NorthWestern Energy, which serves 320,000 customers in Montana, has the highest rates of any major utility in the region, a survey by the Lee Newspapers found. NorthWestern’s residential customers pay 9.59 cents per kilowatt hour, a penny higher than the second-highest rate and 60 percent more than the lowest-cost utilities in Montana’s neighboring states. And the utility’s rates have climbed steadily over the past few months as NorthWestern phased in the cost of a new, more expensive contract to buy power from PPL Montana. The contract takes effect July 1. “We intentionally set it up to be very gradual, so that we could transition into a more stable cost structure for customers,” NorthWestern spokeswoman Claudia Rapkoch said in a Lee State Bureau story Monday. The day the new contract takes effect, NorthWestern expects to reduce its rates slightly to 9.39 cents per kilowatt hour, because the gradual increases over the past few months ended up collecting more money than the utility needed to cover its costs, Rapkoch said. Rapkoch said the main reason for NorthWestern’s high rates is simple: It is the only major utility in the region that doesn’t own any power plants, which often provide electricity at costs below the market price. After utility deregulation in Montana, NorthWestern’s predecessor, Montana Power Co., sold its power plants to PPL Montana in 1999. That means NorthWestern must buy from the market all of the power needed to serve its electric customers _ and that regional market has been trending upward for most of the past several years. “We’re the only utility in the region that is completely subjected to market rates,” Rapkoch said. She also said NorthWestern isn’t making any money off the rising prices, because it just passes that cost on to the consumer. NorthWestern makes its money on the delivery costs, the rates for which haven’t increased since 2000. “That is one of the hardest things to communicate to customers: Even though their bills have increased due to (electricity) supply costs, that money doesn’t end up in NorthWestern’s pocket,” Rapkoch said. However, NorthWestern does plan to ask for a rate increase later this year on its delivery charges, potentially increasing total rates further. When Montana passed its utility deregulation law in 1997, Montana Power Co.’s residential rates were about 6 cents per kilowatt hour, which was somewhere in the middle of the pack for the region. NorthWestern bought Montana Power’s utility operations in 2002. Since a rate freeze for NorthWestern’s Montana customers ended in 2002 and the company had to buy its power on the open market, those rates have since climbed nearly 60 percent, making them the highest in the region. At the same time, Montana’s utility deregulation law exempted the state’s other major electric utility: Montana-Dakota Utilities, which has about 24,000 customers in eastern Montana. In 1997, MDU rates in Montana were about 7 cents per kilowatt hour. Now, 10 years later, they are unchanged, but MDU officials said they’ll ask for a rate increase this month. It will be their first electric rateincrease request in Montana in 20 years. This year, the Montana Legislature passed a law allowing NorthWestern to build or own its own regulated power plants, and dedicate that power to Montana customers. The company was the driving force behind the measure, saying ownership of power plants could partly undo deregulation by giving customers a regulated, reliable source of electricity at a stable cost.