|   |                                                                                      |
|---|--------------------------------------------------------------------------------------|
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

|        |                                                                                          |
|--------|------------------------------------------------------------------------------------------|
| ®  | 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 1-07978                                                           |

|                                                                       |        |                                      |
|-----------------------------------------------------------------------|--------|--------------------------------------|
| Incorporated in South Dakota                                          |   | IRS Identification Number 46-0111677 |
| 625 Ninth Street, Rapid City, South Dakota  57701                     |
|                                                                  |   |                                 |
| Registrant's telephone number, including area code: (605) 721-1700    |
|                                                                  |   |                                 |
| Securities registered pursuant to Section 12(b) of the Act:      None |
|                                                                  |   |                                 |
| Securities registered pursuant to Section 12(g) of the Act:      None |

|                               |                                  |
|-------------------------------|----------------------------------|
| Class                         | Outstanding at February 28, 2011 |
| Common stock, $1.00 par value | 23,416,396 shares                |

----

|                   |                                                                                                             |        |
|-------------------|-------------------------------------------------------------------------------------------------------------|--------|
| TABLE OF CONTENTS |
|              |                                                                                                        |   |
|              |                                                                                                        | Page   |
|              |                                                                                                        |   |
|              | GLOSSARY OF TERMS                                                                                           | 3      |
|              |                                                                                                        |   |
| ITEMS 1. and 2.   | BUSINESS AND PROPERTIES                                                                                     | 5      |
|              | Safe Harbor for Forward Looking Information                                                                 | 5      |
|              | General and Regulations                                                                                     | 7      |
|              |                                                                                                        |   |
| ITEM 1A.          | RISK FACTORS                                                                                                | 11     |
|              |                                                                                                        |   |
| ITEM 1B.          | UNRESOLVED STAFF COMMENTS                                                                                   | 16     |
|              |                                                                                                        |   |
| ITEM 3.           | LEGAL PROCEEDINGS                                                                                           | 16     |
|              |                                                                                                        |   |
| ITEM 5.           | MARKET FOR REGISTRANT'S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 17     |
|              |                                                                                                        |   |
| ITEM 7.           | MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS                                               | 18     |
|              |                                                                                                        |   |
| ITEM 8.           | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                 | 23     |
|              |                                                                                                        |   |
| ITEM 9.           | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                        | 54     |
|              |                                                                                                        |   |
| ITEM 9A.          | CONTROLS AND PROCEDURES                                                                                     | 54     |
|              |                                                                                                        |   |
| ITEM 9B.          | OTHER INFORMATION                                                                                           | 54     |
|              |                                                                                                        |   |
| ITEM 14.          | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                      | 54     |
|              |                                                                                                        |   |
| ITEM 15.          | EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                                     | 55     |
|              |                                                                                                        |   |
|              | SIGNATURES                                                                                                  | 59     |
|              |                                                                                                        |   |
|              | INDEX TO EXHIBITS                                                                                           | 60     |

----

|                                    |                                                                                                                                                                                                |
|------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| AFUDC                              | Allowance for Funds Used During Construction                                                                                                                                                   |
| AOCI                               | Accumulated Other Comprehensive Income                                                                                                                                                         |
| ASC                                | Accounting Standards Codification                                                                                                                                                              |
| ASC 310-10-50                      | ASC 310-10-50, "Disclosure About the Credit Quality of Financing Receivables and the Allowance for Credit Losses"                                                                              |
| ASC 810-10-15                      | ASC 810-10-15, "Consolidation of Variable Interest Entities"                                                                                                                                   |
| Basin Electric                     | Basin Electric Power Cooperative                                                                                                                                                               |
| BHC                                | Black Hills Corporation, Parent                                                                                                                                                                |
| Black Hills Non-regulated Holdings | Black Hills Non-regulated Holdings, LLC, a direct, wholly-owned subsidiary of the Parent Company, that was formerly known as Black Hills Energy, Inc.                                          |
| Black Hills Utility Holdings       | Black Hills Utility Holdings, Inc. a direct, wholly-owned subsidiary of BHC                                                                                                                    |
| Black Hills Wyoming                | Black Hills Wyoming, LLC, an indirect, wholly-owned subsidiary of Black Hills Electric Generation, Inc., a subsidiary of Black Hills Non-regulated Holdings                                    |
| Cheyenne Light                     | Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of BHC                                                                                                               |
| City of Gillette                   | The City of Gillette, Wyoming, affiliate of the JPB.  The JPB financed the purchase of 23% of the Wygen III power plant for the City of Gillette                                               |
| CO2                                | Carbon Dioxide                                                                                                                                                                                 |
| Colorado Electric                  | Black Hills Colorado Electric Utility Company, LP, (doing business as Black Hills Energy), an indirect, wholly-owned  subsidiary of Black Hills Utility Holdings                               |
| Dodd-Frank                         | Dodd-Frank Wall Street Reform and Consumer Protection Act                                                                                                                                      |
| Enserco                            | Enserco Energy Inc., a wholly-owned subsidiary of Black Hills Non-Regulated Holdings, LLC                                                                                                      |
| EPA                                | U.S. Environmental Protection Agency                                                                                                                                                           |
| FASB                               | Financial Accounting Standards Board                                                                                                                                                           |
| FERC                               | Federal Energy Regulatory Commission                                                                                                                                                           |
| GAAP                               | Accounting principles generally accepted in the United States of America                                                                                                                       |
| GHG                                | Greenhouse gas                                                                                                                                                                                 |
| Happy Jack                         | Happy Jack Wind Farms, LLC, a subsidiary of Duke Energy Generation Services                                                                                                                    |
| IRS                                | Internal Revenue Service                                                                                                                                                                       |
| JPB                                | Consolidated Wyoming Municipalities Electric Power System Joint Powers Board.  The JPB exists for the purpose of, among other things, financing the electrical system of the City of Gillette. |
| KV                                 | Kilovolt                                                                                                                                                                                       |
| LIBOR                              | London Interbank Offered Rate                                                                                                                                                                  |
| MACT                               | Maximum Achievable Control Technology                                                                                                                                                          |
| MAPP                               | Mid-Continent Area Power Pool                                                                                                                                                                  |
| MDU                                | Montana Dakota Utilities Company                                                                                                                                                               |
| MEAN                               | Municipal Energy Agency of Nebraska                                                                                                                                                            |
| MMBtu                              | Million British thermal units                                                                                                                                                                  |

----

|             |                                                                                                                        |
|-------------|------------------------------------------------------------------------------------------------------------------------|
| Moody's     | Moody's Investor Services, Inc.                                                                                        |
| MTPSC       | Montana Public Service Commission                                                                                      |
| MW          | Megawatts                                                                                                              |
| MWh         | Megawatt-hours                                                                                                         |
| NOL         | Net operating loss                                                                                                     |
| NQDC        | Non-Qualified Deferred Compensation Plan                                                                               |
| PPA         | Power Purchase Agreement                                                                                               |
| PPACA       | Patient Protection and Affordable Care Act of 2010                                                                     |
| PSD         | Prevention of Significant Deterioration                                                                                |
| PUHCA       | Public Utility Holding Company Act of 2005                                                                             |
| RMSA        | Retiree Medical Savings Account                                                                                        |
| 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                                            |
| SO2         | Sulfur Dioxide                                                                                                         |
| S&P     | Standard & Poor's Rating Services                                                                                  |
| WECC        | Western Electricity Coordinating Council                                                                               |
| WPSC        | Wyoming Public Service Commission                                                                                      |
| WRDC        | Wyodak Resources Development Corporation, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings, LLC |

----

|                                |                                                                                                                                                                                                                                                                                                |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | Our ability to obtain adequate cost recovery for our electric utility operations through regulatory proceedings and receive favorable rulings in periodic applications to recover costs for fuel and purchased power and our ability to add power generation assets into regulatory rate base; |

|                                |                                                                              |
|--------------------------------|------------------------------------------------------------------------------|
| •     | Our ability to successfully maintain or improve our corporate credit rating; |

|                                |                                                                                                                                                                       |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | Our ability to obtain from utility commissions any requisite determination of prudency to support resource planning and development programs we propose to implement; |

|                                |                                                             |
|--------------------------------|-------------------------------------------------------------|
| •     | The timing and extent of scheduled and unscheduled outages; |

|                                |                                                                                                                                                                        |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | The possibility that we may be required to take impairment charges to reduce the carrying value of some of our long-lived assets when indicators of impairment emerge; |

|                                |                                                                                                                                                                                |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | Changes in business and financial reporting practices arising from the enactment of the Energy Policy Act of 2005 and subsequent rules and regulations promulgated thereunder; |

|                                |                                                                                                                                                    |
|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | Our ability to complete the permitting, construction, start-up and operation of power generating facilities in a cost-effective and timely manner; |

|                                |                                                                                                       |
|--------------------------------|-------------------------------------------------------------------------------------------------------|
| •     | Our ability to remedy any deficiencies that may be identified in the review of our internal controls; |

|                                |                                                                         |
|--------------------------------|-------------------------------------------------------------------------|
| •     | Our ability to successfully complete labor negotiations with our union; |

|                                |                                                                                                                                                                                                                                                                                                                                       |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | The timing, volatility and extent of changes in energy-related and commodity prices, interest rates, energy and commodity supply or volume, the cost and availability of transportation of commodities, and demand for our services, all of which can affect our earnings, liquidity position and the underlying value of our assets; |

|                                |                                                                                           |
|--------------------------------|-------------------------------------------------------------------------------------------|
| •     | Our ability to effectively use derivative financial instruments to hedge commodity risks; |

|                                |                                                                                               |
|--------------------------------|-----------------------------------------------------------------------------------------------|
| •     | Our ability to minimize defaults on amounts due from customers and counterparty transactions; |

|                                |                                                                                                                                                                                                                                                                  |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | Our ability to comply, or to make expenditures required to comply with changes in laws and regulations, particularly those relating to taxation, safety and protection of the environment and to recover those expenditures in customer rates, where applicable; |

|                                |                                                                                                                              |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------|
| •     | Liabilities related to environmental conditions, including remediation and reclamation obligations under environmental laws; |

----

|                                |                                                                                                                                                                                                                                                                                                            |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | Federal and state laws concerning climate changes and air emissions, including emission reduction mandates and renewable energy portfolio standards, which may materially increase our generation and production costs and could render some of our generating units uneconomical to operate and maintain; |

|                                |                                                                                                  |
|--------------------------------|--------------------------------------------------------------------------------------------------|
| •     | Our ability to recover our borrowing costs, including debt service costs, in our customer rates; |

|                                |                                      |
|--------------------------------|--------------------------------------|
| •     | Weather and other natural phenomena; |

|                                |                                                                                                                                                                                                                                                                                                        |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | Macro- and micro-economic changes in the economy and energy industry, including the impact of (i) consolidations and changes in competition, (ii) changing conditions in the credit markets, and (iii) general economic and political conditions, including tax rates or policies and inflation rates; |

|                                |                                                                                              |
|--------------------------------|----------------------------------------------------------------------------------------------|
| •     | The effect of accounting policies issued periodically by accounting standard-setting bodies; |

|                                |                                                                                                                                     |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|
| •     | The cost and effects on our business, including insurance, resulting from terrorist actions or responses to such actions or events; |

|                                |                                                                                                                                                                                    |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | The outcome of any ongoing or future litigation or similar disputes and the impact on any such outcome or related settlements on our financial condition or results of operations; |

|                                |                                                                                              |
|--------------------------------|----------------------------------------------------------------------------------------------|
| •     | Capital market conditions, which may affect our ability to raise capital on favorable terms; |

|                                |                                                                                   |
|--------------------------------|-----------------------------------------------------------------------------------|
| •     | Price risk due to marketable securities held as investments in benefit plans; and |

|                                |                                                                              |
|--------------------------------|------------------------------------------------------------------------------|
| •     | Other factors discussed from time to time in our other filings with the SEC. |

