Exhibit 10.1

NORTHWESTERN ENERGY
2014 ANNUAL INCENTIVE PLAN

I.    Introduction

NorthWestern Energy (NWE) utilizes the 2014 Annual Incentive Plan (Plan) to
reward non-represented employees for their contributions toward achieving
desired business results.

II.    Plan Objectives

This Plan is designed to achieve the following objectives:

▪
Align the interests of shareholders, customers and employees.

▪
Create incentives for employees to achieve financial and operating results.

▪
Reward employees individually and as a team by providing compensation
opportunities consistent with company financial and operating performance.

III.    Plan Administration

The Plan is approved by NWE's Board of Directors (Board) and administered by the
NWE Incentive Plan Administration Committee (Administration Committee)
consisting of the President and CEO, and CFO. The Administration Committee is
responsible for all aspects of administration of the Plan, and is responsible
for resolving any conflicts or discrepancies that arise. The Administration
Committee’s decision on any matter associated with this Plan is final, subject
to approval by the Board's Human Resources Committee.

IV.    Performance Period and Effective Date

The Plan becomes effective January 1, 2014, and will continue until December 31,
2014, which is the performance period. The Plan may be suspended and/or
terminated by the Administration Committee, subject to approval by the Board, at
any time, without prior notice and at its sole discretion.

V.    Other Considerations

All awards are subject to income tax withholding and garnishment requirements.
No right or interest in the Plan is transferable or assignable.

Distributions under the Plan are at the discretion of the Administration
Committee, subject to approval of the Board's Human Resources Committee. Awards
will not be made under the Plan if, in the sole and final judgment of the Board,
the overall financial condition of the Company is insufficient to support
awards.

Distributions from the Plan do not provide any rights to continued employment. A
distribution from the Plan in any one-performance period does not guarantee the
participant a distribution or the right to participate in any subsequent
performance period.

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Exhibit 10.1

VI.    Participation and Eligibility

All non-represented regular full-time, regular part-time, limited part-time and
supplemental employees of NWE employed on the last business day of the plan year
are eligible to receive payment under the Plan provided they are actively
employed by NWE for at least one full quarter of the plan year. To participate
in the Plan, employees must have written goals and objectives consistent with
NWE’s goals and objectives. These employee goals must target results that meet
or exceed the normal requirements of the position and that contribute to meeting
the goals and objectives of the company. Goals and objectives can be based on
either individual or team performance; however, each employee must have at least
one goal that contributes to cost reduction or process improvement.

Employees must meet acceptable performance standards, as defined and approved by
the Administration Committee, to be eligible for an award. Employees who are
under an active step of Progressive Discipline or employees whose performance is
rated “unsatisfactory” are not eligible for an award. Employees whose
performance is rated “partially met expectations” may, at the discretion of
their supervisor, be eligible for an award from the discretionary pool.

Employees are eligible for a prorated incentive award based upon the amount of
time served in an eligible status with NorthWestern Energy during the
performance period if they:
(1)
Are classified as seasonal supplemental

(2)
Were under an active step of Progressive Discipline for a portion of the
performance period,

(3)
Work on a part-time basis,

(4)
Are granted unpaid leave, including military leave, that is nonmedical in nature
and that exceeds 80 hours, or

(5)
Retired, provided they worked at least one full quarter during the performance
period even though the retired employee was not employed on the last day of the
Plan year.

Temporary and summer employees, as well as independent contractors, are not
eligible to participate in the Plan.

VII.      Individual Awards

Awards to plan participants from the Performance Pool (Section IX) will be
determined based on individual performance ratings that evaluate achievement
against established goals and objectives as well as overall job performance.
Supervisors will evaluate individual employee performance during the period
covered by the Plan to determine individual awards.

VIII.    Target Incentives

Target incentive level for each participating employee is set by position and
will be expressed as a percentage of base salary. Each participant's target
incentive is subject to approval by the Administration Committee and any changes
will be communicated in writing to participants. The Board will approve senior
executive target incentive levels.

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Exhibit 10.1

IX.    Performance Pool

The Plan is funded through achievement of targeted results on key organizational
performance objectives, inclusive of costs associated with the Plan. After
implementation, the Plan will be reviewed periodically to ensure that the
desired results are being achieved.

