2007
Proxy Statement and
Annual Meeting Notice

Otter Tail Corporation
Annual Meeting of Shareholders

Monday, April 9, 2007
10 a.m., CST
Bigwood Event Center

921 Western Avenue
(Highway 210 West and Interstate 94)
Fergus Falls, Minnesota

Coffee will be served at 9:15 a.m., and lunch will follow the
meeting. No reservation is necessary.

Please present your admission ticket,
which is attached to your proxy.

Contact Shareholder Services for
Information

Email		sharesvc@ottertail.com
Internet		www.ottertail.com
Fax		218-998-3165
Phone		800-664-1259 or 218-739-8479
Mail		Otter Tail Corporation
		Box 496
		Fergus Falls, Minnesota 56538-0496

March 5, 2007

To the Holders of Common Shares of Otter Tail Corporation:

You are cordially invited to attend the Annual Meeting of Shareholders of Otter Tail Corporation, which will be held at the Bigwood Event Center, Best Western Motel, Highway 210 West and Interstate 94, Fergus Falls, Minnesota, at 10:00 a.m. on Monday, April 9, 2007.

Enclosed are a formal Notice of Annual Meeting and the Proxy Statement, which describe the business to be conducted at the meeting. The Board of Directors proposes that shareholders reelect Mr. Arvid R. Liebe, Mr. John C. MacFarlane and Mr. Gary J. Spies for three-year terms on the Board of Directors.

Shareholders will be asked to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2007.

Your vote is important. Whether or not you attend the meeting, we encourage you to vote your shares. You may vote your shares on the Internet or by using a toll-free telephone number. Instructions for using these convenient services are provided with your proxy card. Of course, you may vote your shares by marking your votes on the proxy card, signing and dating it, and mailing it in the envelope provided. If your shares are held of record in a brokerage account, please follow the instructions that you receive from your broker. Your broker will submit a proxy card to Otter Tail Corporation reflecting the votes it receives. ESOP participants should follow the instructions provided by Wells Fargo Bank, N.A.

For those shareholders who have not consented to electronic delivery of proxy materials, I have enclosed a copy of Otter Tail Corporation’s 2006 Annual Report.

Sincerely,

John C. MacFarlane
Chairman of the Board

Notice of Annual Meeting

Notice is hereby given to the holders of common shares of Otter Tail Corporation that the Annual Meeting of Shareholders of Otter Tail Corporation will be held in the Bigwood Event Center, Best Western Motel, Highway 210 West and Interstate 94, Fergus Falls, Minnesota, on Monday, April 9, 2007, at 10:00 a.m. to consider and act upon the following matters:

1.		To elect three Directors to Otter Tail Corporation’s Board of Directors to serve terms of three years.
2.		To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year 2007.
3.		To transact such other business as may properly be brought before the meeting.

March 5, 2007		GEORGE A. KOECK
		Corporate Secretary and General Counsel

Your Vote is Important

Please vote your proxy by telephone or the Internet as described in the instructions on the enclosed proxy card. Or sign, date, and return the proxy card in the enclosed envelope, which does not require postage if mailed in the United States. If your shares are held of record in a brokerage account, please follow the instructions that you receive from your broker. Your broker will submit a proxy card to Otter Tail Corporation reflecting the votes it receives. ESOP participants should follow the instructions provided by Wells Fargo Bank, N.A.

Shareholders who are currently receiving a paper copy of the Proxy Statement and Annual Report can elect to receive future reports over the Internet. If you are interested in this option, please contact Shareholder Services by calling our toll free number 800-664-1259, or by e-mail at sharesvc@ottertail.com.

Table of Contents

Proxy Statement Questions and Answers			1
Outstanding Voting Shares			2
Election of Directors			2
Meetings and Committees of the Board of Directors			4
Contact with the Board of Directors			5
Director Compensation			6
Director Compensation Table			6
Management’s Security Ownership			7
Compensation Discussion and Analysis			8
Report of Compensation Committee			12
Executive Compensation			12
Report of Audit Committee			18
Ratification of Independent Registered Public Accounting Firm			18
Policy and Procedures Regarding Transactions with Related Persons			20
Shareholder Proposals for 2008 Annual Meeting			20
Other Business			20

Proxy Statement Questions and Answers

1. Q:		Why am I receiving these materials?
A:		The Board of Directors of Otter Tail Corporation provides these proxy materials for use at the Annual Meeting of Shareholders to be held on April 9, 2007. As a shareholder you are invited to attend the annual meeting and are entitled to vote on the proposals described in this Proxy Statement. These materials were sent to shareholders on or about March 5, 2007.
2. Q:		Who is entitled to vote at the annual meeting?
A:		Only common shareholders of record at the close of business on February 15, 2007 are entitled to vote at the annual meeting. As of the record date, 29,551,401 common shares of Otter Tail Corporation were issued and outstanding. Each shareholder is entitled to one vote per share.
3. Q:		What issues may I vote on at the annual meeting?
A:		You may vote on (1) the election of three nominees to serve on the Board of Directors; (2) the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2007; and (3) on any other business that is properly brought before the meeting.
4. Q:		How do I vote my shares?
A:		You may vote either in person at the annual meeting or by granting a proxy. If you desire to grant a proxy, then you have three voting options:

	•		by telephone
	•		by Internet
	•		by proxy card

		If you intend to vote by proxy, please refer to the instructions included on your proxy card. Voting by proxy will not affect your right to vote your shares if you attend the annual meeting and desire to vote in person.
5. Q:		May I change my vote?
A:		You have the right to revoke your proxy any time before the annual meeting by:

	•		providing written notice to an officer of Otter Tail Corporation and voting in person at the annual meeting;
	•		submitting another proper proxy by telephone or the Internet; or
	•		submitting a new written proxy bearing a later date at any time before the proxy is voted at the meeting.

6. Q:		How are the votes counted?
A:		In the election of Directors, you may vote FOR all of the nominees or your vote may be WITHHELD with respect to one or more nominees. If you return your signed proxy card, but do not mark the boxes showing how you wish to vote, your shares will be voted FOR all nominees and FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm.
		Shares voted as abstentions on any matter (or as “withhold authority” as to Directors) will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum at the meeting and as unvoted, although present and entitled to vote, for purposes of determining the approval of each matter as to which the shareholder has abstained.
		If your shares are held in the name of a brokerage firm and you do not provide voting instructions to your broker, your shares will not be voted on any proposal for which your broker does not have discretionary authority to vote. If a broker submits a proxy that indicates that the broker does not have discretionary authority as to certain shares to vote on one or more proposals, those shares will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum at the meeting, but will not be considered as present and entitled to vote with respect to such proposals. Brokers have discretionary authority to vote on the election of Directors and the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm.
7. Q:		Where and when will I be able to find the results of the voting?
A:		Preliminary results will be announced at the Annual Meeting of Shareholders. Otter Tail Corporation will publish the final results in its quarterly report on Form 10-Q for the quarter ending June 30, 2007 to be filed with the Securities and Exchange Commission (“SEC”). You may also find the results on our website www.ottertail.com.
8. Q:		Who bears the cost of soliciting votes for the annual meeting?
A:		Otter Tail Corporation will pay the cost of preparing, assembling, printing, mailing, and distributing these proxy materials. In addition to soliciting proxies by mail, employees of Otter Tail Corporation may solicit them by telephone or in person. Employees receive no additional compensation for these solicitation activities.

Outstanding Voting Shares

The only persons known to Otter Tail Corporation to own beneficially (as defined by the SEC for proxy statement purposes) more than 5% of the outstanding common shares of Otter Tail Corporation as of February 26, 2007, are as follows:

Name and Address of		Amount and Nature of
Beneficial Owner		Beneficial Ownership				Percent of Class
Cascade Investment L.L.C. 2365 Carillon Point Kirkland, WA 98033		2,556,499 shs.(1)					8.7 %
Jeffrey L. Gendell 55 Railroad Avenue Greenwich, CT 06830		1,760,756 shs.(2)					6.0 %
Otter Tail Corporation Employee Stock Ownership Plan Wells Fargo Bank, N.A., Trustee Institutional Trust Services MAC: N9113-030 2700 Snelling Avenue North, Suite 300 Roseville, MN 55113		1,652,507 shs.(3)					5.6 %

Election of Directors

The Board of Directors of Otter Tail Corporation is comprised of nine Directors divided into three classes. The members of each class are elected to serve three-year terms with the term of office of each class ending in successive years. The terms of Mr. Arvid R. Liebe, Mr. John C. MacFarlane and Mr. Gary J. Spies expire at the time of the 2007 Annual Meeting of Shareholders. The Board of Directors, upon recommendation of the Corporate Governance Committee, nominates Mr. Liebe, Mr. MacFarlane and Mr. Spies for reelection to serve a three-year term ending at the time of the Annual Meeting of Shareholders in 2010.

