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 March 31, 2019 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



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	June 30, 2019
OR
☐	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
Incorporated in		South Dakota	IRS Identification Number		46-0111677
7001 Mount Rushmore Road		Rapid City		South Dakota	57702
Rapid City, South Dakota 57702
Registrant’s telephone number			(605)	721-1700
Registrant’s telephone number (605) 721-1700
Former name, former address, and former fiscal year if changed since last report
Former name, former address, and former fiscal year if changed since last report
NONE
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 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large ~~accelerated~~Accelerated ~~filer~~Filer o Accelerated ~~filer~~Filer o Non-accelerated ~~filer~~Filer x (Do not check if a smaller reporting company) Smaller ~~reporting~~Reporting ~~company~~Company o☐ Emerging ~~growth~~Growth ~~company~~Company o☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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



Securities registered pursuant to Section 12(b) of the Act: None

As of ~~April~~July 3031, 2019, 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.

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TABLE OF CONTENTS

		~~Page~~	Page
	GLOSSARY OF TERMS AND ABBREVIATIONS	3
Glossary of Terms and Abbreviations			3
PART 1.	FINANCIAL INFORMATION
PART 1. FINANCIAL INFORMATION
Item 1.	Financial Statements - unaudited		4
	Condensed Statements of Comprehensive Income - unaudited	4
	Condensed Statements of Comprehensive Income		4
	Three Months Ended March 31, 2019 and 2018
	Condensed Balance Sheet		5
	Condensed Balance Sheets - unaudited	5
	Condensed Statements of Cash Flows		7
	March 31, 2019 and December 31, 2018
	Condensed Statements of Equity		8
	Condensed Statements of Cash Flows - unaudited	7
	Notes to Condensed Financial Statements		9
	Three Months Ended March 31, 2019 and 2018
	Note 1. Management’s Statement		9
	Notes to Condensed Financial Statements - unaudited	8
	Note 2. Revenue		10
Item 2.	Managements’ Discussion and Analysis of Financial Condition and Results of Operations	16
	Note 3. Accounts Receivable		10
Item 4.	Controls and Procedures	20
	Note 4. Regulatory Accounting		11
PART II.	OTHER INFORMATION	21
	Note 5. Related-Party Transactions		12
Item 1.	Legal Proceedings	21
	Note 6. Employee Benefit Plans		13
Item 1A.	Risk Factors	21
	Note 7. Fair Value of Financial Instruments		15
Item 6.	Exhibits	21
	Note 8. Supplemental Disclosure of Cash Flow Information		15
	Signatures	22
	Note 9. Commitments and Contingencies		15
	Note 10. Leases		15
Item 2.	Managements’ Discussion and Analysis of Financial Condition and Results of Operations		17
Item 4.	Controls and Procedures		22
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		23
Item 6.	Exhibits		23
Signatures			24

Table of Contents

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
ASC	Accounting Standards Codification
ASU	Accounting Standards Update issued by the FASB
BHC	Black Hills Corporation; the Parent Company
Black Hills Energy	The name used to conduct the business of BHC utility companies
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 Black Hills Corporation (doing business as Black Hills Energy and providing electric service)
Cooling degree day (CDD)	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.
CPCN	Certificate of Public Convenience and Necessity
FASB	Financial Accounting Standards Board
FERC	United States Federal Energy Regulatory Commission
Fitch	Fitch Ratings
GAAP	Accounting principles generally accepted in the United States of America
Happy Jack	Happy Jack Wind Farms, LLC, a subsidiary of Duke Energy Generation Services
Heating degree day (HDD)	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.
Horizon Point	BHC Corporate headquarters building in Rapid City, South Dakota, which was completed in 2017.
LIBOR	London Interbank Offered Rate
Moody’s	Moody’s Investors Service, Inc.
MW	Megawatts
MWh	Megawatt-hours
Parent	Black Hills Corporation
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
South Dakota Electric	~~Includes~~ Black Hills Power, which includes operations in South Dakota, Wyoming and Montana
S&P	Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.
TCJA	Tax Cuts and Jobs Act enacted December 22, 2017
WPSC	Wyoming Public Service Commission
WRDC	Wyodak Resources Development Corp., an indirect, wholly-owned subsidiary of BHC
Wygen III	110 MW mine-mouth coal-fired power plant in which BHP owns a 52% interest, MDU owns a 25% interest and the City of Gillette owns the remaining 23% interest. BHP operates the plant.
Wyodak Plant	Wyodak, a 362 MW mine-mouth coal-fired plant in Gillette, Wyoming, owned 80% by Pacificorp and 20% by Black Hills Energy South Dakota. Our WRDC mine supplies all of the fuel for the plant.
Wyoming Electric	Includes Cheyenne Light’s electric utility operations

