SCHEDULE 1. Scheduling, System Control and Dispatch Service

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1 Seventh Revised Volume No. 5 (MT) Original Sheet No. 71 SCHEDULE 1 Scheduling, System Control and Dispatch Service This service is required to schedule the movement of power through, out of, within, or into a Control Area. This service can be provided only by the operator of the Control Area in which the transmission facilities used for transmission service are located. Scheduling, System Control and Dispatch Service is to be provided directly by the Transmission Provider (if the Transmission Provider is the Control Area operator) or indirectly by the Transmission Provider making arrangements with the Control Area operator that performs this service for the Transmission Provider's Transmission System. The Transmission Customer must purchase this service from the Transmission Provider or the Control Area operator. The charges for Scheduling, System Control and Dispatch Service are to be based on the rates set forth below. To the extent the Control Area operator performs this service for the Transmission Provider, charges to the Transmission Customer are to reflect only a pass-through of the costs charged to the Transmission Provider by that Control Area operator. For Transmission Customers Receiving Point-To-Point and Network Integration Transmission Service 1) Yearly rate: the maximum charge shall be $2.00/kW of Reserved Capacity or Network Load per year. 2) Monthly rate: the maximum charge shall be $0.17/kW of Reserved Capacity per month. 3) Weekly rate: the maximum charge shall be $0.038/kW of Reserved Capacity per week. 4) Daily rate: the maximum charge shall be $0.005/kW of Reserved Capacity per day. 5) Hourly rate: the maximum charge shall be $ /kW of Reserved Capacity per hour.

2 Seventh Revised Volume No. 5 (MT) Second Revised Sheet No. 73 SCHEDULE 2 Reactive Supply and Voltage Control from Generation or Other Sources Service In order to maintain transmission voltages on the Transmission Provider's transmission facilities within acceptable limits, generation facilities and non-generation resources capable of providing this service that are under the control of the control area operator are operated to produce (or absorb) reactive power. Thus, Reactive Supply and Voltage Control from Generation or Other Sources Service must be provided for each transaction on the Transmission Provider's transmission facilities. The amount of Reactive Supply and Voltage Control from Generation or Other Sources Service that must be supplied with respect to the Transmission Customer's transaction will be determined based on the reactive power support necessary to maintain transmission voltages within limits that are generally accepted in the region and consistently adhered to by the Transmission Provider. Reactive Supply and Voltage Control from Generation or Other Sources Service is to be provided directly by the Transmission Provider (if the Transmission Provider is the Control Area operator) or indirectly by the Transmission Provider making arrangements with the Control Area operator that performs this service for the Transmission Provider's Transmission System. The Transmission Provider must provide this service, and the Transmission Customer must purchase this service from the Transmission Provider. Although the Transmission Customer is required to purchase this service from the Transmission Provider, the Transmission Customer may reduce the charge for this service to the extent it can reduce its requirement for reactive supply. To the extent the Control Area operator performs this service for the Transmission Provider, charges to the Transmission Customer are to reflect only a pass-through of the costs charged to the Transmission Provider by the Control Area operator. The Monthly Rate (R) for this service is: R = (C ± A) / L, where: C is Transmission Provider s total cost of procuring the service for the month from third-party suppliers; A is (+) unrecovered costs or (-) revenues collected in excess of actual costs from the prior month; and L is the rolling 12 CP billing determinant for Transmission Customers taking the service. The Monthly Rate shall be used to calculate the rates for service of longer and shorter duration, that is, the Yearly Rate shall be the Monthly Rate times 12; the Weekly Rate shall be the

3 Seventh Revised Volume No. 5 (MT) Substitute First Revised Sheet No. 73A Yearly Rate divided by 52; the Daily Rate shall be Weekly Rate divided by seven; and the Hourly Rate shall be the Daily Rate divided by 24. The applicable rate will be multiplied by the individual customer s rolling 12 CP billing determinant. These values (components of the formula and the monthly rate) will be updated each month and posted (not less than 30 days prior to rate s effective date) on Transmission Provider s OASIS. To the extent customer-specific costs are recovered by Transmission Provider directly from such customers, such customer-specific costs shall be excluded from C and the associated customer-specific load will be excluded from L. To the extent a customer makes alternative comparable arrangements and thereby satisfies in part its Reactive Supply and Voltage Control Service obligation, the portion of its load for which it has satisfied its obligation will be excluded from L. Transmission Provider s agreement is required for any alternative comparable arrangement made by a Transmission Customer to satisfy the requirements of this Schedule 2. Transmission Provider s agreement may not be unreasonably withheld. Transmission Provider will procure or self-provide the products necessary to provide this service. To the extent Transmission Provider does not self-provide this service, it shall (1) solicit and post on its OASIS the notice of offers for long-term products (i.e., agreements with a term of one year or greater) through a Request for Proposal process, (2) file under Federal Power Act Section 205, any agreement with a term of one year or longer under which Transmission Provider purchases and also sells capacity and/or energy in the same agreement, such filing indicating that the agreement will be used by Transmission Provider to provide ancillary services under the Tariff, the costs of which, when accepted by the Commission, will be recovered through a formula rate as calculated above; and (3) post on its OASIS the long-term agreements (i.e., the Federal Power Act Section 205 filing) and any agreement(s) for a term under one year, including any cover letter(s) under any master agreement(s). Transmission Provider will maintain, for a minimum period of three years, a complete and accurate record of all reactive power purchases and capacity and energy purchases and sales made to provide this ancillary service. As of the Effective Date of this Schedule 2, the rate for Reactive Supply and Voltage Control from Generation Sources Service is $0.00/kW-month. At this time, Transmission Provider does not incur a cost for providing Reactive Supply and Voltage Control service. There will be no separate charge for such service until such time as Transmission Provider incurs costs for providing this service, at which time the rate will be calculated using the formula stated above. Issue Date: May 11, 2009

