ale-20200930
000006675612/3151,974,8852020Q3FALSE1.60.980.080.052.051.752.051.70.10.10.10.20.228nothree00000667562020-01-012020-09-30xbrli:shares00000667562020-09-30iso4217:USD00000667562019-12-31iso4217:USDxbrli:shares00000667562020-07-012020-09-3000000667562019-07-012019-09-3000000667562019-01-012019-09-3000000667562018-12-3100000667562019-09-300000066756us-gaap:CommonStockMember2020-06-300000066756us-gaap:CommonStockMember2019-06-300000066756us-gaap:CommonStockMember2019-12-310000066756us-gaap:CommonStockMember2018-12-310000066756us-gaap:CommonStockMember2020-07-012020-09-300000066756us-gaap:CommonStockMember2019-07-012019-09-300000066756us-gaap:CommonStockMember2020-01-012020-09-300000066756us-gaap:CommonStockMember2019-01-012019-09-300000066756us-gaap:CommonStockMember2020-09-300000066756us-gaap:CommonStockMember2019-09-300000066756us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300000066756us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300000066756us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000066756us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310000066756us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300000066756us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300000066756us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300000066756us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-09-300000066756us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300000066756us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300000066756us-gaap:RetainedEarningsMember2020-06-300000066756us-gaap:RetainedEarningsMember2019-06-300000066756us-gaap:RetainedEarningsMember2019-12-310000066756us-gaap:RetainedEarningsMember2018-12-310000066756us-gaap:RetainedEarningsMember2020-07-012020-09-300000066756us-gaap:RetainedEarningsMember2019-07-012019-09-300000066756us-gaap:RetainedEarningsMember2020-01-012020-09-300000066756us-gaap:RetainedEarningsMember2019-01-012019-09-300000066756us-gaap:RetainedEarningsMember2020-09-300000066756us-gaap:RetainedEarningsMember2019-09-300000066756us-gaap:NoncontrollingInterestMember2020-06-300000066756us-gaap:NoncontrollingInterestMember2019-06-300000066756us-gaap:NoncontrollingInterestMember2019-12-310000066756us-gaap:NoncontrollingInterestMember2018-12-310000066756us-gaap:NoncontrollingInterestMember2020-07-012020-09-300000066756us-gaap:NoncontrollingInterestMember2019-07-012019-09-300000066756us-gaap:NoncontrollingInterestMember2020-01-012020-09-300000066756us-gaap:NoncontrollingInterestMember2019-01-012019-09-300000066756us-gaap:NoncontrollingInterestMember2020-09-300000066756us-gaap:NoncontrollingInterestMember2019-09-300000066756ale:PensionandOtherPostretirementBenefitPlansNonServiceCreditMember2020-01-012020-09-300000066756ale:PensionandOtherPostretirementBenefitPlansNonServiceCreditMember2019-01-012019-09-300000066756ale:InterestandInvestmentEarningsMember2020-01-012020-09-300000066756ale:InterestandInvestmentEarningsMember2019-01-012019-09-300000066756ale:AFUDCEquityMember2020-01-012020-09-300000066756ale:AFUDCEquityMember2019-01-012019-09-300000066756ale:GainLossonLandSalesMember2020-01-012020-09-300000066756ale:GainLossonLandSalesMember2019-01-012019-09-300000066756ale:OtherIncomeExpenseOtherMember2020-01-012020-09-300000066756ale:OtherIncomeExpenseOtherMember2019-01-012019-09-3000000667562019-01-012019-12-31utr:MW0000066756ale:GlenUllinEnergyCenterMember2020-01-012020-09-300000066756ale:SouthPeakMember2020-01-012020-09-300000066756ale:SouthPeakMember2020-04-162020-04-160000066756ale:SouthPeakMember2020-04-292020-04-290000066756ale:CurrentCostRecoveryRiderMemberale:MinnesotaPowerMemberale:ElectricRatesMemberale:RetailCustomersMemberale:MPUCMember2020-01-012020-09-300000066756ale:CurrentCostRecoveryRiderMemberale:MinnesotaPowerMemberale:ElectricRatesMemberale:RetailCustomersMemberale:MPUCMember2019-01-012019-09-30xbrli:pure0000066756ale:MinnesotaPowerMemberale:ElectricRatesMemberale:RetailCustomersMemberale:A2020MinnesotaGeneralRateReviewMemberale:MPUCMember2019-11-012019-11-010000066756ale:MinnesotaPowerMemberale:ElectricRatesMemberale:RetailCustomersMemberale:A2020MinnesotaGeneralRateReviewMemberale:MPUCMember2020-05-012020-05-010000066756ale:MinnesotaPowerMemberale:ElectricRatesMemberale:RetailCustomersMemberale:A2020MinnesotaGeneralRateReviewMemberale:MPUCMember2020-01-012020-04-300000066756ale:MinnesotaPowerMemberale:ElectricRatesMemberale:RetailCustomersMemberale:A2020MinnesotaGeneralRateReviewMemberale:MPUCMember2020-09-300000066756ale:MinnesotaPowerMemberale:ElectricRatesMemberale:RetailCustomersMemberale:A2020MinnesotaGeneralRateReviewMemberale:MPUCMember2020-01-012020-09-300000066756ale:MinnesotaPowerMemberale:FuelAdjustmentClauseFilingMemberale:MPUCMember2018-07-012019-12-310000066756ale:MinnesotaPowerMemberale:COVID19RelatedDeferredAccountingMemberale:MPUCMember2020-01-012020-09-300000066756ale:MinnesotaPowerMemberale:ResourcePackageMemberale:NaturalGasPPAMemberale:MPUCMember2017-07-282017-07-280000066756ale:CombinedCycleNaturalGasFiredGeneratingFacilityMembersrt:MinimumMemberale:ResourcePackageMemberale:NaturalGasPPAMemberus-gaap:NaturalGasProcessingPlantMemberale:JointlyOwnedbyALLETEandDairylandPowerCooperativeMemberus-gaap:JointlyOwnedElectricityGenerationPlantMemberale:MPUCMember2017-07-280000066756ale:CombinedCycleNaturalGasFiredGeneratingFacilityMemberale:ResourcePackageMemberale:NaturalGasPPAMemberus-gaap:NaturalGasProcessingPlantMemberale:JointlyOwnedbyALLETEandDairylandPowerCooperativeMembersrt:MaximumMemberus-gaap:JointlyOwnedElectricityGenerationPlantMemberale:MPUCMember2017-07-280000066756ale:MinnesotaPowerMemberale:ResourcePackageMemberale:NaturalGasPPAMemberus-gaap:NaturalGasProcessingPlantMemberale:MPUCMember2017-07-282017-07-280000066756ale:NemadjiTrailEnergyCenterMembersrt:MaximumMember2020-09-300000066756ale:NemadjiTrailEnergyCenterMemberale:AlleteIncMember2020-09-300000066756ale:NemadjiTrailEnergyCenterMemberale:AlleteIncMembersrt:MaximumMember2020-09-300000066756ale:MinnesotaPowerMemberale:CIPConsolidatedFilingMemberale:MPUCMember2020-01-012020-09-300000066756ale:MinnesotaPowerMemberale:CIPConsolidatedFilingMemberale:MPUCMember2019-01-012019-09-300000066756ale:FERCMember2020-09-300000066756ale:FERCMember2019-12-310000066756ale:AlleteIncMemberale:MPUCMember2020-09-300000066756us-gaap:PensionAndOtherPostretirementPlansCostsMember2020-09-300000066756us-gaap:PensionAndOtherPostretirementPlansCostsMember2019-12-310000066756us-gaap:DeferredIncomeTaxChargesMember2020-09-300000066756us-gaap:DeferredIncomeTaxChargesMember2019-12-310000066756ale:CostRecoveryRidersMember2020-09-300000