| T | Quarterly      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of      1934 |
|---|---------------------------------------------------------------------------------------------------|

| £ | Transition      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of      1934 |
|--------|----------------------------------------------------------------------------------------------------|

| Minnesota                                                           |   | 41-0418150                             |
|---------------------------------------------------------------------|--------|----------------------------------------|
| (State      or other jurisdiction of incorporation or organization) |   | (IRS      Employer Identification No.) |

| Large      Accelerated Filer T    | Accelerated      Filer £              |
|-----------------------------------|--------------------------------------------|
| Non-Accelerated      Filer £ | Smaller      Reporting Company £ |

----

|                                                                                            |                                            |                                                                                                 | Page   |
|-------------------------------------------------------------------------------------------------|-------------------------------------------------|------------------------------------------------------------------------------------------------------|--------|
|                                                                                            |                                            |                                                                                                 |   |   |
| Definitions                                                                                     |                                            |                                                                                                 | 3      |   |
|                                                                                            |                                            |                                                                                                 |   |   |
| Safe      Harbor Statement Under the Private      Securities Litigation Reform Act of 1995 | 5                                               |                                                                                                 |
|                                                                                            |                                            |                                                                                                 |   |   |
| Part      I.                                                                                    | Financial      Information                      |                                                                                                 |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Item      1.                                    | Financial      Statements                                                                            |   |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Consolidated      Balance Sheet -               |                                                                                                 |   |
|                                                                                            |                                            | September      30, 2008 and December 31, 2007                                                        | 6      |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Consolidated      Statement of Income -         |                                                                                                 |   |
|                                                                                            |                                            | Quarter      and Nine Months Ended September 30, 2008 and 2007                                       | 7      |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Consolidated      Statement of Cash Flows -     |                                                                                                 |   |
|                                                                                            |                                            | Nine      Months Ended September 30, 2008 and 2007                                                   | 8      |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Notes      to Consolidated Financial Statements | 9                                                                                                    |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Item      2.                                    | Management’s      Discussion and Analysis of Financial Conditionand      Results of Operations | 23     |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Item      3.                                    | Quantitative      and Qualitative Disclosures about Market Risk                                      | 37     |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Item      4.                                    | Controls      and Procedures                                                                         | 38     |   |
|                                                                                            |                                            |                                                                                                 |   |   |
| Part      II.                                                                                   | Other      Information                          |                                                                                                 |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Item      1.                                    | Legal      Proceedings                                                                               | 39     |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Item      1A.                                   | Risk      Factors                                                                                    | 39     |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Item      2.                                    | Unregistered      Sales of Equity Securities and Use of Proceeds                                     | 39     |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Item      3.                                    | Defaults      Upon Senior Securities                                                                 | 39     |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Item      4.                                    | Submission      of Matters to a Vote of Security Holders                                             | 39     |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Item      5.                                    | Other      Information                                                                               | 40     |   |
|                                                                                            |                                            |                                                                                                 |   |   |
|                                                                                            | Item      6.                                    | Exhibits                                                                                             | 43     |   |
|                                                                                            |                                            |                                                                                                 |   |   |
| Signatures                                                                                      |                                            |                                                                                                 | 44     |   |

----

| Abbreviation      or Acronym | Term                                                                                                                                                                                             |
|------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| AFUDC                        | Allowance      for Funds Used During Construction – consisting of the cost of both the      debt and equity funds used to finance utility plant additions during      construction periods |
| ALLETE                       | ALLETE,      Inc.                                                                                                                                                                                |
| ALLETE      Properties       | ALLETE      Properties, LLC and its subsidiaries                                                                                                                                                 |
| AREA                         | Arrowhead      Regional Emission Abatement                                                                                                                                                       |
| ATC                          | American      Transmission Company LLC                                                                                                                                                           |
| BNI      Coal                | BNI      Coal, Ltd.                                                                                                                                                                              |
| BNSF                         | BNSF      Railway Company                                                                                                                                                                        |
| Boswell                      | Boswell      Energy Center                                                                                                                                                                       |
| Company                      | ALLETE,      Inc. and its subsidiaries                                                                                                                                                           |
| DC                           | Direct      Current                                                                                                                                                                              |
| DOC                          | Minnesota      Department of Commerce                                                                                                                                                            |
| EITF                         | Emerging      Issues Task Force                                                                                                                                                                  |
| EPA                          | Environmental      Protection Agency                                                                                                                                                             |
| ESOP                         | Employee      Stock Ownership Plan                                                                                                                                                               |
| FASB                         | Financial      Accounting Standards Board                                                                                                                                                        |
| FERC                         | Federal      Energy Regulatory Commission                                                                                                                                                        |
| Form      10-K               | ALLETE      Annual Report on Form 10-K                                                                                                                                                           |
| Form      10-Q               | ALLETE      Quarterly Report on Form 10-Q                                                                                                                                                        |
| FPL      Energy              | FPL      Energy, LLC                                                                                                                                                                             |
| FSP                          | FASB      Staff Position                                                                                                                                                                         |
| GAAP                         | United      States Generally Accepted Accounting Principles                                                                                                                                      |
| GHG                          | Greenhouse      Gases                                                                                                                                                                            |
| Heating      Degree Days     | Measure      of the extent to which the average daily temperature is below 65 degrees      Fahrenheit, increasing demand for heating.                                                            |
| Invest      Direct           | ALLETE’s      Direct Stock Purchase and Dividend Reinvestment Plan                                                                                                                         |
| kV                           | Kilovolt(s)                                                                                                                                                                                      |
| Laskin                       | Laskin      Energy Center                                                                                                                                                                        |
| Minnesota      Power         | An      operating division of ALLETE, Inc.                                                                                                                                                       |
| Minnkota      Power          | Minnkota      Power Cooperative, Inc.                                                                                                                                                            |
| MISO                         | Midwest      Independent Transmission System Operator, Inc.                                                                                                                                      |
| MPCA                         | Minnesota      Pollution Control Agency                                                                                                                                                          |
| MPUC                         | Minnesota      Public Utilities Commission                                                                                                                                                       |
| MW      / MWh                | Megawatt(s)      / Megawatt-hour(s)                                                                                                                                                              |
| Non-residential              | Retail      commercial, non-retail commercial, office, industrial, warehouse, storage      and institutional                                                                                     |
| NOX                          | Nitrogen      Oxide                                                                                                                                                                              |
| Note      ___                | Note      ___ to the consolidated financial statements in this Form    10-Q                                                                                                                      |
| OAG                          | Office      of the Attorney General                                                                                                                                                              |
| OES                          | Minnesota      Office of Energy Security                                                                                                                                                         |
| Oliver      Wind I           | Oliver      Wind I Energy Center                                                                                                                                                                 |
| Oliver      Wind II          | Oliver      Wind II Energy Center                                                                                                                                                                |

