<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>proxy.txt
<TEXT>
<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                                  SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
                                (AMENDMENT NO. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ /  Preliminary Proxy Statement
/ /  CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
     14a-6(e)(2))
/X/  Definitive Proxy Statement
/ /  Definitive Additional Materials
/ /  Soliciting Material Pursuant to Section 240.14a-12

                                    ALLETE, Inc.
--------------------------------------------------------------------------------
                  (Name of Registrant as Specified in its Charter)

--------------------------------------------------------------------------------
     (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/  No fee required.
/ /  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

     (1)  Title of each class of securities to which transaction applies:

          ----------------------------------------------------------------------

     (2)  Aggregate number of securities to which transaction applies:

          ----------------------------------------------------------------------

     (3)  Per unit  price  or other  underlying  value of  transaction  computed
          pursuant to Exchange Act Rule 0-11 (set forth  the amount on which the
          filing fee is calculated and state how it was determined):

          ----------------------------------------------------------------------

     (4)  Proposed maximum aggregate value of transaction:

          ----------------------------------------------------------------------

     (5)  Total fee paid:

          ----------------------------------------------------------------------

/ /  Fee paid previously with preliminary materials.
/ /  Check box if  any  part of the fee is offset as provided  by  Exchange  Act
     Rule  0-11(a)(2) and  identify the filing for which the  offsetting fee was
     paid previously.  Identify  the previous filing by  registration  statement
     number, or the Form or Schedule and the date of its filing.

     (1)  Amount Previously Paid:

          ----------------------------------------------------------------------

     (2)  Form, Schedule or Registration Statement No.:

          ----------------------------------------------------------------------

     (3)  Filing Party:

          ----------------------------------------------------------------------

     (4)  Date Filed:

          ----------------------------------------------------------------------

<PAGE>





[Photo of Medardo Salgado and Manuel      [Photo of ALLETE's Ethics Handbook
Vargas buffing a Beetle at ADESA Golden   on the printing press]
Gate's reconditioning facility]



                                                      NOTICE AND PROXY STATEMENT

[Photo of Minnesota Power lineman         [Photo of vehicle in a parking garage]
working on a power pole in Duluth, MN]



                                                                   [ALLETE LOGO]
                                                                  ANNUAL MEETING
                                                                 OF SHAREHOLDERS
                                                                 ---------------
                                                            Tuesday May 13, 2003
                                                               Duluth, Minnesota

                                          [Photo of a transmission tower in
                                          Duluth, MN]


<PAGE>

[ALLETE LOGO]

                                                March 25, 2003


Dear Shareholder:

         We cordially invite you to our 2003 Annual Meeting of Shareholders to
be held Tuesday, May 13, 2003 at 10:30 a.m. in the auditorium of the Duluth
Entertainment Convention Center (DECC). The DECC is located on the waterfront at
350 Harbor Drive in Duluth. Free parking is available in the adjoining lot. On
behalf of the Board of Directors, I encourage you to attend.

         At this year's meeting you will be asked to elect ten Directors, ratify
the appointment of PricewaterhouseCoopers LLP as independent auditors, and
approve the reservation of an additional 500,000 shares of common stock for
issuance under our employee stock purchase plan.

         Standing for election to the Board for the first time this year is Mr.
Tom Cunningham, recently retired from a long and successful career at Ford Motor
Company where he was responsible for Ford's used vehicle sales strategy in the
United States. His experience will be a valuable asset to the Board in its
oversight of our Automotive Services business. Two directors will not be
standing for re-election this year. Ms. Glenda Hood resigned from the Board
earlier this year to avoid conflicts of interest that would result after her
appointment to the office of Secretary of State for Florida. Ms. Kathleen
Brekken declined to stand for re-election as part of a resolve to find a better
balance to the demands of her professional obligations. We thank them for their
many contributions during their tenure on the Board.

         After our Annual Meeting, we invite you to visit with our directors,
officers and employees over lunch in the Lake Superior Ballroom located within
the DECC. If you plan to join us for lunch, please return the enclosed
reservation card.

         It is important that your shares be represented and voted whether or
not you plan to attend our Annual Meeting. You can vote your shares by Internet,
a toll-free telephone call, or by returning the enclosed Proxy Card. Please see
your Proxy Card for specific instructions on how to vote.

         Thank you for your investment in ALLETE.


                                                Sincerely,


                                                David G. Gartzke

                                                David G. Gartzke
                                                Chairman, President and
                                                Chief Executive Officer


<PAGE>



                                  ALLETE, INC.

--------------------------------------------------------------------------------
             NOTICE OF ANNUAL MEETING OF SHAREHOLDERS - MAY 13, 2003
--------------------------------------------------------------------------------

         The Annual Meeting of Shareholders of ALLETE,  Inc. will be held in the
auditorium  at the Duluth  Entertainment  Convention  Center,  350 Harbor Drive,
Duluth,  Minnesota,  on Tuesday,  May 13, 2003 at 10:30 a.m.  for the  following
purposes:

         1. To elect a Board of ten directors to serve for the ensuing year;

         2. To ratify the appointment of PricewaterhouseCoopers LLP as  ALLETE's
            independent auditors for 2003;

         3. To approve the reservation of an additional 500,000 shares of ALLETE
            Common Stock for issuance under the  ALLETE and Affiliated Companies
            Employee Stock Purchase Plan; and

         4. To transact such other business as  may  properly  come  before  the
            meeting or any adjournments thereof.

         Shareholders  of record on the books of ALLETE at the close of business
on March 14, 2003 are entitled to notice of and to vote at the Annual Meeting.

         All  shareholders  are cordially  invited and  encouraged to attend the
meeting in person.  The holders of a majority of the shares  entitled to vote at
the meeting must be present in person or by Proxy to constitute a quorum.

         Your early response will  facilitate an efficient  tally of your votes.
If voting by mail,  please sign,  date and return the enclosed Proxy Card in the
envelope provided.  Alternatively,  follow the enclosed  instructions to vote by
phone or the Internet.

By order of the Board of Directors,



Philip R. Halverson

Philip R. Halverson
Vice President, General Counsel and Secretary

Dated at Duluth, Minnesota
March 25, 2003

     IF YOU HAVE NOT  RECEIVED  THE ALLETE 2002 ANNUAL  REPORT,  WHICH  INCLUDES
FINANCIAL  STATEMENTS,  KINDLY  NOTIFY  ALLETE  SHAREHOLDER  SERVICES,  30  WEST
SUPERIOR  STREET,  DULUTH,  MN 55802-2093,  TELEPHONE NUMBER  1-800-535-3056  OR
1-218-723-3974, AND A COPY WILL BE SENT TO YOU.


<PAGE>



                                  ALLETE, INC.
                             30 WEST SUPERIOR STREET
                             DULUTH, MINNESOTA 55802

--------------------------------------------------------------------------------
                                 PROXY STATEMENT
--------------------------------------------------------------------------------

SOLICITATION

         The Proxy  accompanying  this Proxy Statement is solicited on behalf of
the Board of Directors of ALLETE, Inc. (ALLETE or Company) for use at the Annual
Meeting of Shareholders to be held on May 13, 2003 and any adjournments thereof.
The purpose of the meeting is to elect a Board of ten directors to serve for the
ensuing  year,  to  ratify  the   appointment  of   PricewaterhouseCoopers   LLP
(PricewaterhouseCoopers)  as ALLETE's  independent auditors for 2003, to approve
the  reservation of an additional  500,000 shares of ALLETE Common Stock (Common
Stock) for issuance  under the ALLETE and  Affiliated  Companies  Employee Stock
Purchase  Plan,  and to transact such other business as may properly come before
the meeting.  All properly  submitted  proxies received at or before the meeting
and entitled to vote will be voted at the meeting.

         This Proxy  Statement and the enclosed  Proxy Card were first mailed on
or about March 25, 2003. Each Proxy delivered  pursuant to this  solicitation is
revocable  any time  before  it is  voted by  written  notice  delivered  to the
Secretary of ALLETE.

         ALLETE expects to solicit proxies  primarily by mail.  Proxies also may
be  solicited  at a nominal  cost in person and by  telephone  by  employees  or
retirees of ALLETE.  The expenses of such  solicitation are the ordinary ones in
connection with preparing, assembling and mailing the material, and also include
charges and expenses of brokerage houses and other custodians, nominees or other
fiduciaries for  communicating  with  shareholders.  Additional  solicitation of
proxies will be made by mail,  telephone and in person by Georgeson  Shareholder
Communications,  Inc., a firm specializing in the solicitation of proxies,  at a
cost to ALLETE of approximately $15,000 plus expenses.  The total amount of such
costs will be borne by ALLETE.

OUTSTANDING SHARES AND VOTING PROCEDURES

         The outstanding  shares of capital stock of ALLETE as of March 14, 2003
were 86,087,753 shares of Common Stock (without par value).

         Each share of the Common  Stock of record on the books of ALLETE at the
close of business on March 14, 2003 is entitled to notice of the Annual  Meeting
and to one vote.

         The  affirmative  vote of a majority of the shares of stock entitled to
vote at the Annual  Meeting is required for election of each  director,  and the
affirmative  vote of a majority of the shares of stock  present and  entitled to
vote is  required  for  approval  of the other  items  described  in this  Proxy
Statement to be acted upon by shareholders.  An automated system administered by
Wells Fargo Bank Minnesota,  N.A. tabulates the votes.  Abstentions are included
in determining the number of shares present and voting, and are treated as votes
against the particular proposal. Broker non-votes are not counted for or against
any proposal.

         Any  shareholder  giving a Proxy has the right to revoke it at any time
prior to its exercise by giving notice in writing to the Secretary.

         Unless  contrary  instructions  are indicated on the Proxy,  all shares
represented  by valid  proxies  will be voted "FOR" the election of all nominees
for   director   named   herein,    "FOR"    ratifying   the    appointment   of
PricewaterhouseCoopers  as ALLETE's  independent  auditors  for 2003,  and "FOR"
approval of the reservation of an additional  500,000 shares of Common Stock for
issuance under the ALLETE and Affiliated Companies Employee Stock Purchase Plan.
If any other  business is transacted at the meeting,  all shares  represented by
valid  proxies  will be  voted in  accordance  with  the  best  judgment  of the
appointed proxies.

                                       1
<PAGE>


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The  only  person  known  to  ALLETE  who as of March  14,  2003  owned
beneficially  more than 5 percent of any class of ALLETE's voting  securities is
American  Express  Trust  Company,  50765  AXP  Financial  Center,  Minneapolis,
Minnesota,  55474.  As of March 14, 2003  American  Express  Trust  Company held
8,343,864  shares,  or 9.7 percent,  of ALLETE's Common Stock in its capacity as
Trustee of the Minnesota Power and Affiliated  Companies  Retirement Savings and
Stock Ownership Plan (RSOP). Generally, these shares will be voted in accordance
with  instructions  received by American Express Trust Company from participants
in the RSOP.

         The following  table  presents the shares of Common Stock  beneficially
owned by directors,  nominees for director and executive  officers  named in the
Summary  Compensation Table which appears  subsequently in this Proxy Statement,
and all directors and executive  officers of ALLETE as a group,  as of March 14,
2003.  Unless  otherwise  indicated,  the  persons  shown  have sole  voting and
investment power over the shares listed.