Under Minnesota law, the affirmative vote of a plurality of the common shares present and entitled to vote with respect to the election of Directors is required for the election of the nominees to the Board of Directors. Proxies, unless otherwise directed thereon, will be voted in favor of all nominees. The proxies solicited may be voted for a substitute nominee or nominees in the event that any of the nominees is unable to serve, or for good reason will not serve, which is a contingency not now anticipated.

Brief biographies of the Director nominees and of the continuing Directors are found below. These biographies include the ages of the Directors (as of the 2007 Annual Meeting of Shareholders) and outlines of their business experiences. Each Director has held the same position or another executive position with the same employer for the past five years.

The Board of Directors has determined that, with the exception of Mr. MacFarlane, all of the Directors and Director nominees are independent (as defined by the NASDAQ Listing Standards). In addition Charles S. MacFarlane, President, Otter Tail Power Company, is the son of Mr. J. MacFarlane.

The Board of Directors recommends a vote FOR the election of all nominees to the Board of Directors.

Name		Principal Occupation		Age				Director Since
Nominees for election for three-year
terms expiring in April 2010:
Arvid R. Liebe		President			65				1995
		Liebe Drug, Inc.
		(retail business)
		Owner
		Liebe Farms, Inc.
		Milbank, South Dakota
		Mr. Liebe serves on the Compensation,Corporate
		Governance, and Executive Committees.
John C. MacFarlane		Chairman of the Board			67				1983
		Retired Chief Executive Officer and President
		Otter Tail Corporation
		Fergus Falls, Minnesota
		Mr. MacFarlane serves on the Executive Committee.
Gary J. Spies		Chairman			65				2001
		Service Food, Inc.
		(retail business)
		Fergus Falls, Minnesota
		Partner
		Fergus Falls Development Company,
		Midwest Regional Development Company, LLC
		(land and housing development)
		Fergus Falls, Minnesota
		Mr. Spies serves on the Audit and Corporate
		Governance Committees.
Directors with terms expiring
in April 2009:
Karen M. Bohn		President			53				2003
		Galeo Group, LLC
		(management consulting firm)
		Edina, Minnesota
		Director, Gander Mountain Company
		Ms. Bohn serves on the Audit,Corporate
		Governance and Executive Committees.
Edward J. McIntyre		Former Vice President and Chief Financial Officer			56				2006
		Xcel Energy, Inc.
		(energy company)
		Incline Village, Nevada
		Mr. McIntyre serves on the Audit and
		Compensation Committees.

Name		Principal Occupation		Age				Director Since
Joyce Nelson Schuette		Retired Managing Director and Investment Banker			56				2006
		Piper Jaffray & Co.
		(financial services)
		Minneapolis, Minnesota
		Ms. Schuette serves on the Compensation and Corporate
		Governance Committees.
Directors with terms expiring
in April 2008:
Dennis R. Emmen		Retired Senior Vice President, Finance, Treasurer			73				1984
		and Chief Financial Officer
		Otter Tail Power Company
		Fergus Falls, Minnesota
		Mr. Emmen serves on the Audit and
		Compensation Committees.
Kenneth L. Nelson		President and Chief Executive Officer			65				1990
		Barrel O’Fun, Inc.
		President and Chief Executive Officer
		Kenny’s Candy, Inc.
		President and Chief Executive Officer
		Tuffy’s Pet Foods, Inc.
		(snack and pet food manufacturing)
		Perham, Minnesota
		Mr. Nelson serves on the Audit Committee.
Nathan I. Partain		President and Chief Investment Officer			50				1993
		Duff and Phelps Investment Management Co.
		Chicago, Illinois
		President, Chief Executive Officer and Chief
		Investment Officer
		DNP Select Income Fund, Inc.
		(closed-end utility income fund)
		Mr. Partain serves on the Audit, Compensation,
		and Executive Committees.

Meetings and Committees of the Board of Directors

The full Board of Directors of Otter Tail Corporation considers all major decisions of Otter Tail Corporation. The Board of Directors has established a standing Audit Committee, Compensation Committee, Corporate Governance Committee, and Executive Committee so that certain important matters can be addressed in more depth than may be possible in a full Board of Directors meeting. Each Committee operates under a charter that is reviewed annually by that committee and the Board of Directors.

The full Board of Directors held a total of eight regularly scheduled and special meetings in 2006. The Board of Directors also held a planning retreat with senior management. In conjunction with each meeting and the retreat, the Board of Directors met in executive session without management present. During 2006, the Board of Directors also met in executive session without management and Chairman Mr. J. MacFarlane present. Each Director attended at least 75% of the total meetings of the Board of Directors, and the meetings of the committees on which he or she served. Each Director attended the Annual Meeting of Shareholders in 2006. Otter Tail Corporation expects that all Directors and executive officers will attend the Annual Meeting of Shareholders in 2007.

The Audit Committee reviews the financial results of Otter Tail Corporation, reviews accounting, audit and control procedures, and retains and supervises the independent registered public accounting firm. The Audit Committee has oversight responsibility for Otter Tail Corporation’s Code of Conduct. This committee is composed of six members of the Board of Directors who, for 2006, were Ms. Karen M. Bohn, Mr. Dennis R. Emmen, Mr. Edward J. McIntyre, Mr. Kenneth L. Nelson, Mr. Nathan I. Partain (Chair), and Mr. Spies. All committee members are independent Directors (as defined by the NASDAQ Listing Standards). The Board of Directors has determined that Mr. Emmen, Mr. McIntyre, and Mr. Partain meet the SEC definition of an audit committee financial expert and all members of the committee are financially literate. During the course of 2006 the Committee received training on new financial issues affecting Otter Tail Corporation. The Audit Committee held four meetings in 2006. For further information on the actions of the Audit Committee, please refer to the Report of the Audit Committee on page 18. The Audit Committee Charter may be reviewed at www.ottertail.com.

Compensation Committee

The Compensation Committee reviews, recommends, and reports to the Board of Directors on all compensation programs, plans and policies involving Otter Tail Corporation’s Board of Directors and certain executive officers and develops, evaluates, and recommends for approval all equity based compensation plans of Otter Tail Corporation. The Compensation Committee oversees the administration of the 1999 Employee Stock Purchase Plan, the 1999 Stock Incentive Plan, and the Executive Annual Incentive Plan. Working with an outside compensation consultant retained by it, and subject to approval by the Board of Directors, this committee sets compensation for the Directors, the Chief Executive Officer, the Chief Financial Officer, and certain other executive officers. This committee is composed of five members of the Board of Directors who, for 2006, were Mr. Emmen, Mr. Liebe (Chair), Mr. McIntyre, Mr. Partain and Ms. Joyce Nelson Schuette, all of whom are independent Directors (as defined by the NASDAQ Listing Standards). The Compensation Committee held three meetings in 2006. For further information on the actions of the Compensation Committee, please refer to the Compensation Discussion and Analysis (“CD&A”) on page 8 and the Report of the Compensation Committee on page 12. The Compensation Committee Charter may be reviewed at www.ottertail.com.

Corporate Governance Committee

The Corporate Governance Committee identifies and recommends to the Board of Directors qualified candidates for election as Directors, on Director committee assignments, on actions necessary for the proper governance of Otter Tail Corporation, and on actions necessary for the evaluation of the performance of the Board of Directors and Chief Executive Officer. With input from the Chief Executive Officer, the Corporate Governance Committee recommends certain executive officers for annual election. The Corporate Governance Committee reviews issues and developments related to corporate governance practices and makes recommendations to the Board of Directors on changes in structure, rule or practice necessary for compliance and for good corporate governance.

