OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Inventories. Inventories are stated at the lower of cost or market. Amounts removed from inventory are recorded on an average cost basis.



Inventories	March 31, 2014		December 31, 2013
Millions
Fuel		$16.3		$13.1
Materials and Supplies	52.6		46.2
Total Inventories		$68.9		$59.3



Prepayments and Other Current Assets	March 31, 2014		December 31, 2013
Millions
Deferred Fuel Adjustment Clause		$22.1		$23.0
Other	11.3		12.1
Total Prepayments and Other Current Assets		$33.4		$35.1

Other Non-Current Assets. As of March 31, 2014, included in Other Non-Current Assets on the Consolidated Balance Sheet was restricted cash of $5.3 million related to ALLETE Clean Energy’s wind energy facilities acquisition, which was completed on January 30, 2014 (see Note 4. Acquisitions). As of December 31, 2013, restricted cash of $5.4 million related to cash held in escrow pending the closing of the acquisition.



Other Current Liabilities	March 31, 2014		December 31, 2013
Millions
Customer Deposits		$24.1		$26.0
Power Purchase Agreements (a)	13.1		—
Other	24.0		26.6
Total Other Current Liabilities		$61.2		$52.6


(a)	Power Purchase Agreements were acquired in conjunction with the ALLETE Clean Energy wind energy facilities acquisition on January 30, 2014 (see Note 4. Acquisitions).

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)



Other Non-Current Liabilities	March 31, 2014		December 31, 2013
Millions
Asset Retirement Obligation		$89.2		$81.8
Power Purchase Agreements (a)	96.4		—
Other	43.7		45.4
Total Other Non-Current Liabilities		$229.3		$127.2


(a)	Power Purchase Agreements were acquired in conjunction with the ALLETE Clean Energy wind energy facilities acquisition on January 30, 2014 (see Note 4. Acquisitions).

Supplemental Statement of Cash Flows Information.



For the Three Months Ended March 31,	2014		2013
Millions
Cash Paid During the Period for Interest – Net of Amounts Capitalized		$12.4		$12.0
Cash Paid During the Period for Income Taxes		$0.2		$0.5
Noncash Investing and Financing Activities
Decrease in Accounts Payable for Capital Additions to Property, Plant and Equipment	$(22.6)		$(26.2)
Capitalized Asset Retirement Costs		$0.6		$1.9
AFUDC – Equity		$1.8		$1.1
ALLETE Common Stock Contributed to the Pension Plan		$19.5	—

Subsequent Events. The Company performed an evaluation of subsequent events for potential recognition and disclosure through the time of the financial statements issuance.

New Accounting Standards.

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. In July 2013, the FASB issued an accounting standard update on the financial statement presentation of unrecognized tax benefits when an NOL carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for an NOL carryforward, a similar tax loss, or a tax credit carryforward. To the extent an NOL carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from the disallowance of a tax position or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance was adopted beginning with the quarter ending March 31, 2014, and did not have a material impact on our consolidated financial position, results of operations, or cash flows.

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. In April 2014, the FASB issued an accounting standard update modifying the criteria for determining which disposals should be presented as discontinued operations and modifying the related disclosure requirements. Additionally, the new guidance requires that a business which qualifies as held for sale upon acquisition should be reported as discontinued operations. The new guidance will be effective beginning with the quarter ending March 31, 2015, and applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. This guidance is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.