UNITED STATESUnited States


SECURITIES AND EXCHANGE COMMISSIONSecurities and Exchange Commission


Washington, D.C. 20549



Form 10-Q

      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         

For the quarterly period ended March 31,June 30, 2005.

OR

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        ACT OF 1934


          

For the transition period from _________________________ to __________._______________.

          

Commission File Number 1-7978

Black Hills Power, Inc.
Incorporated in South Dakota       IRS Identification Number 46-0111677

Black Hills Power, Inc.

Incorporated in South Dakota

IRS Identification Number 46-0111677

625 Ninth Street

625 Ninth Street
Rapid City, South Dakota 57701

Registrant’s telephone number (605) 721-1700

Former name, former address, and former fiscal year if changed since last report

NONE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

x

No

o

       Yes              No  

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes

o

No

x

       Yes              No   

As of April 30,July 29, 2005, there were issued and outstanding 23,416,396 shares of the Registrant’s common stock, $1.00 par value, all of which were held beneficially and of record by Black Hills Corporation.

Reduced Disclosure

The Registrant meets the conditions set forth in General Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.

TABLE OF CONTENTS


Page

PART I.

Page

FINANCIAL INFORMATION

Item 1.


Financial Statements

PART 1.

FINANCIAL INFORMATION

Item 1.

Financial Statements


Condensed Statements of Income –

-

Three and Six Months Ended March 31,June 30, 2005 and 2004

3


Condensed Balance Sheets –

-

March 31,

   June 30, 2005 and December 31, 2004

4


Condensed Statements of Cash Flows –

-

Three and Six Months Ended March 31,June 30, 2005 and 2004

5


Notes to Condensed Financial Statements

6-8

6-9


Item 2.

Results of Operations

9-10

9-12


Item 4.

Controls and Procedures

11

13


PART II.

OTHER INFORMATION

PART II.


Item 1.

OTHER INFORMATION

Legal Proceedings13


Item 6.

Exhibits13

Item 1.

Legal Proceedings

11


Signatures		14

Item 6.

Exhibits

11

Signatures

12


Exhibit Index

13

15

2

BLACK HILLS POWER, INC.


CONDENSED STATEMENTS OF INCOME
(unaudited)

(unaudited)

Three Months EndedSix Months Ended
June 30June 30
2005
2004
2005
2004
(in thousands)

Operating revenue		  $42,261 $39,809 $85,408 $81,456 
Operating expenses:  
   Fuel and purchased power   15,587  14,383  30,794  27,193 
   Operations and maintenance   6,613  7,817  11,970  13,997 
   Administrative and general   5,062  4,110  11,022  8,188 
   Depreciation and amortization   4,759  4,803  9,697  9,746 
   Taxes, other than income taxes   2,120  2,136  4,310  4,364 
    34,141  33,249  67,793  63,488 
Operating income   8,120  6,560  17,615  17,968 
Other income (expense):  
   Interest expense   (3,146) (4,218) (6,361) (8,406)
   Interest income   9  226  43  438 
   Other income, net   134  42  275  141 
    (3,003) (3,950) (6,043) (7,827)
Income before income taxes   5,117  2,610  11,572  10,141 
Income taxes   (1,708) (794) (3,840) (3,289)
         Net income  $3,409 $1,816 $7,732 $6,852 

        

Three Months Ended
March 31
20052004
(in thousands)
Operating revenue  $43,147 $41,647 
Operating expenses:  
   Fuel and purchased power   15,207  12,809 
   Operations and maintenance   5,357  6,180 
   Administrative and general   5,960  4,078 
   Depreciation and amortization   4,938  4,943 
   Taxes, other than income taxes   2,190  2,229 
    33,652  30,239 
Operating income   9,495  11,408 
Other income (expense):  
   Interest expense   (3,215) (4,188)
   Interest income   34  213 
   Other expense   183  (51)
   Other income   (43) 149 
    (3,041) (3,877)
Income before income taxes   6,454  7,531 
Income taxes   (2,132) (2,494)
         Net income  $4,322 $5,037 

The accompanying notes to condensed financial statements are an integral part of these condensed financial statements.

3

BLACK HILLS POWER, INC.