<TABLE>
<CAPTION>
                                                Options                                                     Options
                        Number of Shares      Exercisable                          Number of Shares        Exercisable
Name of                   Beneficially      within 60 days      Name of              Beneficially         within 60 days
Beneficial Owner             Owned<F1>   after March 14, 2003   Beneficial Owner       Owned<F1>       after March 14, 2003
---------------------------------------------------------------------------------------------------------------------------
<S>                     <C>              <C>                    <C>                <C>                 <C>
Kathleen A. Brekken           13,058             7,680          Nick Smith             17,250                  10,537
Wynn V. Bussmann               3,919               750          Bruce W. Stender       20,137                   9,600
Thomas L. Cunningham             500                 0          Donald C. Wegmiller    24,383                   9,600
Dennis E. Evans               27,733             9,600          Donnie R. Crandell     38,344                  89,216 <F2>
David G. Gartzke              46,619           113,673          Robert D. Edwards      49,806                 101,211
Peter J. Johnson              32,746             9,600          James P. Hallett       32,689                  88,844
George L. Mayer               28,626             9,116          Donald J. Shippar      16,142                  28,391
Jack I. Rajala                19,593             9,600

All directors and
executive officers
as a group (20):             476,959           619,565

---------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Includes (i) shares as to which voting and investment power is shared with the person's spouse: Mr. Johnson - 28,300,
     and all directors and officers as a group - 40,088;  (ii) shares owned by the person's  spouse:  Mr. Gartzke - 10, Mr.
     Mayer - 800, Mr. Smith - 50, Mr. Crandell - 8,226 and all directors and officers as a group - 24,589; and (iii) shares
     held as trustee:  Mr. Mayer - 650. Each director and executive  officer owns only a fraction of 1 percent of any class
     of ALLETE stock,  and all  directors  and  executive  officers as a group also own less than 1 percent of any class of
     ALLETE stock.
<F2> Includes 15,154 options owned by Mr. Crandell's spouse that are exercisable within 60 days after March 14, 2003.
</FN>
</TABLE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires  ALLETE's  directors and executive  officers,  and persons who own more
than 10 percent of a registered  class of ALLETE's  equity  securities,  to file
reports of initial  ownership of Common Stock and other  equity  securities  and
subsequent   changes  in  that   ownership  with  the  Securities  and  Exchange
Commission,  and the New York Stock Exchange. Based on a review of such reports,
ALLETE believes that all such filing  requirements  were met during 2002, except
that an initial report (Form 3) for Mr. Donald  Shippar was filed  approximately
three  months late and a report  (Form 5) for Mr. Nick Smith  covering one stock
option  grant was filed seven days late.  Both late  filings  were the result of
administrative error on the part of the Company.

PROPOSALS OF SHAREHOLDERS FOR THE 2004 ANNUAL MEETING

         All proposals from  shareholders  to be considered for inclusion in the
Proxy Statement  relating to the Annual Meeting  scheduled for May 11, 2004 must
be received  by the  Secretary  of ALLETE at 30 West  Superior  Street,  Duluth,
Minnesota, 55802, not later than November 19, 2003. In addition,  the persons to
be named as proxies in the Proxy Cards  relating to that Annual Meeting may have
the  discretion to vote their proxies in accordance  with their  judgment on any
matter as to which ALLETE did not have notice prior to February 8, 2004, without
discussion  of such  matter  in the  Proxy  Statement  relating  to that  Annual
Meeting.

                                       2
<PAGE>


--------------------------------------------------------------------------------
                       ITEM NO. 1 - ELECTION OF DIRECTORS
--------------------------------------------------------------------------------

         It is intended that the shares  represented by the Proxy will be voted,
unless  authority  is  withheld,  "FOR" the  election  of the ten  nominees  for
director  named below and on the opposite  page.  Directors are elected to serve
until the next annual election of directors and until a successor is elected and
qualified,  or until a director's earlier  resignation or removal.  In the event
that any nominee should become unavailable,  which is not anticipated, the Board
of Directors  may provide by resolution  for a lesser  number of  directors,  or
designate  substitute  nominees,  who would receive the votes represented by the
enclosed Proxy.

CURRENT DIRECTORS/NOMINEES FOR DIRECTOR
--------------------------------------------------------------------------------
[PHOTO]             WYNN  V.  BUSSMANN,  61, Birmingham, MI. Member of the Audit
                    Committee.  Senior Vice  President - Global  Forecasting  of
                    J.D.  Power  and  Associates,   an  international  marketing
                    information  firm.  From  1994  to  2001  he  was  Corporate
                    Economist  for  Daimler  Chrysler   Corporation,   where  he
                    provided  forecasts  and analysis of vehicle sales and other
                    trends in the  vehicle  industry  for product  strategy  and
                    planning.  Chair of Society of Automotive  Analysts and past
                    chair of the Conference of Business Analysts. DIRECTOR SINCE
                    2002.
--------------------------------------------------------------------------------
[PHOTO]             THOMAS L. CUNNINGHAM, 57, St. Augustine, FL. Retired in 2002
                    from his position of Director, Remarketing Strategy for Ford
                    Motor Company, where he was responsible for the total design
                    and  implementation  of Ford's  wholesale used vehicle sales
                    strategy  in  the  United   States  for  all  the  Ford  and
                    Ford-affiliate  brands.  From  1989 to 2001 he was  Manager,
                    Vehicle   Remarketing   for   Ford,   where   he   developed
                    industry-leading  vehicle remarketing processes.  FIRST-TIME
                    NOMINEE.
--------------------------------------------------------------------------------
[PHOTO]             DENNIS E. EVANS, 64, Scottsdale, AZ. Member of the Corporate
                    Governance  and  Nominating  Committee,  and  the  Executive
                    Compensation  Committee.  President  and  CEO of the  Hanrow
                    Financial  Group,  Ltd., a merchant  banking firm.  DIRECTOR
                    SINCE 1986.
--------------------------------------------------------------------------------
[PHOTO]             DAVID G. GARTZKE,  59, Duluth,  MN. Chairman,  President and
                    CEO  of  ALLETE.  From  1994  to  2001  he was  Senior  Vice
                    President and CFO of ALLETE. Board member of Edison Electric
                    Institute and the Minnesota Business  Partnership.  DIRECTOR
                    SINCE 2001.
--------------------------------------------------------------------------------
[PHOTO]             PETER  J.  JOHNSON,  66,  Tower,  MN.  Member  of the  Audit
                    Committee.  Chairman and CEO of Hoover Construction Company,
                    a highway and heavy construction contractor.  DIRECTOR SINCE
                    1994.


                                       3
<PAGE>


CURRENT DIRECTORS/NOMINEES FOR DIRECTOR
--------------------------------------------------------------------------------
[PHOTO]             GEORGE  L.  MAYER,  58,  Essex,  CT.  Member  of  the  Audit
                    Committee.  Founder and President of Manhattan  Realty Group
                    which   manages  various  apartment  properties. Director of
                    Schwaab,  Inc., one of the nation's largest manufacturers of
                    handheld  rubber stamps and  associated  products.  DIRECTOR
                    SINCE 1996.
--------------------------------------------------------------------------------
[PHOTO]             JACK  I.  RAJALA,  63,  Grand  Rapids,  MN.  Member  of  the
                    Corporate Governance and Nominating Committee.  Chairman and
                    CEO of Rajala  Companies,  and  Director  and  President  of
                    Rajala Mill  Company  which  manufacture  and trade  lumber.
                    Director of Grand  Rapids  State  Bank.  Board of Regents of
                    Concordia College in Minnesota. DIRECTOR SINCE 1985.
--------------------------------------------------------------------------------
[PHOTO]             NICK SMITH,  66,  Duluth,  MN.  Lead  Director of the ALLETE
                    Board.  Chair of the  Corporate  Governance  and  Nominating
                    Committee,   and  member  of  the   Executive   Compensation
                    Committee.   Chairman   and   CEO  of   Northeast   Ventures
                    Corporation,   a  venture  firm  investing  in  northeastern
                    Minnesota. Chairman of Community Development Venture Capital
                    Alliance,  a national  association.  Director of North Shore
                    Bank of Commerce. DIRECTOR SINCE 1995.
--------------------------------------------------------------------------------
[PHOTO]             BRUCE  W.  STENDER,  61,  Duluth,  MN.  Chair  of the  Audit
                    Committee, and  member  of  the  Corporate   Governance  and
                    Nominating   Committee.   President   and  CEO  of  Labovitz
                    Enterprises,  Inc. which owns and manages hotel  properties.
                    Trustee  of the C.K.  Blandin  Foundation  and member of the
                    Chancellor's   Advisory  Committee  for  the  University  of
                    Minnesota Duluth. DIRECTOR SINCE 1995.
--------------------------------------------------------------------------------
[PHOTO]             DONALD C. WEGMILLER,  64,  Minneapolis,  MN. Chairman of the
                    Executive Compensation  Committee.  Chairman of Clark/Bardes
                    Consulting  - Healthcare  Group,  a national  executive  and
                    physician   compensation   and  benefits   consulting  firm.
                    Director   of   LecTec    Corporation,    Medical   Graphics
                    Corporation,  Possis Medical, Inc., SelectCare, Inc. and JLJ
                    Medical Devices International, LLC. DIRECTOR SINCE 1992.


                                       4
<PAGE>


CORPORATE GOVERNANCE

         Corporate governance encompasses the internal policies and practices by
which ALLETE is operated and  controlled  on behalf of its  shareholders.  Sound
corporate  governance starts with a strong,  independent Board of Directors that
is  accountable  to the  Company  and its  owners.  The role of the  Board is to
effectively   govern  the  affairs  of  the  Company  for  the  benefit  of  its
shareholders  and,  to  the  extent   appropriate  under  Minnesota  law,  other
constituencies which include the Company's employees,  customers, suppliers  and
the communities in which it does business.  Since its ultimate goal is to better
focus and direct the resources of the Company, we see good corporate  governance
as a source of competitive advantage.

         In the last year the Board reviewed its corporate governance practices.
The Board's  practices  already  conformed with most of the  requirements of new
laws, rules and proposed rules pertaining to corporate governance.  However, the
Board and its committees took this opportunity to formalize  existing  practices
and policies and strengthen them as appropriate.  For example, the Board adopted
Corporate  Governance  Guidelines which articulate Board and committee roles and
responsibilities,  guidelines for their  composition,  membership  selection and
operations,  director  compensation  guidelines  and  other  matters.  Committee
charters were reviewed and amended.  Self-evaluation  processes were  formalized
and improved.  The Board and its committees  meet regularly  without  members of
management present,  have direct access to and meet individually with members of
management, and retain their own advisors as they deem appropriate.

BOARD AND COMMITTEE MEETINGS IN 2002

         During 2002 the Board of Directors  held nine  meetings.  The Corporate
Governance and  Nominating  Committee,  which held eight  meetings  during 2002,
provides  recommendations  to the  Board  with  respect  to Board  organization,
membership,  function,  Committee structure and membership,  succession planning
for the  executive  management,  and the  application  of  corporate  governance
principles.  This Committee also performs the functions of a director nominating
committee,  leads the Board's annual  evaluation of the Chief Executive  Officer
and is  authorized  to  exercise  the  authority  of the Board in the  intervals
between  meetings.  Shareholders  may  recommend  nominees  for  director to the
Corporate  Governance  and  Nominating  Committee by addressing the Secretary of
ALLETE, 30 West Superior Street,  Duluth, Minnesota, 55802. The Audit Committee,
which held eight  meetings in 2002,  recommends  the  selection  of  independent
auditors, reviews and evaluates ALLETE's accounting practices,  reviews periodic
financial  reports to be  provided to the  public,  and  reviews and  recommends
approval of the annual audit report. The Executive Compensation Committee, which
held seven meetings in 2002,  establishes  compensation and benefit arrangements
for ALLETE  officers and other key executives that are intended to be equitable,
competitive in  the marketplace and  consistent with corporate  objectives.  All
directors attended 75 percent or more of the aggregate number of meetings of the
Board of Directors and applicable committee meetings in 2002.