The Performance Pool will be created based on four factors: net income, electric
and natural gas service reliability, customer satisfaction, and employee safety.
Each of these measures will be calculated at the conclusion of the performance
period. Periodic accruals will be made to provide for the Performance Pool at
year-end. The Performance Pool will be funded in accordance with Table 1;
however, no awards will be made unless at least 90% of the net income target is
met. Officer awards will be modified based on each officer’s goal performance
during the Performance Period.

Table 1 - 2014 Plan Performance Metrics
 
 
Threshold
Target
Maximum
Incentive Metric
Weight
50%
100%
150%
FINANCIALP1
 
 
 
 
Net Income
55%
-10%
 Budget
+10%
SAFETYP2
 
 
 
 
Lost Time Incident Rate
7.5%
1.0
0.8
0.6
Total Recordable Incident Rate
7.5%
2.8
2.5
2.2
RELIABILITY
 
 
 
 
System Avg Interruption Duration Index (SAIDI excluding MEDs)
5%
120
111
101
System Avg Interruption Duration Index (SAIDI including MEDs)
      5%
192
127
113
Gas - Damages per 1000 Locates
Gas - Leaks per 100 Mile of Main
2.5% 2.5%
3.3
8.0
2.7
5.6
2.2
4.7
CUSTOMER SATISFACTIONP3
 
 
 
 
JD Power Residential Electric and Gas Survey Performance
5%
629
640
645
Operational Performance - Customer Survey by Flynn Wright
5%
39.55
40.32
40.47
Reputational Perceptions - Custom Survey by Flynn Wright
5%
39.03
39.82
39.98

Footnotes: 1) The financial target is based on Board-approved budget for 2014;
2) If a work-related fatality occurs, the safety portion of the Annual Incentive
Plan will be forfeited for all NWE employees unless it is determined by the
Human Resources Committee that no actions on the part of the employee or the
Company contributed to the incident. 3) Customer satisfaction results are based
on independent JD Power residential electric and gas survey results, and data
collected by third-party consultant Flynn-Wright via a longitundal Customer
Tracking Study.

Funding levels are computed by prorating if actual results lie between Threshold
(50%) through Maximum (150%)

In calculating performance against target, adjustments may be made either
positively or negatively for one-time events and extraordinary nonbudgeted items
as approved by the Board. This plan is subjected to any “clawback” provisions
accepted by the Company in the future.
 
As soon as possible after the end of the Performance Period, NWE will calculate
the actual performance as compared against the performance targets. Such
calculations shall be finally determined in the sole discretion of the Board's
Human Resources Committee or an appointed

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Exhibit 10.1

designee. Employees shall have no recourse, appeal or challenge available from
this final determination. Summary results will be provided to employees.

X.    Performance Pool Distribution and Incentive Pay Calculation

Individual employee performance is a key consideration in calculating
distribution of incentive pay. The Performance Pool will be allocated to each
officer using total target incentive dollars at the end of the Performance
Period for eligible employees in each functional unit, division or department
adjusted based on the performance funding level achieved. The Performance Pool
will be divided into two pools: a “Fixed Pool” and a “Discretionary Pool.” Fifty
percent (50%) of the Performance Pool will be allocated to the Fixed Pool; the
remaining fifty percent (50%) will be allocated to the Discretionary Pool. Each
Eligible Employee that has a performance rating of met or exceeded expectations
will receive a distribution from the Fixed Pool calculated as follows:

Employee’s target incentive amount x performance funding level achieved x 50%

Each officer will then allocate the Discretionary Pool to the respective
department supervisors, as appropriate, for further distribution based on either
attainment of team or individual performance goals. Supervisors will submit
recommended distributions to individual employees subject to the functional
officer’s and Administration Committee approval. In no case will the total
payouts in a given Performance Pool exceed the total dollars available for that
Performance Pool.

XI.    Payment of Awards

Cash awards will be made in the same manner as each employee’s normal payroll
processing, either in the form of Company check or direct deposit. Awards will
be paid out to employees in March 2014. Awards are considered ordinary income
and subject to all appropriate taxes.