066756ale:CostRecoveryRidersMember2019-12-310000066756us-gaap:AssetRetirementObligationCostsMember2020-09-300000066756us-gaap:AssetRetirementObligationCostsMember2019-12-310000066756ale:ManufacturedGasPlantMember2020-09-300000066756ale:ManufacturedGasPlantMember2019-12-310000066756ale:Boswell12Member2020-09-300000066756ale:Boswell12Member2019-12-310000066756ale:MedicarePartDRegulatoryAssetMember2020-09-300000066756ale:MedicarePartDRegulatoryAssetMember2019-12-310000066756us-gaap:OtherRegulatoryAssetsLiabilitiesMember2020-09-300000066756us-gaap:OtherRegulatoryAssetsLiabilitiesMember2019-12-310000066756us-gaap:RegulatoryClauseRevenuesUnderRecoveredMember2020-09-300000066756us-gaap:RegulatoryClauseRevenuesUnderRecoveredMember2019-12-310000066756ale:PublicUtilitiesReserveForInterimRates2020-09-300000066756ale:PublicUtilitiesReserveForInterimRates2019-12-310000066756ale:TransmissionFormulaRatesMember2020-09-300000066756ale:TransmissionFormulaRatesMember2019-12-310000066756us-gaap:OtherRegulatoryAssetsLiabilitiesMember2020-09-300000066756us-gaap:OtherRegulatoryAssetsLiabilitiesMember2019-12-310000066756us-gaap:DeferredIncomeTaxChargesMember2020-09-300000066756us-gaap:DeferredIncomeTaxChargesMember2019-12-310000066756ale:WholesaleAndRetailContraAfudcMember2020-09-300000066756ale:WholesaleAndRetailContraAfudcMember2019-12-310000066756us-gaap:RemovalCostsMember2020-09-300000066756us-gaap:RemovalCostsMember2019-12-310000066756us-gaap:PensionAndOtherPostretirementPlansCostsMember2020-09-300000066756us-gaap:PensionAndOtherPostretirementPlansCostsMember2019-12-310000066756ale:NorthDakotaInvestmentTaxCreditsSubjecttoRefundMember2020-09-300000066756ale:NorthDakotaInvestmentTaxCreditsSubjecttoRefundMember2019-12-310000066756ale:CIPFinancialIncentiveMember2020-09-300000066756ale:CIPFinancialIncentiveMember2019-12-310000066756ale:ATCMember2020-09-300000066756ale:ATCMember2020-01-012020-09-300000066756us-gaap:SubsequentEventMemberale:ATCMember2020-10-302020-10-300000066756ale:ATCMember2019-12-310000066756ale:Nobles2Member2020-09-300000066756ale:TenaskaMemberale:MinnesotaPowerMemberale:ResourcePackageMemberale:TenaskaPPAMemberale:WindTurbineGeneratorsMemberale:MPUCMember2020-09-300000066756ale:TenaskaMemberale:MinnesotaPowerMemberale:ResourcePackageMemberale:TenaskaPPAMemberale:WindTurbineGeneratorsMemberale:MPUCMember2020-01-012020-09-300000066756ale:Nobles2Member2019-12-310000066756ale:Nobles2Member2020-01-012020-09-300000066756us-gaap:SubsequentEventMemberale:Nobles2Member2020-10-012020-10-310000066756us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300000066756us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300000066756us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300000066756us-gaap:FairValueMeasurementsRecurringMember2020-09-300000066756us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310000066756us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310000066756us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310000066756us-gaap:FairValueMeasurementsRecurringMember2019-12-310000066756us-gaap:FairValueInputsLevel2Member2020-09-300000066756us-gaap:FairValueInputsLevel2Member2019-12-310000066756ale:ALLETECleanEnergyMember2020-09-300000066756us-gaap:LineOfCreditMember2020-09-300000066756us-gaap:LineOfCreditMember2019-12-310000066756ale:UnsecuredTermLoanDuein2021Member2020-01-102020-01-100000066756ale:ALLETEBonds2.50DueAugust2030Member2020-08-032020-08-030000066756ale:ALLETEBonds2.50DueAugust2030Member2020-08-030000066756ale:ALLETEBonds3.30DueAugust2050Member2020-08-032020-08-030000066756ale:ALLETEBonds3.30DueAugust2050Member2020-08-030000066756ale:UnsecuredTermLoanDueApril2021Member2020-04-082020-04-080000066756ale:UnsecuredTermLoanDueApril2021Member2020-07-060000066756ale:UnsecuredSeniorNotesDueSeptember2025Member2020-09-102020-09-100000066756ale:UnsecuredSeniorNotesDueSeptember2025Member2020-09-100000066756srt:MaximumMember2020-09-300000066756ale:SquareButtePpaMemberale:SquareButteMember2020-01-012020-09-300000066756ale:MinnesotaPowerMemberale:SquareButtePpaMemberale:SquareButteMember2020-01-012020-09-300000066756ale:MinnesotaPowerMemberale:SquareButtePpaMemberale:SquareButteMember2019-01-012019-09-300000066756ale:SquareButteCoalFiredUnitMemberale:MinnesotaPowerMemberale:SquareButtePpaMemberale:SquareButteMember2020-01-012020-09-300000066756ale:MinnesotaPowerMemberale:SquareButteCoalFiredUnitMemberale:SquareButtePpaMemberale:MinnkotaSalesAgreementMemberale:MinnkotaPowerMember2020-01-012020-09-300000066756ale:MinnesotaPowerShorttermPSAsin2020and2021Member2020-01-012020-09-300000066756ale:MinnesotaPowerMemberale:SquareButteCoalFiredUnitMemberale:SquareButtePpaMemberale:MinnkotaSalesAgreementMemberale:MinnkotaPowerMember2019-01-012019-09-300000066756ale:ManitobaHydroMemberale:ManitobaHydroPpaExpires2035Member2020-09-30ale:Miles0000066756ale:MinnesotaPowerMemberale:GreatNorthernTransmissionLineMember2020-09-30ale:kV0000066756ale:GreatNorthernTransmissionLineMember2020-09-300000066756ale:MinnesotaPowerMemberale:CoalCombustionResidualsMember2020-01-012020-09-300000066756ale:MinnesotaPowerMembersrt:MinimumMemberale:CoalCombustionResidualsMember2020-01-012020-09-300000066756ale:MinnesotaPowerMemberale:CoalCombustionResidualsMembersrt:MaximumMember2020-01-012020-09-300000066756ale:SuperiorWIMemberale:SWLPMemberale:ManufacturedGasPlantMember2020-09-300000066756ale:SuperiorWIMemberale:SWLPMemberale:ManufacturedGasPlantMember2019-12-310000066756us-gaap:StandbyLettersOfCreditMemberale:AlleteIncMember2020-09-300000066756us-gaap:StandbyLettersOfCreditMemberale:RegulatedOperationsMember2020-09-300000066756us-gaap:StandbyLettersOfCreditMemberale:ALLETECleanEnergyMember2020-09-300000066756us-gaap:StandbyLettersOfCreditMemberale:ALLETESouthWindMember2020-09-300000066756ale:BniCoalReclamationLiabilityMemberus-gaap:SuretyBondMember2020-09-300000066756ale:BniCoalReclamationLiabilityMember2020-09-300000066756ale:AlletePropertiesPerformanceAndMaintenanceObligationsMemberus-gaap:SuretyBondMember2020-09-300000066756ale:AlletePropertiesPerformanceAndMaintenanceObligationsMember2020-09-300000066756ale:TownCenterCommunityDevelopmentDistrictMember2020-09-300000066756ale:TownCenterCommunityDevelopmentDistrictMember2020-01-012020-09-300000066756us-gaap:PensionPlansDefinedBenefitMember2020-07-012020-09-300000066756us-gaap:PensionPlansDefinedBenefitMember2019-07-012019-09-300000066756us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-07-012020-09-300000066756us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-07-012019-09-300000066756us-gaap:PensionPlansDefinedBenefitMember2020-01-012020-09-300000