----

| Definitions      (Continued)  |
|-------------------------------|
| Abbreviation      or Acronym  | Term |
| Palm      Coast Park          | Palm      Coast Park development project in Florida |
| Palm      Coast Park District | Palm      Coast Park Community Development District |
| PSCW                          | Public      Service Commission of Wisconsin |
| SEC                           | Securities      and Exchange Commission |
| SFAS                          | Statement      of Financial Accounting Standards No. |
| SO2                           | Sulfur      Dioxide |
| Square      Butte             | Square      Butte Electric Cooperative |
| SWL&P                     | Superior      Water, Light and Power Company |
| Taconite      Harbor          | Taconite      Harbor Energy Center |
| Town      Center              | Town      Center at Palm Coast development project in Florida |
| Town      Center District     | Town      Center at Palm Coast Community Development District |
| WDNR                          | Wisconsin      Department of NaturalResources |

----

| · | our      ability to successfully implement our strategic  objectives;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | our      ability to manage expansion and integrate acquisitions;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| · | prevailing      governmental policies, regulatory actions, and legislation including those      of the United States Congress, state legislatures, the FERC, the MPUC, the      PSCW, and various local and county regulators, and city administrators,      about allowed rates of return, financings, industry and rate structure,      acquisition and disposal of assets and facilities, real estate      development, operation and construction of plant facilities, recovery of      purchased power, capital investments and other expenses, present or      prospective wholesale and retail competition (including but not limited to      transmission costs), zoning and permitting of land held for resale and      environmental matters; |
| · | the      potential impacts of climate change and future regulation to restrict the      emissions of GHG on our Regulated Utility operations;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| · | effects      of restructuring initiatives in the electric industry;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | economic      and geographic factors, including political and economic      risks;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| · | changes      in and compliance with laws and policies;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| · | weather      conditions;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| · | natural      disasters and pandemic diseases;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| · | war      and acts of terrorism;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | wholesale      power market conditions;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| · | population      growth rates and demographic patterns;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| · | effects      of competition, including competition for retail and wholesale      customers;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| · | changes      in the real estate market;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| · | pricing      and transportation of commodities;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | changes      in tax rates or policies or in rates of inflation;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | unanticipated      project delays or changes in project costs;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| · | availability      and management of construction      materials and skilled construction labor for capital    projects;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| · | unanticipated      changes in operating expenses, capital and land      development expenditures;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| · | global      and domestic economic conditions to us or ourcustomers;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | our      ability to access capital markets and bank financing;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| · | changes      in interest rates and the performance of the financial      markets;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| · | our      ability to replace a mature workforce and retain qualified, skilled and      experienced personnel; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| · | the      outcome of legal and administrative proceedings (whether civil or      criminal) and settlements that affect the business and profitability of      ALLETE.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

----

|        PART      I.  FINANCIAL INFORMATION |  |
|-----------------------------------------------------------|--|

| ITEM      1. FINANCIAL STATEMENTS |  |
|-----------------------------------|--|

|                                                                          |                                                                   |                                |  September      30, |  December      31, |
|-------------------------------------------------------------------------------|------------------------------------------------------------------------|-------------------------------------|--------------------------|-------------------------|
|                                                                          |                                                                   |                                | 2008                     | 2007                    |
|                                                                          |                                                                   |                                |                     |                    |   |   |
| Assets                                                                        |                                                                   |                                |                     |                    |   |
| Current      Assets                                                           |                                                                   |                                |                     |                    |
|                                                                          | Cash      and Cash Equivalents                                         | $                                   | 78.1                     | $                       | 23.3 |
|                                                                          | Short-Term      Investments                                            |                                | –                  |                    | 23.1 |
|                                                                          | Accounts      Receivable (Less Allowance of $1.0 at September 30, 2008 |                                |                     |                    |   |
|                                                                          |                                                                   | and      $1.0 at December 31, 2007) |                     | 64.9                    |   | 79.5 |
|                                                                          | Inventories                                                            |                                | 59.9                     |                    | 49.5 |
|                                                                          | Prepayments      and Other                                             |                                | 16.9                     |                    | 39.1 |
|                                                                          |                                                                   | Total      Current Assets           |                     | 219.8                   |   | 214.5 |
| Property,      Plant and Equipment - Net                                      |                                                                   | 1,292.4                             |                     | 1,104.5                 |
| Investments                                                                   |                                                                   | 213.3                               |                     | 213.8                   |
| Other      Assets                                                             |                                                                   | 122.1                               |                     | 111.4                   |
| Total      Assets                                                             | $                                                                      | 1,847.6                             | $                        | 1,644.2                 |
|                                                                          |                                                                   |                                |                     |                    |   |   |
| Liabilities      and Shareholders' Equity                                     |                                                                   |                                |                     |                    |
| Liabilities                                                                   |                                                                   |                                |                     |                    |
| Current      Liabilities                                                      |                                                                   |                                |                     |                    |
|                                                                          | Accounts      Payable                                                  | $                                   | 58.5                     | $                       | 72.7 |
|                                                                          | Accrued      Taxes                                                     |                                | 16.4                     |                    | 14.8 |
|                                                                          | Accrued      Interest                                                  |                                | 8.9                      |                    | 7.8 |
|                                                                          | Notes      Payable                                                     |                                | 6.0                      |                    | – |
|                                                                          | Long-Term      Debt Due Within One Year                                |                                | 17.2                     |                    | 11.8 |
|                                                                          | Deferred      Profit on Sales of Real Estate                           |                                | 0.8                      |                    | 2.7 |
|                                                                          | Other                                                                  |                                | 28.0                     |                    | 27.3 |
|                                                                          |                                                                   | Total      Current Liabilities      |                     | 135.8                   |   | 137.1 |
| Long-Term      Debt                                                           |                                                                   | 537.2                               |                     | 410.9                   |
| Deferred      Income Taxes                                                    |                                                                   | 165.8                               |                     | 144.2                   |
| Other      Liabilities                                                        |                                                                   | 199.5                               |                     | 200.1                   |
| Minority      Interest                                                        |                                                                   | 9.6                                 |                     | 9.3                     |
|                                                                          | Total      Liabilities                                                 |                                | 1,047.9                  |                    | 901.6 |
|                                                                          |                                                                   |                                |                     |                    |   |   |
| Commitments      and Contingencies                                            |                                                                   |                                |                     |                    |
|                                                                          |                                                                   |                                |                     |                    |   |   |
| Shareholders'      Equity                                                     |                                                                   |                                |                     |                    |
| Common      Stock Without Par Value, 43.3 Shares Authorized, 31.6 and    30.8 |                                                                   |                                |                     |                    |
|                                                                          | Shares      Outstanding                                                |                                | 497.6                    |                    | 461.2 |
| Unearned      ESOP Shares                                                     |                                                                   | (58.5)                              |                     | (64.5)                  |
| Accumulated      Other Comprehensive Loss                                     |                                                                   | (8.8)                               |                     | (4.5)                   |
| Retained      Earnings                                                        |                                                                   | 369.4                               |                     | 350.4                   |
|                                                                          | Total      Shareholders' Equity                                        |                                | 799.7                    |                    | 742.6 |
| Total      Liabilities and Shareholders' Equity                               | $                                                                      | 1,847.6                             | $                        | 1,644.2                 |

The accompanying notes are an integralpart of these statements.

