BLACK HILLS ENERGY FILES ELECTRIC RESOURCE PLAN WITH COLORADO PUBLIC UTILITIES COMMISSION

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PUEBLO, Colo., Aug. 5, 2008 – Black Hills/Colorado Electric Utility Company, LP, d/b/a Black Hills Energy, successor to Aquila Networks-WPC, filed a proposal with the Colorado Public Utilities Commission detailing how the company plans to provide electrical service to its 93,000 customers in 21 southeastern Colorado communities beginning in 2012.

The proposal, known in the utility industry as an Electric Resource Plan (ERP), is a detailed analysis of the power sources and delivery systems the company proposes for meeting its customers’ future electricity needs. The proposal also shows how the company plans to provide the power while meeting recent changes to state and federal environmental requirements, as well as Colorado’s requirements for adding renewable energy resources.

“We began the planning process more than a year ago,” said Gary Stone, vice president operations of Black Hills Energy’s Colorado electric utility. “Developing the right long-term power supply to meet our customers’ growing needs was at the center of our thinking throughout the process.”

A key element in the Resource Plan is the need to replace a purchased power agreement the company currently holds with Xcel Energy (Public Service Company of Colorado) by building 350 megawatts of natural gas-fired generation and 64 megawatts of additional renewables to meet the state standards. The Xcel purchase power agreement currently provides approximately 75 percent of Black Hill Energy’s capacity and associated energy needs and expires on December. 31, 2011.

“Continuing to substantially rely on purchased power agreements is no longer prudent,” Stone said. “Under that scenario there’s no way we can protect our customers from market forces that may drive prices up just when we might need to obtain a new contract. Constructing and owning our own resources will give our customers security of supply and the cost benefits of long-term and depreciating assets.”

For efficiency and cost considerations, the company recommends construction of five combustion turbines, which should be ready for service beginning January 2012. In order to keep the cost of building the new facilities as low as possible, the company is evaluating sites in Colorado that are near existing transmission lines and natural gas pipelines.

 “We fully recognize that our customers will be concerned about how this proposal will affect their monthly bill,” Stone said.  “Xcel Energy recently received authorization to raise its rates under the existing agreement and all options available when that contract expires will be more expensive than what we have today.  While we can not offer any estimates at this time, we know rates will be increasing.  As a part of the resource planning process, utilities consider a number of alternative power supply options. We are proposing what we believe to be the best plan to provide the most reliable and efficient resources for our customers.  Any change in rates must first be approved by the Colorado Public Utilities Commission.”

The Electric Resource Plan also explains the Company’s approach to integrating renewable energy resources, namely biomass, wind and solar, into its future energy supply portfolio. It was recently announced that in Colorado Black Hills Energy, BP Solar and Colorado State University-Pueblo teamed up on the installation of a one megawatt (MW) solar electric system at the university. When completed later this year, it will be one of the largest systems of its type for an education facility in the United States.  

Linn Evans, President and COO of Black Hills Corporation’s utilities said, “We recognize that resource decisions have long-term effects on the communities we serve and our customers who live in them. Black Hills has demonstrated that construction of utility-owned generation provides the lowest cost, most reliable long-term power supply for customers. We encourage active customer involvement in the Colorado Public Utilities Commission’s review process and we have requested Commission hearings concerning the ERP be held in Pueblo.”

Black Hills/Colorado Electric Utility Company, LP, d/b/a Black Hills Energy, successor to Aquila Networks-WPC, a subsidiary of Black Hills Corporation. (NYSE:BKH), serves approximately 93,000 electric customers in 21 southeastern Colorado communities. Black Hills Corporation is a diversified energy company with a tradition of exemplary service and a vision to be the energy partner of choice is based in Rapid City, S.D. with corporate offices in Golden, Colo. and Omaha, Neb.  The company serves 750,000 utility customers in Colorado, Iowa, Kansas, Montana, South Dakota and Wyoming. The company’s non-regulated businesses generate wholesale electricity, produce natural gas, oil and coal, and market energy. We partner to produce results that improve life with energy. More information is available at www.blackhillscorp.com.