----

|                        |          |                |                     |                     |               |        |           |
|------------------------|----------|----------------|---------------------|---------------------|---------------|--------|-----------|
| Unit                   | FuelType | Location       | OwnershipInterest % | Owned Capacity (MW) | YearInstalled |
| Wygen III (1)     | Coal     | Gillette, WY   | 52                  | %                   | 57.2          |   | 2010      |
| Neil Simpson II        | Coal     | Gillette, WY   | 100                 | %                   | 90.0          |   | 1995      |
| Wyodak (2)             | Coal     | Gillette, WY   | 20                  | %                   | 72.4          |   | 1978      |
| Osage (3)              | Coal     | Osage, WY      | 100                 | %                   | 34.5          |   | 1948-1952 |
| Ben French             | Coal     | Rapid City, SD | 100                 | %                   | 25.0          |   | 1960      |
| Neil Simpson I         | Coal     | Gillette, WY   | 100                 | %                   | 21.8          |   | 1969      |
| Neil Simpson CT        | Gas      | Gillette, WY   | 100                 | %                   | 40.0          |   | 2000      |
| Lange CT               | Gas      | Rapid City, SD | 100                 | %                   | 40.0          |   | 2002      |
| Ben French Diesel #1-5 | Oil      | Rapid City, SD | 100                 | %                   | 10.0          |   | 1965      |
| Ben French CTs #1-4    | Gas/Oil  | Rapid City, SD | 100                 | %                   | 100.0         |   | 1977-1979 |

|                                |                                                                                                                                                                                                                                                                       |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | We have a diverse customer and revenue base.  Our revenue mix for the year ended December 31, 2010 was comprised of 29% commercial, 23% residential, 10% contract wholesale, 16% wholesale off-system, 10% industrial and 12% municipal sales and other revenue. |

----

|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | We own 35% and Basin Electric owns 65% of a DC transmission tie that interconnects the Western and Eastern transmission grids, which are independently-operated transmission grids serving the western United States and the Eastern United States, respectively.  This transmission tie provides transmission access to both the WECC region in the West and the MAPP region in the East.  Our system is located in the WECC region.  The total transfer capacity of the tie is 200 MW from West to East and 200 MW from East to West.  This transmission tie allows us to buy and sell energy in the Eastern interconnection without having to isolate and physically reconnect load or generation between the two electrical transmission grids.  The transmission tie accommodates scheduling transactions in both directions simultaneously.  This transfer capability provides additional opportunity to sell our excess generation or to make economic purchases to serve our native load and our contract obligations, and to take advantage of the power price differentials between the two electric grids.  Additionally, our system is capable of directly interconnecting up to 80 MW of generation or load to the Eastern transmission grid.  Transmission constraints within the MAPP transmission system may limit the amount of capacity that may be directly interconnected to the Eastern system at any given time. |

|                                |                                                                                                                                                                                |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | We have firm point-to-point transmission access to deliver up to 50 MW of power on PacifiCorp's transmission system to wholesale customers in the Western region through 2023. |

|                                |                                                                                                                                                                                                                                                   |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | We have firm network transmission access to deliver power on PacifiCorp's system to Sheridan, Wyoming to serve our power sales contract with MDU through 2016, with the right to renew pursuant to the terms of PacifiCorp's transmission tariff. |

|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | In conjunction with MDU's April 2009 purchase of a 25% ownership interest in Wygen III, an agreement to supply 74 MW of capacity and energy through 2016 was modified.  The sales to MDU have been integrated into our control area and are considered part of our firm native load.  MWs from the Wygen III unit are deemed to supply a portion of the required 74 MW. During periods of reduced production at Wygen III, or during periods when Wygen III is off-line, MDU will be provided with its 25 MW from our other generation facilities or from system purchases with reimbursement of costs by MDU; |

|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | An agreement with the City of Gillette to dispatch the City's 23% of Wygen III's net generating capacity for the life of the plant. Upon the City of Gillette's July 2010 purchase of a 23% ownership interest in Wygen III, a seven year PPA with the City of Gillette effective April 2010, was terminated.  The City of Gillette's 23 MW of Wygen III capacity has been integrated into our control area and are considered part of our firm native load.  During periods of reduced production at Wygen III, or during periods when Wygen III is off-line, we will provide the City of Gillette with its first 23 MW from our other generation facilities or from system purchases with reimbursement of costs by the City of Gillette.  Under this agreement we will also provide the City of Gillette their operating component of spinning reserves; |

|                                |                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | An agreement under which we supply 20 MW of energy and capacity to MEAN under a contract that expires in 2023.  This contract is unit-contingent based on the availability of our Neil Simpson II and Wygen III plants, with capacity purchase decreasing to 15 MW in 2018, 12 MW in 2020 and 10 MW in 2022.  The unit-contingent capacity amounts from Wygen III and Neil Simpson II are as follows: |

|           |                                                                                  |
|-----------|----------------------------------------------------------------------------------|
| 2010-2017 | 20 MW - 10 MW contingent on Wygen III and 10 MW contingent on Neil Simpson II    |
| 2018-2019 | 15 MW - 10 MW contingent on Wygen III and 5 MW contingent on Neil Simpson II     |
| 2020-2021 | 12 MW - 6 MW contingent on Wygen III and 6 MW contingent on Neil Simpson II      |
| 2022-2023 | 10 MW - 5 MW contingent on Wygen III and 5 MW contingent on Neil Simpson II; and |

|                                |                                                                                                                                                                                             |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | A five-year PPA with MEAN which commenced in May 2010 whereby MEAN will purchase 5 MW of unit-contingent capacity from Neil Simpson II and 5 MW of unit-contingent capacity from Wygen III. |

----

|                                |                                                                                                             |
|--------------------------------|-------------------------------------------------------------------------------------------------------------|
| •     | A PPA with PacifiCorp expiring in 2023, involving the purchase by us of 50 MW of coal-fired baseload power; |

|                                |                                                                                                                                                                                                                  |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | A reserve capacity integration agreement with PacifiCorp expiring in 2012, which makes available to us 100 MW of reserve capacity in connection with the utilization of the Ben French Combustion Turbine units; |

|                                |                                                                                                                                                                 |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | A 20-year PPA with Cheyenne Light expiring in 2028, under which we will purchase up to 20 MW of wind energy through Cheyenne Light's agreement with Happy Jack; |

|                                |                                                                                                                                                                      |
|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | A 20-year PPA with Cheyenne Light expiring in 2029, under which we will purchase up to 20 MW of wind energy through Cheyenne Light's agreement with Silver Sage; and |

|                                |                                                                                                                         |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------|
| •     | A Generation Dispatch Agreement with Cheyenne Light that requires us to purchase all of Cheyenne Light's excess energy. |

----

----

----

|                                |                                                                                     |
|--------------------------------|-------------------------------------------------------------------------------------|
| •     | Operational limitations imposed by environmental and other regulatory requirements. |

|                                |                                                                           |
|--------------------------------|---------------------------------------------------------------------------|
| •     | Interruptions to supply of fuel and other commodities used in generation. |

|                                |                                                 |
|--------------------------------|-------------------------------------------------|
| •     | Breakdown or failure of equipment or processes. |

|                                |                                                          |
|--------------------------------|----------------------------------------------------------|
| •     | Inability to recruit and retain skilled technical labor. |

|                                |                  |
|--------------------------------|------------------|
| •     | Labor relations. |

|                                |                                                                                                                                                                                                                                                                                                                                                                    |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | Disrupted transmission and distribution.  We depend on transmission and distribution facilities, including those operated by unaffiliated parties, to deliver the electricity that we sell to our retail and wholesale customers.  If transmission is interrupted, our ability to sell or deliver product and satisfy our contractual obligations may be hindered. |

|                                |                                                                                                                                                                 |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | The inability to obtain required governmental permits and approvals along with the cost of complying with or satisfying conditions imposed upon such approvals; |

|                                |                                                             |
|--------------------------------|-------------------------------------------------------------|
| •     | Contract restrictions upon the timing of scheduled outages; |

|                                |                                                                                           |
|--------------------------------|-------------------------------------------------------------------------------------------|
| •     | Cost of supplying or securing replacement power during scheduled and unscheduled outages; |

|                                |                                                    |
|--------------------------------|----------------------------------------------------|
| •     | The unavailability or increased cost of equipment; |

----

|                                |                                                                              |
|--------------------------------|------------------------------------------------------------------------------|
| •     | The cost of recruiting and retaining or the unavailability of skilled labor; |

|                                |                                                          |
|--------------------------------|----------------------------------------------------------|
| •     | Supply interruptions, work stoppages and labor disputes; |

|                                |                                                                                                       |
|--------------------------------|-------------------------------------------------------------------------------------------------------|
| •     | Capital and operating costs to comply with increasingly stringent environmental laws and regulations; |

|                                |                                                                 |
|--------------------------------|-----------------------------------------------------------------|
| •     | Opposition by members of the public or special-interest groups; |

|                                |                        |
|--------------------------------|------------------------|
| •     | Weather interferences; |

|                                |                                                                    |
|--------------------------------|--------------------------------------------------------------------|
| •     | Unexpected engineering, environmental and geological problems; and |

|                                |                              |
|--------------------------------|------------------------------|
| •     | Unanticipated cost overruns. |

----

----

|                                |                                                                                                 |
|--------------------------------|-------------------------------------------------------------------------------------------------|
| •     | The Energy Policy Act of 2005 and the repeal of the Public Utility Holding Company Act of 1935; |

|                                |                         |
|--------------------------------|-------------------------|
| •     | Industry consolidation; |

|                                |                   |
|--------------------------------|-------------------|
| •     | Consumer demands; |

|                                |                           |
|--------------------------------|---------------------------|
| •     | Transmission constraints; |

|                                |                                         |
|--------------------------------|-----------------------------------------|
| •     | Renewable resource supply requirements; |

|                                |                                                                                         |
|--------------------------------|-----------------------------------------------------------------------------------------|
| •     | Resistance to the siting of utility infrastructure or to the granting of right-of-ways; |

|                                |                             |
|--------------------------------|-----------------------------|
| •     | Technological advances; and |

|                                |                                                                                |
|--------------------------------|--------------------------------------------------------------------------------|
| •     | Greater availability of natural gas-fired power generation, and other factors. |

----

----

----

|                                  |                 |         |         |        |         |        |   |         |        |
|----------------------------------|-----------------|---------|---------|--------|---------|--------|---|---------|--------|
| For the years ended December 31, | 2010            | 2009    | 2008    |
|                             | (in  thousands) |
|                             |            |    |    |
| Revenue                          | $               | 229,763 |    | $      | 207,079 |   | $ | 232,674 |   |
| Fuel and purchased power         | 87,757          |    | 91,349  |   | 113,672 |   |
| Gross margin                     | 142,006         |    | 115,730 |   | 119,002 |   |
|                             |            |    |    |
| Operating expenses               | 92,976          |    | 80,925  |   | 80,366  |   |
| Gain on sale of operating assets | (6,238          | )       | — |   | — |   |
| Operating income                 | 55,268          |    | 34,805  |   | 38,636  |   |
|                             |            |    |    |
| Interest expense, net            | (16,513         | )       | (11,164 | )      | (10,111 | )      |
| Other income                     | 3,254           |    | 7,802   |   | 3,785   |   |
| Income tax expense               | (10,741         | )       | (8,304  | )      | (9,551  | )      |
| Net income                       | $               | 31,268  |    | $      | 23,139  |   | $ | 22,759  |   |

|                      |         |                   |        |                   |         |        |         |        |         |         |   |         |        |
|----------------------|---------|-------------------|--------|-------------------|---------|--------|---------|--------|---------|---------|---|---------|--------|
| Electric Revenue     |
|                 |    |              |   |              |    |
| Customer Base        | 2010    | Percentage Change | 2009   | Percentage Change | 2008    |
| Residential          | $       | 53,549            |   | 10                |  % | $      | 48,586  |   | 4       |  % | $ | 46,854  |   |
| Commercial           | 65,997  |              | 10     |              | 59,897  |   | 3       |   | 58,289  |    |
| Industrial           | 22,621  |              | 13     |              | 20,014  |   | (7      | )      | 21,432  |    |
| Municipal            | 3,029   |              | 11     |              | 2,735   |   | -       | 2,734  |    |
| Total retail sales   | 145,196 |              | 11     |              | 131,232 |   | 1       |   | 129,309 |    |
| Contract wholesale   | 22,996  |              | (9     | )                 | 25,358  |   | (5      | )      | 26,643  |    |
| Wholesale off-system | 36,354  |              | 13     |              | 32,212  |   | (49     | )      | 63,770  |    |
| Total electric sales | 204,546 |              | 8      |              | 188,802 |   | (14     | )      | 219,722 |    |
| Other revenue        | 25,217  |              | 38     |              | 18,277  |   | 41      |   | 12,952  |    |
| Total revenue        | $       | 229,763           |   | 11                |  % | $      | 207,079 |   | (11     | )%      | $ | 232,674 |   |

