Business Segments Business Segments (Notes)

12 Months Ended

Dec. 31, 2019

Segment Reporting Disclosure [Text Block]

BUSINESS SEGMENTS

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

Regulated Operations includes three operating segments which consist of our regulated utilities, Minnesota Power and SWL&P, as well as our investment in ATC. ALLETE Clean Energy is our business focused on developing, acquiring and operating clean and renewable energy projects. U.S. Water Services was our integrated water management company, which reflects operating results until the date of its sale on March 26, 2019. We also present Corporate and Other which includes two operating segments, BNI Energy, our coal mining operations in North Dakota, and ALLETE Properties, our legacy Florida real estate investment, along with our investment in Nobles 2, other business development and corporate expenditures, unallocated interest expense, a small amount of non-rate base generation, approximately 4,000 acres of land in Minnesota, and earnings on cash and investments.

NOTE 14. BUSINESS SEGMENTS (Continued)



Year Ended December 31	2019			2018		2017
Millions
Operating Revenue
Residential		$139.6			$139.7		$127.4
Commercial	145.7			147.9		139.8
Municipal	48.6			54.9		57.9
Industrial	476.4			469.5		470.5
Other Power Suppliers	153.7			170.3		161.8
CIP Financial Incentive	2.8			3.0		5.5
Other	75.6			74.2		100.9
Total Regulated Operations	1,042.4			1,059.5		1,063.8

ALLETE Clean Energy
Long-term PSA	48.0			55.2		56.9
Sale of Wind Energy Facility	—			81.1		—
Other	11.6			23.6		23.6
Total ALLETE Clean Energy	59.6			159.9		80.5

U.S. Water Services (e)
Point-in-time	19.0			100.3		95.8
Contract	9.2			38.3		36.2
Capital Project	5.2			33.5		19.8
Total U.S. Water Services	33.4			172.1		151.8

Corporate and Other
Long-term Contract	82.8			85.5		89.3
Other	22.3			21.6		33.9
Total Corporate and Other	105.1			107.1		123.2
Total Operating Revenue		$1,240.5			$1,498.6		$1,419.3
Net Income (Loss) Attributable to ALLETE (a)(b)
Regulated Operations	$154.4			$131.0		$128.4

ALLETE Clean Energy (c)	12.4			33.7		41.5
U.S. Water Services	(1.1		)	3.2		10.7

Corporate and Other (d)(e)	19.9			6.2		(8.4		)
Total Net Income Attributable to ALLETE	$185.6			$174.1		$172.2

(a) Net income in 2017 included a favorable impact of $13.0 million after-tax due to the remeasurement of deferred income tax assets and liabilities resulting from the TCJA, which consisted of a $23.6 million after-tax benefit for ALLETE Clean Energy, a $9.2 million after-tax benefit for U.S. Water Services and a $19.8 million after-tax expense for Corporate and Other. The TCJA did not have an impact on net income for our Regulated Operations as the remeasurement of deferred income tax assets and liabilities primarily resulted in the recording of regulatory assets and liabilities. (See Note 1. Operations and Significant Accounting Policies and Note 4. Regulatory Matters.)


(b)	Includes interest expense resulting from intercompany loan agreements and allocated to certain subsidiaries. The amounts are eliminated in consolidation.


(c)	Net income in 2018 includes the recognition of profit for the sale of a wind energy facility to Montana-Dakota Utilities.


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

(e) On March 26, 2019, ALLETE sold U.S. Water Services. The Company recognized a gain on the sale of $13.2 million after-tax which is reflected in Corporate and Other. (See Note 1. Operations and Significant Accounting Policies.)

NOTE 14. BUSINESS SEGMENTS (Continued)



Year Ended December 31	2019			2018			2017
Millions
Depreciation and Amortization
Regulated Operations		$159.4			$158.0			$132.6

ALLETE Clean Energy	26.8			24.4			23.4
U.S. Water Services	2.3			10.2			9.8

Corporate and Other	13.5			13.0			11.7
Total Depreciation and Amortization		$202.0			$205.6			$177.5
Operating Expenses – Other (a)
Corporate and Other	—			$(2.0)			$(0.7)
Total Operating Expenses – Other	—			$(2.0)			$(0.7)
Interest Expense (b)
Regulated Operations		$58.9			$60.2			$57.0

ALLETE Clean Energy	2.8			3.6			4.2
U.S. Water Services	0.2			1.5			1.6

Corporate and Other	8.0			7.3			10.3

Eliminations	(5.0		)	(4.7		)	(5.3		)
Total Interest Expense		$64.9			$67.9			$67.8
Equity Earnings
Regulated Operations		$21.7			$17.5			$22.5
Income Tax Expense (Benefit) (c)
Regulated Operations (d)	$(7.1)			$(15.5)				$27.2

ALLETE Clean Energy	(11.9		)	(1.0		)	(14.2		)
U.S. Water Services	(0.4		)	1.0			(7.8		)

Corporate and Other (d)(e)	12.8			—			9.5
Total Income Tax Expense (Benefit)	$(6.6)			$(15.5)				$14.7


(a)	See Note 1. Operations and Significant Accounting Policies.


(b)	Includes interest expense resulting from intercompany loan agreements and allocated to certain subsidiaries. The amounts are eliminated in consolidation.

(c)

Income tax expense in 2017 included an income tax benefit of $13.0 million due to the remeasurement of deferred income tax assets and liabilities resulting from the TCJA, which consisted of income tax benefits of $23.6 million for ALLETE Clean Energy and $9.2 million for U.S. Water Services as well as additional income tax expense of $19.8 million for Corporate and Other. The TCJA did not have an impact on income tax expense for our Regulated Operations as the remeasurement of deferred income tax assets and liabilities primarily resulted in the recording of regulatory assets and liabilities. (See Note 1. Operations and Significant Accounting Policies and Note 4. Regulatory Matters.)

(d)

In 2017, Regulated Operations includes $14.0 million of income tax expense related to North Dakota investment tax credits transferred to Corporate and Other and higher pre-tax income for the favorable impact for the regulatory outcome of the MPUC’s modification of its November 2016 order on the allocation of North Dakota investment tax credits. There was no impact to net income for Regulated Operations. Corporate and Other recorded an offsetting income tax benefit of $7.9 million in 2017. (See Note 4. Regulatory Matters.)

(e) On March 26, 2019, ALLETE sold U.S. Water Services. The Company recognized income tax expense of $10.4 million for the gain on sale of U.S. Water Services which is reflected in Corporate and Other. (See Note 1. Operations and Significant Accounting Policies.)

NOTE 14. BUSINESS SEGMENTS (Continued)



As of December 31	2019		2018
Millions
Assets
Regulated Operations	$4,130.8		$3,952.5

ALLETE Clean Energy	1,001.5		606.6
U.S. Water Services (a)	—		295.8

Corporate and Other	350.5		310.1
Total Assets		$5,482.8		$5,165.0
Capital Expenditures
Regulated Operations	$230.9		$211.9

ALLETE Clean Energy	385.6		89.7
U.S. Water Services (a)	—		5.0

Corporate and Other	10.1		12.0
Total Capital Expenditures		$626.6		$318.6

(a) On March 26, 2019, ALLETE sold U.S. Water Services. (See Note 1. Operations and Significant Accounting Policies.)