CONDENSED BALANCE SHEETS
(unaudited)

(unaudited)

June 30December 31
2005
2004
(in thousands)
                                           ASSETS      

Current assets:		  
   Cash and cash equivalents  $6 $344 
   Restricted cash   --  3,069 
   Receivables (net of allowance for doubtful accounts of $907 and $912,
     respectively)		   15,630  18,497 
   Receivables - affiliate   1,173  891 
   Materials, supplies and fuel   12,944  11,513 
   Deferred income taxes   686  -- 
   Other current assets   1,099  2,346 
    31,538  36,660 
Investments   3,283  3,275 
Property, plant and equipment   645,027  637,630 
   Less accumulated depreciation   (242,246) (232,401)
    402,781  405,229 
Other assets:  
   Regulatory assets   7,144  7,237 
   Other   13,002  13,204 
    20,146  20,441 
   $457,748 $465,605 
                            LIABILITIES AND STOCKHOLDER'S EQUITY  

Current liabilities:		  
   Current maturities of long-term debt  $1,993 $1,991 
   Accounts payable   7,080  7,551 
   Accounts payable - affiliate   485  331 
   Note payable - affiliate   10,724  25,074 
   Accrued liabilities   13,534  13,816 
    33,816  48,763 
Long-term debt, net of current maturities   155,240  157,215 
Deferred credits and other liabilities:  
   Deferred income taxes   70,149  69,233 
   Regulatory liabilities   5,888  6,021 
   Other   14,124  13,537 
    90,161  88,791 
Stockholder's equity:  
   Common stock $1 par value; 50,000,000 shares authorized; 23,416,396
     shares issued		   23,416  23,416 
   Additional paid-in capital   39,549  39,549 
   Retained earnings   117,039  109,307 
   Accumulated other comprehensive loss   (1,473) (1,436)
    178,531  170,836 
   $457,748 $465,605 

        

March 31
2005		December 31
2004
(in thousands)
                                           ASSETS      
Current assets:  
   Cash and cash equivalents  $550 $344 
   Restricted cash   3,069  3,069 
   Receivables (net of allowance for doubtful accounts of $913 and $912, respectively)   15,968  18,497 
   Receivables - related party   1,881  891 
   Materials, supplies and fuel   10,892  11,513 
   Prepaid income taxes   --  1,872 
   Other current assets   296  474 
    32,656  36,660 
Investments   3,411  3,275 
Property, plant and equipment   640,566  637,630 
   Less accumulated depreciation   (237,493) (232,401)
    403,073  405,229 
Other assets:  
   Regulatory asset   7,190  7,237 
   Other   12,951  13,204 
    20,141  20,441 
   $459,281 $465,605 
                            LIABILITIES AND STOCKHOLDER’S EQUITY  
Current liabilities:  
   Current maturities of long-term debt  $1,992 $1,991 
   Accounts payable   5,251  7,551 
   Accounts payable – affiliate   351  331 
   Note payable – affiliate   15,365  25,074 
   Accrued liabilities   15,084  13,814 
   Deferred income taxes   317  2 
    38,360  48,763 
Long-term debt, net of current maturities   157,205  157,215 
Deferred credits and other liabilities:  
   Deferred income taxes   68,940  69,233 
   Regulatory liability   5,935  6,021 
   Other   13,672  13,537 
    88,547  88,791 
 Stockholder’s equity:  
   Common stock $1 par value; 50,000,000 shares authorized; 23,416,396 shares issued   23,416  23,416 
   Additional paid-in capital   39,549  39,549 
   Retained earnings   113,629  109,307 
   Accumulated other comprehensive loss   (1,425) (1,436)
    175,169  170,836 
   $459,281 $465,605 

The accompanying notes to condensed financial statements are an integral part of these condensed financial statements.

4

BLACK HILLS POWER, INC.


CONDENSED STATEMENTSTATEMENTS OF CASH FLOWS
(unaudited)

(unaudited)

Six Months Ended
June 30
2005
2004
(in thousands)
Operating activities:      
   Net income  $7,732 $6,852 
Adjustments to reconcile net income to cash provided by operating activities:  
   Depreciation and amortization   9,697  9,746 
   Deferred income tax   230  897 
Change in operating assets and liabilities -  
   Accounts receivable and other current assets   2,406  3,296 
   Accounts payable and other current liabilities   (599) (7,149)
   Other operating activities   707  1,672 
    20,173  15,314 
Investing activities:  
   Property, plant and equipment additions   (7,249) (5,903)
   Change in notes receivable from associated companies, net   --  4,665 
   Change in investments and restricted cash   3,061  (264)
    (4,188) (1,502)
Financing activities:  
   Changes in notes payable to associated companies, net   (14,350) -- 
   Dividends paid   --  (12,000)
   Long-term debt - repayments   (1,973) (1,971)
    (16,323) (13,971)
                  Decrease in cash and cash equivalents   (338) (159)

