Correct Answer & Explanation
Option C
• This sentence describes two actions occurring in the past: one ongoing action ('having dinner') interrupted by a sudden, shorter action ('lights went out').
• The ongoing action in the past is expressed using the Past Continuous Tense (was/were + V1-ing).
• The interrupting action is expressed in the Simple Past Tense.
• Therefore, 'were having' correctly describes the continuous action of having dinner that was in progress when the lights went out.