UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2013
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 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

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

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of July 31, 2013, 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
	GLOSSARY OF TERMS AND ABBREVIATIONS	3
PART 1.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Statements of Income and Comprehensive Income - unaudited	4
	Three and Six Months Ended June 30, 2013 and 2012
	Condensed Balance Sheets - unaudited	5
	June 30, 2013 and December 31, 2012
	Condensed Statements of Cash Flows - unaudited	6
	Six Months Ended June 30, 2013 and 2012
	Notes to Condensed Financial Statements - unaudited	7
Item 2.	Managements’ Discussion and Analysis of Financial Condition and Results of Operations	13
Item 4.	Controls and Procedures	18
PART II.	OTHER INFORMATION	18
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 6.	Exhibits	19
	Signatures	20
	Exhibit Index	21

2

GLOSSARY OF TERMS AND ABBREVIATIONS

The following terms and abbreviations appear in the text of this report and have the definitions described below:

AFUDC	Allowance for Funds Used During Construction
BHC	Black Hills Corporation, the Parent Company
Black Hills Energy	The name used to conduct the business of Black Hills Utility Holdings, Inc., and its subsidiaries
Black Hills Utility Holdings	Black Hills Utility Holdings, Inc. a direct, wholly-owned subsidiary of BHC
Black Hills Service Company	Black Hills Service Company, LLC, a direct, wholly-owned subsidiary of BHC
Cheyenne Light	Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of the BHC
Cheyenne Prairie	Cheyenne Prairie Generating Station currently being constructed in Cheyenne, Wyoming by Cheyenne Light and Black Hills Power. Construction is expected to be completed for this 132 MW facility in 2014.
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
Fitch	Fitch Ratings
GAAP	Generally Accepted Accounting Principles of the United States
Happy Jack	Happy Jack Wind Farms, LLC, a subsidiary of Duke Energy Generation Services
LIBOR	London Interbank Offered Rate
Moody's	Moody's Investor Services, Inc.
MW	Megawatts
NOL	Net Operating Loss
SDPUC	South Dakota Public Utilities Commission
SEC	U.S. Securities and Exchange Commission
Silver Sage	Silver Sage Windpower, LLC, a subsidiary of Duke Energy Generation Services
S&P	Standard & Poor's Rating Services
WRDC	Wyodak Resources Development Corp., an indirect, wholly-owned subsidiary of BHC

3

BLACK HILLS POWER, INC.

CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands)
Revenue	$	60,832		$	58,372		$	120,649		$	120,642
Operating expenses:
Fuel and purchased power	21,124			19,768			43,222			44,483
Operations and maintenance	17,141			16,776			33,949			33,319
Depreciation and amortization	7,036			6,823			14,022			13,773
Taxes - property	1,238			1,146			2,660			2,466
Total operating expenses	46,539			44,513			93,853			94,041
Operating income	14,293			13,859			26,796			26,601
Other income (expense):
Interest expense	(4,924		)	(4,410		)	(9,771		)	(8,700		)
AFUDC - borrowed	41			56			99			113
Interest income	36			220			63			244
AFUDC - equity	49			113			183			229
Other income (expense), net	144			71			226			459
Total other income (expense)	(4,654		)	(3,950		)	(9,200		)	(7,655		)
Income from continuing operations before income taxes	9,639			9,909			17,596			18,946
Income tax expense	(2,987		)	(3,182		)	(5,362		)	(6,166		)
Net income	6,652			6,727			12,234			12,780
Other comprehensive income (loss):
Reclassification adjustments of cash flow hedges settled and included in net income (net of tax (expense) benefit of $(6) and $(5) for the three months ended June 30, 2013 and 2012 and $(12) and ($11) for the six months ended June 30, 2013 and 2012, respectively))	10			11			20			21
Reclassification adjustment of benefit plan liability (net of tax (expense) benefit of $(6) and $0 for the three months ended June 30, 2013 and 2012 and $(12) and $0 for the six months ended June 30, 2013 and 2012, respectively)	11			—			22			—
Other comprehensive income	21			11			42			21
Comprehensive income	$	6,673		$	6,738		$	12,276		$	12,801

The accompanying Notes to Condensed Financial Statements are an integral part of these Condensed Financial Statements.

