|   | R | Annual      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) |   | (I.R.S.      Employer Identification No.) |

| Title      of Each Class             |   | Name      of Each Stock Exchangeon      Which Registered |
|--------------------------------------|--------|----------------------------------------------------------|
| Common      Stock, without par value |   | New      York Stock Exchange                             |

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

----

| Definitions                                                                                | 3                                                                                                                       |
|--------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|
|                                                                                       |                                                                                                                    |
| Safe      Harbor Statement Under the Private Securities Litigation Reform Act of      1995 | 5                                                                                                                       |
|                                                                                       |                                                                                                                    |
| Part      I                                                                                |                                                                                                                    |
| Item      1.                                                                               | Business                                                                                                                | 6 |
|                                                                                       | Regulated      Operations                                                                                               | 6 |
|                                                                                       |                                                                                                                    | Electric      Sales / Customers | 6 |
|                                                                                       |                                                                                                                    | Power      Supply | 9 |
|                                                                                       |                                                                                                                    | Transmission      and Distribution | 11 |
|                                                                                       |                                                                                                                    | Investment      in ATC | 11 |
|                                                                                       |                                                                                                                    | Properties | 11 |
|                                                                                       |                                                                                                                    | Regulatory      Matters | 12 |
|                                                                                       |                                                                                                                    | Regional      Organizations | 15 |
|                                                                                       |                                                                                                                    | Minnesota      Legislation | 15 |
|                                                                                       |                                                                                                                    | Competition | 15 |
|                                                                                       |                                                                                                                    | Franchises | 16 |
|                                                                                       | Investments      and Other                                                                                              | 16 |
|                                                                                       |                                                                                                                    | BNI      Coal | 16 |
|                                                                                       |                                                                                                                    | ALLETE      Properties | 16 |
|                                                                                       |                                                                                                                    | Non-Rate      Base Generation | 17 |
|                                                                                       |                                                                                                                    | Other. | 17 |
|                                                                                       | Environmental      Matters                                                                                              | 17 |
|                                                                                       | Employees                                                                                                               | 21 |
|                                                                                       | Availability      of Information                                                                                        | 21 |
|                                                                                       | Executive      Officers of the Registrant                                                                               | 22 |
| Item      1A.                                                                              | Risk      Factors                                                                                                       | 23 |
| Item      1B.                                                                              | Unresolved      Staff Comments                                                                                          | 26 |
| Item      2.                                                                               | Properties                                                                                                              | 26 |
| Item      3.                                                                               | Legal      Proceedings                                                                                                  | 26 |
| Item      4.                                                                               | Submission      of Matters to a Vote of Security Holders                                                                | 26 |
| Part      II                                                                               |                                                                                                                    |
| Item      5.                                                                          | Market      for Registrant’s Common Equity, Related Stockholder MattersIssuer      Purchases of Equity Securities |        27 |
| Item      6.                                                                               | Selected      Financial Data                                                                                            | 28 |
| Item      7.                                                                               | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations                   | 29 |
|                                                                                       | Overview                                                                                                                | 29 |
|                                                                                       | 2009      Compared to 2008.                                                                                             | 30 |
|                                                                                       | 2008      Compared to 2007                                                                                              | 32 |
|                                                                                       | Critical      Accounting Estimates                                                                                      | 34 |
|                                                                                       | Outlook                                                                                                                 | 35 |
|                                                                                       | Liquidity      and Capital Resources                                                                                    | 42 |
|                                                                                       | Capital      Requirements                                                                                               | 46 |
|                                                                                       | Environmental      and Other Matters                                                                                    | 46 |
|                                                                                       | Market      Risk                                                                                                        | 46 |
|                                                                                       | New      Accounting Standards                                                                                           | 48 |
| Item      7A.                                                                              | Quantitative      and Qualitative Disclosures about Market Risk                                                         | 48 |
| Item      8.                                                                               | Financial      Statements and Supplementary Data                                                                        | 48 |
| Item      9.                                                                               | Changes      in and Disagreements with Accountants on Accounting and Financial      Disclosure                          | 48 |
| Item      9A.                                                                              | Controls      and Procedures                                                                                            | 48 |
| Item      9B.                                                                              | Other      Information                                                                                                  | 49 |
| Part      III                                                                              |                                                                                                                    |
| Item      10.                                                                              | Directors,      Executive Officers and Corporate Governance                                                             | 50 |
| Item      11.                                                                              | Executive      Compensation                                                                                             | 50 |
| Item      12.                                                                              | Security      Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters                | 50 |
| Item      13.                                                                              | Certain      Relationships and Related Transactions, and Director      Independence                                     | 50 |
| Item      14.                                                                              | Principal      Accounting Fees and Services                                                                             | 50 |
| Part      IV                                                                               |                                                                                                                    |   |
| Item      15.                                                                              | Exhibits      and Financial Statement Schedules                                                                         | 51 |
|                                                                                       |                                                                                                                    |
| Signatures                                                                                 | 55                                                                                                                      |
|                                                                                       |                                                                                                                    |
| Consolidated      Financial Statements                                                     | 58                                                                                                                      |

----

| Abbreviation      or Acronym         | Term                                                                                                                                                                     |
|--------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| AICPA                                | American      Institute of Certified Public Accountants                                                                                                                  |
| ALLETE                               | ALLETE,      Inc.                                                                                                                                                        |
| ALLETE      Properties               | ALLETE      Properties, LLC and its subsidiaries                                                                                                                         |
| AFUDC                                | Allowance      for Funds Used During Construction - the cost of both debt and equity      funds used to finance utility plant additions during construction      periods |
| AREA                                 | Arrowhead      Regional Emission Abatement                                                                                                                               |
| ARS                                  | Auction      Rate Securities                                                                                                                                             |
| ATC                                  | American      Transmission Company LLC                                                                                                                                   |
| Basin                                | Basin      Electric Power Cooperative                                                                                                                                    |
| Bison      I                         | Bison      I Wind Project                                                                                                                                                |
| BNI      Coal                        | BNI      Coal, Ltd.                                                                                                                                                      |
| BNSF                                 | Burlington      Northern Santa Fe Railway Company                                                                                                                        |
| Boswell                              | Boswell      Energy Center                                                                                                                                               |
| Boswell      NOX      Reduction Plan | NOX      emission reductions from Boswell Units 1, 2, and 4                                                                                                              |
| CO2                                  | Carbon      Dioxide                                                                                                                                                      |
| Company                              | ALLETE,      Inc. and its subsidiaries                                                                                                                                   |
| DC                                   | Direct      Current                                                                                                                                                      |
| DRI                                  | Development      of Regional Impact                                                                                                                                      |
| 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      8-K                        | ALLETE      Current Report on Form 8-K                                                                                                                                   |
| Form      10-K                       | ALLETE      Annual Report on Form 10-K                                                                                                                                   |
| Form      10-Q                       | ALLETE      Quarterly Report on Form 10-Q                                                                                                                                |
| FTR                                  | Financial      Transmission Rights                                                                                                                                       |
| GAAP                                 | Accounting      Principles Generally Accepted in the United States                                                                                                       |
| 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                                     |
| IBEW      Local 31                   | International      Brotherhood of Electrical Workers Local 31                                                                                                            |
| Invest      Direct                   | ALLETE’s      Direct Stock Purchase and Dividend Reinvestment Plan                                                                                                 |
| kV                                   | Kilovolt(s)                                                                                                                                                              |
| Laskin                               | Laskin      Energy Center                                                                                                                                                |
| Manitoba      Hydro                  | Manitoba      Hydro-Electric Board                                                                                                                                       |
| MBtu                                 | Million      British thermal units                                                                                                                                       |
| Mesabi      Nugget                   | Mesabi      Nugget Delaware, LLC                                                                                                                                         |
| Minnesota      Power                 | An      operating division of ALLETE, Inc.                                                                                                                               |
| Minnkota      Power                  | Minnkota      Power Cooperative, Inc.                                                                                                                                    |
| MISO                                 | Midwest      Independent Transmission System Operator, Inc.                                                                                                              |
| Moody’s                        | Moody’s      Investors Service, Inc.                                                                                                                               |
| MPCA                                 | Minnesota      Pollution Control Agency                                                                                                                                  |

----

| MPUC                             | Minnesota      Public Utilities Commission                                                                   |
|----------------------------------|--------------------------------------------------------------------------------------------------------------|
| MW      / MWh                    | Megawatt(s)      / Megawatt-hour(s)                                                                          |
| NextEra      Energy              | NextEra      Energy Resources, LLC                                                                           |
| NDPSC                            | North      Dakota Public Service Commission                                                                  |
| Non-residential                  | Retail      commercial, non-retail commercial, office, industrial, warehouse, storage      and institutional |
| NOX                              | Nitrogen      Oxides                                                                                         |
| Note      ___                    | Note      ___ to the consolidated financial statements in this Form    10-K                                  |
| NPDES                            | National      Pollutant Discharge Elimination System                                                         |
| NYSE                             | New      York Stock Exchange                                                                                 |
| OES                              | Minnesota      Office of Energy Security                                                                     |
| Oliver      Wind I               | Oliver      Wind I Energy Center                                                                             |
| Oliver      Wind II              | Oliver      Wind II Energy Center                                                                            |
| Palm      Coast Park             | Palm      Coast Park development project in Florida                                                          |
| Palm      Coast Park District    | Palm      Coast Park Community Development District                                                          |
| PolyMet      Mining              | PolyMet      Mining Corp.                                                                                    |
| PSCW                             | Public      Service Commission of Wisconsin                                                                  |
| PUHCA      2005                  | Public      Utility Holding Company Act of 2005                                                              |
| Rainy      River Energy          | Rainy      River Energy Corporation - Wisconsin                                                              |
| SEC                              | Securities      and Exchange Commission                                                                      |
| SO2                              | Sulfur      Dioxide                                                                                          |
| Square      Butte                | Square      Butte Electric Cooperative                                                                       |
| Standard      & Poor’s | Standard      & Poor’s Ratings Services, a division of The McGraw-Hill Companies,      Inc.        |
| SWL&P                        | Superior      Water, Light and Power Company                                                                 |
| Taconite      Harbor             | Taconite      Harbor Energy Center                                                                           |
| Taconite      Ridge              | Taconite      Ridge 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 Natural Resources                                                               |

----

| · | our      ability to successfully implement our strategic  objectives;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | prevailing      governmental policies, regulatory actions, and legislation including those      of the United States Congress, state legislatures, the FERC, the MPUC, the      PSCW, the NDPSC, 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; |
| · | our      ability to manage expansion and integrate acquisitions;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | the      potential impacts of climate change and future regulation to restrict the      emissions of GHG on our Regulated 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 regulations;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| · | 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| · | project      delays or changes in project costs;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | availability      and management of construction      materials and skilled construction labor for capital    projects;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| · | changes      in operating expenses, capital and land      development expenditures;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| · | global      and domestic economic conditions affecting us or our      customers;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

----

| Item      1. | Business |
|--------------|----------|

| Year      Ended December 31                          |        2009 |        2008 |        2007 |
|------------------------------------------------------|------------------------------------------------|------------------------------------------------|------------------------------------------------|
|                                                 |                                           |                                           |                                           |
| Consolidated      Operating Revenue – Millions | $759.1                                         | $801.0                                         | $841.7                                         |
|                                                 |                                           |                                           |                                           |
| Percentage      of Consolidated Operating Revenue    |                                           |                                           |                                           |
| Regulated      Operations                            | 90%                                            | 89%                                            | 86%                                            |
| Investments      and Other                           | 10%                                            | 11%                                            | 14%                                            |
|                                                 | 100%                                           | 100%                                           | 100%                                           |

| Regulated      Utility Electric Sales             |
|---------------------------------------------------|
| Year Ended December 31             | 2009 | % | 2008 | % | 2007 | % |
| Millions      of Kilowatt-hours                   |   |   |   |   |   |   |
| Retail      and Municipals                        |   |   |   |   |   |   |
| Residential                                       | 1,164 | 10 | 1,172 | 9 | 1,141 | 9 |
| Commercial                                        | 1,420 | 12 | 1,454 | 12 | 1,456 | 11 |
| Industrial                                        | 4,475 | 37 | 7,192 | 57 | 7,054 | 55 |
| Municipals      (FERC rate regulated)             | 992 | 8 | 1,002 | 8 | 1,009 | 8 |
| Total      Retail and Municipals                  | 8,051 | 67 | 10,820 | 86 | 10,660 | 83 |
| Other      Power Suppliers                        | 4,056 | 33 | 1,800 | 14 | 2,157 | 17 |
|  Total      Regulated Utility Electric Sales | 12,107 | 100 | 12,620 | 100 | 12,817 | 100 |

----

| Industrial      Customer Electric Sales |
|-----------------------------------------|
| Year      Ended December 31             | 2009 | % | 2008 | % | 2007 | % |
| Millions      of Kilowatt-hours    |   |   |   |   |   |   |
| Taconite      Producers                 | 2,124 | 47 | 4,579 | 64 | 4,408 | 62 |
| Paper,      Pulp and Wood Products      | 1,454 | 33 | 1,567 | 22 | 1,613 | 23 |
| Pipelines                               | 504 | 11 | 582 | 8 | 562 | 8 |
| Other      Industrial                   | 393 | 9 | 464 | 6 | 471 | 7 |
|                                    | 4,475 | 100 | 7,192 | 100 | 7,054 | 100 |

----

| Customer (a)                                                               | Industry            | Location                           | Ownership                                                                                                               | EarliestTermination      Date |
|----------------------------------------------------------------------------|---------------------|------------------------------------|-------------------------------------------------------------------------------------------------------------------------|-------------------------------|
|  Hibbing      Taconite Co.                                            |  Taconite      |  Hibbing,      MN             |  62.3%      ArcelorMittal USA Inc.23%      Cliffs Natural Resources Inc.14.7%      United States Steel Corporation |  December      31, 2015  |
| ArcelorMittal      USA – Minorca Mine (b)                            | Taconite            | Virginia,      MN                  | ArcelorMittal      USA Inc.                                                                                             | February      28, 2014        |
| United      States Steel Corporation(USS      – Minnesota Ore) (b,c) | Taconite            | Mt.      Iron, MN and Keewatin, MN | United      States Steel Corporation                                                                                    | February      28, 2014        |
| United      Taconite LLC                                                   | Taconite            | Eveleth,      MN                   | Cliffs      Natural Resources Inc.                                                                                      | December      31, 2015        |
| Mesabi      Nugget Delaware, LLC                                           | Iron      Nugget    | Hoyt      Lakes, MN                | Steel      Dynamics, Inc (80%)Kobe      Steel USA (20%)                                                                 | December      31, 2017        |
| UPM,      Blandin Paper Mill (b)                                           | Paper               | Grand      Rapids, MN              | UPM-Kymmene      Corporation                                                                                            | February      28, 2014        |
| Boise      White Paper, LLC                                                | Paper               | International      Falls, MN       | Boise      Paper Holdings, LLC                                                                                          | December      31, 2013        |
| Sappi      Cloquet LLC                                                     | Paper      and Pulp | Cloquet,      MN                   | Sappi      Limited                                                                                                      | February      28, 2014        |
| NewPage      Corporation – Duluth Mills (b)                          | Paper      and Pulp | Duluth,      MN                    | NewPage      Corporation                                                                                                | February      28, 2014        |

|   | (a) | During      2009, three Large Power Customers moved to the Large Light and Power rate      class. |
|--------|-----|---------------------------------------------------------------------------------------------------|

|   | (b) | The      contract will terminate four years from the date of written notice from      either Minnesota Power or the customer. No notice of contract cancellation      has been given by either party. Thus, the earliest date of cancellation is      February 28, 2014. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | United      States Steel Corporation includes the Minntac Plant in Mountain Iron, MN      and the Keewatin Taconite Plant in Keewatin,MN. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Regulated      UtilityPower      Supply                   | UnitNo.        | YearInstalled   | Net      WinterCapability | Year EndedDecember 31,      2009Electric Requirements |
|-----------------------------------------------------------|----------------|-----------------|---------------------------|----------------------------------------------------------------------|
|                                                      |           |            | MW                        | MWh                                                                  | % |
| Coal-Fired                                                |           |            |                      |                                                                 |   |
| Boswell      Energy Center                                | 1              | 1958            | 68                        |                                                                 |   |
| in      Cohasset, MN                                      | 2              | 1960            | 67                        |                                                                 |   |
|                                                      | 3              | 1973            | 352                       |                                                                 |   |
|                                                      | 4              | 1980            | 429                       |                                                                 |   |
|                                                      |           |            | 916                       | 5,390,131                                                            | 42.8% |
| Laskin      Energy Center                                 | 1              | 1953            | 55                        |                                                                 |   |
| in      Hoyt Lakes, MN                                    | 2              | 1953            | 51                        |                                                                 |   |
|                                                      |           |            | 106                       | 510,505                                                              | 4.1 |
| Taconite      Harbor Energy Center                        | 1              | 1957            | 75                        |                                                                 |   |
| in      Schroeder, MN                                     | 2              | 1957            | 74                        |                                                                 |   |
|                                                      | 3              | 1967            | 76                        |                                                                 |   |
|                                                      |           |            | 225                       | 1,058,263                                                            | 8.4 |
| Total      Coal                                           |           |            | 1,247                     | 6,958,899                                                            | 55.3 |
| Biomass/Coal/Natural      Gas                             |           |            |                      |                                                                 |   |
| Hibbard      Renewable Energy Center                      |           |            |                      |                                                                 |   |
| in      Duluth, MN                                        | 3      & 4 | 1949,      1951 | 54                        | 40,703                                                               | 0.3 |
|                                                      |           |            |                      |                                                                 |   |
| Cloquet      Energy Centerin      Cloquet, MN             | 5              | 2001            | 22                        | 19,340                                                               | 0.2 |
| Total      Biomass/Coal/Natural Gas                       |           |            | 76                        | 60,043                                                               | 0.5 |
| Hydro                                                     |           |            |                      |                                                                 |   |
| Group      consisting of ten stations in MN               | Various        |            | 109                       | 434,541                                                              | 3.5 |
| Wind                                                      |           |            |                      |                                                                 |   |
| Taconite      Ridgein      Mt. Iron, MN (a)               | 1-10           | 2008            | 4                         | 56,255                                                               | 0.4 |
| Total      Company Generation                             |           |            | 1,436                     | 7,509,738                                                            | 59.7 |
| Long-Term      Purchased Power                            |           |            |                      |                                                                 |   |
| Square      Butte burns lignite coal near Center, ND      |           |            |                      | 1,695,254                                                            | 13.5 |
| Wind      – Oliver County, ND                       |           |            |                      | 361,624                                                              | 2.9 |
| Hydro      – Manitoba Hydro in Winnipeg, MB, Canada |           |            |                      | 433,543                                                              | 3.4 |
| Total      Long-Term Purchased Power                      |           |            |                      | 2,490,421                                                            | 19.8 |
|                                                      |           |            |                      |                                                                 |   |
| Other      Purchased Power(b)                             |           |            |                      | 2,579,408                                                            | 20.5 |
| Total      Purchased Power                                |           |            |                      | 5,069,829                                                            | 40.3 |
| Total                                                     |           |            | 1,436                     | 12,579,567                                                           | 100.0% |

| (a) | The      nameplate capacity of Taconite Ridge is 25 MWs. The capacity reflected in      the table is actual accredited capacity of the facility. Accredited      capacity is the amount of net generating capability associated with the      facility for which capacity credit may be obtained using limited      historical data. As more data is collected, actual accredited capacity may      increase. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Includes      short term market purchases in the MISO market and from Other Power      Suppliers. |
|-----|---------------------------------------------------------------------------------------------------|

