8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 10, 2016

NorthWestern Corporation

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)		1-10499 (Commission File Number)	46-0172280 (IRS Employer Identification No.)
3010 W. 69th Street Sioux Falls, South Dakota (Address of principal executive offices)			57108 (Zip Code)
	(605) 978-2900 (Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) Short-Term Incentive Compensation Plan

On February 10, 2016, the Board of Directors (the “Board”) of NorthWestern Corporation d/b/a NorthWestern Energy (NYSE: NWE) (the “Company”), based on the recommendation of the Human Resources Committee (the “Committee”) of the Board, established the Company's 2016 Annual Incentive Plan for officers and other eligible employees of the Company (the “2016 AI Plan”). Robert C. Rowe, a Board member and our president and chief executive officer, abstains on all employee compensation-related decisions of the Board and abstained on the Board's decision to approve the 2016 AI Plan.

The 2016 AI Plan provides for a payment of incentive compensation to officers and other eligible employees for the performance period of January 1, 2016, through December 31, 2016. To be eligible to receive a payout under the 2016 AI Plan, employees must be employed on December 31, 2016, and have been employed actively for at least one full quarter of the plan year.

A target incentive level for each participating employee is set by position and is expressed as a percentage of base salary. The short-term incentive target opportunities under the 2016 AI Plan for the Company's principal executive officer, principal financial officer and the other remaining named executive officers in the Company's proxy statement filed for its 2015 annual meeting of shareholders (the “2015 Proxy Statement”) are as follows:

Name	Title	Short-Term Incentive Target Opportunity (as a percentage of base salary)
Robert C. Rowe	President and Chief Executive Officer	80%
Brian B. Bird	Vice President and Chief Financial Officer	50%
Heather H. Grahame	Vice President and General Counsel	45%
Curtis T. Pohl	Vice President - Retail Operations	40%

The short-term incentive target opportunities and performance measures for the 2016 AI Plan are the same as the awards under the Company's 2015 Annual Incentive Plan.

Payouts of awards to plan participants from the performance pool (as discussed below) will be determined based on a combination of:

(i) individual performance ratings that evaluate achievement against established goals and objectives as well as overall job performance; and

(ii) company performance based on the achievement of the following specified performance metrics during 2015:

a. net income targets, weighted at 55%;

b. safety, weighted at 15%, using two measurements of safety based on OSHA definitions - lost time incident target rate and total recordable incident rate;

c. reliability, weighted at 15%, consisting of two electric system reliability indices (each weighted at 5%), which measure the total duration of interruption for the average customer on our system during a predefined period of time, and two natural gas system reliability indices (each weighted at 2.5%), which measure damage per 1,000 locates and leaks per 100 miles on our system during a predefined period of time; and

d. Customer satisfaction, weighted at 15%, consisting of performance as determined by an independent survey conducted by J.D. Power & Associates (5%) and, operational

performance (5%) and reputational perception (5%) pursuant to a separate independent survey conducted by Flynn Wright.

No awards will be paid out under the 2016 AI Plan unless at least 90% of the net income target is met. In the event that a work-related fatality occurs during the year, the safety portion of the 2016 AI Plan will be forfeited for all employees unless it is determined by the Committee that no actions on the part of the employee or the Company contributed to the incident. In calculating performance against target, the Board may make adjustments either positively or negatively for one-time events and extraordinary non-budgeted items.

A Performance Pool will be created and funded based on the level of achievement of the four company performance factors described above. The Performance Pool then 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, as adjusted based on the performance funding level achieved. The Performance Pool will be divided into a “Fixed Pool” and a “Discretionary Pool.”

Fifty percent of the Performance Pool will be allocated to the Fixed Pool. Each Eligible Employee that has a performance rating of “met expectations” 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%

As part of the Fixed Pool calculation, the maximum percentage that can be attributed to the “performance funding level achieved” is 150%.

The remaining 50% of the Performance Pool will be allocated to the Discretionary Pool. Allocations of the Discretionary Pool will be based on the recommendation of an employee's supervisor. In no case will the total payouts in a given performance pool exceed the total dollars available for that performance pool.

Awards will be paid out to employees as soon as practicable after year-end results are known, but no later than March 31, 2017. The actual incentive amounts paid under the 2016 AI Plan will be based on the Company's actual results during 2016 in relation to the established performance objectives, and these payments may be greater or less than the target amounts that have been established.