066756us-gaap:PensionPlansDefinedBenefitMember2019-01-012019-09-300000066756us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-01-012020-09-300000066756us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-01-012019-09-300000066756us-gaap:PensionPlansDefinedBenefitMember2020-09-300000066756us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-09-30ale:Segments0000066756ale:RegulatedOperationsMember2020-01-012020-09-300000066756us-gaap:CorporateAndOtherMember2020-01-012020-09-30utr:acre0000066756us-gaap:CorporateAndOtherMember2020-09-300000066756ale:ResidentialMemberale:RegulatedOperationsMember2020-07-012020-09-300000066756ale:ResidentialMemberale:RegulatedOperationsMember2019-07-012019-09-300000066756ale:ResidentialMemberale:RegulatedOperationsMember2020-01-012020-09-300000066756ale:ResidentialMemberale:RegulatedOperationsMember2019-01-012019-09-300000066756ale:CommercialMemberale:RegulatedOperationsMember2020-07-012020-09-300000066756ale:CommercialMemberale:RegulatedOperationsMember2019-07-012019-09-300000066756ale:CommercialMemberale:RegulatedOperationsMember2020-01-012020-09-300000066756ale:CommercialMemberale:RegulatedOperationsMember2019-01-012019-09-300000066756ale:RegulatedOperationsMemberale:MunicipalMember2020-07-012020-09-300000066756ale:RegulatedOperationsMemberale:MunicipalMember2019-07-012019-09-300000066756ale:RegulatedOperationsMemberale:MunicipalMember2020-01-012020-09-300000066756ale:RegulatedOperationsMemberale:MunicipalMember2019-01-012019-09-300000066756ale:IndustrialMemberale:RegulatedOperationsMember2020-07-012020-09-300000066756ale:IndustrialMemberale:RegulatedOperationsMember2019-07-012019-09-300000066756ale:IndustrialMemberale:RegulatedOperationsMember2020-01-012020-09-300000066756ale:IndustrialMemberale:RegulatedOperationsMember2019-01-012019-09-300000066756ale:RegulatedOperationsMemberale:OtherPowerSuppliersMember2020-07-012020-09-300000066756ale:RegulatedOperationsMemberale:OtherPowerSuppliersMember2019-07-012019-09-300000066756ale:RegulatedOperationsMemberale:OtherPowerSuppliersMember2020-01-012020-09-300000066756ale:RegulatedOperationsMemberale:OtherPowerSuppliersMember2019-01-012019-09-300000066756ale:RegulatedOperationsMemberale:CIPFinancialIncentiveMember2020-07-012020-09-300000066756ale:RegulatedOperationsMemberale:CIPFinancialIncentiveMember2019-07-012019-09-300000066756ale:RegulatedOperationsMemberale:CIPFinancialIncentiveMember2020-01-012020-09-300000066756ale:RegulatedOperationsMemberale:CIPFinancialIncentiveMember2019-01-012019-09-300000066756ale:OtherMemberale:RegulatedOperationsMember2020-07-012020-09-300000066756ale:OtherMemberale:RegulatedOperationsMember2019-07-012019-09-300000066756ale:OtherMemberale:RegulatedOperationsMember2020-01-012020-09-300000066756ale:OtherMemberale:RegulatedOperationsMember2019-01-012019-09-300000066756ale:RegulatedOperationsMember2020-07-012020-09-300000066756ale:RegulatedOperationsMember2019-07-012019-09-300000066756ale:RegulatedOperationsMember2019-01-012019-09-300000066756ale:ALLETECleanEnergyMemberale:LongtermPSAMember2020-07-012020-09-300000066756ale:ALLETECleanEnergyMemberale:LongtermPSAMember2019-07-012019-09-300000066756ale:ALLETECleanEnergyMemberale:LongtermPSAMember2020-01-012020-09-300000066756ale:ALLETECleanEnergyMemberale:LongtermPSAMember2019-01-012019-09-300000066756ale:ALLETECleanEnergyMemberale:ALLETECleanEnergyOtherMember2020-07-012020-09-300000066756ale:ALLETECleanEnergyMemberale:ALLETECleanEnergyOtherMember2019-07-012019-09-300000066756ale:ALLETECleanEnergyMemberale:ALLETECleanEnergyOtherMember2020-01-012020-09-300000066756ale:ALLETECleanEnergyMemberale:ALLETECleanEnergyOtherMember2019-01-012019-09-300000066756ale:ALLETECleanEnergyMember2020-07-012020-09-300000066756ale:ALLETECleanEnergyMember2019-07-012019-09-300000066756ale:ALLETECleanEnergyMember2020-01-012020-09-300000066756ale:ALLETECleanEnergyMember2019-01-012019-09-300000066756ale:PointinTimeMemberale:U.S.WaterServicesMember2020-07-012020-09-300000066756ale:PointinTimeMemberale:U.S.WaterServicesMember2019-07-012019-09-300000066756ale:PointinTimeMemberale:U.S.WaterServicesMember2020-01-012020-09-300000066756ale:PointinTimeMemberale:U.S.WaterServicesMember2019-01-012019-09-300000066756ale:ContractMemberale:U.S.WaterServicesMember2020-07-012020-09-300000066756ale:ContractMemberale:U.S.WaterServicesMember2019-07-012019-09-300000066756ale:ContractMemberale:U.S.WaterServicesMember2020-01-012020-09-300000066756ale:ContractMemberale:U.S.WaterServicesMember2019-01-012019-09-300000066756ale:U.S.WaterServicesMemberale:CapitalProjectMember2020-07-012020-09-300000066756ale:U.S.WaterServicesMemberale:CapitalProjectMember2019-07-012019-09-300000066756ale:U.S.WaterServicesMemberale:CapitalProjectMember2020-01-012020-09-300000066756ale:U.S.WaterServicesMemberale:CapitalProjectMember2019-01-012019-09-300000066756ale:U.S.WaterServicesMember2020-07-012020-09-300000066756ale:U.S.WaterServicesMember2019-07-012019-09-300000066756ale:U.S.WaterServicesMember2020-01-012020-09-300000066756ale:U.S.WaterServicesMember2019-01-012019-09-300000066756ale:LongtermContractMemberus-gaap:CorporateAndOtherMember2020-07-012020-09-300000066756ale:LongtermContractMemberus-gaap:CorporateAndOtherMember2019-07-012019-09-300000066756ale:LongtermContractMemberus-gaap:CorporateAndOtherMember2020-01-012020-09-300000066756ale:LongtermContractMemberus-gaap:CorporateAndOtherMember2019-01-012019-09-300000066756us-gaap:CorporateAndOtherMemberale:CorporateOtherOtherMember2020-07-012020-09-300000066756us-gaap:CorporateAndOtherMemberale:CorporateOtherOtherMember2019-07-012019-09-300000066756us-gaap:CorporateAndOtherMemberale:CorporateOtherOtherMember2020-01-012020-09-300000066756us-gaap:CorporateAndOtherMemberale:CorporateOtherOtherMember2019-01-012019-09-300000066756us-gaap:CorporateAndOtherMember2020-07-012020-09-300000066756us-gaap:CorporateAndOtherMember2019-07-012019-09-300000066756us-gaap:CorporateAndOtherMember2019-01-012019-09-300000066756ale:RegulatedOperationsMember2020-09-300000066756ale:RegulatedOperationsMember2019-12-310000066756ale:ALLETECleanEnergyMember2020-09-300000066756ale:ALLETECleanEnergyMember2019-12-310000066756us-gaap:CorporateAndOtherMember2019-12-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2020
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ______________ to ______________
Commission File Number 1-3548
ALLETE, Inc.
(Exact name of registrant as specified in its charter)
Minnesota 41-0418150
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
30 West Superior Street
Duluth, Minnesota 55802-2093
(Address of principal executive offices)
(Zip Code)