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BLACK HILLS POWER, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
(unaudited)	2019			2018			2019			2018
	(in thousands)
Revenue	$	7969,~~041~~246		$	7370,~~815~~676		$	148,287		$	144,491
Operating expenses:
Fuel and purchased power	2218,~~733~~381			2220,~~440~~753			41,114			43,193
Operations and maintenance	1921,~~557~~128			1918,~~151~~428			40,685			37,579
Depreciation and amortization	10,~~077~~357			9,~~884~~866			20,434			19,750
Taxes - property	2,~~032~~070			12,~~976~~134			4,102			4,110
Total operating expenses	5451,~~399~~936			5351,~~451~~181			106,335			104,632
Operating income	2417,~~642~~310			2019,~~364~~495			41,952			39,859
Other income (expense):
Interest charges -
Interest expense incurred (including amortization of debt issuance costs, premiums, and discounts)	(5,~~830~~876		)	(5,~~587~~654		)	(11,706		)	(11,241		)
Allowance for funds used during construction - borrowed	~~283~~427			48152			710			200
Interest income	~~115~~172			~~115~~123			287			238
Allowance for funds used during construction - equity	—			34
Other income (expense), net	291			(242		)	(84		)	(359		)
Other income (expense), net	(375		)	(151		)
Total other income (expense), net	(4,986		)	(5,621		)	(10,793		)	(11,162		)
Total other income (expense), net	(5,807		)	(5,541		)
Income before income taxes	12,324			13,874			31,159			28,697
Income before income taxes	18,835			14,823
Income tax expense	(2,176		)	(2,749		)	(5,514		)	(5,812		)
Income tax expense	(3,338		)	(3,063		)
Net income	10,148			11,125			25,645			22,885
Net income	15,497			11,760
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss), net of tax:
Reclassification of net realized (gains) losses on settled/amortized interest rate swaps (net of tax of $(7), $(5), $(7) and $(11), respectively)	25			11			25			21
Reclassification of net realized (gains) losses on settled/amortized interest rate swaps (net of tax of $0 and $(6), respectively)	—			10
Reclassification adjustment of benefit plan liability - net gain (loss) (net of tax of $(2), $(9), $(6) and $(18), respectively)	14			17			26			34
Reclassification adjustment of benefit plan liability - net gain (loss) (net of tax of $(4) and $(9), respectively)	12			17
Other comprehensive income (loss), net of tax	39			28			51			55
Other comprehensive income (loss), net of tax	12			27
Comprehensive income	$	10,187		$	11,153		$	25,696		$	22,940
Comprehensive income	$	15,509		$	11,787

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

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BLACK HILLS POWER, INC.

CONDENSED BALANCE SHEETS

	As of
(unaudited)	~~March~~June 3130, 2019			December 31, 2018
	(in thousands)
ASSETS
Current assets:
Cash	$	5		$	112
Accounts receivable, net	2825,~~354~~882			28,431
Accounts receivable from affiliates	95,~~903~~102			8,119
Materials, supplies and fuel	25,~~275~~313			24,853
Regulatory assets, current	2322,~~215~~339			19,052
Other current assets	4,~~692~~460			4,538
Total current assets	9183,~~444~~101			85,105
Investments	4,~~973~~846			4,889
Property, plant and equipment	1,~~399~~428,~~901~~721			1,381,045
Less: accumulated depreciation and amortization	(~~383~~390,~~681~~570		)	(376,160		)
Total property, plant and equipment, net	1,~~016~~038,~~220~~151			1,004,885
Other assets:
Regulatory assets, non-current	53,~~141~~364			56,680
Other assets, non-current	2426,~~616~~284			9,729
Total other assets, non-current	7779,~~757~~648			66,409
TOTAL ASSETS	$	1,~~190~~205,~~394~~746		$	1,161,288

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

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BLACK HILLS POWER, INC.

CONDENSED BALANCE SHEETS

(Continued)

	As of
(unaudited)	~~March~~June 3130, 2019			December 31, 2018
	(in thousands, except share amounts)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	1922,~~434~~730		$	25,122
Accounts payable to affiliates	2624,~~966~~737			25,804
Accrued liabilities	4038,~~428~~159			34,193
Money pool notes payable	3313,~~300~~071			38,690
Regulatory liabilities, current	2,079			2,574
Notes payable to Parent	25,000			—
Total current liabilities	122,207			126,383
Regulatory liabilities, current	2,392			2,574
Long-term debt	340,070			340,035
Total current liabilities	126,089			126,383
Long-term debt	340,105			340,035
Deferred credits and other liabilities:
Deferred income tax liabilities, net	~~116~~117,~~499~~272			114,009
Regulatory liabilities, non-current	~~161~~162,~~714~~104			160,642
Benefit plan liabilities	14,~~631~~568			14,606
Other deferred credits and other liabilities	15,~~525~~672			1,368
Total deferred credits and other liabilities	~~308~~309,~~369~~616			290,625
Commitments and contingencies (Notes 5, 6 and 9)
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	~~357~~367,~~636~~785			342,145
Accumulated other comprehensive loss	(~~879~~840		)	(891		)
Total stockholder’s equity	~~419~~429,~~748~~936			404,245
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	1,~~190~~205,~~394~~746		$	1,161,288

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

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BLACK HILLS POWER, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)	~~Three~~Six Months ~~Ended~~EndedJune ~~March 31~~30,
	2019			2018
	(in thousands)
Operating activities:
Net income	$	1525,~~497~~645		$	1122,~~760~~885
Adjustments to reconcile net income to net cash provided by operating activities-
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1020,~~077~~434			919,~~884~~750
Deferred income tax	12,~~718~~004			(~~898~~1,407		)
Employee benefits	~~195~~389			~~380~~760
Other adjustments, net	1,~~044~~767			1,~~018~~091
Change in operating assets and liabilities -
Change in operating assets and liabilities:
Accounts receivable and other current assets	(24,~~437~~841		)	(21,~~478~~494		)
Accounts payable and other current liabilities	~~6,210~~47			32,~~320~~170
Regulatory assets - current	(12,~~413~~037		)	12,~~807~~797
Regulatory liabilities - current	(~~444~~131		)	35,~~171~~709
Other operating activities, net	(~~594~~2,372		)	35(458		)
Net cash provided by (used in) operating activities	2950,~~853~~587			2751,~~999~~803
Investing activities:
Property, plant and equipment additions	(2449,~~386~~387		)	(1327,~~533~~399		)
Proceeds from sale of assets	—			4,994
Other investing activities	(~~169~~688		)	(34,~~608~~961		)
Net cash provided by (used in) investing activities	(2450,~~555~~075		)	(1227,~~147~~366		)
Financing activities:
Change in money pool notes payable, net	(~~5,390~~619		)	(1524,~~856~~448		)
Other financing activities	(15		)	—
Net cash provided by (used in) financing activities	(619		)	(24,448		)
Net cash provided by (used in) financing activities	(5,405		)	(15,856		)
Net change in cash	(107		)	(11		)
Net change in cash	(107		)	(4		)
Cash, beginning of period	112			16
Cash, end of period	$	5		$	125

See Note 8 for supplemental cash flow information.

