10-Q

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, 2015
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, 2015, 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, 2015 and 2014
	Condensed Balance Sheets - unaudited	5
	June 30, 2015 and December 31, 2014
	Condensed Statements of Cash Flows - unaudited	7
	Six Months Ended June 30, 2015 and 2014
	Notes to Condensed Financial Statements - unaudited	8
Item 2.	Managements’ Discussion and Analysis of Financial Condition and Results of Operations	14
Item 4.	Controls and Procedures	19
PART II.	OTHER INFORMATION	20
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 6.	Exhibits	20
	Signatures	21
	Exhibit Index	22

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
ASU	Accounting Standards Update
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 BHC
Cheyenne Prairie	Cheyenne Prairie Generating Station is a 132 MW natural gas-fired generating facility in Cheyenne, Wyoming, jointly owned by Cheyenne Light and Black Hills Power. Cheyenne Prairie was placed into commercial operations on October 1, 2014.
Cooling degree day	A cooling degree day is equivalent to each degree that the average of the high and low temperature for a day is above 65 degrees. The warmer the climate, the greater the number of cooling degree days. Cooling degree days are used in the utility industry to measure the relative warmth of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations over a 30-year average.
CPCN	Certificate of Public Convenience and Necessity
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
Fitch	Fitch Ratings
GAAP	Generally Accepted Accounting Principles in the United States of America
Global Settlement	Settlement with a utilities commission where the dollar figure is agreed upon, but the specific adjustments used by each party to arrive at the figure are not specified in public rate orders.
Happy Jack	Happy Jack Wind Farms, LLC, a subsidiary of Duke Energy Generation Services
Heating degree day	A heating degree day is equivalent to each degree that the average of the high and the low temperatures for a day is below 65 degrees. The colder the climate, the greater the number of heating degree days. Heating degree days are used in the utility industry to measure the relative coldness of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations over a 30-year average.
kV	Kilovolt
LIBOR	London Interbank Offered Rate
Moody’s	Moody’s Investor Services, Inc.
MW	Megawatts
MWh	Megawatt-hours
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
WPSC	Wyoming Public Service Commission
WRDC	Wyodak Resources Development Corp., an indirect, wholly-owned subsidiary of BHC

3

BLACK HILLS POWER, INC.

CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	Three Months Ended June 30,						Six Months Ended June 30,
(unaudited)	2015			2014			2015			2014
	(in thousands)
Revenue	$	68,038		$	60,741		$	138,321		$	132,007
Operating expenses:
Fuel, purchased power and natural gas	19,353			21,278			41,457			48,323
Operations and maintenance	18,121			17,338			35,212			35,448
Depreciation and amortization	7,842			6,972			15,967			13,859
Taxes - property	1,579			1,371			3,052			3,050
Total operating expenses	46,895			46,959			95,688			100,680
Operating income	21,143			13,782			42,633			31,327
Other income (expense):
Interest expense	(5,680		)	(4,984		)	(11,372		)	(9,931		)
AFUDC - borrowed	44			57			83			129
Interest income	61			211			165			269
AFUDC - equity	80			117			150			262
Other income (expense), net	63			51			98			95
Total other income (expense)	(5,432		)	(4,548		)	(10,876		)	(9,176		)
Income from continuing operations before income taxes	15,711			9,234			31,757			22,151
Income tax expense	(5,164		)	(3,004		)	(10,807		)	(7,278		)
Net income	10,547			6,230			20,950			14,873
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, 2015 and 2014 and $330 and $(11) for the six months ended June 30, 2015 and 2014, respectively)	10			11			362			21
Reclassification adjustment of benefit plan liability - net gain (loss) (net of tax (expense) benefit of $(8) and $(4) for the three months ended June 30, 2015 and 2014 and $(16) and $(8) for the six months ended June 30, 2015 and 2014, respectively)	16			7			31			14
Other comprehensive income	26			18			393			35
Comprehensive income	$	10,573		$	6,248		$	21,343		$	14,908

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, 2015			December 31, 2014
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	79,821		$	6,620
Receivables - customers, net	27,028			34,684
Receivables - affiliates	7,502			5,350
Other receivables, net	265			259
Money pool notes receivable, net	6,981			68,626
Materials, supplies and fuel	22,720			20,965
Deferred income tax assets, net, current	2,679			13,661
Regulatory assets, current	13,465			10,257
Other, current assets	32,108			4,954
Total current assets	192,569			165,376
Investments	4,681			4,584
Property, plant and equipment	1,119,407			1,115,061
Less accumulated depreciation and amortization	(315,873		)	(309,767		)
Total property, plant and equipment, net	803,534			805,294
Other assets:
Regulatory assets, non-current	69,132			68,427
Other, non-current assets	15,033			11,708
Total other assets	84,165			80,135
TOTAL ASSETS	$	1,084,949		$	1,055,389

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

5

BLACK HILLS POWER, INC.

CONDENSED BALANCE SHEETS

(unaudited)	June 30, 2015			December 31, 2014
	(in thousands, except common stock par value and share amounts)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	17,644		$	30,543
Accounts payable - affiliates	21,801			19,242
Accrued liabilities	42,100			16,415
Regulatory liabilities, current	431			3,073
Total current liabilities	81,976			69,273
Long-term debt, net of current maturities	342,754			342,752
Deferred credits and other liabilities:
Deferred income tax liability, net, non-current	192,749			193,042
Regulatory liabilities, non-current	52,219			51,916
Benefit plan liabilities	21,880			20,981
Other, non-current liabilities	3,734			2,631
Total deferred credits and other liabilities	270,582			268,570
Commitments and contingencies (Notes 4, 5 and 8)
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	39,575			39,575
Retained earnings	328,072			313,622
Accumulated other comprehensive loss	(1,426		)	(1,819		)
Total stockholders’ equity	389,637			374,794
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	1,084,949		$	1,055,389

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

6

BLACK HILLS POWER, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)	Six Months Ended June 30,
	2015			2014
	(in thousands)
Operating activities:
Net income	$	20,950		$	14,873
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization	15,967			13,859
Deferred income tax	10,080			7,237
Employee benefits	1,202			647
AFUDC - equity	(150		)	(262		)
Other adjustments, net	291			(1,720		)
Change in operating assets and liabilities -
Accounts receivable and other current assets	582			(8,743		)
Accounts payable and other current liabilities	(11,358		)	7,802
Other operating activities, net	(2,409		)	(2,002		)
Net cash provided by (used in) operating activities	35,155			31,691
Investing activities:
Property, plant and equipment additions	(17,009		)	(43,478		)
Change in money pool notes receivable, net	55,145			14,052
Other investing activities	(90		)	(105		)
Net cash provided by (used in) investing activities	38,046			(29,531		)
Financing activities:
Other financing activities	—			(133		)
Net cash provided by (used in) financing activities	—			(133		)
Net change in cash and cash equivalents	73,201			2,027
Cash and cash equivalents, beginning of period	6,620			2,259
Cash and cash equivalents, end of period	$	79,821		$	4,286

See Note 7 for supplemental cash flow information.

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

7

BLACK HILLS POWER, INC.

