United States
Securities and Exchange Commission
Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2004.

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

For the transition period from _______________ to _______________.

Commission File Number 1-7978

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

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______

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

Yes______ No X

As of July 31, 2004 there were issued and outstanding 23,416,396 shares of the Registrant’s common stock, $1.00 par value, all of which were held beneficially and of record by Black Hills Corporation.

Reduced Disclosure

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

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Statements of Income -
	Three and six months ended June 30, 2004 and 2003	3
	Condensed Balance Sheets -
	June 30, 2004 and December 31, 2003	4
	Condensed Statements of Cash Flows -
	Six months ended June 30, 2004 and 2003	5
	Notes to Condensed Financial Statements	6-9
Item 2.	Results of Operations	10-12
Item 4.	Controls and Procedures	12
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	13
Item 6.	Exhibits and Reports on Form 8-K	13
	Signatures	14
	Exhibit Index	15

BLACK HILLS POWER, INC.
CONDENSED STATEMENTS OF INCOME
(unaudited)

	Three months ended						Six months ended
	June 30						June 30
	2004			2003			2004			2003
	(in thousands)
Operating revenue	$	39,809		$	39,207		$	81,456		$	82,970

Operating expenses:
Fuel and purchased power		14,383			11,445			27,193			25,881
Operations and maintenance		7,817			6,679			13,997			12,103
Administrative and general		4,110			3,665			8,188			7,103
Depreciation and amortization		4,803			4,809			9,746			9,537
Taxes, other than income taxes		2,136			2,012			4,364			4,097

		33,249			28,610			63,488			58,721

Operating income		6,560			10,597			17,968			24,249

Other income (expense):
Interest expense		(4,217	)		(4,301	)		(8,433	)		(8,604	)
Other income		267			741			606			1,424

		(3,950	)		(3,560	)		(7,827	)		(7,180	)

Income before income taxes and
discontinued operations		2,610			7,037			10,141			17,069
Income taxes		(794	)		(2,315	)		(3,289	)		(5,648	)

Income from continuing operations		1,816			4,722			6,852			11,421
Discontinued operations, net of
income taxes (Note 3)		--			--			--			1,906

Net income	$	1,816		$	4,722		$	6,852		$	13,327

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

BLACK HILLS POWER, INC.
CONDENSED BALANCE SHEETS
(unaudited)

	June 30			December 31
	2004			2003
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	893		$	1,052
Receivables (net of allowance for doubtful accounts of $905 and $898, respectively)		16,036			17,012
Receivables - related party		33,551			38,618
Materials, supplies and fuel		10,448			9,560
Prepaid income taxes		--			2,813
Deferred income taxes		108			--

		61,036			69,055

Investments		3,086			2,920

Property and equipment		631,216			623,197
Less accumulated depreciation		(223,921	)		(212,041	)

		407,295			411,156

Other assets:
Regulatory asset		4,320			4,320
Other		14,074			15,622

		18,394			19,942

Total	$	489,811		$	503,073

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable	$	6,786		$	6,929
Accounts payable - related party		569			7,909
Accrued liabilities		16,025			15,691
Current maturities of long-term debt		1,988			1,986
Deferred income taxes		--			239

		25,368			32,754

Long-term debt, net of current maturities		208,083			210,056

Deferred credits:
Deferred income taxes		66,877			65,633
Regulatory liability		6,174			6,337
Other		12,867			12,724

		85,918			84,694

Stockholder's equity:
Common stock $1 par value; 50,000,000 shares authorized; 23,416,396 shares issued		23,416			23,416
Additional paid-in capital		39,549			39,549
Retained earnings		108,950			114,098
Accumulated other comprehensive loss		(1,473	)		(1,494	)

		170,442			175,569

Total	$	489,811		$	503,073

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

BLACK HILLS POWER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)

	Six months ended
	June 30
	2004			2003
	(in thousands)
Operating activities:
Net income	$	6,852		$	13,327
Adjustments to reconcile net income to cash provided by
operating activities:
Income from discontinued operations		--			(1,906	)
Depreciation and amortization		9,746			9,537
Deferred income tax		897			5,679
Change in operating assets and liabilities -
Accounts receivable and other current assets		3,296			788
Accounts payable and other current liabilities		(7,149	)		4,979
Other operating activities		1,672			(1,644	)

		15,314			30,760

Investing activities:
Property additions		(5,903	)		(11,724	)
Decrease in notes receivable from associated companies, net		4,665			2,846
Increase in investments		(264	)		(179	)

		(1,502	)		(9,057	)

Financing activities
Dividends paid		(12,000	)		(17,727	)
Long-term debt - repayments		(1,971	)		(2,518	)

		(13,971	)		(20,245	)