For further information regarding the 2016 AI Plan, see the copy of the plan that is filed as Exhibit 99.1 hereto and incorporated herein by reference.

(e) Long-Term Incentive Program

On February 10, 2016, the Board of the Company, based on the recommendation of the Committee, approved the 2016 Long-Term Incentive Program (the “Program”) for performance shares to be awarded to 116 participants, including all of the executive officers, under the NorthWestern Corporation Amended and Restated Equity Compensation Plan (the “ECP”). Mr. Rowe abstained on the Board's decision to approve the Program, as he did with the 2016 AI Plan, as described above.

Pursuant to the Program, the Form of NorthWestern Corporation Performance Unit Award Agreement (the “Award Agreement”) and the ECP, a participant, including each executive, will receive a targeted number of performance units based upon a percentage of the participant's salary divided by the fair market value of the Company's common stock as of the grant date. The long-term incentive target opportunities for the 2016 LTIP, expressed as a percentage of base compensation, for the Company's pr

incipal executive officer, principal financial officer and the other remaining named executive officers in the Company's 2015 Proxy Statement are as follows:

Individual	Title	Long-Term Incentive Target Opportunity
Robert C. Rowe	President & Chief Executive Officer	200%
Brian B. Bird	Vice President & Chief Financial Officer	100%
Heather H. Grahame	Vice President & General Counsel	80%
Curtis T. Pohl	Vice President - Distribution	60%

Payment of the performance units to each participant, including each executive, is conditioned on the maintenance of investment grade ratings for the Company during the performance period and the attainment of certain performance measures established by the Committee. The performance measures are weighted as follows: 50 percent to a matrix composed of the three-year average of return on average equity and earnings per share growth, and 50 percent to relative total shareholder return as measured against total shareholder return for the members of the Company's peer group. Such performance measures could result in payment of an award ranging from 0 to 200 percent of a participant's target. However, if total shareholder return is negative, then the payout for the total shareholder return component is limited to 100 percent.

Payment of the performance units also generally is contingent upon the participant remaining in the continuous employ of the Company through the end of the performance period; however, acceleration can occur upon the death or disability of the participant or a change of control of the Company. The Committee will have the discretion to include or exclude the impact of specified unusual or extraordinary events from the calculation of the performance measures to decrease, but not increase, the payout. Payout of the earned and vested performance units will be made in shares of common stock of the Company, with one performance unit vested and earned equal to one share of the Company's common stock; however, upon a change of control, awards either will be deemed vested and satisfied at 100 percent of target or will be paid out in cash. Eligible participants will be able to elect to defer receipt of all or any portion of any earned performance units.

For further information regarding the Award Agreement, see the copy of the Award Agreement that is filed as Exhibit 99.2 hereto and incorporated herein by reference. For further information regarding the ECP, see Appendix A to NorthWestern Corporation's Proxy Statement for the 2014 Annual Meeting of Shareholders filed on March 7, 2014, Commission File No. 1-10499, which is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

EXHIBIT NO.	DESCRIPTION OF DOCUMENT
99.1*	2016 Annual Incentive Plan
99.2*	Form of 2016 LTIP Award Agreement

* filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NORTHWESTERN CORPORATION
By:	/s/ Timothy P. Olson
	Timothy P. Olson
	Corporate Secretary

Date: February 16, 2016

Index to Exhibits

EXHIBIT NO.	DESCRIPTION OF DOCUMENT
99.1*	2016 Annual Incentive Plan
99.2*	Form of 2016 LTIP Award Agreement

* filed herewith

EX-99.1

Exhibit 99.1

NORTHWESTERN ENERGY

2016 ANNUAL INCENTIVE PLAN

I.Introduction

NorthWestern Energy (NorthWestern) utilizes the 2016 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 NorthWestern's Board of Directors (Board) and administered by the NorthWestern Energy Incentive Plan Administration Committee (Administration Committee) consisting of the President and CEO, and the 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, 2016, and will continue until December 31, 2016, 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.

Exhibit 99.1

VI.Participation and Eligibility

All non-represented regular full-time, regular part-time, limited part-time and supplemental employees of NorthWestern employed on the last business day of the plan year are eligible to receive payment under the Plan provided they are actively employed by NorthWestern for at least one full quarter of the Plan year. To participate in the Plan, employees must have written goals and objectives consistent with NorthWestern’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 NorthWestern. Goals and objectives can be based on individual and team performance.