4 Seventh Revised Volume No. 5 (MT) Second Revised Sheet No. 74 SCHEDULE 3 Regulation and Frequency Response Service Regulation and Frequency Response Service is necessary to provide for the continuous balancing of resources (generation and interchange) with load and for maintaining scheduled interconnection frequency at sixty cycles per second (60 Hz). Regulation and Frequency Response Service is accomplished by committing on-line generation whose output is raised or lowered (predominantly through the use of automatic generating control equipment) and by other non-generation resources capable of providing this service as necessary to follow the momentby-moment changes in load. The obligation to maintain this balance between resources and load lies with the Transmission Provider (or the Control Area operator that performs this function for the Transmission Provider). The Transmission Provider must offer this service when the transmission service is used to serve load within its Control Area. The Transmission Provider is not obligated to provide this service when the transmission service is used to serve load located outside its control area. The Transmission Customer must either purchase this service from the Transmission Provider or make alternative comparable arrangements to satisfy its Regulation and Frequency Response Service obligation. The amount of and charges for Regulation and Frequency Response Service are set forth below. To the extent the Control Area operator performs this service for the Transmission Provider, charges to the Transmission Customer are to reflect only a pass-through of the costs charged to the Transmission Provider by that Control Area operator. The Transmission Provider must currently purchase products in order to provide this service and shall pass through the actual costs of providing this service. The billing determinants for this service shall be reduced by any portion of the purchase obligation that the Transmission Customer obtains from third parties or supplies itself. The Monthly Rate (R) for this service is: R = (C ± A) / L, where: C A L is Transmission Provider s total cost of procuring the service for the month from third party suppliers and shall include a fixed amount of $45,800; is (+) unrecovered costs or (-) revenues collected in excess of actual costs from the prior month(s); and is the rolling 12 CP billing determinant for Transmission Customers taking the service. The Monthly Rate shall be used to calculate the rates for service of longer and shorter duration, that is, the Yearly Rate shall be the Monthly Rate times 12; the Weekly Rate shall

5 Seventh Revised Volume No. 5 (MT) Substitute Second Revised Sheet No. 75 be the Yearly Rate divided by 52; the Daily Rate shall be Weekly Rate divided by seven; and the Hourly Rate shall be the Daily Rate divided by 24. The applicable rate will be multiplied by the individual customer s rolling 12 CP billing determinant. These values (components of the formula and the monthly rate) will be updated each month and posted (not less than 30 days prior to rate s effective date) on Transmission Provider s OASIS. To the extent customer-specific costs are recovered by Transmission Provider directly from such customers, such customer-specific costs shall be excluded from C and, if such customers no longer receive ancillary services provided under the formulas set forth herein for Schedule 3, the associated customer-specific load will be excluded from L. To the extent a customer makes alternative comparable arrangements and thereby satisfies in whole or part its Regulation and Frequency Response Service obligation, the portion of its load for which it has satisfied its obligation will be excluded from L. Transmission Provider will procure or self-provide the products necessary to provide this service. To the extent Transmission Provider does not self-provide this service, it shall (1) solicit and post on its OASIS the notice of offers for long-term products (i.e., agreements with a term of one year or greater) through a Request for Proposal process, (2) file under Federal Power Act Section 205, any agreement with a term of one year or longer under which Transmission Provider purchases and also sells capacity and/or energy in the same agreement, such filing indicating that the agreement will be used by Transmission Provider to provide ancillary services under the Tariff, the costs of which, when accepted by the Commission, will be recovered through a formula rate as calculated above; and (3) post on its OASIS the long-term agreements (i.e., the Federal Power Act Section 205 filing) and any agreement(s) for a term under one year, including any cover letter(s) under any master agreement(s). Transmission Provider will maintain, for a minimum period of three years, a complete and accurate record of all capacity and energy purchases and sales made to provide this ancillary service. Issue Date: May 11, 2009

