Partners in Business Quarterly Meeting

1. Partners in Business Quarterly Meeting Fox Hills Golf and Banquet CenterAugust 31, 2006Plymouth, MI

2. Agenda • Welcome • Anne Jinks • Capital Project Update • Brian Slocum • Regulatory & Legislative Update • Michael Taylor • Marketing, Operations Update & Closing • Anne Jinks • Lunch • Networking Event

3. Capital Project Update • Brian Slocum, Senior Engineer, System Planning

4. Capital Projects Guiding Principles • ITCTransmission follows a stringent planning process to ensure that the projects that are implemented provide the maximum value to our customers. • The System Planning team develops contingency-based scenarios to identify where our system faces reliability risks. • Additionally, ITCTransmission uses PROMOD software that performs modeling that not only provides visibility to the reliability benefits of the projects but also assists in identifying projects that provide economic benefits. • All system capacity projects proposed are based on at least one projected planning criteria violation. Postponing or eliminating these projects puts ITCTransmission in violation of its Planning Criteria. • ITCTransmission’s 2007 Capital Project Budget will provide the following benefits: • Reliability in the form of increased system capacity and increased transfer capability; • Reliability through infrastructure improvements; or • Economic benefits to ITCTransmission customers by reducing congestion and/or losses.

5. 2006 Capital Project Update • Majestic – Madrid • Work at Madrid has started this year. Most of the work at the Majestic end will be completed in 2007. • Erin – Stephens 3 • The manholes and ductwork is expected to be completed in 2006 with the cable installation moving forward in 2007. • Station work at the terminal ends of the line will also be completed in 2007. • St. Antoine GIS Replacement • Project to replace aging equipment at the end of its useful life was completed on May 26, 2006.

6. 2006 Capital Project Update • Lenox Station • Before the summer, 3 of the 5 - 120kV lines were placed in commission. This helped to improve voltages in Macomb County during the summer peak. • The other 2 - 120kV lines will be placed in commission this fall. The 345kV switchyard and the 345-120kV transformer will be placed in service by the end of this year. • Wyatt Station • Construction is nearing completion in the field. Between now and the end of the year various shutdowns will take place to cut the 4 lines into the station and make connections to the DVAR. • Quaker – Wixom 230kV • Currently waiting on the arrival of the 230-120kV transformer at Quaker. Once transformer arrives the new line will be placed in service and the project will be completed. • Pontiac Reactor • Project was completed and placed in service on May 17, 2006.

7. 1 4 5 3 2 5 Capital Projects For 2007 System Capacity Improvements 1. Bismarck-Troy 345kV Cable 2. Oakland Township Station & Lines 3. Pontiac-Joslyn-Walton 120kV Circuit Upgrade 4. Golf Station 5. Coventry 230kV Station

8. 7 8 9 6 6 Capital Projects For 2007 System Capacity Improvements (cont.) 6. Majestic 345-120kV & Majestic-Madrid 120kV 7. Placid Station Expansion 8. Erin – Stephens 3 9. Yost 120kV Line Breaker

9. System Capacity Improvements • Bismarck-Troy 345kV Cable: First Phase of the Central System Project to improve reliability and add capacity by reducing loading on circuits in Oakland County. • Build a new 345kV circuit to support the central part of ITCTransmission’s 120kV system. • Design started with construction to start upon MPSC siting approval. • Projected completion toward end of 2008. • Benefits: Reduces system losses by 16 MW at peak. Based on PROMOD runs, the total Central System Project will save customers between $13-$24 million annually. • Oakland Township Station & Lines: Second Phase of the Central System Project. Increase transmission capacity and reliability by reducing overloads – Oakland, Pontiac, Tienken and Sunbird Stations in Oakland County. • Build a new 345/120 kV switching station, add 3 new 120kV lines and add/upgrade equipment at 3 other stations. • Design to start in 2006, with construction to start in 2007.