DIRECTOR COMPENSATION

         Employee  directors  receive  no  additional   compensation  for  their
services as directors.  In 2002 ALLETE paid each non-employee director an annual
retainer  fee of $11,000 and 1,300 shares of Common Stock under the terms of the
ALLETE  Director Stock Plan. In addition,  each  non-employee  director was paid
$6,000  as  a  committee  retainer  fee  for  each  committee  assignment.  Each
non-employee  director who is the chairman of a committee received an additional
$3,000 retainer.  Directors may elect to defer all or a part of the cash portion
of their retainer.  The shares of Common Stock paid to directors with respect to
2002 had an average market price of $25.82 per share.

         Under the ALLETE Director Long-Term Stock Incentive Plan,  non-employee
directors  receive  automatic  grants  of 1,500  stock  options  every  year and
performance  shares  valued at $10,000  every other year.  Fifty  percent of the
stock  options  vest and  become  exercisable  after  the  first  year,  and the
remaining 50 percent vest after the second year. All stock options expire on the
tenth anniversary of the date of grant. The exercise price for each grant is the
closing sale price of Common Stock on the date of grant. The performance periods
for  performance  shares end on  December 31 of the year  following  the date of
grant. Dividend equivalents in the form of additional  performance shares accrue
during the  performance  period  and are paid only to the extent the  underlying
grant is earned.  The performance  goal of each  performance  period is based on
Total Shareholder  Return for ALLETE in comparison to Total  Shareholder  Return
for 16 diversified electric utilities.  Any awards earned are paid out in Common
Stock. No performance period ended in 2002 and therefore, no awards were earned.

         The Board  authorized  Mr.  Smith,  as lead  director,  to receive  the
following  additional  compensation in 2002: $12,667 retainer fee; 867 shares of
Common Stock under the Director Stock Plan; 1,875 stock options; and performance
shares valued at $6,251 under the Director  Long-Term  Stock Incentive Plan. The
Board authorized  additional  payments of $5,000 to Audit Committee  members Mr.
Bussmann,  Ms. Hood,  Mr. Johnson and Mr. Mayer,  and $7,500 to Audit  Committee
Chair Mr. Stender in recognition of additional  responsibilities  related to the
implementation of new mandates under the federal securities laws.

                                       5

<PAGE>


COMPENSATION OF EXECUTIVE OFFICERS

         The following information describes compensation paid in the years 2000
through 2002 for ALLETE's named executive officers.
<TABLE>
                                                SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                         Annual Compensation<F1>           Long-Term Compensation
                                         -----------------------  -------------------------------------
                                                                            Awards              Payouts
                                                                  -------------------------    --------
Name                                                              Restricted     Securities                   All
and                                                                 Stock        Underlying      LTIP        Other
Principal                                   Salary     Bonus        Awards        Options       Payouts      Comp.<F6>
Position                          Year       ($)        ($)          ($)            (#)           ($)         ($)
-----------------------------------------------------------------------------------------------------------------------
<S>                               <C>      <C>        <C>         <C>            <C>            <C>          <C>
DAVID G. GARTZKE                  2002     515,385          0             0        89,667        99,388      74,195
Chairman, President and CEO       2001     319,866    489,590<F2>   493,800<F4>    16,883       139,394      42,139
                                  2000     239,927    225,523             0        24,928        11,764      35,403

JAMES P. HALLETT                  2002     420,692    153,344<F3>         0        42,500       117,912      47,516
Executive Vice President;         2001     361,885    890,565             0        19,350       195,531      34,664
President and CEO of              2000     288,446    319,899             0        29,520       213,396<F5>  38,697
ALLETE Automotive Services

ROBERT D. EDWARDS                 2002     332,154     30,724             0        57,869        84,376      61,585
Executive Vice President;         2001     311,558    208,432             0        19,350       144,887      50,995
CEO of Minnesota Power            2000     291,193    204,902             0        30,941        30,580      46,307

DONNIE R. CRANDELL                2002     278,077          0             0        28,125       104,630      46,575
Executive Vice President;         2001     263,135    236,318             0        26,240       157,723      39,159
President of ALLETE
Water Services                    2000     248,192    247,311             0        26,240        20,898      30,698

DONALD J. SHIPPAR                 2002     231,041     25,132             0         8,371        52,961      29,506
President and COO                 2001     194,654    104,654             0         6,136        88,524      21,336
of Minnesota Power                2000     186,373     87,897             0         9,840        17,319      18,588
-----------------------------------------------------------------------------------------------------------------------
<FN>
<F1>  Amounts shown include compensation earned by the named executive officers, as well as amounts earned but deferred
      at the election of those officers.  The "Bonus" column is comprised of amounts earned pursuant to Results Sharing
      and the Executive  Annual  Incentive  Plan.  For bonuses paid in Common  Stock,  the market value of the stock at
      the time of payment is included.
<F2>  Included in this amount is $250,000 paid as a bonus in connection with his election to the office of President.
<F3>  Included in the amount shown for Mr.  Hallett is an annual  retention  bonus of $102,550 paid in a combination of
      Common Stock and cash.
<F4>  The amount  shown  represents  the value of 20,000 deferred  share units of Common Stock  granted on December 18,
      2001. On December 31, 2002,  10,000 shares valued at $226,800 remained deferred under the terms of the grant. Mr.
      Gartzke receives dividend equivalents on these deferred share units.
<F5>  Includes  a   supplemental  payment  based  upon  significantly   exceeding  multi-year   financial   performance
      targets  established in 1996.
<F6>  The amounts shown for 2002 include the following ALLETE annual  contributions for
      the named executive officers:

                          Contribution to the         Contribution to the       Above-Market Interest
                        Retirement Savings and           Supplemental              on Compensation
                         Stock Ownership Plan*             Executive             Deferred Under the
Name                 and the Flexible Benefit Plan      Retirement Plan      Executive Incentive Plan**
---------------------------------------------------------------------------------------------------------
David G. Gartzke               $19,800                      $47,243                    $7,152
James P. Hallett                 2,000                       45,516                         0
Robert D. Edwards               19,800                       31,143                    10,642
Donnie R. Crandell              19,800                       26,775                         0
Donald J. Shippar               17,958                        9,938                     1,610
---------------------------------------------------------------------------------------------------------
 * In 2002 ALLETE consolidated its supplemental retirement and employee  stock  ownership  plans  into  a
   single Retirement Savings and Stock Ownership Plan, which combines the  features of a 401(k) plan  and
   an employee stock ownership plan.
** ALLETE made investments in corporate-owned life insurance which will recover the cost of  this  above-
   market benefit, if actuarial factors and other assumptions are realized. The policy premiums are fully
   paid and ALLETE has discontinued this investment program.
</FN>
</TABLE>

                                       6
<PAGE>


<TABLE>
                                                    OPTION GRANTS IN LAST FISCAL YEAR
------------------------------------------------------------------------------------------------------------------------
                                           Individual Grants                                            Grant Date Value
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                 Number of           % of Total
                                Securities         Options Granted      Exercise or                       Grant Date
                                Underlying         to Employees in      Base Price       Expiration      Present Value
Name                          Options Granted        Fiscal Year          ($/Sh)            Date              ($)<F3>
------------------------------------------------------------------------------------------------------------------------
<S>                           <C>                  <C>                  <C>             <C>              <C>
DAVID G. GARTZKE
   New Options<F1>                 77,595                9.8%              25.68        Jan. 2, 2012        521,431
   Replacement Options<F2>          9,655                1.2%              27.95        Jan. 3, 2010         64,881
   Replacement Options              2,417                0.3%              27.95        Jan. 2, 2006         16,242

JAMES P. HALLETT
   New Options                     42,500                5.4%              25.68        Jan. 2, 2012        285,596

ROBERT D. EDWARDS
   New Options                     33,646                4.2%              25.68        Jan. 2, 2012        226,098
   Replacement Options             13,667                1.7%              30.85        Jan. 3, 2010         91,841
   Replacement Options              5,388                0.7%              30.85        Jan. 2, 2007         36,207
   Replacement Options              5,168                0.7%              30.85        Jan. 2, 2006         34,728

DONNIE R. CRANDELL
   New Options                     28,125                3.5%              25.68        Jan. 2, 2012        188,997

DONALD J. SHIPPAR
   New Options                      8,371                1.1%              25.68        Jan. 2, 2012         56,252
------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> New options vest 50 percent on January 2, 2003 and 50 percent on January 2, 2004. Options  granted  to  each of the
      executives listed in this table are subject to a change-in-control acceleration provision.
<F2> Replacement options (also known as ownership retention options or reload options)  were  granted when the executive
     used his shares of Common Stock to  fund the exercise price of stock options. One replacement option was granted to
     replace each share that was delivered by the executive as payment for the purchase price  of  shares being acquired
     through the exercise of a stock option. Replacement options become exercisable twelve months after their grant date
     and terminate on the expiration date of the option that they replaced. The  exercise price  of  replacement options
     is equal to the  closing  price of Common Stock on the grant date of the replacement options. Effective January 21,
     2003  the replacement option feature was removed from all outstanding stock option grants and eliminated on a going
     forward basis.
<F3> The grant date dollar value of options is based on ALLETE's binomial ratio  (as of  January 2,  2002) of .262.  The
     binomial method is a complicated  mathematical formula premised on immediate exercisability and transferability  of
     the options,  which are not features of ALLETE's options granted to executive  officers and other  employees.   The
     values shown are  theoretical  and do not  necessarily  reflect the actual values the  recipients  may   eventually
     realize.  Any actual value to the officer or other employee will depend on the extent to which the market  value of
     Common Stock at a future date exceeds the exercise price. In addition to the option exercise price,  the  following
     assumptions  for modeling were used to calculate the values shown for the options granted in 2002: (i)  each option
     remains  outstanding for a period of seven years;  (ii) expected dividend yield is 4.17 percent (based  on the most
     recent quarterly dividend);  (iii) expected stock price volatility is .283 (based on 504 trading  days  previous to
     January 2, 2002); and (iv) the risk-free rate of return is 5.16 percent (based on Treasury yields). The  grant date
     dollar value of the replacement options is based on an ALLETE binomial ratio determined using assumptions  that are
     materially similar to those applicable to the new options.
</FN>
</TABLE>

<TABLE>

                                         AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                                                    AND FY-END OPTION VALUES
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                              Number of Securities            Value of Unexercised
                                                             Underlying Unexercised                In-the-Money
                                                              Options at FY-End (#)            Options at FY-End ($)
                       Shares Acquired   Value Realized   ----------------------------     -----------------------------
   Name                on Exercise (#)        ($)         Exercisable    Unexercisable     Exercisable     Unexercisable
------------------------------------------------------------------------------------------------------------------------
<S>                    <C>               <C>              <C>            <C>               <C>             <C>
   David G. Gartzke         21,327          258,671          54,363         98,088           135,704             0

   James P. Hallett              0                0          57,919         52,175           122,106             0

   Robert D. Edwards        49,232          771,490          50,490         67,544            61,221             0

   Donnie R. Crandell            0                0          51,721         36,404           108,905             0

   Donald J. Shippar             0                0          21,138         11,439            59,123             0
------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                        7

<PAGE>


<TABLE>
                    LONG-TERM INCENTIVE PLANS - AWARDS IN THE LAST FISCAL YEAR
<CAPTION>
--------------------------------------------------------------------------------------------------
                                Number of       Performance        Estimated Future Payouts Under
                              Shares, Units       or Other           Non-Stock Price-Based Plans
                                or Other        Period Until       -------------------------------
                                 Rights         Maturation or      Threshold    Target     Maximum
Name                              (#)              Payout             (#)         (#)        (#)
--------------------------------------------------------------------------------------------------
<S>                           <C>               <C>                <C>          <C>        <C>
David G. Gartzke                 17,069         1/02 - 12/03         8,535      17,069      34,138

James P. Hallett                  9,533         1/02 - 12/03         4,767       9,533      19,066

Robert D. Edwards                 7,547         1/02 - 12/03         3,774       7,547      15,094

Donnie R. Crandell                6,308         1/02 - 12/03         3,154       6,308      12,616

Donald J. Shippar                 4,381         1/02 - 12/03         2,191       4,381       8,762
--------------------------------------------------------------------------------------------------
</TABLE>

         The table  directly above reflects the number of shares of Common Stock
that can be earned pursuant to the Executive  Long-Term  Incentive  Compensation
Plan for the 2002-2003 performance period if the Total Shareholder Return of the
Company meets goals established by the Executive Compensation  Committee.  These
goals are based on the Company's  ranking against a peer group of 16 diversified
electric  utilities.  A threshold  performance share award will be earned if the
Company's Total  Shareholder  Return ranks at least 11th, a target award will be
earned if the  Company  ranks  7th,  and a maximum  award  will be earned if the
Company ranks 3rd. For this comparison the Total Shareholder Return ranking will
be computed over the two-year  period from January 1, 2002 through  December 31,
2003. Dividend  equivalents accrue during the performance period and are paid in
shares only to the extent performance goals are achieved.  If earned, 50 percent
of the  performance  shares  will be paid in Common  Stock  after the end of the
performance period; the remaining 50 percent will be paid in Common Stock on the
second anniversary of the end of the performance period.  Payment is accelerated
upon a change in control of the Company at 200  percent of the target  number of
performance  shares  granted  as  increased  by  dividend  equivalents  for  the
performance period.