Notes to Condensed Financial Statements

(unaudited)

(Reference is made to Notes to Financial Statements

included in our 2014 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 2014 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, 2015, December 31, 2014 and June 30, 2014 financial information and are of a normal recurring nature. The results of operations for the three months and six months ended June 30, 2015 and June 30, 2014, and our financial condition as of June 30, 2015 and December 31, 2014 are not necessarily indicative of the results of operations and financial condition to be expected as of or for any other period.

Recently Issued and Adopted Accounting Standards

We have implemented all new accounting pronouncements that are in effect and may impact our financial statements. We are currently assessing the impact any other new accounting pronouncements that have been issued may have on our financial position, results of operations, or cash flows.

Simplifying the Presentation of Debt Issuance Costs, ASU 2015-03

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. Debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts, rather than as an asset. Amortization of these costs will continue to be reported as interest expense. ASU 2015-03 is effective for annual and interim reporting periods beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the impact of adoption that ASU 2015-03 will have on our financial position, results of operations, or cash flows.

Revenue from Contracts with Customers, ASU 2014-09

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. On July 9, 2015, FASB voted to defer the effective date of ASU 2014-09 by one year. The proposed guidance would be effective for annual and interim reporting periods beginning after December 15, 2018 and early adoption is permitted. We are currently evaluating the impact of adoption, if any, that ASU 2014-09 will have on our financial position, results of operations or cash flows.

8

(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, 2015			December 31, 2014
Accounts receivable trade	$	16,089		$	24,946
Unbilled revenues	11,137			9,999
Allowance for doubtful accounts	(198		)	(261		)
Receivables - customers, net	$	27,028		$	34,684

(3) REGULATORY ACCOUNTING

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, 2015		December 31, 2014
Regulatory assets:
Unamortized loss on reacquired debt (a)	10	$	2,236	$	2,377
AFUDC (b)	45	8,308		8,365
Employee benefit plans (c)	12	24,418		24,418
Deferred energy and fuel cost adjustments - current (a)	Less than 1 year	16,446		14,696
Flow through accounting (a)	35	11,956		11,171
Decommissioning costs, net of amortization(d)	10	12,175		11,786
Other	10	7,058		5,871
Total regulatory assets		$	82,597	$	78,684

Regulatory liabilities:
Cost of removal for utility plant (a)	53	$	36,523	$	35,510
Employee benefit plans (c)	12	14,539		14,538
Other	13	1,588		4,941
Total regulatory liabilities		$	52,650	$	54,989

____________________

(a) Recovery of costs, but we are 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 a portion of this amount or a reduction in rate base, respectively.

(d) Approximately $12 million of decommissioning costs are allowed a rate of return, in addition to recovery of costs.

9

(4) RELATED-PARTY TRANSACTIONS

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, 2015		December 31, 2014
Receivables - affiliates	$	7,502	$	5,350
Accounts payable - affiliates	$	21,801	$	19,242

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. We are the administrator of the Money Pool. 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 paying 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, 2015, the average cost of borrowing under the Utility Money Pool was 1.41%.

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

	June 30, 2015		December 31, 2014
Money pool notes receivable, net	$	6,981	$	68,626

Our 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,
	2015		2014		2015		2014
Net interest income (expense)	$	288	$	27	$	546	$	84

10

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Revenue:
Energy sold to Cheyenne Light	$	379	$	397	$	705	$	1,076
Rent from electric properties	$	1,332	$	1,051	$	2,456	$	2,074
Fuel and purchased power:
Purchases of coal from WRDC	$	4,099	$	4,018	$	8,144	$	9,032
Purchase of excess energy from Cheyenne Light	$	213	$	584	$	689	$	1,213
Purchase of renewable wind energy from Cheyenne Light - Happy Jack	$	280	$	465	$	829	$	1,129
Purchase of renewable wind energy from Cheyenne Light - Silver Sage	$	498	$	750	$	1,434	$	1,844
Gas transportation service agreement
Gas transportation service agreement with Cheyenne Light for firm and interruptible gas transportation	$	103	$	—	$	207	$	—
Corporate support:
Corporate support services and fees from Parent, Black Hills Service Company and Black Hills Utility Holdings	$	6,627	$	6,703	$	13,660	$	14,190

(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,
	2015			2014			2015			2014
Service cost	$	199		$	176		$	398		$	352
Interest cost	739			748			1,478			1,496
Expected return on plan assets	(984		)	(925		)	(1,968		)	(1,851		)
Prior service cost	11			10			22			21
Net loss (gain)	549			235			1,098			470
Net periodic benefit cost	$	514		$	244		$	1,028		$	488

Defined Benefit Postretirement Healthcare Plan

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Service cost	$	59		$	56		$	117		$	112
Interest cost	53			60			107			120
Prior service cost (benefit)	(84		)	(84		)	(168		)	(168		)
Net loss (gain)	—			—			—			—
Net periodic benefit cost	$	28		$	32		$	56		$	64

11

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,
	2015		2014		2015		2014
Interest cost	$	36	$	36	$	72	$	73
Net loss (gain)	23		11		46		22
Net periodic benefit cost	$	59	$	47	$	118	$	95

Contributions

We anticipate we will make contributions to the benefit plans during 2015 and 2016. Contributions to the Defined Benefit Pension Plan are cash contributions made directly to the Pension Plan Trust accounts. Contributions to the Healthcare and Supplemental Plans are made in the form of benefit payments. Contributions and anticipated contributions are as follows (in thousands):

	Contributions Six Months Ended June 30, 2015		Remaining Anticipated Contributions for 2015		Anticipated Contributions for 2016
Defined Benefit Pension Plan	$	—	$	—	$	—
Defined Benefit Postretirement Healthcare Plan	$	260	$	260	$	577
Supplemental Non-qualified Defined Benefit Plans	$	109	$	109	$	184

(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 2014 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, 2015				December 31, 2014
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents (a)	$	79,821	$	79,821	$	6,620	$	6,620
Long-term debt, including current maturities (b)	$	342,754	$	401,081	$	342,752	$	430,497

_________________

(a) Carrying value approximates fair 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.

12

(7) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Six months ended June 30,	2015			2014
	(in thousands)
Non-cash investing and financing activities -
Property, plant and equipment acquired with accrued liabilities	$	2,225		$	9,824
Non-cash (decrease) to money pool notes receivable, net	$	(6,500	)	$	—
Non-cash dividend to Parent	$	6,500		$	—
Cash (paid) refunded during the period for -
Interest (net of amounts capitalized)	$	(11,063	)	$	(9,678	)
Income taxes, net	$	—		$	—

(8) COMMITMENTS AND CONTINGENCIES

Other than the item discussed below, there have been no significant changes to commitments and contingencies from those previously disclosed in Note 11 of our Notes to the Financial Statements in our 2014 Annual Report on Form 10-K.

Oil Creek Fire

On June 29, 2012, a forest and grassland fire occurred in the western Black Hills of Wyoming. A fire investigator retained by the Weston County Fire Protection District concluded that the fire was caused by the failure of a transmission structure owned, operated and maintained by Black Hills Power. On April 16, 2013, a large group of private landowners filed suit in the United States District Court for the District of Wyoming. There are approximately 36 Plaintiff groups (including property jointly owned by multiple family members or entities), or approximately 73 individually named private plaintiffs. In addition, the State of Wyoming has intervened in the lawsuit. Both the private landowners and the State of Wyoming assert claims for damages against Black Hills Power. The claims include allegations of negligence, negligence per se, common law nuisance and trespass. In addition to claims for compensatory damages, the lawsuit seeks recovery of punitive damages. We have denied and will vigorously defend all claims arising out of the fire. We cannot predict the outcome of expert investigation, the viability of alleged claims or the outcome of the litigation.