An employee must meet acceptable performance standards, as defined and approved by the Administration Committee, to be eligible for an award. An employee who was under a formal disciplinary action during the Performance Period is not eligible for an award during the disciplinary period. An employee whose performance is rated “unsatisfactory” is not eligible for an award. An employee whose performance is rated “partially met expectations” may, at the discretion of their supervisor, be eligible for an award from the discretionary pool of the Plan.

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 a formal disciplinary action for a portion of the Performance Period,

(3) Work on a part-time basis,

(4) Take 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 business day of the Plan year. For purposes of this incentive Plan, retirement shall mean the termination of an employee’s continuous service with NorthWestern after the employee has attained at least age 55. Retirement shall exclude any termination for cause. Proration for retirement will be based on an employee’s last day actually working, even though an employee may receive approval to extend their actual termination date by using accrued paid leave (i.e, PTO).

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 Performance 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.

Exhibit 99.1

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, system performance comprised of 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 below; 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%
FINANCIAL1
Net Income	55%	-10%	Budget	+10%
SAFETY2
Lost Time Incident Rate	7.5%	0.8	0.65	0.34
Total Recordable Incident Rate	7.5%	2.3	2.0	1.5
RELIABILITY3
System Avg Interruption Duration Index (SAIDI excluding MEDs)	5%	123	108	97
System Avg Interruption Duration Index (SAIDI including MEDs)	5%	191	123	108
Gas - Damages per 1000 Locates Gas - Leaks per 100 Mile of Main	2.5% 2.5%	2.62 7.55	2.12 6.05	1.72 4.84
CUSTOMER SATISFACTION4
JD Power Residential Electric and Gas Survey Performance	5%	638	656	661
Operational Performance - Customer Survey by Flynn Wright	5%	36.62	38.55	40.48
Reputational Perceptions - Custom Survey by Flynn Wright	5%	36.56	38.48	40.40

Footnotes: 1) The financial target is based on Board-approved budget for 2015; 2) If a work-related fatality occurs, the lost-time incident ratte portion of the safety performance metric of the Annual Incentive Plan will be forfeited for all NorthWestern 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) The Reliability results will be adjusted for planned outages and catastrophic events. 4) 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 longitudinal 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, NorthWestern will calculate the actual performance as compared against the established performance targets. Such calculations shall

Exhibit 99.1

be finally determined at the sole discretion of the Board's Human Resources Committee or an appointed 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 2017. Awards are considered ordinary income and subject to all applicable taxes.

Exhibit 99.1

NORTHWESTERN ENERGY

2015 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).”

SAIDI results will be adjusted to exclude planned outages and catastrophic events. A catastrophic event is defined as an event that has an overall impact of 7 times an MED.

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 3^rd party damages experienced on NorthWestern Energy’s system divided by the total number of locate tickets divided by 1000.

Damages per 1000 Locates = total 3^rdparty 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 3^rd party damage divided by the total miles of main divided by 100.

Exhibit 99.1

Leaks per 100 miles of main = total leaks (other than 3^rdparty 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 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

Exhibit 99.1

The customer tracking study is a longitudinal study designed to evaluate customer perception regarding operational and reputational performance. The study is fielded in the Spring and Fall with a total annual sample size of 2,400. 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

EX-99.2

Exhibit 99.2

NorthWestern Corporation

Performance Unit

Award Agreement

(Granted Under the Amended and Restated Equity Compensation Plan)

The long-term incentive program is designed to provide eligible employees of NorthWestern Corporation (together with its subsidiaries, the “Company”) with a reward for their service with the Company for the Performance Period January 1, 2016, through December 31, 2018, and to award Grantee a certain number of Performance Units (“Performance Units”). This program provides eligible employees an incentive to continue their employment with, and to advance the interests of, the Company during and following the Performance Period. This award to Grantee will be governed by this Agreement and the Company's Amended and Restated Equity Compensation Plan (the “Plan”).