The Board of Directors has not set minimum standards for Director candidates. Rather, it seeks highly qualified individuals with a wide variety of business and life experiences that will enable them to constructively review and guide management of Otter Tail Corporation. Otter Tail Corporation has successfully obtained highly qualified candidates for Directors without utilizing a paid outside consultant. The Corporate Governance Committee considers and evaluates potential Director candidates and makes its recommendations to the full Board of Directors. Any shareholder may submit a recommendation for nomination to the Board of Directors by sending a written statement of the qualifications of the recommended individual to the President and Chief Executive Officer, Otter Tail Corporation, Box 496, Fergus Falls, Minnesota 56538-0496. The Corporate Governance Committee will utilize the same process for evaluating all nominees, regardless of whether the nominee is submitted by a shareholder or some other source.

The Corporate Governance Committee is composed of four members of the Board of Directors who, for 2006, were Ms. Bohn (Chair), Mr. Liebe, Ms. Schuette and Mr. Spies, all of whom are independent Directors (as defined by the NASDAQ Listing Standards). The Corporate Governance Committee held three meetings in 2006. The Corporate Governance Committee Charter may be reviewed at www.ottertail.com.

Executive Committeee

The Executive Committee exercises certain powers of the Board of Directors between normally scheduled Board of Directors meetings and performs such duties as the Board of Directors may assign to it. The Executive Committee is composed of four members of the Board of Directors who, for 2006, were Ms. Bohn, Mr. Liebe, Mr. MacFarlane and Mr. Partain (Chair). The Executive Committee did not meet in 2006.

Contact with the Board of Directors

Shareholders may contact the Board of Directors by either mail or e-mail. Questions may be sent to the entire Board of Directors, to a particular committee, or to an individual Director. The mailing address is Otter Tail Corporation, Board of Directors, Box 9156, Fargo, North Dakota 58106-9156 and the e-mail address is boardofdirectors@ottertail.com. Although reviewed by the General Counsel, all questions are forwarded to the Board of Directors or the appropriate committee or Director.

Director Compensation

The Compensation Committee retained Towers Perrin to assess the competitiveness of the compensation provided to Directors of Otter Tail Corporation. Towers Perrin established a group of comparable companies by revenue in general industry. From that it established a market median for compensation in the categories of retainers, committee chair retainers, meeting and committee fees and equity compensation. Towers Perrin made recommendations to the Compensation Committee for changes in Director compensation that would place it at or near market median for Director compensation in each category. Based upon the recommendations, the Compensation Committee set compensation for Directors as described below. Total compensation for Directors as adopted is slightly above the market median.

All Directors of Otter Tail Corporation receive an annual retainer for their services as a Director. All Directors, except the Chairman, receive an annual retainer of $30,000. The Chairman receives an annual retainer of $66,000. Each committee chair receives an additional retainer of $7,000 per year. All Directors receive a fee of $1,500 for each Board of Directors and committee meeting they attend. In addition, Directors receive an actual expense or a $100 travel allowance if they are required to furnish their own transportation to Board of Directors or committee meetings outside their city of residence.

Each Director receives an annual grant of restricted stock, which in 2006 was 2,200 shares granted under the terms of the 1999 Stock Incentive Plan. The shares of restricted stock, which are granted on the date of the annual meeting, vest over a period of four years, at the rate of 25% per year, and are eligible for full dividend and voting rights.

Otter Tail Corporation has established a stock ownership guideline for Directors. Directors are to hold 4,000 shares of Otter Tail Corporation stock to be obtained within five years of beginning service on the Board of Directors.

Directors may elect to receive their compensation (other than expense reimbursements) in the form of cash, stock or a combination. Directors may elect to defer the receipt of all or part of their cash compensation pursuant to the Otter Tail Corporation Deferred Compensation Plan for Directors. The deferral may be in the form of cash or stock units. Cash deferrals receive interest at a rate equal to 1% over the prime commercial rate of U.S. Bank National Association. Deferrals in the form of stock units are credited quarterly with dividend equivalents equal to the dividend rate on Otter Tail Corporation’s common shares and the deferred amount is paid out in common shares.

Director Compensation Table

The following table provides summary compensation information for each Director for the year ending December 31, 2006.

		Fees Earned or
Name		Paid in Cash ($)1				Stock Awards ($)2,3				Total ($)
John C. MacFarlane 4			77,250.00				37,220.00				114,470.00
Karen M. Bohn 5			57,000.00				26,405.00				83,405.00
Dennis R. Emmen			51,750.00				47,574.00				99,324.00
Arvid R. Liebe 6			56,754.00				37,220.00				93,974.00
Edward J. McIntyre 7			40,500.00				10,355.00				50,855.00
Kenneth L. Nelson			45,750.00				37,220.00				82,970.00
Nathan I. Partain 8			63,504.00				37,220.00				100,724.00
Joyce Nelson Schuette 7			39,000.00				10,355.00				49,355.00
Gary J. Spies 9			51,750.00				37,220.00				88,970.00
Thomas M. Brown 10			16,504.00				59,320.00				75,824.00
Robert N. Spolum 10			15,004.00				59,320.00				74,324.00

Management’s Security Ownership

Listed in the following table are the number of common shares of Otter Tail Corporation beneficially owned by Directors and the executive officers named in the Summary Compensation Table, as well as the number of shares owned by Directors and executive officers of Otter Tail Corporation as a group as of December 31, 2006:

		Amount and Nature of				Percent
Name of Beneficial Owner		Beneficial Ownership (1)(2)				Class
Karen M. Bohn			4,950
Dennis R. Emmen			14,000	(3)
John D. Erickson			178,432	(4)
George A. Koeck			23,921
Arvid R. Liebe			12,224
Charles S. MacFarlane			49,984	(5)
John C. MacFarlane			304,713	(6)			1.0	%
Edward J. McIntyre			3,651	(7)
Lauris N. Molbert			70,393	(8)
Kevin G. Moug			39,900	(9)
Kenneth L. Nelson			5,783
Nathan I. Partain			14,316	(10)
Joyce Nelson Schuette			2,265
Gary J. Spies			21,529	(11)
All Directors and executive officers as a group			746,061				2.5	%

No Director or executive officer of Otter Tail Corporation owned beneficially, directly, or indirectly, on December 31, 2006 any shares of any series of cumulative preferred shares of Otter Tail Corporation except for Mr. Emmen, who owned 115 cumulative preferred shares of the $3.60 series.

The information with respect to beneficial ownership of securities of Otter Tail Corporation is based on information furnished to Otter Tail Corporation by each person included in the table.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires Otter Tail Corporation’s Directors and executive officers and holders of more than 10% of Otter Tail Corporation’s common shares to file with the SEC initial reports of ownership and reports of changes in ownership of common shares and other equity securities of Otter Tail Corporation. Based on the certification of the Directors and executive officers, Otter Tail Corporation believes that during the year ended December 31, 2006 its Directors and executive officers complied with all Section 16(a) filing requirements.

Compensation Discussion and Analysis

Purpose and Philosophy

The Compensation Committee of the Board of Directors is responsible for developing and recommending to the Board of Directors Otter Tail Corporation’s executive compensation program for the four principal executive officers: Mr. Erickson, Chief Executive Officer and President; Mr. Molbert, Chief Operating Officer and Executive Vice President; Mr. Moug, Chief Financial Officer and Treasurer; and Mr. Koeck, General Counsel and Corporate Secretary (referred to in this CD&A as the “executive officers”) and recommending it to the Board of Directors. Each of these executive officers is included in the Summary Compensation Table and the related tables beginning on page 12. The fifth individual found in the Summary Compensation Table and the related tables is Mr. C. MacFarlane, President, Otter Tail Power Company, which is a division of Otter Tail Corporation. Compensation for Mr. C. MacFarlane is determined by Mr. Molbert, the Chief Operating Officer of Otter Tail Corporation, to whom he reports. His compensation is discussed separately.

The Compensation Committee has adopted an Executive Compensation Policy which outlines the overall executive compensation philosophy of Otter Tail Corporation and describes the components of executive compensation for the executive officers. Otter Tail Corporation believes that strong, effective leadership is the cornerstone of its continued growth and success. To be successful, Otter Tail Corporation must be able to attract, retain, and motivate highly qualified executive officers with the competencies needed to excel in a rapidly changing marketplace and to understand issues relating to a diverse group of companies in several different industries.

Executive compensation at Otter Tail Corporation is focused on results. Otter Tail Corporation provides fair and equitable compensation to its executive officers by combining base pay, annual cash incentive, stock-based long-term incentive, retirement income, and competitive health, dental and other benefits. The Executive Annual Incentive Plan is designed to reward executives for Otter Tail Corporation’s current year financial success and recognize the responsibilities of the executive officers for meeting Otter Tail Corporation’s financial performance goals. Stock-based incentives focus on long-term performance by aligning the executive officers’ long-term financial interests with Otter Tail Corporation’s shareholders’ interest. Pension and retirement plans are provided to encourage long tenure amongst the executive officers. Health, dental, vacation and other benefits are designed to be competitive with companies with whom Otter Tail Corporation competes for executive talent.

Total direct compensation which includes base pay, annual cash incentive and stock-based long-term incentive is measured against similarly sized organizations (based on revenue) in general industry and the utility sector. Otter Tail Corporation targets total direct compensation for each executive officer near median for similarly sized organizations in general industry and the utility sector. The mix of pay (base pay, annual cash incentive and long-term incentive) is designed to reflect a strong bias

2.		Corporate return on equity. Each officer receives 33.33% of the total target payout if Otter Tail Corporation achieves the targeted return on equity. Each officer receives 8.33% of the total target payout if Otter Tail Corporation achieves the minimum performance level, and additional increments for performance above the target. Otter Tail Corporation was slightly above the targeted performance level for return on equity in 2006.
3.		Cash flow from operations. Each officer receives 33.33% of the total target payout if Otter Tail Corporation achieves the targeted cash flow from operations. Each officer receives 8.33% of the total target payout if Otter Tail Corporation achieves the minimum performance level and additional increments for performance above the target. Otter Tail Corporation was slightly below the targeted performance level for cash flow from operations in 2006.

The Compensation Committee has discretion over the treatment of extraordinary gains, write offs or other events in determining the amount of incentive bonus to be paid. For 2006, the amount of annual cash incentive was based upon actual results.

Long-Term Incentives

Long-term incentive compensation for executive officers consists of performance share awards granted by the Compensation Committee under Otter Tail Corporation’s 1999 Stock Incentive Plan. The performance share awards are designed to tie the long-term incentives for the executive officers to Otter Tail Corporation stock performance and to further align the interests of the executive officers with shareholders. It does so in two ways. First, the number of shares awarded to the executive officers is based upon total shareholder return as compared to the Edison Electric Institute Index (“EEI Index”) for the three year period beginning on the first day of the year in which the grant is awarded. The EEI Index provides the weighted average of total shareholder returns for 63 shareholder owned electric utilities. Second, the value of the shares awarded increases or decreases with value provided to shareholders.

The targeted long-term incentive for each executive officer was again set with reference to the market median for similarly sized companies in general industry and the utility sector as determined by the Compensation Committee’s outside consultant. The long-term incentive awards for the executive officers at target were below market median for general industry; ranging from 34% (Mr. Erickson) of the general industry market median to 72% of the general industry market median. This is due in part to the fact that the utility sector market data is somewhat lower than the general industry market data. The performance shares, to the extent they become payable will be paid in common shares of Otter Tail Corporation.

Whether the performance shares become payable is based upon the total shareholder return of Otter Tail Corporation as compared to the total shareholder return of the companies that comprise the EEI Index over a three year period. For the grant awarded in 2006 the three year period is from January 1, 2006 through December 31, 2008. The EEI Index is chosen because it is the sector which includes Otter Tail Corporation common stock. For purposes of this calculation, total shareholder return equals stock appreciation plus the value of dividends. The actual payment of common shares may range from zero to 150% of the target amount and will be paid in 2009. The target amount will be paid if the total shareholder return for Otter Tail Corporation is at the 50^th percentile of the EEI Index over the three year period. The threshold performance level is set so as to make it achievable in most years and the maximum performance level is set so as to make it achievable only through exceptional performance. Otter Tail Corporation believes that the target is appropriate as it is indicative of performance consistent with the sector over the three year measurement period. Stronger than sector performance is awarded with additional shares. Weaker than sector performance is penalized with the executive officers receiving fewer or no shares. A wide performance range is used because all of the long-term incentive portion of compensation is at risk.

Compensation for Charles S. MacFarlane

Compensation for Mr. C. MacFarlane is set solely by Mr. Molbert in his role as Mr. C. MacFarlane’s supervisor. The components of Mr. C. MacFarlane’s compensation consist of base pay, annual cash incentive, stock-based long-term incentive, retirement income, and competitive health, dental and other benefits.

Mr. C. MacFarlane’s compensation (including base salary, short and long-term incentive) is determined based upon several factors, including (1) market median compensation for similar positions at similarly sized companies in the utility sector; (2) job complexity; (3) tenure; and (4) internal compensation equities with incumbent employees.

Consistent with the philosophy of Otter Tail Corporation, Mr. C. MacFarlane’s annual cash incentive is designed to place a significant portion of his annual cash compensation “at risk” depending upon the financial performance of Otter Tail Power Company for that year. The targeted annual cash incentive percentage for Mr. C. MacFarlane is 50% of base pay. The targets for annual cash incentive for Mr. C. MacFarlane are designed to reward Mr. C. MacFarlane for providing demonstrated leadership, achieving budgeted financial returns and meeting non-financial goals at Otter Tail Power Company. The three components measured in determining annual cash incentive are utility net income, utility return on equity and individual performance. Individual performance is measured by Mr. Molbert and is based upon Mr. C. MacFarlane’s performance against key performance indicators, including safety, customer satisfaction, plant availability, system reliability, and personal goals. It also takes in to consideration Mr. C. MacFarlane’s role on the Otter Tail Corporation executive team. Mr. Molbert has some discretion to vary positively or negatively from the results dictated by performance. The financial targets for utility net income and utility return on equity are based upon meeting the financial goals of Otter Tail Power Company as determined in the Otter Tail Power Company budgeting process with Otter Tail Corporation. For the same reasons as discussed in the section related to the executive officers’ annual cash incentive compensation, Otter Tail Corporation is not disclosing the specific financial targets for utility net income and for utility return on equity in the CD&A.

The annual cash incentive targets for Mr. C. MacFarlane are divided into three components:

1.		Utility Net Income. Mr. C. MacFarlane receives 40% of the total target payout if Otter Tail Power Company achieves targeted utility net income. Mr. C. MacFarlane receives 20% of the total target payout if Otter Tail Power Company achieves the minimum performance level, and additional increments for performance above target. Otter Tail Power Company did not meet the minimum performance level in 2006.
2.		Utility Return on Equity. Mr. C. MacFarlane receives 35% of his total target payout if Otter Tail Power Company achieves the targeted utility return on equity. Mr. C. MacFarlane receives 17.5% of the total target payout if Otter Tail Power Company achieves the minimum performance level, and additional increments for performance above target. Otter Tail Power Company did not meet the minimum performance level in 2006.
3.		Individual Performance. The amount payable under the individual performance goal is targeted at 25% of Mr. C. MacFarlane’s targeted payout and may be increased above or below target at Mr. Molbert’s discretion. It is based upon Mr. C. MacFarlane’s performance against key performance indicators, including safety, customer satisfaction, plant availablility, system reliability, and personal goals. It also takes into consideration Mr. C. MacFarlane’s role on the Otter Tail Corporation executive team. Mr. C. MacFarlane was paid an individual performance bonus at target in 2006.

Mr. C. MacFarlane receives long-term incentive compensation in the form of restricted stock units granted by the Compensation Committee under the Otter Tail Corporation 1999 Stock Incentive Plan. The restricted stock units, which were granted on the date of the 2006 Annual Meeting of Shareholders vest into Otter Tail Corporation common shares in their entirety on April 8, 2010, provided Mr. C. MacFarlane is employed by Otter Tail Power Company on that date. Until the restricted stock units vest into Otter Tail Corporation common shares, Mr. C. MacFarlane has no dividend or voting rights.

Stock Ownership Guidelines

Otter Tail Corporation has established stock ownership requirements to ensure that the executive officers remain focused on long-term shareholder value. The ownership guidelines are as follows: Mr. Erickson, 70,000 shares; Mr. Molbert, 35,000 shares; Mr. Moug, 20,000 shares; and Mr. Koeck, 10,000 shares. Stock options are not considered as shares counting towards the ownership guidelines which must be met in 2009.

Retirement Income and Deferred Compensation

Historically, the executive officers of Otter Tail Corporation have provided Otter Tail Corporation with long-term service. Otter Tail Corporation believes that this long-term service by its executive officers has been fundamental to its success. Accordingly, Otter Tail Corporation encourages long-term service by providing executive officers security in retirement through its pension and supplemental retirement plans. The executive officers, including Mr. C. MacFarlane, participate in the plans related to retirement income and deferred compensation.

Central to providing retirement security and encouraging long-term service by its executive officers are the Otter Tail Corporation Pension Plan (“Pension Plan”) and non-qualified Executive Survivor and Supplemental Retirement Plan (“ESSRP”). Combined, these plans deliver a defined pension benefit that increases with years of service and compensation. A further description of the benefits under the plan is found in the narrative description to the Pension Benefits Table.

The executive officers, including Mr. C. MacFarlane, may elect to participate in a non-qualified deferred compensation plan. The plan offers a relatively low cost, competitive benefit consistent with plans offered by other employers. Participation in the plan is limited to the executive officers of Otter Tail Corporation and certain other employees of Otter Tail Corporation and its subsidiaries. Under the plan, participants may defer up to 50% of their base pay and 100% of their annual cash incentive compensation. The amounts deferred are segregated into one or more accounts chosen by the participant and earn a return based upon the performance of the investment option chosen by the participant. One account under the plan has a beginning distribution date coinciding with retirement. Other accounts may have distribution dates determined by the participant. Deferred contributions are made pre-tax. Each participant makes his or her own investment decisions on the amounts deferred and is solely at risk for investment returns. There are no Otter Tail Corporation contributions to the plan for executive officers and it is not at risk for individual investment returns.

Otter Tail Corporation provides a 401(k) Retirement Savings Plan which the employees of Otter Tail Corporation, including the executive officers and Mr. C MacFarlane, may participate. The plan permits all employees to set aside a portion of their income into the 401(k) Retirement Savings Plan and Otter Tail Corporation matches 50% of the first 5% set aside by an employee up to the statutory maximum. The participation of the executive officers is on precisely the same terms as any other participant in the plan.

Severance Benefits

Otter Tail Corporation has entered into change in control severance agreements with each of the executive officers except Mr. C. MacFarlane, that provide financial protection in the event of a change in control that disrupts the executive officer’s career. These agreements are designed to attract and retain high caliber executive officers, recognizing that change in control protections are commonly provided at comparable companies with which Otter Tail Corporation competes for executive talent. In addition, the change in control protections will enhance the impartiality and objectivity of the executive officers in the event of a change in control situation and better ensure that shareholder interests are protected. The protections contained in the change in control agreements provide for a “double trigger” which means that there must be both a change in control and a termination of

employment for the provisions to apply. A more complete description of the change in control agreements is found in the tabular disclosure in this proxy found at page 17.

Otter Tail Corporation has also entered into executive employment agreements with the executive officers, except for Mr. C.MacFarlane. These agreements have been entered into by Otter Tail Corporation because they clearly define the obligations of Otter Tail Corporation and the benefits to the executive officer upon termination from employment. These agreements are more fully described in the tabular disclosure in this proxy found at page 17.

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code imposes limits on tax deductions for executive compensation in excess of $1,000,000 paid to any of the five top executive officers named in the summary compensation table. It is the Compensation Committee’s policy to take reasonable steps to preserve this tax deduction.

Report of Compensation Committee

The Compensation Committee of Otter Tail Corporation’s Board of Directors is composed of five independent directors defined by the NASDAQ Listing Standards, and operates under a written charter adopted by the Board of Directors. The Compensation Committee met and held discussions with management regarding the foregoing CD&A. Based upon that discussion with management and its review of the CD&A, the Compensation Committee has recommended to the Board of Directors that the CD&A be included in this Proxy Statement and in Otter Tail Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the SEC.

Arvid R. Liebe, Chair
Dennis R. Emmen
Edward J. McIntyre
Nathan I. Partain
Joyce Nelson Schuette

Executive Compensation

The following tables and accompanying narrative disclosure and footnotes should be read in conjunction with the CD&A, which sets forth the objectives of Otter Tail Corporation’s executive compensation and benefit program.

Summary Compensation Table

The table below contains information about compensation for the last fiscal year paid to the individuals who served as Chief Executive Officer and Chief Financial Officer during 2006, and each of the other three most highly compensated executive officers who were serving as executive officers at the end of 2006 (“Named Executive Officers”).

Summary Compensation Table

																						Non-Equity				Change in
																						Incentive				Pension Value &
																						Plan				Non-Qualified				All Other
										Bonus				Stock Awards				Option Awards				Compensation				Deferred Compensation				Compensation
Name and Principal Position		Year				Salary ($)				($)1				($)2				($)3				($)4				Earnings ($)5				($)6				Total ($)
John D. Erickson President & CEO			2006				424,000				—				772,349				—				415,888				—				15,100				1,627,337
Kevin G. Moug Chief Financial Officer & Treasurer			2006				272,250				—				317,582				—				166,824				163,746				16,300				936,702
Lauris N. Molbert Executive Vice President & COO			2006				341,000				—				548,235				—				330,820				333,687				15,100				1,568,842
George A. Koeck General Counsel & Corporate Secretary			2006				241,250				—				193,637				—				121,863				—				15,100				571,850
Charles S. MacFarlane President, Otter Tail Power Company			2006				250,250				63,500				98,549				10,840				31,750				70,738				8,748				534,375

Grants of Plan-Based Awards

The following table summarizes the 2006 grants of equity and non-equity awards to the Named Executive Officers.

Grants of Plan-Based Awards

																														All other				All other
																														Stock				Option
																														Awards:				Awards:
						Estimated Future Payouts Under												Estimated Future Payouts Under												No. of				No. of								Grant Date Fair
						Non-Equity Incentive Plan Awards2												Equity Incentive Plan Awards3												Shares of				Securities				Exercise or Base				Value of Stock
						Threshold				Target				Maximum				Threshold				Target				Maximum				Stock or				Underlying				Price of Option				and Option
Name		Grant Date1				($)				($)				($)				(#)				(#)				(#)				Units (#)4				Options(#)				Awards ($/Sh)				Awards ($)
John D. Erickson		10-April-06					104,500				418,000				836,000				11,400				22,800				34,200				—				—				—				591,660
Kevin G. Moug		10-April-06					42,000				168,000				336,000				5,350				10,700				16,050				—				—				—				277,665
Lauris N. Molbert		10-April-06					83,125				332,500				665,000				8,900				17,800				26,700				—				—				—				461,910
George A. Koeck		10-April-06					30,625				122,500				245,000				3,700				7,400				11,100				—				—				—				192,030
Charles S. MacFarlane		10-April-06					47,625				127,000				—				—				—				—				4,300				—				—				109,263

Outstanding Equity Awards at Fiscal Year End

The following table summarizes the total outstanding equity awards as of December 31, 2006 for the Named Executive Officers:

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

Option Awards

Stock Awards

Equity Incentive

Equity Incentive

Equity Incentive

Plan Awards:

Plan Awards:

Market

Plan Awards:

Market or

Number of

Number of

Number of

Number of

Value of

Number of

Payout Value

Securities

Securities

Securities

Shares or

Shares or

Unearned

of Unearned

Underlying

Underlying

Underlying

Units of

Units of

Shares, Units

Shares, Units

Unexercised

Unexercised

Unexercised

Option

Option

Stock That

Stock That

or Other Rights

or Other Rights

Options (#)

Options (#)

Unearned

Exercise

Expiration

Have Not

Have Not

That Have Not

That Have Not

Name

Exercisable

Unexercisable1

Options (#)

Price ($)

Date

Vested (#)2

Vested ($)2

Vested (#)3

Vested ($)3

John D. Erickson

16,000

19.19

23-Feb-09

25,000

19.75

10-Apr-10

75,000

26.25

09-Apr-11

9,000

280,440

21,150

659,034

Kevin G. Moug

25,000

26.25

09-Apr-11

3,000

93,480

9,900

308,484

Lauris N. Molbert

50,000

26.25

09-Apr-11

5,500

171,380

16,500

514,140

George A. Koeck

20,000

26.25

09-Apr-11

1,550

48,298

6,850

213,446

Charles S. MacFarlane

10,000

29.74

10-Dec-11

3,000

31.34

08-Apr-12

6,000

2,000

27.25

14-Apr-13

3,000

26.50

12-Apr-14

3,000

24.93

11-Apr-15

8,550

266,418

Option Exercises and Stock Vested in Last Fiscal Year

The following table provides information on option exercises and stock vested in 2006 related to the Named Executive Officers and the resulting value realized.