Civil litigation of this kind, however, is likely to lead to settlement negotiations, including negotiations prompted by pre-trial civil court procedures. We believe such negotiations would effect a settlement of all claims. Regardless of whether the litigation is determined at trial or through settlement, we expect to incur significant investigation, legal and expert services expenses associated with the litigation. We maintain insurance coverage to limit our exposure to losses due to civil liability claims, and related litigation expense, and we will pursue recoveries to the maximum extent available under the policies. The deductible applicable to some types of claims arising out of this fire is $1.0 million. Based upon information currently available, we believe that a loss associated with settlement of pending claims is probable. Accordingly, we recorded a loss contingency liability related to these claims and we recorded a receivable for costs we believe are reimbursable and probable of recovery under our insurance coverage. Both of these entries reflect our reasonable estimate of probable future litigation expense and settlement costs; we did not base these contingencies on any determination that it is probable we would be found liable for these claims were they to be litigated.

Given the uncertainty of litigation, however, a loss related to the fire, the litigation and related claims in excess of the loss we have determined to be probable is reasonably possible. We cannot reasonably estimate the amount of such possible loss because expert investigations and our review of damage claim documentation are ongoing, and there are significant factual and legal issues to be resolved. Further claims may be presented by these claimants and other parties. We have received claims seeking recovery for fire suppression, reclamation and rehabilitation costs, damage to fencing and other personal property, alleged injury to timber, grass or hay, livestock and related operations, and diminished value of real estate. Based on the legal standard for measuring damages that we believe applies to this matter, we estimate the current total claims to be approximately $55 million; however the actual amount of allowed claims and any loss will depend on the resolution of certain factual and legal issues. We are not yet able to reasonably estimate the amount of any reasonable possible losses in excess of the amount we have accrued. Based upon information currently available, however, management does not expect the outcome of the claims to have a material adverse effect upon our consolidated financial condition, results of operations or cash flows.

13

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

Regulatory Matters

On July 23, 2015, we received approval from the WPSC for a CPCN originally filed on July 22, 2014 to construct the Wyoming portion of a $54 million, 230-kV, 144 mile-long transmission line that would connect the Teckla Substation in northeast Wyoming, to the Lange Substation near Rapid City, South Dakota. We received approval on November 6, 2014 from the SDPUC for a permit to construct the South Dakota portion of this line. We plan to commence construction in the third quarter of 2015.

On March 2, 2015, the SDPUC issued an order approving a rate stipulation and agreement authorizing an annual electric revenue increase for us of $6.9 million. The agreement was a Global Settlement and did not stipulate return on equity and capital structure. The SDPUC’s decision provides us a return on our investment in Cheyenne Prairie and associated infrastructure, and provides recovery of our share of operating expenses for this natural gas fired facility. We implemented interim rates on October 1, 2014, coinciding with Cheyenne Prairie’s commercial operation date. Final rates were approved on April 1, 2015, effective October 1, 2014.

Results of Operations

The following discussion includes financial information prepared in accordance with GAAP, as well as another financial measure, gross margin, that is considered a “non-GAAP financial measure.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Gross margin (revenue less cost of sales) is a non-GAAP financial measure due to the exclusion of depreciation from the measure. The presentation of gross margin is intended to supplement investors’ understanding of our operating performance.

Gross margin is calculated as operating revenue less cost of fuel, purchased power and natural gas. Our gross margin is impacted by the fluctuations in power purchases, natural gas and other fuel supply costs. However, while these fluctuating costs impact gross margin as a percentage of revenue, they only impact total gross margin if the costs cannot be passed through to our customers.

Our gross margin measure may not be comparable to other companies’ gross margin measure. Furthermore, this measure is not intended to replace operating income as determined in accordance with GAAP as an indicator of operating performance.

14

The following tables provide certain financial information and operating statistics:

	Three Months Ended June 30,									Six Months Ended June 30,
	2015			2014			Variance			2015			2014			Variance
	(in thousands)
Revenue	$	68,038		$	60,741		$	7,297		$	138,321		$	132,007		$	6,314
Fuel and purchased power	19,353			21,278			(1,925		)	41,457			48,323			(6,866		)
Gross margin	48,685			39,463			9,222			96,864			83,684			13,180
Operating expenses	27,542			25,681			1,861			54,231			52,357			1,874
Operating income	21,143			13,782			7,361			42,633			31,327			11,306
Interest income (expense), net	(5,575		)	(4,716		)	(859		)	(11,124		)	(9,533		)	(1,591		)
Other income (expense), net	143			168			(25		)	248			357			(109		)
Income tax expense	(5,164		)	(3,004		)	(2,160		)	(10,807		)	(7,278		)	(3,529		)
Net income	$	10,547		$	6,230		$	4,317		$	20,950		$	14,873		$	6,077

	Electric Revenue by Customer Type
	Three Months Ended June 30,					Six Months Ended June 30,
	(in thousands)
	2015		Percentage Change	2014		2015		Percentage Change	2014
Residential	$	15,470	8%	$	14,332	$	35,610	4%	$	34,392
Commercial	24,433		15%	21,200		49,174		15%	42,728
Industrial	8,459		12%	7,534		16,758		13%	14,869
Municipal	859		2%	846		1,717		5%	1,638
Total retail revenue	49,221		12%	43,912		103,259		10%	93,627
Contract wholesale	3,979		(11)%	4,473		9,399		(7)%	10,071
Wholesale off-system	6,666		23%	5,411		13,301		(8)%	14,486
Other revenue	8,172		18%	6,945		12,362		(11)%	13,823
Total revenue	$	68,038	12%	$	60,741	$	138,321	5%	$	132,007

15

	Megawatt Hours Sold by Customer Type
	Three Months Ended June 30,			Six Months Ended June 30,
	2015	Percentage Change	2014	2015	Percentage Change	2014
Residential	110,017	2%	107,394	256,980	(8)%	278,704
Commercial	189,889	8%	176,541	384,967	7%	360,989
Industrial	102,494	(2)%	104,914	214,353	4%	205,765
Municipal	7,036	(9)%	7,709	14,736	(4)%	15,394
Total retail quantity sold	409,436	3%	396,558	871,036	1%	860,852
Contract wholesale	64,896	(10)%	71,999	149,167	(11)%	167,227
Wholesale off-system	246,213	45%	169,498	491,851	16%	424,294
Total quantity sold	720,545	13%	638,055	1,512,054	4%	1,452,373
Losses and company use	46,993	(30)%	66,915	73,639	(28)%	102,954
Total energy	767,538	9%	704,970	1,585,693	2%	1,555,327

	Megawatt Hours Generated and Purchased
	Three Months Ended June 30,				Six Months Ended June 30,
Generated -	2015	Percentage Change	2014		2015	Percentage Change	2014
Coal-fired	399,763	19%	336,842	(a)	776,597	3%	754,090	(a)
Gas-fired	16,883	534%	2,665	(b)	19,761	297%	4,972	(b)
Total generated	416,646	23%	339,507		796,358	5%	759,062
Total purchased	350,892	(4)%	365,463		789,335	(1)%	796,265
Total generated and purchased	767,538	9%	704,970		1,585,693	2%	1,555,327

__________________

(a) Increase was due to a planned annual outage at Neil Simpson II and an unplanned outage for a catalyst replacement at Wygen III

during the three and and six months ended June 30, 2014.