                                       8

<PAGE>


RETIREMENT PLANS

         The  following  table  sets  forth  examples  of the  estimated  annual
retirement benefits that would be payable to participants in ALLETE's Retirement
Plan and  Supplemental  Executive  Retirement  Plan  after  various  periods  of
service,  assuming  no  changes  to the  plans  and  retirement  at  the  normal
retirement age of 65.

<TABLE>
                                             PENSION PLAN
                                           Years of Service
-------------------------------------------------------------------------------------------------------
       Remuneration<F1>      15                20             25                30            35
-------------------------------------------------------------------------------------------------------
<S>                       <C>               <C>            <C>               <C>           <C>
         $100,000         $12,000           $16,000        $30,600           $35,600       $40,600
          125,000          15,000            20,000         38,250            44,500        50,750
          150,000          18,000            24,000         45,900            53,400        60,900
          175,000          21,000            28,000         53,550            62,300        71,050
          200,000          24,000            32,000         61,200            71,200        81,200
          225,000          27,000            36,000         68,850            80,100        91,350
          250,000          30,000            40,000         76,500            89,000       101,500
          300,000          36,000            48,000         91,800           106,800       121,800
          400,000          48,000            64,000        122,400           142,400       162,400
          450,000          54,000            72,000        137,700           160,200       182,700
          500,000          60,000            80,000        153,000           178,000       203,000
          600,000          72,000            96,000        183,600           213,600       243,600
          700,000          84,000           112,000        214,200           249,200       284,200
          800,000          96,000           128,000        244,800           284,800       324,800
          900,000         108,000           144,000        275,400           320,400       365,400
        1,000,000         120,000           160,000        306,000           356,000       406,000
-------------------------------------------------------------------------------------------------------
<FN>
<F1> Represents the highest annualized average  compensation  (salary  and  bonus)  received  for  48
     consecutive months during the employee's last 15 years of service with ALLETE. For determination
     of the pension benefit, the 48-month period for highest average salary may be different from the
     48-month period of highest aggregate bonus compensation.
</FN>
</TABLE>

         Retirement  benefit  amounts  shown are in the form of a  straight-life
annuity  to the  employee  and  are  based  on  amounts  listed  in the  Summary
Compensation  Table under the headings "Salary" and "Bonus."  Retirement benefit
amounts  shown are not  subject to any  deduction  for Social  Security or other
offset  amounts.  The  Retirement  Plan  provides  that the  benefit  amount  at
retirement  is subject to  adjustment  in future years to reflect cost of living
increases  to a maximum  adjustment  of 3 percent per year.  As of December  31,
2002  the executive  officers named in the Summary  Compensation  Table had  the
following years of credited service under the plans:

         David G. Gartzke    28 years       Donnie R. Crandell    22 years
         James P. Hallett     8 years       Donald J. Shippar     26 years
         Robert D. Edwards   27 years

         If any of Mr. Gartzke, Mr. Hallett, Mr. Edwards or Mr. Crandell remains
employed  as a senior  executive  with  ALLETE  until age 62, a defined  benefit
retirement plan supplements amounts paid under other ALLETE retirement plans, so
that the  executive's  total  retirement  pay is no less than 51  percent of the
executive's  final pay if retirement is at age 62 and no less than 60 percent of
the executive's final pay if retirement is at age 65. This benefit is reduced by
2.3  percent of pay for each year under 22 years of service  with  ALLETE if the
executive  retires at age 62 and by 3 percent of pay for each of the three years
between ages 62 and 65.

         With certain exceptions, the Internal Revenue Code of 1986, as amended,
(Code)  restricts the aggregate amount of annual pension which may be paid to an
employee under  ALLETE's  Retirement  Plan to $160,000 for 2002.  This amount is
subject  to  adjustment  in future  years to reflect  cost of living  increases.
ALLETE's  Supplemental  Executive  Retirement  Plan  provides  for  supplemental
payments by ALLETE to eligible  executives  (including  the  executive  officers
named in the Summary Compensation Table) in amounts sufficient to maintain total
retirement benefits upon retirement at a level which would have been provided by
the Retirement Plan if benefits were not restricted by the Code.

                                       9
<PAGE>


REPORT OF BOARD'S EXECUTIVE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

         Described  below  are  the  compensation   policies  of  the  Executive
Compensation  Committee of the Board of Directors (Committee) effective for 2002
with  respect  to  the  executive  officers  of  ALLETE.  Composed  entirely  of
independent outside directors,  the Committee is responsible for recommending to
the Board policies which govern the executive compensation program of ALLETE and
for  administering  those  policies.  The Committee has retained the services of
Mercer Human  Resource  Consulting  LLC  (Mercer),  a benefits and  compensation
consulting  firm, to assist the Committee in connection  with the performance of
such responsibilities. Mercer has served in this capacity since 1995.

         The  role of the  executive  compensation  program  is to  help  ALLETE
achieve  its  corporate  goals by  motivating  performance,  rewarding  positive
results and enhancing Total Shareholder  Return.  Recognizing that the potential
impact an individual  employee has on the attainment of corporate goals tends to
increase  at higher  levels  of  responsibility  within  ALLETE,  the  executive
compensation  program provides greater  variability in compensating  individuals
based on results achieved as their  responsibilities  within ALLETE increase. In
other words,  individuals  with the greatest  potential  impact on achieving the
stated  goals have the  greatest  amount to gain when goals are achieved and the
greatest amount at risk when goals are not achieved.

         The program recognizes that, in order to attract and retain exceptional
executive talent needed to lead and grow ALLETE's businesses,  compensation must
be  competitive  in  the  national   market.   To  determine  market  levels  of
compensation  for  executive   officers  in  2002,  the  Committee  relied  upon
comparative  information  from  general  industrial  companies  in  tandem  with
available specific industry data (i.e., electric utility,  automotive,  finance,
water  utility,  etc.) which was provided and reviewed by Mercer.  All data were
analyzed to determine  median  compensation  levels for comparable  positions in
comparably sized companies, as measured by revenue.

         Internal  Revenue  Code  Section  162(m)  generally   disallows  a  tax
deduction  to public  companies  for  compensation  over $1 million paid for any
fiscal  year  to each  of the  corporation's  CEO and  four  other  most  highly
compensated  executive  officers  as of the end of any fiscal  year.  Qualifying
performance-based  compensation  will not be subject to the  deduction  limit if
certain  requirements are met. The stock options and performance  shares granted
to the executive officers under the Executive Long-Term  Incentive  Compensation
Plan are  intended  to  qualify  as  performance-based  compensation  within the
meaning of Code  Section  162(m) and should  therefore be fully  deductible  for
federal  income tax  purposes.  The  Committee  generally  intends to  structure
executive  compensation  plans so that the  Company  may  deduct  all  executive
compensation,  but reserves the ability to do otherwise if it is  determined  in
the best interests of the Company and its shareholders.

         As described below, executive officers of ALLETE receive a compensation
package which consists of three basic elements:  base salary,  performance-based
compensation  and supplemental  executive  benefits.  The CEO's  compensation is
discussed separately.

BASE SALARY

         Base  salaries  are set at a level  so  that,  if the  target  level of
performance is achieved under the  performance-based  plans as described  below,
executive officers' total compensation, including amounts paid under each of the
performance-based  compensation  plans,  will be near  the  midpoint  of  market
compensation as described above.

PERFORMANCE-BASED COMPENSATION

         The performance-based  compensation plans of ALLETE are intended by the
Committee to reward executives for achieving  financial and non-financial  goals
which the Committee  determines will be required to achieve  ALLETE's  strategic
and budgeted goals.

         Performance  goals under  performance-based  plans are  established  in
advance by the Committee and the Board of Directors.  Target  performance levels
under the  performance-based  plans are achieved if the business  unit meets its
budget and if ALLETE achieves a Total Shareholder Return ranking of 7th compared
to a peer group of 16 diversified utilities. Total Shareholder Return is defined
as stock price  appreciation  plus dividends  reinvested on the ex-dividend date
throughout the relevant performance period,  divided by the fair market value of
a share at the beginning of the performance period. With target performance,  it
is the Committee's  intent that executive  compensation  (including the value of
stock options granted) will be near the midpoint of the relevant  market.  If no
performance  awards are earned and no value is  attributed  to the stock options
granted,  compensation  of ALLETE's  executive  officers would be  significantly
below the midpoint market  compensation  level,  while performance at increments
above the target level will result in total  compensation  above the midpoint of
the market.

                                       10

<PAGE>



         ALLETE's performance-based compensation plans include:

      -  RESULTS SHARING. The Results Sharing award opportunities for 2002  were
         based on earnings per share and business unit operating income.  Target
         financial  performance  will  result in an award of 5  percent  of base
         salary, assuming safety and environmental  protection goals established
         by the Committee are also accomplished.  No results sharing awards were
         paid to the executive officers of the Company for 2002.

      -  EXECUTIVE  ANNUAL INCENTIVE  PLAN. The Executive Annual Incentive  Plan
         is  intended to focus  executive  attention  on meeting  and  exceeding
         annual financial and  non-financial  business unit goals established by
         the   Committee.   For  2002   financial   goals  were   business  unit
         contributions to net income,  operating free cash flow and earnings per
         share.  These  financial   performance  measures  were  chosen  by  the
         Committee  because  of their  positive  correlation  over time with the
         Total  Shareholder  Return  achieved  by ALLETE  for its  shareholders.
         Target level  performance is earned if budgeted  financial  results are
         achieved.  The results shown on the Summary  Compensation Table reflect
         financial  operating  performance  by business  units in 2002 that were
         below budget.