4

BLACK HILLS POWER, INC.

CONDENSED BALANCE SHEETS

(unaudited)

	June 30, 2013			December 31, 2012
	(in thousands, except common stock par value and share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	2,483		$	3,805
Receivables - customers, net	23,620			23,867
Receivables - affiliates	4,955			5,027
Other receivables, net	737			673
Money pool notes receivable, net	29,459			31,645
Materials, supplies and fuel	21,393			20,633
Deferred income tax assets, net, current	3,257			16,631
Regulatory assets, current	4,700			4,998
Other, current assets	4,809			5,781
Total current assets	95,413			113,060
Investments	4,386			4,359
Property, plant and equipment	1,054,518			1,024,768
Less accumulated depreciation and amortization	(329,532		)	(322,830		)
Total property, plant and equipment, net	724,986			701,938
Other assets:
Regulatory assets, non-current	50,022			48,244
Other, non-current assets	5,797			5,322
Total other assets	55,819			53,566
TOTAL ASSETS	$	880,604		$	872,923
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	17,810		$	14,318
Accounts payable - affiliates	15,739			21,896
Accrued liabilities	15,527			15,477
Regulatory liabilities, current	91			37
Total current liabilities	49,167			51,728
Long-term debt, net of current maturities	269,946			269,944
Deferred credits and other liabilities:
Deferred income tax liability, net, non-current	151,541			158,918
Regulatory liabilities, non-current	47,334			43,849
Benefit plan liabilities	27,358			25,888
Other, non-current liabilities	3,524			3,138
Total deferred credits and other liabilities	229,757			231,793
Commitments and contingencies (Notes 4, 5 and 8)
Stockholders’ equity:
Common stock $1 par value; 50,000,000 shares authorized; 23,416,396 shares issued	23,416			23,416
Additional paid-in capital	39,575			39,575
Retained earnings	270,121			257,887
Accumulated other comprehensive loss	(1,378		)	(1,420		)
Total stockholders’ equity	331,734			319,458
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	880,604		$	872,923

5

The accompanying Notes to Condensed Financial Statements are an integral part of these Condensed Financial Statements.

BLACK HILLS POWER, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

	Six Months Ended June 30,
	2013			2012
	(in thousands)
Operating activities:
Net income	$	12,234		$	12,780
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization	14,022			13,773
Deferred income tax	5,138			6,184
Employee benefits	1,548			1,914
AFUDC - equity	(183		)	(229		)
Other adjustments, net	618			1,185
Change in operating assets and liabilities -
Accounts receivable and other operating assets	(869		)	5,895
Accounts payable and other current liabilities	(5,260		)	(8,978		)
Contributions to defined benefit pension plan	—			(6,835		)
Other operating activities, net	1,371			(3,754		)
Net cash provided by (used in) operating activities	28,619			21,935
Investing activities:
Property, plant and equipment additions	(32,100		)	(18,882		)
Change in money pool notes receivable, net	2,186			3,278
Other investing activities	(27		)	277
Net cash provided by (used in) investing activities	(29,941		)	(15,327		)
Financing activities:
Long-term debt - repayments	—			(6,487		)
Net cash provided by (used in) financing activities	—			(6,487		)
Net change in cash and cash equivalents	(1,322		)	121
Cash and cash equivalents, beginning of period	3,805			2,812
Cash and cash equivalents, end of period	$	2,483		$	2,933

See Note 7 for supplemental cash flow information.

The accompanying Notes to Condensed Financial Statements are an integral part of these Condensed Financial Statements.

6

BLACK HILLS POWER, INC.

