The company, which has previously hinted at such a project, said the power line would be operated outside of its regulated utility business and would have no effect on consumer electric rates.
A Montana Public Service Commission member, however, said the project could have an indirect effect on prices.
NorthWestern said it spent several years evaluating the $800 million project, and believes more regional energy development will follow. If siting and environmental permitting go as planned, the project could be finished by 2013, the company said.
The 500 kilovolt transmission line, called the Mountain States Transmission Intertie, will help pending power plants in Montana reach customers, the company said.
"This is one of the first major transmission projects that we've undertaken since the mid-1980s and underscores our commitment to Montana and the region," NorthWestern President and CEO Mike Hanson said.
The line would stretch about 400 miles, from either Townsend or Garrison, to southern Idaho. Towers would be around 110 feet to 130 feet tall.
PSC Commissioner Ken Toole said the project could face stiff resistance from people who don't want a power line running near their homes in western Montana.
He said it's unclear whether it will impact ratepayers served by the utility.
"My impression is that this is a power line that is predominantly about export and making money on bulk transactions," Toole said.
Toole said ratepayers should be protected by "ring-fencing" if the proposed transmission line proves to be a financial disaster for NorthWestern.
Toole said it's possible the transmission line, along with a separate line proposed between Great Falls and Alberta, could help electricity customers by making the regional grid more efficient.
A NorthWestern spokeswoman said the company has carefully researched its customer base for the project, which includes new and emerging power plants.
"They need additional paths to market, and this is one way to get them to market," Claudia Rapkoch said.
NorthWestern is still seeking a sale to an Australian company, a proposal that the PSC has said it will turn down. NorthWestern has not said if it will appeal that decision.
Rapkoch said the proposed transmission line has no bearing on the merger.