Q & A

1. Why is the company raising its rates?
2. How much will my bill go up?
3. When will this rate increase be effective?
4. When was your last base rate increase?
5. How do Black Hills Energy's rates compare with other providers?
6. What is Black Hills Energy doing to control costs?
7. How is Black Hills Energy integrating renewable energy?
8. What is Black Hills Energy doing to help customers save energy?
9. What can I do if I need help paying my utility bill?
10. What does the term "rate base" mean?
11. What is a "rate case?"
12. Will this requested increase be all profit to Black Hills Energy?
13. Are profits guaranteed for Black Hills Energy if the requested increase is approved?
14. Is this case due to the Aquila transaction and new Black Hills' ownership?
15. Are rates going up now for the new generation being planned to serve Black Hills Energy customers?

1. Why is the company raising its rates?

Black Hills Energy has filed a request for an electric revenue increase with the Colorado Public Utilities Commission. The request is necessary to cover the utility's increased expenses, which are not fully offset by cost savings and efficiency measures the utility has implemented and are primarily associated with electricity supply contracts, and investments in equipment and electricity distribution facilities necessary to maintain and strengthen the reliability of Black Hills' electric delivery system in Colorado.

2. How much will my bill go up?

If approved as requested, a typical residential customer using an average of 600 kilowatt-hours (kWh) of power each month can expect to see an increase of $10.79 per month, or about 36¢ per day.

If the proposed revenue increase is approved, a typical Black Hills Energy small commercial customer using an average of 2,300 kilowatt-hours (kWh) each month can expect to see an estimated increase of $36.00 per month. Increases to commercial and industrial customer bills will vary depending on their rate class, load factor and the amount and nature of their usage.

3. When will this rate increase be effective?

In its rate request, Black Hills Energy is seeking a $22.9 million, or approximately 12.8 percent, increase in annual revenues, with an anticipated effective date of mid-2010.

4. When was your last base rate increase?

The last base rate increase of 6.93 percent for Black Hills Energy customers in Colorado was based on costs for the 12-month period ending August 31, 2003 and became effective in September 2004.

5. How do Black Hills Energy's rates compare with other providers?

Black Hills Energy's rates are reasonable and in-line with other local and regional electric providers.

• With the proposed increase, Black Hills Energy's residential customer rates are in line with rates currently charged by other electricity providers in our region as indicated in the graph below.

*Electric bill costs were calculated per customer based on an average of 600 kilowatt-hours (kWh) use per month. Based on July 2009 data.

6. What is Black Hills Energy doing to control costs?

Black Hills Energy works hard to keep costs down.

• Effective management of assets, and employees operating efficiently, allow Black Hills Energy to reduce the frequency and dollar amount of rate filings.

7. How is Black Hills Energy integrating renewable energy?

Black Hills Energy manages a diverse portfolio of resources.

• Black Hills Energy is in compliance with Colorado's Renewable Energy Standards.
• Since 2006, Black Hills Energy has participated in 1,700 kW of customer on-site solar generation.
• Black Hills Energy continues to look for additional, cost-effective ways to use or include renewable energy and energy efficiency programs into our resource mix to meet our customer's electricity needs.

8. What is Black Hills Energy doing to help customers save energy?

Black Hills Energy is committed to helping customers save energy and money through energy efficiency programs and tips.

We regularly promote energy efficiency education and provide energy saving tips and rebate programs via our Web site at www.bhehowto.com. This includes 12 energy efficiency programs for our residential, commercial and industrial customers, as well as a solar generation rebate program.

Black Hills Energy educates customers about the benefits of energy efficient equipment and appliances, and raises awareness about the no- and low-cost things that we can all do to help save energy. This includes our weatherization effort, in which Black Hills Energy partners with charitable organizations to identify low-income customers and weatherizes their homes each fall.

9. What can I do if I need help paying my utility bill?

Contact Black Hills Energy Customer Service at 800-890-5554 and we will work with you to evaluate payment options. We are available to serve you 24/7.

We also work with local agencies that provide support like the Low Income Energy Assistance Program (LIEAP).

10. What does the term "rate base" mean?"

Rate base is the total amount a utility invests in its plants, equipment or electric delivery system, and other assets that are necessary for providing safe, reliable, electric service. Rate base is the investment that we are allowed to earn a return on when setting base rates.

11. What is a "rate case?"

A rate case is an application to change rates filed by the utility with the Colorado Public Utilities Commission. The application includes proposed rate schedules ("tariffs") and information and documentation supporting the need for the proposed rates.

12. Will this requested increase be all profit to Black Hills Energy?

No. This request is to increase revenues by $22.9 million to reflect the investment in new facilities designed to enhance the reliability of its electric delivery system in Colorado, cost increases in its power supply contracts and other increases in operating and maintenance expenses.

13. Are profits guaranteed for Black Hills Energy if the requested increase is approved?

No. New rates only provide the utility an opportunity to earn the approved rate of return.

14. Is this case due to the Aquila transaction and new Black Hills' ownership?

No. The rate request only asks for recovery of the costs necessary to provide safe, reliable electric service to our customers in southeastern Colorado.

15. Are rates going up now for the new generation being planned to serve Black Hills Energy customers?

No. However, there will be an additional rate request in 2011 for the new generation that's being planned to replace the current purchase power agreement Black Hills Energy currently has with Public Service Company of Colorado/Xcel Energy.

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