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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 September 30, 2004.

OR

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


          For the transition period from _______________ to _______________.

          Commission File Number 1-7978

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

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 October 29, 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 nine months ended September 30, 2004 and 2003   3  
   
Condensed Balance Sheets -		      
       September 30, 2004 and December 31, 2003   4  
   
Condensed Statements of Cash Flows -		      
       Nine months ended September 30, 2004 and 2003   5  
   
Notes to Condensed Financial Statements		   6-10  

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   13  
   
Signatures		   14  
   
Exhibit Index		   15  

2

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

Three months ended Nine months ended
September 30 September 30
2004
 2003
 2004
 2003
(in thousands)

Operating revenue		     $ 47,921   $ 46,268   $ 129,377   $ 129,238  
Operating expenses:  
   Fuel and purchased power    18,506    15,545    45,698    41,426  
   Operations and maintenance    5,993    6,564    19,991    18,667  
   Administrative and general    4,533    2,837    12,721    9,940  
   Depreciation and amortization    4,703    4,809    14,448    14,346  
   Taxes, other than income taxes    1,680    2,018    6,044    6,114  
     35,415    31,773    98,902    90,493  
Operating income    12,506    14,495    30,475    38,745  
Other income (expense):  
   Interest expense    (4,138 )  (4,499 )  (12,545 )  (12,704 )
   Other income    274    335    852    1,360  
     (3,864 )  (4,164 )  (11,693 )  (11,344 )
Income before income taxes and  
  discontinued operations    8,642    10,331    18,782    27,401  
Income taxes    (2,782 )  (3,559 )  (6,070 )  (9,208 )
   Income from continuing operations    5,860    6,772    12,712    18,193  
Discontinued operations, net of  
   income taxes (Note 3)    --    --    --    1,906  
   Net income   $ 5,860   $ 6,772   $ 12,712   $ 20,099  

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

3

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

September 30 December 31
2004
 2003
(in thousands)
                                                               ASSETS            

Current assets:		  
   Cash and cash equivalents   $ 607   $ 1,052  
   Receivables (net of allowance for doubtful accounts of $909 and $898, respectively)    15,145    17,012  
   Receivables - related party    25,868    38,618  
   Materials, supplies and fuel    10,684    9,560  
   Prepaid income taxes    --    2,813  
     52,304    69,055  
Investments    3,101    2,920  
Property and equipment    635,278    623,197  
   Less accumulated depreciation    (228,144 )  (212,041 )
     407,134    411,156  
Other assets:  
   Regulatory asset    4,172    4,320  
   Other    14,287    15,622  
     18,459    19,942  
     Total   $ 480,998   $ 503,073  
                              LIABILITIES AND STOCKHOLDER'S EQUITY  

Current liabilities:		  
   Accounts payable   $ 6,057   $ 6,929  
   Accounts payable - related party    873    7,909  
   Accrued liabilities    13,608    15,691  
   Current maturities of long-term debt    46,989    1,986  
   Deferred income taxes    24    239  
     67,551    32,754  
Long-term debt, net of current maturities    157,224    210,056  
Deferred credits:  
   Deferred income taxes    66,641    65,633  
   Regulatory liability    6,116    6,337  
   Other    13,154    12,724  
     85,911    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    108,810    114,098  
   Accumulated other comprehensive loss    (1,463 )  (1,494 )
     170,312    175,569  
     Total   $ 480,998   $ 503,073  

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

4

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

Nine months ended
September 30
2004
 2003
(in thousands)
Operating activities:            
   Net income   $ 12,712   $ 20,099  
Adjustments to reconcile net income to cash provided by  
  operating activities:  
   Income from discontinued operations    --    (1,906 )
   Depreciation and amortization    14,448    14,346  
   Deferred income tax    793    4,312  
Change in operating assets and liabilities -  
   Accounts receivable and other current assets    3,961    2,927  
   Accounts payable and other current liabilities    (9,991 )  4,526  
   Other operating activities    1,734    (5,983 )
     23,657    38,321  
Investing activities:  
   Property additions    (10,426 )  (21,992 )
   Decrease in notes receivable from associated companies, net    12,334    11,249  
   Increase in investments    (181 )  (199 )
     1,727    (10,942 )
Financing activities  
   Dividends paid    (18,000 )  (23,728 )
   Long-term debt - repayments    (7,829 )  (3,088 )
     (25,829 )  (26,816 )
   Increase (decrease) in cash and cash equivalents    (445 )  563  

Cash and cash equivalents:		  
   Beginning of period    1,052    518  
   End of period   $ 607   $ 1,081  
Supplemental disclosure of cash flow information  
   Cash paid (received) during the period for:  
      Interest   $ 14,745   $ 14,996  
      Income taxes paid (refunded), net   $ (3,111 ) $ (4 )

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.

5

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 September 30, 2004, December 31, 2003 and September 30, 2003, financial information and are of a normal recurring nature. The results of operations for the nine months ended September 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):

Nine months ended
September 30,
2003

Revenue		     $ 41,485  
Income before income taxes   $ 2,833  
Income taxes    (927 )
Net income from discontinued operations   $ 1,906  

6

(4)  

   RECENTLY ADOPTED 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. FSP 106-2 is effective for the first interim period beginning after June 15, 2004. The Company provides prescription drug benefits to certain eligible employees and will include the effects of the 2003 Medicare Act on its next actuarial measurement of the accumulated postretirement benefit obligation or net periodic postretirement benefit cost. The Company uses a September 30 measurement date for the Plan.

(5)  

   COMPREHENSIVE INCOME


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

Three months ended Nine months ended
September 30 September 30
2004
 2003
 2004
 2003

Net income		     $ 5,860   $ 6,772   $ 12,712   $ 20,099  
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    10    10    31    31  
Comprehensive income   $ 5,870   $ 6,782   $ 12,743   $ 19,770  

(6)  

   CHANGES IN LONG-TERM DEBT


  On August 31, 2004, the Company effected a call on $5.9 million, 6.7 percent Pollution Control Revenue Bonds issued through Lawrence County, South Dakota. The bonds had a maturity date of 2010.

  On September 21, 2004, the Company initiated a notice to call, effective October 21, 2004, the entire $45 million Series AB 8.3 percent bonds. The bonds had a maturity date of 2024. Due to the notice to call, the bonds have been classified to current maturities of long-term debt on the September 30, 2004 Balance Sheet.

7

(7)  

   RELATED-PARTY TRANSACTIONS