----

|                                                      |                           |                              | Quarter      Ended | Nine      Months Ended |
|-----------------------------------------------------------|--------------------------------|-----------------------------------|--------------------|------------------------|
|                                                      |                           |                              | September      30, | September      30,     |
|                                                      |                           |                              | 2008               | 2007                   | 2008 | 2007 |
|                                                      |                           |                              |               |                   |   |   |   |   |   |   |
| Operating      Revenue                                    | $                              | 201.7                             | $                  | 200.8                  | $ | 604.9 | $ | 629.4 |
|                                                      |                           |                              |               |                   |   |   |   |   |   |   |
| Operating      Expenses                                   |                           |                              |               |                   |   |   |   |   |
|                                                      | Fuel      and Purchased Power  |                              | 81.0               |                   | 91.8 |   | 242.3 |   | 262.4 |
|                                                      | Operating      and Maintenance |                              | 73.4               |                   | 72.1 |   | 239.6 |   | 231.3 |
|                                                      | Depreciation                   |                              | 13.5               |                   | 12.2 |   | 39.1 |   | 35.8 |
|                                                      |                           | Total      Operating Expenses     |               | 167.9                  |   | 176.1 |   | 521.0 |   | 529.5 |
|                                                      |                           |                              |               |                   |   |   |   |   |   |   |
| Operating      Income                                     |                           | 33.8                              |               | 24.7                   |   | 83.9 |   | 99.9 |
|                                                      |                           |                              |               |                   |   |   |   |   |   |   |
| Other      Income (Expense)                               |                           |                              |               |                   |   |   |   |   |
|                                                      | Interest      Expense          |                              | (7.5)              |                   | (6.3) |   | (21.4) |   | (18.7) |
|                                                      | Equity      Earnings in ATC    |                              | 4.2                |                   | 3.2 |   | 11.2 |   | 9.3 |
|                                                      | Other                          |                              | 2.8                |                   | 3.2 |   | 13.9 |   | 11.9 |
|                                                      |                           | Total      Other Income (Expense) |               | (0.5)                  |   | 0.1 |   | 3.7 |   | 2.5 |
|                                                      |                           |                              |               |                   |   |   |   |   |   |   |
| Income      Before Minority Interest and Income Taxes     |                           | 33.3                              |               | 24.8                   |   | 87.6 |   | 102.4 |
| Income      Tax Expense                                   |                           | 8.4                               |               | 8.1                    |   | 28.3 |   | 35.4 |
| Minority      Interest                                    |                           | 0.2                               |               | 0.2                    |   | 0.3 |   | 1.6 |
| Net      Income                                           | $                              | 24.7                              | $                  | 16.5                   | $ | 59.0 | $ | 65.4 |
|                                                      |                           |                              |               |                   |   |   |   |   |   |   |
| Average      Shares of Common Stock                       |                           |                              |               |                   |   |   |   |   |
|                                                      | Basic                          |                              | 29.1               |                   | 28.5 |   | 28.9 |   | 28.2 |
|                                                      | Diluted                        |                              | 29.3               |                   | 28.5 |   | 29.0 |   | 28.3 |
|                                                      |                           |                              |               |                   |   |   |   |   |
| Basic      and Diluted Earnings Per Share of Common Stock | $                              | 0.85                              | $                  | 0.58                   | $ | 2.04 | $ | 2.31 |
|                                                      |                           |                              |               |                   |   |   |   |   |   |   |
| Dividends      Per Share of Common Stock                  | $                              | 0.43                              | $                  | 0.41                   | $ | 1.29 | $ | 1.23 |

----

|                                                  | Nine      Months Ended                                      |
|-------------------------------------------------------|-------------------------------------------------------------|
|                                                  | September      30,                                          |
|                                                  |                                                        |   | 2008 | 2007 |
|                                                  |                                                        |   |   |   |   |   |
| Operating      Activities                             |                                                        |   |   |   |
|                                                  | Net      Income                                             | $ | 59.0 | $ | 65.4 |
|                                                  | Allowance      for Funds Used During Construction           |   | (2.6) |   | (2.2) |
|                                                  | Income      from Equity Investments, net of dividends       |   | (2.4) |   | (1.9) |
|                                                  | Gain      on Sale of Assets                                 |   | (4.7) |   | (2.1) |
|                                                  | Gain      on Sale of Available for Sale Securities          |   | (6.5) |   | – |
|                                                  | Depreciation      Expense                                   |   | 39.1 |   | 35.8 |
|                                                  | Deferred      Income Tax Expense                            |   | 18.4 |   | 3.8 |
|                                                  | Minority      Interest                                      |   | 0.3 |   | 1.6 |
|                                                  | Stock      Compensation Expense                             |   | 1.3 |   | 1.5 |
|                                                  | Bad      Debt Expense                                       |   | 0.9 |   | 0.8 |
|                                                  | Changes      in Operating Assets and Liabilities            |   |   |   |   |
|                                                  |                                                        | Accounts      Receivable |   | 13.6 |   | 11.3 |
|                                                  |                                                        | Inventories |   | (10.4) |   | (5.2) |
|                                                  |                                                        | Prepayments      and Other |   | 20.2 |   | (1.6) |
|                                                  |                                                        | Accounts      Payable |   | (13.0) |   | (6.1) |
|                                                  |                                                        | Other      Current Liabilities |   | 1.5 |   | (14.5) |
|                                                  | Other      Assets                                           |   | (10.7) |   | 0.1 |
|                                                  | Other      Liabilities                                      |   | (3.3) |   | 9.5 |
|                                                  |                                                        | Cash      from Operating Activities |   | 100.7 |   | 96.2 |
|                                                  |                                                        |   |   |   |   |   |
| Investing      Activities                             |                                                        |   |   |   |
|                                                  | Proceeds      from Sale of Available-For-Sale Securities    |   | 58.5 |   | 374.3 |
|                                                  | Payments      for Purchase of Available-For-Sale Securities |   | (45.1) |   | (340.2) |
|                                                  | Investment      in ATC                                      |   | (5.2) |   | (8.7) |
|                                                  | Changes      to Investments                                 |   | 5.3 |   | (9.3) |
|                                                  | Additions      to Property, Plant and Equipment             |   | (210.0) |   | (134.5) |
|                                                  | Proceeds      from Sale of Assets                           |   | 20.3 |   | 1.4 |
|                                                  | Other                                                       |   | (4.1) |   | 3.0 |
|                                                  |                                                        | Cash      for Investing Activities |   | (180.3) |   | (114.0) |
|                                                  |                                                        |   |   |   |   |   |
| Financing      Activities                             |                                                        |   |   |   |
|                                                  | Issuance      of Common Stock                               |   | 35.2 |   | 19.9 |
|                                                  | Issuance      of Debt                                       |   | 140.1 |   | 110.3 |
|                                                  | Payments      of Long-Term Debt                             |   | (8.4) |   | (61.4) |
|                                                  | Dividends      on Common Stock                              |   | (38.5) |   | (34.4) |
|                                                  | Changes      in Notes Payable                               |   | 6.0 |   | – |
|                                                  |                                                        | Cash      from Financing Activities |   | 134.4 |   | 34.4 |
|                                                  |                                                        |   |   |   |   |   |
| Change      in Cash and Cash Equivalents              |                                                        | 54.8 |   | 16.6 |
| Cash      and Cash Equivalents at Beginning of Period |                                                        | 23.3 |   | 44.8 |
|                                                  |                                                        |   |   |   |   |   |
| Cash      and Cash Equivalents at End of Period       | $                                                           | 78.1 | $ | 61.4 |