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

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BLACK HILLS POWER, INC.

CONDENSED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY



	Common Stock
(in thousands, except share amounts)	Shares	Value		Additional Paid in Capital		Retained Earnings			AOCI			Total
December 31, 2018	23,416,396	$	23,416	$	39,575	$	342,145		$	(891	)	$	404,245
Net income (loss) available for common stock	—	—		—		15,497			—			15,497
Other comprehensive income (loss), net of tax	—	—		—		—			12			12
Cumulative effect of ASC 842 implementation	—	—		—		(7		)	—			(7		)
Other adjustments	—	—		—		1			—			1
March 31, 2019	23,416,396	$	23,416	$	39,575	$	357,636		$	(879	)	$	419,748
Net income (loss) available for common stock	—	—		—		10,148			—			10,148
Other comprehensive income (loss), net of tax	—	—		—		—			39			39
Other adjustments	—	—		—		1			—			1
June 30, 2019	23,416,396	$	23,416	$	39,575	$	367,785		$	(840	)	$	429,936



	Common Stock
(in thousands except share amounts)	Shares	Value		Additional Paid in Capital		Retained Earnings			AOCI			Total
December 31, 2017	23,416,396	$	23,416	$	39,575	$	332,499		$	(1,258	)	$	394,232
Net income (loss) available for common stock	—	—		—		11,760			—			11,760
Other comprehensive income (loss), net of tax	—	—		—		—			27			27
Dividend to Parent company	—	—		—		(16,000		)	—			(16,000		)
Other adjustments	—	—		—		1			—			1
March 31, 2018	23,416,396	$	23,416	$	39,575	$	328,260		$	(1,231	)	$	390,020
Net income (loss) available for common stock	—	—		—		11,125			—			11,125
Other comprehensive income (loss), net of tax	—	—		—		—			28			28
Dividend to Parent company	—	—		—		(10,000		)	—			(10,000		)
June 30, 2018	23,416,396	$	23,416	$	39,575	$	329,385		$	(1,203	)	$	391,173

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BLACK HILLS POWER, INC.

Notes to Condensed Financial Statements

(unaudited)

(Reference is made to Notes to Financial Statements

included in our 2018 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 2018 Annual Report on Form 10-K filed with the SEC.

The information furnished in the accompanying condensed financial statements reflects certain estimates required and all adjustments, including accruals, which are, in the opinion of management, necessary for a fair presentation of the ~~March~~June 3130, 2019, December 31, 2018 and ~~March~~June 3130, 2018 financial information and are of a normal recurring nature. The results of operations for the three and six months ended ~~March~~June 3130, 2019 and ~~March~~June 3130, 2018, and our financial condition as of ~~March~~June 3130, 2019 and December 31, 2018 are not necessarily indicative of the results of operations and financial condition to be expected as of or for any other period.

Recently Issued Accounting Standards

Financial Instruments -- Credit Losses: Measurement of Credit Losses on Financial Instruments, ASU 2018-19

In June 2016, the FASB issued ASU 2016-13, Financial Instruments -- Credit Losses: Measurement of Credit Losses on Financial Instruments, which was subsequently amended by ASU 2018-19 in November 2018. The standard introduces new accounting guidance for credit losses on financial instruments within its scope, including trade receivables. This new guidance adds an impairment model that is based on expected losses rather than incurred losses. It is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently assessing the impacts of adopting this standard.

Recently Adopted Accounting Standards

Leases, ASU 2016-02

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by requiring the recognition of right-of-use assets and lease liabilities on the balance sheet for most leases, whereas previously only financing-type lease liabilities (capital leases) were recognized on the balance sheet. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

We adopted the standard effective January 1, 2019. We elected the option to not recast comparative periods presented with transitioning to the new lease standard and will report these comparative periods as presented under previous lease guidance. In addition, we elected the package of practical expedients permitted under the transition guidance with the new standard, which among other things, allowed us to carry forward the historical lease classification. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment of existing land easement agreements.

Adoption of the new standard resulted in the recording of an operating lease right-of-use asset and an off-setting operating lease obligation liability of $14 million as of January 1, 2019. The lease standard did not materially impact our net earnings and had no impact on cash flows.

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(2) REVENUE

Revenue Recognition

As of January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and its related amendments (collectively known as ASC 606). Revenue is recognized in an amount that reflects the consideration we expect to receive in exchange for goods or services, when control of the promised goods or services is transferred to our customers. The following table depicts the disaggregation of revenue, from contracts with customers by customer type and timing of revenue recognition for the three and six months ended ~~March~~June 3130, 2019 and 2018. Sales tax and other similar taxes are excluded from revenues.