Cash and cash equivalents:		  
   Beginning of period   344  1,052 
   End of period  $6 $893 
Supplemental disclosure of cash flow information:  

    Cash paid (received) during the period for:		  
     Interest  $7,508 $8,349 
     Income taxes paid (refunded)  $3,283 $(3,111)

        

Three Months Ended
March 31
20052004
(in thousands)
Operating activities:      
   Net income  $4,322 $5,037 
Adjustments to reconcile net income to cash provided by operating activities:  
   Depreciation and amortization   4,938  4,943 
   Deferred income tax   22  370 
Change in operating assets and liabilities -  
   Accounts receivable and other current assets   4,209  3,459 
   Accounts payable and other current liabilities   (1,010) (7,402)
   Other operating activities   361  125 
    12,842  6,532 
Investing activities:  
   Property, plant and equipment additions   (2,782) (2,216)
   Change in notes receivable from associated companies, net   --  1,519 
   Increase in investments   (136) (124)
    (2,918) (821)
Financing activities:  
   Changes in notes payable to associated companies, net   (9,709) -- 
   Dividends paid   --  (6,000)
   Long-term debt – repayments   (9) (8)
    (9,718) (6,008)
                  Increase (decrease) in cash and cash equivalents   206  (297)
Cash and cash equivalents:  
   Beginning of period   344  1,052 
   End of period  $550 $755 
Supplemental disclosure of cash flow information:  
   Cash paid during the period for-  
     Interest  $3,374 $6,338 
     Net income taxes (received) paid  $688 $(3,111)

The accompanying notes to condensed financial statements are an integral part of these condensed financial statements.

5

BLACK HILLS POWER, INC.

Notes to Condensed Financial Statements


(unaudited)


(Reference is made to Notes to Financial Statements


included in the Company’s 2004 Annual Report on Form 10-K)

(1)

MANAGEMENT’S STATEMENT

The financial statements included herein have been prepared by Black Hills Power, Inc. (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the footnotes adequately disclose the information presented. These financial statements should be read in conjunction with the financial statements and the notes thereto, included in the Company’s 2004 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Accounting methods historically employed require certain estimates as of interim dates. The information furnished in the accompanying financial statements reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the March 31, 2005, December 31, 2004 and March 31, 2004, financial information and are of a normal recurring nature. The results of operations for the three months ended March 31, 2005, are not necessarily indicative of the results to be expected for the full year.


The financial statements included herein have been prepared by Black Hills Power, Inc. (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the footnotes adequately disclose the information presented. These financial statements should be read in conjunction with the financial statements and the notes thereto, included in the Company’s 2004 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Accounting methods historically employed require certain estimates as of interim dates. The information furnished in the accompanying financial statements reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the June 30, 2005, December 31, 2004 and June 30, 2004, financial information and are of a normal recurring nature. The results of operations for the three and six months ended June 30, 2005, are not necessarily indicative of the results to be expected for the full year.

(2)

COMPREHENSIVE INCOME

The following table presents the components of the Company’s comprehensive income (in thousands):

 

Three Months Ended

 

March 31

 

2005

2004

 

 

 

 

 

Net income

$

4,322

$

5,037

Other comprehensive income, net of tax:

 

 

 

 

Reclassification adjustment on interest rate swap included

 

 

 

 

in net income

 

11

 

10

Comprehensive income

$

4,333

$

5,047


The following table presents the components of the Company’s comprehensive income (in thousands):

Three Months EndedSix Months Ended
June 30June 30
2005
2004
2005
2004

Net income		  $3,409 $1,816 $7,732 $6,852 
Other comprehensive income, net of tax:  
   Fair value adjustment on derivatives designated  
     as cash flow hedges   (59) --  (59) -- 
   Reclassification adjustment on interest rate  
     swap included in net income   11  11  22  21 
Comprehensive income  $3,361 $1,827 $7,695 $6,873 

6

(3)

RELATED-PARTY TRANSACTIONS

Receivables/Payables

The Company has accounts receivable balances related to transactions with other Black Hills Corporation subsidiaries. The balances were $1.9 million and $0.9 million as of March 31, 2005 and December 31, 2004, respectively.