----

|                        | September      30, | December      31, |
|-----------------------------|--------------------|-------------------|
| Inventories                 | 2008               | 2007              |
| Millions                    |               |              |
|                        |               |              |
| Fuel                        | $25.5              | $22.1             |
| Materials      and Supplies | 34.4               | 27.4              |
|                        |               |              |
| Total      Inventories      | $59.9              | $49.5             |

| Consolidated      Statement of Cash FlowsSupplemental      DisclosureFor      the Nine Months Ended September 30, | 2008   | 2007   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------|
| Millions                                                                                                          |   |   |
|                                                                                                              |   |   |
| Cash      Paid During the Period for                                                                              |   |   |
| Interest      – Net of Amounts Capitalized                                                                  | $20.1  | $21.9  |
| Income      Taxes                                                                                                 | $4.9   | $29.3  |
| Noncash      Investing Activities                                                                                 |   |   |
| Change      in Accounts Payable for Capital Additions to Property Plant and      Equipment                        | $(1.1) | $4.6   |

----

----

|                                                  |         | Energy    |         |        |
|-------------------------------------------------------|--------------|-----------|--------------|-------------|
|                                                  |         |      | Nonregulated |        |   |   |
|                                                  |         | Regulated | Energy       | Investment  | Real |   |
|                                                  | Consolidated | Utility   | Operations   | in      ATC | Estate | Other |
| Millions                                              |         |      |         |        |   |   |
|                                                  |         |      |         |        |   |   |
| For      the Quarter Ended September 30, 2008         |         |      |         |        |   |   |
|                                                  |         |      |         |        |   |   |
| Operating      Revenue                                | $201.7       | $179.1    | $18.2        | –     | $4.3 | $0.1 |
| Fuel      and Purchased Power                         | 81.0         | 81.0      | –      | –     | – | – |
| Operating      and Maintenance                        | 73.4         | 53.6      | 15.8         | $      0.1  | 3.8 | 0.1 |
| Depreciation                                          | 13.5         | 12.4      | 1.1          | –     | – | – |
|                                                  |         |      |         |        |   |   |
| Operating      Income (Loss)                          | 33.8         | 32.1      | 1.3          | (0.1)       | 0.5 | – |
| Interest      Expense                                 | (7.5)        | (6.1)     | (0.2)        | –     | (0.1) | (1.1) |
| Equity      Earnings in ATC                           | 4.2          | –   | –      | 4.2         | – | – |
| Other      Income                                     | 2.8          | 0.6       | –      | –     | 0.2 | 2.0 |
|                                                  |         |      |         |        |   |   |
| Income      Before Minority Interest and Income Taxes | 33.3         | 26.6      | 1.1          | 4.1         | 0.6 | 0.9 |
| Income      Tax Expense (Benefit)                     | 8.4          | 9.9       | 0.2          | 1.6         | 0.2 | (3.5) |
| Minority      Interest                                | 0.2          | –   | –      | –     | 0.2 | – |
| Net      Income                                       | $24.7        | $16.7     | $0.9         | $2.5        | $0.2 | $4.4 |
|                                                  |         |      |         |        |   |   |
|                                                  |         |      |         |        |   |   |
| For      the Quarter Ended September 30, 2007         |         |      |         |        |   |   |
|                                                  |         |      |         |        |   |   |
| Operating      Revenue                                | $200.8       | $179.0    | $16.9        | –     | $4.8 | $0.1 |
| Fuel      and Purchased Power                         | 91.8         | 91.8      | –      | –     | – | – |
| Operating      and Maintenance                        | 72.1         | 52.6      | 15.4         | –     | 3.9 | 0.2 |
| Depreciation                                          | 12.2         | 11.0      | 1.1          | –     | 0.1 | – |
|                                                  |         |      |         |        |   |   |
| Operating      Income (Loss)                          | 24.7         | 23.6      | 0.4          | –     | 0.8 | (0.1) |
| Interest      Expense                                 | (6.3)        | (5.3)     | (0.6)        | –     | (0.1) | (0.3) |
| Equity      Earnings in ATC                           | 3.2          | –   | –      | $3.2        | – | – |
| Other      Income                                     | 3.2          | 1.0       | 0.5          | –     | 0.5 | 1.2 |
|                                                  |         |      |         |        |   |   |
| Income      Before Minority Interest and Income Taxes | 24.8         | 19.3      | 0.3          | 3.2         | 1.2 | 0.8 |
| Income      Tax Expense (Benefit)                     | 8.1          | 6.3       | (0.3)        | 1.3         | 0.4 | 0.4 |
| Minority      Interest                                | 0.2          | –   | –      | –     | 0.2 | – |
| Net      Income                                       | $16.5        | $13.0     | $0.6         | $1.9        | $0.6 | $0.4 |