|                            |           |                   |        |                   |           |        |     |         |           |        |
|----------------------------|-----------|-------------------|--------|-------------------|-----------|--------|-----|---------|-----------|--------|
| Megawatt-Hours Sold        |
|                       |      |              |   |              |      |
| Customer Base              | 2010      | Percentage Change | 2009   | Percentage Change | 2008      |
| Residential                | 547,193   |              | 3      |  %           | 529,825   |   | 1   |  % | 524,413   |   |
| Commercial                 | 720,119   |              | (0     | )                 | 723,360   |   | 3   |    | 699,734   |   |
| Industrial                 | 382,562   |              | 8      |              | 353,041   |   | (15 | )       | 414,421   |   |
| Municipal                  | 33,908    |              | (0     | )                 | 33,948    |   | (1  | )       | 34,368    |   |
| Total retail sales         | 1,683,782 |              | 3      |              | 1,640,174 |   | (2  | )       | 1,672,936 |   |
| Contract wholesale         | 468,782   |              | (27    | )                 | 645,297   |   | (3  | )       | 665,795   |   |
| Wholesale off-system       | 1,163,058 |              | 15     |              | 1,009,574 |   | (6  | )       | 1,074,398 |   |
|  Total electric sales | 3,315,622 |              | 1      |              | 3,295,045 |   | (3  | )       | 3,413,129 |   |
| Losses and company use     | 131,263   |              | (18    | )                 | 159,207   |   | 90  |    | 83,598    |   |
|  Total energy         | 3,446,885 |              | (0     | )%                | 3,454,252 |   | (1  | )%      | 3,496,727 |   |

----

|                                           |        |        |        |   |      |   |
|-------------------------------------------|--------|--------|--------|---|------|---|
|                                      | 2010   | 2009   | 2008   |
| Regulated power plant fleet availability: |   |   |   |
| Coal-fired plants                         | 93.5   | %      | 90.3   | % | 93.5 | % |
| Other plants                              | 95.7   | %      | 97.7   | % | 89.2 | % |
| Total availability                        | 94.4   | %      | 93.5   | % | 91.6 | % |

|                 |           |                   |        |                   |           |        |     |    |           |        |
|-----------------|-----------|-------------------|--------|-------------------|-----------|--------|-----|----|-----------|--------|
| Resources       | 2010      | Percentage Change | 2009   | Percentage Change | 2008      |
|            |      |              |   |              |      |
| MWh generated:  |      |              |   |              |      |
| Coal            | 1,987,037 |              | 15     |  %           | 1,721,074 |   | (1  | )% | 1,731,838 |   |
| Gas             | 19,269    |              | (59    | )                 | 46,723    |   | (24 | )  | 61,801    |   |
|            | 2,006,306 |              | 13     |              | 1,767,797 |   | (1  | )  | 1,793,639 |   |
|            |      |              |   |              |      |
| MWh purchased   | 1,440,579 |              | (15    | )                 | 1,686,455 |   | (1  | )  | 1,703,088 |   |
| Total resources | 3,446,885 |              | (0     | )%                | 3,454,252 |   | (1  | )% | 3,496,727 |   |

|                                  |        |         |        |         |       |         |
|----------------------------------|--------|---------|--------|---------|-------|---------|
|                             | 2010   | 2009    | 2008   |
| Heating and cooling degree days: |   |    |   |
| Actual                           |   |    |   |
| Heating degree days              | 7,272  |    | 7,753  |    | 7,676 |    |
| Cooling degree days              | 532    |    | 354    |    | 482   |    |
|                             |   |    |   |
| Variance from 30-year average:   |   |    |   |
| Heating degree days              | 1      |  % | 8      |  % | 6     |  % |
| Cooling degree days              | (11    | )%      | (41    | )%      | (19   | )%      |

----

----

----

----

|         |                                             |
|---------|---------------------------------------------|
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |

|                                                                                                                |        |
|----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                           | Page   |
|                                                                                                           |   |
| Management's Report on Internal Control over Financial Reporting                                               | 24     |
|                                                                                                           |   |
| Report of Independent Registered Public Accounting Firm                                                        | 25     |
|                                                                                                           |   |
| Statements of Income for the three years ended December 31, 2010                                               | 26     |
|                                                                                                           |   |
| Balance Sheets as of December 31, 2010 and 2009                                                                | 27     |
|                                                                                                           |   |
| Statements of Cash Flows for the three years ended December 31, 2010                                           | 28     |
|                                                                                                           |   |
| Statements of Common Stockholder's Equity and Comprehensive Income for the three years ended December 31, 2010 | 29     |
|                                                                                                           |   |
| Notes to Financial Statements                                                                                  | 30     |

----

----

----

|                                                       |                 |         |         |        |         |        |   |         |        |
|-------------------------------------------------------|-----------------|---------|---------|--------|---------|--------|---|---------|--------|
| Years ended December 31,                              | 2010            | 2009    | 2008    |
|                                                  | (in  thousands) |
|                                                  |            |    |    |
| Operating revenues                                    | $               | 229,763 |    | $      | 207,079 |   | $ | 232,674 |   |
|                                                  |            |    |    |
| Operating expenses:                                   |            |    |    |
| Fuel and purchased power                              | 87,757          |    | 91,349  |   | 113,672 |   |
| Operations and maintenance                            | 68,884          |    | 57,116  |   | 55,125  |   |
| Gain on sale of operating assets                      | (6,238          | )       | — |   | — |   |
| Depreciation and amortization                         | 22,030          |    | 19,465  |   | 20,930  |   |
| Taxes - property                                      | 2,062           |    | 4,344   |   | 4,311   |   |
| Total operating expenses                              | 174,495         |    | 172,274 |   | 194,038 |   |
|                                                  |            |    |    |
| Operating income                                      | 55,268          |    | 34,805  |   | 38,636  |   |
|                                                  |            |    |    |
| Other (expense) income:                               |            |    |    |
| Interest expense                                      | (18,737         | )       | (15,779 | )      | (13,392 | )      |
| AFUDC - borrowed                                      | 2,224           |    | 4,357   |   | 2,556   |   |
| Interest income                                       | 318             |    | 258     |   | 725     |   |
| AFUDC - equity                                        | 2,748           |    | 5,831   |   | 3,605   |   |
| Other expense                                         | (35             | )       | — |   | (47     | )      |
| Other income                                          | 223             |    | 1,971   |   | 227     |   |
| Total other expense                                   | (13,259         | )       | (3,362  | )      | (6,326  | )      |
|                                                  |            |    |    |
| Income from continuing operations before income taxes | 42,009          |    | 31,443  |   | 32,310  |   |
| Income tax expense                                    | (10,741         | )       | (8,304  | )      | (9,551  | )      |
|                                                  |            |    |    |
| Net income                                            | $               | 31,268  |    | $      | 23,139  |   | $ | 22,759  |   |

----

|                                                                                                     |                                      |         |          |        |         |        |
|-----------------------------------------------------------------------------------------------------|--------------------------------------|---------|----------|--------|---------|--------|
| At December 31,                                                                                     | 2010                                 | 2009    |
|                                                                                                | (in thousands, except share amounts) |
| ASSETS                                                                                              |                                 |    |
| Current assets:                                                                                     |                                 |    |
| Cash and cash equivalents                                                                           | $                                    | 2,045   |     | $      | 1,709   |   |
| Receivables - customers, net                                                                        | 28,716                               |    | 19,991   |   |
| Receivables - affiliates                                                                            | 6,891                                |    | 4,146    |   |
| Other receivables, net                                                                              | 2,077                                |    | 5,293    |   |
| Money pool notes receivable                                                                         | 39,862                               |    | 57,737   |   |
| Materials, supplies and fuel                                                                        | 21,259                               |    | 18,825   |   |
| Regulatory assets, current                                                                          | 3,584                                |    | 7,467    |   |
| Other current assets                                                                                | 3,712                                |    | 1,639    |   |
| Total current assets                                                                                | 108,146                              |    | 116,807  |   |
|                                                                                                |                                 |    |
| Investments                                                                                         | 4,396                                |    | 4,197    |   |
|                                                                                                |                                 |    |
| Property, plant and equipment                                                                       | 962,640                              |    | 950,577  |   |
| Less accumulated depreciation and amortization                                                      | (304,800                             | )       | (293,823 | )      |
| Total property, plant and equipment, net                                                            | 657,840                              |    | 656,754  |   |
|                                                                                                |                                 |    |
| Other assets:                                                                                       |                                 |    |
| Regulatory assets, non-current                                                                      | 37,740                               |    | 31,305   |   |
| Other, non-current assets                                                                           | 3,610                                |    | 3,730    |   |
| Total other assets                                                                                  | 41,350                               |    | 35,035   |   |
| TOTAL ASSETS                                                                                        | $                                    | 811,732 |     | $      | 812,793 |   |
|                                                                                                |                                 |    |
| LIABILITIES AND STOCKHOLDER'S EQUITY                                                                |                                 |    |
| Current liabilities:                                                                                |                                 |    |
| Current maturities of long-term debt                                                                | $                                    | 81      |     | $      | 32,025  |   |
| Accounts payable                                                                                    | 14,828                               |    | 24,175   |   |
| Accounts payable - affiliate                                                                        | 12,562                               |    | 10,030   |   |
| Accrued liabilities                                                                                 | 15,541                               |    | 17,892   |   |
| Regulatory liability, current                                                                       | 1,932                                |    | 1,238    |   |
| Deferred income tax liability - current                                                             | 859                                  |    | 1,853    |   |
| Total current liabilities                                                                           | 45,803                               |    | 87,213   |   |
|                                                                                                |                                 |    |
| Long-term debt, net of current maturities                                                           | 276,422                              |    | 297,044  |   |
|                                                                                                |                                 |    |
| Deferred credits and other liabilities:                                                             |                                 |    |
| Deferred income tax liability - non-current                                                         | 122,319                              |    | 96,207   |   |
| Regulatory liabilities, non-current                                                                 | 28,276                               |    | 14,955   |   |
| Benefit plan liabilities                                                                            | 19,581                               |    | 28,224   |   |
| Other, non-current liabilities                                                                      | 9,914                                |    | 10,952   |   |
| Total deferred credits and other liabilities                                                        | 180,090                              |    | 150,338  |   |
|                                                                                                |                                 |    |
| Commitments and contingencies (Notes 6, 10, 11 and 13)                                              |                                 |    |
|                                                                                                |                                 |    |
| Stockholder's equity:                                                                               |                                 |    |
| Common stock $1 par value; 50,000,000 shares authorized; Issued: 23,416,396 shares in 2010 and 2009 | 23,416                               |    | 23,416   |   |
| Additional paid-in capital                                                                          | 39,575                               |    | 39,575   |   |
| Retained earnings                                                                                   | 247,688                              |    | 216,420  |   |
| Accumulated other comprehensive loss                                                                | (1,262                               | )       | (1,213   | )      |
| Total stockholder's equity                                                                          | 309,417                              |    | 278,198  |   |
| TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                                                          | $                                    | 811,732 |     | $      | 812,793 |   |