(b) Cheyenne Prairie was placed into commercial operations on October 1, 2014.

16

	Power Plant Availability
	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Coal-fired plants (a)	95.1	%	78.9	%	91.4	%	86.4	%
Other plants (b)	96.9	%	81.6	%	96.0	%	90.7	%
Total availability	96.1	%	80.1	%	94.0	%	88.4	%

__________________

(a) The three months and six months ended June 30, 2014 reflects a planned annual outage at Neil Simpson II and an unplanned outage for a catalyst repair at Wygen III.

(b) The three months and six months ended June 30, 2014 include a planned outage at Bench French CTs #1 and #2 for a controls upgrade.

	Degree Days						Degree Days
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	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	1,005	—	%	1,025	2	%	3,878	(8	)%	4,435	5	%
Cooling degree days	96	(10	)%	99	(7	)%	96	(10	)%	99	(7	)%

Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014. Net income was $11 million compared to $6.2 million for the same period in the prior year primarily due to the following:

Gross marginincreased primarily due to a return on capital investment in Cheyenne Prairie which increased gross margin by$5.1 million. Higher Commercial and Industrial MWh sold increased $0.7 million, wholesale margins and power marketing margins increased $0.4 million, primarily resulting from increased MWh sold, and other one-time items increased $1.8 million. Partially offsetting these increases is a $0.5 million impact from weather.

Operations and maintenance increased reflecting an increase in depreciation expense primarily due to a higher asset base driven by the addition of Cheyenne Prairie and increased employee costs.

Interest expense, net increased primarily due to interest costs from the $85 million of permanent financing put in place during the fourth quarter of 2014 for Cheyenne Prairie.

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

Income tax expense: The effective tax rate is higher in 2015 primarily due to the reduced impact of an estimated flow-through adjustment.

17

Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014. Net income was $21 million compared to $15 million for the same period in the prior year primarily due to the following:

Gross marginincreased primarily due to a return on capital investment in Cheyenne Prairie which increased gross margin by $7.8 million. Wholesale margins increased by $0.9 million, driven by reliability improvements on generation related to unit contingent contracts. Retail margins increased primarily due to Commercial and Industrial load increases of $2.0 million from higher MWh sold, and other one-time items increased $2.3 million. These increases are partially offset by $2.2 million from lower residential MWh sold driven by a 13% decrease in cooling degree days compared to the same period in the prior year.

Operations and maintenance increased, reflecting an increase in depreciation expense primarily due to a higher asset base driven by the addition of Cheyenne Prairie and increased plant maintenance.

Interest expense, net increased primarily due to interest costs from the $85 million of permanent financing put in place during the fourth quarter of 2014 for Cheyenne Prairie.

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

Income tax expense: The effective tax rate is higher in 2015 primarily due to the increase in liability with respect to uncertain tax positions related to research and development credits.

Financing Plans and Activity

On October 1, 2014, in a private placement to provide permanent financing for Cheyenne Prairie, we issued $85 million of 4.43% coupon first mortgage bonds due October 20, 2044.

On September 30, 2014, we repaid in full $12 million in principal on the 5.35% Pollution Control Revenue Bonds originally due to mature on October 1, 2024.

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. The following table represents our credit rating from each agency’s review on July 13, 2015:

Rating Agency	Rating
S&P	A-
Moody’s	A1
Fitch	A

18

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 2 - Management’s Discussion & Analysis of Financial Condition and Results of Operations.

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 2014 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.

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, 2014.

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) as of June 30, 2015. 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, 2015, that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

19

BLACK HILLS POWER, INC.

Part II - Other Information

Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 11 of Notes to Financial Statements in Item 8 of our 2014 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, 2014.

Item 6. Exhibits

Exhibit 3.1* Restated Articles of Incorporation of the Registrant dated March 30, 2015 (filed as Exhibit 3.1 to Registrant’s

Form 10-Q for the quarterly period ended March 31, 2015).

Exhibit 3.2* Amended and Restated Bylaws of the Registrant dated March 30, 2015 (filed as Exhibit 3.2 to Registrant’s

Form 10-Q for the quarterly period ended March 31, 2015).

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)). Third Supplemental Indenture, dated as of October 1, 2014, between Black Hills Power, Inc. and The Bank of New York Mellon (filed as Exhibit 10.1 to the Registrant’s Form 8-K filed on October 2, 2014).

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.

20

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/ RICHARD W. KINZLEY

Richard W. Kinzley, Senior Vice President

and Chief Financial Officer

Dated: August 11, 2015

21

EXHIBIT INDEX

Exhibit Number Description

Exhibit 3.1* Restated Articles of Incorporation of the Registrant dated March 30, 2015 (filed as Exhibit 3.1 to Registrant’s Form 10-Q for the quarterly period ended March 31, 2015).

Exhibit 3.2* Amended and Restated Bylaws of the Registrant dated March 30, 2015 (filed as Exhibit 3.2 to Registrant’s Form 10-Q for the quarterly period ended March 31, 2015).

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)). Third Supplemental Indenture, dated as of October 1, 2014, between Black Hills Power, Inc. and The Bank of New York Mellon (filed as Exhibit 10.1 to the Registrant’s Form 8-K filed on October 2, 2014).

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.

22

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, David R. Emery, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Black Hills Power, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	August 11, 2015
		/S/ DAVID R. EMERY
		David R. Emery
		Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Richard W. Kinzley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Black Hills Power, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	August 11, 2015
		/S/ RICHARD W. KINZLEY
		Richard W. Kinzley
		Senior Vice President and
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Black Hills Power, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David R. Emery, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13 (a) or

15 (d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material

respects, the financial condition and results of operations of the Company.

Date:	August 11, 2015
		/S/ DAVID R. EMERY
		David R. Emery
		Chairman and Chief Executive Officer

EX-32.1

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Black Hills Power, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard W. Kinzley, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13 (a) or

15 (d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material

respects, the financial condition and results of operations of the Company.

Date:	August 11, 2015
		/S/ RICHARD W. KINZLEY
		Richard W. Kinzley
		Senior Vice President and
		Chief Financial Officer

XML

Fair Value of Financial Instruments: Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands		Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents, carrying amount		$ 79,821	$ 6,620	$ 4,286	$ 2,259
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents, carrying amount	[1]	79,821	6,620
Long-term debt, including current maturities, carrying amount	[2]	342,754	342,752
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents, fair value	[1]	79,821	6,620
Long-term debt, including current maturities, fair value	[2]	$ 401,081	$ 430,497

[1] Carrying value approximates fair 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.

[2] 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.