	Three Months Ended March 31, 2019		Three Months Ended March 31, 2018
	Three Months Ended June 30, 2019		Three Months Ended June 30, 2018		Six Months Ended June 30, 2019		Six Months Ended June 30, 2018
	(in thousands)
Customer types:
Retail	$	5346,~~076~~809	$	5046,~~641~~525	$	99,885	$	97,166
Wholesale	86,~~343~~780		98,~~050~~191		15,123		17,241
Market - off-system sales	42,~~670~~393		23,~~275~~449		7,063		5,724
Transmission/Other	1213,~~831~~083		1112,~~718~~372		25,914		24,090
Revenue from contracts with customers	7869,~~920~~065		7370,~~684~~537		147,985		144,221
Other revenues	~~121~~181		~~131~~139		302		270
Total revenues	$	7969,~~041~~246	$	7370,~~815~~676	$	148,287	$	144,491
Timing of revenue recognition:
Services transferred over time	$	7869,~~920~~065	$	7370,~~684~~537	$	147,985	$	144,221
Revenue from contracts with customers	$	7869,~~920~~065	$	7370,~~684~~537	$	147,985	$	144,221

Contract Balances

The nature of our primary revenue contracts provides an unconditional right to consideration upon service delivery; therefore, no customer contract assets or liabilities exist. The unconditional right to consideration is represented by the balance in our Accounts receivable and is further discussed in Note 3. We do not typically incur costs that would be capitalized, to obtain or fulfill a revenue contract.


(3)	ACCOUNTS RECEIVABLE

Following is a summary of Accounts receivable, net included in the accompanying Condensed Balance Sheets (in thousands) as of:

	March 31, 2019			December 31, 2018
	June 30, 2019			December 31, 2018
Accounts receivable trade	$	1815,~~196~~972		$	16,236
Unbilled revenues	10,~~356~~110			12,333
Allowance for doubtful accounts	(~~198~~200		)	(138		)
Accounts receivable, net	$	2825,~~354~~882		$	28,431

910

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(4)	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:

	March 31, 2019			December 31, 2018
	June 30, 2019			December 31, 2018
Regulatory assets:
Loss on reacquired debt (a)	$	1,~~191~~124		$	1,259
Deferred taxes on AFUDC (b)	54,~~048~~955			5,020
Employee benefit plans and related deferred taxes (c)	20,~~085~~022			19,868
Deferred energy and fuel cost adjustments (b)	2122,~~649~~195			20,334
Deferred taxes on flow through accounting (c)	9,~~045~~201			8,749
Decommissioning costs (a)	7,~~682~~168			8,196
Vegetation management (a)	9,~~790~~214			10,366
Other regulatory assets (a)	1,~~866~~824			1,940
Total regulatory assets	$	7675,~~356~~703		$	75,732
Less current regulatory assets	(2322,~~215~~339		)	(19,052		)
Regulatory assets, non-current	$	53,~~141~~364		$	56,680

Regulatory liabilities:
Cost of removal for utility plant (a)	$	5354,~~758~~947		$	52,366
Employee benefit plan costs and related deferred taxes (c)	7,518			7,518
Excess deferred income taxes (c)	99,~~846~~417			100,276
TCJA revenue reserve	2,~~079~~392			2,523
Other regulatory liabilities (c)	~~592~~222			533
Total regulatory liabilities	$	~~163~~164,~~793~~496		$	163,216
Less current regulatory liabilities	(2,~~079~~392		)	(2,574		)
Regulatory liabilities, non-current	$	~~161~~162,~~714~~104		$	160,642

____________________


(a)	We are allowed 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 or repayment of costs, we are allowed a return on a portion of this amount or a reduction in rate base.

Regulatory Matters

There have been no ~~other~~ significant changes to our Regulatory Matters from those previously disclosed in Note 1 of the Notes to the Financial Statements in our 2018 Annual Report on Form 10-K except as reported below.

Renewable 10Ready Service Tariffs and Corriedale Wind Energy Project

South Dakota Electric and Wyoming Electric received approvals for the Renewable Ready Service Tariffs and related jointly-filed CPCN to construct the $57 million, 40 MW Corriedale Wind Energy Project. The wind project will be jointly owned by the two electric utilities to deliver renewable energy for large commercial and industrial customers and governmental agencies. The project is expected to be in service in 2020.

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(5)	RELATED-PARTY TRANSACTIONS

Dividend to Parent

We did not record any dividends for the six months ended June 30, 2019. We recorded non-cash dividends to our Parent of $1626 million and decreased the utility Money pool note receivable by $1626 million for the ~~three~~six months ended ~~March~~June 3130, 2018. ~~We did not record any dividends for the three months ended March 31, 2019.~~

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:

	March 31, 2019		December 31, 2018
	June 30, 2019		December 31, 2018
Accounts receivable from affiliates	$	95,~~903~~102	$	8,119
Accounts payable to affiliates	$	2624,~~966~~737	$	25,804

Money Pool Notes Receivable and Notes Payable

We participate in the Utility Money Pool Agreement (the Agreement). Under the Agreement, we may borrow from the pool; however the Agreement restricts the pool 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 under the Agreement bear interest at the weighted average daily cost of our parent company’s external 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 ~~March~~June 3130, 2019, the average cost of borrowing under the Utility Money Pool was 2.8878%.

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

	March 31, 2019		December 31, 2018
	June 30, 2019		December 31, 2018
Money pool notes payable	$	3313,~~300~~071	$	38,690

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

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net interest income (expense)	$	(~~273~~198	)	$	(3696	)	$	(471	)	$	(132	)

Notes 11payable to Parent

(a) Note bears interest at 4.51%, expires December 31, 2019, and is eligible for annual renewal. Interest payable related to this note was $0.2 million as of June 30, 2019.