      -  LONG-TERM  INCENTIVE  PLAN  (LTIP).  Under  the  Executive    Long-Term
         Incentive  Compensation Plan, the executive  officers of ALLETE,  other
         than the CEO,  have been  awarded  stock  options  (which  are  granted
         annually) and  performance  shares (which are granted in  even-numbered
         years)  having in the  aggregate  target award  values  ranging from 40
         percent to 100  percent of their  annual base  salaries.  The value has
         been   allocated  70  percent  to  stock  options  and  30  percent  to
         performance  shares.  The stock  options  have value only if the Common
         Stock  price  appreciates  above the  price on the date of  grant.  The
         performance  shares granted for the two-year  performance period ending
         December  31, 2003 will have value if the Total  Shareholder  Return of
         ALLETE over the two-year  period ranks at least 11th in a peer group of
         16  diversified   electric   utilities  adopted  by  the  Committee  as
         appropriate  comparators.  Dividend  equivalents  accrue on performance
         shares during the performance  period and are paid in Common Stock only
         to the extent performance goals are achieved. The maximum payout is 200
         percent of the target award. If earned,  the performance shares will be
         paid in Common Stock with 50 percent of the award paid after the end of
         the  performance  period  and the  remaining  50  percent  on the first
         anniversary  thereof.  The LTIP  payout for 2002  shown in the  Summary
         Compensation  Table  includes a payment of the second 50 percent of the
         award earned for the  performance  period ending December 31, 2001, the
         first 50 percent of which was paid and reported in 2001.

         The Committee has determined  that these awards are consistent with its
philosophy of aligning executive  officers' interests with those of shareholders
and to the performance of ALLETE.

SUPPLEMENTAL EXECUTIVE BENEFITS

         ALLETE has established a Supplemental  Executive Retirement Plan (SERP)
to compensate certain employees,  including the executive officers, equitably by
replacing  benefits  not  provided by  ALLETE's  Flexible  Benefit  Plan and the
Retirement Savings and Stock Ownership Plan due to government-imposed limits and
to provide retirement benefits which are competitive with those offered by other
businesses  with which  ALLETE  competes  for  executive  talent.  The SERP also
provides   employees   whose  salaries   exceed  the  salary   limitations   for
tax-qualified  plans imposed by the Code with additional benefits such that they
receive in aggregate  the benefits  they would have been entitled to receive had
such  limitations  not been imposed.  Effective as of January 21, 2002  the SERP
also provides  certain  executive  employees with a 40 percent  supplemental tax
benefit  in the event that a change in  control  of the  Company  results in the
termination of the covered executive's  employment and an immediate distribution
in full of the covered executives' SERP account and/or Executive Investment Plan
deferral  account.  The  supplemental  tax benefit  applies  only if the covered
executive  employee  is not  eligible  for early  retirement  at the time of the
change-in-control event.

CHIEF EXECUTIVE OFFICER COMPENSATION

         The Committee has endeavored to provide Mr. Gartzke with a compensation
package that is at the 50th percentile of compensation paid by  comparably-sized
general  industrial  companies  with  revenue  comparable  to the  Company.  The
Committee has designed Mr. Gartzke's compensation package to provide substantial
incentive to achieve and exceed the Board's financial  performance goals for the
Company and Total Shareholder Return goals for the Company's shareholders.

                                       11
<PAGE>


         In June 2002 the Board of Directors increased Mr. Gartzke's annual base
salary  15.8  percent to move his base  salary  toward the median of salaries of
chief executive officers of comparably-sized companies. Mr. Gartzke did not earn
any awards under the Company's  Results  Sharing Plan nor the  Executive  Annual
Incentive Plan in 2002 because financial goals under the plans were not met.

         Mr. Gartzke's compensation also contains elements which motivate him to
focus  on the  longer-term  performance  of the  Company.  Under  the  Executive
Long-Term  Incentive  Compensation  Plan,  Mr. Gartzke was awarded annual target
opportunities  with a value equal to 150 percent of his base salary.  This value
has been allocated 70 percent to stock options (which are granted  annually) and
30 percent to performance shares (which are granted in even-numbered years). The
stock  options and  performance  shares have the same  characteristics  as those
issued to other executive  officers as described above. The LTIP payout for 2002
shown in the  Summary  Compensation  Table  includes  a payment of the second 50
percent of the award earned for the performance period ending December 31, 2001,
the first 50 percent of which was paid and reported in 2001.

March 25, 2003

Executive Compensation Committee

Donald C. Wegmiller, Chairman
Kathleen A. Brekken
Dennis E. Evans
Nick Smith

EQUITY COMPENSATION PLAN INFORMATION

         The  following  table sets forth the Company  securities  available for
issuance under the Company's equity compensation plans as of December 31, 2002.
<TABLE>
                                     EQUITY COMPENSATION PLAN INFORMATION
--------------------------------------------------------------------------------------------------------------
<CAPTION>
                                 Number of Securities                                 Number of Securities
                                  to be Issued Upon           Weighted-Average         Remaining Available
                                     Exercise of              Exercise Price of        for Future Issuance
                                 Outstanding Options,        Outstanding Options,          Under Equity
Plan Category                    Warrants and Rights         Warrants and Rights       Compensation Plans<F1>
--------------------------------------------------------------------------------------------------------------
<S>                              <C>                         <C>                      <C>
Equity Compensation                   2,292,258                    $22.48                    5,624,409<F2>
   Plans Approved by
   Security Holders

Equity Compensation                           0                       N/A                            0
   Plans Not Approved
   by Security Holders
--------------------------------------------------------------------------------------------------------------
   Total                              2,292,258                    $22.48                    5,624,409
--------------------------------------------------------------------------------------------------------------
<FN>
<F1> Excludes the number of securities to be issued upon exercise of outstanding options, warrants and rights.
<F2> The  amount  shown  includes: (i) 5,053,228 shares available for  issuance under the Executive  Long-Term
     Incentive Compensation Plan (LTIP) in the form of options, rights, restricted  stock,  performance  units
     and shares, or other grants as approved by the Executive Compensation Committee; (ii) 162,672 shares  are
     available for issuance under the Director Long-Term Stock Incentive Plan  in the  form  of  options   and
     performance shares;  (iii)  370,366  shares  available for issuance  under the Director  Stock  Plan   as
     payment for a portion of the annual retainer payable to non-employee  directors;  and (iv) 38,143  shares
     available for  issuance  under  the  ALLETE  and  Affiliated   Companies  Employee  Stock  Purchase Plan.
     Shares available for issuance under the LTIP may be increased  by shares purchased  on the open   market,
     tendered to exercise options or withheld  to  satisfy tax  withholding  requirements in connection   with
     LTIP awards.
</FN>
</TABLE>

                                       12
<PAGE>


REPORT OF THE AUDIT COMMITTEE

         The Audit Committee of the Board of Directors  consists of four members
who are independent,  non-employee  directors, as required by applicable listing
standards  of the New York Stock  Exchange.  The  Committee  assists the Board's
oversight of the integrity of ALLETE's  financial reports  compliance with legal
and  regulatory  requirements,   the  qualifications  and  independence  of  the
independent  auditors,  the audit process and internal  controls.  The Committee
reviews and  recommends  to the Board of  Directors  that the audited  financial
statements be included in ALLETE's Annual Report on Form 10-K.

          The Audit  Committee  has reviewed the  relevant  requirements  of the
Sarbanes-Oxley  Act of 2002,  the proposed  rules of the Securities and Exchange
Commission,  and the  proposed  new  listing  standards  of the New  York  Stock
Exchange regarding audit committee procedures and responsibilities. Although the
Audit Committee's  existing procedures and  responsibilities  generally complied
with the  requirements of these rules and standards,  the Board of Directors has
adopted amendments to the Committee's  charter to voluntarily  implement certain
of the  rules  and to make  explicit  its  adherence  to  others.  A copy of the
Committee's amended charter is attached as an Appendix to this Proxy Statement.

         During  2002 the  Committee  met and  held  separate  discussions  with
members  of  ALLETE's  management,   and  the  Company's   independent  auditor,
PricewaterhouseCoopers, regarding certain audit activities and the plans for and
results of selected  internal  audits.  The  Committee  reviewed  the  quarterly
financial  statements.  It  reviewed  the  adequacy  of the  systems of internal
controls,  and the  Company's  compliance  with  laws and  regulations.  It also
reviewed the Company's  process for  communicating  its code of business conduct
and ethics. The Committee approved the appointment of  PricewaterhouseCoopers as
the  Company's  independent  auditor for the year 2003,  subject to  shareholder
ratification.  The Company's  independent  auditor provided to the Committee the
written  disclosure  required by  Independence  Standards  Board  Standard No. 1
(Independence  Discussions with Audit Committees),  and the Committee  discussed
with the independent auditor that firm's independence.

         The Audit  Committee has: (i) reviewed and discussed  ALLETE's  audited
financial  statements  for the year  ending  December  31,  2002  with  ALLETE's
management and with ALLETE's independent  auditors;  (ii) met with management to
discuss  all  financial  statements  prior  to  their  issuance  and to  discuss
significant  accounting  issues;  and (iii) discussed with ALLETE's  independent
auditors  the  matters  required  to be  discussed  by SAS 61  (Codification  of
Statements on Auditing  Standards)  which  include,  among other items,  matters
related  to the  conduct  of the audit of  ALLETE's  financial  statements.  The
Committee  has also  discussed  with  the  Chief  Executive  Officer  and  Chief
Financial Officer the certification  process required by the  Sarbanes-Oxley Act
of 2002. Management represented to the Committee that the Company's consolidated
financial  statements  were  prepared  in  accordance  with  generally  accepted
accounting  principles.  The Committee  discussed with the  independent  auditor
matters  required to be  discussed by  Statement  on Auditing  Standards  No. 61
(Communication  with Audit  Committees)  as  currently  in effect.  Based on the
above-mentioned  review and discussions,  the Committee recommended to the Board
of  Directors  that the  audited  financial  statements  be included in ALLETE's
Annual  Report on Form 10-K for the fiscal year ended  December  31,  2002,  for
filing with the Securities and Exchange Commission.

         Management has advised the Audit Committee that PricewaterhouseCoopers'
fees for the year ended December 31, 2002 were as follows:

         AUDIT  FEES:  The  aggregate  fees  billed  for  professional
         services  rendered  for the  audit  of the  Company's  annual
         financial statements for the year ended December 31, 2002 and
         the reviews of the financial  statements included in ALLETE's
         quarterly reports on Form 10-Q for 2002 were $1.1 million.

         TAX  CONSULTING  FEES:  The   aggregate   fees   billed   for
         professional  services  rendered  for tax  consulting  to the
         Company were $1.0 million.

         FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES:
         No  fees  were  billed  for  professional  services  rendered
         for financial information systems design and implementation.

         ALL OTHER  FEES:  The  aggregate  fees  billed  for all other
         professional services rendered were $0.2 million.


                                       13
<PAGE>


We have considered and determined  that the provision of the non-audit  services
noted above is compatible with maintaining PricewaterhouseCoopers' independence.

March 25, 2003

Audit Committee

Bruce W. Stender, Chair
Wynn V. Bussman
Peter J. Johnson
George L. Mayer


ALLETE COMMON STOCK PERFORMANCE

         The following  graph compares  ALLETE's  cumulative  Total  Shareholder
Return on its Common Stock with the cumulative  return of the S&P 500 Index, the
Philadelphia Stock Exchange Utility Index (Philadelphia   Utility Index) and the
S&P Utilities  Index - Electric. The S&P 500 Index is a  capitalization-weighted
index of 500  stocks  designed  to  measure  performance  of the broad  domestic
economy through changes in the aggregate market value of 500 stocks representing
all major  industries.  Because this composite  index has a broad industry base,
its performance may not closely track that of a composite index comprised solely
of electric utilities. In 2002 ALLETE selected the Philadelphia Utility Index as
a  comparative  to  replace  the  S&P  Utilities  Index  -  Electric  which  was
discontinued in  2001. The  Philadelphia   Utility  Index is  a  capitalization-
weighted index of 20 utility companies  involved in the production of electrical
energy, while the S&P Utilities  Index - Electric was a  capitalization-weighted
index of 27 stocks  designed to measure the  performance  of the electric  power
utility  company  sector of the S&P 500 Index.  The  calculations  assume a $100
investment on December 31, 1997 and reinvestment of dividends on the ex-dividend
date.