Notes to Condensed Financial Statements

(unaudited)

(Reference is made to Notes to Financial Statements

included in our 2012 Annual Report on Form 10-K)

(1) MANAGEMENT'S STATEMENT

The unaudited condensed financial statements included herein have been prepared by Black Hills Power, Inc. (the “Company,” “we,” “us,” or “our”), pursuant to the rules and regulations of the SEC. 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, we believe that the footnotes adequately disclose the information presented. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto, included in our 2012 Annual Report on Form 10-K filed with the SEC.

Accounting methods historically employed require certain estimates as of interim dates. The information furnished in the accompanying condensed financial statements reflects all adjustments, including accruals, which are, in the opinion of management, necessary for a fair presentation of the June 30, 2013, December 31, 2012 and June 30, 2012 financial information and are of a normal recurring nature. The results of operations for the three months and six months ended June 30, 2013 and June 30, 2012, and our financial condition as of June 30, 2013 and December 31, 2012 are not necessarily indicative of the results of operations and financial condition to be expected as of or for any other period.

Recently Issued Accounting Pronouncements

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In July 2013, the FASB issued an amendment to accounting for income taxes which provides guidance on financial statement presentation of an unrecognized tax benefit when an NOL carryforward, a similar tax loss, or a tax credit carryforward exists. The objective in issuing this amendment is to eliminate diversity in practice resulting from a lack of guidance on this topic in current GAAP. Under the amendment, an entity must present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for an NOL carryforward, a similar tax loss, or a tax credit carryforward except under certain conditions. The amendment is effective for fiscal years beginning after December 15, 2013, and interim periods within those years and should be applied to all unrecognized tax benefits that exist as of the effective date. The adoption of this standard is not expected to have an impact on our financial position, results of operations or cash flows.

(2) ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Following is a summary of Receivables - customers, net included in the accompanying Condensed Balance Sheets (in thousands) as of:

	June 30, 2013			December 31, 2012
Accounts receivable trade	$	15,240		$	14,965
Unbilled revenues	8,549			9,004
Allowance for doubtful accounts	(169		)	(102		)
Receivables - customers, net	$	23,620		$	23,867

7

(3) REGULATORY ASSETS AND LIABILITIES

Our regulated electric operations are subject to regulation by various state and federal agencies. The accounting policies followed are generally subject to the Uniform System of Accounts of the FERC.

Our regulatory assets and liabilities were as follows (in thousands) as of:

	Recovery/Amortization Period (in years)	June 30, 2013		December 31, 2012
Regulatory assets:
Unamortized loss on reacquired debt(a)	14	$	2,379	$	2,501
AFUDC(b)	45	8,457		8,460
Employee benefit plans(c)	13	27,854		27,001
Deferred energy costs(a)	1	6,499		6,892
Flow through accounting(a)	35	8,719		8,019
Other(a)	2	814		369
Total regulatory assets		$	54,722	$	53,242

Regulatory liabilities:
Cost of removal for utility plant(a)	53	$	28,852	$	26,630
Employee benefit plans(d)	13	16,542		15,689
Other(e)	13	2,031		1,567
Total regulatory liabilities		$	47,425	$	43,886

____________________

(a) Recovery or return of costs, but not allowed a rate of return.

(b) In addition to recovery of costs, we are allowed a rate of return.

(c) In addition to recovery of costs, we are allowed a return on approximately $23.5 million.

(d) Approximately $13.2 million is included in our rate base calculation as a reduction to rate base.

(e) Approximately $0.8 million is included in our rate base calculation as a reduction to rate base.

(4) RELATED-PARTY TRANSACTIONS

Non-cash Dividend to Parent

In the second quarter of 2012 we recorded a non-cash dividend to BHC of $44.0 million and decreased the utility money pool note receivable, net by the amount of $44.0 million.

