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Colorado approves agreement for steel mill to replace coal plant with solar

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Colorado approves agreement for steel mill to replace coal plant with solar

Colorado regulators approved an EVRAZ PLC subsidiary's unique agreement with Xcel Energy Inc. for the steel company to have a 240-MW solar plant built on its mill property in Pueblo, Colo.

Xcel Energy subsidiary Public Service Co. of Colorado on Aug. 15 applied to the Colorado Public Utilities Commission for approval of a special energy services agreement and rates the utility said would enable EVRAZ to use power generated by the solar plant for its operations.

EVRAZ is Xcel Energy's largest retail electric customer in Colorado and now receives service directly through transmission lines from the Comanche Generating Station. Xcel Energy plans to close two units of the coal power plant with a total capacity of 660 MW as part of its Colorado Energy Plan.

The commission on Sept. 10 approved the plan, which Xcel Energy said was essential for clearing the path for EVRAZ to build the solar plant. Allowing solar to replace coal will free up transmission capacity for the solar plant to export surplus energy and for the mill to receive power from other sources when solar output diminishes, according to Xcel Energy spokesman Mark Stutz.

An as yet unnamed third-party independent power producer will build and own the solar facility for EVRAZ, and no information was available as to when the plant will be built. Details remain confidential because the EVRAZ board of directors has not yet approved the facility, Stutz said.

EVRAZ said its ability to maintain stable energy costs at its Pueblo mill is critical to its decision to continue operating that facility, which employs about 1,000 workers. With the pending closure of the coal plant, EVRAZ alternatively planned to move its mill operations to the southeast U.S.

That prompted Xcel Energy and state officials, including Gov. John Hickenlooper, to make arrangements to keep EVRAZ from moving. The quick, unanimous Oct. 3 vote of the three-member commission was indicative of the broad support for EVRAZ's deal with Xcel Energy.

The commissioners dismissed concerns expressed by their own staff that the 23-year agreement between the utility and the steel company includes a contract default provision in which Xcel Energy would assume control of the solar facility and put it in its customer rate base if the mill closes. Noting that Xcel Energy was not guaranteed to have a future need for the resource, staff advised the commissioners to remove that provision even though it is part of the agreement.

Commissioner Frances Koncilja said ratepayers also would have faced risks if EVRAZ left the state in the event the contract was not approved. Commission Chairman Jeffrey Ackermann noted that risks exist any time special contracts are negotiated, especially with a unique and new resource. In this case, Ackermann said he saw it as a creative way to maintain a critical customer for the benefit of everyone in the state.

Xcel Energy's Colorado Energy Plan calls for 525 MW of new photovoltaic solar and 225 MW of storage in the Pueblo area, but the EVRAZ solar project is not included in that plan.

Under the special services contract, Xcel Energy will buy any energy the EVRAZ solar facility generates that the mill cannot use under a net energy metering tariff and will provide power to the mill under an interruptible contract when the solar output drops, according to testimony of EVRAZ Executive Vice President Jerry Reed.

The steel manufacturer operates the mill through its subsidiary, CF&I Steel LP, which in turn is a subsidiary of EVRAZ North America PLC.