----

|                                                  |         | Energy    |         |        |
|-------------------------------------------------------|--------------|-----------|--------------|-------------|
|                                                  |         |      | Nonregulated |        |   |   |
|                                                  |         | Regulated | Energy       | Investment  | Real |   |
|                                                  | Consolidated | Utility   | Operations   | in      ATC | Estate | Other |
| Millions                                              |         |      |         |        |   |   |
|                                                  |         |      |         |        |   |   |
| For      the Nine Months Ended September 30, 2008     |         |      |         |        |   |   |
|                                                  |         |      |         |        |   |   |
| Operating      Revenue                                | $604.9       | $535.9    | $53.8        | –     | $14.9 | $0.3 |
| Fuel      and Purchased Power                         | 242.3        | 242.3     | –      | –     | – | – |
| Operating      and Maintenance                        | 239.6        | 179.4     | 47.6         | $0.3        | 11.2 | 1.1 |
| Depreciation                                          | 39.1         | 35.6      | 3.4          | –     | – | 0.1 |
|                                                  |         |      |         |        |   |   |
| Operating      Income (Loss)                          | 83.9         | 78.6      | 2.8          | (0.3)       | 3.7 | (0.9) |
| Interest      Expense                                 | (21.4)       | (17.5)    | (0.9)        | –     | (0.4) | (2.6) |
| Equity      Earnings in ATC                           | 11.2         | –   | –      | 11.2        | – | – |
| Other      Income                                     | 13.9         | 2.8       | 0.7          | –     | 0.7 | 9.7 |
|                                                  |         |      |         |        |   |   |
| Income      Before Minority Interest and Income Taxes | 87.6         | 63.9      | 2.6          | 10.9        | 4.0 | 6.2 |
| Income      Tax Expense (Benefit)                     | 28.3         | 23.9      | 0.3          | 4.4         | 1.5 | (1.8) |
| Minority      Interest                                | 0.3          | –   | –      | –     | 0.3 | – |
| Net      Income                                       | $59.0        | $40.0     | $2.3         | $6.5        | $2.2 | $8.0 |
|                                                  |         |      |         |        |   |   |
|                                                  |         |      |         |        |   |   |
| At      September 30, 2008                            |         |      |         |        |   |   |
|                                                  |         |      |         |        |   |   |
| Total      Assets                                     | $1,847.6     | $1,492.0  | $87.1        | $73.9       | $81.8 | $112.8 |
| Property,      Plant and Equipment – Net        | $1,292.4     | $1,239.3  | $49.8        | –     | – | $3.3 |
| Accumulated      Depreciation                         | $854.2       | $806.2    | $46.2        | –     | – | $1.8 |
| Capital      Expenditures                             | $211.1       | $207.3    | $3.8         | –     | – | – |
|                                                  |         |      |         |        |   |   |
| For      the Nine Months Ended September 30, 2007     |         |      |         |        |   |   |
|                                                  |         |      |         |        |   |   |
| Operating      Revenue                                | $629.4       | $538.2    | $49.9        | –     | $41.0 | $0.3 |
| Fuel      and Purchased Power                         | 262.4        | 262.4     | –      | –     | – | – |
| Operating      and Maintenance                        | 231.3        | 170.7     | 44.7         | –     | 15.1 | 0.8 |
| Depreciation                                          | 35.8         | 32.3      | 3.3          | –     | 0.1 | 0.1 |
|                                                  |         |      |         |        |   |   |
| Operating      Income (Loss)                          | 99.9         | 72.8      | 1.9          | –     | 25.8 | (0.6) |
| Interest      Expense                                 | (18.7)       | (15.7)    | (1.4)        | –     | (0.3) | (1.3) |
| Equity      Earnings in ATC                           | 9.3          | –   | –      | $9.3        | – | – |
| Other      Income                                     | 11.9         | 2.4       | 3.2          | –     | 1.0 | 5.3 |
|                                                  |         |      |         |        |   |   |
| Income      Before Minority Interest and Income Taxes | 102.4        | 59.5      | 3.7          | 9.3         | 26.5 | 3.4 |
| Income      Tax Expense                               | 35.4         | 21.6      | 0.3          | 3.7         | 9.7 | 0.1 |
| Minority      Interest                                | 1.6          | –   | –      | –     | 1.6 | – |
| Net      Income                                       | $65.4        | $37.9     | $3.4         | $5.6        | $15.2 | $3.3 |
|                                                  |         |      |         |        |   |   |
|                                                  |         |      |         |        |   |   |
| At      September 30, 2007                            |         |      |         |        |   |   |
|                                                  |         |      |         |        |   |   |
| Total      Assets                                     | $1,646.5     | $1,264.5  | $78.9        | $65.0       | $86.7 | $151.4 |
| Property,      Plant and Equipment – Net        | $1,033.8     | $983.1    | $47.3        | –     | – | $3.4 |
| Accumulated      Depreciation                         | $843.2       | $799.3    | $42.1        | –     | – | $1.8 |
| Capital      Expenditures                             | $141.3       | $140.2    | $1.1         | –     | – | – |

----

|                                | September    30, | December      31, |
|-------------------------------------|------------------|-------------------|
| Investments                         | 2008             | 2007              |
| Millions                            |             |              |
| Real      Estate Assets             | $81.8            | $91.3             |
| Debt      and Equity Securities (a) | 42.9             | 39.7              |
| Investment      in ATC              | 73.9             | 65.7              |
| Emerging      Technology Portfolio  | 7.5              | 7.9               |
| Other                               | 7.2              | 9.2               |
| Total      Investments              | $213.3           | $213.8            |

|                                                                                                                                                                                                                                                                                    | September    30, | December      31, |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|-------------------|
| Real      Estate Assets                                                                                                                                                                                                                                                                 | 2008             | 2007              |
| Millions                                                                                                                                                                                                                                                                                |             |              |
|                                                                                                                                                                                                                                                                                    |             |              |
| Land      Held for Sale Beginning Balance                                                                                                                                                                                                                                               | $62.6            | $58.0             |
| Additions      during period: Capitalized Improvements                                                                                                                                                                                                                                  | 6.8              | 12.8              |
|                                              Purchases | –          | –           |
| Deductions      during period: Cost of Real Estate Sold                                                                                                                                                                                                                                 | (1.6)            | (8.2)             |
|                                                                                                                                                                                                                                                                                    |             |              |
| Land      Held for Sale Ending Balance                                                                                                                                                                                                                                                  | 67.8             | 62.6              |
| Long-Term      Finance Receivables                                                                                                                                                                                                                                                      | 13.9             | 15.3              |
| Other (a)                                                                                                                                                                                                                                                                               | 0.1              | 13.4              |
|                                                                                                                                                                                                                                                                                    |             |              |
| Total      Real Estate Assets                                                                                                                                                                                                                                                           | $81.8            | $91.3             |

| ALLETE's      Interest in ATC                        |   |   |   |   |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|
| As      of September 30, 2008                        |   |   |   |   |   |
| Millions                                             |   |   |   |   |   |   |   |
|                                                 |   |   |   |   |   |   |   |
| Equity      Investment Balance at December 31, 2007  |   |   | $65.7  |
| 2008      Cash Investments                           |   |   |   |   |   | 5.2 |
| Equity      in ATC Earnings                          |   |   |   |   |   | 11.2 |
| Distributed      ATC Earnings                        |   |   |   |   |   | (8.2) |
| Equity      Investment Balance at September 30, 2008 |   |   | $73.9  |