----

|                                                                                    |                |        |          |        |          |        |   |        |        |
|------------------------------------------------------------------------------------|----------------|--------|----------|--------|----------|--------|---|--------|--------|
| Years ended December 31,                                                           | 2010           | 2009   | 2008     |
|                                                                               | (in thousands) |
| Operating activities:                                                              |           |   |     |
| Net income                                                                         | $              | 31,268 |     | $      | 23,139   |   | $ | 22,759 |   |
| Adjustments to reconcile net income to net cash provided by operating activities - |           |   |     |
| Depreciation and amortization                                                      | 22,030         |   | 19,465   |   | 20,930   |   |
| Deferred income taxes                                                              | 25,626         |   | 11,600   |   | 16,072   |   |
| AFUDC - equity                                                                     | (2,748         | )      | (5,831   | )      | (3,605   | )      |
| Gain on sale of operating assets                                                   | (6,238         | )      | —  |   | —  |   |
| Employee benefits                                                                  | 4,030          |   | 4,234    |   | 730      |   |
| Other adjustments                                                                  | (4,335         | )      | 240      |   | 416      |   |
| Change in operating assets and liabilities -                                       |           |   |     |
| Accounts receivable and other current assets                                       | (14,541        | )      | 13,233   |   | (11,909  | )      |
| Accounts payable and other current liabilities                                     | (5,525         | )      | 2,556    |   | 7,821    |   |
| Regulatory assets                                                                  | 3,883          |   | (2,205   | )      | (738     | )      |
| Regulatory liabilities                                                             | 3,562          |   | 586      |   | (518     | )      |
| Contributions to defined benefit pension plan                                      | (8,798         | )      | —  |   | —  |   |
| Other operating activities                                                         | 2,389          |   | (859     | )      | 6        |   |
| Net cash provided by operating activities                                          | 50,603         |   | 66,158   |   | 51,964   |   |
|                                                                               |           |   |     |
| Investing activities:                                                              |           |   |     |
| Property, plant and equipment additions                                            | (78,602        | )      | (146,148 | )      | (132,247 | )      |
| Proceeds from sale of ownership interest in plant                                  | 62,000         |   | 32,783   |   | —  |   |
| Notes receivable from affiliate companies, net                                     | 17,875         |   | (82,737  | )      | 10,304   |   |
| Other investing activities                                                         | 2,202          |   | 1,067    |   | (225     | )      |
| Net cash (used in) provided by investing activities                                | 3,475          |   | (195,035 | )      | (122,168 | )      |
|                                                                               |           |   |     |
| Financing activities:                                                              |           |   |     |
| Note payable to affiliate companies, net                                           | —        |   | (45,184  | )      | 70,184   |   |
| Long-term debt issuance                                                            | —        |   | 180,000  |   | —  |   |
| Long-term debt - repayments                                                        | (52,566        | )      | (2,140   | )      | (2,009   | )      |
| Other financing activities                                                         | (1,176         | )      | (2,094   | )      | —  |   |
| Net cash (used in) provided by financing activities                                | (53,742        | )      | 130,582  |   | 68,175   |   |
|                                                                               |           |   |     |
| Increase (decrease) in cash and cash equivalents                                   | 336            |   | 1,705    |   | (2,029   | )      |
|                                                                               |           |   |     |
| Cash and cash equivalents:                                                         |           |   |     |
| Beginning of year                                                                  | 1,709          |   | 4        |   | 2,033    |   |
| End of year                                                                        | $              | 2,045  |     | $      | 1,709    |   | $ | 4      |   |

----

|                                                             |                |         |         |        |         |        |   |         |        |
|-------------------------------------------------------------|----------------|---------|---------|--------|---------|--------|---|---------|--------|
|                                                        | 2010           | 2009    | 2008    |
|                                                        | (in thousands) |
| Common stock shares:                                        |           |    |    |
| Balance beginning of year                                   | 23,416         |    | 23,416  |   | 23,416  |   |
| Issuance of common stock                                    | —        |    | — |   | — |   |
| Balance end of year                                         | 23,416         |    | 23,416  |   | 23,416  |   |
|                                                        |           |    |    |
| Common stock amounts:                                       |           |    |    |
| Balance beginning of year                                   | $              | 23,416  |    | $      | 23,416  |   | $ | 23,416  |   |
| Issuance of common stock                                    | —        |    | — |   | — |   |
| Balance end of year                                         | $              | 23,416  |    | $      | 23,416  |   | $ | 23,416  |   |
|                                                        |           |    |    |
| Additional paid-in capital:                                 |           |    |    |
| Balance beginning of year                                   | $              | 39,575  |    | $      | 39,575  |   | $ | 39,575  |   |
| Issuance of common stock                                    | —        |    | — |   | — |   |
| Balance end of year                                         | $              | 39,575  |    | $      | 39,575  |   | $ | 39,575  |   |
|                                                        |           |    |    |
| Retained earnings:                                          |           |    |    |
| Balance beginning of year                                   | $              | 216,420 |    | $      | 193,281 |   | $ | 170,706 |   |
| Net income available for common stock                       | 31,268         |    | 23,139  |   | 22,759  |   |
| Adoption of accounting pronouncement                        | —        |    | — |   | (184    | )      |
| Balance end of year                                         | $              | 247,688 |    | $      | 216,420 |   | $ | 193,281 |   |
|                                                        |           |    |    |
| Accumulated other comprehensive loss:                       |           |    |    |
| Balance beginning of year                                   | $              | (1,213  | )       | $      | (1,349  | )      | $ | (1,277  | )      |
| Other comprehensive (loss) income, net of tax               | (49            | )       | 136     |   | (72     | )      |
| Balance end of year                                         | $              | (1,262  | )       | $      | (1,213  | )      | $ | (1,349  | )      |
|                                                        |           |    |    |
| Total stockholder's equity                                  | $              | 309,417 |    | $      | 278,198 |   | $ | 254,923 |   |
|                                                        |           |    |    |
| Comprehensive income:                                       |           |    |    |
| Net income                                                  | $              | 31,268  |    | $      | 23,139  |   | $ | 22,759  |   |
| Other comprehensive income (loss) , net of tax (see Note 9) | (49            | )       | 136     |   | (72     | )      |
| Comprehensive income                                        | $              | 31,219  |    | $      | 23,275  |   | $ | 22,687  |   |

----

----

|                                      |                    |        |        |         |        |        |        |
|--------------------------------------|--------------------|--------|--------|---------|--------|--------|--------|
|                                 | Recovery Period    | 2010   | 2009   |
|                                 |               |   |   |
| Regulatory assets:                   |               |   |   |
| Unamortized loss on reacquired debt  | 14 years           | $      | 3,016  |    | $      | 2,207  |   |
| AFUDC                                | Up to 45 years     | 9,489  |   | 7,579   |   |
| Defined benefit postretirement plans | Up to 13 years     | 18,049 |   | 21,024  |   |
| Deferred energy costs                | Less than one year | 3,584  |   | 7,467   |   |
| Flow through accounting              | Up to 35 years     | 4,772  |   | — |   |
| Other                                |               | 2,414  |   | 495     |   |
| Total regulatory assets              |               | $      | 41,324 |    | $      | 38,772 |   |
|                                 |               |   |   |
| Regulatory liabilities:              |               |   |   |
| Cost of removal for utility plant    | Up to 53 years     | $      | 15,429 |    | $      | 13,678 |   |
| Defined benefit postretirement plans | Up to 13 years     | 10,204 |   | — |   |
| Other                                |               | 4,575  |   | 2,515   |   |
| Total regulatory liabilities         |               | $      | 30,208 |    | $      | 16,193 |   |

|                  |        |        |        |        |        |        |       |        |        |
|------------------|--------|--------|--------|--------|--------|--------|-------|--------|--------|
|             | 2010   | 2009   | 2008   |
|             |   |   |   |
| AFUDC - borrowed | $      | 2,224  |   | $      | 4,357  |   | 2,556 |   |
| AFUDC - equity   | 2,748  |   | 5,831  |   | 3,605  |   |
| Total AFUDC      | $      | 4,972  |   | $      | 10,188 |   | $     | 6,161  |   |

----

|                                       |        |        |        |        |        |        |
|---------------------------------------|--------|--------|--------|--------|--------|--------|
|                                  | 2010   | 2009   |
|                                  |   |   |
| Accounts receivable trade             | $      | 21,365 |   | $      | 14,703 |   |
| Unbilled revenues                     | 7,581  |   | 5,547  |   |
| Total accounts receivable - customers | 28,946 |   | 20,250 |   |
| Allowance for doubtful accounts       | (230   | )      | (259   | )      |
| Net accounts receivable               | $      | 28,716 |   | $      | 19,991 |   |

----

----

|                                                                  |                        |                              |                        |                              |                  |         |        |        |        |        |
|------------------------------------------------------------------|------------------------|------------------------------|------------------------|------------------------------|------------------|---------|--------|--------|--------|--------|
|                                                             |                   | December 31, 2010       |                   | December 31, 2009       |             |
|                                                             | December 31, 2010 | Weighted Average Useful Life | December 31, 2009 | Weighted Average Useful Life | Lives (in years) |
| Electric plant:                                                  |                   |                         |                   |                         |             |
| Production                                                       | $                      | 475,762                      |                   | 50                           | $                | 336,534 |   | 53     | 30-62  |   |
| Transmission                                                     | 116,056                |                         | 43                     | 86,841                       |             | 44      | 35-55  |   |
| Distribution                                                     | 271,470                |                         | 37                     | 264,847                      |             | 37      | 15-65  |   |
| Plant acquisition adjustment                                     | 4,870                  |                         | 32                     | 4,870                        |             | 32      | 32     |   |
| General                                                          | 58,777                 |                         | 22                     | 55,701                       |             | 22      | 10-50  |   |
| Total electric plant                                             | 926,935                |                         |                   | 748,793                      |             |    |   |
| Less accumulated depreciation and amortization                   | 304,800                |                         |                   | 293,823                      |             |    |   |
| Electric plant net of accumulated  depreciation and amortization | 622,135                |                         |                   | 454,970                      |             |    |   |
| Construction work in progress                                    | 35,705                 |                         |                   | 201,784                      |             |    |   |
| Net electric plant                                               | $                      | 657,840                      |                   |                         | $                | 656,754 |   |   |   |

----

|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | We own a 20% interest and PacifiCorp owns an 80% interest in the Wyodak Plant (the "Plant"), a 362 MW coal-fired electric generating station located in Campbell County, Wyoming.  PacifiCorp is the operator of the Plant.  We receive 20% of the Plant's capacity and are committed to pay 20% of its additions, replacements and operating and maintenance expenses.  Our investment in the Plant and accumulated depreciation is included in the corresponding captions in the accompanying Balance Sheets.  Our share of direct expenses of the Plant is included in the corresponding categories of operating expenses in the accompanying Statements of Income. |

|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | We own a 35% interest and Basin Electric owns a 65% interest in the Converter Station Site and South Rapid City Interconnection (the transmission tie), an AC-DC-AC transmission tie.  The transmission tie provides an interconnection between the Western and Eastern transmission grids, which provides us with access to both the WECC region and the MAPP region.  The total transfer capacity of the transmission tie is 400 MW - 200 MW West to East and 200 MW from East to West.  We are committed to pay 35% of the additions, replacements and operating and maintenance expenses.  Our investment in the transmission tie and accumulated depreciation is included in the corresponding captions in the accompanying Balance Sheets. |

|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | We own a 52% interest in the Wygen III power plant. MDU owns 25% which was purchased in April 2009.  At closing, MDU made a payment to us for its 25% share of the costs to date on the ongoing construction of the facility and subsequently reimbursed us for 25% of the total costs paid to complete the project.  Our share of direct expenses of the jointly-owned facility are included in Operating expenses in the Statements of Income.  Our share of property, plant and equipment in Wygen III and associated accumulated depreciation is included in the corresponding captions in the accompanying Balance Sheets. |

|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | The City of Gillette owns a 23% interest in the Wygen III power plant which was purchased in July 2010 for $62.0 million. Wygen III was placed into commercial operations on April 1, 2010.  Our share of direct expenses of the jointly-owned facility are included in Operating expenses in the Statements of Income.  Our share of property, plant and equipment in Wygen III and associated accumulated depreciation is included in the corresponding captions in the accompanying Balance Sheets. |

|                          |                      |      |      |       |        |   |         |        |   |         |        |
|--------------------------|----------------------|------|------|-------|--------|---|---------|--------|---|---------|--------|
| Share of Direct Expenses | Ownership Percentage | 2010 | 2009 | 2008  |
| Wyodak Plant             | 20.0                 | %    | $    | 8,546 |   | $ | 8,021   |   | $ | 8,000   |   |
| Transmission Tie         | 35.0                 | %    | $    | 154   |   | $ | 100     |   | $ | 123     |   |
| Wygen III (a)       | 52.0                 | %    | $    | 7,618 |   | $ | — |   | $ | — |   |

|                          |                      |                  |                               |                          |        |   |         |        |   |        |        |
|--------------------------|----------------------|------------------|-------------------------------|--------------------------|--------|---|---------|--------|---|--------|--------|
| Share of Direct Expenses | Ownership Percentage | Plant in Service | Construction Work in Progress | Accumulated Depreciation |
| Wyodak Plant             | 20.0                 | %                | $                             | 82,466                   |   | $ | 21,687  |   | $ | 54,108 |   |
| Transmission Tie         | 35.0                 | %                | $                             | 19,644                   |   | $ | — |   | $ | 4,111  |   |
| Wygen III (a)       | 52.0                 | %                | $                             | 129,340                  |   | $ | 194     |   | $ | 2,282  |   |