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

	Three Months EndedMarch 31,
	Three Months EndedJune 30,				Six Months EndedJune 30,
	2019		2018		2019		2018
Revenue:
Energy sold to Cheyenne Light	$	~~574~~340	$	~~703~~501	$	914	$	1,204
Rent from electric properties	$	~~896~~895	$	~~909~~908	$	1,791	$	1,817
Horizon Point shared facility revenues	$	3,~~007~~006	$	2,~~769~~783	$	6,013	$	5,552
Fuel and purchased power:
Purchases of coal from WRDC	$	43,~~657~~216	$	4,~~067~~249	$	7,873	$	8,316
Purchase of excess energy from Cheyenne Light	$	~~132~~41	$	8682	$	173	$	168
Purchase of renewable wind energy from Cheyenne Light - Happy Jack	$	~~535~~342	$	~~641~~381	$	877	$	1,022
Purchase of renewable wind energy from Cheyenne Light - Silver Sage	$	~~983~~611	$	~~1,093~~696	$	1,594	$	1,789
Gas transportation service agreement:
Gas transportation service agreement with Cheyenne Light for firm and interruptible gas transportation	$	75	$	96	$	151	$	192
Gas transportation service agreement with Cheyenne Light for firm and interruptible gas transportation	$	76	$	96
Operations and maintenance:
Corporate support:
Corporate support services and fees from Black Hills Service Company (a)	$	9,451	$	7,604	$	19,642	$	15,210
Corporate support services and fees from Black Hills Service Company	$	10,191	$	7,606
Wygen III ground lease with WRDC	$	247	$	241	$	493	$	481

~~Horizon~~(a) Increase ~~Point~~in ~~Agreement~~2019 was primarily due to higher outside service expenses and higher employee costs driven by labor and benefits.

We have a shared facility agreement among South Dakota Electric and Black Hills Service Company where there is a cost allocation for the use of the Horizon Point facility that is owned by South Dakota Electric. This cost allocation includes the recovery of and return on allocable property and recovery of incurred administrative service expenses for the operation and maintenance of the Horizon Point facility.


(6)	EMPLOYEE BENEFIT PLANS

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

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Service cost	$	9192		$	129		$	183		$	258
Interest cost	~~603~~602			~~548~~549			1,205			1,097
Expected return on plan assets	(~~851~~852		)	(~~886~~887		)	(1,703		)	(1,773		)
Prior service cost	23			11			5			22
Net loss (gain)	305			516			610			1,032
Net periodic benefit cost	$	150		$	318		$	300		$	636

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 March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Service cost	$	37		$	4849		$	74		$	97
Interest cost	4746			4544			93			89
Prior service cost (benefit)	(84		)	(84		)	(168		)	(168		)
Net periodic benefit cost	$	—(1	)	$	9		$	(1	)	$	18

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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 March 31,
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Interest cost	$	2928	$	27	$	57	$	54
Net loss (gain)	1617		26		33		52
Net periodic benefit cost	$	45	$	53	$	90	$	106

Contributions

Contributions to the Defined Benefit Pension Plan are cash contributions made directly to the Pension Plan Trust account. Contributions to the Postretirement Healthcare and Supplemental Plans are made in the form of benefit payments. Contributions made for 2019 and anticipated contributions for 2019 and 2020 are as follows (in thousands):

	ContributionsThree Months EndedMarch 31, 2019		Remaining Anticipated Contributions for 2019		Anticipated Contributions for 2020
	ContributionsSix Months EndedJune 30, 2019		Remaining Anticipated Contributions for 2019		Anticipated Contributions for 2020
Defined Benefit Pension Plan	$	—	$	1,753	$	1,841
Defined Benefit Postretirement Healthcare Plan	$	~~117~~233	$	~~349~~233	$	466
Supplemental Non-qualified Defined Benefit Plans	$	58115	$	~~172~~115	$	240

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(7)	FAIR VALUE OF FINANCIAL INSTRUMENTS

~~Fair~~Financial ~~value~~instruments isfor ~~defined~~which as the ~~price~~carrying ~~that~~amount ~~would~~did benot ~~received~~equal ~~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~~were ~~establishes~~as afollows ~~hierarchy for grouping assets and liabilities, based on significance of inputs. For additional information see Note 1 included~~ (in ~~our~~thousands) ~~2018~~as ~~Annual Report on Form 10-K filed with the SEC.~~of:

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



	June 30, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current maturities ^{(a) (b)}	$	340,105	$	447,036	$	340,035	$	412,894

	March 31, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash (a)	$	5	$	5	$	112	$	112
Long-term debt, including current maturities (b) (c)	$	340,070	$	428,498	$	340,035	$	412,894

_________________

(a) ~~The~~Long-term ~~cash~~debt ~~fair~~is ~~value~~valued ~~approximates~~based ~~carrying~~on ~~value~~observable ~~and~~inputs ~~therefore~~available iseither ~~classified~~directly asor ~~Level~~indirectly 1for insimilar ~~the~~liabilities ~~fair~~in ~~value~~active ~~hierarchy.~~markets Weand ~~believe~~therefore ~~that~~is ~~the~~classified ~~market~~in ~~risk~~Level ~~arising~~2 ~~from cash~~ in athe ~~bank~~fair ~~account~~value ~~is minimal~~hierarchy.

(b) ~~Long~~Carrying amount of long-term debt is ~~valued~~net ~~based~~of ondeferred ~~observable~~financing ~~inputs available either directly or indirectly for similar liabilities in active markets and therefore is classified in Level 2 in the fair value hierarchy~~costs.