In consideration of the mutual promises and covenants contained in this Agreement, the Grantee and the Company each agree as follows:

ARTICLE I - Grant of Performance Units

Section 1.1. Performance Units Granted. Subject to the terms of the Plan, the Company hereby grants to <<Proper Name>> (the “Grantee”) a target number of Performance Units equal to <<Shares>> (the “Target Performance Units”) on February 10, 2016 (the “Grant Date”), payment of which depends on the Company's performance as set forth in this Agreement and in the matrix on Addendum A as approved by the Human Resources Committee (the “Committee”). In accordance with the terms of Section 10(b) of the Plan, the Performance Units evidenced by this Agreement are intended to be “Performance Compensation Awards” constituting “qualified performance-based compensation” under Section 162m of the Internal Revenue Code of 1986, as amended.

Section 1.2. Performance Measures. Payment of Performance Unit Awards to Grantee are conditioned on the maintenance of investment grade ratings during the Performance Period and the attainment of Performance Measures set forth below. The resulting performance measures are weighted:

• 50 percent weighting to the matrix composed of both the three-year average Return on Average Equity (ROAE) and average earnings per share growth per Addendum A; and

• 50 percent to the Relative Total Shareholder Return (TSR) per Addendum A, measured against the Company's Peer Group listed on Addendum B.

If TSR is negative, the maximum payout for the TSR component is limited to 100 percent. Performance Measures as set forth in Addendum A for this grant will be measured over the period of calendar years 2016 through 2018 (“Performance Period”). All Performance Measures on Addendum A shall be determined using USA GAAP consistently applied as set forth in the Company's audited financial statements, as they may be adjusted in accordance with Section 2.3.

ARTICLE II - Earning of Performance Units

Section 2.1. Determination of Earned Performance Units. As soon as practicable following the conclusion of the Performance Period, the Committee will approve by resolution whether and to what extent the Performance Measures have been achieved for the Performance Period and certify by resolution the amount of the Performance Units to be paid to Grantee hereunder. In determining the amount of Performance Units to be paid to Grantee, the Committee may use discretion to decrease, but not increase, the amount of the award otherwise payable to Grantee based upon such performance.

Exhibit 99.2

Section 2.2. Conditions; Vesting of Earned Award. Except as otherwise provided in ARTICLE III, ARTICLE IV, and ARTICLE V herein, the Grantee's right to receive any Performance Units is contingent upon his or her remaining in the continuous employ of the Company through the end of the Performance Period. For purposes of this Agreement, the continuous employ of the Grantee shall not be considered interrupted or terminated in the case of sick leave, military leave or any other leave of absence approved by the Company or in the case of transfers between locations of the Company and its Subsidiaries.

Section 2.3. Other Factors in Determination of Earned Award. Notwithstanding the established Performance Measures, in determining attainment of any such Performance Measures, the Committee shall exclude the impact of the following specified objective events, except where such exclusion would result in the loss of an otherwise available exemption under Section 162(m): expenses as a result of restructuring or productivity initiatives; non-operating items; acquisition expenses; and any other items of gain, loss or expense that are extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or to a change of accounting principles, in each case as determined using USA GAAP consistently applied as set forth in the Company's audited financial statements.

ARTICLE III - Change in Control

As provided in Section 13 of the Plan, if a “Change in Control”, as defined in Appendix A of the Plan, occurs prior to the end of the Performance Period, either (1) the Performance Measures on Addendum A shall be deemed to be satisfied at 100 percent for the Performance Period and all Target Performance Units will vest as of the closing date of the Change in Control or (2) the Committee shall arrange or provide for the payment of cash or other consideration in exchange for cancellation of outstanding non-vested Performance Units. In the event that due to the acceleration of vesting, Grantee would, but for this ARTICLE III, be subject to the excise tax provisions of Code Section 4999 as a result of “parachute payments” described in Code Section 280G, the number of Performance Units otherwise payable shall be reduced, eliminated or postponed in such amount that is required to reduce the aggregate present value of such payments to a dollar less than an amount equal to three times Grantee's “base amount” (as such term is defined in Code Sections 280G(b)(3)(A) and 280G(d)(1) and (2)) so that Grantee is not subject to the tax under Code Section 4999 and no tax deduction is disallowed by reason of Code Section 280G.