[GRAPHIC OMITTED - PERFORMANCE GRAPH]
<TABLE>
         TOTAL SHAREHOLDER RETURN FOR THE FIVE YEARS ENDING DECEMBER 31, 2002
<CAPTION>
                                   1997      1998      1999     2000     2001    2002
                                  ----------------------------------------------------
<S>                                <C>       <C>       <C>      <C>      <C>     <C>
ALLETE                             $100      $106       $86     $134     $142    $133
Philadelphia Utility Index         $100      $118       $97     $146     $127    $104
S&P 500 Index                      $100      $129      $156     $141     $125     $97
S&P Utilities Index - Electric     $100      $115       $93     $143     $131     N/A
</TABLE>

                                       14

<PAGE>


--------------------------------------------------------------------------------
        ITEM NO. 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------

          The Audit  Committee of the Board of  Directors  of ALLETE  recommends
shareholder  ratification  of  the  appointment  of   PricewaterhouseCoopers  as
independent  auditors for ALLETE for the year 2003.  PricewaterhouseCoopers  has
acted in this capacity since October 1963.

          A  representative  of  PricewaterhouseCoopers  will  be present at the
Annual Meeting of Shareholders,  will have an opportunity to make a statement if
he or she so desires and will be available to respond to appropriate questions.

          In connection with  the 2002  audit,  PricewaterhouseCoopers  reviewed
ALLETE's annual report, examined the related financial statements,  and reviewed
interim  financial  statements  and  certain  filings of ALLETE with the Federal
Energy Regulatory Commission and the Securities and Exchange Commission.

          The  Board  of  Directors   recommends  a  vote  "FOR"  ratifying  the
appointment of PricewaterhouseCoopers as ALLETE's independent auditors for 2003.

--------------------------------------------------------------------------------
    ITEM NO. 3 - APPROVAL OF THE RESERVATION OF ADDITIONAL SHARES UNDER THE
          ALLETE AND AFFILIATED COMPANIES EMPLOYEE STOCK PURCHASE PLAN
--------------------------------------------------------------------------------

         Shareholders  are asked to  approve  an  amendment  to the  ALLETE  and
Affiliated Companies Employee Stock Purchase Plan (ESPP), to increase the number
of shares of ALLETE Common Stock  authorized for issuance  thereunder by 500,000
shares.  On  January  21,  2003 the  Company's  Board of  Directors  unanimously
approved an amendment of the ESPP,  thereby  providing  for this increase in the
number of shares  authorized for issuance under the ESPP (subject to shareholder
approval).

         Approval of an amended and  restated  ESPP by the  shareholders  is not
required by the terms of the ESPP.  Management requests such approval,  however,
in order to ensure the  availability to employees  participating  in the ESPP of
certain tax benefits discussed below.

         The ESPP was  established  in 1976 and approved at its inception by the
shareholders  at the Annual  Meeting of  Shareholders  held on May 11, 1976. The
ESPP was amended and restated  effective July 1, 1993, and approved again by the
shareholders  at the Annual  Meeting of  Shareholders  held on May 10, 1994. The
Company  amended and restated the ESPP  effective  November 20, 1996,  and again
effective December 21, 2000, to reflect minor changes in administration.

         The ESPP is a broad-based plan that provides eligible  employees of the
Company and certain of its  subsidiaries  with an opportunity to purchase shares
of Common Stock at a 5 percent  discount  through payroll  deductions,  optional
cash payments and dividend  reinvestment.  By encouraging the purchase of Common
Stock, the ESPP supports a basic principle of the Company's  compensation policy
which is to align the financial  interests of the  employees  with the financial
interests  of the  Company  and its  shareholders.  The ESPP also  provides  the
Company  with a source of capital for which  there is no cost of issuance  other
than the 5  percent  discount  from  market  price  discussed  below  and  minor
administrative costs.  Management is eligible to purchase shares of Common Stock
through the ESPP at the 5 percent discount on the same basis as other employees.
Future  benefits  to  management  under the plan will  depend on the  individual
election  of each  manager  whether  to  purchase  under the plan and in at what
amounts.  Management is subject to the annual contribution limits of the ESPP as
described below.

         Currently,  the  total  number  of  shares  of  Common  Stock  that are
authorized for issuance under the ESPP is 300,043.  As of March 3, 2003,  17,196
shares remain  available for issuance  under the ESPP and, as of this same date,
1,796 employees were participating in the ESPP.

SUMMARY OF THE ESPP

         The  purposes  of  the  ESPP  are  to  encourage  employees  to  become
shareholders in the Company,  to stimulate  employee  interest in the affairs of
the Company,  and to afford employees an opportunity to share in the profits and
growth of the Company.

                                       15
<PAGE>


         Purchases  of Common  Stock under the ESPP are made  directly  from the
Company at a 5 percent  discount from the market price at the time the purchases
are made.  The purchase price is equal to 95 percent of the closing price of the
Common Stock on the New York Stock  Exchange on the applicable  investment  date
(or the next day on which the New York Stock Exchange is open if it is closed on
the  investment  date).  On each monthly  investment  date,  each  participating
employee   is  deemed  to  have  been   granted  by  the  Company  and  to  have
simultaneously  exercised  an option to  purchase  shares of Common  Stock in an
amount  equal  to  the  participant's  investment  contribution  divided  by the
purchase price.

         The ESPP is intended to qualify as an "employee  stock  purchase  plan"
within the meaning of Section 423 of the  Internal  Revenue  Code.  Under a plan
that so qualifies,  neither the grant of an option nor the acquisition of shares
upon exercise of such option will result in taxable  income to the employee or a
tax deduction for the Company.  Participants generally will be subject to income
tax liability upon a disposition  of Common Stock acquired under the ESPP.  Such
income tax liability would be based on the difference  between the participant's
basis in the Common Stock and the price at which the  disposition  of the Common
Stock took  place.  The  Company  will be  entitled  to a  corporate  income tax
deduction in any amount equal to ordinary  income  realized by participants as a
result  of  "disqualifying   dispositions"  of  Common  Stock.  In  general,   a
disqualifying  disposition  of Common Stock occurs if a participant  disposes of
Common Stock acquired under the ESPP within two years of the date of purchase of
such Common Stock.

         There are no fees or expenses to  participants  in connection  with the
purchases of Common Stock under the ESPP.  There also are no fees or expenses to
participants  upon withdrawal from the ESPP, or upon  termination of the ESPP by
the Company,  except that a participant who instructs the Company to sell shares
of Common  Stock held in his or her ESPP  account is  charged  the  commissions,
taxes and other applicable  expenses relating to those sales. All other costs of
administration of the ESPP will be paid by the Company.

         The ESPP is  administered  for the Company by a committee  known as the
Employee Benefit Plans Committee  (Benefits  Committee).  The Benefits Committee
consists of not less than three members appointed by the Board of Directors with
at least one member of the  Benefits  Committee  being an officer of the Company
responsible for recording and maintaining the Benefits  Committee  records.  The
Board of Directors  has the power to remove  members of the  Benefits  Committee
from office.

         Employee participation in the ESPP is entirely voluntary.  Employees of
the Company and employees of its subsidiaries whose participation in the ESPP is
approved,  upon request,  by the Company's Board of Directors or by the Benefits
Committee are eligible to participate in the ESPP except: (i) employees who have
been employed  less than six months at the time shares would be purchased;  (ii)
employees  who  normally  work less than 1,000 hours in a calendar  year;  (iii)
employees  who normally  work less than five months in any calendar  year;  (iv)
employees  who  immediately  after a purchase of shares under the ESPP would own
stock  possessing 5 percent or more of the total combined  voting power or value
of all classes of stock in the Company; or (v) members of the Board of Directors
who are not officers of the Company.  An eligible  employee may join the ESPP at
any time.

         Eligible  employees  who  participate  in the ESPP are able to purchase
Common Stock through  reinvested  dividends,  payroll  deduction,  optional cash
payments  or a  combination  of all.  An eligible  employee  may select  payroll
deductions  in  after-tax  dollars in any  amount  not less than $5 per  payroll
period, nor more than a total of $23,750 per year. Optional cash payments cannot
be less than $10 per  payment,  nor more than a total of $23,750  per year.  The
same  amount of money need not be  invested  each month  through  optional  cash
payments  and there is no  obligation  to make an optional  cash  payment in any
month. Until the Company is notified of a participant's death or withdrawal from
the ESPP, the ESPP is terminated by the Company, or the participant ceases to be
a regular  employee of the Company,  all cash dividends paid on shares of Common
Stock  in the  participant's  ESPP  account  are  used  to  purchase  additional
authorized,  but  unissued  shares of Common  Stock.  In any  event,  the sum of
payroll   deductions,   optional  cash  payments  and  dividends  available  for
reinvestment  for any participant may not exceed $23,750 per year. Any amount in
excess of $23,750 will be refunded to the participant without interest.

         Each  participant  in the ESPP is  allowed  to have  only one  account.
Shares of Common Stock  purchased  for the account of each  participant  will be
registered in the name of the Company as "Agent" for the participant.

         Each  participant  will  receive  a  periodic  statement  of his or her
account and a statement  following  any  transaction  affecting  his or her ESPP
account.  Each participant  also will receive copies of the same  communications
sent to all holders of Common Stock,  including the Company's  current quarterly
Investor

                                       16
<PAGE>


Newsletter,  the   Annual   Report  to   Shareholders,   the  Notice  of  Annual
Meeting and Proxy  Statement,  and  Internal  Revenue  Service  information  for
reporting dividends paid.

         The number of shares to be purchased  pursuant to the ESPP depends upon
the amount of the participant's  payroll  deductions and optional cash payments,
dividends  available for reinvestment,  the price of the shares of Common Stock,
and the number of shares available for issuance and sale under the ESPP.

         Subject to the maximum  number of shares of Common Stock  available for
issuance and sale under the ESPP,  each  participant's  account will be credited
with that number of shares  (including any fraction of a share computed to three
decimal  places)  equal to the total  amount to be  invested  divided by the per
share purchase price of the Common Stock on the appropriate investment date.

         Certificates  for shares of Common Stock  purchased under the ESPP will
not  normally  be issued to  participants.  The number of shares  credited to an
account under the ESPP will be shown on each  statement of account mailed to the
participant.

         Without  withdrawing  from the ESPP,  a  participant  may  request  the
issuance  of, and the Company will issue,  certificates  for any number of whole
shares in the  participant's  ESPP account.  Any remaining  whole shares and any
fractional  share will  continue to be credited  to the  participant's  account.
Certificates for fractional  shares will not be issued under any  circumstances.
Certificates  for whole shares,  when issued,  will be registered in the name of
the account.

         Shares of Common Stock  credited to the account of a participant  under
the ESPP may not be pledged.  The right to purchase  shares pursuant to the ESPP
is not transferable in any manner.

         A participant  may withdraw from the ESPP at any time. A  participant's
death or  withdrawal  from the ESPP will stop all  investment  on an  investment
date, if written  notification of death or withdrawal is received not later than
five  business  days prior to such  investment  date.  Any  payroll  deductions,
optional  cash  payments,  or dividends  available  for  reinvestment  for which
investment has been stopped by timely  notification  of death or withdrawal from
the ESPP will be paid by the  Company to the  participant  or the  participant's
estate without interest.

         The  Company or its  designated  agent must be notified in writing of a
participant's  death  or  withdrawal  from  the  ESPP.  Upon  notification  of a
participant's  death or withdrawal from the ESPP,  termination of the ESPP, or a
participant  ceasing to be a regular  employee of the Company,  certificates for
whole shares  included in the  participant's  ESPP  account  (less any shares of
Common  Stock sold by the Company on behalf of the  participant)  will be issued
and a cash  payment  will be made for any  fraction  of a share  included in the
participant's  account.  The cash payment for any fractional share will be based
on the net price  received by the Company  when such  fractional  share is sold.
Sales of  fractional  shares are  combined  with sales of other such  fractional
shares.