Receivables and Payables

We have accounts receivable and accounts payable balances related to transactions with other BHC subsidiaries. The balances were as follows (in thousands) as of:

	June 30, 2013		December 31, 2012
Receivables - affiliates	$	4,955	$	5,027
Accounts payable - affiliates	$	15,739	$	21,896

8

Money Pool Notes Receivable and Notes Payable

We have entered into a Utility Money Pool Agreement (the “Agreement”) with BHC, Cheyenne Light and Black Hills Energy. Under the Agreement, we may borrow from BHC however the Agreement restricts us from loaning funds to BHC or to any of BHC’s non-utility subsidiaries. The Agreement does not restrict us from making dividends to BHC. Borrowings and advances under the Agreement bear interest at the weighted average daily cost of our parent company’s credit facility borrowings as defined under the Agreement, or if there are no external funds outstanding on that date, then the rate will be the daily one-month LIBOR plus 1.0%. At June 30, 2013, the cost of borrowing under the Utility Money Pool was 1.75%.

We had the following balances with the Utility Money Pool (in thousands) as of:

	June 30, 2013		December 31, 2012
Money pool notes receivable, net	$	29,459	$	31,645

Net interest income (expense) relating to balances with the Utility Money Pool was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Net interest income (expense)	$	138	$	168	$	288	$	468

Other related party activity was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Revenue:
Energy sold to Cheyenne Light	$	217	$	750	$	357	$	1,276
Rent from electric properties	$	986	$	1,256	$	1,974	$	2,515
Fuel and purchased power:
Purchases of coal from WRDC	$	4,741	$	4,426	$	9,265	$	10,421
Purchase of excess energy from Cheyenne Light	$	969	$	683	$	1,915	$	1,425
Purchase of renewable wind energy from Cheyenne Light - Happy Jack	$	415	$	496	$	1,065	$	1,167
Purchase of renewable wind energy from Cheyenne Light - Silver Sage	$	711	$	793	$	1,796	$	1,870
Corporate support:
Corporate support services and fees from Parent, Black Hills Service Company and Black Hills Utility Holdings	$	7,328	$	5,825	$	15,054	$	10,647

9

(5) EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plan

The components of net periodic benefit cost for the Defined Benefit Pension Plan were as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Service cost	$	213		$	191		$	426		$	382
Interest cost	742			742			1,484			1,484
Expected return on plan assets	(941		)	(785		)	(1,882		)	(1,570		)
Prior service cost	11			14			22			28
Net loss (gain)	652			650			1,304			1,300
Net periodic benefit cost	$	677		$	812		$	1,354		$	1,624

Non-pension Defined Benefit Postretirement Healthcare Plan

The components of net periodic benefit cost for the Non-Pension Defined Benefit Postretirement Healthcare Plan were as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Service cost	$	54		$	53		$	108		$	106
Interest cost	60			86			120			172
Prior service cost	(69		)	(69		)	(138		)	(138		)
Net loss (gain)	2			35			4			70
Net periodic benefit cost	$	47		$	105		$	94		$	210

Supplemental Non-qualified Defined Benefit Plans

The components of net periodic benefit cost for the Supplemental Non-qualified Defined Benefit Plans were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Interest cost	$	33	$	26	$	66	$	52
Net loss (gain)	17		14		34		28
Net periodic benefit cost	$	50	$	40	$	100	$	80

10

Contributions

We anticipate we will make contributions to each of the benefit plans during 2013 and 2014. Contributions to the Pension Plan will be made in cash and contributions to the Healthcare Plan and the Supplemental Plans are expected to be made in the form of benefit payments. Contributions are as follows (in thousands):

	Six Months Ended June 30, 2013		Remaining Anticipated Contributions for 2013		Anticipated Contributions for 2014
Defined Benefit Pension Plan	$	—	$	2,299	$	2,247
Non-Pension Defined Benefit Postretirement Healthcare Plan	$	219	$	219	$	489
Supplemental Non-qualified Defined Benefit Plans	$	108	$	108	$	215

(6) FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting guidance on fair value measurements establishes a hierarchy for grouping assets and liabilities, based on significance of inputs. For additional information see Note 1 included in our 2012 Annual Report on Form 10-K filed with the SEC.