XML

Regulatory Accounting:

6 Months Ended

Jun. 30, 2015

Regulated Operations [Abstract]

Regulatory Assets and Liabilities

REGULATORY ACCOUNTING

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, 2015		December 31, 2014
Regulatory assets:
Unamortized loss on reacquired debt (a)	10	$	2,236	$	2,377
AFUDC (b)	45	8,308		8,365
Employee benefit plans (c)	12	24,418		24,418
Deferred energy and fuel cost adjustments - current (a)	Less than 1 year	16,446		14,696
Flow through accounting (a)	35	11,956		11,171
Decommissioning costs, net of amortization(d)	10	12,175		11,786
Other	10	7,058		5,871
Total regulatory assets		$	82,597	$	78,684

Regulatory liabilities:
Cost of removal for utility plant (a)	53	$	36,523	$	35,510
Employee benefit plans (c)	12	14,539		14,538
Other	13	1,588		4,941
Total regulatory liabilities		$	52,650	$	54,989

____________________

(a) Recovery of costs, but we are 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 a portion of this amount or a reduction in rate base, respectively.

(d) Approximately $12 million of decommissioning costs are allowed a rate of return, in addition to recovery of costs.

XML

Accounts Receivable and Allowance For Doubtful Accounts:

6 Months Ended

Jun. 30, 2015

Accounts Receivable, Net [Abstract]

Accounts Receivables

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, 2015			December 31, 2014
Accounts receivable trade	$	16,089		$	24,946
Unbilled revenues	11,137			9,999
Allowance for doubtful accounts	(198		)	(261		)
Receivables - customers, net	$	27,028		$	34,684

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Condensed Statements of Income and Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement [Abstract]
Revenue	$ 68,038	$ 60,741	$ 138,321	$ 132,007
Operating expenses:
Fuel, purchased power and natural gas	19,353	21,278	41,457	48,323
Operations and maintenance	18,121	17,338	35,212	35,448
Depreciation and amortization	7,842	6,972	15,967	13,859
Taxes - property	1,579	1,371	3,052	3,050
Total operating expenses	46,895	46,959	95,688	100,680
Operating income	21,143	13,782	42,633	31,327
Other income (expense):
Interest expense	(5,680)	(4,984)	(11,372)	(9,931)
AFUDC - borrowed	44	57	83	129
Interest income	61	211	165	269
AFUDC - equity	80	117	150	262
Other income (expense), net	63	51	98	95
Total other income (expense)	(5,432)	(4,548)	(10,876)	(9,176)
Income from continuing operations before income taxes	15,711	9,234	31,757	22,151
Income tax expense	(5,164)	(3,004)	(10,807)	(7,278)
Net Income	10,547	6,230	20,950	14,873
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, 2015 and 2014 and $330 and $(11) for the six months ended June 30, 2015 and 2014, respectively)	10	11	362	21
Reclassification adjustment of benefit plan liability - net gain (loss) (net of tax (expense) benefit of $(8) and $(4) for the three months ended June 30, 2015 and 2014 and $(16) and $(8) for the six months ended June 30, 2015 and 2014, respectively)	16	7	31	14
Other comprehensive income	26	18	393	35
Comprehensive income	$ 10,573	$ 6,248	$ 21,343	$ 14,908

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Condensed Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Operating activities:
Net income	$ 20,950	$ 14,873
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization	15,967	13,859
Deferred income tax	10,080	7,237
Employee benefits	1,202	647
AFUDC - equity	(150)	(262)
Other adjustments, net	291	(1,720)
Change in operating assets and liabilities -
Accounts receivable and other current assets	582	(8,743)
Accounts payable and other current liabilities	(11,358)	7,802
Other operating activities, net	(2,409)	(2,002)
Net Cash Provided by (Used in) Operating Activities	35,155	31,691
Investing activities:
Property, plant and equipment additions	(17,009)	(43,478)
Change in money pool notes receivable, net	55,145	14,052
Other investing activities	(90)	(105)
Net Cash Provided by (Used in) Investing Activities	38,046	(29,531)
Financing activities:
Other financing activities	0	(133)
Net Cash Provided by (Used in) Financing Activities	0	(133)
Net change in cash and cash equivalents	73,201	2,027
Cash and Cash Equivalents:
Cash and cash equivalents, beginning of period	6,620	2,259
Cash and cash equivalents, end of period	$ 79,821	$ 4,286

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Regulatory Accounting: Regulatory Accounting (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2015	Dec. 31, 2014
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Assets		$ 82,597	$ 78,684
Regulatory Liabilities		$ 52,650	54,989
Cost of removal for utility plant [Member]
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liabilities Amortization Period, Unclassified		53 years
Regulatory Liabilities	[1]	$ 36,523	35,510
Employee benefit plans [Member]
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liabilities Amortization Period, Unclassified		12 years
Regulatory Liabilities	[2]	$ 14,539	14,538
Other regulatory liabilities [Member]
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liabilities Amortization Period, Unclassified		13 years
Regulatory Liabilities		$ 1,588	4,941
Unamortized Loss on reacquired debt [Member]
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Assets Amortization Period, Unclassified		10 years
Regulatory Assets	[1]	$ 2,236	2,377
Allowance For Funds Used During Construction [Member]
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Assets Amortization Period, Unclassified		45 years
Regulatory Assets	[3]	$ 8,308	8,365
Employee benefit plans [Member]
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Assets Amortization Period, Unclassified		12 years
Regulatory Assets	[2]	$ 24,418	24,418
Deferred energy and fuel cost adjustments - current [Member]
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Assets	[1]	$ 16,446	14,696
Flow through accounting [Member]
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Assets Amortization Period, Unclassified		35 years
Regulatory Assets	[1]	$ 11,956	11,171
Decommissioning costs, net of amortization [Member]
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Assets Amortization Period, Unclassified		10 years
Regulatory Assets	[4]	$ 12,175	11,786
Other regulatory assets [Member]
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Assets Amortization Period, Unclassified		10 years
Regulatory Assets		$ 7,058	$ 5,871

[1] Recovery of costs, but we are not allowed a rate of return.

[2] In addition to recovery of costs, we are allowed a return on a portion of this amount or a reduction in rate base, respectively.

[3] In addition to recovery of costs, we are allowed a rate of return.

[4] Approximately $12 million of decommissioning costs are allowed a rate of return, in addition to recovery of costs.

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Employee Benefit Plans: Employee Benefit Plans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Defined Benefit Pension Plan
Defined Benefit Plan, Net Periodic Benefit Cost [Abstract]
Service cost	$ 199	$ 176	$ 398	$ 352
Interest cost	739	748	1,478	1,496
Expected return on plan assets	(984)	(925)	(1,968)	(1,851)
Prior service cost (benefit)	11	10	22	21
Net loss (gain)	549	235	1,098	470
Net periodic benefit cost	514	244	1,028	488
Pension and Other Postretirement Benefit Contributions [Abstract]
Contributions made by Employer			0
Remaining Anticipated Contributions for Current Year			0
Anticipated Contributions for Next Year			0
Defined Benefit Postretirement Healthcare Plan
Defined Benefit Plan, Net Periodic Benefit Cost [Abstract]
Service cost	59	56	117	112
Interest cost	53	60	107	120
Prior service cost (benefit)	(84)	(84)	(168)	(168)
Net loss (gain)	0	0	0	0
Net periodic benefit cost	28	32	56	64
Pension and Other Postretirement Benefit Contributions [Abstract]
Contributions made by Employer			260
Remaining Anticipated Contributions for Current Year			260
Anticipated Contributions for Next Year			577
Supplemental Non-qualified Defined Benefit Plans
Defined Benefit Plan, Net Periodic Benefit Cost [Abstract]
Interest cost	36	36	72	73
Net loss (gain)	23	11	46	22
Net periodic benefit cost	$ 59	$ 47	118	$ 95
Pension and Other Postretirement Benefit Contributions [Abstract]
Contributions made by Employer			109
Remaining Anticipated Contributions for Current Year			109
Anticipated Contributions for Next Year			$ 184

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Management's Statement:

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Management's Statement

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 2014 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, 2015, December 31, 2014 and June 30, 2014 financial information and are of a normal recurring nature. The results of operations for the three months and six months ended June 30, 2015 and June 30, 2014, and our financial condition as of June 30, 2015 and December 31, 2014 are not necessarily indicative of the results of operations and financial condition to be expected as of or for any other period.