The Company also has a line of credit with its Parent, Black Hills Corporation (the Parent), which is due on demand. Outstanding advances were $15.4 million at March 31, 2005 and $25.1 million at December 31, 2004. Interest paid on the note was $0.2 million for the three-month period ended March 31, 2005. Advances under this note bear interest at 1.25 percent above the one-month average LIBOR rate (4.12 percent at March 31, 2005) and is payable monthly.

6

Other Balances and Transactions

The Company received revenues of approximately $0.1 million and $0.5 million for each of the three-month periods ended March 31, 2005 and March 31, 2004, respectively, from Black Hills Wyoming, Inc., an indirect subsidiary of Black Hills Corporation, for the transmission of electricity.


Receivables/Payables

The Company has accounts receivable balances related to transactions with other Black Hills Corporation subsidiaries. The balances were $1.2 million and $0.9 million as of June 30, 2005 and December 31, 2004, respectively.

The Company also has a line of credit with its Parent, Black Hills Corporation (the Parent), which is due on demand. Outstanding advances were $10.7 million at June 30, 2005 and $25.1 million at December 31, 2004. Interest paid on the note was $0.1 million and $0.3 million for the three and six month periods ended June 30, 2005. Advances under this note bear interest at 1.25 percent above the one-month average LIBOR rate (4.59 percent at June 30, 2005) and is payable monthly.

Other Balances and Transactions

The Company received revenues of approximately $0.4 million and $0.2 million for each of the three month periods ended June 30, 2005 and June 30, 2004, respectively, and $0.4 million and $0.6 million for each of the six month periods ended June 30, 2005 and June 30, 2004, respectively, from Black Hills Wyoming, Inc., an indirect subsidiary of Black Hills Corporation, for the transmission of electricity.

(4)

LONG TERM DEBT

In May 2005, the Company’s parent, Black Hills Corporation, completed a new five year, $400 million revolving bank facility. As part of the new bank facility, Black Hills Corporation has agreed to reserve an aggregate amount equal to $3.1 million (the “BHP Reserve”) to fund, directly or indirectly, any liquidity needs arising under, or in connection with, the loan agreement between the City of Gillette, Campbell County, Wyoming and the Company pursuant to the Company’s $2.9 million Series 94A Floating Rate Environmental Improvement Revenue Bonds.


In May 2005, the Company’s parent, Black Hills Corporation, completed a new five year, $400 million revolving bank facility. As part of the new bank facility, Black Hills Corporation has agreed to reserve an aggregate amount equal to $3.1 million (the “BHP Reserve”) to fund, directly or indirectly, any liquidity needs arising under, or in connection with, the loan agreement between the City of Gillette, Campbell County, Wyoming and the Company pursuant to the Company’s $2.9 million Series 94A Floating Rate Environmental Improvement Revenue Bonds.

(5)

EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plan

The Company has a noncontributory defined benefit pension plan (Plan) covering the employees of the Company who meet certain eligibility requirements.

The components of net periodic benefit cost for the Plan for the three months ended March 31 are as follows (in thousands):

 

2005

2004

 

 

 

 

 

Service cost

$

248

$

240

Interest cost

 

675

 

655

Expected return on plan assets

 

(870)

 

(855)

Amortization of prior service cost

 

39

 

41

Amortization of net loss

 

213

 

270

 

 

 

 

 

Net periodic benefit cost

$

305

$

351

The Company does not anticipate that a contribution will be made to the Plan in the 2005 fiscal year.


Defined Benefit Pension Plan

The Company has a noncontributory defined benefit pension plan (Plan) covering the employees of the Company who meet certain eligibility requirements.

The components of net periodic benefit cost for the Plan are as follows (in thousands):

Three Months EndedSix Months Ended
June 30June 30
2005
2004
2005
2004

Service cost		  $248 $240 $496 $480 
Interest cost   675  655  1,350  1,310 
Expected return on plan assets   (870) (855) (1,740) (1,710)
Amortization of prior service cost   39  41  78  82 
Amortization of net loss   213  270  426  540 
Net periodic benefit cost  $305 $351 $610 $702 

The Company does not anticipate that it will need to make a contribution to the Plan in the 2005 fiscal year.

7

Supplemental Nonqualified Defined Benefit Plan

The Company has various supplemental retirement plans for outside directors and key executives of the Company. The Plans are nonqualified defined benefit plans.

