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                                                                    EXHIBIT 10.7

                                                                  EXECUTION COPY

                 MPC/PP&L COLSTRIP UNITS 3&4 GENERATING PROJECT
                          RECIPROCAL SHARING AGREEMENT

         This MPC/PP&L COLSTRIP UNITS 3&4 GENERATING PROJECT RECIPROCAL SHARING
AGREEMENT (this "Agreement"), is entered into as of December 17th, 1999, by and
between PP&L MONTANA, LLC, a Delaware limited liability company ("PP&L
Montana"), and THE MONTANA POWER COMPANY, a Montana corporation ("MPC" and,
collectively, with the PP&L Montana, the "Parties").

                                    RECITALS:

1.       The ownership, operation and maintenance of the Project is governed by
         that certain Ownership and Operation Agreement, dated as of May 6, 1981
         and amended on October 11, 1991 and July 13, 1998, by and between MPC,
         Puget Sound Energy, Inc. (formerly named "Puget Sound Power & Light
         Company"), a Washington corporation, Avista Corporation (formerly named
         "Washington Water Power Company"), a Washington corporation, Portland
         General Electric Company, an Oregon corporation, and PacifiCorp
         (successor by merger to the Maine corporation named "Pacific Power &
         Light Company"), an Oregon corporation (as amended, modified and
         supplemented from time to time, the "Ownership Agreement"). Unless
         otherwise defined in this Agreement (including the Recitals), all other
         capitalized terms used in this Agreement have the meanings assigned to
         such terms in the Ownership Agreement.

2.       MPC holds interests in (a) that certain Power Sales Agreement (as
         amended, modified and supplemented from time to time, the "PSE PSA"),
         dated as of October 1, 1989, by and between MPC and Puget, and (b) that
         certain Power Sales Agreement (as amended, modified and supplemented
         from time to time, the "LADWP PSA"), dated July 17, 1989, by and
         between MPC and Department of Water and Power of the City of Los
         Angeles (the PSE PSA, the LADWP PSA and any of the replacement power
         purchase agreements which MPC contemplates entering into in its sole
         discretion to replace the PSE PSA or the LADWP PSA, collectively, the
         "CS4 PSAs").

3.       Colstrip 3 and Colstrip 4 are relied upon by MPC to serve its
         customers.

4.       The contractual provisions of the Ownership Agreement and the CS4 PSAs
         require the coordinated operation of Colstrip 3 and Colstrip 4. In
         furtherance of such coordination and cooperation, the Parties are
         concurrently executing and delivering a Project Committee Vote Sharing
         Agreement that will govern the voting of their Shared Vote (as defined
         therein) that relates to their Project Shares in the Project.

5.       MPC's Colstrip 4 Project Share (as defined in the Project Committee
         Vote Sharing Agreement) is subject to (i) the Participation Agreement
         dated as of December 16, 1985 (including all exhibits to same as
         actually executed by the parties thereto), by and among
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         United States Trust Company of New York, a New York corporation
         ("USTC"), Louis P. Young, an individual ("Young" and together with
         USTC, "Owner Trustee" or "Lessor"), MPC, Bankers Trust Company (the
         "Indenture Trustee"), Mellon Leasing Corporation (the "Owner
         Participant" as assignee and successor to Burnham Leasing Corporation,
         the original Owner Participant)) and the Loan Participants identified
         therein and (ii) the Participation Agreement, dated as of December 16,
         1985 (including all exhibits to same as actually executed by the
         parties thereto), by and among the Owner Trustee, MPC, the Indenture
         Trustee, SGE (New York) Associates (the "Owner Participant") and the
         Loan Participant identified therein (items (i) and (ii), collectively,
         and as amended, modified and supplemented from time to time, the
         "Colstrip 4 Leveraged Lease Documents").

         NOW, THEREFORE, in consideration of the foregoing premises, and for
other consideration the sufficiency and receipt of which is hereby acknowledged,
the Parties agree to the following terms and conditions:

                                    AGREEMENT

         Section 1. Effective Date and Term. This Agreement shall become
effective as of the date first written above and shall continue in full force
and effect until the occurrence of the Lessor Possession Date (under any of the
Colstrip 4 Leveraged Lease Documents). Termination of this Agreement shall not
affect the Parties' respective rights and obligations under the Ownership
Agreement as Project Users with 15% Project Shares.

         Section 2. Confirmation and Agreement. Consistent with Section 2(c) of
the Ownership Agreement, the Parties hereby confirm and agree as follows:

                  (a) subject to the provisions of the Ownership Agreement, each
         Party holds a fifteen percent (15%) Project Share in the Project;

                  (b) subject to the provisions of this Agreement and the
         Ownership Agreement, each Party shall be (i) entitled to schedule and
         take an amount of generation from the Project up to but not to exceed
         such Parties' respective Project Shares of Net Generating Capability
         and (ii) obligated to take or otherwise dispose of a percentage of the
         minimum energy production from the Project in accordance with such
         Party's Project Share in the Project and Section 13(d) of the Ownership
         Agreement irrespective of whether a particular cost is specific to Unit
         3 or Unit 4; and

                  (c) except for (i) charges payable by the Parties pursuant to
         Section 12 of the Ownership Agreement, (ii) coal transportation charges
         payable by the Parties pursuant to the Coal Transportation Agreement,
         and (iii) other Costs of Operation the Project Users pay based on each
         Project User's allocation of generation (e.g., lime and diesel fuel),
         the Parties shall be responsible for their respective Project Shares of
         Costs of Operation and Costs of Construction irrespective of whether a
         particular cost is specific to Unit 3 or Unit 4.