----

|                                              |                        |        |        |
|----------------------------------------------|------------------------|--------|--------|
|                                         | December 31, 2009 |
|                                         |                   |
| Notional*                                    | 232,500                |   |
| Maximum terms in months                      | 10                     |   |
| Current derivative liabilities               | $                      | 5      |   |
| Pre-tax accumulated other comprehensive loss | $                      | (5     | )      |

|                                                   |                   |                        |         |        |         |        |
|---------------------------------------------------|-------------------|------------------------|---------|--------|---------|--------|
|                                              | December 31, 2010 | December 31, 2009 |
| First mortgage bonds:                             |              |                   |
| 8.06% due 2010                                    | $                 | —                |    | $      | 30,000  |   |
| 9.49% due 2018                                    | —           |                   | 2,520   |   |
| 9.35% due 2021                                    | —           |                   | 19,980  |   |
| 7.23% due 2032                                    | 75,000            |                   | 75,000  |   |
| 6.125% due 2039                                   | 180,000           |                   | 180,000 |   |
| Unamortized discount on 6.125% bonds              | (119              | )                      | (124    | )      |
|                                              | 254,881           |                   | 307,376 |   |
| Other long-term debt:                             |              |                   |
| Pollution control revenue bonds at 4.8% due 2014  | 6,450             |                   | 6,450   |   |
| Pollution control revenue bonds at 5.35% due 2024 | 12,200            |                   | 12,200  |   |
| Other                                             | 2,972             |                   | 3,043   |   |
|                                              | 21,622            |                   | 21,693  |   |
|                                              |              |                   |
| Total long-term debt                              | 276,503           |                   | 329,069 |   |
| Less current maturities                           | (81               | )                      | (32,025 | )      |
| Net long-term debt                                | $                 | 276,422                |    | $      | 297,044 |   |

----

|            |   |         |        |
|------------|---|---------|--------|
| 2011       | $ | 81      |   |
| 2012       | $ | 36      |   |
| 2013       | $ | — |   |
| 2014       | $ | 6,450   |   |
| 2015       | $ | — |   |
| Thereafter | $ | 270,055 |   |

----

|                                                        |                        |                        |                |            |         |        |   |         |        |   |         |        |
|--------------------------------------------------------|------------------------|------------------------|----------------|------------|---------|--------|---|---------|--------|---|---------|--------|
|                                                   | December 31, 2010 | December 31, 2009 |
|                                                   | Carrying Value         | Fair Value             | Carrying Value | Fair Value |
|                                                   |                   |                   |           |       |
| Cash and cash equivalents                              | $                      | 2,045                  |           | $          | 2,045   |   | $ | 1,709   |   | $ | 1,709   |   |
| Derivative financial instruments - Accrued liabilities | $                      | —                |           | $          | — |   | $ | 5       |   | $ | 5       |   |
| Long-term debt, including current maturities           | $                      | 276,503                |           | $          | 301,964 |   | $ | 329,069 |   | $ | 344,942 |   |

|                          |                        |                        |                        |        |        |        |   |        |        |
|--------------------------|------------------------|------------------------|------------------------|--------|--------|--------|---|--------|--------|
|                     | December 31, 2010 | December 31, 2009 | December 31, 2008 |
|                     |                   |                   |                   |
| Current                  | $                      | (14,885                | )                      | $      | (3,296 | )      | $ | (6,521 | )      |
| Deferred                 | 25,626                 |                   | 11,600                 |   | 16,072 |   |
| Total income tax expense | $                      | 10,741                 |                   | $      | 8,304  |   | $ | 9,551  |   |

----

|                                                              |                        |                        |          |        |         |        |
|--------------------------------------------------------------|------------------------|------------------------|----------|--------|---------|--------|
|                                                         | December 31, 2010 | December 31, 2009 |
|                                                         |                   |                   |
| Deferred tax assets, current:                                |                   |                   |
| Asset valuation reserve                                      | $                      | 217                    |     | $      | 90      |   |
| Employee benefits                                            | 803                    |                   | 946      |   |
| Rate refund                                                  | 428                    |                   | —  |   |
| Other                                                        | —                |                   | 2        |   |
| Total deferred tax assets, current                           | 1,448                  |                   | 1,038    |   |
|                                                         |                   |                   |
| Deferred tax liabilities, current:                           |                   |                   |
| Prepaid expenses                                             | (251                   | )                      | (214     | )      |
| Deferred costs                                               | (2,056                 | )                      | (2,677   | )      |
| Total deferred tax liabilities, current                      | (2,307                 | )                      | (2,891   | )      |
|                                                         |                   |                   |
| Net deferred tax assets (liabilities), current               | $                      | (859                   | )        | $      | (1,853  | )      |
|                                                         |                   |                   |
| Deferred tax assets, non-current:                            |                   |                   |
| Plant related differences                                    | $                      | 909                    |     | $      | 1,151   |   |
| Regulatory liabilities                                       | 10,074                 |                   | 7,847    |   |
| Employee benefits                                            | 3,547                  |                   | 3,468    |   |
| Net operating loss                                           | 9,147                  |                   | —  |   |
| Items of other comprehensive income                          | 225                    |                   | 175      |   |
| Research and development credit                              | 1,613                  |                   | 1,038    |   |
| Other                                                        | —                |                   | 128      |   |
| Total deferred tax assets, non-current                       | 25,515                 |                   | 13,807   |   |
|                                                         |                   |                   |
| Deferred tax liabilities, non-current:                       |                   |                   |
| Accelerated depreciation and other plant related differences | (132,338               | )                      | (93,253  | )      |
| AFUDC                                                        | (6,168                 | )                      | (4,926   | )      |
| Regulatory assets                                            | (5,557                 | )                      | (10,011  | )      |
| Employee benefits                                            | (2,983                 | )                      | (1,052   | )      |
| Other                                                        | (788                   | )                      | (772     | )      |
| Total deferred tax liabilities, non-current                  | (147,834               | )                      | (110,014 | )      |
|                                                         |                   |                   |
| Net deferred tax assets (liabilities), non-current           | $                      | (122,319               | )        | $      | (96,207 | )      |
|                                                         |                   |                   |
| Net deferred tax assets (liabilities)                        | $                      | (123,178               | )        | $      | (98,060 | )      |

----

|                                                             |         |        |         |        |        |        |
|-------------------------------------------------------------|---------|--------|---------|--------|--------|--------|
|                                                        | 2010    | 2009   |
|                                                        |    |   |
| Change in deferred income tax assets (liabilities)          | $       | 25,118 |    | $      | 11,824 |   |
| Deferred taxes related to regulatory assets and liabilities | 9,272   |   | (1,323  | )      |
| Deferred taxes associated with other comprehensive income   | (2,141  | )      | (73     | )      |
| Deferred taxes related to property basis differences        | (4,713  | )      | 2,851   |   |
| Deferred taxes related to AFUDC                             | (1,910  | )      | (1,679  | )      |
| Other                                                       | — |   | — |   |
| Deferred income tax expense (benefit) for the period        | $       | 25,626 |    | $      | 11,600 |   |

|                                                            |                        |                        |                        |         |         |         |
|------------------------------------------------------------|------------------------|------------------------|------------------------|---------|---------|---------|
|                                                       | December 31, 2010 | December 31, 2009 | December 31, 2008 |
|                                                       |                   |                   |                   |
| Federal statutory rate                                     | 35.0                   |  %                | 35.0                   |  % | 35.0    |  % |
| Amortization of excess deferred and investment tax credits | (0.6                   | )                      | (0.9                   | )       | (0.7    | )       |
| Equity AFUDC                                               | (2.0                   | )                      | (6.2                   | )       | (3.6    | )       |
| Flow through adjustments *                                 | (7.4                   | )                      | —                |    | — |    |
| Other                                                      | 0.6                    |                   | (1.5                   | )       | (1.1    | )       |
|                                                       | 25.6                   |  %                | 26.4                   |  % | 29.6    |  % |

|                                          |        |        |         |        |       |        |
|------------------------------------------|--------|--------|---------|--------|-------|--------|
|                                     | 2010   | 2009   |
|                                     |   |   |
| Unrecognized tax benefits at January 1   | $      | 3,877  |    | $      | 767   |   |
| Additions for prior year tax positions   | 130    |   | 3,110   |   |
| Reductions for prior year tax positions  | (913   | )      | — |   |
|                                     |   |   |
| Unrecognized tax benefits at December 31 | $      | 3,094  |    | $      | 3,877 |   |

----

|                                                                                     |                        |                      |                   |   |    |        |   |     |   |
|-------------------------------------------------------------------------------------|------------------------|----------------------|-------------------|---|----|--------|---|-----|---|
|                                                                                | December 31, 2010 |
|                                                                                | Pre-tax Amount         | Tax (Expense)Benefit | Net-of-tax Amount |
|                                                                                |                   |                 |              |
| Minimum pension liability adjustment                                                | $                      | (145                 | )                 | $ | 51 |   | $ | (94 | ) |
| Reclassification adjustments of cash flow hedges settled and included in net income | 64                     |                 | (23               | ) | 41 |   |
| Net change in fair value of derivatives designated as cash flow hedges              | 6                      |                 | (2                | ) | 4  |   |
| Other comprehensive loss                                                            | $                      | (75                  | )                 | $ | 26 |   | $ | (49 | ) |

|                                                                                     |                        |                       |                   |        |     |        |   |     |        |
|-------------------------------------------------------------------------------------|------------------------|-----------------------|-------------------|--------|-----|--------|---|-----|--------|
|                                                                                | December 31, 2009 |
|                                                                                | Pre-tax Amount         | Tax (Expense) Benefit | Net-of-tax Amount |
|                                                                                |                   |                  |              |
| Minimum pension liability adjustment                                                | $                      | 150                   |              | $      | (52 | )      | $ | 98  |   |
| Reclassification adjustments of cash flow hedges settled and included in net income | 64                     |                  | (24               | )      | 40  |   |
| Net change in fair value of derivatives designated as cash flow hedges              | (5                     | )                     | 3                 |   | (2  | )      |
| Other comprehensive income                                                          | $                      | 209                   |              | $      | (73 | )      | $ | 136 |   |

|                                                                                     |                        |            |                   |        |     |        |   |     |   |
|-------------------------------------------------------------------------------------|------------------------|------------|-------------------|--------|-----|--------|---|-----|---|
|                                                                                | December 31, 2008 |
|                                                                                | Pre-tax Amount         | TaxBenefit | Net-of-tax Amount |
|                                                                                |                   |       |              |
| Minimum pension liability adjustment                                                | $                      | (4         | )                 | $      | 1   |   | $ | (3  | ) |
| Reclassification adjustments of cash flow hedges settled and included in net income | (107                   | )          | 38                |   | (69 | )      |
| Other comprehensive loss                                                            | $                      | (111       | )                 | $      | 39  |   | $ | (72 | ) |

----

|                                            |                        |                        |      |   |        |   |
|--------------------------------------------|------------------------|------------------------|------|---|--------|---|
|                                       | December 31, 2010 | December 31, 2009 |
|                                       |                   |                   |
| Derivatives designated as cash flow hedges | $                      | (848                   | )    | $ | (893   | ) |
| Employee benefit plans                     | (414                   | )                      | (320 | ) |
| Total accumulated other comprehensive loss | $                      | (1,262                 | )    | $ | (1,213 | ) |

----

|              |        |        |     |        |
|--------------|--------|--------|-----|--------|
|         | 2010   | 2009   |
|         |   |   |
| Equity       | 68     | %      | 72  | %      |
| Fixed income | 29     |   | 25  |   |
| Cash         | 3      |   | 3   |   |
| Total        | 100    | %      | 100 | %      |