Recently Issued and Adopted Accounting Standards

We have implemented all new accounting pronouncements that are in effect and may impact our financial statements. We are currently assessing the impact any other new accounting pronouncements that have been issued may have on our financial position, results of operations, or cash flows.

Simplifying the Presentation of Debt Issuance Costs, ASU 2015-03

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. Debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts, rather than as an asset. Amortization of these costs will continue to be reported as interest expense. ASU 2015-03 is effective for annual and interim reporting periods beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the impact of adoption that ASU 2015-03 will have on our financial position, results of operations, or cash flows.

Revenue from Contracts with Customers, ASU 2014-09

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. On July 9, 2015, FASB voted to defer the effective date of ASU 2014-09 by one year. The proposed guidance would be effective for annual and interim reporting periods beginning after December 15, 2018 and early adoption is permitted. We are currently evaluating the impact of adoption, if any, that ASU 2014-09 will have on our financial position, results of operations or cash flows.

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Condensed Statements of Income and Comprehensive Income OCI Parenthetical - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Reclassification adjustment of cash flow hedges settled, (tax) benefit	$ (6)	$ (5)	$ 330	$ (11)
Reclassification adjustment of benefit and other postretirement plans included in net income, (tax) benefit	$ (8)	$ (4)	$ (16)	$ (8)

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Related Party Transactions: Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2015

Related Party Transactions [Abstract]

Schedule of Related Party Accounts Receivable and Payable

The balances were as follows (in thousands) as of:

	June 30, 2015		December 31, 2014
Receivables - affiliates	$	7,502	$	5,350
Accounts payable - affiliates	$	21,801	$	19,242

Schedule of Related Party Notes

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

	June 30, 2015		December 31, 2014
Money pool notes receivable, net	$	6,981	$	68,626

Schedule of Related Party Interest Income Expense

Our 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,
	2015		2014		2015		2014
Net interest income (expense)	$	288	$	27	$	546	$	84

Schedule of Revenues and Purchases from Related Parties

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Revenue:
Energy sold to Cheyenne Light	$	379	$	397	$	705	$	1,076
Rent from electric properties	$	1,332	$	1,051	$	2,456	$	2,074
Fuel and purchased power:
Purchases of coal from WRDC	$	4,099	$	4,018	$	8,144	$	9,032
Purchase of excess energy from Cheyenne Light	$	213	$	584	$	689	$	1,213
Purchase of renewable wind energy from Cheyenne Light - Happy Jack	$	280	$	465	$	829	$	1,129
Purchase of renewable wind energy from Cheyenne Light - Silver Sage	$	498	$	750	$	1,434	$	1,844
Gas transportation service agreement
Gas transportation service agreement with Cheyenne Light for firm and interruptible gas transportation	$	103	$	—	$	207	$	—
Corporate support:
Corporate support services and fees from Parent, Black Hills Service Company and Black Hills Utility Holdings	$	6,627	$	6,703	$	13,660	$	14,190

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Document and Entity Information Document - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
Document Information [Line Items]
Entity Registrant Name	BLACK HILLS POWER INC
Entity Central Index Key	0000012400
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Amendment Flag	false
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		23,416,396

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Employee Benefit Plans: Employee Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2015

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Schedule of Net Benefit Costs

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,
	2015			2014			2015			2014
Service cost	$	199		$	176		$	398		$	352
Interest cost	739			748			1,478			1,496
Expected return on plan assets	(984		)	(925		)	(1,968		)	(1,851		)
Prior service cost	11			10			22			21
Net loss (gain)	549			235			1,098			470
Net periodic benefit cost	$	514		$	244		$	1,028		$	488

Defined Benefit Postretirement Healthcare Plan

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Service cost	$	59		$	56		$	117		$	112
Interest cost	53			60			107			120
Prior service cost (benefit)	(84		)	(84		)	(168		)	(168		)
Net loss (gain)	—			—			—			—
Net periodic benefit cost	$	28		$	32		$	56		$	64

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,
	2015		2014		2015		2014
Interest cost	$	36	$	36	$	72	$	73
Net loss (gain)	23		11		46		22
Net periodic benefit cost	$	59	$	47	$	118	$	95

Schedule of Defined Benefit Plans Contributions

Contributions and anticipated contributions are as follows (in thousands):

	Contributions Six Months Ended June 30, 2015		Remaining Anticipated Contributions for 2015		Anticipated Contributions for 2016
Defined Benefit Pension Plan	$	—	$	—	$	—
Defined Benefit Postretirement Healthcare Plan	$	260	$	260	$	577
Supplemental Non-qualified Defined Benefit Plans	$	109	$	109	$	184

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Condensed Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 79,821	$ 6,620
Receivables - customers, net	27,028	34,684
Receivables - affiliates	7,502	5,350
Other receivables, net	265	259
Money pool notes receivable, net	6,981	68,626
Materials, supplies and fuel	22,720	20,965
Deferred income tax assets, net, current	2,679	13,661
Regulatory assets, current	13,465	10,257
Other, current assets	32,108	4,954
Total current assets	192,569	165,376
Investments	4,681	4,584
Property, plant and equipment	1,119,407	1,115,061
Less accumulated depreciation and amortization	(315,873)	(309,767)
Total property, plant and equipment, net	803,534	805,294
Other assets:
Regulatory assets, non-current	69,132	68,427
Other, non-current assets	15,033	11,708
Total other assets	84,165	80,135
TOTAL ASSETS	1,084,949	1,055,389
Current liabilities:
Accounts payable	17,644	30,543
Accounts payable - affiliates	21,801	19,242
Accrued liabilities	42,100	16,415
Regulatory liabilities, current	431	3,073
Total current liabilities	81,976	69,273
Long-term debt, net of current maturities	342,754	342,752
Deferred credits and other liabilities:
Deferred income tax liability, net, non-current	192,749	193,042
Regulatory liabilities, non-current	52,219	51,916
Benefit plan liabilities	21,880	20,981
Other, non-current liabilities	3,734	2,631
Total deferred credits and other liabilities	$ 270,582	$ 268,570
Commitments and contingencies (Notes 4, 5 and 8)
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	39,575	39,575
Retained earnings	328,072	313,622
Accumulated other comprehensive loss	(1,426)	(1,819)
Total stockholder’s equity	389,637	374,794
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$ 1,084,949	$ 1,055,389

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Fair Value of Financial Instruments:

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

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 2014 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, 2015				December 31, 2014
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents (a)	$	79,821	$	79,821	$	6,620	$	6,620
Long-term debt, including current maturities (b)	$	342,754	$	401,081	$	342,752	$	430,497

_________________

(a) Carrying value approximates fair 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.