Increase (decrease) in cash and cash equivalents		(159	)		1,458
Cash and cash equivalents:
Beginning of period		1,052			518

End of period	$	893		$	1,976

Supplemental disclosure of cash flow information
Cash paid (received) during the period for:
Interest	$	8,349		$	8,529
Income taxes refunded, net	$	(3,111	)	$	(3,886	)
Stock dividend distribution to Black Hills Corporation, the
parent company of Black Hills Power, Inc. (Note 3)	$	--		$	45,687

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

BLACK HILLS POWER, INC.
Notes to Condensed Financial Statements
(unaudited)
(Reference is made to Notes to Financial Statements
included in the Company’s Annual Report on Form 10-K)

(1)

MANAGEMENT’S STATEMENT

The financial statements included herein have been prepared by Black Hills Power, Inc. (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the footnotes adequately disclose the information presented. These financial statements should be read in conjunction with the financial statements and the notes thereto, included in the Company’s 2003 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Accounting methods historically employed require certain estimates as of interim dates. The information furnished in the accompanying financial statements reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the June 30, 2004, December 31, 2003 and June 30, 2003, financial information and are of a normal recurring nature. The results of operations for the six months ended June 30, 2004, are not necessarily indicative of the results to be expected for the full year.

(2)

RECLASSIFICATIONS

Certain 2003 amounts in the financial statements have been reclassified to conform to the 2004 presentation. These reclassifications did not have an effect on the Company’s total stockholder’s equity or net income as previously reported.

(3)

NON-CASH DIVIDEND AND DISCONTINUED OPERATIONS

During the quarter ended March 31, 2003, the Company distributed a non-cash dividend to its parent company, Black Hills Corporation (Parent). The dividend consisted of 10,000 common shares of Black Hills Generation, Inc., formerly known as Black Hills Energy Capital, Inc., (Generation), which represents 100 percent ownership of Generation.

Revenues and net income from the discontinued operations are as follows (in thousands):

	Six months ended
	June 30,
	2003
Revenue	$	41,485

Income before income taxes	$	2,833
Income taxes		(927	)

Net income from discontinued operations	$	1,906

(4)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (FSP 106-2), which provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (2003 Medicare Act) for employers that sponsor postretirement healthcare plans that provide prescription drug benefits. FSP 106-2 supersedes FSP 106-1 that was issued in January 2004 under the same title. The Company provides prescription drug benefits to certain eligible employees and is currently analyzing what the effects of the 2003 Medicare Act has on its accumulated postretirement benefit obligation or net periodic postretirement benefit cost. FSP 106-2 is effective for the first interim period beginning after June 15, 2004.

(5)

COMPREHENSIVE INCOME

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

	Three months ended				Six months ended
	June 30				June 30
	2004		2003		2004		2003
Net income	$	1,816	$	4,722	$	6,852	$	13,327
Other comprehensive income, net of tax:
Fair value adjustment on derivatives
designated as cash flow hedges included
in discontinued operations		--		--		--		(360	)
Reclassification adjustment on interest rate
swap included in net income		11		10		21		20

Comprehensive income	$	1,827	$	4,732	$	6,873	$	12,987

(6)

RELATED-PARTY TRANSACTIONS

Receivables

The Company has accounts receivable balances related to transactions with other Black Hills Corporation subsidiaries. The balances were $0.5 million and $0.9 million as of June 30, 2004 and December 31, 2003, respectively.

The Company also has extended a line of credit to its Parent, Black Hills Corporation (the Parent), which is due on demand. Outstanding advances were $33.0 million at June 30, 2004 and $37.7 million at December 31, 2003. Interest income received on the note was $0.4 million and $0.9 for the six month periods ended June 30, 2004 and June 30, 2003, respectively. Advances under these notes bear interest at a variable rate that does not exceed prime (2.62 percent at June 30, 2004) and is receivable monthly.

Other Balances and Transactions

In addition to the above transactions, in order to fuel its combustion turbine, the Company purchased natural gas from Enserco Energy, an indirect subsidiary of the Parent. The amount purchased during the three month periods ended June 30, 2004 and June 30, 2003 was

Reduced Disclosure

BLACK HILLS POWER, INC. CONDENSED STATEMENTS OF INCOME(unaudited)

BLACK HILLS POWER, INC. CONDENSED BALANCE SHEETS (unaudited)

BLACK HILLS POWER, INC. CONDENSED STATEMENTS OF CASH FLOWS (unaudited)

BLACK HILLS POWER, INC.
CONDENSED STATEMENTS OF INCOME
(unaudited)

BLACK HILLS POWER, INC.
CONDENSED BALANCE SHEETS
(unaudited)

BLACK HILLS POWER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)