----

| Coal      Delivered to Minnesota Power |
|----------------------------------------|
| Year      Ended December 31            |        2009 |        2008 |        2007 |
| Average      Price per Ton             | $24.99 | $22.73 | $21.78 |
| Average      Price per MBtu            | $1.37 | $1.25 | $1.20 |

----

----

|   | · | Increased      system flexibility to adapt to volatile business cycles and varied future      industrial load scenarios; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | · | Reductions      in the emission of GHGs (primarily carbon dioxide);  and |
|--------|--------|--------------------------------------------------------------------------|

|   | · | Compliance      with mandated renewable energystandards. |
|--------|--------|----------------------------------------------------------|

----

----

----

----

| Non-Rate      Base Power Supply             | Unit      No.  | YearInstalled   | YearAcquired | NetCapability      (MW) |
|---------------------------------------------|----------------|-----------------|--------------|-------------------------|
| Steam                                       |           |            |         |                    |
| Biomass      (a)                            |           |            |         |                    |
| Cloquet      Energy Center (b)              | 5              | 2001            | 2001         | 22                      |
|     in      Cloquet, MN |           |            |         |                    |
| Rapids      Energy Center (c)               | 6      & 7 | 1969,      1980 | 2000         | 29                      |
| in      Grand Rapids, MN                    |           |            |         |                    |
| Hydro                                       |           |            |         |                    |
| Conventional      Run-of-River              |           |            |         |                    |
| Rapids      Energy Center (c)               | 4      & 5 | 1917            | 2000         | 1                       |
| in      Grand Rapids, MN                    |           |            |         |                    |

| (a) | Cloquet      Energy Center is supplemented by natural gas; Rapids Energy Center is      supplemented by coal. |
|-----|---------------------------------------------------------------------------------------------------------------|

| (b) | Transferred      to Regulated Operations as a result of our 2008 rate order on November 1,      2009. |
|-----|-------------------------------------------------------------------------------------------------------|

| (c) | The      net generation is primarily dedicated to the needs of one      customer. |
|-----|-----------------------------------------------------------------------------------|

----

----

|   | · | Expand      our renewable energy supply. |
|--------|--------|------------------------------------------|

|   | · | Improve      the efficiency of our coal-based generation facilities, as well as other      process efficiencies. |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | · | Provide      energy conservation initiatives with our customers and demand side      efforts. |
|--------|--------|-----------------------------------------------------------------------------------------------|

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

|   | · | Achieve      overall carbon emission reductions. |
|--------|--------|--------------------------------------------------|

----

----

----

| Executive Officers                                                      | Initial Effective Date  |
|-------------------------------------------------------------------------|-------------------------|
|                                                                    |                    |
| Donald J. Shippar, Age      60                                          |                    |
| Chairman      and Chief Executive Officer                               | May      12, 2009       |
| Chairman,      President and Chief Executive Officer                    | January      1, 2006    |
| President      and Chief Executive Officer                              | January      21, 2004   |
|                                                                    |                    |
| Alan R. Hodnik, Age      50                                             |                    |
| President      – ALLETE                                           | May      12, 2009       |
| Chief      Operating Officer – Minnesota Power                    | May      8, 2007        |
| Senior      Vice President – Minnesota Power Operations           | September      22, 2006 |
| Vice      President – Minnesota Power Generation                  | May      1, 2005        |
|                                                                    |                    |
| Robert J. Adams, Age      47                                            |                    |
| Vice      President – Business Development and Chief Risk Officer | May      13, 2008       |
| Vice      President – Utility Business Development                | February      1, 2004   |
|                                                                    |                    |
| Deborah A. Amberg, Age      44                                          |                    |
| Senior      Vice President, General Counsel and Secretary               | January      1, 2006    |
| Vice      President, General Counsel and Secretary                      | March      8, 2004      |
|                                                                    |                    |
| Steven Q. DeVinck, Age      50                                          |                    |
| Controller      and Vice President – Business Support             | December      17, 2009  |
| Controller                                                              | July      12, 2006      |
|                                                                    |                    |
| Mark A. Schober, Age      54                                            |                    |
| Senior      Vice President and Chief Financial Officer                  | July      1, 2006       |
| Senior      Vice President and Controller                               | February      1, 2004   |
|                                                                    |                    |
| Donald W. Stellmaker,      Age 52                                       |                    |
| Treasurer                                                               | July      24, 2004      |

|   | Mr. DeVinck was      Director of Nonutility Business Development, and Assistant Controller. |
|--------|---------------------------------------------------------------------------------------------|

|   | Mr. Hodnik was General      Manager of Thermal Operations. |
|--------|------------------------------------------------------------|

----

| Item      1A. | Risk      Factors |
|---------------|-------------------|

----

----

|   | · | severe      or unexpected weather conditions; |
|--------|--------|-----------------------------------------------|

|   | · | seasonality; |
|--------|--------|--------------|

|   | · | changes      in electricity usage; |
|--------|--------|------------------------------------|

|   | · | transmission      or transportation constraints, inoperability or      inefficiencies; |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | availability      of competitively priced alternative energy  sources; |
|--------|--------|------------------------------------------------------------------------|

|   | · | changes      in supply and demand for energy; |
|--------|--------|-----------------------------------------------|

|   | · | changes      in power production capacity; |
|--------|--------|--------------------------------------------|

|   | · | outages      at Minnesota Power’s generating facilities or those of our      competitors; |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | changes      in production and storage levels of natural gas, lignite, coal, crude oil      and refined products; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | natural      disasters, wars, sabotage, terrorist acts or other catastrophic events;      and |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | federal,      state, local and foreign energy, environmental, or other regulation and      legislation. |
|--------|--------|---------------------------------------------------------------------------------------------------------|

----

| Item      1B. | Unresolved      Staff Comments |
|---------------|--------------------------------|

| Item      2. | Properties |
|--------------|------------|

| Item      3. | Legal      Proceedings |
|--------------|------------------------|

| Item      4. | Submission      of Matters to a Vote of SecurityHolders |
|--------------|---------------------------------------------------------|

----

| Item      5. | Market      for Registrant’s Common Equity, Related Stockholder Matters and Issuer      Purchases of Equity Securities |
|--------------|------------------------------------------------------------------------------------------------------------------------------|

|              | 2009             | 2008      |
|-------------------|------------------|-----------|
|              | Price      Range | Dividends | Price      Range | Dividends |
| Quarter           | High             | Low       | Declared | High | Low | Declared |
|              |             |      |   |   |   |   |
| First             | $33.27           | $23.35    | $0.44 | $39.86 | $33.76 | $0.43 |
| Second            | 29.14            | 24.45     | 0.44 | 46.11 | 38.82 | 0.43 |
| Third             | 34.57            | 27.75     | 0.44 | 49.00 | 38.05 | 0.43 |
| Fourth            | 35.29            | 32.23     | 0.44 | 44.63 | 28.28 | 0.43 |
| Annual      Total |             |      | $1.76 |   |   | $1.72 |

----

| Item      6. | Selected      Financial Data |
|--------------|------------------------------|

|                                                                                           | 2009     |   | 2008     |   | 2007     |   | 2006      |   | 2005      |   |
|------------------------------------------------------------------------------------------------|----------|--------|----------|--------|----------|--------|-----------|--------|-----------|--------|
| Millions                                                                                       |     |   |     |   |     |   |      |   |      |   |
| Operating      Revenue                                                                         | $759.1   |   | $801.0   |   | $841.7   |   | $767.1    |   | $737.4    |   |
| Operating      Expenses                                                                        | 653.1    |   | 679.2    |   | 710.0    |   | 628.8     |   | 692.3     | (e)    |
| Income      from Continuing Operations Before Non-Controlling Interest – Net of      Tax | 60.7     |   | 83.0     |   | 89.5     |   | 81.9      |   | 20.3      | (e)    |
| Income      (Loss) from Discontinued Operations – Net of Tax                             | –  |   | –  |   | –  |   | (0.9)     |   | (4.3)     | (e)    |
| Net      Income                                                                                | 60.7     |   | 83.0     |   | 89.5     |   | 81.0      |   | 16.0      |   |
|      Less:      Non-Controlling Interest in Subsidiaries              | (0.3)    |   | 0.5      |   | 1.9      |   | 4.6       |   |  2.7 |   |
| Net      Income Attributable to ALLETE                                                         | 61.0     |   | 82.5     |   | 87.6     |   | 76.4      |   | 13.3      |   |
| Common      Stock Dividends                                                                    | 56.5     |   | 50.4     |   | 44.3     |   | 40.7      |   | 34.4      |   |
| Earnings      Retained in (Distributed from) Business                                          | $4.5     |   | $32.1    |   | $43.3    |   | $35.7     |   | $(21.1)   |   |
| Shares      Outstanding – Millions                                                       |     |   |     |   |     |   |      |   |      |   |
| Year-End                                                                                       | 35.2     |   | 32.6     |   | 30.8     |   | 30.4      |   | 30.1      |   |
| Average (a)                                                                                    |     |   |     |   |     |   |      |   |      |   |
| Basic                                                                                          | 32.2     |   | 29.2     |   | 28.3     |   | 27.8      |   | 27.3      |   |
| Diluted                                                                                        | 32.2     |   | 29.3     |   | 28.4     |   | 27.9      |   | 27.4      |   |
| Diluted      Earnings (Loss) Per Share                                                         |     |   |     |   |     |   |      |   |      |   |
| Continuing      Operations                                                                     | $1.89    |   | $2.82    |   | $3.08    |   | $2.77     |   | $0.64     | (e)    |
| Discontinued      Operations (b)                                                               | –  |   | –  |   | –  |   | (0.03)    |   | (0.16)    |   |
|                                                                                           | $1.89    |   | $2.82    |   | $3.08    |   | $2.74     |   | $0.48     |   |
| Total      Assets                                                                              | $2,393.1 |   | $2,134.8 |   | $1,644.2 |   | $1,533.4  | (d)    | $1,398.8  |   |
| Long-Term      Debt                                                                            | 695.8    |   | 588.3    |   | 410.9    |   | 359.8     |   | 387.8     |   |
| Return      on Common Equity                                                                   | 6.9%     |   | 10.7%    |   | 12.4%    |   | 12.1%     |   | 2.2%      | (e)    |
| Common      Equity Ratio                                                                       | 57.0%    |   | 58.0%    |   | 63.7%    |   | 63.1%     |   | 60.7%     |   |
| Dividends      Declared per Common Share                                                       | $1.76    |   | $1.72    |   | $1.64    |   | $1.45     |   | $1.245    |   |
| Dividend      Payout Ratio                                                                     | 93%      |   | 61%      |   | 53%      |   | 53%       |   | 259%      | (e)    |
| Book      Value Per Share at Year-End                                                          | $26.39   |   | $25.37   |   | $24.11   |   | $21.90    |   | $20.03    |   |
| Capital      Expenditures by Segment (c)                                                       |     |   |     |   |     |   |      |   |      |   |
| Regulated      Operations                                                                      | $299.2   |   | $317.0   |   | $220.6   |   | $107.5    |   | $46.5     |   |
| Investments      and Other                                                                     | 4.5      |   | 5.9      |   | 3.3      |   |  1.9 |   | 12.1      |   |
| Discontinued      Operations                                                                   | –  |   | –  |   | –  |   | –   |   | 4.5       |   |
| Total      Capital Expenditures                                                                | $303.7   |   | $322.9   |   | $223.9   |   | $109.4    |   | $63.1     |   |

| (a) | Excludes      unallocated ESOP shares. |
|-----|----------------------------------------|

| (b) | Operating      results of our Water Services businesses and our telecommunications      business are included in discontinued operations, and accordingly, amounts      have been restate for all periodspresented. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | In      2008, we made changes to our reportable business segments in our      continuing effort to manage and measure performance of our operations      based on the nature of products and services provided and customers      served. (See Note 2. BusinessSegments.) |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | Included      $86.1 million of assets reflecting the adoption of Plan Accounting –      Defined Benefit Pension Plans, and Health and Welfare Benefit      Plans. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e) | Impacted      by a $50.4 million, or $1.84 per share, charge related to the assignment      of the Kendall County power purchaseagreement. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item      7. | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations |
|--------------|-------------------------------------------------------------------------------------------------------|

----

| Kilowatt-hours      Sold                                   | 2009   | 2008   | Quantity      Variance | %Variance     |
|------------------------------------------------------------|--------|--------|------------------------|---------------|
| Millions                                                   |   |   |                   |          |
| Regulated      Utility                                     |   |   |                   |          |
| Retail      and Municipals                                 |   |   |                   |          |
| Residential                                                | 1,164  | 1,172  | (8)                    | (0.7)      %  |
| Commercial                                                 | 1,420  | 1,454  | (34)                   | (2.3)      %  |
| Industrial                                                 | 4,475  | 7,192  | (2,717)                | (37.8)      % |
| Municipals                                                 | 992    | 1,002  | (10)                   | (1.0)      %  |
| Total      Retail and Municipals                           | 8,051  | 10,820 | (2,769)                | (25.6)      % |
| Other      Power Suppliers                                 | 4,056  | 1,800  | 2,256                  | 125.3      %  |
| Total      Regulated Utility Kilowatt-hours      Sold | 12,107 | 12,620 | (513)                  | (4.1)      %  |

----

| ALLETE      Properties                                 | 2009     | 2008    |
|--------------------------------------------------------|----------|---------|
| Revenue      and Sales Activity                        | Quantity | Amount  | Quantity | Amount |
| Dollars      in Millions                               |     |    |   |   |
| Revenue      from Land Sales                           |     |    |   |   |
| Acres      (a)                                         | 35       | $3.8    | 219 | $6.3 |
| Contract      Sales Price (b)                          |     | 3.8     |   | 6.3 |
| Revenue      Recognized from Previously Deferred Sales |     | – |   | 3.7 |
| Revenue      from Land Sales                           |     | 3.8     |   | 10.0 |
| Other      Revenue (c)                                 |     | 0.2     |   | 8.3 |
|  Total      ALLETE Properties Revenue             |     | $4.0    |   | $18.3 |

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

| (b) | Reflected      total contract sales price on closed land transactions. Land sales are      recorded using a percentage-of-completion method. (See Note 1. Operations      and Significant AccountingPolicies.) |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | Included      a $4.5 million pre-tax gain from the sale of a shopping center in Winter      Haven, Florida in 2008. |
|-----|---------------------------------------------------------------------------------------------------------------------|

----

| Kilowatt-hours      Sold                                   | 2008   | 2007   | Quantity      Variance | %Variance |
|------------------------------------------------------------|--------|--------|------------------------|-----------|
| Millions                                                   |   |   |                   |      |
| Regulated      Utility                                     |   |   |                   |      |
| Retail      and Municipals                                 |   |   |                   |      |
| Residential                                                | 1,172  | 1,141  | 31                     | 2.7%      |
| Commercial                                                 | 1,454  | 1,457  | (3)                    | (0.2)%    |
| Industrial                                                 | 7,192  | 7,054  | 138                    | 2.0%      |
| Municipals                                                 | 1,002  | 1,008  | (6)                    | (0.6)%    |
| Total      Retail and Municipals                           | 10,820 | 10,660 | 160                    | 1.5%      |
| Other      Power Suppliers                                 | 1,800  | 2,157  | (357)                  | (16.6)%   |
| Total      Regulated Utility Kilowatt-hours      Sold | 12,620 | 12,817 | (197)                  | (1.5)%    |

----

| ALLETE      Properties                                 | 2008     | 2007    |
|--------------------------------------------------------|----------|---------|
| Revenue      and Sales Activity                        | Quantity | Amount  | Quantity | Amount |
| Dollars      in Millions                               |     |    |   |   |
| Revenue      from Land Sales                           |     |    |   |   |
| Non-residential      Sq. Ft.                           | –  | – | 580,059 | $17.0 |
| Residential      Units                                 | –  | – | 736 | 14.8 |
| Acres      (a)                                         | 219      | $6.3    | 483 | 10.6 |
| Contract      Sales Price (b)                          |     | 6.3     |   | 42.4 |
| Revenue      Recognized from Previously Deferred Sales |     | 3.7     |   | 3.1 |
| Deferred      Revenue                                  |     | – |   | (1.2) |
| Revenue      from Land Sales                           |     | 10.0    |   | 44.3 |
| Other      Revenue (c)                                 |     | 8.3     |   | 6.2 |
|  Total      ALLETE Properties Revenue             |     | $18.3   |   | $50.5 |

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

| (b) | Reflected      total contract sales price on closed land transactions. Land sales are      recorded using a percentage-of-completion method. (See Note 1. Operations      and Significant AccountingPolicies.) |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | Included      a $4.5 million pre-tax gain from the sale of a shopping center in Winter      Haven, Florida in 2008. |
|-----|---------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

|   | · | Increased      system flexibility to adapt to volatile business cycles and varied future      industrial load scenarios; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | · | Reductions      in the emission of GHGs (primarily carbon dioxide);  and |
|--------|--------|--------------------------------------------------------------------------|

|   | · | Compliance      with mandated renewable energystandards. |
|--------|--------|----------------------------------------------------------|

----

|   | · | Expand      our renewable energy supply. |
|--------|--------|------------------------------------------|

|   | · | Improve      the efficiency of our coal-based generation facilities, as well as other      process efficiencies. |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | · | Provide      energy conservation initiatives with our customers and demand side      efforts. |
|--------|--------|-----------------------------------------------------------------------------------------------|

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

|   | · | Achieve      overall carbon emission reductions. |
|--------|--------|--------------------------------------------------|

----

----

| Summary      of Development Projects       |      | Total          | Residential    | Non-residential          |
|--------------------------------------------|-----------|----------------|----------------|--------------------------|
| Land      Available-for-Sale               | Ownership | Acres      (a) | Units      (b) | Sq.      Ft. (b,      c) |
| Current      Development Projects          |      |           |           |                     |
| Town      Center                           | 80%       | 854            | 2,264          | 2,238,400                |
|  Palm      Coast Park                 | 100%      | 3,143          | 3,154          | 3,555,000                |
| Total      Current Development Projects    |      | 3,997          | 5,418          | 5,793,400                |
| Proposed      Development Project          |      |           |           |                     |
|  Ormond      Crossings                | 100%      | 2,924          | (d)            | (d)                      |
| Other                                      |      |           |           |                     |
| Lake      Swamp Wetland Mitigation Project | 100%      | 3,034          | (e)            | (e)                      |
| Total      of Development Projects         |      | 9,955          | 5,418          | 5,793,400                |

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

| (b) | Estimated      and includes non-controlling 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 that was approved by the City of Ormond Beach is being      replaced by a development agreement to facilitate development of Ormond      Crossings as currently planned. At build-out, we expect the project to      include 2,950 residential units, 4.87 million square feet of various types      of non-residential space and publicfacilities. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e) | Lake Swamp wetland mitigation      bank is a regionally significant wetlands mitigation bank that was      permitted by the St. Johns River Water Management District in 2008 and by      the U.S. Army Corps of Engineers in December 2009. Wetland mitigation      credits will be used at Ormond Crossings and will also be available for      sale to developers of other projects that are located in the bank’s      service area. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Other      Land Available-for-Sale (a) | Total  | Mixed      Use | Residential | Non-residential | Agricultural |
|----------------------------------------|--------|----------------|-------------|-----------------|--------------|
| Acres      (b)                         |   |           |        |            |         |
| Other      Land                        | 1,277  | 394            | 113         | 267             | 503          |

| (a) | Other      land includes land located in Palm Coast, Lehigh, and Cape Coral,      Florida. |
|-----|--------------------------------------------------------------------------------------------|

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

| Year      Ended December 31                        | 2009     | %       | 2008     | %       | 2007     | %       |
|----------------------------------------------------|----------|---------|----------|---------|----------|---------|
| Millions                                           |     |    |     |    |     |    |
| Common      Equity                                 | $929.5   | 57      | $827.1   | 57      | $742.6   | 63      |
| Non-Controlling      Interest                      | 9.5      | – | 9.8      | 1       | 9.3      | 1       |
| Long-Term      Debt (Including Current Maturities) | 701.0    | 43      | 598.7    | 42      | 422.7    | 36      |
| Short-Term      Debt                               | 1.9      | – | 6.0      | – | –  | – |
|                                               | $1,641.9 | 100     | $1,441.6 | 100     | $1,174.6 | 100     |

----

| Year      Ended December 31                                      | 2009    | 2008    | 2007    |
|------------------------------------------------------------------|---------|---------|---------|
| Millions                                                         |    |    |    |
| Cash      and Cash Equivalents at Beginning of Period            | $102.0  | $23.3   | $44.8   |
| Cash      Flows from (used for)                                  |    |    |    |
| Operating      Activities                                        | 137.4   | 153.6   | 124.2   |
| Investing      Activities                                        | (320.0) | (276.1) | (154.1) |
| Financing      Activities                                        | 106.3   | 201.2   | 8.4     |
|     Change      in Cash and Cash Equivalents | (76.3)  | 78.7    | (21.5)  |
| Cash      and Cash Equivalents at End of Period                  | $25.7   | $102.0  | $23.3   |

----

| Issue      Date(on      or about) | Maturity            | Principal      Amount | Coupon |
|-----------------------------------|---------------------|-----------------------|--------|
| February      17, 2010            | April      15, 2021 | $15      Million      | 4.85%  |
| February      17, 2010            | April      15, 2025 | $30      Million      | 5.10%  |
| February      17, 2010            | April      15, 2040 | $35      Million      | 6.00%  |

----

|                                                | Payments      Due by Period |
|-----------------------------------------------------|-----------------------------|
| Contractual      Obligations                        |                        | Less      than | 1      to 3 | 4      to 5 | After |
| As      of December 31, 2009                        | Total                       | 1      Year | Years | Years | 5      Years |
| Millions                                            |                        |   |   |   |   |
| Long-Term      Debt (a)                             | $1,172.1                    | $41.5 | $196.6 | $98.2 | $835.8 |
| Pension      and Other Postretirement Benefit Plans | 194.1                       | 36.6 | 105.4 | 52.1 | – |
| Operating      Lease Obligations                    | 89.1                        | 8.8 | 26.4 | 15.8 | 38.1 |
| Uncertain      Tax Positions (b)                    | –                     | – | – | – | – |
| Unconditional      Purchase Obligations             | 394.0                       | 114.1 | 102.7 | 30.4 | 146.8 |
|                                                | $1,849.3                    | $201.0 | $431.1 | $196.5 | $1,020.7 |

| (a) | Includes      interest and assumes variable interest rates in effect at December 31,      2009, remains constant through remainingterm. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Excludes      $9.5 million of noncurrent unrecognized tax benefits due to uncertainty      regarding the timing of future cash payments related to the guidance in      accounting for uncertain taxpositions. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Credit      Ratings                                                         | Standard      & Poor’s | Moody’s |
|-----------------------------------------------------------------------------|----------------------------------|---------------|
| Issuer      Credit Rating                                                   | BBB+                             | Baa1          |
| Commercial      Paper                                                       | A-2                              | P-2           |
| Senior      Secured                                                         |                             |          |
| First      Mortgage Bonds (a)                                               | A–                         | A2            |
| Unsecured      Debt                                                         |                             |          |
| Collier      County Industrial Development Revenue Bonds – Fixed Rate | BBB                              | –       |

| (a) | Includes      collateralized pollution controlbonds. |
|-----|------------------------------------------------------|

| Capital      Expenditures                   | 2010                                | 2011          | 2012    | 2013    | 2014    | Total   |
|---------------------------------------------|-------------------------------------|---------------|---------|---------|---------|---------|
| Regulated      Utility Operations           |                                |          |    |    |    |    |
|                                        | Base      and Other                 | $156          | $82     | $81     | $82     | $89     | $490 |
|                                        | Current      Cost Recovery (a) |          |    |    |    |    |   |
|                                        |                                | Environmental | 2       | – | – | – | – | 2 |
|                                        |                                | Renewable     | 81      | 66      | – | – | – | 147 |
|                                        |                                | Transmission  | 5       | 21      | 27      | 42      | 13 | 108 |
|                                        |                                | Generation    | – | – | – | – | – | – |
|                                        | Total      Current Cost Recovery    | 88            | 87      | 27      | 42      | 13      | 257 |
| Regulated      Utility Capital Expenditures | 244                                 | 169           | 108     | 124     | 102     | 747     |
| Other                                       |                                | 6             | 18      | 24      | 8       | 8       | 64 |
| Total      Capital Expenditures             | $250                                | $187          | $132    | $132    | $110    | $811    |

| (a) | Estimated      current capital expenditures recoverable outside of a rate      case. |
|-----|--------------------------------------------------------------------------------------|

----

|                                     | Expected      Maturity Date |
|------------------------------------------|-----------------------------|
| Interest      Rate Sensitive             |                        |   |   |   |   |   |   | Fair |
| Financial      Instruments               | 2010                        | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | Value |
| Dollars      in Millions                 |                        |   |   |   |   |   |   |   |
| Long-Term      Debt                      |                        |   |   |   |   |   |   |   |
| Fixed      Rate (a)                      | $1.6                        | $1.6 | $1.6 | $71.1 | $19.6 | $528.1 | $623.6 | $657.3 |
| Average      Interest Rate – %     | 5.9                         | 5.9 | 5.9 | 5.2 | 6.9 | 5.9 | 5.8 |   |
|                                     |                        |   |   |   |   |   |   |   |
| Variable      Rate                       | $3.6                        | $12.3 | $1.7 | $2.8 | – | $57.0 | $77.4 | $77.5 |
| Average      Interest Rate – % (b) | 0.4                         | 3.6 | 1.9 | 0.3 | – | 0.3 | 0.9 |   |

| (a) | The      $65 million line of credit is included in the fixed rate maturity of      $528.1 as it will be refinanced with long-term debt in the first quarter      of 2010. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Assumes      rate in effect at December 31, 2009, remains constant through remaining      term. |
|-----|-------------------------------------------------------------------------------------------------|

----

| Item      7A. | Quantitative      and Qualitative Disclosures about MarketRisk |
|---------------|----------------------------------------------------------------|

| Item      8. | Financial      Statements and Supplementary Data |
|--------------|--------------------------------------------------|

| Item      9. | Changes      in and Disagreements with Accountants on Accounting and Financial      Disclosure |
|--------------|------------------------------------------------------------------------------------------------|

| Item      9A. | Controls      and Procedures |
|---------------|------------------------------|

----

| Item      9A. | Controls      and Procedures (Continued) |
|---------------|------------------------------------------|

| Item      9B. | Other      Information |
|---------------|------------------------|

----

| Item      10. | Directors,      Executive Officers and CorporateGovernance |
|---------------|------------------------------------------------------------|

|   | · | Directors. The      information regarding directors will be included in the “Election of      Directors” section; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | · | Audit Committee Financial      Expert. The information regarding the Audit Committee financial      expert will be included in the “Audit Committee Report”      section; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Audit Committee Members.      The identity of the Audit Committee members is included in the “Audit      Committee Report” section; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Executive Officers. The      information regarding executive officers is included in Part I of this      Form 10-K; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|

|   | · | Section 16(a)      Compliance. The information regarding Section 16(a) compliance will      be included in the “Section 16(a) Beneficial Ownership Reporting      Compliance” section. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Corporate      Governance Guidelines; |
|--------|--------|---------------------------------------|

|   | · | Audit      Committee Charter; |
|--------|--------|-------------------------------|

|   | · | Executive      Compensation Committee Charter; and |
|--------|--------|----------------------------------------------------|

|   | · | Corporate      Governance and Nominating CommitteeCharter. |
|--------|--------|------------------------------------------------------------|

| Item      11. | Executive      Compensation |
|---------------|-----------------------------|

| Item      12. | Security      Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters |
|---------------|----------------------------------------------------------------------------------------------------------|

| Item      13. | Certain      Relationships and Related Transactions, and Director      Independence |
|---------------|-------------------------------------------------------------------------------------|

| Item      14. | Principal      Accounting Fees and Services |
|---------------|---------------------------------------------|

----

| Item      15. | Exhibits      and Financial Statement Schedules |
|---------------|-------------------------------------------------|

| (a)    | Certain      Documents Filed as Part of this Form 10-K.                                                                                                                                                                    |                                                                           |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------|
| (1)    | Financial      Statements                                                                                                                                                                                                  | Page                                                                           |
|   |                                                                                                                                                                                                                       | ALLETE                                                                         |   |
|   |                                                                                                                                                                                                                       | Report      of Independent Registered Public Accounting Firm                   | 57 |
|   |                                                                                                                                                                                                                       | Consolidated      Balance Sheet at December 31, 2009 and 2008                  | 58 |
|   |                                                                                                                                                                                                                       | For      the Three Years Ended December 31, 2009                               |   |
|   |                                                                                                                                                                                                                       |                                                                           | Consolidated      Statement of Income | 59 |
|   |                                                                                                                                                                                                                       |                                                                           | Consolidated      Statement of Cash Flows | 60 |
|   |                                                                                                                                                                                                                       |                                                                           | Consolidated      Statement of Shareholders’ Equity | 61 |
|   |                                                                                                                                                                                                                       | Notes      to Consolidated Financial Statements                                | 62 |
| (2)    | Financial      Statement Schedules                                                                                                                                                                                         |                                                                           |
|   |                                                                                                                                                                                                                       | Schedule      II – ALLETE Valuation and Qualifying Accounts and Reserves | 97 |
|   | All      other schedules have been omitted either because the information is not      required to be reported by ALLETE or because the information is included      in the consolidated financial statements or the notes. |
| (3)    | Exhibits      including those incorporated by reference.                                                                                                                                                                   |                                                                           |

|   | *3(a)1 | -      | Articles      of Incorporation, amended and restated as of May 8, 2001, (filed as      Exhibit 3(b) to the March 31, 2001, Form 10-Q, File No.      1-3548).                                                                                                                                              |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *3(a)2 | -      | Amendment      to Articles of Incorporation, dated as of May 12, 2009, (filed as Exhibit      3 to the June 30, 2009, Form 10-Q, File No.    1-3548).                                                                                                                                                     |
|   | *3(a)3 | -      | Amendment      to Certificate of Assumed Name, filed with the Minnesota Secretary of      State on May 8, 2001, (filed as Exhibit 3(a) to the March 31, 2001, Form      10-Q, File No. 1-3548).                                                                                                                     |
|   | *3(b)  | -      | Bylaws,      as amended effective August 24, 2004, (filed as Exhibit 3 to the August      25, 2004, Form 8-K, File No. 1-3548).                                                                                                                                                                                     |
|   | *4(a)1 | -      | Mortgage      and Deed of Trust, dated as of September 1, 1945, between Minnesota Power      & Light Company (now ALLETE) and The Bank of New York Mellon (formerly      Irving Trust Company) and Douglas J. MacInnes (successor to Richard H.      West), Trustees (filed as Exhibit 7(c), File No.  2-5865). |
|   | *4(a)2 | -      | Supplemental      Indentures to ALLETE’s Mortgage and Deed of Trust:                                                                                                                                                                                                                                          |
|   |   |   | Number                                                                                                                                                                                                                                                                                                              | Dated      as of | Reference      File | Exhibit |
|   |   |   | First                                                                                                                                                                                                                                                                                                               | March      1, 1949 | 2-7826 | 7(b) |
|   |   |   | Second                                                                                                                                                                                                                                                                                                              | July      1, 1951 | 2-9036 | 7(c) |
|   |   |   | Third                                                                                                                                                                                                                                                                                                               | March      1, 1957 | 2-13075 | 2(c) |
|   |   |   | Fourth                                                                                                                                                                                                                                                                                                              | January      1, 1968 | 2-27794 | 2(c) |
|   |   |   | Fifth                                                                                                                                                                                                                                                                                                               | April      1, 1971 | 2-39537 | 2(c) |
|   |   |   | Sixth                                                                                                                                                                                                                                                                                                               | August      1, 1975 | 2-54116 | 2(c) |
|   |   |   | Seventh                                                                                                                                                                                                                                                                                                             | September      1, 1976 | 2-57014 | 2(c) |
|   |   |   | Eighth                                                                                                                                                                                                                                                                                                              | September      1, 1977 | 2-59690 | 2(c) |
|   |   |   | Ninth                                                                                                                                                                                                                                                                                                               | April      1, 1978 | 2-60866 | 2(c) |
|   |   |   | Tenth                                                                                                                                                                                                                                                                                                               | August      1, 1978 | 2-62852 | 2(d)2 |
|   |   |   | Eleventh                                                                                                                                                                                                                                                                                                            | December      1, 1982 | 2-56649 | 4(a)3 |
|   |   |   | Twelfth                                                                                                                                                                                                                                                                                                             | April      1, 1987 | 33-30224 | 4(a)3 |
|   |   |   | Thirteenth                                                                                                                                                                                                                                                                                                          | March      1, 1992 | 33-47438 | 4(b) |
|   |   |   | Fourteenth                                                                                                                                                                                                                                                                                                          | June      1, 1992 | 33-55240 | 4(b) |
|   |   |   | Fifteenth                                                                                                                                                                                                                                                                                                           | July      1, 1992 | 33-55240 | 4(c) |
|   |   |   | Sixteenth                                                                                                                                                                                                                                                                                                           | July      1, 1992 | 33-55240 | 4(d) |
|   |   |   | Seventeenth                                                                                                                                                                                                                                                                                                         | February      1, 1993 | 33-50143 | 4(b) |
|   |   |   | Eighteenth                                                                                                                                                                                                                                                                                                          | July      1, 1993 | 33-50143 | 4(c) |
|   |   |   | Nineteenth                                                                                                                                                                                                                                                                                                          | February      1, 1997 | 1-3548      (1996 Form 10-K) | 4(a)3 |
|   |   |   | Twentieth                                                                                                                                                                                                                                                                                                           | November      1, 1997 | 1-3548      (1997 Form 10-K) | 4(a)3 |
|   |   |   | Twenty-first                                                                                                                                                                                                                                                                                                        | October      1, 2000 | 333-54330 | 4(c)3 |
|   |   |   | Twenty-second                                                                                                                                                                                                                                                                                                       | July      1, 2003 | 1-3548      (June 30, 2003 Form 10-Q) | 4 |
|   |   |   | Twenty-third                                                                                                                                                                                                                                                                                                        | August      1, 2004 | 1-3548      (Sept. 30, 2004 Form 10-Q) | 4(a) |
|   |   |   | Twenty-fourth                                                                                                                                                                                                                                                                                                       | March      1, 2005 | 1-3548      (March 31, 2005 Form 10-Q) | 4 |
|   |   |   | Twenty-fifth                                                                                                                                                                                                                                                                                                        | December      1, 2005 | 1-3548      (March 31, 2006 Form 10-Q) | 4 |
|   |   |   | Twenty-sixth                                                                                                                                                                                                                                                                                                        | October      1, 2006 | 1-3548      (2006 Form 10-K) | 4 |
|   |   |   | Twenty-seventh                                                                                                                                                                                                                                                                                                      | February      1, 2008 | 1-3548      (2007 Form 10-K) | 4(a)3 |
|   |   |   | Twenty-eighth                                                                                                                                                                                                                                                                                                       | May      1, 2008 | 1-3548      (June 30, 2008 Form 10-Q) | 4 |
|   |   |   | Twenty-ninth                                                                                                                                                                                                                                                                                                        | November      1, 2008 | 1-3548      (2008 Form 10-K) | 4(a)3 |
|   |   |   | Thirtieth                                                                                                                                                                                                                                                                                                           | January      1, 2009 | 1-3548      (2008 Form 10-K) | 4(a)4 |

----

|   | *4(b)1   | -      | Indenture      of Trust, dated as of August 1, 2004, between the City of Cohasset,      Minnesota and U.S. Bank National Association, as Trustee relating to $111      Million Collateralized Pollution Control Refunding Revenue Bonds (filed as      Exhibit 4(b) to the September 30, 2004, Form 10-Q, File No.      1-3548). |
|--------|----------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *4(b)2   | -      | Loan      Agreement, dated as of August 1, 2004, between the City of Cohasset,      Minnesota and ALLETE relating to $111 Million Collateralized Pollution      Control Refunding Revenue Bonds (filed as Exhibit 4(c) to the September      30, 2004, Form 10-Q, File No. 1-3548).                                              |
|   | *4(c)1   | -      | Mortgage      and Deed of Trust, dated as of March 1, 1943, between Superior Water,      Light and Power Company and Chemical Bank & Trust Company and Howard      B. Smith, as Trustees, both succeeded by U.S. Bank National Association,      as Trustee (filed as Exhibit 7(c), File No. 2-8668).                        |
|   | *4(c)2   | -      | Supplemental      Indentures to Superior Water, Light and Power Company’s Mortgage and Deed      of Trust:                                                                                                                                                                                                                 |
|   |     |   | Number                                                                                                                                                                                                                                                                                                                           | Dated      as of | Reference      File | Exhibit |
|   |     |   | First                                                                                                                                                                                                                                                                                                                            | March      1, 1951 | 2-59690 | 2(d)(1) |
|   |     |   | Second                                                                                                                                                                                                                                                                                                                           | March      1, 1962 | 2-27794 | 2(d)1 |
|   |     |   | Third                                                                                                                                                                                                                                                                                                                            | July      1, 1976 | 2-57478 | 2(e)1 |
|   |     |   | Fourth                                                                                                                                                                                                                                                                                                                           | March      1, 1985 | 2-78641 | 4(b) |
|   |     |   | Fifth                                                                                                                                                                                                                                                                                                                            | December      1, 1992 | 1-3548      (1992 Form 10-K) | 4(b)1 |
|   |     |   | Sixth                                                                                                                                                                                                                                                                                                                            | March      24, 1994 | 1-3548      (1996 Form 10-K) | 4(b)1 |
|   |     |   | Seventh                                                                                                                                                                                                                                                                                                                          | November      1, 1994 | 1-3548      (1996 Form 10-K) | 4(b)2 |
|   |     |   | Eighth                                                                                                                                                                                                                                                                                                                           | January      1, 1997 | 1-3548      (1996 Form 10-K) | 4(b)3 |
|   |     |   | Ninth                                                                                                                                                                                                                                                                                                                            | October      1, 2007 | 1-3548      (2007 Form 10-K) | 4(c)3 |
|   |     |   | Tenth                                                                                                                                                                                                                                                                                                                            | October      1, 2007 | 1-3548      (2007 Form 10-K) | 4(c)4 |
|   |     |   | Eleventh                                                                                                                                                                                                                                                                                                                         | December      1, 2008 | 1-3548      (2008 Form 10-K) | 4(c)3 |
|   | *10(a)   | -      | Power      Purchase and Sale Agreement, dated as of May 29, 1998, between Minnesota      Power, Inc. (now ALLETE) and Square Butte Electric Cooperative (filed as      Exhibit 10 to the June 30, 1998, Form 10-Q, File No.    1-3548).                                                                                          |
|   | 10(d)1   | -      | Fourth Amended and Restated Committed Facility      Letter, dated January 11, 2006, by and among ALLETE and LaSalle Bank      National Association, as Agent.                                                                                                                                                                    |
|   | *10(d)2  | -      | First      Amendment to Fourth Amended and Restated Committed Facility Letter dated      June 19, 2006, by and among ALLETE and LaSalle Bank National Association,      as Agent (filed as Exhibit 10(a) to the June 30, 2006, Form 10-Q,      File No. 1-3548).                                                            |
|   | *10(d)3  | -      | Second      Amendment to Fourth Amended and Restated Committed Facility Letter dated      December 14, 2006, by and among ALLETE and LaSalle Bank National      Association, as Agent (filed as Exhibit 10(d)3 to the 2006 Form 10-K, File      No. 1-3548).                                                           |
|   | *10(e)1  | -      | Financing      Agreement between Collier County Industrial Development Authority and      ALLETE dated as of July 1, 2006, (filed as Exhibit 10(b)1 to the      June 30, 2006, Form 10-Q, File No. 1-3548).                                                                                                                 |
|   | *10(e)2  | -      | Letter      of Credit Agreement, dated as of July 5, 2006, among ALLETE, the      Participating Banks and Wells Fargo Bank, National Association, as      Administrative Agent and Issuing Bank (filed as Exhibit 10(b)2 to the      June 30, 2006, Form 10-Q, File No. 1-3548).                                            |
|   | 10(g)    | -      | Agreement dated December 16, 2005, among ALLETE,      Wisconsin Public Service Corporation and WPS Investments,      LLC.                                                                                                                                                                                                        |
|   | +10(h)1  | -      | ALLETE Executive Annual Incentive Plan as amended      and restated with amendments through      January 1, 2010.                                                                                                                                                                                                      |
|   | +*10(h)2 | -      | Form      of ALLETE Executive Annual Incentive Plan Form of Awards Effective 2009      (filed as Exhibit 10(h)7 to the 2008 Form 10-K, File No.      1-3548).                                                                                                                                                                    |
|   | +10(h)3  | -      | Form of ALLETE Executive Annual Incentive Plan      Form of Awards Effective 2010.                                                                                                                                                                                                                                               |
|   | +*10(i)1 | -      | ALLETE      and Affiliated Companies Supplemental Executive Retirement Plan I (SERP      I), as amended and restated, effective January 1, 2009, (filed as Exhibit      10(i)4 to the 2008 Form 10-K, File No. 1-3548).                                                                                                          |
|   | +*10(i)2 | -      | ALLETE      and Affiliated Companies Supplemental Executive Retirement Plan II (SERP      II), effective January 1, 2009, (filed as Exhibit 10(i)5 to the 2008 Form      10-K, File No. 1-3548).                                                                                                                                 |
|   | +*10(i)3 | -      | January      2009 Amendment to the ALLETE and Affiliated Companies Supplemental      Executive Retirement Plan II (SERP II), effective January 20, 2009, (filed      as Exhibit 10(i)6 to the 2008 Form 10-K, File No.  1-3548).                                                                                                 |
|   | +*10(j)1 | -      | Minnesota      Power and Affiliated Companies Executive Investment Plan I, as amended and      restated, effective November 1, 1988, (filed as Exhibit 10(c) to the 1988      Form 10-K, File No. 1-3548).                                                                                                                       |
|   | +*10(j)2 | -      | Amendments      through December 2003 to the Minnesota Power and Affiliated Companies      Executive Investment Plan I (filed as Exhibit 10(v)2 to the 2003 Form      10-K, File No. 1-3548).                                                                                                                                    |

----

|   | +*10(j)3       | - | July      2004 Amendment to the Minnesota Power and Affiliated Companies Executive      Investment Plan I (filed as Exhibit 10(b) to the June 30, 2004, Form 10-Q,      File No. 1-3548).                   |
|--------|----------------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | +*10(j)4       | - | August      2006 Amendment to the Minnesota Power and Affiliated Companies Executive      Investment Plan I (filed as Exhibit 10(b) to the September 30, 2006,      Form 10-Q, File No. 1-3548).       |
|   | +*10(k)1       | - | Minnesota      Power and Affiliated Companies Executive Investment Plan II, as amended      and restated, effective November 1, 1988, (filed as Exhibit 10(d) to the      1988 Form 10-K, File No. 1-3548). |
|   | +*10(k)2       | - | Amendments      through December 2003 to the Minnesota Power and Affiliated Companies      Executive Investment Plan II (filed as Exhibit 10(w)2 to the 2003 Form      10-K, File No. 1-3548).              |
|   | +*10(k)3       | - | July      2004 Amendment to the Minnesota Power and Affiliated Companies Executive      Investment Plan II (filed as Exhibit 10(c) to the June 30, 2004, Form      10-Q, File No. 1-3548).                  |
|   | +*10(k)4       | - | August      2006 Amendment to the Minnesota Power and Affiliated Companies Executive      Investment Plan II (filed as Exhibit 10(c) to the September 30, 2006,      Form 10-Q, File No. 1-3548).      |
|   | +*10(l)        | - | Deferred      Compensation Trust Agreement, as amended and restated, effective January      1, 1989 (filed as Exhibit 10(f) to the 1988 Form 10-K, File No.      1-3548).                                   |
|   | +*10(m)1       | - | ALLETE      Executive Long-Term Incentive Compensation Plan as amended and restated      effective January 1, 2006, (filed as Exhibit 10 to the May 16,      2005, Form 8-K, File No. 1-3548).    |
|   | +*10(m)2       | - | Form      of ALLETE Executive Long-Term Incentive Compensation Plan 2006      Nonqualified Stock Option Grant (filed as Exhibit 10(a)1 to the January      30, 2006, Form 8-K, File No. 1-3548).            |
|   | +*10(m)3       | - | Form      of ALLETE Executive Long-Term Incentive Compensation Plan Nonqualified      Stock Option Grant Effective 2007 (filed as Exhibit 10(m)6 to the 2006      Form 10-K, File No. 1-3548).              |
|   | +*10(m)4       | - | Form      of ALLETE Executive Long-Term Incentive Compensation Plan Performance      Share Grant Effective 2007 (filed as Exhibit 10(m)7 to the 2006 Form 10-K,      File No. 1-3548).                      |
|   | +*10(m)5       | - | Form      of ALLETE Executive Long-Term Incentive Compensation Plan Performance      Share Grant Effective 2008 (filed as Exhibit 10(m)10 to the 2007 Form      10-K, File No. 1-3548).                     |
|   | +*10(m)6       | - | Form      of ALLETE Executive Long-Term Incentive Compensation Plan Performance      Share Grant Effective 2009 (filed as Exhibit 10(m)11 to the 2008 Form      10-K, File No. 1-3548).                     |
|   | +*10(m)7  | - | Form      of ALLETE Executive Long-Term Incentive Compensation Plan – Restricted      Stock Unit Grant Effective 2009 (filed as Exhibit 10(m)12 to the 2008 Form      10-K, File No. 1-3548).         |
|   | +10(m)8        | - | Form of ALLETE Executive Long-Term Incentive      Compensation Plan Performance Share Grant Effective    2010.                                                                                              |
|   | +10(m)9        | - | Form of ALLETE Executive Long-Term Incentive      Compensation Plan – Restricted Stock Unit Grant Effective      2010.                                                                                |
|   | +*10(n)1       | - | Minnesota      Power (now ALLETE) Director Stock Plan, effective January 1, 1995 (filed      as Exhibit 10 to the March 31, 1995, Form 10-Q, File No.      1-3548).                                         |
|   | +*10(n)2       | - | Amendments      through December 2003 to the Minnesota Power (now ALLETE) Director Stock      Plan (filed as Exhibit 10(z)2 to the 2003 Form 10-K, File No.      1-3548).                                   |
|   | +*10(n)3       | - | July      2004 Amendment to the ALLETE Director Stock Plan (filed as Exhibit 10(e)      to the June 30, 2004, Form 10-Q, File No. 1-3548).                                                                  |
|   | +*10(n)4       | - | January      2007 Amendment to the ALLETE Director Stock Plan (filed as Exhibit 10(n)4      to the 2006 Form 10-K, File No. 1-3548).                                                                        |
|   | +*10(n)5       | - | May      2009 Amendment to the ALLETE Director Stock Plan (filed as Exhibit 10(b)      to the June 30, 2009, Form 10-Q, File No. 1-3548).                                                                   |
|   | +*10(n)6       | - | ALLETE      Non-Management Director Compensation Summary Effective February 15, 2007      (filed as Exhibit 10(n)6 to the 2006 Form 10-K, File No.      1-3548).                                            |
|   | +*10(o)1       | - | Minnesota      Power (now ALLETE) Director Compensation Deferral Plan Amended and      Restated, effective January 1, 1990, (filed as Exhibit 10(ac) to the 2002      Form 10-K, File No. 1-3548).          |
|   | +*10(o)2       | - | October      2003 Amendment to the Minnesota Power (now ALLETE) Director Compensation      Deferral Plan (filed as Exhibit 10(aa)2 to the 2003 Form 10-K, File No.      1-3548).                            |
|   | +*10(o)3       | - | January      2005 Amendment to the ALLETE Director Compensation Deferral Plan (filed as      Exhibit 10(c) to the March 31, 2005, Form 10-Q, File No.      1-3548).                                         |
|   | +*10(o)4       | - | August      2006 Amendment to the ALLETE Director Compensation Deferral Plan (filed as      Exhibit 10(d) to the September 30, 2006, Form 10-Q, File No.      1-3548).                                      |

----

|   | +*10(o)5 | - | ALLETE      Non-Employee Director Compensation Deferral Plan II, effective May 1, 2009      (filed as Exhibit 10(a) to the June 30, 2009, Form 10-Q, File No.      1-3548).                                                                                                                                                                                                                                                                                                   |
|--------|----------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | +*10(p)  | - | ALLETE      Director Compensation Trust Agreement, effective October 11, 2004, (filed      as Exhibit 10(a) to the September 30, 2004, Form 10-Q, File No.      1-3548).                                                                                                                                                                                                                                                                                                      |
|   | +*10(q)  | - | ALLETE      Change of Control Severance Pay Plan Effective February 13, 2008, (filed      as Exhibit 10(q) to the 2007 Form 10-K, File No.  1-3548).                                                                                                                                                                                                                                                                                                                          |
|   | 12       | - | Computation of Ratios of Earnings to Fixed      Charges.                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | 21       | - | Subsidiaries of the  Registrant.                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 23(a)    | - | Consent of Independent Registered Public Accounting      Firm.                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | 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 Annual 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 February 12, 2010,      announcing earnings for the year ended December 31, 2009. (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.) |

| * | Incorporated      herein by reference as indicated.                                       |
|---|-------------------------------------------------------------------------------------------|
| + | Management      contract or compensatory plan or arrangement pursuant to Item      15(b). |

----

|                          | ALLETE,      Inc.                         |
|-------------------------------|-------------------------------------------|
|                          |
|                          |
| Dated:      February 12, 2010 | By                                        | Donald      J. Shippar |
|                          | Donald      J. Shippar                    |
|                          | Chairman      and Chief Executive Officer |

| Signature              |   | Title                                                       |   | Date                   |
|------------------------|--------|-------------------------------------------------------------|--------|------------------------|
|                   |   |                                                        |   |                   |
| Donald      J. Shippar |   | Chairman,      Chief Executive Officer                      |   | February      12, 2010 |
| Donald      J. Shippar |   | and      Director(Principal      Executive Officer)         |   |                   |
|                   |   |                                                        |   |                   |
| Alan      R. Hodnik    |   | President      and Director                                 |   | February      12, 2010 |
| Alan      R. Hodnik    |   |                                                        |   |                   |
|                   |   |                                                        |   |                   |
| Mark      A. Schober   |   | Senior      Vice President and Chief Financial Officer      |   | February      12, 2010 |
| Mark      A. Schober   |   | (Principal      Financial Officer)                          |   |                   |
|                   |   |                                                        |   |                   |
| Steven      Q. DeVinck |   | Controller      and Vice President – Business Support |   | February      12, 2010 |
| Steven      Q. DeVinck |   | (Principal      Accounting Officer)                         |   |                   |

----

| Signature                 |   | Title    |   | Date                   |
|---------------------------|--------|----------|--------|------------------------|
|                      |   |     |   |                   |
| Kathleen      A. Brekken  |   | Director |   | February      12, 2010 |
| Kathleen      A. Brekken  |   |     |   |                   |
|                      |   |     |   |                   |
| Kathryn      W. Dindo     |   | Director |   | February      12, 2010 |
| Kathryn      W. Dindo     |   |     |   |                   |
|                      |   |     |   |                   |
| Heidi      J. Eddins      |   | Director |   | February      12, 2010 |
| Heidi      J. Eddins      |   |     |   |                   |
|                      |   |     |   |                   |
| Sidney      W. Emery, Jr. |   | Director |   | February      12, 2010 |
| Sidney      W. Emery, Jr. |   |     |   |                   |
|                      |   |     |   |                   |
| James      S. Haines, Jr  |   | Director |   | February      12, 2010 |
| James      S. Haines, Jr  |   |     |   |                   |
|                      |   |     |   |                   |
| James      J. Hoolihan    |   | Director |   | February      12, 2010 |
| James      J. Hoolihan    |   |     |   |                   |
|                      |   |     |   |                   |
| Madeleine      W. Ludlow  |   | Director |   | February      12, 2010 |
| Madeleine      W. Ludlow  |   |     |   |                   |
|                      |   |     |   |                   |
| George      L. Mayer      |   | Director |   | February      12, 2010 |
| George      L. Mayer      |   |     |   |                   |
|                      |   |     |   |                   |
| Douglas      C. Neve      |   | Director |   | February      12, 2010 |
| Douglas      C. Neve      |   |     |   |                   |
|                      |   |     |   |                   |
| Jack      I. Rajala       |   | Director |   | February      12, 2010 |
| Jack      I. Rajala       |   |     |   |                   |
|                      |   |     |   |                   |
| Leonard      C. Rodman    |   | Director |   | February      12, 2010 |
| Leonard      C. Rodman    |   |     |   |                   |
|                      |   |     |   |                   |
| Bruce      W. Stender     |   | Director |   | February      12, 2010 |
| Bruce      W. Stender     |   |     |   |                   |

----

----

| As      of December 31                                                        | 2009     | 2008     |
|-------------------------------------------------------------------------------|----------|----------|
| Millions                                                                      |     |     |
| Assets                                                                        |     |     |
| Current      Assets                                                           |     |     |
| Cash      and Cash Equivalents                                                | $25.7    | $102.0   |
| Accounts      Receivable (Less Allowance of $0.9 and $0.7)                    | 118.5    | 76.3     |
| Inventories                                                                   | 57.0     | 49.7     |
| Prepayments      and Other                                                    | 24.3     | 24.3     |
| Total      Current Assets                                                     | 225.5    | 252.3    |
| Property,      Plant and Equipment – Net                                | 1,622.7  | 1,387.3  |
| Regulatory      Assets                                                        | 293.2    | 249.3    |
| Investment      in ATC                                                        | 88.4     | 76.9     |
| Other      Investments                                                        | 130.5    | 136.9    |
| Other      Assets                                                             | 32.8     | 32.1     |
| Total      Assets                                                             | $2,393.1 | $2,134.8 |
|                                                                          |     |     |
| Liabilities      and Equity                                                   |     |     |
| Liabilities                                                                   |     |     |
| Current      Liabilities                                                      |     |     |
| Accounts      Payable                                                         | $62.1    | $75.7    |
| Accrued      Taxes                                                            | 20.6     | 12.9     |
| Accrued      Interest                                                         | 11.1     | 8.9      |
| Long-Term      Debt Due Within One Year                                       | 5.2      | 10.4     |
| Notes      Payable                                                            | 1.9      | 6.0      |
| Other                                                                         | 32.2     | 36.8     |
| Total      Current Liabilities                                                | 133.1    | 150.7    |
| Long-Term      Debt                                                           | 695.8    | 588.3    |
| Deferred      Income Taxes                                                    | 253.1    | 169.6    |
| Regulatory      Liabilities                                                   | 47.1     | 50.0     |
| Other      Liabilities                                                        | 325.0    | 339.3    |
| Total      Liabilities                                                        | 1,454.1  | 1,297.9  |
|                                                                          |     |     |
| Commitments      and Contingencies (Note 11)                                  |     |     |
|                                                                          |     |     |
| Equity                                                                        |     |     |
| ALLETE’s      Equity                                                    |     |     |
| Common      Stock Without Par Value, 80.0 Shares Authorized, 35.2 and    32.6 |     |     |
| Shares      Outstanding                                                       | 613.4    | 534.1    |
| Unearned      ESOP Shares                                                     | (45.3)   | (54.9)   |
| Accumulated      Other Comprehensive Loss                                     | (24.0)   | (33.0)   |
| Retained      Earnings                                                        | 385.4    | 380.9    |
| Total      ALLETE Equity                                                      | 929.5    | 827.1    |
| Non-Controlling      Interest in Subsidiaries                                 | 9.5      | 9.8      |
| Total      Equity                                                             | 939.0    | 836.9    |
| Total      Liabilities and Equity                                             | $2,393.1 | $2,134.8 |

----

| Year      Ended December 31                                  | 2009   | 2008    | 2007    |
|--------------------------------------------------------------|--------|---------|---------|
| Millions      Except Per Share Amounts                       |   |    |    |
| Operating      Revenue                                       |   |    |    |
| Operating      Revenue                                       | $766.7 | $801.0  | $841.7  |
| Prior      Year Rate Refunds                                 | (7.6)  | – | – |
| Total      Operating Revenue                                 | 759.1  | 801.0   | 841.7   |
| Operating      Expenses                                      |   |    |    |
| Fuel      and Purchased Power                                | 279.5  | 305.6   | 347.6   |
| Operating      and Maintenance                               | 308.9  | 318.1   | 313.9   |
| Depreciation                                                 | 64.7   | 55.5    | 48.5    |
| Total      Operating Expenses                                | 653.1  | 679.2   | 710.0   |
| Operating      Income                                        | 106.0  | 121.8   | 131.7   |
| Other      Income (Expense)                                  |   |    |    |
| Interest      Expense                                        | (33.8) | (26.3)  | (22.6)  |
| Equity      Earnings in ATC                                  | 17.5   | 15.3    | 12.6    |
| Other                                                        | 1.8    | 15.6    | 15.5    |
| Total      Other Income (Expense)                            | (14.5) | 4.6     | 5.5     |
|                                                         |   |    |    |
| Income      Before Non-Controlling Interest and Income Taxes | 91.5   | 126.4   | 137.2   |
| Income      Tax Expense                                      | 30.8   | 43.4    | 47.7    |
| Net      Income                                              | 60.7   | 83.0    | 89.5    |
| Less:      Non-Controlling Interest in Subsidiaries          | (0.3)  | 0.5     | 1.9     |
| Net      Income Attributable to ALLETE                       | $61.0  | $82.5   | $87.6   |
|                                                         |   |    |    |
| Average      Shares of Common Stock                          |   |    |    |
| Basic                                                        | 32.2   | 29.2    | 28.3    |
| Diluted                                                      | 32.2   | 29.3    | 28.4    |
|                                                         |   |    |    |
| Basic      Earnings Per Share of Common Stock                | $1.89  | $2.82   | $3.09   |
| Diluted      Earnings Per Share of Common Stock              | $1.89  | $2.82   | $3.08   |
|                                                         |   |    |    |
| Dividends      Per Share of Common Stock                     | $1.76  | $1.72   | $1.64   |

----

| Year      Ended December 31                                  |         2009 |         2008 |        2007 |
|--------------------------------------------------------------|------------------------------------------------------|-------------------------------------------------|------------------------------------------------|
| Millions                                                     |                                                 |                                            |                                           |
| Operating      Activities                                    |                                                 |                                            |                                           |
| Net      Income                                              | $60.7                                                | $83.0                                           | $89.5                                          |
| Allowance      for Funds Used During Construction            | (5.8)                                                | (3.3)                                           | (3.8)                                          |
| Loss      (Income) from Equity Investments, Net of Dividends | 0.1                                                  | (3.1)                                           | (2.7)                                          |
| Gain      on Sale of Assets                                  | (0.2)                                                | (4.8)                                           | (2.2)                                          |
| Gain      on Sale of Available-for-sale Securities           | –                                              | (6.4)                                           | –                                        |
| Loss      on Impairment of Assets                            | 3.1                                                  | –                                         | 0.3                                            |
| Depreciation      Expense                                    | 64.7                                                 | 55.5                                            | 48.5                                           |
| Amortization      of Debt Issuance Costs                     | 0.9                                                  | 0.8                                             | 1.0                                            |
| Deferred      Income Tax Expense                             | 75.2                                                 | 38.8                                            | 14.0                                           |
| Stock      Compensation Expense                              | 2.1                                                  | 1.8                                             | 2.0                                            |
| Bad      Debt Expense                                        | 1.3                                                  | 0.7                                             | 1.0                                            |
| Changes      in Operating Assets and Liabilities             |                                                 |                                            |                                           |
| Accounts      Receivable                                     | (43.5)                                               | 2.4                                             | (6.6)                                          |
| Inventories                                                  | (7.3)                                                | (0.2)                                           | (6.1)                                          |
| Prepayments      and Other                                   | –                                              | 11.2                                            | (11.7)                                         |
| Accounts      Payable                                        | 10.5                                                 | (14.1)                                          | 9.4                                            |
| Other      Current Liabilities                               | 5.3                                                  | 5.9                                             | (10.0)                                         |
| Regulatory      and Other Assets                             | (18.3)                                               | (1.8)                                           | 0.9                                            |
| Regulatory      and Other Liabilities                        | (11.4)                                               | (12.8)                                          | 0.7                                            |
| Cash      from Operating Activities                          | 137.4                                                | 153.6                                           | 124.2                                          |
| Investing      Activities                                    |                                                 |                                            |                                           |
| Proceeds      from Sale of Available-for-sale Securities     | 8.9                                                  | 62.3                                            | 449.7                                          |
| Payments      for Purchase of Available-for-sale Securities  | (2.2)                                                | (44.8)                                          | (368.3)                                        |
| Investment      in ATC                                       | (7.8)                                                | (7.4)                                           | (8.7)                                          |
| Changes      to Other Investments                            | (0.7)                                                | (9.2)                                           | (12.4)                                         |
| Additions      to Property, Plant and Equipment              | (318.5)                                              | (301.1)                                         | (210.2)                                        |
| Proceeds      from Sale of Assets                            | 0.3                                                  | 20.4                                            | 1.5                                            |
| Other                                                        | –                                              | 3.7                                             | (5.7)                                          |
| Cash      for Investing Activities                           | (320.0)                                              | (276.1)                                         | (154.1)                                        |
| Financing      Activities                                    |                                                 |                                            |                                           |
| Proceeds      from Issuance of Common Stock                  | 65.2                                                 | 71.1                                            | 20.6                                           |
| Proceeds      from Issuance of Long-Term Debt                | 111.4                                                | 198.7                                           | 123.9                                          |
| Changes      in Notes Payable                                | (4.1)                                                | 6.0                                             | –                                        |
| Reductions      of Long-Term Debt                            | (9.1)                                                | (22.7)                                          | (90.7)                                         |
| Debt      Issuance Costs                                     | (0.6)                                                | (1.5)                                           | (1.1)                                          |
| Dividends      on Common Stock                               | (56.5)                                               | (50.4)                                          | (44.3)                                         |
| Cash      from Financing Activities                          | 106.3                                                | 201.2                                           | 8.4                                            |
| Change      in Cash and Cash Equivalents                     | (76.3)                                               | 78.7                                            | (21.5)                                         |
| Cash      and Cash Equivalents at Beginning of Period        | 102.0                                                | 23.3                                            | 44.8                                           |
| Cash      and Cash Equivalents at End of Period              | $25.7                                                | $102.0                                          | $23.3                                          |

----

|                                                                              |                |     |  Accumulated  |     |   |
|-----------------------------------------------------------------------------------|---------------------|----------|--------------------|----------|--------|
|                                                                              | Total               |     | Other              | Unearned |   |
|                                                                              | Shareholders’ | Retained | Comprehensive      | ESOP     | Common |
|                                                                              | Equity              | Earnings | Income      (Loss) | Shares   | Stock  |
| Millions                                                                          |                |     |               |     |   |
| Balance      as of December 31, 2006                                              | $665.8              | $307.8   | $(8.8)             | $(71.9)  | $438.7 |
| Comprehensive      Income                                                         |                |     |               |     |   |
| Net      Income                                                                   | 89.5                | 89.5     |               |     |   |
| Other      Comprehensive Income – Net of Tax                                |                |     |               |     |   |
| Unrealized      Gains on Securities – Net                                   | 1.1                 |     | 1.1                |     |   |
| Defined      Benefit Pension and Other Postretirement Plans                       | 3.2                 |     | 3.2                |     |   |
| Total      Comprehensive Income                                                   | 93.8                |     |               |     |   |
|    Non-Controlling      Interest in Subsidiaries                   |  (1.9)         | (1.9)    |               |     |   |
| Comprehensive      Income Attributable to ALLETE                                  | 91.9                |     |               |     |   |
| Adjustment      to apply accounting standards for Income Taxes                    | (0.7)               | (0.7)    |               |     |   |
| Common      Stock Issued – Net                                              | 22.5                |     |               |     | 22.5   |
| Dividends      Declared                                                           | (44.3)              | (44.3)   |               |     |   |
| ESOP      Shares Earned                                                           | 7.4                 |     |               | 7.4      |   |
| Balance      as of December 31, 2007                                              | 742.6               | 350.4    | (4.5)              | (64.5)   | 461.2  |
| Comprehensive      Income                                                         |                |     |               |     |   |
| Net      Income                                                                   | 83.0                | 83.0     |               |     |   |
| Other      Comprehensive Income – Net of Tax                                |                |     |               |     |   |
| Unrealized      Loss on Securities – Net                                    | (6.0)               |     | (6.0)              |     |   |
| Reclassification      Adjustment for Gains Included in Income                     | (3.7)               |     | (3.7)              |     |   |
| Defined      Benefit Pension and Other Postretirement Plans                       | (18.8)              |     | (18.8)             |     |   |
| Total      Comprehensive Income                                                   | 54.5                |     |               |     |   |
|    Non-Controlling      Interest in Subsidiaries                   | (0.5)               | (0.5)    |               |     |   |
| Comprehensive      Income Attributable to ALLETE                                  | 54.0                |     |               |     |   |
| Adjustment      to apply change in Pension and Postretirement measurement    date | (1.6)               | (1.6)    |               |     |   |
| Common      Stock Issued – Net                                              | 72.9                |     |               |     | 72.9   |
| Dividends      Declared                                                           | (50.4)              | (50.4)   |               |     |   |
| ESOP      Shares Earned                                                           | 9.6                 |     |               | 9.6      |   |
| Balance      as of December 31, 2008                                              | 827.1               | 380.9    | (33.0)             | (54.9)   | 534.1  |
| Comprehensive      Income                                                         |                |     |               |     |   |
| Net      Income                                                                   | 60.7                | 60.7     |               |     |   |
| Other      Comprehensive Income – Net of Tax                                |                |     |               |     |   |
| Unrealized      Gain on Securities – Net                                    | 2.8                 |     | 2.8                |     |   |
| Defined      Benefit Pension and Other Postretirement Plans                       | 6.2                 |     | 6.2                |     |   |
| Total      Comprehensive Income                                                   | 69.7                |     |               |     |   |
|    Non-Controlling      Interest in Subsidiaries                   | 0.3                 | 0.3      |               |     |   |
| Comprehensive      Income Attributable to ALLETE                                  | 70.0                |     |               |     |   |
| Common      Stock Issued – Net                                              | 79.3                |     |               |     | 79.3   |
| Dividends      Declared                                                           | (56.5)              | (56.5)   |               |     |   |
| ESOP      Shares Earned                                                           | 9.6                 |     |               | 9.6      |   |
| Balance      as of December 31, 2009                                              | $929.5              | $385.4   | $(24.0)            | $(45.3)  | $613.4 |

----

| Note      1. | Operations      and Significant Accounting Policies |
|--------------|-----------------------------------------------------|

----

| Note      1. | Operations      and Significant Accounting Policies(Continued) |
|--------------|----------------------------------------------------------------|

| Accounts      Receivable                   |                                                                               |
|--------------------------------------------|------------------------------------------------------------------------------------|
| As      of December 31                     |              2009 | 2008 |
| Millions                                   |                                                                               |   |
| Trade      Accounts Receivable             |                                                                               |   |
| Billed                                     | $56.5                                                                              | $61.1 |
| Unbilled                                   | 15.1                                                                               | 15.9 |
| Less:      Allowance for Doubtful Accounts | 0.9                                                                                | 0.7 |
| Total      Trade Accounts Receivable       | 70.7                                                                               | 76.3 |
| Income      Taxes Receivable               | 47.8                                                                               | – |
| Total      Accounts Receivable – Net | $118.5                                                                             | $76.3 |

| Inventories                 |                                                 |
|-----------------------------|------------------------------------------------------|
| As      of December 31      |         2009 |         2008 |
| Millions                    |                                                 |   |
| Fuel                        | $23.0                                                | $16.6 |
| Materials      and Supplies | 34.0                                                 | 33.1 |
| Total      Inventories      | $57.0                                                | $49.7 |

----

| Note      1. | Operations      and Significant Accounting Policies(Continued) |
|--------------|----------------------------------------------------------------|

| Consolidated      Statement of Cash Flows                                                    |    |
|----------------------------------------------------------------------------------------------|---------|
| Supplemental      Disclosure                                                                 |    |
| Year      Ended December 31                                                                  | 2009    | 2008 | 2007 |
| Millions                                                                                     |    |   |   |
| Cash      Paid During the Period for                                                         |    |   |   |
| Interest      – Net of Amounts Capitalized                                             | $29.8   | $25.2 | $26.3 |
| Income      Taxes                                                                            | $1.1    | $6.5 | $34.2 |
|                                                                                         |    |   |   |
| Noncash      Investing and Financing Activities                                              |    |   |   |
| Changes      in Accounts Payable for Capital Additions to Property, Plant and      Equipment | $24.1   | $17.1 | $9.8 |
| AFUDC      – Equity                                                                    | $5.8    | $3.3 | $3.8 |
| ALLETE      Common Stock contributed to the Pension Plan                                     | $(12.0) | – | – |

| Prepayments      and Other Current Assets       |   |   |
|-------------------------------------------------|--------|--------|
| As      of December 31                          | 2009   | 2008   |
| Millions                                        |   |   |
| Deferred      Fuel Adjustment Clause            | $15.5  | $13.1  |
| Other                                           | 8.8    | 11.2   |
| Total      Prepayments and Other Current Assets | $24.3  | $24.3  |

| Other      Liabilities                                                                           |   |   |
|--------------------------------------------------------------------------------------------------|--------|--------|
| As      of December 31                                                                           | 2009   | 2008   |
| Millions                                                                                         |   |   |
| Future      Benefit Obligation Under Defined Benefit Pension and Other Postretirement      Plans | $231.2 | $251.8 |
| Asset      Retirement Obligation (See Note 3. Property, Plant and      Equipment)                | 44.6   | 39.5   |
| Other                                                                                            | 49.2   | 48.0   |
| Total      Other Liabilities                                                                     | $325.0 | $339.3 |

----

| Note      1. | Operations      and Significant Accounting Policies(Continued) |
|--------------|----------------------------------------------------------------|

----

| Note      1. | Operations      and Significant Accounting Policies(Continued) |
|--------------|----------------------------------------------------------------|

----

| Note      1. | Operations      and Significant Accounting Policies(Continued) |
|--------------|----------------------------------------------------------------|

| Note      2. | Business      Segments |
|--------------|------------------------|

|                                                                | Regulated    | Investments |
|---------------------------------------------------------------------|--------------|-------------|
|                                                                | Consolidated | Operations  | and      Other |
| Millions                                                            |         |        |   |
| 2009                                                                |         |        |   |
| Operating      Revenue                                              | $766.7       | $689.4      | $77.3 |
| Prior      Year Rate Refunds                                        | (7.6)        | (7.6)       | – |
| Total      Operating Revenue                                        | 759.1        | 681.8       | 77.3 |
| Fuel      and Purchased Power                                       | 279.5        | 279.5       | – |
| Operating      and Maintenance                                      | 308.9        | 235.8       | 73.1 |
| Depreciation      Expense                                           | 64.7         | 60.2        | 4.5 |
| Operating      Income (Loss)                                        | 106.0        | 106.3       | (0.3) |
| Interest      Expense                                               | (33.8)       | (28.3)      | (5.5) |
| Equity      Earnings in ATC                                         | 17.5         | 17.5        | – |
| Other      Income (Expense)                                         | 1.8          | 5.8         | (4.0) |
| Income      (Loss) Before Non-Controlling Interest and Income Taxes | 91.5         | 101.3       | (9.8) |
| Income      Tax Expense (Benefit)                                   | 30.8         | 35.4        | (4.6) |
| Net      Income (Loss)                                              | 60.7         | 65.9        |  (5.2) |
| Less:      Non-Controlling Interest in Subsidiaries                 | (0.3)        | –     | (0.3) |
| Net      Income (Loss) Attributable to ALLETE                       | $61.0        | $65.9       | $(4.9) |
|                                                                |         |        |   |
| Total      Assets                                                   | $2,393.1     | $2,184.0    | $209.1 |
| Capital      Additions                                              | $303.7       | $299.2      | $4.5 |

----

|                                                         | Regulated    | Investments |
|--------------------------------------------------------------|--------------|-------------|
|                                                         | Consolidated | Operations  | and      Other |
| Millions                                                     |         |        |   |
| 2008                                                         |         |        |   |
| Operating      Revenue                                       | $801.0       | $712.2      | $88.8 |
| Fuel      and Purchased Power                                | 305.6        | 305.6       | – |
| Operating      and Maintenance                               | 318.1        | 239.3       | 78.8 |
| Depreciation      Expense                                    | 55.5         | 50.7        | 4.8 |
| Operating      Income                                        | 121.8        | 116.6       | 5.2 |
| Interest      Expense                                        | (26.3)       | (24.0)      | (2.3) |
| Equity      Earnings in ATC                                  | 15.3         | 15.3        | – |
| Other      Income                                            | 15.6         | 3.6         | 12.0 |
| Income      Before Non-Controlling Interest and Income Taxes | 126.4        | 111.5       | 14.9 |
| Income      Tax Expense (Benefit)                            | 43.4         | 43.6        | (0.2) |
| Net      Income                                              | 83.0         | 67.9        | 15.1 |
| Less:      Non-Controlling Interest in Subsidiaries          | 0.5          | –     | 0.5 |
| Net      Income Attributable to ALLETE                       | $82.5        | $67.9       | $14.6 |
|                                                         |         |        |   |
| Total      Assets                                            | $2,134.8     | $1,832.1    | $302.7 |
| Capital      Additions                                       | $322.9       | $317.0      | $5.9 |

|                                                         | Regulated    | Investments |
|--------------------------------------------------------------|--------------|-------------|
|                                                         | Consolidated | Operations  | and      Other |
| Millions                                                     |         |        |   |
| 2007                                                         |         |        |   |
| Operating      Revenue                                       | $841.7       | $723.8      | $117.9 |
| Fuel      and Purchased Power                                | 347.6        | 347.6       | – |
| Operating      and Maintenance                               | 313.9        | 229.3       | 84.6 |
| Depreciation      Expense                                    | 48.5         | 43.8        | 4.7 |
| Operating      Income                                        | 131.7        | 103.1       | 28.6 |
| Interest      Expense                                        | (22.6)       | (21.0)      | (1.6) |
| Equity      Earnings in ATC                                  | 12.6         | 12.6        | – |
| Other      Income                                            | 15.5         | 4.1         | 11.4 |
| Income      Before Non-Controlling Interest and Income Taxes | 137.2        | 98.8        | 38.4 |
| Income      Tax Expense                                      | 47.7         | 36.4        | 11.3 |
| Net      Income                                              | 89.5         | 62.4        | 27.1 |
| Less:      Non-Controlling Interest in Subsidiaries          | 1.9          | –     | 1.9 |
| Net      Income Attributable to ALLETE                       | $87.6        | $62.4       | $25.2 |
|                                                         |         |        |   |
| Total      Assets                                            | $1,644.2     | $1,396.6    | $247.6 |
| Capital      Additions                                       | $223.9       | $220.6      | $3.3 |

| Note      3. | Property,      Plant and Equipment |
|--------------|------------------------------------|

| Property,      Plant and Equipment                     |                                           |                                                             |
|--------------------------------------------------------|------------------------------------------------|------------------------------------------------------------------|
| As      of December 31                                 |        2009 |           2008 |
| Millions                                               |                                           |                                                             |
| Regulated      Utility                                 | $2,415.7                                       | $1,837.2                                                         |
| Construction      Work in Progress                     | 89.6                                           | 303.0                                                            |
| Accumulated      Depreciation                          | (928.8)                                        | (806.8)                                                          |
| Regulated      Utility Plant – Net               | 1,576.5                                        | 1,333.4                                                          |
| Non-Rate      Base Energy Operations                   | 87.0                                           | 94.0                                                             |
| Construction      Work in Progress                     | 3.6                                            | 3.9                                                              |
| Accumulated      Depreciation                          | (45.5)                                         | (47.2)                                                           |
| Non-Rate      Base Energy Operations Plant – Net | 45.1                                           | 50.7                                                             |
| Other      Plant – Net                           | 1.1                                            | 3.2                                                              |
| Property,      Plant and Equipment – Net         | $1,622.7                                       | $1,387.3                                                         |

----

| Note      3. | Property,      Plant and Equipment (Continued) |
|--------------|------------------------------------------------|

| Estimated      Useful Lives of Property, Plant and Equipment |
|--------------------------------------------------------------|
|                                                         |   |   |   |   |
| Regulated      Utility  –                    | Generation | 2      to 34 years | Non-Rate      Base Operations | 3      to 61 years |
|                                                         | Transmission | 42      to 61 years | Other      Plant | 5      to 25 years |
|                                                         | Distribution | 14      to 65 years |   |   |

| Asset      Retirement Obligation             |   |
|----------------------------------------------|--------|
| Millions                                     |   |
| Obligation      as of December 31, 2007      | $36.5  |
| Accretion      Expense                       | 2.0    |
| Additional      Liabilities Incurred in 2008 | 1.0    |
| Obligation      as of December 31, 2008      | 39.5   |
| Accretion      Expense                       | 2.3    |
| Additional      Liabilities Incurred in 2009 | 2.8    |
| Obligation      as of December 31, 2009      | $44.6  |

| Note      4. | Jointly-Owned      Electric Facility |
|--------------|--------------------------------------|

| Note      5. | Regulatory      Matters |
|--------------|-------------------------|

----

| Note      5. | Regulatory      Matters (Continued) |
|--------------|-------------------------------------|

----

| Note      5. | Regulatory      Matters (Continued) |
|--------------|-------------------------------------|

| Deferred      Regulatory Assets and Liabilities                 |                                           |                                           |
|-----------------------------------------------------------------|------------------------------------------------|------------------------------------------------|
| As      of December 31                                          |        2009 |        2008 |
| Millions                                                        |                                           |                                           |
| Deferred      Regulatory Assets                                 |                                           |                                           |
| Future      Benefit Obligations Under                           |                                           |                                           |
| Defined      Benefit Pension and Other Postretirement Plans (a) | 235.8                                          | 216.5                                          |
| Boswell      Unit 3 Environmental Rider (b)                     | 20.9                                           | 3.8                                            |
| Deferred      Fuel (c)                                          | 20.8                                           | 13.1                                           |
| Income      Taxes                                               | 15.7                                           | 12.2                                           |
| Asset      Retirement Obligation                                | 6.3                                            | 5.1                                            |
| Deferred      MISO Costs                                        | 2.4                                            | 3.9                                            |
| Premium      on Reacquired Debt                                 | 2.0                                            | 2.2                                            |
| Other                                                           | 4.8                                            | 5.6                                            |
| Total      Deferred Regulatory Assets                           | $308.7                                         | $262.4                                         |
|                                                            |                                           |                                           |
| Deferred      Regulatory Liabilities                            |                                           |                                           |
| Income      Taxes                                               | $25.9                                          | $28.7                                          |
| Plant      Removal Obligations                                  | 16.9                                           | 15.9                                           |
| Accrued      MISO Refund                                        | –                                        | 4.7                                            |
| Other                                                           | 4.3                                            | 0.7                                            |
| Total      Deferred Regulatory Liabilities                      | $47.1                                          | $50.0                                          |

| (a) | See      Note 16. Pension and Other Postretirement Benefit  Plans. |
|-----|--------------------------------------------------------------------|

| (b) | MPUC-approved      current cost recovery rider. Our 2010 rate case proposes to move this      project from a current cost recovery rider to base  rates. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | As      of December 31, 2009, $5 million of this balance relates to deferred fuel      costs incurred under the former base cost of fuel calculation. Any revenue      impact associated with this transition will be identified in a future      filing related to the Company’s fuel clause  operation. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Current      and Non-Current Deferred Regulatory Assets and Liabilities |                                           |                                           |
|-------------------------------------------------------------------------|------------------------------------------------|------------------------------------------------|
| As      of December 31                                                  |        2009 |        2008 |
| Millions                                                                |                                           |                                           |
| Total      Current Deferred Regulatory Assets (a)                       | $15.5                                          | $13.1                                          |
| Total      Non-Current Deferred Regulatory Assets                       | 293.2                                          | 249.3                                          |
| Total      Deferred Regulatory Assets                                   | 308.7                                          | 262.4                                          |
| Total      Current Deferred Regulatory Liabilities                      | –                                        | –                                        |
| Total      Non-Current Deferred Regulatory Liabilities                  | 47.1                                           | 50.0                                           |
| Total      Deferred Regulatory Liabilities                              | $47.1                                          | $50.0                                          |

| (a) | Current      deferred regulatory assets are included in prepayments and other on the      consolidated balance sheet. |
|-----|-----------------------------------------------------------------------------------------------------------------------|

| Note      6. | Investment      in ATC |
|--------------|------------------------|

| ALLETE’s      Interest in ATC      |                                           |                                           |
|------------------------------------------|------------------------------------------------|------------------------------------------------|
| Year      Ended December 31              |        2009 |        2008 |
| Millions                                 |                                           |                                           |
| Equity      Investment Beginning Balance | $76.9                                          | $65.7                                          |
| Cash      Investments                    | 7.8                                            | 7.4                                            |
| Equity      in ATC Earnings              | 17.5                                           | 15.3                                           |
| Distributed      ATC Earnings            | (13.8)                                         | (11.5)                                         |
| Equity      Investment Ending Balance    | $88.4                                          | $76.9                                          |

----

| Note      6. | Investment      in ATC (Continued) |
|--------------|------------------------------------|

| ATC      Summarized Financial Data       |                                           |                                           |                                           |
|------------------------------------------|------------------------------------------------|------------------------------------------------|------------------------------------------------|
| Year      Ended December 31              |                                           |                                           |                                           |
| Income      Statement Data               |        2009 |        2008 |        2007 |
| Millions                                 |                                           |                                           |                                           |
| Revenue                                  | $521.5                                         | $466.6                                         | $408.0                                         |
| Operating      Expense                   | 230.3                                          | 209.0                                          | 198.2                                          |
| Other      Expense                       | 77.8                                           | 69.6                                           | 55.7                                           |
| Net      Income                          | $213.4                                         | $188.0                                         | $154.1                                         |
| ALLETE’s      Equity in Net Income | $17.5                                          | $15.3                                          | $12.6                                          |

| Balance      Sheet Data                          |     |     |     |
|--------------------------------------------------|----------|----------|----------|
| Millions                                         |     |     |     |
| Current      Assets                              | $51.1    | $50.8    | $48.3    |
| Non-Current      Assets                          | 2,767.3  | 2,480.0  | 2,189.0  |
| Total      Assets                                | 2,818.4  | 2,530.8  | 2,237.3  |
|                                             |     |     |     |
| Current      Liabilities                         | 285.5    | 252.0    | 317.1    |
| Long-Term      Debt                              | 1,259.6  | 1,109.4  | 899.1    |
| Other      Non-Current Liabilities               | 76.9     | 120.2    | 108.5    |
| Members’      Equity                       | 1,196.4  | 1,049.2  | 912.6    |
| Total      Liabilities and Members’ Equity | $2,818.4 | $2,530.8 | $2,237.3 |

| Note      7. | Investments |
|--------------|-------------|

| Investments                        |                                                             |                                                             |
|------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|
| As      of December 31             |           2009 |           2008 |
| Millions                           |                                                             |                                                             |
| ALLETE      Properties             | $93.1                                                            | $84.9                                                            |
| Available-for-sale      Securities | 29.5                                                             | 32.6                                                             |
| Other                              | 7.9                                                              | 19.4                                                             |
| Total      Investments             | $130.5                                                           | $136.9                                                           |

| ALLETE      Properties                                  |                                                             |                                                             |
|---------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|
| As      of December 31                                  |           2009 |           2008 |
| Millions                                                |                                                             |                                                             |
| Land      Held-for-Sale Beginning Balance               | $71.2                                                            | $62.6                                                            |
| Additions      during period: Capitalized Improvements  | 5.6                                                              | 10.5                                                             |
| Deductions      during period: Cost of Real Estate Sold | (1.9)                                                            | (1.9)                                                            |
| Land      Held-for-Sale Ending Balance                  | 74.9                                                             | 71.2                                                             |
| Long-Term      Finance Receivables                      | 12.9                                                             | 13.6                                                             |
| Other                                                   | 5.3                                                              | 0.1                                                              |
| Total      Real Estate Assets                           | $93.1                                                            | $84.9                                                            |

----

| Note      7. | Investments      (Continued) |
|--------------|------------------------------|

| Available-For-Sale      Securities |
|------------------------------------|
| Millions                           |   | Gross      Unrealized |   |
| As      of December 31   |  Cost | Gain | (Loss) | Fair      Value |
|                               |   |   |   |   |
| 2009                               | $33.1 | $0.1 | $(3.7) | $29.5 |
| 2008                               | $40.5 | – | $(7.9) | $32.6 |
| 2007                               | $45.3 | $8.4 | $(0.1) | $53.6 |

|                        |     |                | Net      Unrealized       |
|-----------------------------|----------|---------------------|---------------------------|
|                        | Net      | Gross      Realized | Gain      (Loss) in Other |
| Year      Ended December 31 | Proceeds | Gain                | (Loss)                    | Comprehensive      Income |
|                        |     |                |                      |   |
| 2009                        | $6.7     | –             | –                   | $4.5 |
| 2008                        | $17.5    | $6.5                | $(0.1)                    | $(9.7) |
| 2007                        | $81.4    | –             | –                   | $1.4 |

| Note      8. | Derivatives |
|--------------|-------------|

----

| Note      8. | Derivatives      (Continued) |
|--------------|------------------------------|

| Note      9. | Fair      Value |
|--------------|-----------------|

|                                                             | At      Fair Value as of December 31, 2009 |
|------------------------------------------------------------------|--------------------------------------------|
| Recurring Fair Value      Measures                               | Level      1                               | Level      2 | Level      3 | Total |
| Millions                                                         |                                       |   |   |   |
| Assets:                                                          |                                       |   |   |   |
| Equity      Securities                                           | $17.8                                      | – | – | $17.8 |
| Corporate      Debt Securities                                   | –                                    | $6.4 | – | 6.4 |
| Derivatives                                                      | –                                    | – | $0.7 | 0.7 |
| Debt      Securities Issued by States of the United States (ARS) | –                                    | – | 6.7 | 6.7 |
| Money      Market Funds                                          | 1.4                                        | – | – | 1.4 |
| Total      Fair Value of Assets                                  | $19.2                                      | $6.4 | $7.4 | $33.0 |
|                                                             |                                       |   |   |   |
| Liabilities:                                                     |                                       |   |   |   |
| Deferred      Compensation                                       | –                                    | $14.6 | – | $14.6 |
| Total      Fair Value of Liabilities                             | –                                    | $14.6 | – | $14.6 |
|                                                             |                                       |   |   |   |
| Total      Net Fair Value of Assets (Liabilities)                | $19.2                                      | $(8.2) | $7.4 | $18.4 |

----

| Note      9. | Fair      Value (Continued) |
|--------------|-----------------------------|

|                                                      |        | Debt      Securities                |
|-----------------------------------------------------------|-------------|-------------------------------------|
|                                                      |        | Issued      by the States           |
| Recurring      Fair Value Measures                        |        | of      the United States           |
| Activity      in Level 3                                  | Derivatives | (ARS)                               |
| Millions                                                  |        |                                |
| Balance      as of December 31, 2008                      | –     | $15.2                               |
| Purchases,      sales, issuances and settlements, net (a) | $0.7        | (8.5)      |
| Level      3 transfers in                                 | –     | –                             |
| Balance      as of December 31, 2009                      | $0.7        | $6.7                                |

| (a) | ARS      called during 2009 at par value. |
|-----|-------------------------------------------|

|                                                             | At      Fair Value as of December 31, 2008 |
|------------------------------------------------------------------|--------------------------------------------|
| Recurring Fair Value      Measures                               | Level      1                               | Level      2 | Level      3 | Total |
| Millions                                                         |                                       |   |   |   |
| Assets:                                                          |                                       |   |   |   |
| Equity      Securities                                           | $13.5                                      | – | – | $13.5 |
| Corporate      Debt Securities                                   | –                                    | $3.3 | – | 3.3 |
| Debt      Securities Issued by States of the United States (ARS) | –                                    | – | $15.2 | 15.2 |
| Money      Market Funds                                          | 10.6                                       | – | – | 10.6 |
| Total      Fair Value of Assets                                  | $24.1                                      | $3.3 | $15.2 | $42.6 |
|                                                             |                                       |   |   |   |
| Liabilities:                                                     |                                       |   |   |   |
| Deferred      Compensation                                       | –                                    | $13.5 | – | $13.5 |
| Total      Fair Value of Liabilities                             | –                                    | $13.5 | – | $13.5 |
|                                                             |                                       |   |   |   |
| Total      Net Fair Value of Assets (Liabilities)                | $24.1                                      | $(10.2) | $15.2 | $29.1 |

|                                                      | Debt      Securities      |
|-----------------------------------------------------------|---------------------------|
|                                                      | Issued      by the States |
| Recurring      Fair Value Measures                        | of      the United States |
| Activity      in Level 3                                  | (ARS)                     |
| Millions                                                  |                      |
| Balance      as of December 31, 2007                      | –                   |
| Purchases,      sales, issuances and settlements, net (a) | $(10.0)                   |
| Level      3 transfers in                                 | 25.2                      |
| Balance      as of December 31, 2008                      | $15.2                     |

| (a) | 2008      includes a $5.2 million transfer of ARS to our Voluntary Employee Benefit      Association trust used to fund postretirement health and life      benefits. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Financial      Instruments                     | Carrying      Amount | Fair      Value |
|------------------------------------------------|----------------------|-----------------|
| Millions                                       |                 |            |
| Long-Term      Debt, Including Current Portion |                 |            |
| December      31, 2009                         | $701.0               | $734.8          |
| December      31, 2008                         | $598.7               | $561.6          |

| Note      10. | Short-Term      and Long-Term Debt |
|---------------|------------------------------------|