(8)	SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

	Three Months Ended March 31,
	Six Months Ended June 30,
	2019			2018
	(in thousands)
Non-cash investing and financing activities -
Property, plant and equipment acquired with accrued liabilities	$	815,~~633~~316		$	7,~~556~~477
Non-cash (decrease) to money pool notes receivable, net	$	—		$	(1626,000	)
Non-cash dividend to Parent	$	—		$	1626,000
Cash (paid) refunded during the period for -
Interest (net of amounts capitalized)	$	(311,~~345~~342	)	$	(310,~~088~~930	)
Income taxes, net	$	—		$	—


(9)	COMMITMENTS AND CONTINGENCIES

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 2018 Annual Report on Form 10-K.


(10)	LEASES

We have a ground lease for the Wygen III generating facility with an affiliate and communication tower site and operation center facility leases with third parties. Our leases have remaining terms ranging from less than one year to 3130 years.

The components of lease expense were as follows (in thousands):

	Income Statement Location	Three Months Ended ~~March~~June 3130, 2019		Six Months Ended June 30, 2019
Operating lease cost	Operations and maintenance	$	228	$	456
Variable lease cost	Operations and maintenance	4339		82
Total lease cost		$	~~271~~267	$	538

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Supplemental balance sheet information related to leases was as follows (in thousands):

	Balance Sheet Location	As of ~~March~~June 3130, 2019
Assets:
Operating lease assets	Other assets, non-current	$	14,~~316~~244
Total lease assets		$	14,~~316~~244
Liabilities:
Current:
Operating leases	Accrued liabilities	$	~~279~~268
Noncurrent:
Operating leases	Other deferred credits and other liabilities	1413,~~054~~993
Total lease liabilities		$	14,~~333~~261

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended March 31, 2019
	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	~~223~~451
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—

	As of March 31, 2019
	As of June 30, 2019
Weighted average remaining lease term (years):
Operating leases	3130 years
Weighted average discount rate:
Operating leases	4.4	%

Scheduled maturities of operating lease liabilities for future years were as follows (in thousands):

	Total
2019 (a)	$	~~681~~463
2020	856
2021	~~855~~856
2022	856
2023	853
Thereafter	21,947
Total lease payments	$	2625,~~048~~831
Less imputed interest	11,~~715~~570
Present value of lease liabilities	$	14,~~333~~261

(a) Includes lease obligations for the remaining ~~nine~~six months of 2019.

1516

~~(11)~~Table ~~EQUITY~~of Contents

A summary of the changes in equity is as follows:

Three Months Ended March 31, 2019	Common Stock
(in thousands except share amounts)	Shares	Value		Additional Paid in Capital		Retained Earnings			AOCI			Total
December 31, 2018	23,416	$	23,416	$	39,575	$	342,145		$	(891	)	$	404,245
Net income (loss) available for common stock	—	—		—		15,497			—			15,497
Other comprehensive income (loss), net of tax	—	—		—		—			12			12
Cumulative effect of ASU 2016-02, Leases implementation	—	—		—		(7		)	—			(7		)
Other adjustments	—	—		—		1			—			1
March 31, 2019	23,416	$	23,416	$	39,575	$	357,636		$	(879	)	$	419,748

Three Months Ended March 31, 2018	Common Stock
(in thousands except share amounts)	Shares	Value		Additional Paid in Capital		Retained Earnings			AOCI			Total
December 31, 2017	23,416	$	23,416	$	39,575	$	332,499		$	(1,258	)	$	394,232
Net income (loss) available for common stock	—	—		—		11,760			—			11,760
Other comprehensive income (loss), net of tax	—	—		—		—			27			27
Non-cash dividend to Parent company	—	—		—		(16,000		)	—			(16,000		)
Other adjustments	—	—		—		1			—			1
March 31, 2018	23,416	$	23,416	$	39,575	$	328,260		$	(1,231	)	$	390,020

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

On July 23, 2019, Fitch affirmed South Dakota Electric’s credit rating at A.

South Dakota Electric and Wyoming Electric received approvals for the Renewable Ready Service Tariffs and related jointly-filed CPCN to construct the $57 million, 40-megawatt Corriedale Wind Energy Project. The wind project will be jointly owned by the two electric utilities to deliver renewable energy for large commercial and industrial customers and governmental agencies. The project is expected to be in service in 2020.

South Dakota Electric continued construction on a 175-mile electric transmission line from Stegall, Nebraska to Rapid City, South Dakota. The 94-mile final segment of the transmission line is expected to be in service in the fall of 2019.

On April 30, 2019, S&P affirmed South Dakota Electric’s credit rating at A.

During the first quarter, South Dakota Electric continued construction on a $70 million, 175-mile electric transmission line from Stegall, Nebraska to Rapid City, South Dakota. The 94-mile final segment of the transmission line is expected to be completed and placed in service in the fall of 2019.

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 and amortization 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 and purchased power. Our gross margin is impacted by the fluctuations in ~~power~~purchased ~~purchases~~power, 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.

The following tables provide certain financial information and operating statistics:

	Three Months Ended March 31,
	2019			2018			Variance
	(in thousands)
Revenue	$	79,041		$	73,815		$	5,226
Fuel and purchased power	22,733			22,440			293
Gross margin (non-GAAP)	56,308			51,375			4,933
Operating expenses	31,666			31,011			655
Operating income	24,642			20,364			4,278
Interest income (expense), net	(5,432		)	(5,424		)	(8		)
Other income (expense), net	(375		)	(117		)	(258		)
Income tax expense	(3,338		)	(3,063		)	(275		)
Net income	$	15,497		$	11,760		$	3,737

Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018. Net income was $15 million compared to $12 million for the same period in the prior year primarily due to the following:

Gross margin increased primarily due to $2.4 million of higher power marketing revenue, customer growth, and favorable weather. A $1.6 million reduction in the purchased power capacity charges and higher rider revenues of $0.9 million, primarily related to transmission investment recovery, comprised the remainder of the increase.