ARTICLE IV - Disability or Death

If the Grantee's employment with the Company terminates during the Performance Period, but before the payment of any Performance Units as set forth in ARTICLE VII below due to (a) “disability” (as defined in Appendix A of the Plan as amended) or (b) death, the Company shall pay to the Grantee or his or her executor or administrator, as the case may be, as soon as practicable following such termination of employment, a pro rata number of the Target Performance Units based on the number of full months during the Performance Period during which the Grantee was employed by the Company and the remaining Performance Units will be forfeited.

ARTICLE V - Retirement

If the Grantee's Continuous Service with the Company terminates before the end of the Performance Period due to the Grantee's Retirement (and at a time when the Performance Units have not otherwise been forfeited), a pro rata portion of the Performance Units covered by this Agreement shall be forfeited (based on the number of full months during the Performance Period, minus the number of full months of the Grantee's Continuous Service with the Company during the Performance Period). The vesting of any Performance Units covered by this Agreement that are not forfeited by this ARTICLE V shall be determined in accordance with ARTICLE II above as if Grantee had remained employed by the Company through the end of the Performance Period. The Company shall pay to the

Exhibit 99.2

Grantee, at the date provided in ARTICLE VII following the end of the Performance Period, the Performance Units to which the Grantee entitled under this ARTICLE V. The Committee may, in its discretion, allow Grantee to retire at an earlier age and earn Performance Units under this ARTICLE V so long as the timing and form of distribution are not modified in violation of Code Section 409A. For purposes of this Agreement, “Retirement” shall mean a termination of the Grantee's Continuous Service with the Company after the Grantee has (y) attained age 50 and completed at least five years of Continuous Service or (z) attained age 65. Further, “Retirement” shall exclude any termination of the Grantee's Continuous Service for Cause.

ARTICLE VI - Forfeiting of Performance Units

If the Grantee's employment with the Company terminates before the end of the Performance Period for any reason other than as set forth in ARTICLE III, ARTICLE IV, and ARTICLE V above, the awarded Performance Units will be forfeited in their entirety. Acceleration of vesting of Performance Units is permitted under ARTICLE III, ARTICLE IV, and ARTICLE V above.

ARTICLE VII - Payment of Performance Units

Payment of any Performance Units that become earned and vested as set forth herein will be made in the form of Common Shares. Except as otherwise provided in ARTICLE III, ARTICLE IV, and ARTICLE V, payment will be made as soon as practicable after the last fiscal year of the Performance Period and the determination by the Committee (or the independent members of the Board of Directors) of the level of attainment of the Performance Measures in the manner set forth in Section 2.1 above, but in no event shall such payment occur after two and a half months from the end of the applicable Performance Period. Performance Units will be forfeited if they are not earned at the end of the Performance Period as provided in ARTICLE VI and, except as otherwise provided in this Agreement, if the Grantee ceases to be employed by the Company at any time prior to such Performance Units becoming earned at the end of the Performance Period. To the extent that the Company is required to withhold any federal, state, local or foreign tax in connection with the payment of earned Performance Units pursuant to this Agreement, the Company shall satisfy the tax withholding obligation by withholding Performance Units otherwise payable pursuant to this award, unless either (a) the Grantee makes prior alternative arrangements satisfactory to the Company for payment of such taxes required to be withheld, or (b) all or any portion of such withholding is not required due to any deferral election made by Grantee as provided in ARTICLE XI hereof.

ARTICLE VIII - Dividends

No dividends shall be accrued or earned with respect to the Performance Units until such Performance Units are vested and earned by the Grantee as provided in ARTICLE II hereof.

ARTICLE IX - Non-Assignability

The Performance Units and the Common Shares subject to this grant are personal to the Grantee and may not be sold, exchanged, assigned, transferred, pledged, encumbered or otherwise disposed of by the Grantee until they become earned and payable as provided in this Agreement; provided, however, that the Grantee's rights with respect to such Performance Units and Common Shares may be transferred by will or pursuant to the laws of descent and distribution. Any purported transfer or encumbrance in violation of the provisions of this ARTICLE IX shall be void, and the other party to any such purported transaction shall not obtain any rights to or interest in such Performance Units or Common Shares. Once Grantee has received Common Shares in respect of earned and vested Performance Units pursuant to this Award, Grantee may transfer such Shares by sale or gift unless (a) Grantee is subject to a Company stock holding requirement and retention of such Shares is necessary to comply with Grantee's holding requirements, or (b) a transfer of Shares is prohibited by federal or state securities laws or regulations.

