Cascade: The Trickle-Down Effect of Take-or-Pay

✍ Scribed by Willett, Robert E.

• Publisher: John Wiley and Sons
• Year: 2007
• Weight: 373 KB
• Volume: 4
• Category: Article
• ISSN: 0743-5665
• DOI: 10.1002/gas.3410040804

✦ Synopsis

In 1986 Cascade Natural Gas, a $200-million (figure 1 ) local distribution company in the Northwest, saw earnings plummet by 85 percent. Cascade lagged largely because of warmer weather and because during much of the year, the company could not get gas from its pipeline supplier at rates that would compete with fuel oil. In Cascade's markets, fuel oil was then as low as $7.00 a barrel, equivalent to $1.10 a million Btu's, generally much cheaper than Cascade's gas, for which the company never paid less than $1.94 a million Btu's.

Had Cascade been able to buy cheaper gas, which was available on the spot market, the company would have saved some market share. But from August 1986 through early February 1987, Cascade could not get spot-market gas: the pipeline that supplies the company, Northwest Pipeline, a subsidiary of the Williams Companies, of Tulsa, Oklahoma, had shut ofliransportation of spot gas. And Cascade had no help from the Federal Energy Regulatory Commission: according to Donald E. Bennett, Cascade's vice president, finance, whom I interviewed in mid-January