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         Section 1. Representations and Warranties. Each Party represents and
warrants to the other as of the date of this Agreement that:

                  (a) such Party is duly formed and validly existing under the
         laws of the jurisdiction of its organization and is duly authorized to
         do business in each other jurisdiction in which it is required to be so
         qualified with full power and authority to perform its obligations
         hereunder and that the execution, delivery and performance of this
         Agreement has been duly authorized by such Party;

                  (b) this Agreement has been duly executed and delivered by
         such Party and constitutes the legal, valid, binding and enforceable
         agreement of such Party enforceable in accordance with its terms
         against such Party subject to the effect of bankruptcy, insolvency,
         moratorium and other similar laws relating to creditors' rights
         generally, whether existing at law or in equity, by general equitable
         principles and by an implied covenant of good faith and fair dealing;

                  (c) no consent, approval or authorization of, or filing,
         registration or qualification with, any court or governmental authority
         on the part of such Party is required for the execution and delivery of
         this Agreement by such Party and the performance of its obligations and
         duties hereunder, other than those that have been made or obtained; and

                  (d) such Party is in material compliance with all laws and
         legal requirements applicable to its business.

         Section 1. Assignment; Third Party Beneficiaries. Any transfer or
assignment by either Party of any part of its interest under this Agreement to
any other Person (an "Assignee") shall be subject to the satisfaction of each of
the following conditions: (a) the assigning Party under this Agreement shall be
simultaneously transferring or assigning a corresponding portion of its Project
Share to such Assignee and (b) such Assignee shall have assumed in writing the
corresponding duties and obligations of the assigning Party which arise and are
attributable to the period after the effective date of the assignment. Nothing
in this Agreement, express or implied, is intended to confer on any person or
entity other than the Parties and their successors and assigns permitted
hereunder any rights, remedies, obligations or liabilities under or by reason of
this Agreement.

         Section 2. Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of Montana without regard to
conflicts of laws principles.

         Section 3. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

         Section 4. Notices and Communications.



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                  (a) Unless otherwise specified herein, all notices under this
Agreement shall be in writing and shall be (i) delivered personally; (ii) sent
by a recognized overnight mail or courier service, with delivery receipt
requested; or (iii) sent by facsimile transmission, followed by written
confirmation, to the Parties at the addresses, telephone and facsimile numbers
set forth on the signature pages hereto.

                  (b) All notices sent under this Agreement shall be effective
when received by the other Party, except that any facsimile which is received
after 5:00 p.m. at the location of the receiving Party shall be deemed to be
effective on the next business day.

                  (c) Each Party may change its notice information set forth
above by written notice to the other Party pursuant to this Section 7.

         Section 1. Counterparts. This Agreement may be executed in any number
of counterparts, all of which together shall constitute a single instrument.

         Section 2. Conflicts. In the event of a conflict between the Asset
Purchase Agreement, on the one hand, and this Agreement on the other hand, the
terms and provisions of this Agreement shall govern.

         Section 3. Amendments and Waivers. This Agreement may be amended,
supplemented or otherwise modified only in writing executed and delivered by
each Party. Notwithstanding the foregoing, the Parties shall not enter into any
amendment, supplement, or modification to this Agreement which conflicts with
the terms and conditions of the CS4 PSAs or the Ownership Agreement. No waiver
of any right under this Agreement shall be binding unless such waiver is in a
writing by the Party to be bound. No failure to exercise and no delay in
exercising, on the part of any Party, any right, remedy, power or privilege
under this Agreement, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.

                               [SIGNATURES FOLLOW]



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         IN WITNESS WHEREOF, the parties have executed this MPC/PP&L Colstrip
Units 3&4 Generating Project Reciprocal Sharing Agreement as of the date first
above written.

                                       THE MONTANA POWER COMPANY


                                       By:    /s/ Richard F. Cromer
                                       Name:  Richard F. Cromer
                                       Title: Executive Vice President

                                       Addresses for Notices:
                                       The Montana Power Company
                                       Energy Supply Division
                                       40 E. Broadway
                                       Butte, MT 59701
                                       Attn: Executive Vice President and Chief
                                       Operating Officer
                                       Telephone Number: (406) 496-5100
                                       Facsimile Number: (406) 497-2150

                                       With a copy of written notices to:
                                       Montana Power Company
                                       40 E. Broadway
                                       Butte, MT 59701
                                       Attn: General Counsel
                                       Facsimile Number: (406) 497-2451


                                       PP&L MONTANA, LLC


                                       By:    /s/ Roger Petersen
                                       Name:  Roger Petersen
                                       Title: President

                                       Address for Notices:
                                       PP&L Montana, LLC
                                       US Bank Building
                                       303 North Broadway,
                                       Suite 400
                                       Billings, Montana 59101
                                       Attention: David Kinnard, General Counsel
                                       Telephone: (406) 869-5100
                                       Facsimile: (406) 869-5149