----

|                                                            |        |        |        |   |         |        |
|------------------------------------------------------------|--------|--------|--------|---|---------|--------|
|                                                       | 2010   | 2009   |
| Defined Benefit Plans                                      |   |   |
| Defined Benefit Pension Plan                               | $      | 8,798  |   | $ | — |   |
| Non-pension Defined Benefit Postretirement Healthcare Plan | $      | 657    |   | $ | 578     |   |
| Supplemental Non-Qualified Defined Benefit Plan            | $      | 108    |   | $ | 89      |   |
|                                                       |   |   |
| Defined Contribution Plans                                 |   |   |
| Company Retirement Contribution                            | $      | 171    |   | $ | — |   |
| Matching contributions                                     | $      | 1,029  |   | $ | 712     |   |

|                                                            |        |         |        |
|------------------------------------------------------------|--------|---------|--------|
|                                                       | 2011   |
| Defined Benefit Plans                                      |   |
| Defined Benefit Pension Plan                               | $      | — |   |
| Non-Pension Defined Benefit Postretirement Healthcare Plan | $      | 503     |   |
| Supplemental Non-Qualified Defined Benefit Plan            | $      | 108     |   |

----

|                                          |                        |         |         |                  |         |        |        |         |        |   |        |        |
|------------------------------------------|------------------------|---------|---------|------------------|---------|--------|--------|---------|--------|---|--------|--------|
| Defined Benefit Pension Plan             | December 31, 2010 |
| Recurring Fair Value Measures            | Level 1                | Level 2 | Level 3 | Total Fair Value |
|                                     |                   |    |    |             |
| Registered Investment Companies          | $                      | 28,042  |    | $                | — |   | $      | — |   | $ | 28,042 |   |
| Common Collective Trust                  | —                |    | 19,104  |             | — |   | 19,104 |    |
| Insurance contracts                      | —                |    | 1,082   |             | — |   | 1,082  |    |
| Total investments measured at fair value | $                      | 28,042  |    | $                | 20,186  |   | $      | — |   | $ | 48,228 |   |

|                                          |                        |         |         |                  |         |        |        |         |        |   |        |        |
|------------------------------------------|------------------------|---------|---------|------------------|---------|--------|--------|---------|--------|---|--------|--------|
| Defined Benefit Pension Plan             | December 31, 2009 |
| Recurring Fair Value Measures            | Level 1                | Level 2 | Level 3 | Total Fair Value |
|                                     |                   |    |    |             |
| Registered Investment Companies          | $                      | 22,632  |    | $                | — |   | $      | — |   | $ | 22,632 |   |
| Common Collective Trust                  | —                |    | 16,408  |             | — |   | 16,408 |    |
| Total investments measured at fair value | $                      | 22,632  |    | $                | 16,408  |   | $      | — |   | $ | 39,040 |   |

----

|                                                   |                               |                                                            |                                                  |        |         |        |         |        |         |        |         |        |   |       |        |   |       |        |
|---------------------------------------------------|-------------------------------|------------------------------------------------------------|--------------------------------------------------|--------|---------|--------|---------|--------|---------|--------|---------|--------|---|-------|--------|---|-------|--------|
|                                              | Defined Benefit Pension Plans | Supplemental Nonqualified Defined Benefit Retirement Plans | Non-pension Defined Benefit Postretirement Plans |
|                                              | 2010                          | 2009                                                       | 2010                                             | 2009   | 2010    | 2009   |
| Change in benefit obligation:                     |                          |                                                       |                                             |   |    |   |
|                                              |                          |                                                       |                                             |   |    |   |
| Projected benefit obligation at beginning of year | $                             | 55,615                                                     |                                             | $      | 51,965  |   | $       | 1,690  |    | $      | 1,672   |   | $ | 9,432 |   | $ | 7,393 |   |
| Service cost                                      | 1,215                         |                                                       | 1,155                                            |   | — |   | — |   | 340     |   | 216     |   |
| Interest cost                                     | 3,280                         |                                                       | 3,143                                            |   | 100     |   | 100     |   | 547     |   | 444     |   |
| Actuarial loss (gain)                             | 4,129                         |                                                       | 1,686                                            |   | 54      |   | 7       |   | (88     | )      | 3,474   |   |
| Amendments                                        | 260                           |                                                       | 100                                              |   | — |   | — |   | (2,270  | )      | (1,960  | )      |
| Discount rate change                              | —                       |                                                       | 1,047                                            |   | — |   | — |   | — |   | — |   |
| Benefits paid                                     | (2,472                        | )                                                          | (2,312                                           | )      | (109    | )      | (89     | )      | (658    | )      | (579    | )      |
| Asset transfer (to) from affiliate                | (3,300                        | )                                                          | (121                                             | )      | 417     |   | — |   | (328    | )      | (23     | )      |
| Plan curtailment reduction                        | (974                          | )                                                          | (1,048                                           | )      | — |   | — |   | — |   | — |   |
| Medicare Part D adjustment                        | —                       |                                                       | —                                          |   | — |   | — |   | 88      |   | 46      |   |
| Plan participants' contributions                  | —                       |                                                       | —                                          |   | — |   | — |   | 454     |   | 421     |   |
| Net increase (decrease)                           | 2,138                         |                                                       | 3,650                                            |   | 462     |   | 18      |   | (1,915  | )      | 2,039   |   |
| Projected benefit obligation at end of year       | $                             | 57,753                                                     |                                             | $      | 55,615  |   | $       | 2,152  |    | $      | 1,690   |   | $ | 7,517 |   | $ | 9,432 |   |

|                                       |                               |                                                            |                                                  |        |         |        |         |         |         |        |         |        |   |         |        |   |         |        |
|---------------------------------------|-------------------------------|------------------------------------------------------------|--------------------------------------------------|--------|---------|--------|---------|---------|---------|--------|---------|--------|---|---------|--------|---|---------|--------|
|                                  | Defined Benefit Pension Plans | Supplemental Nonqualified Defined Benefit Retirement Plans | Non-pension Defined Benefit Postretirement Plans |
|                                  | 2010                          | 2009                                                       | 2010                                             | 2009   | 2010    | 2009   |
|                                  |                          |                                                       |                                             |   |    |   |
| Beginning market value of plan assets | $                             | 39,040                                                     |                                             | $      | 32,100  |   | $       | — |    | $      | — |   | $ | — |   | $ | — |   |
| Investment income                     | 5,361                         |                                                       | 9,337                                            |   | — |   | — |    | — |   | — |   |
| Benefits paid                         | (2,472                        | )                                                          | (2,312                                           | )      | — |   | — |    | — |   | — |   |
| Employer contributions                | 8,798                         |                                                       | —                                          |   | — |   | — |    | — |   | — |   |
| Asset transfer to affiliate           | (2,499                        | )                                                          | (85                                              | )      | — |   | — |    | — |   | — |   |
| Ending market value of plan assets    | $                             | 48,228                                                     |                                             | $      | 39,040  |   | $       | — |    | $      | — |   | $ | — |   | $ | — |   |

----

|                              |                               |                                                            |                                                  |        |         |        |   |         |        |   |         |        |   |        |   |   |        |        |
|------------------------------|-------------------------------|------------------------------------------------------------|--------------------------------------------------|--------|---------|--------|---|---------|--------|---|---------|--------|---|--------|---|---|--------|--------|
|                         | Defined Benefit Pension Plans | Supplemental Nonqualified Defined Benefit Retirement Plans | Non-pension Defined Benefit Postretirement Plans |
|                         | 2010                          | 2009                                                       | 2010                                             | 2009   | 2010    | 2009   |
|                         |                          |                                                       |                                             |   |    |   |
| Regulatory asset (liability) | $                             | 18,049                                                     |                                             | $      | 19,580  |   | $ | — |   | $ | — |   | $ | (1,050 | ) | $ | 1,443  |   |
| Current (liability)          | $                             | —                                                    |                                             | $      | — |   | $ | (141    | )      | $ | (98     | )      | $ | (428   | ) | $ | (325   | )      |
| Non-current (liability)      | $                             | (9,525                                                     | )                                                | $      | (16,576 | )      | $ | (2,011  | )      | $ | (1,592  | )      | $ | (7,096 | ) | $ | (9,110 | )      |

|                                |                               |                                                            |                                                  |        |        |        |   |       |        |   |       |        |   |       |        |   |       |        |
|--------------------------------|-------------------------------|------------------------------------------------------------|--------------------------------------------------|--------|--------|--------|---|-------|--------|---|-------|--------|---|-------|--------|---|-------|--------|
|                           | Defined Benefit Pension Plans | Supplemental Nonqualified Defined Benefit Retirement Plans | Non-pension Defined Benefit Postretirement Plans |
|                           | 2010                          | 2009                                                       | 2010                                             | 2009   | 2010   | 2009   |
|                           |                          |                                                       |                                             |   |   |   |
| Accumulated benefit obligation | $                             | 52,250                                                     |                                             | $      | 47,745 |   | $ | 2,058 |   | $ | 1,645 |   | $ | 7,517 |   | $ | 9,432 |   |

|                                       |                               |                                                            |                                                  |        |         |        |         |        |         |        |         |        |         |         |         |        |         |        |   |     |        |   |     |        |   |     |        |
|---------------------------------------|-------------------------------|------------------------------------------------------------|--------------------------------------------------|--------|---------|--------|---------|--------|---------|--------|---------|--------|---------|---------|---------|--------|---------|--------|---|-----|--------|---|-----|--------|---|-----|--------|
|                                  | Defined Benefit Pension Plans | Supplemental Nonqualified Defined Benefit Retirement Plans | Non-pension Defined Benefit Postretirement Plans |
|                                  | 2010                          | 2009                                                       | 2008                                             | 2010   | 2009    | 2008   | 2010    | 2009   | 2008    |
|                                  |                          |                                                       |                                             |   |    |   |    |   |    |
| Service cost                          | $                             | 1,214                                                      |                                             | $      | 1,155   |   | $       | 1,117  |    | $      | — |   | $       | — |    | $      | — |   | $ | 340 |   | $ | 216 |   | $ | 211 |   |
| Interest cost                         | 3,280                         |                                                       | 3,143                                            |   | 3,032   |   | 100     |   | 100     |   | 120     |   | 547     |    | 444     |   | 417     |   |
| Expected return on assets             | (3,008                        | )                                                          | (2,780                                           | )      | (4,374  | )      | — |   | — |   | — |   | — |    | — |   | — |   |
| Amortization of prior service cost    | 62                            |                                                       | 87                                               |   | 112     |   | — |   | — |   | 1       |   | (141    | )       | — |   | — |   |
| Amortization of transition obligation | —                       |                                                       | —                                          |   | — |   | — |   | — |   | — |   | 171     |    | 51      |   | 51      |   |
| Recognized net actuarial loss (gain)  | 1,378                         |                                                       | 1,586                                            |   | — |   | 30      |   | 43      |   | 44      |   | — |    | — |   | (1      | )      |
| Curtailment expense                   | 57                            |                                                       | 189                                              |   | — |   | — |   | — |   | — |   | — |    | — |   | — |   |
| Net periodic expense                  | $                             | 2,983                                                      |                                             | $      | 3,380   |   | $       | (113   | )       | $      | 130     |   | $       | 143     |    | $      | 165     |   | $ | 917 |   | $ | 711 |   | $ | 678 |   |