The components of net periodic benefit cost for the supplemental nonqualified plans for the three months ended March 31 are as follows (in thousands):

 

2005

2004

 

 

 

 

 

Service cost

$

—

$

—

Interest cost

 

27

 

27

Amortization of net loss

 

12

 

13

 

 

 

 

 

Net periodic benefit cost

$

39

$

40

The Company anticipates that contributions to the Plan for the 2005 fiscal year will be approximately $0.1 million; the contributions are expected to be in the form of benefit payments.

Non-pension Defined Benefit Postretirement Plan

Employees who are participant’s in the Company’s Postretirement Healthcare Plan and who retire from the Company on or after attaining age 55 after completing at least five years of service to the Company are entitled to postretirement healthcare benefits. These financial statements and this Note do not reflect the effects of the 2003 Medicare Act on the postretirement benefit plan.

The components of net periodic benefit cost for the Postretirement Healthcare Plan for the three months ended March 31 are as follows (in thousands):

 

2005

2004

 

 

 

 

 

Service cost

$

73

$

75

Interest cost

 

116

 

121

Amortization of net transition obligation

 

29

 

29

Amortization of prior service cost

 

(5)

 

(5)

Amortization of net loss

 

19

 

36

 

 

 

 

 

Net periodic benefit cost

$

232

$

256

The Company anticipates that contributions to the Plan for the 2005 fiscal year will be approximately $0.2 million; the contributions are expected to be in the form of benefits paid.

Supplemental Nonqualified Defined Benefit Plan

The Company has various supplemental retirement plans for outside directors and key executives of the Company (Supplemental Plans). The Supplemental Plans are nonqualified defined benefit plans.

The components of net periodic benefit cost for the Supplemental Plans are as follows (in thousands):

Three Months EndedSix Months Ended
June 30June 30
2005
2004
2005
2004

Service cost		  $-- $-- $-- $-- 
Interest cost   27  27  54  54 
Amortization of net loss   12  13  24  26 
Net periodic benefit cost  $39 $40 $78 $80 

The Company anticipates that it will need to make contributions to the Supplemental Plans for the 2005 fiscal year of approximately $0.1 million. The contributions are expected to be in the form of benefit payments.

Non-pension Defined Benefit Postretirement Plan

Employees who are participant’s in the Company’s Postretirement Healthcare Plan (Healthcare Plan) and who retire from the Company on or after attaining age 55 after completing at least five years of service to the Company are entitled to postretirement healthcare benefits. These financial statements and this Note do not reflect the effects of the 2003 Medicare Act on the Healthcare Plan.

The components of net periodic benefit cost for the Healthcare Plan are as follows (in thousands):

Three Months EndedSix Months Ended
June 30June 30
2005
2004
2005
2004

Service cost		  $73 $75 $146 $150 
Interest cost   116  121  232  242 
Amortization of net transition obligation   29  29  58  58 
Amortization of prior service cost   (5) (5) (10) (10)
Amortization of net loss   19  36  38  72 
Net periodic benefit cost  $232 $256 $464 $512 

The Company anticipates that it will need to make contributions to the Plan for the 2005 fiscal year of approximately $0.2 million. The contributions are expected to be in the form of benefits paid.

8

(6)

LEGAL PROCEEDINGS

The Company is subject to various legal proceedings, claims and litigation as described in Note 10 of the Company’s 2004 Annual Report on Form 10-K. There have been no material developments in these proceedings or any new material proceedings that have developed during the first quarter of 2005.

8


The Company is subject to various legal proceedings, claims and litigation as described in Note 10 of the Notes to Consolidated Financial Statements in the Company’s 2004 Annual Report on Form 10-K. There have been no material developments in these proceedings or any new material proceedings that have developed or material proceedings that have terminated during the first six months of 2005.

ITEM 2.