6 Seventh Revised Volume No. 5 (MT) Second Revised Sheet No. 76 SCHEDULE 4 Energy Imbalance Service Energy Imbalance Service is provided when a difference occurs between the scheduled and the actual delivery of energy (either metered or load profiled) to a load located within a Control Area over a single hour. The Transmission Provider must offer this service when the transmission service is used to serve load within its Control Area. The Transmission Customer must either purchase this service from the Transmission Provider or make alternative comparable arrangements, which may include use of non-generation resources capable of providing this service, to satisfy its Energy Imbalance Service obligation. Transmission Provider s agreement is required for any alternative comparable arrangements made by the Transmission Customer to satisfy the balancing requirements that this Schedule 4 is intended to address. Transmission Provider s agreement may not be unreasonably withheld. To the extent the Control Area operator performs this service for the Transmission Provider, charges to the Transmission Customer are to reflect only a pass-through of the costs charged to the Transmission Provider by that Control Area operator. The Transmission Provider may charge a Transmission Customer a penalty for either hourly generator imbalances under Schedule 9 or hourly energy imbalances under this Schedule, but may not charge both for the same imbalance. The Transmission Provider shall establish two deviation bands: (1) the first band (Deviation Band 1) shall be +/- 2.5 percent of the scheduled transaction (if the energy imbalance during an hour is 2 MW or less, such energy imbalance will be deemed to be within Deviation Band 1); and (2) the second band (Deviation Band 2) shall be +/ percent of the scheduled transaction, each to be applied hourly to any energy imbalance that occurs as a result of the Transmission Customer's scheduled transaction(s). The Transmission Customer shall compensate the Transmission Provider for all such service. Energy imbalances will be subject to charges to be specified by the Transmission Provider. The charges for Energy Imbalance Service are set forth below. Charges for Energy Imbalance Service: Compensation for Energy Imbalances within Deviation Band 1. Where the Transmission Customer s scheduled resources exceed its load (Positive Imbalance) but such imbalances are, on an hourly basis, within Deviation Band 1, the Transmission Provider shall pay the Transmission Customer 100% of Transmission Provider s System Decremental Cost defined below, for all energy associated with such Positive Imbalance

7 Seventh Revised Volume No. 5 (MT) First Revised Sheet No. 76A Where the Transmission Customer s scheduled resources are less than its load (Negative Imbalance) but such imbalances are, on an hourly basis, within Deviation Band 1, the Transmission Customer shall pay the Transmission Provider 100% of Transmission Provider s System Incremental Cost defined below for all energy associated with such Negative Imbalance. Compensation for Energy Imbalances within Deviation Band 2. For Positive Imbalances that are, on an hourly basis, within Deviation Band 2 but outside Deviation Band 1, the Transmission Provider shall pay the Transmission Customer 90% of the Transmission Provider s System Decremental Cost for the incremental energy between Deviation Band 1 and Deviation Band 2 associated with such Positive Imbalance. For Negative Imbalances that are, on an hourly basis, within Deviation Band 2 but outside Deviation Band 1, the Transmission Customer shall pay the Transmission Provider 110% of the Transmission Provider s System Incremental Cost for the incremental energy between Deviation Band 1 and Deviation Band 2 associated with such Negative Imbalance. Compensation for Energy Imbalances outside Deviation Band 2. For Positive Imbalances that are, on an hourly basis, outside of Deviation Band 2, the Transmission Provider shall pay the Transmission Customer 80% of the Transmission Provider s System Decremental Cost for the incremental energy outside of Deviation Band 2 associated with such Positive Imbalance. For Negative Imbalances that are, on an hourly basis, outside of Deviation Band 2, the Transmission Customer shall pay the Transmission Provider 120% of the Transmission Provider s System Incremental Cost for the incremental energy outside of Deviation Band 2 associated with such Negative Imbalance. System Incremental Cost and System Decremental Cost, as used in this Schedule 4, shall be defined as the Transmission Provider s actual cost, which is the hourly weighted average cost incurred under third party agreements for all energy used for system balancing and load following energy, including any fixed charge(s) associated specifically with the procurement of system balancing and load following energy. On the tenth business day of each calendar month, Transmission Provider shall post on its OASIS, the hourly System Incremental and Decremental Cost, the actual energy cost incurred in providing system balancing and load following during the previous calendar month and the total net megawatt hours of energy supplied or received for each hour of the previous month. Transmission Provider will procure or self-provide the products necessary to provide this service. To the extent Transmission Provider does not self-provide this service, it shall (1) solicit and post on its OASIS the notice of offers for long-term products (i.e., agreements with a term of one year or greater) through a Request for Proposal process, (2) file under Federal Power Act.