The estimated fair values of our financial instruments were as follows (in thousands) as of:

	June 30, 2013				December 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents (a)	$	2,483	$	2,483	$	3,805	$	3,805
Long-term debt, including current maturities (b)	$	269,946	$	319,459	$	269,944	$	359,567

_________________

(a) Fair value approximates carrying value due to either short-term length of maturity or variable interest rates that approximate prevailing market rates and therefore is classified in Level 1 in the fair value hierarchy.

(b) Long-term debt is valued using the market approach based on observable inputs of quoted market prices and yields available for debt instruments either directly or indirectly for similar maturities and debt ratings in active markets and therefore is classified in Level 2 in the fair value hierarchy. The carrying amount of our variable rate debt approximates fair value due to the variable interest rates with short reset periods.

11

(7) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

	Six Months Ended June 30,
	2013			2012
	(in thousands)
Non-cash investing and financing activities -
Property, plant and equipment acquired with accrued liabilities	$	7,240		$	2,217
Non-cash (decrease) to money pool notes receivable, net	$	—		$	(43,984	)
Non-cash dividend to Parent	$	—		$	43,984
Cash (paid) refunded during the period for -
Interest (net of amounts capitalized)	$	(9,498	)	$	(8,312	)
Income taxes, net	$	—		$	(150	)

(8) COMMITMENTS AND CONTINGENCIES

Other than the items discussed below, there have been no significant changes to commitments and contingencies from those previously disclosed in Note 12 of our Notes to the Financial Statements in our 2012 Annual Report on Form 10-K.

Cheyenne Prairie

Construction of Cheyenne Prairie, a 132 MW natural gas-fired electric generating facility, by us and Cheyenne Light is expected to cost approximately $222.0 million, exclusive of financing costs. Construction is expected to be completed by September 30, 2014. As of June 30, 2013, committed contracts for equipment purchases and for construction were 62% and 22% complete, respectively.

Oil Creek Fire

On June 29, 2012, a forest and grassland fire occurred in the western Black Hills. We subsequently received written damage claims from the State of Wyoming and one landowner seeking recovery for alleged injury to timber, grass, fencing, fire suppression and rehabilitation costs of approximately $8.0 million. On April 16, 2013, thirty-four private landowners filed suit in United States District Court for the District of Wyoming, asserting similar claims, based upon allegations of negligence, common law nuisance and trespass. The suit seeks recovery of both actual and exemplary damages in an unspecified amount. Our investigation into the cause and origin of the fire is pending. We expect to deny and will vigorously defend all claims arising out of the lawsuit, pending the completion of our investigation. Given the uncertainty of litigation, however, a loss related to the fire and the litigation is reasonably possible. We cannot reasonably estimate the amount of a potential loss because our investigation is ongoing. Further claims may be presented by other parties. Although we cannot predict the outcome of our investigation or the viability of alleged claims, based on information currently available, management believes that any such claims, if determined adversely to us, will not have a material adverse effect on our financial condition or results of operations.

12

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Amounts are presented on a pre-tax basis unless otherwise indicated.

Minor differences in amounts may result due to rounding.

Significant Events

Cheyenne Prairie

Construction and infrastructure work began in April for Cheyenne Prairie, a natural gas-fired electric generating facility to serve our customers and the customers of Cheyenne Light. The 132 MW generation project is expected to cost approximately $222.0 million, with up to $15 million of construction financing costs, for a total of $237 million. Project to date we have expended approximately $87.6 million, and the project is on schedule to be placed into service in the fourth quarter of 2014.

The SDPUC approved a stipulation for interim rates effective April 1, 2013, subject to refund, for the use of a construction financing rider for the South Dakota portion of costs for Cheyenne Prairie in lieu of the traditional allowance for funds used during construction. We recorded additional gross margins of approximately $0.7 million for the six months ended June 30, 2013, relating to this rider. Public hearings with the SDPUC are scheduled in the third quarter of 2013. The WPSC approved a similar construction financing rider for our Wyoming customers during 2012.