OPTION EXERCISES & STOCK VESTED

		Option Awards								Stock Awards
		Number of Shares Acquired				Value Realized on Exercise				Number of Shares				Value Realized on
Name		on Exercise (#)				($)1				Acquired on Vesting (#)				Vesting ($)1
John D. Erickson											26,900				785,404
Kevin G. Moug			14,750				148,203				9,075				268,602
Lauris N. Molbert											16,325				481,462
George A. Koeck											5,450				161,272
Charles S. MacFarlane											2,000				56,320

Pension and Supplemental Retirement Plans

The Pension Plan is a tax-qualified defined benefit pension plan. All employees of Otter Tail Corporation, including Otter Tail Power Company employees hired prior to January 1, 2006, are eligible to participate in the Pension Plan. Benefits for Mr. Erickson, Mr. Molbert, Mr. Moug and Mr. Koeck are determined by multiplying 37% of final average earnings (as defined in the Plan) by a fraction the numerator of which is the number of years of benefit accrual service up to 30 years and the denominator of which is 30. For these executive officers, final average earnings is determined using the 42 consecutive months out of the last 10 consecutive years prior to the participant’s retirement which produces the highest average salary, which includes base salary and bonus. For Mr. C. MacFarlane, the benefit is determined by multiplying 38% of his final average earnings by a fraction the numerator of which is the number of years of benefit accrual service up to 30 years and the denominator of which is 30. Final average earnings for Mr. C. MacFarlane is determined by using the 30 consecutive months out of the last 10 years prior to the participant’s retirement that produces the highest average salary which includes base salary and bonus. A full pension benefit is paid if the executive officer retires after he or she reaches age 62. If the executive officer commences payment prior to age 62, there is a reduction in pension benefit on a scale beginning at 5% at age 61 and ending at 39% at age 55, the earliest age at which the pension benefit may be received. The plan does not provide for a lump sum distribution. The plan does not contemplate, nor have there been granted additional years of credited service.

Each of the Named Executive Officers participates in the ESSRP. Participation in the ESSRP is determined by the Board of Directors. The ESSRP was amended and restated effective January 1, 2005 and amended again effective January 1, 2006. The principal effect of the restatement is to reduce future benefits under the ESSRP and reduce costs to Otter Tail Corporation. Mr. Erickson and Mr. Koeck will receive retirement benefits under the ESSRP equal to the greater of the following:

(1)		A benefit equal to 70% of the participant’s final average earnings (as defined in the ESSRP) offset by the participant’s social security benefit and the amount of the participant’s benefit from Otter Tail Corporation’s tax-qualified defined benefit Pension Plan; provided that the amount of this benefit will not increase after December 31, 2010. If this benefit is applicable, it will be paid for 15 years to the participant or the participant’s beneficiary, or for such longer period of time as the participant lives. Final average earnings under the ESSRP is the average of the participant’s total cash payments (base salary and bonus) paid to the participant during the highest consecutive 42 months in the 10 years prior to the date as of which final average earnings is determined.
(2)		The benefit is calculated under Otter Tail Corporation’s tax-qualified defined benefit Pension Plan, modified to include the participant’s bonus in the computation of covered compensation and to exclude any statutory compensation and benefits limit, and is offset by the participant’s benefit from the tax-qualified defined benefit Pension Plan. If this benefit is applicable, it will be paid in the same form as the participant’s tax-qualified defined benefit Pension Plan benefit.

Mr. Molbert, Mr. Moug and Mr. C. MacFarlane will receive retirement benefits under the ESSRP equal to the greater of the following:

(1)		A benefit equal to 65% of the participant’s final average earnings (as defined in the ESSRP) offset by the participant’s social security benefit and the amount of the participant’s benefit from Otter Tail Corporation’s tax-qualified defined benefit Pension Plan; provided that the amount of this benefit will not increase after December 31, 2010. The benefit amount accrues over a 15 year period. If this benefit is applicable, it will be paid for 15 years to the participant or the participant’s beneficiary, or for such longer period of time as the participant lives. Final average earnings for Mr. Molbert and Mr. Moug is defined in the same manner as for Mr. Erickson and Mr. Koeck. Final average earnings for Mr. C. MacFarlane is defined as the average of the total cash payments (base salary and bonus) paid to the participant during the highest consecutive 30 months in the 10 years prior to the date as of which final average earnings is determined.
(2)		The benefit is calculated under Otter Tail Corporation’s tax-qualified defined benefit Pension Plan, modified to include the participant’s bonus in the computation of covered compensation and to exclude any statutory compensation and benefit limits, and is offset by the participant’s benefit from the tax-qualified defined Pension Plan. If this benefit is applicable, it will be paid in the same form as the participant’s tax-qualified defined benefit Pension Plan benefit.

The executive officers are all vested in their benefits under the ESSRP. Mr. Molbert, Mr. Moug and Mr. Koeck were granted an additional 6.5, 5, and 3.6 years of service, respectively, under the ESSRP as of January 1, 2005. These increases were designed to more equitably apply the reduction in benefits caused by the January 1, 2005 Amendment to the ESSRP. The ESSRP does not provide for a lump sum distribution.

If an executive officer under the ESSRP dies while employed by Otter Tail Corporation, Otter Tail Corporation will pay the participant’s beneficiary an amount equal to four times the participant’s annual salary and bonus at the time of death. If an executive officer under the ESSRP dies after retirement or dies after termination for other reasons with a vested benefit, Otter Tail Corporation will pay the participant’s beneficiary a lesser amount, depending upon the executive officer’s age at death and his or her vested percentage.

If an executive officer retires prior to age 62 or terminates prior to retirement, with a vested benefit in the ESSRP, the executive officer will receive a reduced benefit amount. If a participant dies while still employed, his or her beneficiary will receive the actuarial equivalent of the participant’s benefit in 15 annual installments. Upon a change in control (as defined in the ESSRP), or in the event of the death of the executive officer while actively employed by Otter Tail Corporation, the executive officer becomes 100% vested in his or her accrued benefit. In the event of disability, years of credited service and years of participation continue to accrue under the ESSRP until such time as payments under Otter Tail Corporation’s long-term disability plan end. The Board of Directors has the right to amend, suspend or terminate the ESSRP, but no such action can reduce the benefits already accrued.

The following table summarizes the number of years of credited service and present accumulated value of the pension benefits for the Named Executive Officers under the Otter Tail Corporation Pension Plan and ESSRP.

PENSION BENEFITS

						Present Value of		Payments During
				Number of Years		Accumulated		Last Fiscal Year
Name		Plan Name		Credited Service (#)		Benefit ($)1		($)
John D. Erickson		Pension Plan		26.50		449,000		—
		ESSRP		12.00		2,185,890
Kevin G. Moug		Pension Plan		5.00		80,000		—
		ESSRP		10.002		699,222
Lauris N. Molbert		Pension Plan		5.00		90,000		—
		ESSRP		11.503		1,529,974
George A. Koeck		Pension Plan		7.33		171,000		—
		ESSRP		10.604		882,957
Charles S. MacFarlane		Pension Plan		5.08		58,000		—
		ESSRP		5.00		170,219

Non-Qualified Deferred Compensation

The following table presents information on non-qualified deferred compensation for the Named Executive Officers:

NON-QUALIFIED DEFERRED COMPENSATION¹

		Executive				Registrant		Aggregate				Aggregate		Aggregate
		Contributions				Contributions in		Earnings in				Withdrawals /		Balance at Last
Name		in Last FY ($)2				Last FY ($)		Last FY ($)2				Distributions ($)		FYE ($)3
John D. Erickson			139,202			—			43,915			—			548,294
Kevin G. Moug			13,612			—			9,078			—			137,866
Lauris N. Molbert			91,248			—			26,309			—			257,266
George A. Koeck			—			—			—			—		—
Charles S. MacFarlane			25,001			—			32,901			—			262,446