(218) 279-5000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common Stock, without par valueALENew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
         Large Accelerated Filer                 Accelerated Filer    
         Non-Accelerated Filer             Smaller Reporting Company    
                             Emerging Growth Company    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No

Common Stock, without par value,
51,974,885 shares outstanding
as of September 30, 2020




Index
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ALLETE, Inc. Third Quarter 2020 Form 10-Q
2



Definitions

The following abbreviations or acronyms are used in the text. References in this report to “we,” “us” and “our” are to ALLETE, Inc., and its subsidiaries, collectively.
Abbreviation or AcronymTerm
AFUDCAllowance for Funds Used During Construction – the cost of both debt and equity funds used to finance regulated utility plant additions during construction periods
ALLETEALLETE, Inc.
ALLETE Clean EnergyALLETE Clean Energy, Inc. and its subsidiaries
ALLETE PropertiesALLETE Properties, LLC and its subsidiaries
ALLETE Transmission HoldingsALLETE Transmission Holdings, Inc.
ArcelorMittalArcelorMittal S.A.
ATCAmerican Transmission Company LLC
BisonBison Wind Energy Center
BNI EnergyBNI Energy, Inc. and its subsidiary
BoswellBoswell Energy Center
Camp RipleyCamp Ripley Solar Array
CliffsCleveland-Cliffs Inc.
CompanyALLETE, Inc. and its subsidiaries
COVID-192019 novel coronavirus
CSAPRCross-State Air Pollution Rule
DCDirect Current
EISEnvironmental Impact Statement
EPAUnited States Environmental Protection Agency
ESOPEmployee Stock Ownership Plan
FASBFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
Form 10-KALLETE Annual Report on Form 10-K
Form 10-QALLETE Quarterly Report on Form 10-Q
GAAPGenerally Accepted Accounting Principles in the United States of America
GHGGreenhouse Gases
GNTLGreat Northern Transmission Line
Hibbing TaconiteHibbing Taconite Co.
Husky EnergyHusky Energy Inc.
Invest DirectALLETE’s Direct Stock Purchase and Dividend Reinvestment Plan
IRPIntegrated Resource Plan
Item ___Item ___ of this Form 10-Q
kVKilovolt(s)
kW / kWh
Kilowatt(s) / Kilowatt-hour(s)
LaskinLaskin Energy Center
Lampert Capital MarketsLampert Capital Markets, Inc.
Manitoba HydroManitoba Hydro-Electric Board
Minnesota PowerAn operating division of ALLETE, Inc.
Minnkota PowerMinnkota Power Cooperative, Inc.
MISOMidcontinent Independent System Operator, Inc.
MMTPManitoba-Minnesota Transmission Project
Moody’sMoody’s Investors Service, Inc.
MPCAMinnesota Pollution Control Agency
ALLETE, Inc. Third Quarter 2020 Form 10-Q
3



Abbreviation or AcronymTerm
MPUCMinnesota Public Utilities Commission
MW / MWhMegawatt(s) / Megawatt-hour(s)
NAAQSNational Ambient Air Quality Standards
NDPSCNorth Dakota Public Service Commission
Nobles 2Nobles 2 Power Partners, LLC
NOLNet Operating Loss
NOX
Nitrogen Oxides
Northshore MiningNorthshore Mining Company, a wholly-owned subsidiary of Cleveland-Cliffs Inc.
Note ___Note ___ to the Consolidated Financial Statements in this Form 10-Q
NPDESNational Pollutant Discharge Elimination System
NTECNemadji Trail Energy Center
Oliver Wind IOliver Wind I Energy Center
Oliver Wind IIOliver Wind II Energy Center
PolyMetPolyMet Mining Corp.
PPA / PSAPower Purchase Agreement / Power Sales Agreement
PPACAPatient Protection and Affordable Care Act of 2010
PSCWPublic Service Commission of Wisconsin
SECSecurities and Exchange Commission
Silver Bay PowerSilver Bay Power Company, a wholly-owned subsidiary of Cleveland-Cliffs Inc.
SO2
Sulfur Dioxide
Square ButteSquare Butte Electric Cooperative, a North Dakota cooperative corporation
SWL&PSuperior Water, Light and Power Company
Taconite HarborTaconite Harbor Energy Center
Town Center DistrictTown Center at Palm Coast Community Development District in Florida
U.S.United States of America
U.S. Water ServicesU.S. Water Services Holding Company and its subsidiaries
USS CorporationUnited States Steel Corporation
WTGWind Turbine Generator

ALLETE, Inc. Third Quarter 2020 Form 10-Q
4



Forward-Looking Statements

Statements in this report that are not statements of historical facts are considered “forward-looking” and, accordingly, involve risks and uncertainties that could cause actual results to differ materially from those discussed. Although such forward-looking statements have been made in good faith and are based on reasonable assumptions, there can be no assurance that the expected results will be achieved. Any statements that express, or involve discussions as to, future expectations, risks, beliefs, plans, objectives, assumptions, events, uncertainties, financial performance, or growth strategies (often, but not always, through the use of words or phrases such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “likely,” “will continue,” “could,” “may,” “potential,” “target,” “outlook” or words of similar meaning) are not statements of historical facts and may be forward-looking.

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, we are providing this cautionary statement to identify important factors that could cause our actual results to differ materially from those indicated in forward-looking statements made by or on behalf of ALLETE in this Form 10-Q, in presentations, on our website, in response to questions or otherwise. These statements are qualified in their entirety by reference to, and are accompanied by, the following important factors, in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements that could cause our actual results to differ materially from those indicated in the forward-looking statements:

our ability to successfully implement our strategic objectives;
global and domestic economic conditions affecting us or our customers;
changes in and compliance with laws and regulations;
changes in tax rates or policies or in rates of inflation;
the outcome of legal and administrative proceedings (whether civil or criminal) and settlements;
weather conditions, natural disasters and pandemic diseases, including the ongoing COVID-19 pandemic;
our ability to access capital markets, bank financing and other financing sources;
changes in interest rates and the performance of the financial markets;
project delays or changes in project costs;
changes in operating expenses and capital expenditures and our ability to raise revenues from our customers;
the impacts of commodity prices on ALLETE and our customers;
our ability to attract and retain qualified, skilled and experienced personnel;
effects of emerging technology;
war, acts of terrorism and cybersecurity attacks;
our ability to manage expansion and integrate acquisitions;
population growth rates and demographic patterns;
wholesale power market conditions;
federal and state regulatory and legislative actions that impact regulated utility economics, including our allowed rates of return, capital structure, ability to secure financing, industry and rate structure, acquisition and disposal of assets and facilities, operation and construction of plant facilities and utility infrastructure, recovery of purchased power, capital investments and other expenses, including present or prospective environmental matters;
effects of competition, including competition for retail and wholesale customers;
effects of restructuring initiatives in the electric industry;
the impacts on our businesses of climate change and future regulation to restrict the emissions of GHG;
effects of increased deployment of distributed low-carbon electricity generation resources;
the impacts of laws and regulations related to renewable and distributed generation;
pricing, availability and transportation of fuel and other commodities and the ability to recover the costs of such commodities;
our current and potential industrial and municipal customers’ ability to execute announced expansion plans;
real estate market conditions where our legacy Florida real estate investment is located may not improve; and
the success of efforts to realize value from, invest in, and develop new opportunities.

Additional disclosures regarding factors that could cause our results or performance to differ from those anticipated by this report are discussed in Part I, Item 1A. Risk Factors of ALLETE’s 2019 Form 10-K and Part II, Item 1A. Risk Factors of this Form 10-Q. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which that statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of these factors, nor can it assess the impact of each of these factors on the businesses of ALLETE or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Readers are urged to carefully review and consider the various disclosures made by ALLETE in this Form 10-Q and in other reports filed with the SEC that attempt to identify the risks and uncertainties that may affect ALLETE’s business.
ALLETE, Inc. Third Quarter 2020 Form 10-Q
5