Operating expenses increased primarily due to higher outside services expenses and higher employee costs driven by labor and benefits partially offset by a decrease in expenses due to generation outage timing.

Interest expense, net, Other income (expense), net, and Income tax expense were all comparable to prior year.

	Electric Revenue by Customer Type
	Three Months Ended March 31,
	(in thousands)
	2019		Percentage Change	2018
Residential	$	21,190	1%	$	21,061
Commercial	23,144		(2)%	23,544
Industrial	8,357		1%	8,276
Municipal	781		(4)%	811
Total retail revenue	53,472		—%	53,692
Wholesale	8,343		(8)%	9,050
Market - off-system sales (a)	4,670		105%	2,275
Other revenue (b)	12,556		43%	8,798
Total revenue	$	79,041	7%	$	73,815

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The following tables provide certain financial information and operating statistics:



	Three Months Ended June 30,									Six Months Ended June 30,
	2019			2018			Variance			2019			2018			Variance
	(in thousands)
Revenue	$	69,246		$	70,676		$	(1,430	)	$	148,287		$	144,491		$	3,796
Fuel and purchased power	18,381			20,753			(2,372		)	41,114			43,193			(2,079		)
Gross margin (non-GAAP)	50,865			49,923			942			107,173			101,298			5,875

Operating expenses	33,555			30,428			3,127			65,221			61,439			3,782
Operating income	17,310			19,495			(2,185		)	41,952			39,859			2,093

Interest income (expense), net	(5,277		)	(5,379		)	102			(10,709		)	(10,803		)	94
Other income (expense), net	291			(242		)	533			(84		)	(359		)	275
Income tax expense	(2,176		)	(2,749		)	573			(5,514		)	(5,812		)	298
Net income	$	10,148		$	11,125		$	(977	)	$	25,645		$	22,885		$	2,760

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018. Net income was $26 million compared to $23 million for the same period in the prior year primarily due to the following:

Gross margin increased primarily due to a $3.2 million reduction in the purchased power capacity charges and higher rider revenues of $1.4 million related to transmission investment recovery. Higher power marketing revenue, customer growth, and favorable weather, comprised the remainder of the increase.

Operating expenses increased primarily due to higher outside services expenses and higher employee costs driven by increased headcount partially offset by a decrease in expenses due to generation outages.



	Electric Revenue by Customer Type
	Three Months Ended June 30,					Six Months Ended June 30,
	(in thousands)
	2019		Percentage Change	2018		2019		Percentage Change	2018
Residential	$	15,570	(5)%	$	16,426	$	36,760	(2)%	$	37,487
Commercial	22,131		(6)%	23,538		45,275		(4)%	47,082
Industrial	8,576		5%	8,170		16,933		3%	16,446
Municipal	776		(11)%	876		1,557		(8)%	1,687
Total retail revenue	47,053		(4)%	49,010		100,525		(2)%	102,702
Wholesale ^(a)	6,780		(17)%	8,191		15,123		(12)%	17,241
Market - off-system sales ^(b)	2,393		(31)%	3,449		7,063		23%	5,724
Other revenue ^(c)	13,020		30%	10,026		25,576		36%	18,824
Total revenue	$	69,246	(2)%	$	70,676	$	148,287	3%	$	144,491

____________________

(a) ~~Increase~~Decrease for the ~~three~~six months ended ~~March~~June 3130, 2019 was ~~due~~primarily todriven ~~higher~~by ~~trading~~prior ~~volume~~year ~~opportunities~~increased ~~driven~~volumes byon ~~weather~~long-term ~~and~~wholesale ~~energy prices~~contracts.

(b) Increase for the ~~three~~six months ended ~~March~~June 3130, 2019 was ~~primarily~~driven ~~due~~by toweather ~~the~~and ~~prior~~energy ~~year reserve to revenue to reflect the reduction of the lower federal income tax rate from the TCJA on our existing rate tariffs~~prices.

	Megawatt Hours Sold by Customer Type
	Three Months Ended March 31,
	2019	Percentage Change	2018
Residential	169,936	4%	163,113
Commercial	194,794	—%	194,931
Industrial	108,196	4%	104,302
Municipal	7,573	1%	7,503
Total retail quantity sold	480,499	2%	469,849
Wholesale	223,020	(6)%	237,704
Market - off-system sales	99,572	8%	92,102
Total quantity sold	803,091	—%	799,655
Losses and Company use (a)	41,910	47%	28,522
Total energy	845,001	2%	828,177


(c)	Increase for the six months ended June 30, 2019 was primarily due to the prior year reserve to revenue to reflect the reduction of the lower federal income tax rate from the TCJA on our existing rate tariffs.