----

----

|                                         | Quarter      Ended | Nine      Months Ended |
|----------------------------------------------|--------------------|------------------------|
|                                         | September      30, | September      30,     |
|                                         | 2008               | 2007                   | 2008 | 2007 |
| Millions                                     |               |                   |   |   |
|                                         |               |                   |   |   |
| Loss      on Emerging Technology Investments | $(0.1)             | $(0.2)                 | $(0.6) | $(1.0) |
| AFUDC      –    Equity                 | 0.5                | 1.0                    | 2.6 | 2.2 |
| Investment      and Other Income             | 2.4                | 2.4                    | 11.9 | 10.7 |
|                                         |               |                   |   |   |
| Total      Other Income                      | $2.8               | $3.2                   | $13.9 | $11.9 |

----

|                                |             | Quarter      Ended | Nine      Months Ended |
|-------------------------------------|------------------|--------------------|------------------------|
|                                |             | September      30, | September      30,     |
|                                |             | 2008               | 2007                   | 2008 | 2007 |
| Millions                            |             |               |                   |   |
|                                |             |               |                   |   |   |
| Current      Tax Expense            |             |               |                   |   |
|                                | Federal      (a) | $2.2               | $2.5                   | $10.2 | $24.5 |
|                                | State      (b)   | (3.1)              | 0.7                    | (0.3) | 7.1 |
|                                |             | (0.9)              | 3.2                    | 9.9 | 31.6 |
|                                |             |               |                   |   |   |
| Deferred      Tax Expense (Benefit) |             |               |                   |   |
|                                | Federal      (a) | 6.9                | 3.5                    | 15.0 | 2.2 |
|                                | State            | 2.6                | 1.7                    | 4.1 | 2.4 |
|                                |             | 9.5                | 5.2                    | 19.1 | 4.6 |
|                                |             |               |                   |   |   |
| Deferred      Tax Credits           | (0.2)            | (0.3)              | (0.7)                  | (0.8) |
| Total      Income Tax Expense       | $8.4             | $8.1               | $28.3                  | $35.4 |

| (a) | Federal      current tax expense is lower and federal deferred tax expense is higher      than previous year due to lower pre-tax income and bonus depreciation      provisions in the Economic Stimulus Act of2008. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | State      current tax expense includes a benefit for the recognition of the Kendall      County loss for state purposes. The Federal tax benefit had been      recognized previously. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Other      Comprehensive Income (Loss)       | Quarter      Ended                                                                          | Nine      Months Ended |
|----------------------------------------------|---------------------------------------------------------------------------------------------|------------------------|
| Net      of Tax                              | September      30,                                                                          | September      30,     |
|                                         | 2008                                                                                        | 2007                   | 2008 | 2007 |
| Millions                                     |                                                                                        |                   |   |   |
| Net      Income                              | $24.7                                                                                       | $16.5                  | $59.0 | $65.4 |
| Other      Comprehensive Income              |                                                                                        |                   |   |   |
|                                         | Unrealized      Gain (Loss) on Securities                                                   | (1.3)                  | (0.6) | (2.0) | 0.4 |
|                                         |      Reclassification      Adjustment for Gains Included in Income | –                | – | (3.8) | – |
|                                         | Defined      Benefit Pension and Other Postretirement Plans                                 | 0.2                    | 0.4 | 1.5 | 0.9 |
| Total      Other Comprehensive Income (Loss) | (1.1)                                                                                       | (0.2)                  | (4.3) | 1.3 |
| Total      Comprehensive Income              | $23.7                                                                                       | $16.3                  | $54.7 | $66.7 |

----

|                                         |   | 2008       |    |   |   | 2007       |    |
|----------------------------------------------|--------|------------|---------|--------|--------|------------|---------|
| Reconciliation      of Basic and Diluted     |   | Dilutive   |    |   |   | Dilutive   |    |
| Earnings      Per Share                      | Basic  | Securities | Diluted |   | Basic  | Securities | Diluted |
| Millions      Except Per Share Amounts       |   |       |    |   |   |       |    |
|                                         |   |       |    |   |   |       |    |
| For      the Quarter Ended September 30,     |   |       |    |   |   |       |    |
|                                         |   |       |    |   |   |       |    |
| Net      Income                              | $24.7  | –    | $24.7   |   | $16.5  | –    | $16.5   |
| Common      Shares                           | 29.1   | 0.2        | 29.3    |   | 28.5   | –    | 28.5    |
| Earnings      Per Share                      | $0.85  | –    | $0.85   |   | $0.58  | –    | $0.58   |
|                                         |   |       |    |   |   |       |    |
| For      the Nine Months Ended September 30, |   |       |    |   |   |       |    |
|                                         |   |       |    |   |   |       |    |
| Net      Income                              | $59.0  | –    | $59.0   |   | $65.4  | –    | $65.4   |
| Common      Shares                           | 28.9   | 0.1        | 29.0    |   | 28.2   | 0.1        | 28.3    |
| Earnings      Per Share                      | $2.04  | –    | $2.04   |   | $2.31  | –    | $2.31   |

|                                            |    |                 | Postretirement |
|-------------------------------------------------|---------|----------------------|----------------|
|                                            | Pension | Health      and Life |
| Components      of Net Periodic Benefit Expense | 2008    | 2007                 | 2008           | 2007 |
| Millions                                        |    |                 |           |   |
|                                            |    |                 |           |   |
| For      the Quarter Ended September 30,        |    |                 |           |   |
|                                            |    |                 |           |   |
| Service      Cost                               | $1.5    | $1.3                 | $1.0           | $1.2 |
| Interest      Cost                              | 6.3     | 5.7                  | 2.4            | 2.1 |
| Expected      Return on Plan Assets             | (8.1)   | (7.7)                | (1.8)          | (1.6) |
| Amortization      of Prior Service Costs        | 0.2     | 0.2                  | –        | – |
| Amortization      of Net Loss                   | 0.4     | 0.8                  | 0.4            | 0.4 |
| Amortization      of Transition Obligation      | – | –              | 0.6            | 0.6 |
|                                            |    |                 |           |   |
| Net      Periodic Benefit Expense               | $0.3    | $0.3                 | $2.6           | $2.7 |
|                                            |    |                 |           |   |
| For      the Nine Months Ended September 30,    |    |                 |           |   |
|                                            |    |                 |           |   |
| Service      Cost                               | $4.4    | $3.9                 | $3.0           | $3.1 |
| Interest      Cost                              | 18.9    | 17.1                 | 7.2            | 5.8 |
| Expected      Return on Plan Assets             | (24.3)  | (23.0)               | (5.4)          | (4.8) |
| Amortization      of Prior Service Costs        | 0.5     | 0.5                  | –        | – |
| Amortization      of Net Loss                   | 1.2     | 2.4                  | 1.2            | 0.7 |
| Amortization      of Transition Obligation      | – | –              | 1.8            | 1.8 |
|                                            |    |                 |           |   |
| Net      Periodic Benefit Expense               | $0.7    | $0.9                 | $7.8           | $6.6 |

