HELENA - Next week, state utility regulators will give NorthWestern Energy the green light to build a new natural gas-fired power plant near Anaconda - a plant estimated to raise the average homeowner's electric rates by $35 to $50 a year in 2011.

The Public Service Commission has given preliminary preapproval to the beginnings of the plant, and will vote on a final, formal order next week.

Commissioners endorsing the Mill Creek Generation Station acknowledge the power is expensive compared to what consumers pay now for a similar product bought on the open market.

But those prices may change, and it's better to have a regulated and reliable long-term source of electricity owned by the company and dedicated to Montana consumers, they say.

"This is what all of our decisions are like," says Commissioner Ken Toole, D-Helena. "You end up saying, ‘I know this is expensive as hell. But, what about the market? You don't know what it will be.' "

All four Democrats on the commission - Toole, Gail Gutsche of Missoula, John Vincent of Gallatin Gateway and Greg Jergeson of Chinook - are supporting the plant.

The one commissioner who voted against the proposal - Republican Brad Molnar of Laurel - says the PSC should have looked more closely at alternatives that might be less costly.

"This thing is going to be possibly the most expensive ‘regulating reserve' plant in the nation," he says. "It is a blind, no-bid giveaway. All I asked for was information on alternatives, and I was hammered down 4-1."

Claudia Rapkoch, spokeswoman for NorthWestern in Butte, says the company "has a very good idea" of what plant costs will be, and that some of the construction and material contracts are still under negotiation.

"We're very comfortable that the final price will be very near the $201 million that we (proposed)," she says. Construction is scheduled to begin later this year, at a site several miles southeast of Anaconda.

The Mill Creek project, which NorthWestern submitted to the PSC for approval last year, is a 150-megawatt plant providing what's known as "regulating reserve" or "balancing" power.

Electric utilities need a source of power they can draw on to keep their system in electrical balance, to fill in gaps caused by fluctuating demand for power or intermittent power sources such as wind.

NorthWestern, whose predecessor Montana Power Co. sold all its power plants in the wake of the 1997 deregulation, has been buying balancing power on the open market, from power generators in neighboring states and Canada.

It's paying as much as $30 million a year for that power now, but says it's increasingly difficult and more expensive to purchase this type of power on the open market.

"The markets are getting liquid and even tighter," Rapkoch says. "We don't believe those (third-party) contracts will even exist in a few years."

The company proposed building Mill Creek to have its own, regulated source of this power - and a new source of profit for the company. Yet the cost to ratepayers of this new power is estimated at $68 million a year, or more than twice the current cost.

PSC and company analysts estimate rates will increase $3 to $4 a month for the average homeowner when the plant goes online in early 2011.

The precise cost, however, isn't yet known. The PSC is approving rate recovery of only $81 million of the plant's $200 million cost, requiring NorthWestern to come back and ask for approval of remaining costs.

Toole says construction costs should be less than originally projected, because construction material and other costs are cheaper in the down economy.

Molnar says he's not confident the PSC will properly scrutinize the costs, given that it endorsed the Mill Creek plant without demanding firmer numbers from NorthWestern on alternatives or building contracts.

Toole and Vincent also hope the plant will help spur wind power development, by generating the reserve power needed to offset intermittent wind power.

"That is something that I'm going to watch very carefully as we move forward on that," Vincent says.

Vincent says he voted for the plant primarily because it's another step in rebuilding NorthWestern as a "vertically integrated utility," which owns the plants that generate power reserved for its customers - rather than having to buy most power on an unpredictable open market.