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Employee Benefit Plans:

6 Months Ended

Jun. 30, 2015

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Employee Benefit Plans Disclosure

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,
	2015			2014			2015			2014
Service cost	$	199		$	176		$	398		$	352
Interest cost	739			748			1,478			1,496
Expected return on plan assets	(984		)	(925		)	(1,968		)	(1,851		)
Prior service cost	11			10			22			21
Net loss (gain)	549			235			1,098			470
Net periodic benefit cost	$	514		$	244		$	1,028		$	488

Defined Benefit Postretirement Healthcare Plan

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Service cost	$	59		$	56		$	117		$	112
Interest cost	53			60			107			120
Prior service cost (benefit)	(84		)	(84		)	(168		)	(168		)
Net loss (gain)	—			—			—			—
Net periodic benefit cost	$	28		$	32		$	56		$	64

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,
	2015		2014		2015		2014
Interest cost	$	36	$	36	$	72	$	73
Net loss (gain)	23		11		46		22
Net periodic benefit cost	$	59	$	47	$	118	$	95

Contributions

We anticipate we will make contributions to the benefit plans during 2015 and 2016. Contributions to the Defined Benefit Pension Plan are cash contributions made directly to the Pension Plan Trust accounts. Contributions to the Healthcare and Supplemental Plans are made in the form of benefit payments. Contributions and anticipated contributions are as follows (in thousands):

	Contributions Six Months Ended June 30, 2015		Remaining Anticipated Contributions for 2015		Anticipated Contributions for 2016
Defined Benefit Pension Plan	$	—	$	—	$	—
Defined Benefit Postretirement Healthcare Plan	$	260	$	260	$	577
Supplemental Non-qualified Defined Benefit Plans	$	109	$	109	$	184

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Related Party Transactions: Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Related Party Transaction [Line Items]
Receivables - affiliates	$ 7,502		$ 7,502		$ 5,350
Accounts payable - affiliates	21,801		$ 21,801		19,242
Related Party Transaction, Utility Money Pool Interest Rate			1.41%
Money pool notes receivable, net	6,981		$ 6,981		$ 68,626
Parent [Member]
Related Party Transaction [Line Items]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage			1.00%
Utility Money Pool [Member]
Related Party Transaction [Line Items]
Interest Income (Expense), Net	288	$ 27	$ 546	$ 84
Subsidiary of Common Parent [Member] | Allocated Costs From Related Parties [Member]
Related Party Transaction [Line Items]
Costs and Expenses, Related Party	6,627	6,703	13,660	14,190
Subsidiary of Common Parent [Member] | Purchase Of Natural Gas, Cheyenne Light [Member]
Related Party Transaction [Line Items]
Costs and Expenses, Related Party	103	0	207	0
Subsidiary of Common Parent [Member] | Coal, Purchased [Member]
Related Party Transaction [Line Items]
Costs and Expenses, Related Party	4,099	4,018	8,144	9,032
Subsidiary of Common Parent [Member] | Purchase of Excess Energy, Cheyenne Light [Member]
Related Party Transaction [Line Items]
Costs and Expenses, Related Party	213	584	689	1,213
Subsidiary of Common Parent [Member] | Happy Jack Wind Purchase Power Agreeement [Member]
Related Party Transaction [Line Items]
Costs and Expenses, Related Party	280	465	829	1,129
Subsidiary of Common Parent [Member] | Silver Sage Wind Power Purchase Agreement [Member]
Related Party Transaction [Line Items]
Costs and Expenses, Related Party	498	750	1,434	1,844
Subsidiary of Common Parent [Member] | Energy sold to Cheyenne Light [Member]
Related Party Transaction [Line Items]
Revenue from Related Parties	379	397	705	1,076
Subsidiary of Common Parent [Member] | Lease Agreements [Member]
Related Party Transaction [Line Items]
Revenue from Related Parties	$ 1,332	$ 1,051	$ 2,456	$ 2,074

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Fair Value of Financial Instruments: Fair Value of Financial Instruments(Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Schedule of Fair Value of Financial Instruments

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

	June 30, 2015				December 31, 2014
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents (a)	$	79,821	$	79,821	$	6,620	$	6,620
Long-term debt, including current maturities (b)	$	342,754	$	401,081	$	342,752	$	430,497

_________________

(a) Carrying value approximates fair 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.

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Accounts Receivable and Allowance For Doubtful Accounts: Accounts Receivable (Tables)

6 Months Ended

Jun. 30, 2015

Accounts Receivable, Net [Abstract]

Schedule of Accounts Receivable

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

	June 30, 2015			December 31, 2014
Accounts receivable trade	$	16,089		$	24,946
Unbilled revenues	11,137			9,999
Allowance for doubtful accounts	(198		)	(261		)
Receivables - customers, net	$	27,028		$	34,684

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Supplemental Disclosure of Cash Flow Information:

6 Months Ended

Jun. 30, 2015

Supplemental Cash Flow Information [Abstract]

Cash Flow, Supplemental Disclosures

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Six months ended June 30,	2015			2014
	(in thousands)
Non-cash investing and financing activities -
Property, plant and equipment acquired with accrued liabilities	$	2,225		$	9,824
Non-cash (decrease) to money pool notes receivable, net	$	(6,500	)	$	—
Non-cash dividend to Parent	$	6,500		$	—
Cash (paid) refunded during the period for -
Interest (net of amounts capitalized)	$	(11,063	)	$	(9,678	)
Income taxes, net	$	—		$	—

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Commitment and Contingencies:

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure

COMMITMENTS AND CONTINGENCIES

Other than the item discussed below, there have been no significant changes to commitments and contingencies from those previously disclosed in Note 11 of our Notes to the Financial Statements in our 2014 Annual Report on Form 10-K.

Oil Creek Fire

On June 29, 2012, a forest and grassland fire occurred in the western Black Hills of Wyoming. A fire investigator retained by the Weston County Fire Protection District concluded that the fire was caused by the failure of a transmission structure owned, operated and maintained by Black Hills Power. On April 16, 2013, a large group of private landowners filed suit in the United States District Court for the District of Wyoming. There are approximately 36 Plaintiff groups (including property jointly owned by multiple family members or entities), or approximately 73 individually named private plaintiffs. In addition, the State of Wyoming has intervened in the lawsuit. Both the private landowners and the State of Wyoming assert claims for damages against Black Hills Power. The claims include allegations of negligence, negligence per se, common law nuisance and trespass. In addition to claims for compensatory damages, the lawsuit seeks recovery of punitive damages. We have denied and will vigorously defend all claims arising out of the fire. We cannot predict the outcome of expert investigation, the viability of alleged claims or the outcome of the litigation.