Request for Rate Increase

On December 17, 2012, we filed a request with the SDPUC seeking a $13.7 million increase in annual electric revenues. Public hearings with the SDPUC are scheduled in the fourth quarter of 2013. Interim rates, subject to refund, were implemented on June 16, 2013.

The following tables provide certain financial information and operating statistics:

	Three Months Ended June 30,									Six Months Ended June 30,
	2013			2012			Variance			2013			2012			Variance
	(in thousands)
Revenue	$	60,832		$	58,372		$	2,460		$	120,649		$	120,642		$	7
Fuel and purchased power	21,124			19,768			1,356			43,222			44,483			(1,261		)
Gross margin	39,708			38,604			1,104			77,427			76,159			1,268
Operating expenses	25,415			24,745			670			50,631			49,558			1,073
Operating income	14,293			13,859			434			26,796			26,601			195
Interest income (expense), net	(4,847		)	(4,134		)	(713		)	(9,609		)	(8,343		)	(1,266		)
Other income (expense), net	193			184			9			409			688			(279		)
Income tax expense	(2,987		)	(3,182		)	195			(5,362		)	(6,166		)	804
Net income	$	6,652		$	6,727		$	(75	)	$	12,234		$	12,780		$	(546	)

13

	Electric Revenue by Customer Type
	Three Months Ended June 30,					Six Months Ended June 30,
	(dollars in thousands)
	2013		Percentage Change	2012		2013		Percentage Change	2012
Residential	$	13,535	7%	$	12,633	$	29,977	7%	$	28,109
Commercial	18,913		1%	18,804		36,397		2%	35,612
Industrial	7,210		2%	7,063		13,220		1%	13,083
Municipal	847		(5)%	887		1,561		(2)%	1,585
Total retail revenue	40,505		3%	39,387		81,155		4%	78,389
Contract wholesale	4,926		13%	4,370		10,693		15%	9,275
Off-system wholesale	7,849		22%	6,459		14,099		(20)%	17,732
Other revenue	7,552		(7)%	8,156		14,702		(4)%	15,246
Total revenue	$	60,832	4%	$	58,372	$	120,649	—%	$	120,642

	Megawatt Hours Sold by Customer Type
	Three Months Ended June 30,			Six Months Ended June 30,
	2013	Percentage Change	2012	2013	Percentage Change	2012
Residential	113,525	7%	106,557	274,495	7%	256,985
Commercial	174,763	(4)%	181,281	350,380	—%	351,374
Industrial	105,856	(8)%	115,024	197,488	(6)%	210,759
Municipal	8,147	(8)%	8,843	15,930	(3)%	16,411
Total retail quantity sold	402,291	(2)%	411,705	838,293	—%	835,529
Contract wholesale	77,653	8%	72,006	181,437	13%	161,054
Wholesale off-system	277,840	(6)%	295,149	516,287	(31)%	753,379
Total quantity sold	757,784	(3)%	778,860	1,536,017	(12)%	1,749,962
Losses and company use	46,054	58%	29,128	86,155	18%	72,715
Total energy	803,838	(1)%	807,988	1,622,172	(11)%	1,822,677

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	Megawatt Hours Generated and Purchased
	Three Months Ended June 30,			Six Months Ended June 30,
Generated -	2013	Percentage Change	2012	2013	Percentage Change	2012
Coal-fired	450,097	22%	369,049	877,112	1%	868,841
Gas-fired	4,558	(27)%	6,216	7,678	17%	6,579
Total generated	454,655	21%	375,265	884,790	1%	875,420
Total purchased	349,183	(19)%	432,723	737,382	(22)%	947,257
Total generated and purchased	803,838	(1)%	807,988	1,622,172	(11)%	1,822,677

	Power Plant Availability
	Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013		2012
Coal-fired plants	97.8	%	76.4	%	(a)	96.9	%	86.9	%	(a)
Other plants	97.8	%	99.5	%		97.8	%	99.7	%
Total availability	97.8	%	85.5	%		97.2	%	91.9	%

________________________

(a) Reflects an unplanned outage at Neil Simpson II due to a transformer failure.