8 Seventh Revised Volume No. 5 (MT) Substitute First Revised Sheet No. 76B Section 205, any agreement with a term of one year or longer under which Transmission Provider purchases and also sells capacity and/or energy in the same agreement, such filing indicating that the agreement will be used by Transmission Provider to provide ancillary services under the Tariff, the costs of which, when accepted by the Commission, will be recovered through a formula rate as calculated above; and (3) post on its OASIS the long-term agreements (i.e., the Federal Power Act Section 205 filing) and any agreement(s) for a term under one year, including any cover letter(s) under any master agreement(s). Transmission Provider will maintain, for a minimum period of three years, a complete and accurate record of all capacity and energy purchases and sales made to provide this ancillary service. Only Schedule 4 customers with hourly metered loads will be charged penalties. An account can have up to 100 kw of profile-metered load and still be considered to be hourlymetered load. Schedule 4 customers that have more than 100 kw of profiled load will be split into an hourly-metered account and a profile-metered account and separate schedules will be submitted for each account. The profile-metered accounts will be charged for hourly imbalance using the System Incremental and Decremental Cost and will not be charged penalties. NorthWestern Corporation s Montana retail load customers that have not chosen another electric commodity supplier will be treated as a profiled load and will not be charged penalties nor receive penalty revenues. All penalties billed to customers during the imbalance settlements will be returned to customers as follows. After the settlements have been completed for the hourly metered customers, the total penalties will be calculated for each hour and redistributed to those within Deviation Band 1 for the hour. The amount returned to a customer in the Deviation Band 1 for a given hour will be equal to the customer s total hourly energy divided by the sum of all hourlymetered loads for customers staying within Deviation Band 1 multiplied by the total penalty dollars for the hour. Penalty dollars billed to Schedule 4 customers will be returned only to Schedule 4 customers. If no customer is within Deviation Band 1 in any hour, the applicable penalty revenues for that hour will be distributed on a pro rata basis to all customers within Deviation Band 1 for that particular day. Trading or netting of imbalances will not be allowed, except as follows. When a network service Transmission Customer receives service at multiple points of receipt and/or delivery under a single network integration transmission service agreement, Transmission Provider will aggregate all hourly schedules and loads at such multiple points of receipt and/or delivery to determine the difference between the Transmission Customer s schedules and actual loads for purposes of calculating that Transmission Customer s Energy Imbalance in each hour. Transmission Customers with both hourly-metered loads and profiled loads will have imbalances calculated separately for the hourly-metered loads and profiled loads, respectively. Issue Date: May 11, 2009.

9 Seventh Revised Volume No. 5 (MT) Second Revised Sheet No. 76C Any Transmission Customer incurring an Energy Imbalance resulting from curtailment of its firm transmission service by Transmission Provider in its role as the control area operator and/or transmission provider, or any reliability entity with the authority to order such curtailment in Transmission Provider s control area or otherwise incurring an energy imbalance as a result of compliance with reliability requirements shall pay or receive resulting energy imbalance payments within the lowest applicable deviation band.

10 Seventh Revised Volume No. 5 (MT) Second Revised Sheet No. 77 SCHEDULE 5 Operating Reserve - Spinning Reserve Service Spinning Reserve Service is needed to serve load immediately in the event of a system contingency. Spinning Reserve Service may be provided by generating units that are on-line and loaded at less than maximum output and by non-generation resources capable of providing this service. The Transmission Provider must offer this service when the transmission service is used to serve load within its Control Area. Transmission Provider is not obligated to provide operating reserve service under Schedule 5 to load and/or generation when the transmission service is used to serve load located outside of the Transmission Provider s Control Area. The Transmission Customer must either purchase this service from the Transmission Provider or make alternative comparable arrangements to satisfy its Spinning Reserve Service obligation. To the extent the Control Area operator performs this service for the Transmission Provider, charges to the Transmission Customer are to reflect only a pass-through of the costs charged to the Transmission Provider by that Control Area operator. The Transmission Provider shall not be obligated to acquire products to provide this service in connection with transmission service used to serve load within Transmission Provider s control area in advance of a Transmission Customer request for such service. Existing (as of February 15, 2008) Transmission Customers service agreements indicate whether the Transmission Customer has made alternative comparable arrangements to satisfy operating reserves obligations. If alternative arrangements have been made, Transmission Provider shall not be obligated to provide such Transmission Customer with operating reserve service until the terms of the transmission service agreement have been modified. If Transmission Provider receives a request to modify the comparable arrangement provisions of a service agreement, Transmission Provider and the Transmission Customer will negotiate in good faith to modify the terms of the service agreement. Upon receiving a request for this service from either a new Transmission Customer or an existing Transmission Customer (after agreement has been reached to modify the transmission service agreement), Transmission Provider will solicit offers for the products needed to provide this service, unless the request involves a term for which Transmission Provider can provide the service through purchases under an existing power purchase agreement, such as the Western Systems Power Pool Agreement. The individual Transmission Customer(s), for whom the products needed to provide this service have been procured, shall bear the costs of such service. Transmission Customers with alternate comparable arrangements will not be responsible for the costs incurred to provide.

11 Seventh Revised Volume No. 5 (MT) Substitute Second Revised Sheet No. 78 this service requested by one or more customers. Transmission Provider shall not post on its OASIS any agreement (or summary of terms) for products needed to provide this service. Transmission Provider will maintain, for a minimum period of three years, a complete and accurate record of all capacity and energy purchases made to provide this ancillary service. For a Transmission Customer s load and/or generation located in the Transmission Provider s Control Area, the Transmission Customer s Operating Reserve Requirement shall be determined in accordance with applicable WECC and Northwest Power Pool (NWPP) guidelines. Currently, these guidelines require minimum operating reserves equal to the sum of (i) five percent (5%) of hydroelectric or wind generation dedicated to the Transmission Customer s firm load responsibility, (ii) seven percent (7%) of non-hydroelectric generation dedicated to the Transmission Customer s firm load responsibility, and (iii) any power scheduled into the Control Area which can be interrupted on ten (10) minutes notice. The Transmission Customer s Spinning Reserve Requirement and Supplemental Reserve Requirement shall also be determined in accordance with the applicable WECC and NWPP guidelines. Currently, these guidelines require minimum spinning reserves equal to fifty percent (50%) of the minimum operating reserve requirement. The balance of the minimum operating reserve requirement may be met by supplemental reserves. For Operating Reserve Service provided by the Transmission Provider for load and/or generation located outside the Transmission Provider s Control Area, the Transmission Customer s Spinning Reserve Requirement and Supplemental Reserve Requirement shall be specified in the Service Agreement. However, Transmission Provider is not obligated to provide such service. No energy imbalance charge will be imposed as a result of a Transmission Customer s use of Spinning Reserve Service. If the WECC or NWPP revise the Operating Reserve guidelines such that the Spinning Reserve Requirement changes, the Transmission Provider shall file a revised Schedule 5 with the Commission depicting the appropriate Spinning Reserve Requirement. Issue Date: May 11, 2009.

12 Seventh Revised Volume No. 5 (MT) Substitute Second Revised Sheet No. 79 SCHEDULE 6 Operating Reserve - Supplemental Reserve Service Supplemental Reserve Service is needed to serve load in the event of a system contingency; however, it is not available immediately to serve load but rather within a short period of time. Supplemental Reserve Service may be provided by generating units that are online but unloaded, by quick-start generation or by interruptible load or other non-generation resources capable of providing this service. The Transmission Provider must offer this service when the transmission service is used to serve load within its Control Area. Transmission Provider is not obligated to provide operating reserve service under Schedule 6 to load and/or generation when the transmission service is used to serve load located outside of the Transmission Provider s Control Area. The Transmission Customer must either purchase this service from the Transmission Provider or make alternative comparable arrangements to satisfy its Supplemental Reserve Service obligation. To the extent the Control Area operator performs this service for the Transmission Provider, charges to the Transmission Customer are to reflect only a pass-through of the costs charged to the Transmission Provider by that Control Area operator. The Transmission Provider shall not be obligated to acquire products to provide this service in connection with transmission service used to serve load within Transmission Provider s control area in advance of a Transmission Customer request for such service. Existing (as of February 15, 2008) Transmission Customers service agreements indicate whether the Transmission Customer has made alternative comparable arrangements to satisfy operating reserves obligations. If alternative arrangements have been made, Transmission Provider shall not be obligated to provide such Transmission Customer with operating reserve service until the terms of the transmission service agreement have been modified. If Transmission Provider receives a request to modify the comparable arrangement provisions of a service agreement, Transmission Provider and the Transmission Customer will negotiate in good faith to modify the terms of the service agreement. Upon receiving a request for this service from either a new Transmission Customer or an existing Transmission Customer (after agreement has been reached to modify the transmission service agreement), Transmission Provider will solicit offers for the products needed to provide this service, unless the request involves a term for which Transmission Provider can provide the service through purchases under an existing power purchase agreement, such as the Western Systems Power Pool Agreement. The individual Transmission Customer(s), for whom the products needed to provide this service have been procured, shall bear the costs of such service. Transmission Customers with alternate comparable arrangements will not be responsible for the costs incurred to provide this service requested by one or more customers. Transmission Provider shall not post on its OASIS any agreement (or summary of terms) for products needed to provide this service. Issue Date: May 11, 2009.

13 Seventh Revised Volume No. 5 (MT) Substitute Second Revised Sheet No. 80 Transmission Provider will maintain, for a minimum period of three years, a complete and accurate record of all capacity and energy purchases made to provide this ancillary service. For a Transmission Customer s load and/or generation located in the Transmission Provider s Control Area, the Transmission Customer s Operating Reserve Requirement shall be determined in accordance with applicable WECC and Northwest Power Pool (NWPP) guidelines. Currently, these guidelines require minimum operating reserves equal to the sum of (i) five percent (5%) of hydroelectric or wind generation dedicated to the Transmission Customer s firm load responsibility, (ii) seven percent (7%) of non-hydroelectric generation dedicated to the Transmission Customer s firm load responsibility, and (iii) any power scheduled into the Control Area which can be interrupted on ten (10) minutes notice. The Transmission Customer s Spinning Reserve Requirement and Supplemental Reserve Requirement shall also be determined in accordance with the applicable WECC and NWPP guidelines. Currently, these guidelines require minimum spinning reserves equal to fifty percent (50%) of the minimum operating reserve requirement. The balance of the minimum operating reserve requirement may be met by supplemental reserves. For Operating Reserve Service provided by the Transmission Provider for load and/or generation located outside the Transmission Provider s Control Area, the Transmission Customer s Spinning Reserve Requirement and Supplemental Reserve Requirement shall be specified in the Service Agreement. However, the Transmission Provider is not obligated to provide such service. No energy imbalance charge will be imposed as a result of a Transmission Customer's use of Supplemental Reserve Service. If the WECC or NWPP revise the Operating Reserve guidelines such that the Supplemental Reserve Requirement changes, the Transmission Provider shall file a revised Schedule 6 with the Commission depicting the appropriate Supplemental Reserve Requirement. Issue Date: May 11, 2009.

14 Seventh Revised Volume No. 5 (MT) Substitute Second Revised Sheet No. 81 SCHEDULE 7 Long-Term Firm and Short-Term Firm Point-To-Point Transmission Service The Transmission Customer shall compensate the Transmission Provider each month for Reserved Capacity at the sum of the applicable charges set forth below: 1) Yearly delivery: the maximum charge shall be one-twelfth of the demand charge of $37.92/kW of Reserved Capacity per year. 2) Monthly delivery: the maximum charge shall be $3.16/kW of Reserved Capacity per month. 3) Weekly delivery: the maximum charge shall be $0.7292/kW of Reserved Capacity per week. 4) Daily delivery: the maximum charge shall be $0.1039/kW of Reserved Capacity per day. 5) Discounts: Three principal requirements apply to discounts for transmission service as follows (1) any offer of a discount made by the Transmission Provider must be announced to all Eligible Customers solely by posting on the OASIS, (2) any customerinitiated requests for discounts (including requests for use by one's wholesale merchant or an Affiliate's use) must occur solely by posting on the OASIS, and (3) once a discount is negotiated, details must be immediately posted on the OASIS. For any discount agreed upon for service on a path, from point(s) of receipt to point(s) of delivery, the Transmission Provider must offer the same discounted transmission service rate for the same time period to all Eligible Customers on all unconstrained transmission paths that go to the same point(s) of delivery on the Transmission System. 6) Resales: The rates and rules governing charges and discounts stated above shall not apply to resales of transmission service, compensation for which shall be governed by section 23.1 of the Tariff. and with Preventing Undue Discrimination and Preference in Transmission Service, Order No. 890-A, Docket No. RM , et al., 73 Fed. Reg (Jan. 16, 2008) FERC Stats. & Regs. 31, 261 (2007).

15 Seventh Revised Volume No. 5 (MT) Original Sheet No. 81A 7) If a Transmission Customer exceeds its Reserved Capacity at any Point of Receipt and/or any Point of Delivery the Transmission Customer shall be charged 200% of the applicable Schedule 7 demand charge (i.e., Yearly, Monthly, Weekly, or Daily) for the sum of the maximum amount that the Transmission Customer exceeds its Reserved Capacity at each Point of Receipt and/or each Point of Delivery during the billing period. 8) Capacity designations at the points of receipt will be inclusive of losses. and with Preventing Undue Discrimination and Preference in Transmission Service, Order No. 890-A, Docket No. RM , et al., 73 Fed. Reg (Jan. 16, 2008) FERC Stats. & Regs. 31, 261 (2007).

16 Seventh Revised Volume No. 5 (MT) Second Revised Sheet No. 82 SCHEDULE 8 Non-Firm Point-To-Point Transmission Service The Transmission Customer shall compensate the Transmission Provider for Non-Firm Point-To-Point Transmission Service up to the sum of the applicable charges set forth below: 1) Monthly delivery: the maximum charge shall $3.16/kW of Reserved Capacity per month. 2) Weekly delivery: the maximum charge shall $0.7292/kW of Reserved Capacity per week. 3) Daily delivery: the maximum charge shall $0.1039/kW of Reserved Capacity per day. 4) Hourly delivery: The basic charge shall be that agreed upon by the Parties at the time this service is reserved and in no event shall exceed $ /kW of Reserved Capacity per hour. 5) Discounts: Three principal requirements apply to discounts for transmission service as follows (1) any offer of a discount made by the Transmission Provider must be announced to all Eligible Customers solely by posting on the OASIS, (2) any customerinitiated requests for discounts (including requests for use by one's wholesale merchant or an Affiliate's use) must occur solely by posting on the OASIS, and (3) once a discount is negotiated, details must be immediately posted on the OASIS. For any discount agreed upon for service on a path, from point(s) of receipt to point(s) of delivery, the Transmission Provider must offer the same discounted transmission service rate for the same time period to all Eligible Customers on all unconstrained transmission paths that go to the same point(s) of delivery on the Transmission System. 6) Resales: The rates and rules governing charges and discounts stated above shall not apply to resales of transmission service, compensation for which shall be governed by section 23.1 of the Tariff. and with Preventing Undue Discrimination and Preference in Transmission Service, Order No. 890-A, Docket No. RM , et al., 73 Fed. Reg (Jan. 16, 2008) FERC Stats. & Regs. 31, 261 (2007).

17 Seventh Revised Volume No. 5 (MT) Original Sheet No. 82A 7) If a Transmission Customer exceeds its Reserved Capacity at any Point of Receipt and/or any Point of Delivery the Transmission Customer shall be charged 200% of the applicable Schedule 8 demand charge (i.e., Monthly, Weekly, Daily or Hourly) for the sum of the maximum amount that the Transmission Customer exceeds its Reserved Capacity at each Point of Receipt and/or each Point of Delivery during the billing period. 8) Capacity designations at the points of receipt will be inclusive of losses. and with Preventing Undue Discrimination and Preference in Transmission Service, Order No. 890-A, Docket No. RM , et al., 73 Fed. Reg (Jan. 16, 2008) FERC Stats. & Regs. 31, 261 (2007).

18 Seventh Revised Volume No. 5 (MT) Second Revised Sheet No. 83 SCHEDULE 9 Generator Imbalance Service Generator Imbalance Service is provided when a difference occurs between the output of a generator located in the Transmission Provider s Control Area and a delivery schedule from that generator to (1) another Control Area or (2) a load within the Transmission Provider s Control Area over a single hour. The Transmission Provider must offer this service, to the extent it is physically feasible to do so from its resources or from resources available to it, when Transmission Service is used to deliver energy from a generator located within its Control Area. The Transmission Customer must either purchase this service from the Transmission Provider or make alternative comparable arrangements, which may include use of non-generation resources capable of providing this service, to satisfy its Generator Imbalance Service obligation. Transmission Provider s agreement is required for any alternative comparable arrangements made by the Transmission Customer to satisfy the balancing requirements that this Schedule 9 is intended to address. Transmission Provider s agreement will not be unreasonably withheld. To the extent the Control Area operator performs this service for the Transmission Provider, charges to the Transmission Customer are to reflect only a pass-through of the costs charged to the Transmission Provider by that Control Area operator. The Transmission Provider may charge a Transmission Customer a penalty for either hourly generator imbalances under this Schedule or hourly energy imbalances under Schedule 4, but may not charge both for the same imbalance. No charge shall apply under this Schedule (1) when an imbalance occurs because the generator producing the energy is providing frequency control service at the request of the Transmission Provider or (2) when an imbalance occurs because the generator producing energy is providing operating (spinning or supplemental) reserves at the request of the Transmission Provider. If comparable arrangements to satisfy a Transmission Customer s Generator Imbalance Service obligation are already in place by agreement between the Transmission Customer and the Transmission Provider, then such agreement supersedes and takes precedence over this Schedule 9. Transmission Provider shall post on its OASIS all generators with comparable arrangements. The Transmission Provider has established a Deviation Band associated with Generation Imbalances of Intermittent Generators of +/- ten percent (10%) of the scheduled transaction (if the Generation Imbalance during an hour is 2 MW or less, such Generation Imbalance will be deemed to be within the Deviation Band), to be applied hourly to any Generation Imbalance that occurs as a result of the Transmission Customer's scheduled transaction(s). The Transmission Customer will compensate the Transmission Provider for all such Generation Imbalance Service. Generation imbalances will be subject to charges set forth below.

19 Seventh Revised Volume No. 5 (MT) Second Revised Sheet No. 84 The Transmission Provider has established a Deviation Band associated with Generation Imbalance which shall be +/- five percent (5%) of the scheduled transaction (if the Generation Imbalance during an hour is 2 MW or less, such Generation Imbalance will be deemed to be within the Deviation Band), to be applied hourly to any Generation Imbalance that occurs as a result of the Transmission Customer's scheduled transaction(s). The Transmission Customer will compensate the Transmission Provider for all such Generation Imbalance Service. Generation imbalances will be subject to charges set forth below. Where the Transmission Customer s scheduled generation exceeds its actual deliveries (Negative Imbalance) but such imbalances are, on an hourly basis, within the Deviation Band, the Transmission Customer shall pay the Transmission Provider 100% of Transmission Provider s System Incremental Cost, defined below, for all energy associated with such Negative Imbalance. Where the Transmission Customer s scheduled generation is less than its actual deliveries (Positive Imbalance) but such imbalances are, on an hourly basis, within the Deviation Band, the Transmission Provider shall pay the Transmission Customer 100% of Transmission Provider s System Decremental Cost for all energy associated with such Positive Imbalance. For Negative Imbalances that are, on an hourly basis, outside the Deviation Band, the Transmission Customer shall pay the Transmission Provider 110% of Transmission Provider s System Incremental Cost for the incremental energy outside the Deviation Band associated with such Negative Imbalance. For Positive Imbalances that are, on an hourly basis, outside the Deviation Band, the Transmission Provider shall pay the Transmission Customer 90% of Transmission Provider s System Decremental Cost for the incremental energy outside of the Deviation Band associated with such Positive Imbalance. An intermittent resource, for the limited purpose of this Schedule is an electric generator that is not dispatchable and cannot store its fuel source and therefore cannot respond to changes in system demand or respond to transmission security constraints. Transmission Provider will post on its OASIS, all generating facilities that meet the definition of Intermittent Generator as defined by this Schedule 9. System Incremental Cost and System Decremental Cost, as used in this Schedule 9, shall be defined as the Transmission Provider s actual cost, which is the hourly weighted average cost incurred under third party agreements for all energy used for system balancing and load following energy, including any fixed charge(s) associated specifically with the procurement of system balancing and load following energy. On the tenth business day of each calendar month, Transmission Provider shall post on its OASIS, the hourly System Incremental and Decremental Cost, the actual energy cost incurred in providing system balancing and load