Civil litigation of this kind, however, is likely to lead to settlement negotiations, including negotiations prompted by pre-trial civil court procedures. We believe such negotiations would effect a settlement of all claims. Regardless of whether the litigation is determined at trial or through settlement, we expect to incur significant investigation, legal and expert services expenses associated with the litigation. We maintain insurance coverage to limit our exposure to losses due to civil liability claims, and related litigation expense, and we will pursue recoveries to the maximum extent available under the policies. The deductible applicable to some types of claims arising out of this fire is $1.0 million. Based upon information currently available, we believe that a loss associated with settlement of pending claims is probable. Accordingly, we recorded a loss contingency liability related to these claims and we recorded a receivable for costs we believe are reimbursable and probable of recovery under our insurance coverage. Both of these entries reflect our reasonable estimate of probable future litigation expense and settlement costs; we did not base these contingencies on any determination that it is probable we would be found liable for these claims were they to be litigated.

Given the uncertainty of litigation, however, a loss related to the fire, the litigation and related claims in excess of the loss we have determined to be probable is reasonably possible. We cannot reasonably estimate the amount of such possible loss because expert investigations and our review of damage claim documentation are ongoing, and there are significant factual and legal issues to be resolved. Further claims may be presented by these claimants and other parties. We have received claims seeking recovery for fire suppression, reclamation and rehabilitation costs, damage to fencing and other personal property, alleged injury to timber, grass or hay, livestock and related operations, and diminished value of real estate. Based on the legal standard for measuring damages that we believe applies to this matter, we estimate the current total claims to be approximately $55 million; however the actual amount of allowed claims and any loss will depend on the resolution of certain factual and legal issues. We are not yet able to reasonably estimate the amount of any reasonable possible losses in excess of the amount we have accrued. Based upon information currently available, however, management does not expect the outcome of the claims to have a material adverse effect upon our consolidated financial condition, results of operations or cash flows.

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Regulatory Accounting: Regulatory Accounting (Tables)

6 Months Ended

Jun. 30, 2015

Regulated Operations [Abstract]

Schedule of Regulatory Assets

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

	Recovery/Amortization Period (in years)	June 30, 2015		December 31, 2014
Regulatory assets:
Unamortized loss on reacquired debt (a)	10	$	2,236	$	2,377
AFUDC (b)	45	8,308		8,365
Employee benefit plans (c)	12	24,418		24,418
Deferred energy and fuel cost adjustments - current (a)	Less than 1 year	16,446		14,696
Flow through accounting (a)	35	11,956		11,171
Decommissioning costs, net of amortization(d)	10	12,175		11,786
Other	10	7,058		5,871
Total regulatory assets		$	82,597	$	78,684

Schedule of Regulatory Liabilities

Regulatory liabilities:
Cost of removal for utility plant (a)	53	$	36,523	$	35,510
Employee benefit plans (c)	12	14,539		14,538
Other	13	1,588		4,941
Total regulatory liabilities		$	52,650	$	54,989

____________________

(a) Recovery of costs, but we are 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 a portion of this amount or a reduction in rate base, respectively.

(d) Approximately $12 million of decommissioning costs are allowed a rate of return, in addition to recovery of costs.

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Accounts Receivable and Allowance For Doubtful Accounts: Accounts Receivable (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Accounts Receivable [Line Items]
Allowance for doubtful accounts	$ (198)	$ (261)
Receivables - customers, net	27,028	34,684
Billed Revenues [Member]
Accounts Receivable [Line Items]
Accounts receivable, trade	16,089	24,946
Unbilled Revenues [Member]
Accounts Receivable [Line Items]
Accounts receivable, trade	$ 11,137	$ 9,999

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Supplemental Disclosure of Cash Flow Information: Supplemental Disclosures of Cash Flow Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Noncash Investing and Financing Items [Abstract]
Property, plant and equipment acquired with accrued liabilities	$ 2,225	$ 9,824
Interest and Income Taxes Paid Net [Abstract]
Interest paid, (net of amounts capitalized)	(11,063)	(9,678)
Income taxes, net	0	0
Subsidiary of Common Parent [Member]
Noncash Investing and Financing Items [Abstract]
Non-cash (decrease) to money pool notes receivable, net	(6,500)	0
Parent [Member]
Noncash Investing and Financing Items [Abstract]
Non-cash dividend to Parent	$ 6,500	$ 0

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Balance Sheet Parentheticals - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]
Common Stock, Par Value Per Share	$ 1	$ 1
Common Stock, Shares Authorized	50,000,000	50,000,000
Common Stock, Shares, Issued	23,416,396	23,416,396

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Related Party Transactions:

6 Months Ended

Jun. 30, 2015

Related Party Transactions [Abstract]

Related Party Transactions Disclosure

RELATED-PARTY TRANSACTIONS

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, 2015		December 31, 2014
Receivables - affiliates	$	7,502	$	5,350
Accounts payable - affiliates	$	21,801	$	19,242

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. We are the administrator of the Money Pool. 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 paying 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, 2015, the average cost of borrowing under the Utility Money Pool was 1.41%.

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

	June 30, 2015		December 31, 2014
Money pool notes receivable, net	$	6,981	$	68,626

Our 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,
	2015		2014		2015		2014
Net interest income (expense)	$	288	$	27	$	546	$	84

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Revenue:
Energy sold to Cheyenne Light	$	379	$	397	$	705	$	1,076
Rent from electric properties	$	1,332	$	1,051	$	2,456	$	2,074
Fuel and purchased power:
Purchases of coal from WRDC	$	4,099	$	4,018	$	8,144	$	9,032
Purchase of excess energy from Cheyenne Light	$	213	$	584	$	689	$	1,213
Purchase of renewable wind energy from Cheyenne Light - Happy Jack	$	280	$	465	$	829	$	1,129
Purchase of renewable wind energy from Cheyenne Light - Silver Sage	$	498	$	750	$	1,434	$	1,844
Gas transportation service agreement
Gas transportation service agreement with Cheyenne Light for firm and interruptible gas transportation	$	103	$	—	$	207	$	—
Corporate support:
Corporate support services and fees from Parent, Black Hills Service Company and Black Hills Utility Holdings	$	6,627	$	6,703	$	13,660	$	14,190

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Commitment and Contingencies: Oil Creek Fire (Details) - Pending Litigation [Member] - Oil Creek Fire [Member] - Loss from Catastrophes [Member] $ in Millions	6 Months Ended
	Jun. 30, 2015 USD ($)
Minimum [Member]
Loss Contingencies [Line Items]
Insurance Coverage Deductible Per Occurrence	$ 1.0
Maximum [Member]
Loss Contingencies [Line Items]
Loss Contingency, Damages Sought, Value	$ 55.0

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Supplemental Disclosure of Cash Flow Information: Supplemental Disclosures of Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2015

Supplemental Cash Flow Information [Abstract]

Schedule of Cash Flow, Supplemental Disclosures

Six months ended June 30,	2015			2014
	(in thousands)
Non-cash investing and financing activities -
Property, plant and equipment acquired with accrued liabilities	$	2,225		$	9,824
Non-cash (decrease) to money pool notes receivable, net	$	(6,500	)	$	—
Non-cash dividend to Parent	$	6,500		$	—
Cash (paid) refunded during the period for -
Interest (net of amounts capitalized)	$	(11,063	)	$	(9,678	)
Income taxes, net	$	—		$	—