PART I.  FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

ALLETE
CONSOLIDATED BALANCE SHEET
Unaudited
September 30,
2020
December 31,
2019
Millions
Assets  
Current Assets  
Cash and Cash Equivalents$79.0 $69.3 
Accounts Receivable (Less Allowance of $1.6 and $0.9)92.0 96.4 
Inventories – Net74.8 72.8 
Prepayments and Other19.3 31.0 
Total Current Assets265.1 269.5 
Property, Plant and Equipment – Net4,697.5 4,377.0 
Regulatory Assets427.9 420.5 
Equity Investments291.8 197.6 
Other Non-Current Assets196.2 218.2 
Total Assets$5,878.5 $5,482.8 
Liabilities and Equity  
Liabilities  
Current Liabilities  
Accounts Payable$79.0 $165.2 
Accrued Taxes60.0 50.8 
Accrued Interest15.8 18.1 
Long-Term Debt Due Within One Year404.5 212.9 
Other70.7 60.4 
Total Current Liabilities630.0 507.4 
Long-Term Debt1,608.0 1,400.9 
Deferred Income Taxes204.8 212.8 
Regulatory Liabilities547.1 560.3 
Defined Benefit Pension and Other Postretirement Benefit Plans157.5 172.8 
Other Non-Current Liabilities285.5 293.0 
Total Liabilities3,432.9 3,147.2 
Commitments, Guarantees and Contingencies (Note 6)
Equity  
ALLETE Equity
Common Stock Without Par Value, 80.0 Shares Authorized, 52.0 and 51.7 Shares Issued and Outstanding1,454.2 1,436.7 
Accumulated Other Comprehensive Loss(23.1)(23.6)
Retained Earnings849.9 818.8 
Total ALLETE Equity2,281.0 2,231.9 
Non-Controlling Interest in Subsidiaries164.6 103.7 
Total Equity2,445.6 2,335.6 
Total Liabilities and Equity$5,878.5 $5,482.8 
The accompanying notes are an integral part of these statements.
ALLETE, Inc. Third Quarter 2020 Form 10-Q
6



ALLETE
CONSOLIDATED STATEMENT OF INCOME
Unaudited
Quarter EndedNine Months Ended
September 30,September 30,
 2020201920202019
Millions Except Per Share Amounts
Operating Revenue
Contracts with Customers – Utility$255.1 $254.1 $721.2 $786.1 
Contracts with Customers – Non-utility35.9 31.3 119.0 141.1 
Other – Non-utility2.9 2.9 8.5 8.7 
Total Operating Revenue293.9 288.3 848.7 935.9 
Operating Expenses  
Fuel, Purchased Power and Gas – Utility93.4 98.2 251.7 295.9 
Transmission Services – Utility14.9 18.3 49.8 55.8 
Cost of Sales – Non-utility15.4 14.7 48.6 61.8 
Operating and Maintenance61.9 58.1 181.9 201.0 
Depreciation and Amortization53.4 49.5 161.3 151.6 
Taxes Other than Income Taxes13.3 12.5 40.9 39.8 
Total Operating Expenses252.3 251.3 734.2 805.9 
Operating Income41.6 37.0 114.5 130.0 
Other Income (Expense)  
Interest Expense(16.3)(16.1)(47.9)(48.9)
Equity Earnings5.1 4.9 16.7 15.3 
Gain on Sale of U.S. Water Services   20.6 
Other2.9 3.0 9.1 14.6 
Total Other Income (Expense)(8.3)(8.2)(22.1)1.6 
Income Before Income Taxes33.3 28.8 92.4 131.6 
Income Tax Expense (Benefit)(5.5)(2.4)(27.8)(4.3)
Net Income38.8 31.2 120.2 135.9 
Net Loss Attributable to Non-Controlling Interest(1.9) (6.9) 
Net Income Attributable to ALLETE$40.7 $31.2 $127.1 $135.9 
Average Shares of Common Stock  
Basic51.9 51.7 51.8 51.6 
Diluted52.0 51.8 51.9 51.7 
Basic Earnings Per Share of Common Stock$0.78 $0.60 $2.45 $2.63 
Diluted Earnings Per Share of Common Stock$0.78 $0.60 $2.45 $2.63 
The accompanying notes are an integral part of these statements.
ALLETE, Inc. Third Quarter 2020 Form 10-Q
7



ALLETE
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited
Quarter EndedNine Months Ended
September 30,September 30,
2020201920202019
Millions    
Net Income$38.8 $31.2 $120.2 $135.9 
Other Comprehensive Income    
Unrealized Gain on Securities
Net of Income Tax Expense of $–, $–, $– and $0.1   0.2 
Defined Benefit Pension and Other Postretirement Benefit Plans
Net of Income Tax Expense of $0.1, $0.1, $0.2 and $0.20.2 0.1 0.5 0.3 
Total Other Comprehensive Income0.2 0.1 0.5 0.5 
Total Comprehensive Income39.0 31.3 120.7 136.4 
Net Loss Attributable to Non-Controlling Interest(1.9) (6.9) 
Total Comprehensive Income Attributable to ALLETE$40.9 $31.3 $127.6 $136.4 
The accompanying notes are an integral part of these statements.

ALLETE, Inc. Third Quarter 2020 Form 10-Q
8



ALLETE
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
Nine Months Ended
September 30,
 20202019
Millions
Operating Activities  
Net Income$120.2 $135.9 
AFUDC – Equity(1.8)(1.9)
Income from Equity Investments – Net of Dividends(2.3)(3.2)
Realized and Unrealized Gain on Investments and Property, Plant and Equipment (2.1)
Depreciation Expense161.3 150.3 
Amortization of PSAs(8.5)(8.7)
Amortization of Other Intangible Assets and Other Assets8.5 9.9 
Deferred Income Tax Benefit(27.9)(4.5)
Share-Based and ESOP Compensation Expense4.7 4.9 
Defined Benefit Pension and Postretirement Benefit Expense0.1 1.8 
Provision (Payments) for Interim Rate Refund5.2 (40.0)
Payments for Tax Reform Refund(0.1)(10.4)
Bad Debt Expense1.6 (0.3)
Gain on Sale of U.S. Water Services (20.6)
Changes in Operating Assets and Liabilities  
Accounts Receivable2.8 34.1 
Inventories(2.0)(15.9)
Prepayments and Other8.8 7.3 
Accounts Payable2.2 (3.3)
Other Current Liabilities12.5 (15.8)
Cash Contributions to Defined Benefit Pension Plans(10.7)(10.4)
Changes in Regulatory and Other Non-Current Assets(23.5)(16.2)
Changes in Regulatory and Other Non-Current Liabilities(7.2)(14.5)
Cash from Operating Activities243.9 176.4 
Investing Activities  
Proceeds from Sale of Available-for-sale Securities6.8 11.2 
Payments for Purchase of Available-for-sale Securities(7.2)(11.1)
Payments for Equity Investments(91.0)(26.4)
Return of Capital from Equity Investments 8.3 
Proceeds from Sale of U.S. Water Services – Net of Transaction Costs and Cash Retained 266.1 
Additions to Property, Plant and Equipment(540.8)(421.3)
Other Investing Activities(1.0)13.2 
Cash for Investing Activities(633.2)(160.0)
Financing Activities  
Proceeds from Issuance of Common Stock12.8 1.7 
Proceeds from Issuance of Long-Term Debt607.4 200.0 
Repayments of Long-Term Debt(207.4)(66.1)
Proceeds from Non-Controlling Interest in Subsidiaries – Net of Issuance Costs67.8  
Acquisition-Related Contingent Consideration Payments (3.8)
Dividends on Common Stock(96.0)(91.0)
Other Financing Activities(2.7)(1.0)
Cash from Financing Activities381.9 39.8 
Change in Cash, Cash Equivalents and Restricted Cash(7.4)56.2 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period92.5 79.0 
Cash, Cash Equivalents and Restricted Cash at End of Period$85.1 $135.2 
The accompanying notes are an integral part of these statements.
ALLETE, Inc. Third Quarter 2020 Form 10-Q
9



ALLETE
CONSOLIDATED STATEMENT OF EQUITY
Unaudited
Quarter EndedNine Months Ended
September 30,September 30,
2020201920202019
Millions Except Per Share Amounts
Common Stock
Balance, Beginning of Period$1,447.7 $1,433.3 $1,436.7 $1,428.5 
Common Stock Issued6.5 1.8 17.5 6.6 
Balance, End of Period1,454.2 1,435.1 1,454.2 1,435.1 
Accumulated Other Comprehensive Loss
Balance, Beginning of Period(23.3)(26.9)(23.6)(27.3)
Other Comprehensive Income - Net of Income Taxes
Unrealized Gain on Debt Securities   0.2 
Defined Benefit Pension and Other Postretirement Plans0.2 0.1 0.5 0.3 
Balance, End of Period(23.1)(26.8)(23.1)(26.8)
Retained Earnings
Balance, Beginning of Period841.3 798.6 818.8 754.6 
Net Income Attributable to ALLETE40.7 31.2 127.1 135.9 
Common Stock Dividends (32.1)(30.3)(96.0)(91.0)
Balance, End of Period849.9 799.5 849.9 799.5 
Non-Controlling Interest in Subsidiaries
Balance, Beginning of Period166.5  103.7  
Proceeds from Non-Controlling Interest in Subsidiaries – Net of Issuance Costs  67.8  
Net Loss Attributable to Non-Controlling Interest(1.9) (6.9) 
Balance, End of Period164.6  164.6  
Total Equity$2,445.6 $2,207.8 $2,445.6 $2,207.8 
Dividends Per Share of Common Stock$0.6175 $0.5875 $1.8525 $1.7625 
The accompanying notes are an integral part of these statements.
ALLETE, Inc. Third Quarter 2020 Form 10-Q
10



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and do not include all of the information and notes required by GAAP for complete financial statements. Similarly, the December 31, 2019, Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. In management’s opinion, these unaudited financial statements include all adjustments necessary for a fair statement of financial results. All adjustments are of a normal, recurring nature, except as otherwise disclosed. Operating results for the quarter and nine months ended September 30, 2020, are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2020. For further information, refer to the Consolidated Financial Statements and notes included in our 2019 Form 10-K.


NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Cash, Cash Equivalents and Restricted Cash. We consider all investments purchased with original maturities of three months or less to be cash equivalents. As of September 30, 2020, restricted cash amounts included in Prepayments and Other on the Consolidated Balance Sheet include collateral deposits required under an ALLETE Clean Energy loan agreement. The restricted cash amounts included in Other Non-Current Assets represent collateral deposits required under ALLETE Clean Energy PSAs as well as loan and tax equity financing agreements. The December 31, 2018, balance presented also included deposits from a SWL&P customer in aid of future capital expenditures. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheet that aggregate to the amounts presented in the Consolidated Statement of Cash Flows.
Cash, Cash Equivalents and Restricted CashSeptember 30,
2020
December 31,
2019
September 30,
2019
December 31,
2018
Millions  
Cash and Cash Equivalents$79.0 $69.3 $100.3 $69.1 
Restricted Cash included in Prepayments and Other 3.2 2.8 3.4 1.3 
Restricted Cash included in Other Non-Current Assets2.9 20.4 31.5 8.6 
Cash, Cash Equivalents and Restricted Cash on the Consolidated Statement of Cash Flows$85.1 $92.5 $135.2 $79.0 

Inventories – Net. Inventories are stated at the lower of cost or net realizable value. Inventories in our Regulated Operations segment are carried at an average cost or first-in, first-out basis. Inventories in our ALLETE Clean Energy segment and Corporate and Other businesses are carried at an average cost, first-in, first-out or specific identification basis.
Inventories – NetSeptember 30,
2020
December 31,
2019
Millions  
Fuel (a)
$25.1 $25.9 
Materials and Supplies49.7 46.9 
Total Inventories – Net$74.8 $72.8 
(a)    Fuel consists primarily of coal inventory at Minnesota Power.
Other Non-Current AssetsSeptember 30,
2020
December 31,
2019
Millions
Contract Assets (a)
$26.1 $28.0 
Operating Lease Right-of-use Assets24.0 28.6 
ALLETE Properties21.2 21.9 
Restricted Cash2.9 20.4 
Other Postretirement Benefit Plans38.9 37.5 
Other83.1 81.8 
Total Other Non-Current Assets$196.2 $218.2 
(a)    Contract Assets consist of payments made to customers as an incentive to execute or extend service agreements. The contract payments are being amortized over the term of the respective agreements as a reduction to revenue.     
ALLETE, Inc. Third Quarter 2020 Form 10-Q
11



NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Other Current LiabilitiesSeptember 30,
2020
December 31,
2019
Millions  
PSAs$12.5 $12.3 
Provision for Interim Rate Refund (a)
5.2  
Fuel Adjustment Clause (b)
10.3  
Operating Lease Liabilities6.3 6.9 
Other36.4 41.2 
Total Other Current Liabilities$70.7 $60.4 
(a)Provision for Interim Rate Refund represents reserves for interim rates resulting from the MPUC’s approval of Minnesota Power’s petition and proposal to resolve and withdraw its rate case. (See Note 2. Regulatory Matters.)
(b)See Note 2. Regulatory Matters.
Other Non-Current LiabilitiesSeptember 30,
2020
December 31,
2019
Millions  
Asset Retirement Obligation$164.4 $160.3 
PSAs55.2 64.6 
Operating Lease Liabilities17.7 21.8 
Other48.2 46.3 
Total Other Non-Current Liabilities$285.5 $293.0 

Other Income
Nine Months Ended September 30, 20202019
Millions
Pension and Other Postretirement Benefit Plan Non-Service Credits (a)
$6.5 $5.2 
Interest and Investment Income0.4 3.3 
AFUDC - Equity1.8 1.9 
Gain on Land Sales0.5 2.1 
Other(0.1)2.1 
Total Other Income$9.1 $14.6 
(a)These are components of net periodic pension and other postretirement benefit cost other than service cost. (See Note 9. Pension and Other Postretirement Benefit Plans.)

Supplemental Statement of Cash Flows Information.
Nine Months Ended September 30, 20202019
Millions  
Cash Paid for Interest – Net of Amounts Capitalized$48.8 $53.5 
Recognition of Right-of-use Assets and Lease Liabilities $30.4 
Noncash Investing and Financing Activities  
Increase (Decrease) in Accounts Payable for Capital Additions to Property, Plant and Equipment$(88.4)$6.3 
Capitalized Asset Retirement Costs$2.1 $16.6 
AFUDC–Equity$1.8 $1.9 

Sale of U.S. Water Services. In February 2019, the Company entered into a stock purchase agreement providing for the sale of U.S. Water Services to a subsidiary of Kurita Water Industries Ltd. In March 2019, ALLETE completed the sale and received approximately $270 million in cash, net of transaction costs and cash retained. The gain on sale of U.S. Water Services in 2019 was $13.2 million after-tax.

ALLETE, Inc. Third Quarter 2020 Form 10-Q
12



NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Non-Controlling Interest in Subsidiaries. Non-controlling interest in subsidiaries on the Consolidated Balance Sheet and net loss attributable to non-controlling interest on the Consolidated Statement of Income represent the portion of equity ownership and earnings, respectively, of subsidiaries that are not attributable to equity holders of ALLETE. These amounts as of and during the quarter and nine months ended September 30, 2020, related to the tax equity financing structure for ALLETE Clean Energy’s 106 MW Glen Ullin and 80 MW South Peak wind energy facilities.

On April 16, 2020, ALLETE Clean Energy commenced operations of South Peak, an 80 MW wind energy facility in Montana, and on April 29, 2020, received $67.8 million in cash, net of issuance costs, from a third-party investor as part of a tax equity financing for this wind energy facility.

Subsequent Events. The Company performed an evaluation of subsequent events for potential recognition and disclosure through the date of the financial statements issuance.

New Accounting Pronouncements.

Credit Losses. In 2016, the FASB issued an accounting standard update that requires entities to recognize an allowance for expected credit losses for financial instruments within its scope. Examples of financial instruments within the scope include trade receivables, certain financial guarantees, and held-to-maturity debt securities. The allowance for expected credit losses should be based on historical information, current conditions and reasonable and supportable forecasts. The new standard also revises the other-than-temporary impairment model for available-for-sale debt securities. The new guidance became effective January 1, 2020, and was adopted by the Company in the first quarter of 2020. Adoption of this standard did not have a material impact on our Consolidated Financial Statements.


NOTE 2. REGULATORY MATTERS

Regulatory matters are summarized in Note 4. Regulatory Matters to the Consolidated Financial Statements in our 2019 Form 10-K, with additional disclosure provided in the following paragraphs.

Electric Rates. Entities within our Regulated Operations segment file for periodic rate revisions with the MPUC, PSCW or FERC. As authorized by the MPUC, Minnesota Power also recognizes revenue under cost recovery riders for transmission, renewable, and environmental investments and expenditures. Revenue from cost recovery riders was $22.6 million for the nine months ended September 30, 2020 ($24.3 million for nine months ended September 30, 2019).