----

|                       |                               |                                                            |                                                  |        |         |        |         |        |         |        |         |        |   |         |        |   |         |        |
|-----------------------|-------------------------------|------------------------------------------------------------|--------------------------------------------------|--------|---------|--------|---------|--------|---------|--------|---------|--------|---|---------|--------|---|---------|--------|
|                  | Defined Benefit Pension Plans | Supplemental Nonqualified Defined Benefit Retirement Plans | Non-pension Defined Benefit Postretirement Plans |
|                  | 2010                          | 2009                                                       | 2010                                             | 2009   | 2010    | 2009   |
|                  |                          |
| Net loss              | $                             | —                                                    |                                             | $      | — |   | $       | (418   | )       | $      | (324    | )      | $ | — |   | $ | — |   |
| Prior service cost    | —                       |                                                       | —                                          |   | — |   | — |   | — |   | — |   |
| Transition obligation | —                       |                                                       | —                                          |   | — |   | — |   | — |   | — |   |
|                  | $                             | —                                                    |                                             | $      | — |   | $       | (418   | )       | $      | (324    | )      | $ | — |   | $ | — |   |

|                                                                                     |                                |                                                            |                                                  |        |         |        |   |     |        |
|-------------------------------------------------------------------------------------|--------------------------------|------------------------------------------------------------|--------------------------------------------------|--------|---------|--------|---|-----|--------|
|                                                                                | Defined Benefits Pension Plans | Supplemental Nonqualified Defined Benefit Retirement Plans | Non-pension Defined Benefit Postretirement Plans |
|                                                                                |                           |                                                       |                                             |
| Net loss                                                                            | $                              | 966                                                        |                                             | $      | 31      |   | $ | 106 |   |
| Prior service cost                                                                  | 40                             |                                                       | —                                          |   | (204    | )      |
| Transition obligation                                                               | —                        |                                                       | —                                          |   | — |   |
| Total net periodic benefit cost expected to be recognized during calendar year 2011 | $                              | 1,006                                                      |                                             | $      | 31      |   | $ | (98 | )      |

|                                                                                         |                               |                                                            |                                                  |        |        |        |        |        |        |     |      |     |      |     |      |   |      |   |
|-----------------------------------------------------------------------------------------|-------------------------------|------------------------------------------------------------|--------------------------------------------------|--------|--------|--------|--------|--------|--------|-----|------|-----|------|-----|------|---|------|---|
|                                                                                    | Defined Benefit Pension Plans | Supplemental Nonqualified Defined Benefit Retirement Plans | Non-pension Defined Benefit Postretirement Plans |
|                                                                                    | 2010                          | 2009                                                       | 2008                                             | 2010   | 2009   | 2008   | 2010   | 2009   | 2008   |
| Weighted-average assumptions used to determine benefit obligations:                     |                          |                                                       |                                             |   |   |   |   |   |   |
| Discount rate                                                                           | 5.50                          | %                                                          | 6.05                                             | %      | 6.20   | %      | 5.50   | %      | 6.10   | %   | 6.20 | %   | 5.00 | %   | 5.90 | % | 6.10 | % |
| Rate of increase in compensation levels                                                 | 3.70                          | %                                                          | 4.25                                             | %      | 4.25   | %      | 5.00   | %      | 5.00   | %   | 5.00 | %   | N/A  | N/A | N/A  |
|                                                                                    |                          |                                                       |                                             |   |   |   |   |   |   |
| Weighted-average assumptions used to determine net periodic benefit cost for plan year: |                          |                                                       |                                             |   |   |   |   |   |   |
| Discount rate                                                                           | 6.05                          | %                                                          | 6.25                                             | %      | 6.35   | %      | 6.10   | %      | 6.20   | %   | 6.35 | %   | 5.90 | %   | 6.10 | % | 6.35 | % |
| Expected long-term rate of return on assets*                                            | 8.00                          | %                                                          | 8.50                                             | %      | 8.50   | %      | N/A    | N/A    | N/A    | N/A | N/A  | N/A |
| Rate of increase in compensation levels                                                 | 4.25                          | %                                                          | 4.25                                             | %      | 4.34   | %      | 5.00   | %      | 5.00   | %   | N/A  | N/A | N/A  | N/A |

----

|               |                            |                                                        |         |         |         |   |      |        |    |         |
|---------------|----------------------------|--------------------------------------------------------|---------|---------|---------|---|------|--------|----|---------|
|          | Service and Interest Costs | Accumulated Periodic Postretirement Benefit Obligation |
|          | Dollars                    | Percent                                                | Dollars | Percent |
| 1% increase   | $                          | 147                                                    |    | 17      |  % | $ | 426  |   | 6  |  % |
| 1% (decrease) | $                          | (114                                                   | )       | (13     | )%      | $ | (375 | )      | (5 | )%      |

|           |                               |                                                           |                                                  |                                               |                               |        |   |       |        |   |      |   |   |       |        |
|-----------|-------------------------------|-----------------------------------------------------------|--------------------------------------------------|-----------------------------------------------|-------------------------------|--------|---|-------|--------|---|------|---|---|-------|--------|
|      |                          |                                                      | Non-pension Defined Benefit Postretirement Plans |
|      | Defined Benefit Pension Plans | Supplemental Nonqualified Defined Benefit Retirement Plan | Expected Gross Benefit Payments                  | Expected Medicare Part D Drug Benefit Subsidy | Expected Net Benefit Payments |
|      |                          |                                                      |                                             |                                          |                          |
| 2011      | $                             | 2,817                                                     |                                             | $                                             | 141                           |   | $ | 503   |   | $ | (75  | ) | $ | 428   |   |
| 2012      | $                             | 2,907                                                     |                                             | $                                             | 122                           |   | $ | 600   |   | $ | (82  | ) | $ | 518   |   |
| 2013      | $                             | 3,016                                                     |                                             | $                                             | 102                           |   | $ | 652   |   | $ | (87  | ) | $ | 565   |   |
| 2014      | $                             | 3,148                                                     |                                             | $                                             | 103                           |   | $ | 699   |   | $ | (91  | ) | $ | 608   |   |
| 2015      | $                             | 3,224                                                     |                                             | $                                             | 91                            |   | $ | 723   |   | $ | (95  | ) | $ | 628   |   |
| 2016-2020 | $                             | 18,167                                                    |                                             | $                                             | 583                           |   | $ | 4,266 |   | $ | (500 | ) | $ | 3,766 |   |

|                           |      |        |        |   |        |        |
|---------------------------|------|--------|--------|---|--------|--------|
|                      | 2010 | 2009   |
| Related party receivables | $    | 6,891  |   | $ | 4,146  |   |
| Related party payables    | $    | 12,562 |   | $ | 10,030 |   |

----

|                                                         |        |        |        |   |        |        |   |         |   |
|---------------------------------------------------------|--------|--------|--------|---|--------|--------|---|---------|---|
|                                                    | 2010   | 2009   | 2008   |
|                                                    |   |   |   |
| Notes receivable (payable) with Utility Money Pool, net | $      | 39,862 |   | $ | 57,737 |   | $ | (70,184 | ) |
|                                                    |   |   |   |
| Net interest revenue (expense)                          | $      | 467    |   | $ | (1,123 | )      | $ | (865    | ) |

|                                |                                                                                          |
|--------------------------------|------------------------------------------------------------------------------------------|
| •     | We received revenues from Black Hills Wyoming, Inc. for the transmission of electricity. |

|                                |                                                                                             |
|--------------------------------|---------------------------------------------------------------------------------------------|
| •     | We received revenues from Cheyenne Light for the sale of electricity and dispatch services. |

|                                |                                                                                                              |
|--------------------------------|--------------------------------------------------------------------------------------------------------------|
| •     | We recorded revenues relating to payments received pursuant to a natural gas swap entered into with Enserco. |

|                                |                                                                                                                               |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------|
| •     | We purchase coal from WRDC.  These amounts are included in Fuel and purchased power on the accompanying Statements of Income. |

|                                |                                                       |
|--------------------------------|-------------------------------------------------------|
| •     | We purchase excess power generated by Cheyenne Light. |

|                                |                                                                                                                                                                                 |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | In order to fuel our combustion turbine, we purchase natural gas from Enserco. These amounts are included in Fuel and purchased power on the accompanying Statements of Income. |

|                                |                                                                                                           |
|--------------------------------|-----------------------------------------------------------------------------------------------------------|
| •     | In addition, we also pay the Parent for allocated corporate support service costs incurred on our behalf. |

|                                |                                                                                                                                   |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|
| •     | We have two contracts with Cheyenne Light under which Cheyenne Light sells up to 40 MW of wind-generated, renewable energy to us. |

|                                                      |                |         |        |   |         |        |   |        |        |
|------------------------------------------------------|----------------|---------|--------|---|---------|--------|---|--------|--------|
|                                                 | 2010           | 2009    | 2008   |
|                                                 | (in thousands) |
| Revenues:                                            |           |    |   |
| Black Hills Wyoming for transmission of electricity  | $              | 1,378   |   | $ | 873     |   | $ | 1,245  |   |
| Cheyenne Light for electricity and dispatch services | $              | 1,200   |   | $ | 1,823   |   | $ | 2,778  |   |
| Natural gas swaps from Enserco                       | $              | — |   | $ | — |   | $ | 200    |   |
|                                                 |           |    |   |
| Purchases:                                           |           |    |   |
| Coal purchases from WRDC                             | $              | 13,569  |   | $ | 16,284  |   | $ | 15,469 |   |
| Excess power purchased from Cheyenne Light           | $              | 8,664   |   | $ | 8,580   |   | $ | 6,387  |   |
| Natural gas from Enserco                             | $              | 1,652   |   | $ | 2,250   |   | $ | 8,049  |   |
| Corporate support services from Parent               | $              | 17,145  |   | $ | 15,014  |   | $ | 12,391 |   |
| Renewable wind energy from Cheyenne Light            | $              | 4,538   |   | $ | 2,791   |   | $ | 628    |   |

----

|                                        |      |       |        |   |       |        |
|----------------------------------------|------|-------|--------|---|-------|--------|
|                                   | 2010 | 2009  |
| Deferred credits and other liabilities | $    | 2,044 |   | $ | 1,978 |   |

|                  |      |      |        |   |    |        |   |     |        |
|------------------|------|------|--------|---|----|--------|---|-----|--------|
|             | 2010 | 2009 | 2008   |
| Interest expense | $    | 65   |   | $ | 70 |   | $ | 114 |   |

|                                                                 |                |         |        |   |         |        |   |         |        |
|-----------------------------------------------------------------|----------------|---------|--------|---|---------|--------|---|---------|--------|
| Years ended December 31,                                        | 2010           | 2009    | 2008   |
|                                                            | (in thousands) |
| Non-cash investing activities -                                 |           |    |   |
| Property, plant and equipment financed with accrued liabilities | $              | 7,188   |   | $ | 10,191  |   | $ | 13,294  |   |
| Money pool activity - net repayment of funds loaned             | $              | — |   | $ | 25,000  |   | $ | — |   |
| Non-cash financing activities -                                 |           |    |   |
| Money pool activity - net repayment of funds borrowed           | $              | — |   | $ | (25,000 | )      | $ | — |   |
|                                                            |           |    |   |
| Supplemental disclosure of cash flow information:               |           |    |   |
| Cash (paid) refunded during the period for -                    |           |    |   |
| Interest (net of amounts capitalized)                           | $              | (19,554 | )      | $ | (14,252 | )      | $ | (11,578 | )      |
| Income taxes                                                    | $              | 15,805  |   | $ | 3,700   |   | $ | 5,877   |   |

|                                |                                                                                                                                                                                                                                                                   |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | A PPA with PacifiCorp expiring in 2023, which provides for the purchase by us of 50 MW of electric capacity and energy.  The price paid for the capacity and energy is based on the operating costs of one of PacifiCorp's coal-fired electric generating plants; |

|                                |                                                                                                                                                                                    |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | A firm point-to-point transmission access agreement to deliver up to 50 MW of power on PacifiCorp's transmission system to wholesale customers in the western region through 2023; |