Potential Termination Payments Upon a Change in Control

Otter Tail Corporation has entered into change in control severance agreements (the Severance Agreements) with Mr. Erickson, Mr. Molbert, Mr. Moug, and Mr. Koeck. The Severance Agreements provide for certain payments and other benefits if, following a Change in Control, Otter Tail Corporation terminates the executive officer’s employment without Cause or the executive officer terminates his employment for Good Reason. Such payments and benefits include: (i) severance pay equal to three times the sum of the executive officer’s salary (at the highest annual rate in effect during the three years prior to the termination) and average annual bonus (for the three years prior to the termination); (ii) three years of continued life, health and disability insurance; (iii) the payment of legal fees and expenses relating to the termination; (iv) the termination of any noncompetition arrangement between Otter Tail Corporation and the executive officer; and (v) a gross-up payment for any excise tax imposed on such payments or benefits and for any tax imposed on such gross-up. Under the Severance Agreements, “Cause” is defined as willful and continued failure to perform duties and obligations or willful misconduct materially injurious to Otter Tail Corporation; “Good Reason” is defined to include a change in the employee’s responsibility or status, a reduction in salary or benefits, or a mandatory relocation; and “Change in Control” is defined to include a change in control of the type required to be disclosed under SEC proxy rules, acquisition by a person or group of 35% of the outstanding voting stock of Otter Tail Corporation, a proxy fight or contested election which results in Continuing Directors (as defined in the Agreements) not constituting a majority of Otter Tail Corporation’s Board of Directors, or another event the majority of the Continuing Directors determines to be a Change in Control.

Potential Termination Payments due Outside a Change in Control

Otter Tail Corporation has entered into employment agreements (the Employment Agreements) with Mr. Erickson, Mr. Molbert, Mr. Moug, and Mr. Koeck. The Employment Agreements provide that if Otter Tail Corporation terminates the employment of one of the executive officers for Cause or if one of the executive officers terminates the employment relationship without Good Reason (as defined in the Agreements) that the executive officer shall receive base pay and benefits through the date of termination. Alternatively, if Otter Tail Corporation terminates the employment of one of the executive officers for any other reason, or if one of the executive officers terminates the employment relationship for Good Reason, Otter Tail Corporation shall pay a severance payment equal to 1.5 times the sum of the executive officer’s base pay plus his most recent annual cash incentive payment in full satisfaction of Otter Tail Corporation’s obligations to the executive officer.

The following table presents information regarding potential payments pursuant to the agreements described above upon termination or change in control for each of the executive officers named below assuming the event took place on December 31, 2006.

Summary of Termination Provisions

		No Change in Control										Change in Control
		For Cause ($)		Death/Disability ($)				Without Cause ($)				($)
John D. Erickson1		—			1,318,068				2,601,900				5,440,825
Kevin G. Moug2		—			616,968				1,287,204				3,140,409
Lauris N. Molbert3		—			1,028,280				2,049,510				4,963,182
George A. Koeck4		—			426,892				977,187				2,477,486
Charles S. MacFarlane5		—			—				—				158,206

(4)		For Mr. Koeck, Death/Disability consists of performance shares vesting at target in the amount of $426,892; Without Cause consists of performance shares vesting at target in the amount of $426,892, and severance in the amount of $550,295; Upon a Change in Control consists of performance shares vesting at target in the amount of $426,892, severance in the amount of $1,072,000, restricted stock vesting in the amount of $48,298, three additional years of credited service under the ESSRP in the amount of $194,284, a health benefit in the amount of $46,791 and a tax gross up in the amount of $689,221.
(5)		Mr. C. MacFarlane does not have a Change in Control agreement, but he would receive three additional years of credited service under the ESSRP in the event of a change in control in the amount of $158,206.

Report of Audit Committee

The Audit Committee of Otter Tail Corporation’s Board of Directors is composed of six independent Directors (as defined by NASDAQ Listing Standards), and operates under a written charter adopted by the Board of Directors. The Audit Committee retains and supervises Otter Tail Corporation’s independent registered public accounting firm, currently Deloitte & Touche LLP.

Management is responsible for Otter Tail Corporation’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of Otter Tail Corporation’s consolidated financial statements in accordance with generally accepted auditing standards and to issue a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes.

In this context, the Audit Committee met and held discussions with management and the independent registered public accounting firm. Management represented to the Audit Committee that Otter Tail Corporation’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm. The Audit Committee discussed with the independent registered public accounting firm matters required to be discussed by Statement on Auditing Standards No. 61 (Communications with Audit Committees).

Otter Tail Corporation’s independent registered public accounting firm also provided to the Audit Committee the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and the Audit Committee discussed with the independent registered public accounting firm that firm’s independence.

Based on the Audit Committee’s discussions with management and the independent registered public accounting firm and the Audit Committee’s review of the consolidated financial statements and the report of the independent registered public accounting firm to the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in Otter Tail Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the SEC.

Nathan I. Partain, Chair
Karen M. Bohn
Dennis R. Emmen
Edward J. Mclntyre
Kenneth L. Nelson
Gary J. Spies

Ratification of Independent Registered
Public Accounting Firm

At the Annual Meeting of Shareholders, the Board of Directors will propose that shareholders ratify the appointment of the firm of Deloitte & Touche LLP as the independent registered public accounting firm to audit the consolidated financial statements of Otter Tail Corporation for 2007. This firm has no direct or indirect financial interest in Otter Tail Corporation.

The Audit Committee of Otter Tail Corporation’s Board of Directors has appointed Deloitte & Touche LLP as our independent registered public accounting firm for 2007. Shareholder ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm is not required by our bylaws or otherwise. However, the Board of Directors is submitting the appointment of Deloitte & Touche LLP to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the appointment, the Audit Committee will reconsider whether or not to retain that firm. Even if the appointment is ratified, the Audit Committee, which is solely responsible for appointing and terminating our independent registered public accounting firm, may in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of Otter Tail Corporation and its shareholders.

A partner of the independent registered public accounting firm of Deloitte & Touche LLP will be present at the annual meeting to answer questions and to make a statement if he or she desires to do so. An affirmative vote of a majority of the common shares present and entitled to vote with respect to the ratification of the independent registered public accounting firm is required for ratification. Proxies, unless otherwise directed thereon, will be voted in favor of this proposal. The Board of Directors recommends a vote FOR the ratification of Deloitte & Touche LLP as the independent registered public accounting firm for 2007.

Fees
Aggregate fees that Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmastu, and their respective affiliates (collectively, the “Deloitee Entities”) billed to Otter Tail Corporation for 2006 and 2005 are as follows:

Fees for Professional Services
		2006				2005
Total Audit Fees		$	1,200,000	(a)		$	1,418,011	(b)
Audit-Related Fees			17,080	(c)			5,800	(d)
Total Audit and Audit-Related Fees			1,217,080				1,423,811
Tax Fees			50,640	(e)			33,070	(f)
Total Fees Paid to Deloitte Entities		$	1,267,720			$	1,456,881

Pre-Approval of Audit/Non-Audit Services Policy

Otter Tail Corporation’s Audit Committee has adopted, and the Board of Directors has ratified, the Audit and Non-Audit Services Pre-Approval Policy which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent registered public accounting firm may be pre-approved. The independent registered public accounting firm has reviewed this policy and believes that implementation of the policy will not adversely affect the firm’s independence.

Four categories of services have been defined by Otter Tail Corporation within the policy to provide a consistent framework for assessment, decision-making, approval and reporting. The following is a summary of the key provisions of the policy.

Audit services are specified services directly related to performing the independent audit of Otter Tail Corporation and its subsidiaries. The independent registered public accounting firm will submit to the Audit Committee for pre-approval the scope and estimated fees associated with the current year audit at the July Audit Committee meeting.

Audit-related services are specified services that are related extensions of audit services and are logically performed by the independent registered public accounting firm. Additional services exceeding the specified pre-approved limits require specific Audit Committee approval.

Tax services are specified services related to tax matters. Using the independent registered public accounting firm for these matters creates efficiencies, minimizes disruption, or preserves confidentiality. Additional services exceeding the specified pre-approved limits, or adding service types to the pre-approved list, requires specific Audit Committee approval.