2020 Minnesota General Rate Case. In November 2019, Minnesota Power filed a retail rate increase request with the MPUC seeking an average increase of approximately 10.6 percent for retail customers. The rate filing sought a return on equity of 10.05 percent and a 53.81 percent equity ratio. On an annualized basis, the requested final rate increase would have generated approximately $66 million in additional revenue. In orders dated December 23, 2019, the MPUC accepted the filing as complete and authorized an annual interim rate increase of $36.1 million that began January 1, 2020.

On April 23, 2020, Minnesota Power filed a request with the MPUC that proposed a resolution of Minnesota Power’s 2020 general rate case. Key components of our proposal included removing the power marketing margin credit in base rates and reflecting actual power marketing margins in the fuel adjustment clause effective May 1, 2020; refunding to customers interim rates collected through April 2020; increasing customer rates 4.1 percent compared to the 5.8 percent increase reflected in interim rates; and a provision that Minnesota Power would not file another rate case until at least November 1, 2021, unless certain events occur. In an order dated June 30, 2020, the MPUC approved Minnesota Power’s petition and proposal to resolve and withdraw the general rate case. Effective May 1, 2020, customer rates were set at an increase of 4.1 percent with the removal of the power marketing margin credit from base rates. Actual power marketing margins will be reflected in the fuel adjustment clause on an ongoing basis. Reserves for interim rates of $11.7 million were recorded in the second quarter of 2020 of which $6.5 million were refunded in the third quarter. The remainder will be refunded in the fourth quarter of 2020.


ALLETE, Inc. Third Quarter 2020 Form 10-Q
13



NOTE 2. REGULATORY MATTERS (Continued)
Electric Rates (Continued)

Transmission Cost Recovery Rider. Minnesota Power has an approved cost recovery rider in place for certain transmission investments and expenditures. In a 2016 order, the MPUC approved Minnesota Power’s updated customer billing rates allowing Minnesota Power to charge retail customers on a current basis for the costs of constructing certain transmission facilities plus a return on the capital invested. On July 9, 2019, Minnesota Power filed a petition seeking MPUC approval to update the customer billing factor to include investments made for the GNTL, which was approved at a hearing on May 14, 2020. (See Note 6. Commitments, Guarantees and Contingencies.)

Renewable Cost Recovery Rider. Minnesota Power has an approved cost recovery rider for certain renewable investments and expenditures. The cost recovery rider allows Minnesota Power to charge retail customers on a current basis for the costs of certain renewable investments plus a return on the capital invested. On August 15, 2019, Minnesota Power filed a petition seeking MPUC approval to update the customer billing factor, which was approved at a hearing on October 1, 2020.

On June 30, 2020, Minnesota Power filed a petition seeking MPUC approval of a customer billing rate for solar costs related to investments and expenditures for meeting the state of Minnesota’s solar energy standard.

Fuel Adjustment Clause Reform. In a 2017 order, the MPUC adopted a program to implement certain procedural reforms to Minnesota utilities’ automatic fuel adjustment clause (FAC) for fuel and purchased power. With this order, the method of accounting for all Minnesota electric utilities changed to a monthly budgeted, forward-looking FAC with annual prudence review and true-up to actual allowed costs. On May 1, 2019, Minnesota Power filed its fuel adjustment forecast for 2020, which was accepted by the MPUC in an order dated November 14, 2019, for purposes of setting fuel adjustment clause rates for 2020, subject to a true-up filing in 2021. On May 1, 2020, Minnesota Power filed its fuel adjustment forecast for 2021, subject to MPUC approval.

On March 2, 2020, Minnesota Power filed its fuel adjustment clause report covering July 2018 through December 2019. In an order dated September 16, 2020, the MPUC referred the review of Minnesota Power’s forced outage costs during the period of the report, which totaled approximately $8 million, to an administrative law judge for a contested case hearing to determine if any of those costs should be returned to customers. A decision by the administrative law judge is expected in mid-2021. We cannot predict the outcome of this proceeding.

COVID-19 Related Deferred Accounting. In an order dated March 24, 2020, the PSCW authorized public utilities, which includes SWL&P, to defer expenditures incurred by the utility resulting from its compliance with state government or regulator orders, and as otherwise required to ensure the provision of safe, reliable and affordable access to utility services during Wisconsin’s declared public health emergency for COVID-19. On April 20, 2020, Minnesota Power along with other regulated electric and natural gas service providers in Minnesota filed a joint petition to request MPUC authorization to track incremental costs and expenses incurred as a result of the COVID-19 pandemic, and to defer and record such costs as a regulatory asset, subject to recovery in a future proceeding. In an order dated May 22, 2020, the MPUC approved the joint petition requiring the joint petitioners to track cost and revenue impacts resulting from the COVID-19 pandemic with review for recovery in a future rate proceeding.

Minnesota Power submitted a petition in November 2020 to the MPUC requesting authority to track and record as a regulatory asset lost large industrial customer revenue resulting from the idling of USS Corporation’s Keetac plant and Verso Corporation’s paper mill in Duluth, Minnesota. Keetac and Verso represent revenue of approximately $30 million annually, net of associated expense savings such as fuel costs. Minnesota Power proposed in this petition to defer any lost revenue related to the idling of the Keetac facility and the Verso paper mill to its next general rate case or other proceeding for review for recovery by the MPUC.


ALLETE, Inc. Third Quarter 2020 Form 10-Q
14



NOTE 2. REGULATORY MATTERS (Continued)

Integrated Resource Plan. In a 2016 order, the MPUC approved Minnesota Power’s 2015 IRP with modifications. The order accepted Minnesota Power’s plans for the economic idling of Taconite Harbor Units 1 and 2 and the ceasing of coal-fired operations at Taconite Harbor in 2020, directed Minnesota Power to retire Boswell Units 1 and 2 no later than 2022, required an analysis of generation and demand response alternatives to be filed with a natural gas resource proposal, and required Minnesota Power to conduct requests for proposal for additional wind, solar and demand response resource additions. Minnesota Power retired Boswell Units 1 and 2 in the fourth quarter of 2018. The MPUC also has required a baseload retirement evaluation in Minnesota Power’s next IRP filing analyzing its existing fleet, including potential early retirement scenarios of Boswell Units 3 and 4, as well as a securitization plan. Minnesota Power’s next IRP filing was due October 1, 2020; however, on May 29, 2020, Minnesota Power filed a request to extend the deadline for submitting its next IRP filing citing the COVID-19 pandemic. In an order dated September 25, 2020, the MPUC granted an extension of the deadline for submission until February 1, 2021, with interim reports due in the fourth quarter of 2020. On October 1, 2020, Minnesota Power submitted an initial securitization report regarding Boswell Units 3 and 4 as required in the MPUC’s order.

Nemadji Trail Energy Center. In 2017, Minnesota Power submitted a resource package to the MPUC which included requesting approval of a 250 MW natural gas capacity dedication agreement. The natural gas capacity dedication agreement was subject to MPUC approval of the construction of NTEC, a 525 MW to 550 MW combined-cycle natural gas-fired generating facility which will be jointly owned by Dairyland Power Cooperative and a subsidiary of ALLETE. Minnesota Power would purchase approximately 50 percent of the facility's output starting in 2025. In an order dated January 24, 2019, the MPUC approved Minnesota Power’s request for approval of the NTEC natural gas capacity dedication agreement. On December 23, 2019, the Minnesota Court of Appeals reversed and remanded the MPUC’s decision to approve certain affiliated-interest agreements. The MPUC was ordered to determine whether NTEC may have the potential for significant environmental effects and, if so, to prepare an environmental assessment before reassessing the agreements. On January 22, 2020, Minnesota Power filed a petition for further review with the Minnesota Supreme Court requesting that it review and overturn the Minnesota Court of Appeals decision, which petition was accepted for review by the Minnesota Supreme Court with oral arguments held on October 6, 2020. There is no deadline for the Minnesota Supreme Court to issue a ruling. On January 8, 2019, an application for a certificate of public convenience and necessity for NTEC was submitted to the PSCW, which was approved by the PSCW at a hearing on January 16, 2020. Construction of NTEC is subject to obtaining additional permits from local, state and federal authorities. The total project cost is estimated to be approximately $700 million, of which ALLETE’s portion is expected to be approximately $350 million. ALLETE’s portion of NTEC project costs incurred through September 30, 2020, is approximately $14 million.