----

|                                |                                                                                                                                                                                                                                 |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | Cheyenne Light entered into a 20-year PPA with Happy Jack for 29.4 MW of energy. Under a separate inter-company agreement expiring in 2028, Cheyenne Light has agreed to sell 50% of the facility output from Happy Jack to us; |

|                                |                                                                                                                                                                                                                           |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | Cheyenne Light entered into a 20-year PPA with Silver Sage for 30 MW of energy.  Under a separate inter-company agreement expiring in 2029, Cheyenne Light has agreed to sell 20 MW of energy from Silver Sage to us; and |

|                                |                                                                                                                         |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------|
| •     | A Generation Dispatch Agreement with Cheyenne Light that requires us to purchase all of Cheyenne Light's excess energy. |

|                |                              |          |        |        |        |   |        |        |   |         |        |
|----------------|------------------------------|----------|--------|--------|--------|---|--------|--------|---|---------|--------|
| Contract       | Contract Type                | Expiring | 2010   | 2009   | 2008   |
|           |                         |     |   |   |   |
| PacifiCorp     | Electric capacity and energy | 2023     | $      | 12,936 |   | $ | 11,862 |   | $ | 11,571  |   |
| PacifiCorp     | Transmission access          | 2023     | $      | 1,215  |   | $ | 1,215  |   | $ | 1,215   |   |
| Cheyenne Light | Happy Jack Wind Farm         | 2028     | $      | 2,815  |   | $ | 2,078  |   | $ | 628     |   |
| Cheyenne Light | Silver Sage Wind Farm        | 2029     | $      | 1,723  |   | $ | 713    |   | $ | — |   |

|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | In March 2010, we entered into a seven-year PPA and Purchase Option Agreement with the City of Gillette effective April 2010 that replaces a previous agreement.  This PPA  provided the City of Gillette, with an option to purchase a 23% ownership interest in our Wygen III facility which commenced commercial operations on April 1, 2010.  The City of Gillette exercised its option to purchase the 23% ownership interest in Wygen III and the transaction closed in July 2010.  The PPA terminated upon the closing of the transaction.  We retain responsibility for operations of the facility with a life-of-plant lease and agreement for operations and coal supply.  We entered into a five year agreement with the City of Gillette to dispatch the City of Gillette's first 23% of net generating capacity.  MWs from the Wygen III unit are deemed to supply a portion of the City of Gillette's capacity and energy annually.  During periods of reduced production at Wygen III, or during periods when Wygen III is off-line, we will provide the City of Gillette with its first 23% from our other generating facilities or from system purchases with reimbursement of costs by the City of Gillette.  Under this agreement, we will also provide the City of Gillette their operating component of spinning reserves; |

|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | An agreement with MDU to provide 25% of Wygen III's net generating capacity for the life of the plant.  In conjunction with MDU's April 2009 purchase of 25% ownership interest in Wygen III, an agreement to supply 74 MW of capacity and energy through 2016 was modified.  The sales to MDU have been integrated into our control area and are considered part of our firm native load.  MWs from the Wygen III unit are deemed to supply a portion of the required 74 MW. During periods of reduced production at Wygen III, or during periods when Wygen III is off-line, MDU will be provided with its 25 MW from our other generation facilities or from system purchases with reimbursement of costs by MDU; |

|                                |                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | An agreement under which we supply 20 MW of energy and capacity to MEAN under a contract that expires in 2023. This contract is unit-contingent based on the availability of our Neil Simpson II and Wygen III plants, with capacity purchase decreasing to 15 MW in 2018, 12 MW in 2020 and 10 MW in 2022. The unit-contingent capacity amounts from Wygen III and Neil Simpson II are as follows: |

|           |                                                                                  |
|-----------|----------------------------------------------------------------------------------|
| 2010-2017 | 20 MW - 10 MW contingent on Wygen III and 10 MW contingent on Neil Simpson II    |
| 2018-2019 | 15 MW - 10 MW contingent on Wygen III and 5 MW contingent on Neil Simpson II     |
| 2020-2021 | 12 MW - 6 MW contingent on Wygen III and 6 MW contingent on Neil Simpson II      |
| 2022-2023 | 10 MW - 5 MW contingent on Wygen III and 5 MW contingent on Neil Simpson II; and |

----

|                                |                                                                                                                                                                                                            |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •     | A five-year PPA with MEAN which commenced on April 1, 2010. Under this contract, MEAN purchases 5 MW of unit-contingent capacity from Neil Simpson II and 5 MW of unit-contingent capacity from Wygen III. |

|                    |              |               |              |               |        |        |   |        |        |   |        |        |
|--------------------|--------------|---------------|--------------|---------------|--------|--------|---|--------|--------|---|--------|--------|
|               | FirstQuarter | SecondQuarter | ThirdQuarter | FourthQuarter |
| 2010               |         |          |         |          |
| Operating revenues | $            | 54,489        |         | $             | 56,438 |   | $ | 59,051 |   | $ | 59,785 |   |
| Operating income   | $            | 9,361         |         | $             | 10,510 |   | $ | 21,092 |   | $ | 14,305 |   |
| Net income         | $            | 5,934         |         | $             | 4,102  |   | $ | 14,078 |   | $ | 7,154  |   |
|               |         |          |         |          |
| 2009               |         |          |         |          |
| Operating revenues | $            | 54,458        |         | $             | 46,836 |   | $ | 53,086 |   | $ | 52,699 |   |
| Operating income   | $            | 10,705        |         | $             | 5,006  |   | $ | 8,920  |   | $ | 10,174 |   |
| Net income         | $            | 6,964         |         | $             | 3,105  |   | $ | 7,166  |   | $ | 5,904  |   |

----

|                                                                                                                                   |
|-----------------------------------------------------------------------------------------------------------------------------------|
| Management's Report on Internal Control over Financial Reporting is presented on Page 24 of this Annual Report on Form 10-K. |

----

|                           |      |        |        |        |     |        |
|---------------------------|------|--------|--------|--------|-----|--------|
| Deloitte & Touche LLP | 2010 | 2009   |
| Audit Fees                | $    | 335    |   | $      | 552 |   |
| Tax Fees                  | 157  |   | 116    |   |
| Audit-related fees        | 48   |   | 190    |   |
| Total                     | $    | 540    |   | $      | 858 |   |

|          |                                         |
|----------|-----------------------------------------|
| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |

|        |        |                                                                                                 |
|--------|--------|-------------------------------------------------------------------------------------------------|
| (a)    | 1.     | Financial Statements                                                                            |
|   |   |                                                                                            |
|   |   | Financial statements required by Item 15 are listed in the index included in Item 8 of Part II. |
|   |   |                                                                                            |
|   | 2.     | Schedules                                                                                       |

|        |        |                                                                                                                                                                                                                                                 |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | All other schedules have been omitted because of the absence of the conditions under which they are required or because the required information is included elsewhere in the financial statements incorporated by reference in this Form 10-K. |

----

|                                                                                                      |                              |                                         |            |                        |     |        |   |      |   |   |     |        |
|------------------------------------------------------------------------------------------------------|------------------------------|-----------------------------------------|------------|------------------------|-----|--------|---|------|---|---|-----|--------|
| BLACK HILLS POWER, INC.VALUATION AND QUALIFYING ACCOUNTSYEARS ENDED DECEMBER 31, 2010, 2009 AND 2008 |
|                                                                                                 |
| Description                                                                                          | Balance at beginning of year | Additions Charged to costs and expenses | Deductions | Balance at end of year |
|                                                                                                 | (in thousands)               |
| Allowance for doubtful accounts:                                                                     |                         |                                    |       |                   |
| 2010                                                                                                 | $                            | 259                                     |       | $                      | 499 |   | $ | (528 | ) | $ | 230 |   |
| 2009                                                                                                 | $                            | 370                                     |       | $                      | 316 |   | $ | (427 | ) | $ | 259 |   |
| 2008                                                                                                 | $                            | 388                                     |       | $                      | 637 |   | $ | (655 | ) | $ | 370 |   |

----

|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit Number | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.1*           | Restated Articles of Incorporation of the Registrant (filed as an exhibit to the Registrant's Form 8-K dated June 7, 1994 (No. 1-7978)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2*           | Articles of Amendment to the Articles of Incorporation of the Registrant, as filed with the Secretary of State of the State of South Dakota on December 22, 2000 (filed as an exhibit to the Registrant's Form 10-K for 2000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.3*           | Bylaws of the Registrant (filed as an exhibit to the Registrant's Registration Statement on Form S-8 dated July 13, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 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 JPMorgan 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)). |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.1*          | Restated and Amended Coal Supply Agreement for NS II dated February 12, 1993 (filed as Exhibit 10.1 to the Registrant's Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-150669-01)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.2*          | Second Restated and Amended Power Sales Agreement dated September 29, 1997, between PacifiCorp and Black Hills Power, Inc. (filed as Exhibit 10.2 to the Registrant's Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-150669-01)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.3*          | Reserve Capacity Integration Agreement dated May 5, 1987, between Pacific Power & Light Company and Black Hills Power, Inc. (filed as Exhibit 10.3 to the Registrant's Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-150669-01)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 23             | Independent Auditors' Consent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 31.1           | Certification of Chief Executive Officer pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 31.2           | Certification of Chief Financial Officer pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

|                             |                            |
|-----------------------------|----------------------------|
| (a)     | See (a) 3. Exhibits above. |

|                             |                             |
|-----------------------------|-----------------------------|
| (b)     | See (a) 2. Schedules above. |

----

----

|        |                    |                              |                    |
|--------|--------------------|------------------------------|--------------------|
|   |               | BLACK HILLS POWER, INC.      |
|   |               |                         |
|   |               | By                           | /s/ DAVID R. EMERY |
|   |               | David R. Emery, Chairman and |
|   |               | Chief Executive Officer      |
|   |               |                         |
| Dated: | March 7, 2011 |                         |

|                                              |                             |                    |
|----------------------------------------------|-----------------------------|--------------------|
| /s/ DAVID R. EMERY                           | Director and                | March 7, 2011 |
| David R. Emery, Chairman and                 | Principal Executive Officer |               |
| Chief Executive Officer                      |                        |               |
|                                         |                        |               |
| /s/ ANTHONY S. CLEBERG                       | Principal Financial and     | March 7, 2011 |
| Anthony S. Cleberg, Executive Vice President | Accounting Officer          |               |
| and Chief Financial Officer                  |                        |               |
|                                         |                        |               |
| /s/ DAVID C. EBERTZ                          | Director                    | March 7, 2011 |
| David C. Ebertz                              |                        |               |
|                                         |                        |               |
| /s/ JACK W. EUGSTER                          | Director                    | March 7, 2011 |
| Jack W. Eugster                              |                        |               |
|                                         |                        |               |
| /s/ JOHN R. HOWARD                           | Director                    | March 7, 2011 |
| John R. Howard                               |                        |               |
|                                         |                        |               |
| /s/ KAY S. JORGENSEN                         | Director                    | March 7, 2011 |
| Kay S. Jorgensen                             |                        |               |
|                                         |                        |               |
| /s/ STEPHEN D. NEWLIN                        | Director                    | March 7, 2011 |
| Stephen D. Newlin                            |                        |               |
|                                         |                        |               |
| /s/ GARY L. PECHOTA                          | Director                    | March 7, 2011 |
| Gary L. Pechota                              |                        |               |
|                                         |                        |               |
| /s/ WARREN L. ROBINSON                       | Director                    | March 7, 2011 |
| Warren L. Robinson                           |                        |               |
|                                         |                        |               |
| /s/ JOHN B. VERING                           | Director                    | March 7, 2011 |
| John B. Vering                               |                        |               |
|                                         |                        |               |
| /s/ THOMAS J. ZELLER                         | Director                    | March 7, 2011 |
| Thomas J. Zeller                             |                        |               |

----

|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit Number | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.1*           | Restated Articles of Incorporation of the Registrant (filed as an exhibit to the Registrant's Form 8-K dated June 7, 1994 (No. 1-7978)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2*           | Articles of Amendment to the Articles of Incorporation of the Registrant, as filed with the Secretary of State of the State of South Dakota on December 22, 2000 (filed as an exhibit to the Registrant's Form 10-K for 2000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.3*           | Bylaws of the Registrant (filed as an exhibit to the Registrant's Registration Statement on Form S-8 dated July 13, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 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 JPMorgan 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)). |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.1*          | Restated and Amended Coal Supply Agreement for NS II dated February 12, 1993 (filed as Exhibit 10.1 to the Registrant's Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-150669-01)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
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| 10.2*          | Second Restated and Amended Power Sales Agreement dated September 29, 1997, between PacifiCorp and Black Hills Power, Inc. (filed as Exhibit 10.2 to the Registrant's Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-150669-01)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
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| 10.3*          | Reserve Capacity Integration Agreement dated May 5, 1987, between Pacific Power & Light Company and Black Hills Power, Inc. (filed as Exhibit 10.3 to the Registrant's Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-150669-01)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
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| 23             | Independent Auditors' Consent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
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| 31.1           | Certification of Chief Executive Officer pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
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| 31.2           | Certification of Chief Financial Officer pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
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| 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
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| 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |