ALLETE, Inc.

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Meeting Regional Energy Needs While Addressing
Regional, State National Energy Challenges
Dave McMillan Executive Vice President-Minnesota
Power September 17, 2008
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ALLETE Perspective

• Entering 5th Year Since ADESA Spin
• Energy Businesses Providing Growth
• Real Estate Market Presents Challenge
• Diversity Remains Important

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Energy Infrastructure Investments1.5 billion
in five years!
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Energy Infrastructure InvestmentCurrent Recent
Examples
Duluth-Wausau 345 kV Transmission Line
Boswell 3 Retrofit

Maintaining Distribution Assets
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Taconite Ridge I
DedicatedJune 11th

• T-10 5/30
• 51.5 vs. 50.0 (1.5)
• Dedicated June 11th

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Growing Changing Industrial Load in Region
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A Distant Planning Horizon

• Anticipate regulatory environment
• Estimate capital spending
• Judge future technology

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Major State Energy Policy Initiatives

• 2005 - Transmission, CBED
• 2006 - Mercury
• 2007 - Renewables, Conservation Carbon
• 2008 - Omnibus Bill
• 2009 - ?

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Federal Energy Policy

• 110th Congress Little Action
• Key Issues for 111th Congress
• Renewable Energy
• Production Tax Credit
• Climate
• Emissions Reductions (SO2, NOx, Hg, particulates)
• Natural Gas Supply (Oil)

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State RPS Policies and Non-Binding Renewable
Energy Goals (as of May 2008)
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Our Climate Policy

• Add cost effective renewables
• Aggressively pursue conservation
• Improve efficiency
• No new coal generation without a reasonable
  carbon solution
• Invest in technology
• Measure and track CO2

MP Will Reduce its Carbon Emissions!
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North Dakota Wind Opportunity

• Purchase 460-mile DC line
• Phase out Young 2 purchases
• MP to add 500-700 MW of wind capacity
• Minnkota Power to add new AC line

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MPs Changing Carbon Profile
MP Generation in 2005
MP Generation in 2025
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MPs Long Term Resource Outlook Support Regional
Growth

• Taconite Harbor available after May 2010
• /- 500 MW of renewable energy by 2015
• 250 MW of Manitoba Hydro by 2020
• Conservation! Power of One
• Gas generation by 2014
• Summary No new base load resources needed
  before 2020

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Questions Dialogue
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MPs 2008 Retail Rate CaseHow Much and When?

• August 1 7.5
• Next Spring 9.5 overall (class-by-class
  impacts vary because of rate design)

• MPUC must approve everything!

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Why are costs rising?

• Public policy
• O M costs
• Reliability and duty cycle preservation
• Commodity escalations