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Exhibit 10.1

NORTHWESTERN ENERGY
2014 ANNUAL INCENTIVE PLAN
ADDENDUM 1

UDefinitions

Financial

The Net Income target is based upon the Board approved budget for the plan year,
and is determined by what is reported in the SEC Form 10k filed mid-February of
the year following the plan year.

UReliability

Electric System Reliablity

Electric system reliability (MT and SD Electric Distribution System) is
calculated by NorthWestern Energy and participating Institute of Electrical and
Electronic Engineers, Inc. (IEEE) benchmarking utilities and is determined as
follows:

System Average Interruption Duration Index (SAIDI) indicates, in minutes, the
total duration of interruption for the average customer during a predefined
period of time.
SAIDI = Usum of the customer interruption durations
total number of customers served

    
Major Event Days (MEDs) is defined as a is a day whose SAIDI value exceeds a
statically derived threshold value (Tmed) that nominally represents “stresses
beyond that normally expected (such as during severe weather).”

Gas System Reliability
Gas system reliability is calculated by NorthWestern Energy and participating in
the American Gas Association benchmarking survey for gas distribution system
performance.

Damages per 1000 Locates is calculated as the total number of 3rd party damages
experienced on NorthWestern Energy’s system divided by the total number of
locate tickets divided by 1000.

Damages per 1000 Locates = total 3rd party damages to the system
              total locate tickets / 1000

Leaks per 100 miles of main is calculated as the total number of leaks recorded
on NorthWestern’s system caused by something other than 3rd party damage divided
by the total miles of main divided by 100.

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Exhibit 10.1

Leaks per 100 miles of main = total leaks (other than 3rd party damages)
         total miles of main / 100

USafety Metric

Safety performance is calculated by NorthWestern Energy and participating Edison
Electric Institute (EEI) benchmarking utilities as defined by OSHA. OSHA
recordable incident rates and lost time incident rates are the most common
method of determining relative safety performance. OSHA has specifically defined
what injuries and illnesses should be recorded, and of those recorded cases,
which must be considered lost time. By utilizing the "total manhours worked" of
a specific work group in the denominator, the resulting rate from the
calculation can be used to compare different size departments, divisions,
companies, etc. The 200,000 number and the total manhours worked number
"normalize" the rate so comparisons can be made.

Lost time incident rate is calculated by taking the total number of all OSHA
lost time cases, multiplying the number by 200,000, and dividing the number by
the total number of manhours worked by a specific group.

Lost Time Incident Rate = total lost time cases x 200,000
     total manhours worked

Total recordable incident rate is calculated by taking the total number of all
OSHA recordable cases, multiplying the number by 200,000, and dividing the
number by the total number of manhours worked by a specific group.

Total Recordable Incident Rate = total recordable cases x 200,000
         total manhours worked

Customer Satisfaction

Customer satisfaction utilizes operational and reputational inputs designed to
provide actional insight into customer sentiment throughout the service
terrority. Customer satisfaction is measured by the annual JD Power residential
electric and gas survey, and the longitudinal Customer Tracking Study conducted
by a third party consultant.

JD Power is a global marketing information services company providing
performance improvement, social media and customer satisfaction insights and
solutions. JD Power results are measured against a peer group of 26 combination
electric and gas utililies. Results are weighted by residential customer count
by energy source utilizing FERC data.

The JD Power model includes the following six components:
1.
Communications

2.
Corporate Citizenship

3.
Billing and Payment

4.
Price

5.
Power Quality and Reliability (electric) or Field Services (gas)

6.
Customer Service

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Exhibit 10.1

The Customer Tracking Study is a longitudinal study designed to evaluate
customer perception regarding operational and reputational performance. The
study is fielded in March and September with a total annual sample size of
1,200. Results are weighted 70 percent Montana and 30 percent South Dakota &
Nebraska.

Operational Inputs
Reputational Inputs
Overal satisfaction with NorthWestern Energy
Sets the standard of excellence for delivery
Reliable service
Prepared
Responsiveness
Trustworthy
Involved in community
Community-focused
Visible employees
Customers first