10. System Capacity Improvements • Project completion toward end of 2008. • Benefits: Reduces loading on Pontiac transformers and 120kV lines; reduces system losses at peak by 6MW. Benefit: Based on PROMOD runs, the total Central System Project will save customers between $13-$24 million annually. • Pontiac-Joslyn-Walton 120kV Circuit Upgrade, Third Phase of the Central System Project: Increase transmission capacity and reliability by increasing line ratings and reducing overloads in Oakland County. • Replace terminal equipment at Pontiac and Walton stations. • Projected completion date – June 2007. • Benefits: Based on PROMOD runs, the total Central System Project will save customers between $13-$24 million annually.

11. System Capacity Improvements • Golf 120kV Station: Increase transmission capacity and reliability, and reduce transmission system losses in Macomb County • Completion of project which began in 2005 with line work. • 2007 work includes creation of 120kV switching station at Golf station. • Projected completion date – June 2007. • Benefits: 1.4 MW loss savings, frees up 13 MVAR of dynamic reserve. • Coventry 230kV Station: Increase transfer capability into ITCTransmission system by reducing constraints. • Creates a new 230kV Station at Coventry and upgrades 2 – 120kV circuits to 230 kV operation and splits an existing 120kV circuit into 2 circuits. • Projected completion date – June 2007. • Benefits: Increases import capability into ITCTransmission system by approximately 750MW. Directly improves the loss of load expectation toward the standard 1 day in 10 years.

12. System Capacity Improvements • Majestic 345-120kV & Majestic-Madrid 120kV: Improve voltages in Washtenaw and Livingston Counties to allow for increased transfer capability. • Install a new 345/120kV transformer at Majestic Station, create a new 120kV circuit between the Majestic and Madrid stations and a capacitor at Madrid. • Construction completion – June 2007. • Benefits: 15 MVAR loss savings; increases METC to ITCTransmission transfer capability by improving voltages on both systems in the Livingston County area. • Placid Station Expansion: Increase capacity and improve reliability by adding additional transformation at Placid Station in Oakland County • Install a 2nd 345/120kV transformer at Placid Station as an in-service spare. • Design started in 2005 with completion by June 2007. • Benefits: Approximately 8 MVAR loss savings; raises post contingency voltages in the area.

13. System Capacity Improvements • Erin-Stephens 3 120kV: Increase capacity and improve reliability in Macomb County • Install a 120kV cable from Erin to Stephens stations, creating a 3rd circuit to Erin. • Station improvements at Stephens to provide separation between the feeds to Erin and the addition of a new section breaker at Macomb will further improve reliability to the area. • Construction on conduit and manholes began in 2006. Projected completion – December, 2007. • Benefits: Secures approximately 400 MW of load that was at risk for a single common element outage on the ITCTransmission system. • Yost 120kV line breaker: Improve reliability in Livonia area by reducing exposure to outages • Install a 120kV line breaker at Yost on the Polaris – Yost line. • Completion by December 2007. • Benefits: Improves reliability to industrial end-use customers by reducing the exposure to outages caused by 120kV bus, capacitor and distribution transformer problems.

14. System Capacity Improvements • Overloaded non-terminal Station Equipment replacement • Replace non-terminal equipment found to be overloaded in system normal configurations and in open breaker configurations across the footprint. • Ongoing project to address found issues to allow for full operability of station equipment. • Arrowhead Station Bypass Switch • Install a bypass switch at Arrowhead Station to allow for shutdowns of the Arrowhead equipment without breaking the series circuit from Tuscola to Harbor Beach. • Eliminates dependence on Harbor Beach generation for shutdowns at Arrowhead Station. • Monroe Transformer 303 Secondary Breaker Installation • Install a 120kV breaker on the secondary of Monroe 345/120 kV Transformer 303. • Improves operating flexibility by allowing for shutdowns of the transformer without requiring an industrial customer shutdown simultaneously.