----

| Note      10. | Short-Term      and Long-Term Debt (Continued) |
|---------------|------------------------------------------------|

| Issue      Date(on      or about) | Maturity            | Principal      Amount | Coupon |
|-----------------------------------|---------------------|-----------------------|--------|
| February      17, 2010            | April      15, 2021 | $15      Million      | 4.85%  |
| February      17, 2010            | April      15, 2025 | $30      Million      | 5.10%  |
| February      17, 2010            | April      15, 2040 | $35      Million      | 6.00%  |

----

| Note      10. | Short-Term      and Long-Term Debt (Continued) |
|---------------|------------------------------------------------|

| Long-Term      Debt                                                                             |   |    |
|-------------------------------------------------------------------------------------------------|--------|---------|
| As      of December 31                                                                          | 2009   | 2008    |
| Millions                                                                                        |   |    |
| First      Mortgage Bonds                                                                       |   |    |
| 4.86%      Series Due 2013                                                                      | $60.0  | $60.0   |
| 6.94%      Series Due 2014                                                                      | 18.0   | 18.0    |
| 7.70%      Series Due 2016                                                                      | 20.0   | 20.0    |
| 8.17%      Series Due 2019                                                                      | 42.0   | – |
| 5.28%      Series Due 2020                                                                      | 35.0   | 35.0    |
| 4.95%      Pollution Control Series F Due 2022                                                  | 111.0  | 111.0   |
| 6.02%      Series Due 2023                                                                      | 75.0   | 75.0    |
| 5.99%      Series Due 2027                                                                      | 60.0   | 60.0    |
| 5.69%      Series Due 2036                                                                      | 50.0   | 50.0    |
| SWL&P      First Mortgage Bonds                                                             |   |    |
| 7.25%      Series Due 2013                                                                      | 10.0   | 10.0    |
| Senior      Unsecured Notes 5.99% Due 2017                                                      | 50.0   | 50.0    |
| Variable      Demand Revenue Refunding Bonds Series 1997 A, B, and C Due 2009 –      2020 | 28.3   | 28.3    |
| Industrial      Development Revenue Bonds 6.5% Due 2025                                         | 6.0    | 6.0     |
| Industrial      Development Variable Rate Demand Refunding                                      |   |    |
| Revenue      Bonds Series 2006 Due 2025                                                         | 27.8   | 27.8    |
| Line      of Credit Facility (a)                                                                | 65.0   | – |
| Other      Long-Term Debt, 2.0% – 8.0% Due 2009 – 2037                              | 42.9   | 47.6    |
| Total      Long-Term Debt                                                                       | 701.0  | 598.7   |
| Less:      Due Within One Year                                                                  | 5.2    | 10.4    |
| Net      Long-Term Debt                                                                         | $695.8 | $588.3  |

|  (a) | The      $80 million First Mortgage Bonds due in 2021, 2025 and 2040 to be issued      on or about February 17, 2010, will replace the balance due on the Line of      Credit Facility as of December 31,2009. |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note      11. | Commitments,      Guarantees and Contingencies |
|---------------|------------------------------------------------|

----

----

----

| Note      11. | Commitments,      Guarantees and Contingencies(Continued) |
|---------------|-----------------------------------------------------------|

----

| Note      11. | Commitments,      Guarantees and Contingencies(Continued) |
|---------------|-----------------------------------------------------------|

----

| Note      12. | Common      Stock and Earnings Per Share |
|---------------|------------------------------------------|

| Summary      of Common Stock                            | Shares    | Equity   |
|---------------------------------------------------------|-----------|----------|
|                                                    | Thousands | Millions |
| Balance      as of December 31, 2006                    | 30,436    | $438.7   |
| 2007   Employee      Stock Purchase Plan | 17        | 0.7      |
| Invest      Direct                                      | 331       | 15.1     |
| Options      and Stock Awards                           | 43        | 6.7      |
| Balance      as of December 31, 2007                    | 30,827    | $461.2   |
| 2008   Employee      Stock Purchase Plan | 17        | 0.6      |
| Invest      Direct                                      | 161       | 6.9      |
| Options      and Stock Awards                           | 24        | 4.6      |
| Equity      Issuance Program                            | 1,556     | 60.8     |
| Balance      as of December 31, 2008                    | 32,585    | $534.1   |
| 2009   Employee      Stock Purchase Plan | 24        | 0.7      |
| Invest      Direct                                      | 456       | 13.6     |
| Options      and Stock Awards                           | 8         | 1.1      |
| Equity      Issuance Program                            | 1,685     | 51.9     |
| Contributions      to Pension                           | 463       | 12.0     |
| Balance      as of December 31, 2009                    | 35,221    | $613.4   |

----

| Note      12. | Common      Stock and Earnings Per Share(Continued) |
|---------------|-----------------------------------------------------|

| Reconciliation      of Basic and Diluted |   |       |    |
|------------------------------------------|--------|------------|---------|
| Earnings      Per Share                  |   | Dilutive   |    |
| Year      Ended December 31              | Basic  | Securities | Diluted |
| Millions      Except Per Share Amounts   |   |       |    |
|                                     |   |       |    |
| 2009                                     |   |       |    |
| Net      Income Attributable to ALLETE   | $61.0  | –    | $61.0   |
| Common      Shares                       | 32.2   | –    | 32.2    |
| Per      Share of Common Stock           | $1.89  | –    | $1.89   |
|                                     |   |       |    |
| 2008                                     |   |       |    |
| Net      Income Attributable to ALLETE   | $82.5  | –    | $82.5   |
| Common      Shares                       | 29.2   | 0.1        | 29.3    |
| Per      Share of Common Stock           | $2.82  | –    | $2.82   |
|                                     |   |       |    |
| 2007                                     |   |       |    |
| Net      Income Attributable to ALLETE   | $87.6  | –    | $87.6   |
| Common      Shares                       | 28.3   | 0.1        | 28.4    |
| Per      Share of Common Stock           | $3.09  | –    | $3.08   |

| Note      13. | Other      Income (Expense) |
|---------------|-----------------------------|

| Year      Ended December 31                  | 2009   | 2008   | 2007   |
|----------------------------------------------|--------|--------|--------|
| Millions                                     |   |   |   |
| Loss      on Emerging Technology Investments | $(4.6) | $(0.7) | $(1.3) |
| AFUDC      - Equity                          | 5.8    | 3.3    | 3.8    |
| Investments      and Other Income (a)        | 0.6    | 13.0   | 13.0   |
| Total      Other Income                      | $1.8   | $15.6  | $15.5  |

| (a) | In      2008, Investment and Other Income included a gain from the sale of certain      available-for-sale securities. The gain was triggered when securities were      sold to reallocate investments to meet defined investment allocations      based upon an approved investment strategy. In 2007, Investment and Other      Income primarily included earnings on excess cash and Minnesota land      sales. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Income      Tax Expense                  |    |   |   |
|------------------------------------------|---------|--------|--------|
| Year      Ended December 31              | 2009    | 2008   | 2007   |
| Millions                                 |    |   |   |
| Current      Tax Expense (Benefit)       |    |   |   |
| Federal      (a)                         | $(42.6) | $6.2   | $26.5  |
| State                                    | (1.8)   | (1.6)  | 7.2    |
| Total      Current Tax Expense (Benefit) | (44.4)  | 4.6    | 33.7   |
| Deferred      Tax Expense                |    |   |   |
| Federal                                  | 66.0    | 29.3   | 10.7   |
| State                                    | 10.3    | 13.4   | 4.7    |
| Change      in Valuation Allowance       | (0.1)   | (2.9)  | (0.3)  |
| Investment      Tax Credit Amortization  | (1.0)   | (1.0)  | (1.1)  |
| Total      Deferred Tax Expense          | 75.2    | 38.8   | 14.0   |
| Total      Income Tax Expense            | $30.8   | $43.4  | $47.7  |

| (a) | Due      to the bonus depreciation provisions in the American Recovery and      Reinvestment Act of 2009, we are in a net operating loss position for      2009. The loss will be utilized by carrying it back against prior years’      taxable income. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Note      14. | Income      Tax Expense (Continued) |
|---------------|-------------------------------------|

| Reconciliation      of Taxes from Federal Statutory               |    |    |    |
|-------------------------------------------------------------------|---------|---------|---------|
| Rate      to Total Income Tax Expense                             |    |    |    |
| Year      Ended December 31                                       | 2009    | 2008    | 2007    |
| Millions                                                          |    |    |    |
| Income      Before Non-Controlling Interest and Income Taxes      | $91.5   | $126.4  | $137.2  |
| Statutory      Federal Income Tax Rate                            | 35%     | 35%     | 35%     |
| Income      Taxes Computed at 35 percent Statutory Federal Rate   | $32.0   | $44.2   | $48.0   |
| Increase      (Decrease) in Tax Due to:                           |    |    |    |
| Amortization      of Deferred Investment Tax Credits              | (1.0)   | (1.0)   | (1.1)   |
| State      Income Taxes – Net of Federal Income Tax Benefit | 5.4     | 4.8     | 7.4     |
| Depletion                                                         | (0.9)   | (0.8)   | (0.9)   |
| Regulatory      Differences for Utility Plant                     | (2.5)   | (1.6)   | (2.2)   |
| Production      Tax Credit                                        | (1.2)   | (0.4)   | – |
| Positive      Resolution of Audit Issues                          | – | – | (1.6)   |
| Other                                                             | (1.0)   | (1.8)   | (1.9)   |
| Total      Income Tax Expense                                     | $30.8   | $43.4   | $47.7   |

| Deferred      Tax Assets and Liabilities      |   |   |
|-----------------------------------------------|--------|--------|
| As      of December 31                        | 2009   | 2008   |
| Millions                                      |   |   |
| Deferred      Tax Assets                      |   |   |
| Employee      Benefits and Compensation (a)   | $118.2 | $125.2 |
| Property      Related                         | 46.5   | 36.4   |
| Investment      Tax Credits                   | 10.0   | 10.7   |
| Other                                         | 14.4   | 16.3   |
| Gross      Deferred Tax Assets                | 189.1  | 188.6  |
| Deferred      Tax Asset Valuation Allowance   | (0.3)  | (0.4)  |
| Total      Deferred Tax Assets                | $188.8 | $188.2 |
| Deferred      Tax Liabilities                 |   |   |
| Property      Related                         | $294.1 | $235.6 |
| Regulatory      Asset for Benefit Obligations | 96.5   | 87.7   |
| Unamortized      Investment Tax Credits       | 14.1   | 15.1   |
| Partnership      Basis Differences            | 14.6   | 3.7    |
| Other                                         | 28.2   | 16.8   |
| Total      Deferred Tax Liabilities           | $447.5 | $358.9 |
| Net      Deferred Income Taxes                | $258.7 | $170.7 |
|                                          |   |   |
| Recorded      as:                             |   |   |
| Net      Current Deferred Tax Liabilities (b) | $5.6   | $1.1   |
| Net      Long-Term Deferred Tax Liabilities   | 253.1  | 169.6  |
| Net      Deferred Income Taxes                | $258.7 | $170.7 |

| (a) | Includes      Unfunded Employee Benefits |
|-----|------------------------------------------|

| (b) | Included      in Other Current Liabilities. |
|-----|---------------------------------------------|

----

| Note      14. | Income      Tax Expense (Continued) |
|---------------|-------------------------------------|

| Gross      Unrecognized Income Tax Benefits                   | 2009    | 2008    | 2007    |
|---------------------------------------------------------------|---------|---------|---------|
| Millions                                                      |    |    |    |
| Balance      at January 1                                     | $8.0    | $5.3    | $10.4   |
| Additions      for Tax Positions Related to the Current Year  | 0.5     | 0.7     | 0.8     |
| Reductions      for Tax Positions Related to the Current Year | – | – | – |
| Additions      for Tax Positions Related to Prior Years       | 1.0     | 4.5     | – |
| Reduction      for Tax Positions Related to Prior Years       | – | (2.5)   | (2.4)   |
| Settlements                                                   | – | – | (3.5)   |
| Balance      as of December 31                                | $9.5    | $8.0    | $5.3    |

| Note      15. | Other      Comprehensive Income (Loss) |
|---------------|----------------------------------------|

| Other      Comprehensive Income (Loss)                                                                                                                                               |    |   |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------|---------|
| Year      Ended December 31                                                                                                                                                          | 2009    | 2008   | 2007    |
| Millions                                                                                                                                                                             |    |   |    |
| Net      Income                                                                                                                                                                      | $60.7   | $83.0  | $89.5   |
| Other      Comprehensive Income                                                                                                                                                      |    |   |    |
|     Unrealized      Gain on Securities   Net      of income taxes of $1.7, $(3.7), and $0.3                                                       | 2.8     | (6.0)  | 1.1     |
|     Reclassification      Adjustment for Losses Included in Income      Net      of income taxes of $–, $(2.7), and $– | – | (3.7)  | – |
|     Defined      Benefit Pension and Other Postretirement Plans   Net      of income taxes of $4.1, $(13.3), and $2.3                             | 6.2     | (18.8) | 3.2     |
| Total      Other Comprehensive Income (Loss)                                                                                                                                         | 9.0     | (28.5) | 4.3     |
| Total      Comprehensive Income                                                                                                                                                      | $69.7   | $54.5  | $93.8   |
| Less:      Non-Controlling Interest in Subsidiaries                                                                                                                                  | (0.3)   | 0.5    | 1.9     |
| Comprehensive      Income Attributable to ALLETE                                                                                                                                     | $70.0   | $54.0  | $91.9   |

| Accumulated      Other Comprehensive Income (Loss)          |    |    |
|-------------------------------------------------------------|---------|---------|
| As      of December 31                                      | 2009    | 2008    |
| Millions                                                    |    |    |
| Unrealized      Gain (Loss) on Securities                   | $(1.8)  | $(4.6)  |
| Defined      Benefit Pension and Other Postretirement Plans | (22.2)  | (28.4)  |
| Total      Accumulated Other Comprehensive Loss             | $(24.0) | $(33.0) |

----

| Note      16. | Pension      and Other Postretirement Benefit Plans  (Continued) |
|---------------|------------------------------------------------------------------|

| Pension      Obligation and Funded Status                                          |
|------------------------------------------------------------------------------------|
| Year      Ended December 31                                                        | 2009 | 2008 |
| Millions                                                                           |   |   |
| Accumulated      Benefit Obligation                                                | $435.9 | $406.6 |
|                                                                               |   |   |
| Change      in Benefit Obligation                                                  |   |   |
| Obligation,      Beginning of Year                                                 | $440.4 | $421.9 |
| Service      Cost                                                                  | 5.7 | 7.3 |
| Interest      Cost                                                                 | 26.2 | 31.8 |
| Actuarial      Loss (Gain)                                                         | 14.6 | 3.2 |
| Benefits      Paid                                                                 | (25.5) | (29.9) |
| Participant      Contributions                                                     | 3.9 | 6.1 |
| Obligation,      End of Year                                                       | $465.3 | $440.4 |
| Change      in Plan Assets                                                         |   |   |
| Fair      Value, Beginning of Year                                                 | $273.7 | $405.6 |
| Actual      Return on Plan Assets                                                  | 41.6 | (120.2) |
| Employer      Contribution                                                         | 37.8 | 18.2 |
| Benefits      Paid                                                                 | (25.5) | (29.9) |
| Fair      Value, End of Year                                                       | $327.6 | $273.7 |
| Funded      Status, End of Year                                                    | $(137.7) | $(166.7) |
|                                                                               |   |   |
| Net      Pension Amounts Recognized in Consolidated Balance Sheet Consist      of: |   |   |
| Current      Liabilities                                                           | $(0.9) | $(0.9) |
| Noncurrent      Liabilities                                                        | $(136.8) | $(165.8) |

----

| Note      16. | Pension      and Other Postretirement Benefit Plans  (Continued) |
|---------------|------------------------------------------------------------------|

| Unrecognized      Pension Costs       |
|---------------------------------------|
| Year      Ended December 31           | 2009 |  2008 |
| Millions                              |   |   |
| Net      Loss                         | $196.5 | $193.2 |
| Prior      Service Cost               | 1.8 | 2.4 |
| Transition      Obligation            | – | – |
| Total      Unrecognized Pension Costs | $198.3 | $195.6 |

| Components      of Net Periodic Pension Expense |
|-------------------------------------------------|
| Year      Ended December 31                     | 2009 | 2008 | 2007 |
| Millions                                        |   |   |   |
| Service      Cost                               | $5.7 | $5.8 | $5.3 |
| Interest      Cost                              | 26.2 | 25.4 | 23.4 |
| Expected      Return on Plan Assets             | (33.8) | (32.5) | (30.6) |
| Amortization      of Loss                       | 3.4 | 1.6 | 4.9 |
| Amortization      of Prior Service Costs        | 0.6 | 0.6 | 0.6 |
| Net      Pension Expense                        | $2.1 | $0.9 | $3.6 |

| Other      Changes in Pension Plan Assets and Benefit Obligations Recognized      inOther      Comprehensive Income and Regulatory Assets |
|-------------------------------------------------------------------------------------------------------------------------------------------|
| Year      Ended December 31                                                                                                               | 2009 | 2008 |
| Millions                                                                                                                                  |   |   |
| Net      Loss (Gain)                                                                                                                      | $6.8 | $164.0 |
| Amortization      of Prior Service Costs                                                                                                  | (0.6) | (0.6) |
| Amortization      of Loss (Gain)                                                                                                          | (3.4) | (1.6) |
| Total      Recognized in Other Comprehensive Income and Regulatory    Assets                                                              | $2.8 | $161.8 |

| Information      for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan      Assets |
|---------------------------------------------------------------------------------------------------------|
| Year      Ended December 31                                                                             | 2009 | 2008 |
| Millions                                                                                                |   |             |
| Projected      Benefit Obligation                                                                       | $465.3 | $440.4 |
| Accumulated      Benefit Obligation                                                                     | $435.9 | $406.6 |
| Fair      Value of Plan Assets                                                                          | $327.6 | $273.7 |