	Degree Days						Degree Days
	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	Actual	Variance from 30-year Average		Actual	Variance from 30-year Average		Actual	Variance from 30-year Average		Actual	Variance from 30-year Average
Heating and cooling degree days:
Heating degree days	1,227	43	%	748	(27	)%	4,437	9	%	3,459	(18	)%
Cooling degree days	78	(27	)%	206	108	%	78	(27	)%	206	108	%

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Three Months Ended June 30, 2013 Compared to Three Months Ended June 30, 2012. Net income was $6.7 million compared to $6.7 million for the same period in the prior year primarily due to the following:

Gross marginincreased primarily due to $0.7 million from interim rates from the newly implemented construction financing rider and $0.4 million increased wholesale margins due to higher price and increased volumes. Interim rates, subject to refund, were implemented on June 16, 2013, related to a request with the SDPUC seeking a $13.7 million increase in annual electric revenues.

Operations and maintenanceincreased primarily due to increased employee benefit costs and outside services, partially offset by lower costs due to plant suspensions.

Interest expense, net increased primarily due to increased allocations for debt related costs.

Other income, net was comparable to the same period in the prior year.

Income tax expense: The effective tax rate decreased due to the result of retroactive reinstatement of the research and development credit and flow through of a greater tax benefit attributable to costs deducted as repairs and maintenance for tax purposes.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012. Net income was $12.2 million compared to $12.8 million for the same period in the prior year primarily due to the following:

Gross marginincreased primarily due to $0.7 million from interim rates from the newly implemented construction financing rider and $0.8 million increased wholesale margin from higher volumes, partially offset by $0.6 million lower off-system sales margins due to lower volumes. Interim rates, subject to refund, were implemented on June 16, 2013, related to a request with the SDPUC seeking a $13.7 million increase in annual electric revenues.

Operations and maintenanceincreased primarily due to increased employee benefit costs and outside services, partially offset by lower costs due to plant suspensions.

Interest expense, net increased primarily due to lower interest income received on affiliate borrowings and increased allocations for debt related costs.

Other income, net was comparable to the same period in the prior year.

Income tax expense: The effective tax rate decreased due to the result of retroactive reinstatement of the research and development credit and flow through of a greater tax benefit attributable to costs deducted as repairs and maintenance for tax purposes.

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Credit Ratings

Credit ratings impact our ability to obtain short- and long-term financing, the cost of such financing, and vendor payment terms, including collateral requirements. As of June 30, 2013, our credit ratings for our Senior Secured Debt, as assessed by the three major credit rating agencies, were as follows:

Rating Agency	Rating
S&P(a)	BBB+
Moody’s	A3
Fitch	A-

___________________

(a) S&P upgraded our rating to A- on July 24, 2013.

FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements as defined by the SEC. Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words “anticipates,” “estimates,” “expects,” “intends,” “plans,” “predicts” and similar expressions, and include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature, including statements contained within Item 7 - Management’s Discussion & Analysis.

Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. The Company’s expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Nonetheless, the Company’s expectations, beliefs or projections may not be achieved or accomplished.

Any forward-looking statement contained in this document speaks only as of the date on which the statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of the factors, nor can it assess the effect of each factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by the risk factors and cautionary statements described in Item 1A of our 2012 Annual Report on Form 10-K, including statements contained within Item 1A - Risk Factors and Part II, Item 1A of this Quarterly Report on Form 10Q.

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ITEM 4. CONTROLS AND PROCEDURES

This section should be read in conjunction with Item 9A, “Controls and Procedures” included in our Annual Report on Form 10-K for the year ended December 31, 2012.

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 June 30, 2013. Based on their evaluation, they have concluded that our disclosure controls and procedures are effective.

