HELENA -- NorthWestern Energy's residential customers in Montana are now paying the highest electricity rates in the region, a comparison by the Lee Newspapers State Bureau shows.

As of this month, the 300,000 homeowners on NorthWestern's electric system in Montana are paying 8.83 cents per kilowatt hour (kWh) -- a 6 percent increase over last month.

That translates into about $75 a month for electricity, based on an average monthly consumption of 800 kwh.

It also represents a 50 percent increase in NorthWestern's electric rates since the 1997 Legislature passed Montana's electric utility deregulation law, or more than twice the rate of inflation.

John Hines, director of energy supply for NorthWestern, said Friday that electric rates are increasing because the company owns no power plants, and must buy virtually all of its power on the open market.

"If our resources hadn't been sold off by Montana Power Co., we would still be one of the lowest-cost utilities,'' he said. "We have to buy 80 percent of our customers' needs from the (wholesale) market.''

Wholesale market electricity prices have been rising in recent months, in part because of growing regional demand and rising natural gas prices, which affect electricity prices.

Electric rates charged by NorthWestern and its predecessor, Montana Power Co., used to be in the middle of the pack in the region. But since the full effects of deregulation began mid-2002, those rates have slowly climbed to the top.

Here's a closer look at what the State Bureau comparison found, examining 12 major electric utilities and co-ops in Montana and six surrounding states:

n NorthWestern charges the highest per-kWh rate at 8.83 cents, followed by Portland General Electric at 8.24 cents. All rates are based on consumption of 800 kwh per month, for residential customers.

n The lowest rate in the region is Avista Utilities of Spokane, Wash., which charges 5.1 cents per kWh for a customer using 800 kWh per month. A monthly bill for an Avista customer at that level is $46, compared with $75 for NorthWestern.

Most major electric utilities and co-ops in the region charge from 6 cents to 7 cents per kWh.

n The monthly bill for a Portland General customer at 800 kWh is slightly higher than NorthWestern, because PGE's also has a per-customer monthly charge of $10, compared to only $4.78 per month for NorthWestern's customers in Montana.

However, once consumption passes about 900 kWh, the monthly bill for NorthWestern customers is higher.

n Like NorthWestern, several utilities in the region have increased electric rates in the past two years. However, half of them have seen rates either decline or stay the same since mid-2003.

One of those whose rates have declined is Flathead Electric Co-op, which serves about 50,000 customers in northwestern Montana.

Flathead was the only electric co-op in Montana that entered the deregulated market in the late 1990s, and got stuck with a relatively high-priced contract for some of its power. But the co-op has since recovered and dropped its rates since mid-2003, from about 6.2 cents per kWh to 5.9 cents now. It gets a good chunk of power from low-priced Bonneville Power Administration, the federal power-marketing agency headquartered in Oregon.

"We don't see any chance of having a rate increase in the foreseeable future,'' said Stephanie Wallace, manager of community affairs for the co-op. "We're telling customers it's an item they can safely budget for.''

Flathead still has a relatively high monthly per-customer fee of $16, which means a monthly bill at 800 kWh is about $63 -- still among the higher costs in the region.

Unlike NorthWestern, nearly all other regional utilities still own power plants that provide them with reliable, lower-cost electricity.

After Montana passed its 1997 deregulation law, Montana Power Co. decided to sell off its power plants, which had provided low-cost power for MPC customers for years.

Critics of deregulation say the sale was a fatal mistake.

"We're the only ones (in the region) who entered into this weird idea that selling off the hydroelectric system (and other plants) would reduce our rates,'' said state Sen. Ken Toole, D-Helena. "The bottom line is it made us a lot more vulnerable to markets that are full of profiteering and bad business practices.''

Scott Simms, a spokesman for Portland General Electric, said his company and other utilities in the Northwest have been doing just the opposite in recent years: Trying to buy or build generation, so they're less exposed to the volatile market.

"We're still trying to get toward more energy independence,'' he said.

Rep. Alan Olson, R-Roundup, said he plans to reintroduce a bill next year that would allow NorthWestern to acquire or build power plants and move back toward being a more traditional utility.

"That's what we need,'' he said. "There are a lot of things that could make it work.''

NorthWestern didn't fully support Olson's bill last year, but may give it a look next time, Hines said.

"We're either going to have to find some very low-cost contracts with third parties or develop (power plants),'' he said.