RESULTS OF OPERATIONS

ITEM 2.        RESULTS OF OPERATIONS

Retail Services Group

Electric Utility

 

Three Months Ended

 

March 31

 

2005

2004

 

(in thousands)

 

 

 

 

 

Revenue

$

43,147

$

41,647

Operating expenses

 

33,652

 

30,239

Operating income

$

9,495

$

11,408

 

 

 

 

 

Net income

$

4,322

$

5,037

Three Months EndedSix Months Ended
June 30June 30
2005
2004
2005
2004
(in thousands)

Revenue		  $42,261 $39,809 $85,408 $81,456 
Operating expenses   34,141  33,249  67,793  63,488 
Operating income  $8,120 $6,560 $17,615 $17,968 
Net income  $3,409 $1,816 $7,732 $6,852 

The following table providestables provide certain operating statistics:

Electric Revenue
(in thousands)

 

Three Months Ended

 

March 31

 

2005

2004

 

 

Firm (system) sales – MWh

517,962

513,234

Off-system sales – MWh

231,314

202,294

Three Months Ended June 30
Six Months Ended June 30
PercentagePercentage
Customer Base
2005
Change
2004
2005
Change
2004

Commercial		  $11,634  6%$10,987 $23,065  4%$22,162 
Residential   8,649  9  7,936  19,207  5  18,356 
Industrial   4,910  1  4,870  9,764  --  9,788 
Municipal sales   555  1  549  1,048  2  1,025 
Contract wholesale   5,672  12  5,049  11,657  6  10,977 
Wholesale off-system   9,171  5  8,697  17,284  15  15,002 
   Total electric sales  $40,591  7%$38,088 $82,025  6%$77,310 
Other revenue   1,670  (3) 1,721  3,383  (18) 4,146 
   Total revenue  $42,261  6%$39,809 $85,408  5%$81,456 

9

Megawatt Hours

Three Months Ended June 30
Six Months Ended June 30
PercentagePercentage
Customer Base
2005
Change
2004
2005
Change
2004

Commercial		   152,644  5% 145,802  310,162  4% 298,407 
Residential   102,692  9  94,311  240,639  4  232,056 
Industrial   103,695  5  98,745  202,093  2  197,266 
Municipal sales   6,827  1  6,756  13,290  2  13,027 
Contract wholesale   150,659  9  138,106  311,997  4  299,695 
Wholesale off-system   212,460  (6) 226,099  400,074  4  384,887 
Total electric sales   728,977  3% 709,819  1,478,255  4% 1,425,338 


Three Months EndedSix Months Ended
June 30
June 30
PercentagePercentage
Resources
2005
Change
2004
2005
Change
2004

Megawatt-hours generated:		              
   Coal   426,400  15% 371,500  862,300  5% 823,100 
   Gas   3,830  (26) 5,200  5,500  (35) 8,400 
    430,230  14  376,700  867,800  4  831,500 
Megawatt-hours purchased   331,434  (8) 358,592  653,105  2  639,531 
Total resources   761,664  4% 735,292  1,520,905  3% 1,471,031 


Three Months EndedSix Months Ended
June 30PercentageJune 30Percentage
2005
2004
Change
2005
2004
Change
Heating and cooling degree days              
Actual  
   Heating degree days   933  940  (1)% 3,923  4,048  (3)%
   Cooling degree days   148  59  151% 148  59  151%

Variance from normal		  
   Heating degree days   (6)% (6)% --  (9)% (6)% -- 
   Cooling degree days   47% (42)% --  47% (42)% -- 

Three Months Ended March 31,June 30, 2005 Compared to Three Months Ended March 31,June 30, 2004. Electric utility revenues increased 46 percent for the three-monththree month period ended March 31,June 30, 2005, compared to the same period in the prior year. The increase in revenue was primarily due toFirm commercial, residential, industrial and contract wholesale sales increased 6 percent, 9 percent, 1 percent and 12 percent, respectively. Wholesale off-system sales increased 5 percent with a 14 percent increase in off-system electric megawatt-hour sales at an 812 percent increase in average prices received. Firm residential, commercial and wholesale sales increased 1price received, partially offset by a 6 percent 2 percent and 1 percent, respectively, and industrial sales declined 1 percent. Degreedecrease in megawatt-hours sold. Cooling degree days, which is a measure of weather trends, were 4151 percent below lasthigher than the same period in the prior year.

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Electric operating expenses increased 113 percent for the three-monththree month period ended March 31,June 30, 2005, compared to the same period in the prior year. PurchasedHigher operating expenses were primarily the result of a $0.6 million increase in fuel and purchased power increased $2.7costs. The increase in fuel and purchased power was due to a $0.4 million increase in purchased power, resulting from a 12 percent increase in average price per megawatt-hour partially offset by an 8 percent decrease in megawatt-hours purchased, and a $0.2 million increase in fuel costs due to a 14 percent increase in megawatt-hours generated partially offset by a 7 percent decrease in average cost. Megawatt-hours produced through coal-fired generation increased in the three months ended June 30, 2005, as we incurred scheduled and unscheduled plant outages during the second quarter of 2004. Prevailing gas prices have made it more economical for us to purchase power for our peaking needs, rather than generate energy from our gas turbines. The increase in operating expense was also affected by increased legal expense and compensation costs, partially offset by lower maintenance costs.