         For each meeting of  shareholders,  each  participant  in the ESPP will
receive a Proxy for voting shares and fractional  shares  included in his or her
ESPP account.  If a properly signed Proxy is returned lacking full  instructions
with regard to any item thereon,  then all of the participant's  shares included
in the participant's ESPP account will be voted with respect to such item in the
same manner as for non-participating  shareholders who return proxies and do not
provide  instructions,  that is, in accordance  with the  recommendation  of the
Board of Directors.  If the Proxy is not returned or if it is returned unsigned,
none of the  participant's  shares will be voted unless the participant votes in
person.

         The Board of Directors reserves the right to suspend,  modify, amend or
terminate  the  ESPP at any time, except  that the  Board  of  Directors  cannot
decrease the purchase price of the shares offered  pursuant to the ESPP  or make
more  restrictive  the  eligibility   requirements  for  employees   wishing  to
participate in the ESPP. All participants will receive notice of any suspension,
modification, amendment or termination of the ESPP.

         The Company is authorized to take such actions to carry out the ESPP as
may be consistent with the ESPP's terms and conditions. The Company reserves the
right to interpret  and regulate the ESPP as it deems  desirable or necessary in
connection with the ESPP's operation.

         The Board of  Directors  recommends  that the  shareholders  vote "FOR"
approval of the amendment to the ESPP.

                                       17
<PAGE>

--------------------------------------------------------------------------------
                                 OTHER BUSINESS
--------------------------------------------------------------------------------

         The  Board  of  Directors  does not know of any  other  business  to be
presented at the meeting. However, if any other matters properly come before the
meeting, it is the intention of the persons named in the accompanying Proxy Card
to vote  pursuant  to the  proxies in  accordance  with their  judgment  in such
matters.

         All shareholders are asked to promptly return their Proxy in order that
the necessary vote may be present at the meeting.  We respectfully  request that
you vote your Proxy at your earliest convenience either by signing and returning
the accompanying  Proxy Card by mail, or following the enclosed  instructions to
vote by phone or the Internet.

By order of the Board of Directors,

Dated March 25, 2003


Philip R. Halverson

Philip R. Halverson
Vice President, General Counsel and Secretary


                                       18
<PAGE>


                                                                        APPENDIX

                                  ALLETE, INC.
                               BOARD OF DIRECTORS

                             AUDIT COMMITTEE CHARTER

PURPOSES AND ROLE OF COMMITTEE

The  purposes  of the Audit  Committee  (Committee)  of the  Board of  Directors
(Board) of ALLETE,  Inc.  (Company) are to: (A) assist the Board's  oversight of
(1) the  integrity of the  Company's  financial  statements,  (2) the  Company's
compliance with legal and regulatory requirements, (3) the independent auditor's
qualifications  and  independence,  and (4)  the  performance  of the  Company's
internal audit  function and  independent  auditors;  and (B) prepare the report
that  Securities  and  Exchange  Commission  (Commission)  rules  require  to be
included in the Company's annual proxy statement.

The role of the  Committee  is  oversight.  Management  and the  internal  audit
department are responsible for maintaining and evaluating appropriate accounting
and  financial  reporting  principles  and policies  and  internal  controls and
procedures   designed  to  assure  compliance  with  accounting   standards  and
applicable laws and  regulations.  The independent  auditors are responsible for
auditing the financial statements and assessing the Company's internal controls.
Consequently,  in carrying out its oversight responsibilities,  the Committee is
not providing any certification as to the independent auditors' work or the work
or report of any  expert.  Each  member of the  Committee  shall be  entitled to
reasonably  rely on the  integrity  of people  and  organizations  from whom the
Committee receives  information and the accuracy of such information.

COMMITTEE MEMBERSHIP

The Committee shall consist of three or more members of the Board,  each of whom
(A) satisfies the requirements for independence  pursuant to law and the listing
standards of the New York Stock Exchange (NYSE), and (B) is financially literate
as required by the listing  standards of the NYSE. At least one Committee member
shall have accounting or related financial  management  expertise as required by
the  listing  standards  of the NYSE.  Committee  members may not serve on audit
committees of more than two other publicly traded  companies.  Committee members
shall serve at the pleasure of the Board and for such term or
terms as the Board may determine.

COMMITTEE STRUCTURE AND OPERATIONS

The  Board  shall  designate  one  member of the  Committee  as its  Chair.  The
Committee  shall meet at least  quarterly at a time and place  determined by the
Board or the  Committee  Chair,  with  further  meetings  to occur  when  deemed
necessary  or  desirable  by a  majority  of the  Committee  or its  Chair.  The
Committee  will  meet  periodically  in  executive  session  without  management
present.

A majority of the  Committee  members  currently  holding  office  constitutes a
quorum for the  transaction of business.  The Committee shall take action by the
affirmative  vote of a majority of the Committee  members present at a duly held
meeting.  The  Committee  may meet in person or  telephonically,  and may act by
unanimous written consent when deemed necessary or desirable by the Committee or
its Chair. The Committee may recommend to the Board procedures to be observed in
executing  its  responsibilities.  The  Committee  may  invite  such  members of
management to its meetings as it may deem desirable or appropriate.

COMMITTEE DUTIES AND RESPONSIBILITIES

The duties and responsibilities of the Committee are to:

1.   Appoint, retain and terminate, and approve fees and terms of  retention  of
     the public  accounting firm serving as the Company's  independent  auditors
     (subject to  ratification by Company  shareholders if deemed  appropriate).
     The Committee  shall be  responsible  for the oversight of the  independent
     accounting  firm  engaged by the Company for the  purpose of  preparing  or
     issuing an audit report or related work or performing  other audit,  review
     or attest services, including resolution of disagreements between

                                      19
<PAGE>



     management  and  the  independent   accounting  firm  regarding   financial
     reporting. The Committee shall pre-approve any audit and non-audit services
     by the independent  auditors as required by applicable law and the rules of
     the NYSE. The Committee shall directly implement these responsibilities.

2.   Instruct the independent  auditors  that they are to report directly to the
     Committee,  and  provide  that  they  are  ultimately  responsible  to  the
     Committee and the Board.

3.   Review with the independent auditors the scope of  the  prospective  audit,
     the estimated fees therefor and such other matters pertaining to such audit
     as the  Committee  may  deem  appropriate.  Receive  copies  of the  annual
     comments from the outside auditors on accounting  procedures and systems of
     control.  Recommend  to the Board the  acceptance  of such  audits that are
     accompanied by certification.

4.   Review and discuss with management  and  the  independent  auditor,  before
     filing with the  Commission,  the annual audited  financial  statements and
     quarterly financial  statements,  including the Company's disclosures under
     "Management's Discussion and Analysis of Financial Condition and Results of
     Operations."

5.   Review  and  discuss   earnings  press  releases,  as  well  as   financial
     information and earnings guidance provided to analysts and rating agencies.

6.   Advise management,  the  internal  audit  department  and  the  independent
     auditors  that they are  expected  to  provide  to the  Committee  a timely
     analysis of and  opportunity  to discuss  significant  financial  reporting
     issues and practices,  critical accounting policies, major issues regarding
     accounting principles and financial statement presentations  (including any
     significant changes in the Company's selection or application of accounting
     principles),  and major issues as to the adequacy of the Company's internal
     controls and any special audit steps  adopted in light of material  control
     deficiencies.

7.   Direct management and the independent auditors to disclose to the Committee
     any significant risks and exposures;  discuss policies with respect to risk
     assessment and risk management.

8.   Review with the independent auditors any audit problems or difficulties and
     management's response.

9.   Review  the  action taken  by  management  on  the internal  auditors'  and
     independent auditors' recommendations.

10.  Review with the senior internal audit executive the  annual internal  audit
     plan and scope of internal  audits,  including  the  procedure for assuring
     implementation  of  accepted   recommendations   made  by  the  independent
     auditors.  Advise the senior  internal  audit  executive  that he or she is
     expected  to  provide  the  Committee  with  summaries  of any  significant
     identified control issues and management's response thereto, and inform the
     Committee  of any  significant  changes to the  internal  audit  department
     charter, staffing or budget.

11.  Make or cause to be made, from time  to time,  such  other  examinations or
     reviews as the Committee may deem advisable with respect to the adequacy of
     the systems of internal  controls and  accounting  practices of the Company
     and its  subsidiaries  and with  respect to current  accounting  trends and
     developments,  and take such action with  respect  thereto as may be deemed
     appropriate.

12.  Review  the  appointment,  reassignment,  and  replacement  of  the  senior
     internal audit executive.

13.  Set  clear  hiring  policies  for  employees  or  former  employees  of the
     independent auditors.

14.  On a periodic basis, and without others present, meet separately  with  the
     independent auditors, the senior internal audit executive,  the controller,
     the general counsel, and other members of management as appropriate.

15.  Review with management, the independent auditors and  the  senior  internal
     audit executive the adequacy of and any significant changes in the internal
     controls,  the accounting  policies  procedures or practices of the Company
     and its subsidiaries,  and compliance with Corporate  policies,  directives
     and applicable laws.

16.  Ensure that the independent auditor  submits on  a  periodic  basis  to the
     Committee a formal written statement  delineating all relationships between
     the  auditor  and the  Company  that may have a  bearing  on

                                       20
<PAGE>



     the  auditor's  independence,   engage  in  an  active  dialogue  with  the
     independent auditor with respect to any disclosed relationships or services
     that  may  impact  the  objectivity  and  independence  of the  independent
     auditor,  and  recommend  to the Board any  action  deemed  appropriate  in
     response to the independent  auditor's  report to satisfy the Board and the
     Committee of the independent auditor's independence.

17.  Obtain and review, at least annually, a report by the  independent  auditor
     describing: the independent auditor's internal quality-control  procedures;
     any  material  issues  raised by the most recent  internal  quality-control
     review,  or peer review, of the firm, or by any inquiry or investigation by
     governmental or professional authorities,  within the preceding five years,
     respecting one or more independent  audits carried out by the firm, and any
     steps  taken to deal with any such  issues;  and (to assess  the  auditor's
     independence)  all  relationships  between the independent  auditor and the
     Company.

18.  Establish  procedures   for  the  receipt,  retention,  and  treatment   of
     complaints   received  by  the  Company  regarding   accounting,   internal
     accounting controls,  or auditing matters; and the confidential,  anonymous
     submission  by  employees  of the  Company and its  affiliates  of concerns
     regarding questionable accounting, internal control or auditing matters.

19.  Review  the  status  of  compliance with laws,  regulations,  and  internal
     procedures,  contingent  liabilities  and risks that may be material to the
     Company,  the  scope and  status  of  systems  designed  to assure  Company
     compliance  with  laws,   regulations  and  internal  procedures,   through
     receiving reports from management, legal counsel and other third parties as
     determined by the Committee on such matters,  as well as major  legislative
     and regulatory  developments  which could  materially  impact the Company's
     contingent liabilities and risks.

20.  Prepare a report for inclusion in the annual proxy statement that specifies
     the  Directors  who  sit  on  the  Committee,   describes  the  Committee's
     responsibilities  as  outlined in this  Charter,  and  discusses  how these
     responsibilities were discharged during the year.

21.  Conduct or authorize investigations into any matters within the Committee's
     scope of  responsibility,  consistent  with procedures to be adopted by the
     Committee.

22.  Review and assess the adequacy of the Committee charter annually.

COMMITTEE REPORTS

1.   Report to  the  Board on a regular basis on the activities of the Committee
     and make such  recommendations  with  respect  to the above  matters as the
     Committee may deem  necessary or  appropriate.  This report shall include a
     review of any issues that arise with respect to the quality or integrity of
     the Company's financial statements,  the Company's compliance with legal or
     regulatory requirements,  the performance and independence of the Company's
     independent auditors, or the performance of the internal audit function.