Exhibit 99.2

ARTICLE X - Adjustments

In the event of any change in the number of outstanding Common Shares by reason of a merger, consolidation, reorganization, recapitalization, or similar transaction, or in the event of a stock dividend, stock split, or distribution to shareholders (other than normal cash dividends), the Committee shall adjust the number and class of shares subject to outstanding Target Performance Units and other value determinations applicable to outstanding Target Performance Units. No adjustment provided for in this ARTICLE X shall require the Company to issue any fractional share.

ARTICLE XI - Deferral

Section 11.1. Ability to Defer. If the Grantee is eligible to participate in the NorthWestern Corporation 2009 Officers Deferred Compensation Plan (the “Deferred Compensation Plan”), the Grantee may elect to defer receipt of all or any portion of the earned Performance Units, in accordance with the Plan.

Section 11.2. Elections. An election pursuant to Section 11.1 must be made in writing and delivered to the Company in accordance with the terms of the Deferred Compensation Plan, provided that the election is made at least six months in advance of the earliest date on which the Performance Units could be earned based upon achievement of the Performance Measures (disregarding death, disability or a Change in Control). If the Grantee does not file an election form by the specified date, he or she will receive the Performance Units when they otherwise would have been paid pursuant to ARTICLE VII.

Section 11.3. Crediting to Accounts. If a Grantee elects to defer receipt of the earned Performance Units, there will be credited to the Grantee's account as of the day such Common Shares underlying the earned Performance Units would have been paid, a number of deferred units (the “Deferred Share Units”) equal to the number of Common Shares that would otherwise have been delivered to the Grantee pursuant to ARTICLE VII on such date. The Deferred Share Units credited to the Grantee's account (plus any cash or stock dividends on the equivalent number of Common Shares declared during the deferral period) will represent the number of Common Shares that the Company will issue to the Grantee at the end of the deferral period. All Deferred Share Units will be 100 percent vested at all times.

Section 11.4. Deferral Period. The Deferred Share Units will be subject to a deferral period in accordance with the election made by Grantee and the terms of the Deferred Compensation Plan. The Grantee may change the period of deferral by filing a subsequent election with the Company in accordance with the terms of the Deferred Compensation Plan. During the deferral period, the Grantee will have no right to transfer any rights under his or her Deferred Share Units and will have no other rights of ownership therein.

Section 11.5. Dividends. The Grantee's account will be credited with cash or stock dividend equivalents related to the Deferred Share Units for dividends declared after the date of deferral until the Deferred Share Units are paid. Cash dividend equivalents will be credited as additional Deferred Share Units.

ARTICLE XII - Compliance With Section 409A of the Code

To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A (a) (1) of the Code do not apply to the Grantee. This Agreement and the Plan shall be administered in a manner consistent with this intent, and any provision that would cause the Agreement or the Plan to fail to satisfy Section 409A of the Code shall have no force and effect unless and until amended to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A

Exhibit 99.2

of the Code and may be made by the Company without the consent of the Grantee). In particular, to the extent the Grantee has a right to receive payment pursuant to ARTICLE III or ARTICLE IV and the event triggering the right to payment does not constitute a permitted distribution event under Section 409A(a)(2) of the Code, then notwithstanding anything to the contrary in ARTICLE III, ARTICLE IV or ARTICLE VII above, issuance of the Common Shares will be made, to the extent necessary to comply with Section 409A of the Code, to the Grantee on the earlier of (a) the Grantee's “separation from service” with the Company (determined in accordance with Section 409A); provided, however, that if the Grantee is a “specified employee” (within the meaning of Section 409A), the Grantee's date of issuance of the Common Shares shall be the date that is six months after the date of the Grantee's separation of service; (b) the date the payment would otherwise occur under this Agreement (to the extent it constitutes a permitted distribution event); or (c) the Grantee's death. References to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

ARTICLE XIII - Miscellaneous

Section 13.1. Interpretation. The contents of this Agreement are subject in all respects to the terms and conditions of the Plan as approved by the Board of Directors of the Company, which are incorporated by reference herein. The interpretation and construction by the Board and/or the Committee of any provision of the Plan or this Agreement shall be final and conclusive upon the Grantee, the Grantee's estate, executor, administrator, beneficiaries, personal representative and guardian and the Company and its successors and assigns. Unless otherwise indicated, the capitalized terms used in this Agreement shall have the same meanings as set forth in the Plan.