Income from continuing operations increased $1.6 million primarily due to increased revenues, lower maintenance costs and lower interest expense, due to the pay down of debt, partially offset by increased fuel and purchased at a 13power costs, legal expense and compensation costs.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004. Electric utility revenues increased 5 percent for the six month period ended June 30, 2005 compared to the same period in the prior year. Firm commercial, residential and contract wholesale sales increased 4 percent, 5 percent and 6 percent, respectively. Wholesale off-system sales increased 15 percent due to an 11 percent increase in average price received and a 4 percent increase in megawatt-hours sold. Cooling degree days for the average cost per megawatt-hour.six month period were 151 percent higher than the same period in 2004 and heating degree days were 3 percent lower than the same period in 2004.

Electric operating expenses increased 7 percent for the six month period ended June 30, 2005, compared to the same period in the prior year. Higher operating expenses were primarily the result of a $3.0 million increase in fuel and purchased power costs. The increase in fuel and purchased power was due to a $3.1 million increase in purchased power, resulting from a 12 percent increase in average price per megawatt-hour and a 3 percent increase in megawatt-hours purchased, offset by a nominal decrease in fuel costs was primarily due to the increased off-system sales and 18 days of unscheduled plant outages at the Wyodak plant and wasa 6 percent decrease in average cost, partially offset by a $0.3 million decrease4 percent increase in fuel costsmegawatt-hours generated. Megawatt-hours produced through coal-fired generation increased in the six months ended June 30, 2005, as prevailingwe incurred scheduled and unscheduled plant outages during the second quarter of 2004. Prevailing gas prices have made it more economical for us to purchase power for our peaking needs and increased off-system sales, rather than generate energy utilizingfrom our gas turbines. The increase in operating expense was also affected by increased legal expense and health insurancecompensation costs, partially offset by lower maintenance costs.

Net income decreased $0.7Income from continuing operations increased $0.9 million primarily due to the increase in purchased power expense, legal expenseincreased revenues, lower maintenance costs and health insurance expense, partially offset by an increase in electric sales and a decrease inlower interest expense, primarily due to the pay down of debt.debt, partially offset by increased fuel and purchased power costs, legal expense and compensation costs.

Other Event

In July 2005, the electric utility experienced an unscheduled outage at its 90 megawatt Neil Simpson II power plant. That plant is expected to be out of service for the month of August. To meet our forecasted needs, we have obtained supplemental purchased power and additional natural gas supplies, which will negatively affect third quarter 2005 financial results. The economic impact of this outage is expected to be in the range of $2.5 million to $3.0 million pre-tax, taking into account increased fuel costs, higher purchased power expenses and reduced coal sales.

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SAFE HARBOR FOR FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q includes “forward-looking statements” as defined by the Securities and Exchange Commission, or SEC. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this Form 10-Q that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These forward-looking statements are based on assumptions which we believe are reasonable based on current expectations and projections about future events and industry conditions and trends affecting our business. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward-looking statements, including the risk factors described in Items 1 and 2 of our 2004 Annual Report on Form 10-K filed with the SEC, and the following:

•             The amount and timing of capital deployment in new investment opportunities or for the repurchase of debt or stock;

•             Our ability to remedy any deficiencies that may be identified in the periodic review of our internal controls;

•             The timing and extent of changes in energy-related and commodity prices, interest rates, energy and commodity supply or volume, the cost of transportation of commodities, and demand for our services, all of which can affect our earnings, liquidity position and the underlying value of our assets;

•             The timing and extent of scheduled and unscheduled outages of power generation facilities;

•             General economic and political conditions, including tax rates or policies and inflation rates;

•             The creditworthiness of counterparties to trading and other transactions, and defaults on amounts due from counterparties;

•             The amount of collateral required to be posted from time to time in our transactions;

•             Changes in or compliance with laws and regulations, particularly those relating to taxation, safety and protection of the environment;

•             Changes in state laws or regulations that could cause us to curtail our independent power production;

•             Weather and other natural phenomena;

•             Industry and market changes, including the impact of consolidations and changes in competition;

•             The effect of accounting policies issued periodically by accounting standard-setting bodies;

•             The cost and effects on our business, including insurance, resulting from terrorist actions or responses to such actions;

•             Capital market conditions, which may affect our ability to raise capital on favorable terms;

•             Price risk due to marketable securities held as investments in benefit plans;

•             Obtaining adequate cost recovery for our operations through regulatory proceedings; and

•             Other factors discussed from time to time in our other filings with the SEC.