----

----

----

----

----

|                                  | At      Fair Value as of September 30, 2008 |
|---------------------------------------|---------------------------------------------|
| Recurring Fair Value      Measures    |                                        | Level      1 |   | Level      2 |   | Level      3 |   | Total |
| Millions                              |                                        |   |   |   |   |   |   |   |
| Assets:                               |                                        |   |   |   |   |   |   |   |
| Mutual      Funds                     |                                        | $19.8 |   | – |   | – |   | $19.8 |
| Bonds                                 |                                        | – |   | $3.7 |   | – |   | 3.7 |
| Auction      Rate Securities          |                                        | – |   | – |   | $19.4 | (a) | 19.4 |
| Total      Assets                     |                                        | $19.8 |   | $3.7 |   | $19.4 |   | $42.9 |
|                                  |                                        |   |   |   |   |   |   |   |
| Liabilities:                          |                                        |   |   |   |   |   |   |   |
| Deferred      compensation obligation |                                        | – |   | $7.6 |   | – |   | $7.6 |
| Total      Liabilities                |                                        | – |   | $7.6 |   | – |   | $7.6 |
| Total      Net Assets (Liabilities)   |                                        | $19.8 |   | $(3.9) |   | $19.4 |   | $35.3 |

|   | (a) | See      Note 3 – Investments for additionalinformation. |
|--------|-----|----------------------------------------------------------------|

| Recurring      Fair Value Measures For The Nine Months Ended September 30,      2008 | Auction      Rate                                         |
|--------------------------------------------------------------------------------------|-----------------------------------------------------------|
| Activity      in Level 3                                                             |                                                      | Securities |
| Millions                                                                             |                                                      |   |   |   |   |   |   |
| Balance      as of January 1, 2008                                                   |                                                      |   |   |   | – |
|                                                                                 | Purchases,      sales, issuances and settlements, net (a) |   |   | $(5.8) |
|                                                                                 | Level      3 transfers in                                 |   |   |   |   | 25.2 |
| Balance      as of September 30, 2008                                                |                                                      |   |   |   | $19.4 |

|   | (a) | Primarily      due to a $5.2 million transfer of auction rate securities to our Voluntary      Employee Benefit Association trust used to fund postretirement health and      life benefits. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Regulated Utility      includes retail and wholesale rate regulated electric, natural gas and      water services in northeastern Minnesota and northwestern Wisconsin under      the jurisdiction of state and federal regulatory    authorities. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Nonregulated Energy      Operations includes our coal mining activities in North Dakota,      approximately 50 MW of nonregulated generation and Minnesota land      sales. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Investment in ATC      includes our equity ownership interest inATC. |
|--------|--------|----------------------------------------------------------------------|

----

|                     | Quarter      Ended                  | Nine      Months Ended |
|--------------------------|-------------------------------------|------------------------|
|                     | September      30,                  | September      30,     |
| Kilowatt-hours      Sold | 2008                                | 2007                   | 2008 | 2007 |
| Millions                 |                                |                   |   |   |   |
|                     |                                |                   |   |   |   |   |   |
| Regulated      Utility   |                                |                   |   |   |
|                     | Retail      and Municipals          |                   |   |   |   |
|                     |                                | Residential            | 252.1 | 258.8 | 853.9 | 832.1 |
|                     |                                | Commercial             | 360.5 | 360.5 | 1,027.7 | 1,033.6 |
|                     |                                | Municipals             | 243.0 | 255.7 | 742.5 | 751.3 |
|                     |                                | Industrial             | 1,854.1 | 1,775.8 | 5,466.2 | 5,215.2 |
|                     |                                | Other                  | 20.5 | 21.5 | 62.0 | 62.8 |
|                     |                                |                   | Total      Retail and Municipals | 2,730.2 | 2,672.3 | 8,152.3 | 7,895.0 |
|                     |                                |                   |   |   |   |   |   |
|                     | Other      Power Suppliers          | 464.8                  | 571.9 | 1,244.0 | 1,608.8 |
|                     |                                |                   | Total      Regulated Utility | 3,195.0 | 3,244.2 | 9,396.3 | 9,503.8 |
|                     |                                |                   |   |   |   |   |   |
|                     | Nonregulated      Energy Operations | 60.6                   | 60.7 | 168.9 | 184.2 |
|                     |                                |                   |   |   |   |   |   |
|                     |                                |                   |  Total      Kilowatt-hours Sold | 3,255.6 | 3,304.9 | 9,565.2 | 9,688.0 |

|                                                   | Quarter      Ended | Nine      Months Ended |
|--------------------------------------------------------|--------------------|------------------------|
|                                                   | September      30, | September      30,     |
| Real      Estate                                       | 2008               | 2007                   | 2008 | 2007 |
| Revenue      and Sales Activity (a)                    | Qty                | Amount                 | Qty | Amount | Qty | Amount | Qty | Amount |
| Dollars      in Millions                               |               |                   |   |   |   |   |   |   |
|                                                   |               |                   |   |   |   |   |   |   |
| Town      Center Sales                                 |               |                   |   |   |   |   |   |   |
| Non-residential      Sq. Ft.                           | –            | –                | 50,000 | $1.8 | – | – | 474,476 | $14.5 |
| Residential      Units                                 | –            | –                | – | – | – | – | 130 | 1.6 |
|                                                   |               |                   |   |   |   |   |   |   |
| Palm      Coast Park                                   |               |                   |   |   |   |   |   |   |
| Non-residential      Sq. Ft.                           | –            | –                | – | – | – | – | 40,000 | 2.0 |
| Residential      Units                                 | –            | –                | – | – | – | – | 406 | 11.1 |
|                                                   |               |                   |   |   |   |   |   |   |
| Other      Land Sales                                  |               |                   |   |   |   |   |   |   |
| Acres      (b)                                         | 1                  | $0.7                   | 83 | $3.0 | 52 | $4.6 | 450 | $8.9 |
|                                                   |               |                   |   |   |   |   |   |   |
| Contract      Sales Price (c)                          |               | 0.7                    |   | 4.8 |   | 4.6 |   | 38.1 |
|                                                   |               |                   |   |   |   |   |   |   |
| Revenue      Recognized from Previously Deferred Sales |               | 2.6                    |   | 0.1 |   | 2.6 |   | 2.4 |
|                                                   |               |                   |   |   |   |   |   |   |
| Deferred      Revenue                                  |               | –                |   | (1.1) |   | – |   | (4.2) |
|                                                   |               |                   |   |   |   |   |   |   |
| Revenue      from Land Sales                           |               | 3.3                    |   | 3.8 |   | 7.2 |   | 36.3 |
|                                                   |               |                   |   |   |   |   |   |   |
| Other      Revenue (d)                                 |               | 1.0                    |   | 1.0 |   | 7.7 |   | 4.7 |
|                                                   |               |                   |   |   |   |   |   |   |
|                                                   |               | $4.3                   |   | $4.8 |   | $14.9 |   | $41.0 |