15. Infrastructure Improvements • Gas Insulated Switchgear (GIS) Replacements • Caniff and Midtown Stations • Replaces aging and leaking equipment reducing maintenance costs and improving reliability • Completed St. Antoine earlier this year • Breaker Replacements • Improving overall reliability of the ITCTransmission system by replacing aging circuit breakers which will reduce maintenance and testing costs and maintain safety. • A total 24 replacements are planned in 2007 at various 345kV, 230kV and 120kV stations. • Gas Cable Termination Replacements • Replace 120kV cable terminations which are at end of life, are un-maintainable and have no readily available spare parts.

16. Infrastructure Improvements • New 120kV Synchronizing Sites • Add synchronizing equipment (controls and potential transformers) to 120kV sites in order to facilitate system restoration. • Relay Betterment – Improving reliability by replacing end of life relays with state of the art microprocessor based relays. • Ongoing program to replace aged equipment. • Wood Pole Replacement Program – Replace aging infrastructure • Ongoing program to replace aged and condemned wooden poles across the ITCTransmission system. • Power Plant Control Relocation – Improving Reliability and Security • Replace controls and other equipment at ITCTransmission stations that are currently located in DTE Power Plants. Improves power plant and switchyard security and replaces aged equipment.

17. Customer Connection Requests • Customer Connections – ITCTransmission strives to supply Best-in-Class service to all transmission customers • New Distribution Interconnections • We currently have 13 distribution interconnection requests that are in various stages of the project cycle. • New Generation Interconnections • We currently have 7 generation interconnection requests in the MISO Queue which could drive the need for further infrastructure improvement. • No Interconnection Agreements have been executed to date on any of these requests.

18. MISO Transmission Expansion Plan • ITCTransmission participates in the MISO Transmission Expansion Plan (MTEP) process and submits its system projects to MISO for their review and approval. • The projects in the 2007 Capital Budget are in various stages in the MTEP Process. • Some have been submitted and approved as parts of previous MTEP. Others are being submitted for the first time as part of the current MTEP study.

19. Regulatory & Legislative Update • Michael Taylor, Regulatory Analyst

20. Regulatory Update • The Federal Energy Regulatory Commission (FERC) approved ITCTransmission’s request to implement Attachment O on a prospective basis with a true-up mechanism (ER06-1006). • Allows ITCTransmission to recover its expenses and investments in property, plant, and equipment on a current rather than on a lagging basis. • ITCTransmission will be having a customer meeting on September 14 to discuss the rate that will go into effect on January 1, 2007. • Compliance filing made on August 14, 2006. • FERC issued a final rule regarding incentive pricing for transmission expansion projects (Order 679). • The incentives identified in the order generally track the ones proposed in the NOPR. • Incentive treatment is to be granted on a case-by-case basis. • Further reporting requirements were adopted for projects that qualify for incentive treatment under the Rule.

21. Regulatory Update • FERC accepted the North American Electric Reliability Council’s (NERC) application to become the Electric Reliability Organization (ERO) for the US (RR06-1). • This will make the NERC’s reliability standards legally enforceable, as provided for under the Energy Policy Act of 2005. • The standards are under consideration in a separate docket (RM06-16). • The order largely accepted, subject to a compliance filing, the governance structure, funding methodology and standards development process proposed by NERC. • FERC finalized guidelines for transmission providers to follow in developing long-term firm transmission rights in organized electricity markets (RM06-8). • Deference was given to Regional Transmission Organizations (RTOS) to propose mechanisms that reflect the nuances of their markets. • ITCTransmission remains interested in MISO’s compliance process, as it wants to ensure that it remains a non-market participant.

