Business Segments

9 Months Ended

Sep. 30, 2018

BUSINESS SEGMENTS

We present three reportable segments: Regulated Operations, ALLETE Clean Energy and U.S. Water Services. We measure performance of our operations through budgeting and monitoring of contributions to consolidated net income by each business segment.

Regulated Operations includes three operating segments which consist of our regulated utilities, Minnesota Power and SWL&P, as well as our investment in ATC. ALLETE Clean Energy is our business focused on developing, acquiring and operating clean and renewable energy projects. U.S. Water Services is our integrated water management company. The ALLETE Clean Energy and U.S. Water Services reportable segments comprise our Energy Infrastructure and Related Services businesses. We also present Corporate and Other which includes two operating segments, BNI Energy, our coal mining operations in North Dakota, and ALLETE Properties, our legacy Florida real estate investment, along with other business development and corporate expenditures, unallocated interest expense, a small amount of non-rate base generation, approximately 4,000 acres of land in Minnesota, and earnings on cash and investments.

NOTE 14. BUSINESS SEGMENTS (Continued)



	Quarter Ended					Nine Months Ended
	September 30,					September 30,
	2018			2017		2018			2017
Millions
Operating Revenue (a)
Regulated Operations
Residential		$30.8			$28.3		$102.2			$95.4
Commercial	38.1			36.2		110.9			108.1
Municipal	14.2			14.6		41.9			45.1
Industrial	117.3			122.3		347.5			365.6
Other Power Suppliers	40.9			41.2		127.3			124.1
CIP Financial Incentive (b)	3.0			—		3.0			5.5
Other (c)	17.0			35.0		56.5			80.3
Total Regulated Operations	261.3			277.6		789.3			824.1

Energy Infrastructure and Related Services

ALLETE Clean Energy
Long-term PSA	9.0			7.6		40.0			39.1
Other	6.0			5.9		17.9			17.7
Total ALLETE Clean Energy	15.0			13.5		57.9			56.8

U.S. Water Services
Point-in-Time	29.0			26.2		77.0			71.9
Contract	9.7			9.1		28.7			26.8
Capital Project	6.3			4.9		19.0			12.0
Total U.S. Water Services	45.0			40.2		124.7			110.7

Corporate and Other
Long-term Contract	21.2			21.1		63.9			66.4
Other	5.5			10.1		14.5			23.4
Total Corporate and Other	26.7			31.2		78.4			89.8
Total Operating Revenue		$348.0			$362.5		$1,050.3			$1,081.4
Net Income (Loss)
Regulated Operations		$29.8			$34.2		$99.7			$110.1

Energy Infrastructure and Related Services
ALLETE Clean Energy	1.0			0.6		15.9			11.1
U.S. Water Services	1.7			1.3		0.5			1.6

Corporate and Other (d)	(1.8		)	8.8		(3.1		)	8.0
Total Net Income		$30.7			$44.9		$113.0			$130.8


(a)	With the adoption of new revenue recognition guidance, the Company has enhanced the presentation of business segment Operating Revenue. (See Note 1. Operations and Significant Accounting Policies.)


(b)	See Note 6. Regulatory Matters.


(c)	Operating revenue in 2017 included $14.3 million of additional revenue as a result of the favorable impact for the regulatory outcome of the MPUC’s modification of its November 2016 order on the allocation of North Dakota investment tax credits. (See Note 6. Regulatory Matters.)


(d)	Net income in 2017 included a $7.9 million after-tax favorable impact for the regulatory outcome of the MPUC’s modification of its November 2016 order on the allocation of North Dakota investment tax credits. (See Note 6. Regulatory Matters.)

NOTE 14. BUSINESS SEGMENTS (Continued)



	September 30, 2018		December 31, 2017
Millions
Assets
Regulated Operations		$3,904.3		$3,886.6

Energy Infrastructure and Related Services
ALLETE Clean Energy	639.0		600.5
U.S. Water Services	293.7		292.4

Corporate and Other	326.3		300.5
Total Assets		$5,163.3		$5,080.0