Other services include (a) “synergistic” services for which utilizing the independent registered public accounting firm creates efficiencies, minimizes disruption, or preserves confidentiality, or (b) “unique qualifications” services for which management has determined that the independent registered public accounting firm possesses unique or superior qualifications to provide the services. Additional services exceeding the specified pre-approved limits, or adding service types to the pre-approved list, requires specific Audit Committee approval.

“Restricted” non-audit services include nine specific restricted services outlined in the SEC’s final rule on auditor independence issued January 28, 2003. These services are not to be performed by the independent registered public accounting firm.

During 2005 and 2006, all of the services provided by Deloitte Entities for the services described above under audit fees, audit-related fees, tax fees and all other fees were pre-approved by the Audit Committee consistent with this procedure.

Policy and Procedures Regarding Transactions with Related Persons

The Board of Directors of Otter Tail Corporation has adopted a Policy and Procedures Regarding Transactions with Related Persons. This policy delegates to the Audit Committee responsibility for reviewing, approving, or ratifying transactions with “Related Persons” that are required to be disclosed under the rules of the Securities and Exchange Commission. Under the policy, a “Related Person” includes any of the directors or executive officers of Otter Tail Corporation, certain shareholders, and their immediate families. The policy applies to transactions in which Otter Tail Corporation is a participant and a Related Person will have a direct or indirect material interest, and where the amount involved exceeds $120,000. Under the policy, management of Otter Tail Corporation is responsible for disclosing to the Audit Committee all material information related to any covered transaction in order to give the Audit Committee an opportunity to authorize, approve, or ratify the covered transaction based upon its determination that the covered transaction is fair and reasonable and on terms no less favorable to Otter Tail Corporation than could be obtained in a comparable arm’s length transaction with an unrelated third party. A copy of Policy and Procedures Regarding Transactions with Related Persons can be found at www.ottertail.com.

At its February 16, 2007 meeting, the Audit Committee approved Otter Tail Corporation entering into a Note Purchase Agreement with Cascade Investment L.L.C. pursuant to which Otter Tail Corporation agreed to issue to Cascade, in a private placement transaction, $50 million aggregate principal amount of our senior notes due November 30, 2017. The notes will bear interest at a rate of 5.778% per annum, subject to adjustment in the event certain ratings assigned to our long-term senior unsecured indebtedness are downgraded below specific levels prior to the closing of the note purchase. The terms of the note purchase agreement are substantially similar to the terms of the note purchase agreement entered into in connection with the issuance of our $90 million 6.63% senior notes due December 1, 2011. The closing is expected to occur on December 3, 2007 subject to the satisfaction of certain conditions to closing, such as, there having been no event or events having a material adverse effect on the company as a whole, certain senior executives will still be in their roles, there having been no change in control nor impermissible sale of assets, the consolidated debt ratio to earnings before interest, taxes, depreciation and amortization as of September 30, 2007 will be less than 3.5 to 1, certain waivers will have been obtained and certain other customary conditions of closing will have been satisfied.

Otter Tail Corporation has the right to terminate the note purchase agreement by giving at least 30 days’ prior written notice to Cascade and paying a termination fee of $1 million. The proceeds of this financing will be used to redeem our $50 million 6.375% senior debentures due December 1, 2007.

Cascade is considered a Related Person because it own’s approximately 8.7% of Otter Tail Corporation’s outstanding common shares as of February 15, 2007.

Shareholder Proposals for 2008 Annual Meeting

Any holder of common shares of Otter Tail Corporation who intends to present a proposal which may properly be acted upon at the 2008 Annual Meeting of Shareholders of Otter Tail Corporation must submit such proposal to Otter Tail Corporation so that it is received at Otter Tail Corporation’s executive offices at 4334 18th Avenue SW, Suite 200, P. O. Box 9156, Fargo, North Dakota 58106-9156, on or before November 6, 2007, for inclusion in Otter Tail Corporation’s Proxy Statement and form of Proxy relating to that meeting.

If a holder of common shares wishes to present a proposal at the 2008 Annual Meeting of Shareholders, but does not wish to include it in the Proxy Statement and form of Proxy relating to that meeting, the holder must submit notice of the proposal to Otter Tail Corporation’s executive offices on or before January 21, 2008 in order for the proposal to be considered timely.

Other Business

As of the date hereof, the Board of Directors of Otter Tail Corporation is aware of no other proposals to be presented to the annual meeting, in addition to the items described above. If any other matters properly come before the annual meeting, the proxies will vote thereon at their discretion.

A copy of Otter Tail Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006, including financial statements and schedules thereto, filed with the SEC, is available without charge to shareholders. Address written requests to:

		Corporate Secretary Otter Tail Corporation PO Box 9156 Fargo, ND 58106-9156

215 South Cascade Street
Box 496
Fergus Falls, Minnesota 56538-0496

4334 18^th Avenue SW
Box 9156
Fargo, North Dakota 58106-9156

www.ottertail.com

    

215

South Cascade Street, Fergus Falls, MN 56537

SEE OTHER SIDE

This proxy will be voted as directed. In the absence of specific directions, the proxy will be voted FOR the election of Directors, and FOR Item 2.

		P/N

Please return upper portion in envelope provided.

OTTER TAIL CORPORATION

ANNUAL MEETING OF SHAREHOLDERS

Monday, April 9, 2007
10:00 AM

ADMISSION TICKET

(OVER)

				ANNUAL MEETING ADMISSION TICKET

Admission ticket for Otter Tail Corporation Annual Meeting of Shareholders, April 9, 2007 at 10:00 a.m. at the
Bigwood Event Center, 921 Western Avenue (Highway 210 West and I-94), Fergus Falls, MN.

Number of individuals                              

Please present this ticket for admittance of shareholder(s) named above.

								VOTING INSTRUCTIONS	Company Number:     664       Number:
								You may vote your proxy in one of three ways.
VOTE BY THE INTERNET — https://secure.ottertail.com/proxy
		•		Use the Internet to vote your proxy 24 hours a day, 7 days a week.
		•		You will be prompted to enter the 3-digit company number and the 6-digit number, which are located in the box above.
		•		Internet voting will terminate at 12:00 noon C.S.T., April 6, 2007.
VOTE BY TELEPHONE — 1-888-514-5365
		•		Use any touch-tone phone to vote your proxy 24 hours a day, 7 days a week.
		•		You will be prompted to enter the 3-digit company number and the 6-digit number which are located in the box above.
		•		Please note the following options:
				Ø		To vote as the Board of Directors recommends on All proposals: Press 1
				Ø		To vote on each item separately, press 0. You will then hear these instructions:
						Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees, press 9; To WITHHOLD FOR AN INDIVIDUAL nominee, press 0.
						Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
				Ø		When asked, you must confirm your vote by pressing 1.
		•		Phone voting will terminate at 12:00 noon C.S.T., April 6, 2007.
VOTE BY MAIL
		•		Mark, sign, and date your proxy card and return it in the postage-paid envelope provided.
				Do not mail the proxy card if you vote by phone or Internet.

Thank you for voting.

ò    Please detach here    ò

PROXY
Solicited on Behalf of the Board of Directors
of OTTER TAIL CORPORATION

The undersigned hereby appoint KAREN BOHN AND JOYCE NELSON SCHUETTE (each with power to act alone and with full power of substitution) the proxies of the undersigned to vote all common shares that the undersigned is entitled to vote at the Annual Meeting of Otter Tail Corporation to be held April 9, 2007, and at any adjournment thereof, and hereby directs that this proxy be voted as instructed herein. The Board of Directors recommends voting for the election of Directors (Item 1), for the ratification of Deloitte & Touche LLP as our independent registered public accounting firm (Item 2).

1. ELECTION OF DIRECTORS
01) Arvid R. Liebe		02) John C. MacFarlane		03) Gary J. Spies
o FOR		o FOR		o FOR
o WITHHOLD		o WITHHOLD		o WITHHOLD

2. THE RATIFICATION OF DELOITTE & TOUCHE LLP as our independent registered public accounting firm.

                         FOR o           AGAINST o           ABSTAIN o

3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting.

Dated:                    , 2007          

Signature		Signature, if held jointly

Please sign exactly as name appears on other side. When signing as attorney, administrator, trustee, or guardian, please give your full title.