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	Megawatt Hours Sold by Customer Type
	Three Months Ended June 30,			Six Months Ended June 30,
	2019	Percentage Change	2018	2019	Percentage Change	2018
Residential	114,399	(1)%	115,905	284,335	2%	279,018
Commercial	180,966	(3)%	186,784	375,760	(2)%	381,715
Industrial	112,623	6%	106,100	220,819	5%	210,402
Municipal	6,756	(10)%	7,479	14,329	(4)%	14,982
Total retail quantity sold	414,744	—%	416,268	895,243	1%	886,117
Wholesale	194,222	(11)%	218,132	417,242	(8)%	455,836
Market - off-system sales	113,014	(20)%	141,866	212,586	(9)%	233,968
Total quantity sold	721,980	(7)%	776,266	1,525,071	(3)%	1,575,921
Losses and Company use ^(a)	35,660	(42)%	61,677	77,570	(14)%	90,199
Total energy	757,640	(10)%	837,943	1,602,641	(4)%	1,666,120

____________________


(a)	Includes company uses, line losses, and excess exchange production.



	Megawatt Hours Generated and Purchased
	Three Months Ended June 30,			Six Months Ended June 30,
Generated -	2019	Percentage Change	2018	2019	Percentage Change	2018
Coal-fired ^(a)	287,201	(26)%	388,081	696,867	(11)%	787,168
Natural Gas and Oil ^(b)	28,724	21%	23,758	76,427	107%	36,865
Total generated	315,925	(23)%	411,839	773,294	(6)%	824,033

Total purchased	441,715	4%	426,104	829,347	(2)%	842,087
Total generated and purchased	757,640	(10)%	837,943	1,602,641	(4)%	1,666,120

	Megawatt Hours Generated and Purchased
	Three Months Ended March 31,
Generated -	2019	Percentage Change	2018
Coal-fired	409,666	3%	399,087
Natural Gas and Oil (a)	47,703	264%	13,107
Total generated	457,369	11%	412,194
Total purchased	387,632	(7)%	415,983
Total generated and purchased	845,001	2%	828,177

____________________

(a) ~~Increase~~Decrease isfor ~~primarily due to low natural gas prices and~~ the ~~ability~~six tomonths ~~generate~~ended atJune a30, ~~lower~~2019 ~~cost~~is ~~than~~due to ~~purchase~~planned ~~generation~~outages onat ~~the~~Neil ~~open~~Simpson ~~market~~II ~~for~~and ~~the~~Wygen ~~three~~III ~~months~~and ~~ended~~unplanned ~~March~~outages ~~31,~~at ~~2019~~Wyodak Plant.

	Power Plant Availability
	Three Months Ended March 31,
	2019		2018
Coal-fired plants (a)	98.2	%	92.9	%
Other plants (b)	87.3	%	99.4	%
Total availability	92.4	%	96.3	%

(b) Increase is primarily due to low natural gas prices and the ability to generate at a lower cost than to purchase generation on the open market for the six months ended June 30, 2019.



	Power Plant Availability
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Coal-fired plants ^(a)	71.9	%	91.3	%	85.0	%	92.1	%
Other plants^(b)	79.7	%	97.5	%	83.5	%	98.4	%
Total availability	76.0	%	94.6	%	84.2	%	95.5	%

____________________

(a) ~~2018~~2019 included planned outages at Neil Simpson II, and Wygen III unplanned outages at Wyodak Plant, and ~~Wygen~~2018 included planned outages at Neil Simpson II and Wyodak Plant.

(b) 2019 ~~includes~~included a planned ~~outage~~outages at Neil Simpson CT and Lange CT.

	Degree Days
	Three Months Ended March 31,
	2019			2018
	Actual	Variance from Normal		Actual	Variance from Normal
Heating degree days	3,916	22	%	3,699	15	%

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	Degree Days						Degree Days
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	Actual	Variance from Normal		Actual	Variance from Normal		Actual	Variance from Normal		Actual	Variance from Normal

Heating degree days	1,279	25	%	1,037	1	%	5,195	23	%	4,736	12	%
Cooling degree days	38	(62	)%	132	33	%	38	(62	)%	132	33	%

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Credit Ratings

Credit ratings impact our ability to obtain short and long-term financing, the cost of such financing, and vendor payment terms, including collateral requirements. The following table represents our secured credit rating from each agency’s review which was in effect at ~~March~~June 3130, 2019:



Rating Agency	Senior Secured Rating
S&P ^(a)	A
Moody’s ^(b)	A1
Fitch ^(c)	A

__________


(a)	On April 30, 2019, S&P affirmed A rating.


(b)	On December 12, 2018, Moody’s affirmed A1 rating.

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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 2018 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 10-Q.


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, 2018.

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 ~~March~~June 3130, 2019. Based on their evaluation, they have concluded that our disclosure controls and procedures were effective as of ~~March~~June 3130, 2019.

Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Security Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the quarter ended ~~March~~June 3130, 2019, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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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 2018 Annual Report on Form 10-K and Note 9 of our Notes to Condensed Financial Statements in this Quarterly Report on Form 10-Q, which information from Note 9 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, 2018.


Item 6.	Exhibits


Exhibit 3.1*	Restated Articles of Incorporation of the Registrant dated January 30, 2018 (filed as Exhibit 3 to Registrant’s Form 8-K filed on February 5, 2018).


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.


101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document


101.SCH	XBRL Taxonomy Extension Schema Document


101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document


101.DEF	XBRL Taxonomy Extension Definition Linkbase Document


101.LAB	XBRL Taxonomy Extension Label Linkbase Document


101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

_________________________


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

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BLACK HILLS POWER, INC.

Signatures

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

BLACK HILLS POWER, INC.

/S/ LINDEN R. EVANS

Linden R. Evans, Chairman, President

and Chief Executive Officer

/S/ RICHARD W. KINZLEY

Richard W. Kinzley, Senior Vice President

and Chief Financial Officer

Dated: ~~May~~August 36, 2019

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June 30, 2019

December 31, 2018

Notes payable to Parent ^(a)

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