The amount and timing of capital deployment in new investment opportunities or for the repurchase of debt or stock;
Our ability to remedy any deficiencies that may be identified in the periodic review of our internal controls;
The timing and extent of changes in energy-related and commodity prices, interest rates, energy and commodity supply or volume, the cost of transportation of commodities, and demand for our services, all of which can affect our earnings, liquidity position and the underlying value of our assets;
The timing and extent of scheduled and unscheduled outages of power generation facilities;
General economic and political conditions, including tax rates or policies and inflation rates;
The creditworthiness of counterparties to trading and other transactions, and defaults on amounts due from counterparties;
The amount of collateral required to be posted from time to time in our transactions;
Changes in or compliance with laws and regulations, particularly those relating to taxation, safety and protection of the environment;
Changes in state laws or regulations that could cause us to curtail our independent power production;
Weather and other natural phenomena;
Industry and market changes, including the impact of consolidations and changes in competition;
The effect of accounting policies issued periodically by accounting standard-setting bodies;
The cost and effects on our business, including insurance, resulting from terrorist actions or responses to such actions;
Capital market conditions, which may affect our ability to raise capital on favorable terms;
Price risk due to marketable securities held as investments in benefit plans;
Obtaining adequate cost recovery for our operations through regulatory proceedings; and
Other factors discussed from time to time in our other filings with the SEC.

New factors that could cause actual results to differ materially from those described in forward-looking statements emerge from time to time, and it is not possible for us to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. We assume no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events, or otherwise.

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ITEM 4.

CONTROLS AND PROCEDURES

ITEM 4.       CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act)) as of March 31,June 30, 2005. Based on their evaluation, they have concluded that our disclosure controls and procedures are adequate and effective to ensure that material information relating to us that is required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the required time periods.

Internal Control Over Financial Reporting

During the period covered by this Quarterly Report on Form 10-Q, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

BLACK HILLS POWER, INC.

Part II – Other Information

Item 1.

Legal Proceedings

For information regarding legal proceedings, see Note 10 in Item 8 of the Company’s 2004 Annual Report on Form 10-K and Note 6 of our Notes to Financial Statements in this Quarterly Report on Form 10-Q, which information from Note 6 is incorporated by reference into this item.


For information regarding legal proceedings, see Note 10 of Notes to Consolidated Financial Statements in Item 8 of the Company’s 2004 Annual Report on Form 10-K and Note 6 of our Notes to Financial Statements in this Quarterly Report on Form 10-Q, which information from Note 6 is incorporated by reference into this item.

Item 6.

Exhibits


(a)

Exhibits–

(a)       Exhibits-


Exhibit 31.1

Certification pursuant to Rule 13a –- 14(a) of the Securities Exchange Act of 1934, as
                                     adopted pursuant to Section 302 of the Sarbanes – OxleySarbanes-Oxley Act of 2002.


Exhibit 31.2

Certification pursuant to Rule 13a –- 14(a) of the Securities Exchange Act of 1934, as
                                     adopted pursuant to Section 302 of the Sarbanes – OxleySarbanes-Oxley Act of 2002.


Exhibit 32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
                                      of the Sarbanes – OxleySarbanes-Oxley Act of 2002.


Exhibit 32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
                                      of the Sarbanes – OxleySarbanes-Oxley Act of 2002.


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BLACK HILLS POWER, INC.

Signatures

        

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BLACK HILLS POWER, INC.


/s/ David R. Emery


David R. Emery, Chairman, President and


Chief Executive Officer


/s/ Mark T. Thies


Mark T. Thies, Executive Vice President and


Chief Financial Officer

Dated: May 16, 2005


Dated: August 15, 2005

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EXHIBIT INDEX

Exhibit
Number


Description


Exhibit 31.1

Certification pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes – Oxley Act of 2002.


Exhibit 31.2

Certification pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes – Oxley Act of 2002.


Exhibit 32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – OxleySarbanes-Oxley Act of 2002.


Exhibit 32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – OxleySarbanes-Oxley Act of 2002.


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