2.   Transmit to the Board notices of Committee meetings, agendas,  and  meeting
     minutes.

3.   At the time of or in advance of the Annual Directors Meeting held in May of
     each year, present an annual performance evaluation of the Committee, which
     shall assess the performance of the Committee in relation to its duties and
     responsibilities  under this  charter,  recommend  any  amendments  to this
     charter,  and set forth the goals and  objectives  of the Committee for the
     ensuing twelve months.

4.   Report on matters required by the rules of the Commission  to  be disclosed
     in the Company's annual proxy statement.

DELEGATION OF AUTHORITY

The  Committee  may,  in its  discretion,  delegate  certain  of its  duties and
responsibilities to a subcommittee of the Committee.

The  Committee may delegate to one or more of its members the authority to grant
pre-approvals  of  auditing  and  non-audit  services  to be  performed  by  the
Company's  independent  auditor  subject to such guidelines as the Committee may
determine.  Any such  decisions  to  pre-approve  shall be presented to the full
Committee at its next following regular meeting.

                                       21
<PAGE>



RESOURCES AND AUTHORITY OF THE COMMITTEE

The Committee shall have the resources and appropriate funding, as determined by
the Committee, to discharge its duties and responsibilities. The Committee shall
have the authority to retain and discharge, and approve fees and other terms and
conditions  for retention of  independent  experts in  accounting  and auditing,
legal  counsel  and other  experts or  advisors.  The  Committee  may direct any
officer or  employee of the  Company or request  any  employee of the  Company's
independent  auditors or outside legal counsel to attend a Committee  meeting or
meet with any Committee members.




                                       22

<PAGE>




          "Printed with soy based inks on recycled paper containing at
           least 10 percent fibers from paper recycled by consumers."

                    [RECYCLE LOGO] [LOGO PRINTED WITH SOY INK]




<PAGE>


                                  [ALLETE LOGO]


                         ANNUAL MEETING OF SHAREHOLDERS
                              TUESDAY, MAY 13, 2003
                                   10:30 A.M.
                              DULUTH ENTERTAINMENT
                                CONVENTION CENTER
                                350 HARBOR DRIVE
                                   DULUTH, MN





[ALLETE LOGO]  ALLETE, INC.
               30 WEST SUPERIOR STREET
               DULUTH, MINNESOTA 55802-2093                                PROXY
--------------------------------------------------------------------------------

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL  MEETING
ON MAY 13, 2003.

David G.  Gartzke  and  Philip R.  Halverson  or either of them,  with  power of
substitution, are hereby appointed Proxies of the undersigned to vote all shares
of  ALLETE,  Inc.  stock  owned by the  undersigned  at the  Annual  Meeting  of
Shareholders to be held in the auditorium at the Duluth Entertainment Convention
Center, 350 Harbor Drive, Duluth,  Minnesota,  at 10:30 a.m. on Tuesday, May 13,
2003, or any  adjournments  thereof,  with respect to the election of Directors,
ratification  of the  appointment of independent  auditors,  the  reservation of
additional  shares of ALLETE Common Stock to be issued under the Employee  Stock
Purchase Plan  and any other matters as may properly come before the meeting.

THIS PROXY  CONFERS  AUTHORITY  TO VOTE EACH  PROPOSAL  LISTED ON THE OTHER SIDE
UNLESS OTHERWISE INDICATED. If any other business is transacted at said meeting,
this Proxy shall be voted in  accordance  with the best judgment of the Proxies.
The Board of  Directors  recommends  a vote "FOR" each of the listed  proposals.
This Proxy is solicited on behalf of the Board of Directors of ALLETE, Inc., and
may be revoked prior to its exercise.  PLEASE MARK,  SIGN,  DATE AND RETURN THIS
PROXY CARD USING THE ENCLOSED ENVELOPE. ALTERNATIVELY, AUTHORIZE THE ABOVE-NAMED
PROXIES  TO VOTE  THE  SHARES  REPRESENTED  ON THIS  PROXY  CARD BY PHONE OR THE
INTERNET AS  DESCRIBED  ON THE OTHER SIDE.  Shares  cannot be voted unless these
instructions are followed,  or other specific  arrangements are made to have the
shares represented at the meeting. By responding promptly, you may help save the
costs of additional Proxy solicitations.

                      SEE REVERSE FOR VOTING INSTRUCTIONS.

<PAGE>



THERE ARE THREE WAYS TO VOTE YOUR PROXY                               ----------
                                                                       COMPANY #
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO        CONTROL #
VOTE YOUR SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND      ----------
RETURNED YOUR PROXY CARD.

VOTE BY PHONE - TOLL FREE - 1-800-240-6326 - QUICK --- EASY --- IMMEDIATE

- Use any touch-tone telephone to vote your Proxy 24 hours a day, 7 days a week,
  until 11:00 a.m. (CT) on May 12, 2003.
- You will be prompted to enter your 3-digit Company Number, your 7-digit
  Control Number (these numbers are located on the Proxy Card) and the last 4-
  digits of the U.S. Social Security Number or Tax Identification Number for
  this account. If you do not have a U.S. SSN or TIN please enter 4 zeros.
- Follow the simple instructions the voice provides you.

VOTE BY INTERNET - http://www.eproxy.com/ale/ - QUICK --- EASY --- IMMEDIATE

- Use the Internet to vote your Proxy 24 hours a day, 7 days a week, until 12:00
  p.m. (CT) on May 12, 2003.
- You will be prompted to enter your 3-digit Company Number, your 7-digit
  Control Number (these numbers are located on the Proxy Card) and the last
  4-digits of the U.S. Social Security Number or Tax Identification Number for
  this account to obtain your records and create an electronic ballot. If you
  do not have a U.S. SSN or TIN please leave blank.

VOTE BY MAIL

Mark, sign and date your Proxy card and return it in the  postage-paid  envelope
we've provided or return it to ALLETE, Inc., c/o Shareowner Services
(servicemark), P.O. Box 64873, St. Paul, MN 55164-0873.

      IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD

                             - PLEASE DETACH HERE -

--------------------------------------------------------------------------------

   THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.

1. Election of Directors:  01 Bussmann    02 Cunningham   03 Evans    04 Gartzke
                           05 Johnson     06 Mayer        07 Rajala   08 Smith
                           09 Stender     10 Wegmiller

/ / Vote FOR all nominees    / / Vote WITHHELD from all nominees
    (except as marked)

(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY      ----------------------
INDICATED NOMINEE, WRITE THE NUMBER(S) OF THE NOMINEE(S)
IN THE BOX PROVIDED TO THE RIGHT.)                        ----------------------



2. Ratification of the appointment of PricewaterhouseCoopers LLP as  independent
   auditors.

    / / For       / / Against       / / Abstain


3.  Reservation of an additional 500,000 shares of ALLETE Common Stock for
    issuance under the Employee Stock Purchase Plan.

    / / For       / / Against       / / Abstain


THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR ITEMS 1, 2 AND 3.
                        ---

Address Change? Mark Box  / /                       Date
                                                         -----------------------
Indicate changes below:
                                             -----------------------------------




                                             -----------------------------------
                                             Signature(s) in Box

                                             Please sign exactly as your name(s)
                                             appears on Proxy.  If held in joint
                                             tenancy,  all  persons  must  sign.
                                             Trustees,   administrators,   etc.,
                                             should include title and authority.
                                             Corporations  should  provide  full
                                             name of  corporation  and  title of
                                             authorized   officer   signing  the
                                             Proxy.
--------------------------------------------------------------------------------


<PAGE>


YOU'RE INVITED

[ALLETE LOGO]     ANNUAL MEETING OF SHAREHOLDERS
                          2003 May 13th
                            10:30 AM
             At the Duluth Entertainment Convention Center
                        IN DULUTH, MINNESOTA


Dear Shareholder:

It's my pleasure to invite you to ALLETE's Annual Meeting of Shareholders on
Tuesday, May 13 beginning at 10:30 a.m. at the Duluth Entertainment Convention
Center. Our agenda will include business highlights from 2002 and a discussion
of strategic issues facing ALLETE. Lunch will be served in the DECC's Lake
Superior Ballroom after the meeting.

Please make plans to join us May 13. It will be a great opportunity to learn the
latest information about ALLETE and enjoy the camaraderie of your fellow
shareholders. We look forward to seeing you.

Sincerely,


/s/ David G. Gartzke

David G. Gartzke
Chairman, President
and Chief Executive Officer


REGISTRATION
Registration  begins at 9 a.m. inside the entrance to the DECC. Parking is free,
so be sure to tell the gate attendant you're a shareholder.

When you register, you'll receive a ticket to lunch and a ticket for a chance to
win shares of ALLETE stock.

ANNUAL MEETING
The DECC Auditorium doors will open at 9:30 a.m. and the meeting will begin
promptly at 10:30 a.m.

LUNCH
A box lunch will be served following the meeting in the Lake Superior Ballroom
within the DECC.

RESERVATION INSTRUCTIONS
Please complete the card below, detach and mail. If you have questions, call
Shareholder Services toll-free at 1-800-535-3056, or 218-723-3974.

If your plans change after you've sent the reservation card and you can't
attend, please let us know by calling Shareholder Services.

--------------------------------------------------------------------------------
 RESERVATION CARD-Complete and mail this postage-paid card as soon as possible.
                       Please do not enclose with your proxy.
--------------------------------------------------------------------------------

      Yes, I will attend the Annual Meeting and the lunch.
-----
Each shareholder may bring one guest. Please PRINT clearly your name and your
guest's name.

Shareholder's Name
--------------------------------------------------------------------------------

Guest's Name
-------------------------------------------------------------------

Shareholder's Name
----------------------------------------------------------------- [ALLETE LOGO]

Guest's Name
-------------------------------------------------------------------

<PAGE>










                                     [GRAPHIC OMITTED - Fim Markings]
                                                              -----------------
                                                                  NO POSTAGE
                                                                   NECESSARY
                                                                   IF MAILED
                                                                     IN THE
                                                                 UNITED STATES
                                                              -----------------
                                                 [GRAPHIC OMITTED - Solid bars
                                                  below indicia]


                 ----------------------------------------
                  BUSINESS REPLY MAIL
                  FIRST CLASS Permit No. 74 Duluth, MN
                 ----------------------------------------
                  POSTAGE WILL BE PAID BY ADDRESSEE

                  ALLETE
                  ATTN: BERNADETTE NELSON
                  30 WEST SUPERIOR STREET
                  DULUTH, MINNESOTA 55802-9986


                                     [GRAPHIC OMITTED - Bar Code]



<PAGE>






                                                 April __, 2003



Dear Shareholder:

     We have not yet  received  your vote on issues to come  before  the  Annual
Meeting of ALLETE Shareholders on May 13, 2003. Proxy materials were sent to you
on or about March 25, 2003.  Please take time to vote the enclosed  copy of your
Proxy using one of the three options available to you:

     1. MAIL - Complete the enclosed duplicate Proxy Card and return it in
        the self-addressed stamped envelope;

     2. TELEPHONE - Call  the  800  number listed  on  the Proxy Card  and
        follow the instructions; or

     3. INTERNET - Log onto  the web  site listed  on the  Proxy Card  and
        follow the instructions.

     We again  extend to you a cordial  invitation  to  attend  ALLETE's  Annual
Meeting of Shareholders to be held in the auditorium of the Duluth Entertainment
Convention Center, 350 Harbor Drive, Duluth,  Minnesota on Tuesday, May 13, 2003
at 10:30 a.m.

     Your prompt response will be appreciated.


                                                 Sincerely,




                                                 Philip R. Halverson


Enclosures




</TEXT>
</DOCUMENT>