Section 13.2. Fractional Shares. Any fractional share earned under this Agreement will be rounded up or down to the nearest whole share.

Section 13.3. No Right to Employment. The grant of the Performance Units is discretionary and will not be considered to be an employment contract or a part of the Grantee's terms and conditions of employment or of the Grantee's salary or compensation.

Section 13.4. Successors and Assigns. This Agreement, and the terms and conditions of the Plan, shall bind, and inure to the benefit of the Grantee, the Grantee's estate, executor, administrator, beneficiaries, personal representative and guardian and the Company and its successors and assigns.

Section 13.5. Governing Law. This Plan will be governed by and construed in accordance with applicable United States federal law and, to the extent not preempted by such federal law, in accordance with the laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof.

Section 13.6. Amendment or Termination. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto. The terms and conditions of this Agreement may not be modified, amended or waived, except by an instrument in writing signed by a duly authorized executive officer of the Company. Notwithstanding the foregoing, no amendment shall adversely affect the Grantee's rights under this Agreement without the Grantee's consent.

Exhibit 99.2

IN WITNESS WHEREOF, the parties hereto have duly executed this Long Term Incentive Plan - Performance Unit Award Agreement, to be duly executed on their behalf, as of the Grant Date.

NORTHWESTERN CORPORATION
By:
Name:	[pre-type name]
Title:	[pre-type title]
GRANTEE (signature):
Name (print):
Employee Number:

Exhibit 99.2

LTIP Metrics:								Addendum A
	=> 50% of LTIP payout as a result of 3 year ROAE / Simple Average Earnings Per Share (EPS) Growth Matrix
	=> 50% of LTIP payout as a result of 3 year relative Total Shareholder Return (TSR) performance
	=> If TSR is negative, the maximum payout for the TSR component is limited to 100%
	=> Maintaining investment grade ratings required for any payout
			2014 - 2016 Simple Average EPS Growth
		GAAP Earnings	—%	—%	—%	—%	—%	—%	—%
	3 Yr Avg ROAE (%)	—%	—%	17%	33%	50%	67%	83%	100%
		—%	17%	33%	50%	67%	83%	100%	117%
		—%	33%	50%	67%	83%	100%	117%	133%
		—%	50%	67%	83%	100%	117%	133%	150%
		—%	67%	83%	100%	117%	133%	150%	167%
		—%	83%	100%	117%	133%	150%	167%	183%
		—%	100%	117%	133%	150%	167%	183%	200%
			Share Payout		Additional notes to LTIP Metrics: 1.) All LTIP Metrics will be determined using USA GAAP. 2.) For actual ROAE and Simple Average Net Income Growth numbers between the numbers on the matrix, the Committee will interpolate to arrive at the earned award. 3.) For purposes of the Award, the “TSR” for the Relative 3-year TSR for the Company and each of its Peer Group Members for the Performance Period will be determined by comparing the average closing price for a share of common stock of each company during the period beginning 10 days prior to the end of the Performance Period and ending 10 days after the Performance Period plus the cumulative dividends earned during the Performance Period, to the average closing price of a share of common stock of each company during the period beginning 10 days prior to the start of the Performance Period and ending 10 days after the start of the Performance Period.
	Relative 3 Year TSR vs. Peers	1st	200%
		2nd	180%
		3rd	160%
		4th	140%
		5th	120%
		6th	100%
		7th	80%
		8th	60%
		9th	50%
		10th	40%
		11th	30%
		12th	20%
		13th	10%
		14th	—%
		15th	—%

Exhibit 99.2

ADDENDUM B

NorthWestern Energy Peer Companies*

1. ALLETE, Inc.

2. Avista Corp.

3. Black Hills Corporation

4. Cleco Corporation

5. El Paso Electric Co.

6. Great Plains Energy Incorporated

7. IDACORP, Inc.

8. MGE Energy Inc.

9. OGE Energy Corp.

10. Otter Tail Corporation

11. PNM Resources Inc.

12. Portland General Electric Company

13. UIL Holdings Corporation

14. Vectren Corporation

15. Westar Energy, Inc.

* At the conclusion of the Performance Period, any peer companies that (a) have been acquired, (b) have merged with another entity, or (c) otherwise cease to exist as a standalone entity, will be excluded from the peer group.