HELENA -- Natural gas rates for NorthWestern Energy's 160,000 customers are going up 14 percent next month, reflecting another big jump in market prices the utility says it must pay for gas.

In fact, NorthWestern had asked to increase rates 22.5 percent on Jan. 1, saying the price hike is needed to cover costs it will incur buying gas for customers over the next six months.

But the Montana Public Service Commission on Wednesday voted 3-2 to adopt the lower increase, with the majority not convinced the full increase is justified.

Commissioner Tom Schneider, D-Helena, said earlier statements by NorthWestern indicate the company should have had more lower-cost gas in storage for the winter.

"You've got to show me how that stacks up," he said, noting that a hearing on gas rates is expected in late February. "And it doesn't for me."

When this latest increase takes effect Jan. 1, NorthWestern customers will have seen a 40 percent increase in natural gas rates since June.

For an average household, the latest increase is about $16.50 per month -- although it could be much higher if that household is not on budget billing and has high consumption during the coming winter months.

The 40 percent increase represents an average monthly increase of about $37.

NorthWestern officials said Wednesday the price increases are tied to record-high market prices for natural gas, which the company must buy from third-party suppliers and then provide to customers.

NorthWestern owns no natural gas wells and makes no profit off the buying and selling of the actual commodity, company officials said. However, it does make money off the delivery charges.

"The bottom line is rates are higher than anyone would like to see them," said John Hines, director of energy supply for NorthWestern. "We're trying to manage them in a way that minimizes the impact to everybody."

Hines said the company bought about half the amount of gas needed for the winter earlier this year, at prices lower than the current market.

But NorthWestern still must buy additional gas on the market, where prices have shot up in recent weeks, leading the company to believe it will need more money to cover its costs through next June, he said.

The company said without the larger increase, by next June it will be short $12.7 million needed to cover gas-purchasing costs.

If the PSC doesn't allow recovery of those costs now, the company may ask to have them folded into higher rates next fall, company officials said.

The Public Service Commission staff had recommended adoption of the larger increase, saying the company is entitled to recover its costs for buying gas.

"We don't like the rates; we don't like that they're high," said utility analyst Dave Burchett. "I'm as disgusted as anyone else. But that's what the figures are showing. We can't ignore it."

Still, Commissioner Brad Molnar, R-Laurel, said he wants the commission to review how NorthWestern arranged contracts to buy gas for this winter.

"It's a matter of whether they acted prudently," he said. "It's not a matter of whether the tracker (of current costs) adds up."

Some commissioners noted that natural gas rates charged by Montana's other two gas utilities, Energy West of Great Falls and Montana-Dakota Utilities, are lower than what NorthWestern will be charging in January.

Burchett, however, said he wouldn't be surprised to see Energy West and MDU ask for higher prices in the coming weeks, because they're buying gas on the same inflated market.

Market prices for natural gas are hitting $12 per dekatherm in the region and as much as $14 in other parts of the country.

An average household served by NorthWestern consumes about 120 dekatherms a year.

The rate approved Wednesday for NorthWestern customers is $10.36 per dekatherm. That's up from $6.51 a dekatherm in June and $6.03 per dekatherm last January.

Consumers pay an additional $3.40 per dekatherm for delivery costs.