22. Regulatory Update • FERC approved changes to the MISO Transmission Owners Agreement to establish a Funds Trust Agreement (ER06-785). • Trust is designed to receive, hold, and distribute transmission revenues and is intended to protect transmission revenues belonging to the MISO Transmission Owners, particularly in the event the Midwest ISO becomes insolvent. • FERC Administrative Law Judge (ALJ) issued an initial decision in the Seams Elimination Cost Adjustment (SECA) proceeding (EL02-111 et al). • Generally finds that the SECA rates are unjust and unreasonable. • FERC Approved the MISO’s request for a 60-day extension of the September 1st filing deadline for the MISO to file a cost-allocation methodology for regionally-beneficial transmission projects (ER06-18). • Extension was granted on August 17, 2006. • Several proposals are currently being discussed.

23. Regulatory Update • ITCTransmission recently filed comments in response to the Order 888 reform NOPR (RM05-25). • Advocated structural reforms and prudent expansion of the transmission grid as a means of eliminating incentives towards discriminatory service. • Commented on Available Transmission Capacity calculations. • ITCTransmission filed for a Certificate of Public Convenience and Necessity for the construction of a transmission line through Genoa, Hartland, Oceola, Milford, and Brighton Townships (U–14861). • Hearings scheduled for November 28-30. • FERC ALJ issued an initial decision in the investigation of zonal pricing within PJM (EL05-121). • Initial decision found that existing license plate methodology is unjust and unreasonable and that postage stamp pricing is one of a couple methodologies that is just and reasonable.

24. Marketing and Operations Update • Anne Jinks, Director, Stakeholder Relations

25. ITCTransmission Educational Tool • When the Blackout of 2003 occurred, many people were unaware of ITCTransmission and the importance of high voltage transmission. • It became apparent to ITCTransmission that as a new independent company focusing only on transmission, it was necessary to educate end use consumers on the importance of maintaining the grid. • Victor, a 345kV lattice-style transmission tower, was created as a way to explain our business in a simple manner and to capture the audience attention. • Intended for audiences that are new to ITCTransmission, i.e., municipality officials, end-use customers, vendors, potential employees, schools, etc. • Let’s meet Victor the High Power Tower

26. Operations Performance • We experienced record peak loads in May, July and August. • On August 2, ITCTransmission set an all time record peak of 12,762MW which surpassed the previous record by over 400MW. • There were no transmission related outages, voltage violations or system overloads. • Our Planning Engineers identified problem areas on the system and initiated projects necessary to strengthen the weak areas. These projects have increased capacity and boosted voltage levels. • To increase import capability into our area, we completed the Michigan Electric Transmission Company (METC) interface project which allowed us to import approximately 800MW of power into our area helping us meet the record demand that we experienced in August.

27. Operations Performance

28. Operations Performance • Without our capital investment and preventative maintenance, we would have experienced reliability issues during this peak load. • Our Operations and Field Staff did everything possible to ensure maximum system capacity during this peak demand period. • For example, during these peak periods, we defer preventative maintenance on equipment until the load subsides, we delay routine maintenance on equipment, etc. • We still have much work to do and need to continue rebuilding infrastructure on our system to handle these demands and also be prepared for unplanned events occurring on the system and the increased traffic across regions. • Our goal is to stay proactive in identifying capital projects that will help us to continue to meet future demands.

29. Recap & Closing • Anne Jinks, Director, Stakeholder Relations

30. Working Together • Our success depends on your success. • Our only business is transmission. The independent transmission company model, focused on one product, will provide the highest level of benefits to our Partners in the form of increased reliability, reduced congestion and a reduction in the overall cost of delivered energy. • How are we performing in the reliability area? Let us know. Our goal is to serve you more efficiently. • Working together, identifying problems and sharing ideas is an essential component – let’s work for win-win solutions. • Let’s keep the lines of communication open. • Visit our website: www.itctransco.com • Any suggestions/concerns please contact: ajinks@itctransco.com or call 248-374-7250 • REMINDER: Special Partners in Business Meeting – Attachment O Thursday, September 14, 2006, 1:00 P.M. Schoolcraft College – VisTaTech Center