1903 the two companies were combined to create The Detroit Edison Company. Like all utility companies at the time, it was a vertically integrated operation, controlling all aspects of the business, from power generation to transmission to distribution. Over the ensuing decades, Detroit Edison acquired smaller Michigan utilities, steadily increasing the area it covered, all the while adding generating capacity and a network of transmission lines. During the 1990s, however, the longtime utility model became obsolete.

In 1992 the U.S. Congress passed the Energy Policy Act, which created competition in the wholesale sector of electricity by requiring utilities to make their power lines available for the transmission of electricity generated by outside producers. Next, in 1996, the Federal Energy Regulatory Commission (FERC) established new rules regarding transmission, and a year later the industry was deregulated, eliminating the monopoly status only as it pertained to transmission access of such longtime utility companies as Detroit Edison, which by now had been reorganized into a holding company called DTE Energy Company. This new structure created separation between non-regulated subsidiaries and those business units that remained regulated, such as the power transmission system.

Formation of the International Transmission Company in 2000

For DTE, transmission was not a growth business, a major reason why in 2000 DTE began the process of exiting from transmission, forming a new subsidiary called International Transmission Company. It then sought approval from FERC and notified the U.S. Securities and Exchange Commission regarding plans to spin off its transmission system into the subsidiary with assets worth $440 million. These assets included approximately 6,500 miles of both 120,000-volt cable and 345,000-volt electric cable, rights-of-way, and interconnections with other utilities. Although a subsidiary of DTE, International Transmission would become a common carrier, open to all suppliers of electricity. Some protests arose, however, after International Transmission made its initial rate request from federal regulators. Customers who chose to buy power from a supplier other than Detroit Edison would pay a higher rate, which opponents charged would discourage customers from choosing a different electricity supplier, in effect helping Detroit Edison to retain business. International Transmission disagreed, maintaining that it was not in the company's interest to hinder open access: In fact, the new company needed it simply to survive. In October 2000, FERC approved the rate request, imposing only minor modifications. The stage was now set for DTE's board of directors to approve the actual transfer of transmission assets to International Transmission.

Selected to serve as International Transmission's president and chief executive officer was Joseph L. Welch, the manager of transmission for Detroit Edison. Welch earned a Bachelor of Science degree in Electrical Engineering from the University of Kansas and was a Licensed Professional Engineer in Michigan. He began his career at Detroit Edison in 1971 and worked his way up through the organization. Although International Transmission was a DTE subsidiary, it was understood from the outset that it was soon likely to be sold off and become an unaffiliated, separate company. It would be Welch who would be called upon to supply the vision for the new company finding its way in a new environment for the energy industry.