Conservation Improvement Program. On July 1, 2020, Minnesota Power submitted its CIP triennial filing for 2021 through 2023 to the MPUC, which outlines Minnesota Power’s CIP spending and energy-saving goals for those years. Minnesota Power’s CIP investment goals are $10.5 million for 2021, $10.7 million for 2022 and $10.9 million for 2023, subject to MPUC approval.

On May 1, 2020, Minnesota Power submitted its 2019 consolidated filing detailing Minnesota Power’s CIP program results and requesting a CIP financial incentive of $2.4 million based upon MPUC procedures, which was recognized in the third quarter of 2020 upon approval by the MPUC in an order dated August 18, 2020. In 2019, the CIP financial incentive of $2.8 million was recognized in the third quarter upon approval by the MPUC of Minnesota Power’s 2018 CIP consolidated filing. CIP financial incentives are recognized in the period in which the MPUC approves the filing.

MISO Return on Equity Complaint. MISO transmission owners, including ALLETE and ATC, have an authorized return on equity of 10.02 percent, or 10.52 percent including an incentive adder for participation in a regional transmission organization, based on a May 21, 2020, FERC order that granted rehearing of a November 2019 FERC order, which had reduced the base return on equity for regional transmission organizations to 9.88 percent, or 10.38 percent including an incentive adder.


ALLETE, Inc. Third Quarter 2020 Form 10-Q
15



NOTE 2. REGULATORY MATTERS (Continued)

Minnesota Solar Energy Standard. On May 20, 2020, the MPUC issued a notice requesting all regulated gas and electric utilities provide a list of all ongoing, planned, or possible investments that support Minnesota’s energy policy objectives and aid economic recovery in Minnesota, among other items. On June 17, 2020, Minnesota Power filed a response which included outlining a proposal to accelerate its plans for solar energy with an estimated $40 million investment in approximately 20 MW of solar energy projects in Minnesota.

Regulatory Assets and Liabilities. Our regulated utility operations are subject to accounting guidance for the effect of certain types of regulation. Regulatory assets represent incurred costs that have been deferred as they are probable for recovery in customer rates. Regulatory liabilities represent obligations to make refunds to customers and amounts collected in rates for which the related costs have not yet been incurred. The Company assesses quarterly whether regulatory assets and liabilities meet the criteria for probability of future recovery or deferral. With the exception of the regulatory asset for Boswell Units 1 and 2 net plant and equipment, no other regulatory assets are currently earning a return. The recovery, refund or credit to rates for these regulatory assets and liabilities will occur over the periods either specified by the applicable regulatory authority or over the corresponding period related to the asset or liability.
Regulatory Assets and LiabilitiesSeptember 30,
2020
December 31,
2019
Millions 
Non-Current Regulatory Assets  
Defined Benefit Pension and Other Postretirement Benefit Plans$204.9 $212.9 
Income Taxes122.3 123.4 
Cost Recovery Riders46.8 24.7 
Asset Retirement Obligations 31.6 32.0 
Manufactured Gas Plant
8.7 8.2 
Boswell Units 1 and 2 Net Plant and Equipment6.4 10.7 
PPACA Income Tax Deferral4.6 4.8 
Other2.6 3.8 
Total Non-Current Regulatory Assets$427.9 $420.5 
Current Regulatory Liabilities (a)
  
Fuel Adjustment Clause (b)
$10.3  
Provision for Interim Rate Refund (c)
5.2  
Transmission Formula Rates Refund1.0 $1.7 
Other1.6 0.2 
Total Current Regulatory Liabilities 18.1 1.9 
Non-Current Regulatory Liabilities  
Income Taxes 388.0 407.2 
Wholesale and Retail Contra AFUDC 86.9 79.3 
Plant Removal Obligations41.1 35.5 
Defined Benefit Pension and Other Postretirement Benefit Plans12.6 17.0 
North Dakota Investment Tax Credits 12.1 12.3 
Conservation Improvement Program 3.1 5.4 
Other3.3 3.6 
Total Non-Current Regulatory Liabilities547.1 560.3 
Total Regulatory Liabilities$565.2 $562.2 
(a)Current regulatory liabilities are presented within Other Current Liabilities on the Consolidated Balance Sheet.
(b)Fuel adjustment clause regulatory liability represents the amount expected to be refunded to customers for the over-collection of fuel adjustment clause recoveries. (See Fuel Adjustment Clause Reform.)
(c)Provision for Interim Rate Refund represents reserves for interim rates resulting from the MPUC’s approval of Minnesota Power’s petition and proposal to resolve and withdraw its rate case. This amount is expected to be refunded to Minnesota Power regulated retail customers in the fourth quarter of 2020. (See 2020 Minnesota General Rate Case.)


ALLETE, Inc. Third Quarter 2020 Form 10-Q
16



NOTE 3. EQUITY INVESTMENTS

Investment in ATC. Our wholly-owned subsidiary, ALLETE Transmission Holdings, owns approximately 8 percent of ATC, a Wisconsin-based utility that owns and maintains electric transmission assets in portions of Wisconsin, Michigan, Minnesota and Illinois. We account for our investment in ATC under the equity method of accounting. For the nine months ended September 30, 2020, we invested $2.0 million in ATC, and on October 30, 2020, we invested an additional $0.8 million. We do not expect to make any additional investments in 2020.
ALLETE’s Investment in ATC 
Millions 
Equity Investment Balance as of December 31, 2019$141.6 
Cash Investments2.0 
Equity in ATC Earnings (a)
16.7 
Distributed ATC Earnings(14.4)
Amortization of the Remeasurement of Deferred Income Taxes0.9 
Equity Investment Balance as of September 30, 2020$146.8 
(a)Equity in ATC Earnings includes $1.2 million of additional earnings resulting from the FERC’s May 21, 2020, order increasing ATC’s authorized return on equity to 10.52 percent including an incentive adder for participation in a regional transmission organization.

ATC’s authorized return on equity is 10.02 percent, or 10.52 percent including an incentive adder for participation in a regional transmission organization, based on a May 21, 2020, FERC order that granted rehearing of a November 2019 FERC order. (See Note 2. Regulatory Matters.)

Investment in Nobles 2. Our wholly-owned subsidiary, ALLETE South Wind, owns 49 percent of Nobles 2, the entity that will own and operate a 250 MW wind energy facility in southwestern Minnesota pursuant to a 20-year PPA with Minnesota Power. We account for our investment in Nobles 2 under the equity method of accounting. As of September 30, 2020, our equity investment in Nobles 2 was $145.0 million ($56.0 million at December 31, 2019). For the nine months ended September 30, 2020, we invested $89.0 million in Nobles 2, and in October 2020 we invested an additional $0.7 million. We expect to make approximately $25 million in additional investments in 2020.


NOTE 4. FAIR VALUE

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs, which are used to measure fair value, are prioritized through the fair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Descriptions of the three levels of the fair value hierarchy are discussed in Note 7. Fair Value to the Consolidated Financial Statements in our 2019 Form 10-K.

The following tables set forth, by level within the fair value hierarchy, our assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2020, and December 31, 2019. Each asset and liability is classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of these assets and liabilities and their placement within the fair value hierarchy levels. The estimated fair value of Cash and Cash Equivalents listed on the Consolidated Balance Sheet approximates the carrying amount and therefore is excluded from the recurring fair value measures in the following tables.

ALLETE, Inc. Third Quarter 2020 Form 10-Q
17



NOTE 4. FAIR VALUE (Continued)
 Fair Value as of September 30, 2020
Recurring Fair Value MeasuresLevel 1Level 2Level 3Total
Millions    
Assets    
Investments (a)
Available-for-sale – Equity Securities$10.4   $10.4 
Available-for-sale – Corporate and Governmental Debt Securities (b)
 $10.5 10.5 
Cash Equivalents1.3