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2013, that 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 12 of Notes to Financial Statements in Item 8 of our 2012 Annual Report on Form 10-K and Note 8 of our Notes to Condensed Financial Statements in this Quarterly Report on Form 10-Q, which information from Note 8 is incorporated by reference into this item.

Item 1A. Risk Factors

There are no material changes to the Risk Factors previously disclosed in Item 1A. of Part I in our Annual Report on Form 10-K for the year ended December 31, 2012.

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Item 6. Exhibits

Exhibit 3.1* Restated Articles of Incorporation of the Registrant (filed as an exhibit to the Registrant’s Form 8-K dated June 7, 1994 (No. 1-7978)).

Exhibit 3.2* Articles of Amendment to the Articles of Incorporation of the Registrant, as filed with the Secretary of State of the State of South Dakota on December 22, 2000 (filed as an exhibit to the Registrant’s Form 10-K for 2000).

Exhibit 3.3* Bylaws of the Registrant (filed as an exhibit to the Registrant’s Registration Statement on Form S-8 dated July 13, 1999).

Exhibit 4.1* Restated and Amended Indenture of Mortgage and Deed of Trust of Black Hills Corporation (now called Black Hills Power, Inc.) dated as of September 1, 1999 (filed as Exhibit 4.19 to the Registrant's Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-150669-01)). First Supplemental Indenture, dated as of August 13, 2002, between Black Hills Power, Inc. and The Bank of New York Mellon (as successor to J.P. Morgan Chase Bank), as Trustee (filed as Exhibit 4.20 to the Registrant's Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-150669-01)). Second Supplemental Indenture, dated as of October 27, 2009, between Black Hills Power, Inc. and The Bank of New York Mellon (filed as Exhibit 4.21 to the Registration Statement on Form S-3 (No. 333-150669-01)).

Exhibit 31.1 Certification of Chief Executive Officer 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 of Chief Financial Officer 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 of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.

Exhibit 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.

Exhibit 101 Financial Statements for XBRL Format

_________________________

* Previously filed as part of the filing indicated and incorporated by reference herein.

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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

and Chief Executive Officer

/S/ ANTHONY S. CLEBERG

Anthony S. Cleberg, Executive Vice President

and Chief Financial Officer

Dated: August 7, 2013

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EXHIBIT INDEX

Exhibit Number Description

Exhibit 3.1* Restated Articles of Incorporation of the Registrant (filed as an exhibit to the Registrant’s Form 8-K dated June 7, 1994 (No. 1-7978)).

Exhibit 3.2* Articles of Amendment to the Articles of Incorporation of the Registrant, as filed with the Secretary of State of the State of South Dakota on December 22, 2000 (filed as an exhibit to the Registrant’s Form 10-K for 2000).

Exhibit 3.3* Bylaws of the Registrant (filed as an exhibit to the Registrant’s Registration Statement on Form S-8 dated July 13, 1999).

Exhibit 4.1* Restated and Amended Indenture of Mortgage and Deed of Trust of Black Hills Corporation (now called Black Hills Power, Inc.) dated as of September 1, 1999 (filed as Exhibit 4.19 to the Registrant's Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-150669-01)). First Supplemental Indenture, dated as of August 13, 2002, between Black Hills Power, Inc. and The Bank of New York Mellon (as successor to J.P. Morgan Chase Bank), as Trustee (filed as Exhibit 4.20 to the Registrant's Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-150669-01)). Second Supplemental Indenture, dated as of October 27, 2009, between Black Hills Power, Inc. and The Bank of New York Mellon (filed as Exhibit 4.21 to the Registration Statement on Form S-3 (No. 333-150669-01)).

Exhibit 31.1 Certification of Chief Executive Officer 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 of Chief Financial Officer 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 of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.

Exhibit 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.

Exhibit 101 Financial Statements for XBRL Format

_________________________

* Previously filed as part of the filing indicated and incorporated by reference herein.

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