20 Seventh Revised Volume No. 5 (MT) Substitute First Revised Sheet No. 84A following during the previous calendar month and the total net megawatt hours of energy supplied or received for each hour of the previous month. Transmission Provider will procure or self-provide the products necessary to provide this service. To the extent Transmission Provider does not self-provide this service, it shall (1) solicit and post on its OASIS the notice of offers for long-term products (i.e., agreements with a term of one year or greater) through a Request for Proposal process, (2) file under Federal Power Act Section 205, any agreement with a term of one year or longer under which Transmission Provider purchases and also sells capacity and/or energy, such filing indicating that the agreement will be used by Transmission Provider to provide ancillary services under the Tariff, the costs of which, when accepted by the Commission, will be recovered through a formula rate as calculated above; and (3) post on its OASIS the long-term agreements (i.e., the Federal Power Act Section 205 filing) and any agreement(s) for a term under one year, including any cover letter(s) under any master agreement(s). Transmission Provider will maintain, for a minimum period of three years, a complete and accurate record of all capacity and energy purchases and sales made to provide this ancillary service. Existing qualifying facilities in Transmission Providers control area, which sell energy to NorthWestern Corporation for the purpose of serving NorthWestern s retail load customers and are already included in the imbalance calculation of NorthWestern s retail customers shall not be assessed generation imbalance penalties nor receive generation penalty revenues. All penalties collected from generators during the imbalance settlements will be returned to generators as follows. After the settlements have been completed for the generators, the total penalties will be calculated for each hour and redistributed to those within the Deviation Band for the hour. The amount returned to a generator in the Deviation Band for a given hour will be equal to the generator s total hourly energy divided by the sum of all generation for generators staying within the Deviation Band multiplied by the total penalty dollars for the hour. Penalty dollars billed to Schedule 9 customers will only be returned to Schedule 9 customers. Penalties collected from non-intermittent resources will be returned to non-intermittent resources, and penalties collected from intermittent resources (as defined in this Schedule) will be returned to intermittent resources. If no customer is within the Deviation Band in any hour, the applicable penalty revenues for that hour will be distributed on a pro rata basis to all customers within the Deviation Band for that particular day. Trading or netting of imbalances will not be allowed, except as follows. When a generator owns and/or controls one or more generating plants connected to Transmission Provider s Transmission System and are not Intermittent Generators (as defined above), Issue Date: May 11, 2009

21 Seventh Revised Volume No. 5 (MT) First Revised Sheet No. 84B equal to the generator s total hourly energy divided by the sum of all generation for generators staying within the Deviation Band multiplied by the total penalty dollars for the hour. Penalty dollars billed to Schedule 9 customers will only be returned to Schedule 9 customers. Penalties collected from non-intermittent resources will be returned to non-intermittent resources, and penalties collected from intermittent resources (as defined in this Schedule) will be returned to intermittent resources. If no customer is within the Deviation Band in any hour, the applicable penalty revenues for that hour will be distributed on a pro rata basis to all customers within the Deviation Band for that particular day. Trading or netting of imbalances will not be allowed, except as follows. When a generator owns and/or controls one or more generating plants connected to Transmission Provider s Transmission System and are not Intermittent Generators (as defined above), Transmission Provider will aggregate all hourly generation and schedule values for all generating plants that are not Intermittent Generators to determine a single hourly Generation Imbalance Service Quantity for that Generator. When a generator owns and/or controls more than one generating plant connected to Transmission Provider s Transmission System and at least one of those generating plants is an Intermittent Generator, Transmission Provider will separately aggregate all hourly generation and schedule values for all generating plants that are not Intermittent Generators and those that are Intermittent Generators to determine a single hourly Non-Intermittent Generation Imbalance Service Quantity and a single hourly Intermittent Generation Imbalance Service Quantity for that Generating Party. The netting of hourly Generation Imbalances of Intermittent Generation and Non-Intermittent Generation is not appropriate and will not be allowed. Any generator incurring a generation imbalance resulting from dispatch orders issued by Transmission Provider in its role as the control area operator and/or transmission provider, or any reliability entity with the authority to order generation dispatch in Transmission Provider s control area or otherwise incurring a generation imbalance as a result of compliance with reliability requirements shall pay or receive resulting generation imbalance payments within the lowest applicable deviation band. Transmission Customers Subject to Generation Imbalance Service: Unless alternative comparable arrangements are made to satisfy its Generator Imbalance Service obligation, any party owning and/or controlling generation (Generating Party) within the Transmission Provider s control area is deemed to be a Transmission Customer and must obtain Generator Imbalance Service under the Tariff, regardless of whether or not the Generating Party acquires any Transmission Service or other Ancillary Services from the Transmission Provider.

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