----

----

----

----

----

----

|   | · | We      will consider only carbon minimizing resources to supply power to our      customers. We will not consider a new coal resource without a reasonable      carbon emission solution. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We      will aggressively pursue Minnesota’s Renewable Energy Standard by adding      significant renewable resources to our portfolio of generation facilities      and power supply agreements. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We      will continue to improve the efficiency of coal-based generation      facilities. |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | We      plan to implement aggressive demand side conservation    efforts. |
|--------|--------|---------------------------------------------------------------------------|

|   | · | We      will continue to support research of technologies to reduce carbon      emissions from generation facilities and support carbon sequestration      efforts. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We      plan to achieve overall carbon emission reductions while maintaining      competitively priced electric service to our  customers. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

| Summary      of Development Projects |
|--------------------------------------|
| For      the Nine Months Ended       |   | Total | Residential | Non-residential |
| September      30, 2008              | Ownership | Acres      (a) | Units      (b) | Sq.      Ft. (b,      c) |
| Town      Center                     | 80% |   |   |   |
| At      December 31, 2007            |   | 991 | 2,289 | 2,228,200 |
| Property      Sold                   |   | – | – | – |
| Change      in Estimate              |   | – | – | – |
|                                 |   | 991 | 2,289 | 2,228,200 |
| Palm      Coast Park                 | 100% |   |   |   |
| At      December 31, 2007            |   | 3,436 | 3,154 | 3,116,800 |
| Property      Sold                   |   | – | – | – |
| Change      in Estimate              |   | – | 85 | – |
|                                 |   | 3,436 | 3,239 | 3,116,800 |
| Ormond      Crossings                | 100% |   |   |   |
| At      December 31, 2007            |   | 5,968 | (d) | (d) |
| Change      in Estimate              |   | – |   |   |
|                                 |   | 5,968 |   |   |
|                                 |   | 10,395 | 5,528 | 5,345,000 |

| (a) | Acreage      amounts are approximate and shown on a gross basis, including wetlands and      minority interest. |
|-----|-----------------------------------------------------------------------------------------------------------------|

| (b) | Estimated      and includes minority interest. Density at build out may differ from these      estimates. |
|-----|-----------------------------------------------------------------------------------------------------------|

| (c) | Depending      on the project, non-residential includes retail commercial, non-retail      commercial, office, industrial, warehouse, storage and      institutional. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | A development order approved      by the City of Ormond Beach includes up to 3,700 residential units and 5      million square feet of non-residential space. We estimate the first two      phases of Ormond Crossings will include 2,500-3,200 residential units and      2.5-3.5 million square feet of various types of non-residential      space. Density of the residential and      non-residential components of the project will be determined based upon      market and traffic mitigation cost considerations. Approximately 2,000      acres will be devoted to a regionally significant wetlands mitigation      bank. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Other      Land (a)       |                      |           |        |        |         |
|--------------------------------|---------------------------|----------------|-------------|-------------|--------------|
| For      the Nine Months Ended |                      |           |        | Non-        |         |
| September      30, 2008        | Total                     | Mixed      Use | Residential | residential | Agricultural |
| Acres      (b)                 |                      |           |        |        |         |
|                           |                      |           |        |        |         |   |
| Other                          |                      |           |        |        |         |
|                           | At      December 31, 2007 | 1,573          | 362         | 248         | 424          | 539 |
|                           | Property      Sold        | (52)           | (2)         | (47)        | (3)          | – |
|                           | Change      in Estimate   | –        | –     | –     | –      | – |
|                           |                      | 1,521          | 360         | 201         | 421          | 539 |

| (a) | Other      land includes land located in Palm Coast, Florida not included in      development projects, Lehigh and CapeCoral. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|

| (b) | Acreage      amounts are approximate and shown on a gross basis, including wetlands and      minority interest. |
|-----|-----------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

|                                           | Minimum                         |      |
|------------------------------------------------|---------------------------------|-----------|
| Minimum      Revenue and Demand Under Contract | Annual      Revenue (a,      b) | Monthly   |
| As      of October 1, 2008                     | (Millions)                      | Megawatts |
|                                           |                            |      |
| 2008                                           | $107.8                          | 734       |
| 2009                                           | $40.0                           | 242       |
| 2010                                           | $25.5                           | 148       |
| 2011                                           | $25.3                           | 148       |
| 2012                                           | $23.3                           | 136       |
|                                           |                            |      |

| (a) | Based      on past experience, we believe revenue from our Large Power Customers will      be substantially in excess of the minimum contract  amounts. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Although      several contracts have a feature that allows demand to go to zero after a      two-year advance notice of a permanent closure, this minimum revenue      summary does not reflect this occurrence happening in the forecasted      period because we believe it isunlikely. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| 31(a) | Rule      13a-14(a)/15d-14(a) Certification by the Chief Executive Officer Pursuant      to Section 302 of the Sarbanes-Oxley Act of  2002. |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------|

| 31(b) | Rule      13a-14(a)/15d-14(a) Certification by the Chief Financial Officer Pursuant      to Section 302 of the Sarbanes-Oxley Act of  2002. |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32 |   | Section      1350 Certification of Periodic Report by the Chief Executive Officer and      Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act      of 2002. |
|--------|----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 99 |   | ALLETE      News Release dated October 31, 2008, announcing 2008 third quarter      earnings. (This exhibit      has been furnished and shall not be deemed “filed” for purposes of      Section 18 of the Securities Exchange Act of 1934, nor shall it be      deemed incorporated by reference in any filing under the Securities Act of      1933, except as shall be expressly set forth by specific reference in such      filing.) |
|--------|----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | SIGNATURES |
|--------|------------|

|                  |   | ALLETE,      INC.                                      |
|-----------------------|--------|--------------------------------------------------------|
|                  |   |                                                   |
|                  |   |                                                   |
|                  |   |                                                   |
|                  |   |                                                   |
| October      31, 2008 |   | /s/      Mark A. Schober                               |
|                  |   | Mark      A. Schober                                   |
|                  |   | Senior      Vice President and Chief Financial Officer |
|                  |   |                                                   |
|                  |   |                                                   |
|                  |   |                                                   |
|                  |   |                                                   |
|                  |   |                                                   |
| October      31, 2008 |   | /s/      Steven Q. DeVinck                             |
|                  |   | Steven      Q. DeVinck                                 |
|                  |   | Controller                                             |

----