----

| Note      16. | Pension      and Other Postretirement Benefit Plans  (Continued) |
|---------------|------------------------------------------------------------------|

| Postretirement      Health and Life Obligation and Funded Status                                                |
|-----------------------------------------------------------------------------------------------------------------|
| Year      Ended December 31                                                                                     | 2009 | 2008 |
| Millions                                                                                                        |   |   |
| Change      in Benefit Obligation                                                                               |   |   |
| Obligation,      Beginning of Year                                                                              | $166.9 | $153.7 |
| Service      Cost                                                                                               | 4.1 | 5.0 |
| Interest      Cost                                                                                              | 10.0 | 11.7 |
| Actuarial      Loss                                                                                             | 18.4 | 4.0 |
| Participant      Contributions                                                                                  | 1.7 | 2.0 |
| Plan      Amendments                                                                                            | (1.3) | – |
| Benefits      Paid                                                                                              | (7.7) | (9.5) |
| Obligation,      End of Year                                                                                    | $192.1 | $166.9 |
| Change      in Plan Assets                                                                                      |   |   |
| Fair      Value, Beginning of Year                                                                              | $78.6 | $90.9 |
| Actual      Return on Plan Assets                                                                               | 13.9 | (25.2) |
| Employer      Contribution                                                                                      | 9.9 | 20.3 |
| Participant      Contributions                                                                                  | 1.6 | 1.9 |
| Benefits      Paid                                                                                              | (7.6) | (9.3) |
| Fair      Value, End of Year                                                                                    | $96.4 | $78.6 |
| Funded      Status, End of Year                                                                                 | $(95.7) | $(88.3) |
|                                                                                                            |   |   |
|  Net      Postretirement Health and Life Amounts Recognized in Consolidated Balance      Sheet Consist of: |   |   |
| Current      Liabilities                                                                                        | $(0.8) | $(0.7) |
| Noncurrent      Liabilities                                                                                     | $(94.8) | $(87.6) |

| Unrecognized      Postretirement Health and Life Costs       |
|--------------------------------------------------------------|
| Year      Ended December 31                                  | 2009 | 2008 |
| Millions                                                     |   |   |
| Net      Loss                                                | $69.6 | $59.2 |
| Prior      Service Cost                                      | (1.3) | – |
| Transition      Obligation                                   | 6.9 | 9.4 |
| Total      Unrecognized Postretirement Health and Life Costs | $75.2 | $68.6 |

| Components      of Net Periodic Postretirement Health and Life Expense |
|------------------------------------------------------------------------|
| Year      Ended December 31                                            | 2009 | 2008 | 2007 |
| Millions                                                               |   |   |   |
| Service      Cost                                                      | $4.1 | $4.0 | $4.2 |
| Interest      Cost                                                     | 10.0 | 9.4 | 7.8 |
| Expected      Return on Plan Assets                                    | (8.3) | (7.2) | (6.5) |
| Amortization      of Loss                                              | 2.5 | 1.4 | 1.0 |
| Amortization      of Transition Obligation                             | 2.5 | 2.5 | 2.4 |
| Net      Postretirement Health and Life Expense                        | $10.8 | $10.1 | $8.9 |

----

| Other      Changes in Postretirement Benefit Plan Assets and Benefit      ObligationsRecognized      in Other Comprehensive Income and Regulatory Assets |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|
| Year      Ended December 31                                                                                                                              | 2009 | 2008 |
| Millions                                                                                                                                                 |   |   |
| Net      Loss (Gain)                                                                                                                                     | $12.9 | $38.3 |
| Prior      Service Cost (Credit) Arising During the Period                                                                                               | (1.3) | – |
| Amortization      of Transition Obligation                                                                                                               | (2.5) | (2.5) |
| Amortization      of Loss (Gain)                                                                                                                         | (2.5) | (1.4) |
| Total      Recognized in Other Comprehensive Income and Regulatory    Assets                                                                             | $6.6 | $34.4 |

| Estimated      Future Benefit Payments |
|----------------------------------------|
|                                   |   | Postretirement |
|                                   | Pension | Health      and Life |
| Millions                               |   |   |
| 2010                                   | $26.4 | $7.5 |
| 2011                                   | $26.9 | $8.4 |
| 2012                                   | $27.8 | $9.2 |
| 2013                                   | $28.8 | $10.0 |
| 2014                                   | $29.9 | $10.9 |
| Years      2015 – 2019           | $165.0 | $65.5 |

|                                                        |    | Postretirement       |
|-------------------------------------------------------------|---------|----------------------|
|                                                        | Pension | Health      and Life |
| Millions                                                    |    |                 |
| Net      Loss                                               | $6.6    | $4.8                 |
| Prior      Service Costs                                    | $0.5    | $(0.1)               |
| Transition      Obligations                                 | – | $2.5                 |
| Total      Pension and Postretirement Health and Life Costs | $7.1    | $7.2                 |

| Weighted-Average      Assumptions Used to Determine Benefit Obligation |
|------------------------------------------------------------------------|
| Year      Ended December 31                                            | 2009 | 2008 |
| Discount      Rate                                                     | 5.81% | 6.12% |
| Rate      of Compensation Increase                                     | 4.3      – 4.6% | 4.3      – 4.6% |
| Health      Care Trend Rates                                           |   |   |
| Trend      Rate                                                        | 8.5% | 9% |
| Ultimate      Trend Rate                                               | 5% | 5% |
| Year      Ultimate Trend Rate Effective                                | 2017 | 2012 |

| Weighted-Average      Assumptions Used to Determine Net Periodic BenefitCosts |
|-------------------------------------------------------------------------------|
| Year      Ended December 31                                                   | 2009 | 2008 | 2007 |
| Discount      Rate                                                            | 6.12% | 6.25% | 5.75% |
| Expected      Long-Term Return on Plan Assets                                 |   |   |   |
| Pension                                                                       | 8.5% | 9.0% | 9.0% |
| Postretirement      Health and Life                                           | 6.8      – 8.5% | 7.2      – 9.0% | 5.0      – 9.0% |
| Rate      of Compensation Increase                                            | 4.3      – 4.6% | 4.3      – 4.6% | 4.3      – 4.6% |

----

| Note      16. | Pension      and Other Postretirement Benefit Plans  (Continued) |
|---------------|------------------------------------------------------------------|

| Sensitivity      of a One-Percentage-Point Change in Health Care Trend  Rates         |
|---------------------------------------------------------------------------------------|
|                                                                                  | One      Percent | One      Percent |
|                                                                                  | Increase | Decrease |
| Millions                                                                              |   |   |
| Effect      on Total of Postretirement Health and Life Service and Interest      Cost | $2.1 | $(1.8) |
| Effect      on Postretirement Health and Life Obligation                              | $23.6 | $(20.9) |

| Actual      Plan Asset Allocations |
|------------------------------------|
|                               | Pension | PostretirementHealth      and Life (a) |
|                               | 2009 | 2008 | 2009 |  2008 |
| Equity      Securities             | 53% | 46% | 54% | 47% |
| Debt      Securities               | 28% | 32% | 38% | 40% |
| Real      Estate                   | 5% | 6% | – | – |
| Private      Equity                | 14% | 16% | 8% | 9% |
| Cash                               | – | – | – | 4% |
|                               | 100% | 100% | 100% | 100% |

| (a) | Includes      VEBAs and irrevocable grantortrusts. |
|-----|----------------------------------------------------|

| Plan      Asset Target Allocations |
|------------------------------------|
|                               |   | Postretirement |
|                               | Pension | Health and Life (a) |
| Equity      Securities             | 50% | 48% |
| Debt      Securities               | 30% | 34% |
| Real      Estate                   | 10% | 9% |
| Private      Equity                | 10% | 9% |
|                               | 100% | 100% |

----

| Note      16. | Pension      and Other Postretirement Benefit Plans  (Continued) |
|---------------|------------------------------------------------------------------|

|                                                       | At      Fair Value as of December 31, 2009 |
|------------------------------------------------------------|--------------------------------------------|
| Recurring Fair Value      Measures                         | Level      1                               | Level      2 | Level      3 | Total |
| Millions                                                   |                                       |   |   |   |
| Assets:                                                    |                                       |   |   |   |
| Equity      Securities                                     |                                       |   |   |   |
|      U.S.      Large-cap (a)      | $23.2                                      | $27.5 | $5.2 | $55.9 |
|      U.S.      Mid-cap Growth (a) | 8.9                                        | 10.6 | 2.0 | 21.5 |
|      U.S.      Small-cap (a)      | 8.6                                        | 10.1 | 1.9 | 20.6 |
|      International                | –                                    | 66.4 | – | 66.4 |
|      ALLETE                       | 9.9                                        | – | – | 9.9 |
| Debt      Securities:                                      |                                       |   |   |   |
|      Mutual      Funds            | 32.0                                       | – | – | 32.0 |
|      Fixed      Income            | –                                    | 59.3 | – | 59.3 |
| Other      Types of Investments:                           |                                       |   |   |   |
|      Private      Equity Funds    | –                                    | – | 44.7 | 44.7 |
| Real      Estate                                           | –                                    | – | 17.3 | 17.3 |
| Total      Fair Value of Assets                            | $82.6                                      | $173.9 | $71.1 | $327.6 |

| Recurring      Fair Value Measures          | Equity      Securities         |                      |             |
|---------------------------------------------|--------------------------------|---------------------------|------------------|
| Activity      in Level 3                    | (Auction      Rate Securities) | Private      Equity Funds | Real      Estate |
| Millions                                    |                           |                      |             |
| Balance      as of December 31, 2008        | $10.2                          | $43.2                     | $17.0            |
| Actual      Return on Plan Assets           | 0.1                            | (8.7)                     | (8.6)            |
| Purchases,      sales, and settlements, net | (1.1)                          | 10.2                      | 8.9              |
| Balance      as of December 31, 2009        | $9.1                           | $44.7                     | $17.3            |

----

|                                                    | At      Fair Value as of December 31, 2009 |
|---------------------------------------------------------|--------------------------------------------|
| Recurring Fair Value      Measures                      | Level      1                               | Level      2 | Level      3 | Total |
| Millions                                                |                                       |   |   |   |
| Assets:                                                 |                                       |   |   |   |
| Equity      Securities                                  |                                       |   |   |   |
|      U.S.      Large-cap       | $13.4                                      | – | – | $13.4 |
|      U.S.      Mid-cap Growth  | 9.0                                        | – | – | 9.0 |
|      U.S.      Small-cap       | 6.3                                        | – | – | 6.3 |
|      International             | 21.4                                       | – | – | 21.4 |
| Debt      Securities:                                   |                                       |   |   |   |
|      Mutual      Funds         | 5.5                                        | – | – | 5.5 |
|      Fixed      Income         | –                                    | $31.4 | – | 31.4 |
| Other      Types of Investments:                        |                                       |   |   |   |
|      Private      Equity Funds | –                                    | – | $9.4 | 9.4 |
| Total      Fair Value of Assets                         | $55.6                                      | $31.4 | $9.4 | $96.4 |

| Recurring      Fair Value Measures          |                      |
|---------------------------------------------|---------------------------|
| Activity      in Level 3                    | Private      Equity Funds |
| Millions                                    |                      |
| Balance      as of December 31, 2008        | $7.9                      |
| Actual      Return on Plan Assets           | (1.1)                     |
| Purchases,      sales, and settlements, net | 2.6                       |
| Balance      as of December 31, 2009        | $9.4                      |

| Note      17. | Employee      Stock and Incentive Plans |
|---------------|-----------------------------------------|

----

| Note      17. | Employee      Stock and Incentive Plans(Continued) |
|---------------|----------------------------------------------------|

| Year      Ended December 31           | 2009   | 2008   | 2007   |
|---------------------------------------|--------|--------|--------|
| Millions                              |   |   |   |
| ESOP      Shares                      |   |   |   |
| Allocated                             | 2.2    | 2.0    | 1.8    |
| Unallocated                           | 1.5    | 1.9    | 2.2    |
| Total                                 | 3.7    | 3.9    | 4.0    |
| Fair      Value of Unallocated Shares | $49.0  | $61.3  | $87.1  |

|                         | 2008               | 2007               |
|------------------------------|--------------------|--------------------|
| Risk-Free      Interest Rate | 2.8%               | 4.8%               |
| Expected      Life           |  5      Years |  5      Years |
| Expected      Volatility     | 20%                | 20%                |
| Dividend      Growth Rate    | 4.4%               | 5.0%               |

----

| Note      17. | Employee      Stock and Incentive Plans(Continued) |
|---------------|----------------------------------------------------|

| Share-Based      Compensation Expense       |
|---------------------------------------------|
| Year      Ended December 31                 | 2009 | 2008 | 2007 |
| Millions                                    |   |   |   |
| Stock      Options                          | $0.3 | $0.7 | $0.8 |
| Performance      Shares                     | 1.5 | 1.1 | 1.0 |
| Restricted      Stock Units                 | 0.3 | – | – |
| Total      Share-Based Compensation Expense | $2.1 | $1.8 | $1.8 |
| Income      Tax Benefit                     | $0.8 | $0.7 | $0.7 |

|                                     |           |             |      | Weighted-Average |
|------------------------------------------|----------------|------------------|-----------|------------------|
|                                     |           | Weighted-Average | Aggregate | Remaining        |
|                                     | Number      of | Exercise         | Intrinsic | Contractual      |
|                                     | Options        | Price            | Value     | Term             |
|                                     |           |             | Millions  |             |
| Outstanding      as of December 31, 2008 | 672,419        | $39.99           | $(5.2)    | 6.9      years   |
| Granted      (a)                         | –        | –          |      |             |
| Exercised                                | 4,508          | $18.85           |      |             |
| Forfeited                                | 21,676         | $42.62           |      |             |
| Outstanding      as of December 31, 2009 | 646,235        | $40.05           | $(4.8)    | 5.9      years   |
| Exercisable      as of December 31, 2009 | 512,743        | $37.34           | $(3.7)    | 5.4      years   |

----

| Note      17. | Employee      Stock and Incentive Plans(Continued) |
|---------------|----------------------------------------------------|

|                                    |           | Weighted-Average |
|-----------------------------------------|----------------|------------------|
|                                    | Number      of | Grant      Date  |
|                                    | Shares         | Fair      Value  |
| Non-vested      as of December 31, 2008 | 79,238         | $47.94           |
| Granted                                 | 69,800         | $35.06           |
| Unearned      Grant Award               | (24,615)       | $41.97           |
| Forfeited                               | (2,598)        | $38.78           |
| Non-vested      as of December 31, 2009 | 121,825        | $41.96           |

|                                    |           | Weighted-Average |
|-----------------------------------------|----------------|------------------|
|                                    | Number      of | Grant      Date  |
|                                    | Shares         | Fair      Value  |
| Non-vested      as of December 31, 2008 | –        | –          |
| Granted                                 | 30,465         | $29.41           |
| Forfeited                               | (1,482)        | $29.41           |
| Non-vested      as of December 31, 2009 | 28,983         | $29.41           |

----

| Note      18. | Quarterly      Financial Data (Unaudited) |
|---------------|-------------------------------------------|

| Quarter      Ended                      | Mar.      31 | Jun.      30 | Sept.      30 | Dec.      31 |
|-----------------------------------------|--------------|--------------|---------------|--------------|
| Millions      Except Earnings Per Share |         |         |          |         |
| 2009                                    |         |         |          |         |
| Operating      Revenue                  | $199.6       | $164.7       | $178.8        | $216.0       |
| Operating      Income                   | $31.1        | $15.7        | $25.4         | $33.8        |
| Net      Income Attributable to ALLETE  | $16.9        | $9.4         | $16.0         | $18.7        |
| Earnings      Per Share of Common Stock |         |         |          |         |
| Basic                                   | $0.55        | $0.29        | $0.49         | $0.56        |
| Diluted                                 | $0.55        | $0.29        | $0.49         | $0.56        |
| 2008                                    |         |         |          |         |
| Operating      Revenue                  | $213.4       | $189.8       | $201.7        | $196.1       |
| Operating      Income                   | $31.3        | $17.5        | $33.2         | $39.8        |
| Net      Income Attributable to ALLETE  | $23.6        | $10.7        | $24.7         | $23.5        |
| Earnings      Per Share of Common Stock |         |         |          |         |
| Basic                                   | $0.82        | $0.37        | $0.85         | $0.78        |
| Diluted                                 | $0.82        | $0.37        | $0.85         | $0.78        |

----

|                                           | Balance      at | Additions      | Deductions | Balance      at   |
|------------------------------------------------|-----------------|----------------|------------|-------------------|
|                                           | Beginning       | Charged        | Other      | from              | End      of |
| Year      Ended December 31                    | of      Year    | to      Income | Changes    | Reserves      (a) | Period |
| Millions                                       |            |           |       |              |   |
| Reserve      Deducted from Related Assets      |            |           |       |              |   |
| Reserve      For Uncollectible Accounts        |            |           |       |              |   |
| 2007  Trade      Accounts Receivable | $1.1            | $1.0           | –    | $1.1              | $1.0 |
| Finance      Receivables – Long-Term     | 0.2             | –        | –    | –           | 0.2 |
| 2008  Trade      Accounts Receivable | 1.0             | 1.0            | –    | 1.3               | 0.7 |
| Finance      Receivables – Long-Term     | 0.2             | –        | –    | 0.1               | 0.1 |
| 2009  Trade      Accounts Receivable | 0.7             | 1.3            | –    | 1.1               | 0.9 |
| Finance      Receivables – Long-Term     | 0.1             | 0.3            | –    | –           | 0.4 |
| Deferred      Asset Valuation Allowance        |            |           |       |              |   |
| 2007  Deferred      Tax Assets       | 3.6             | (0.3)          | –    | –           | 3.3 |
| 2008  Deferred      Tax Assets       | 3.3             | (2.9)          | –    | –           | 0.4 |
| 2009  Deferred      Tax Assets       | 0.4             | (0.1)          | –    | –           | 0.3 |

|   | (a) | Includes      uncollectible accounts written off. |
|--------|-----|---------------------------------------------------|

----