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Xcel Energy proposes replacing Colo. steel mill's coal-fired power with solar

Highlights

Xcel plans to shut 1,426-MW Comanche plant

Will replace power with 240-MW onsite solar plant

Houston β€” Xcel Energy has signed a contract with its largest retail customer in Colorado to replace power the customer gets directly from the utility's nearby coal-fired plant with a 240-MW solar photovoltaic facility to be built at the customer's site.

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Xcel Energy has plans to close its coal-fired Comanche plant, from which New CF&I, a unit of Evraz, has a direct transmission link to its steel mill in Pueblo, Colorado. Evraz said that unless the solar deal is signed it will move its operations, which have been in Pueblo since the late 19th century, out of state.

Xcel Energy spokeswoman Michelle Aguayo said this is the first such contract Xcel has filed under Colorado law that uses customer-sited renewables.

"This is a unique deal, but the Company has filed these types of contracts in the past under the provision of Colorado law that allows for them," Aguayo said in an email Monday.

The utility company plans to shut the 1,426-MW Comanche plant in Pueblo County as an integral part of its Colorado Energy Plan to replace coal-fired resources and meet future energy needs largely with wind and solar energy. Xcel Energy Executive Vice President David Eves said in testimony in support of the plan that the Evraz solar project would illustrate the evolution of Xcel Energy's business. "It is indicative of our move away from coal-fired power and towards zero-emission resources to serve our customers," Eves said.

PROJECT FILING DETAILS

Xcel Energy applied Wednesday to the Colorado Public Utilities Commission for approval of the solar plant, a special energy services agreement and rates the utility said it would provide Evraz to keep the company operating in Pueblo (18A-0569E).

Xcel Energy filed the financial terms of the agreement, such as the cost of the project and the energy it produces "as highly confidential and sought a protective order for this information consistent with Colorado law," Aguayo said.

"There is a fixed rate, but we cannot release details of its escalation or anything beyond that," Aguayo said.

The Evraz agreement is also contingent upon the PUC's approval of the overall energy plan, which an administrative law judge has recommended the commission approve by September 4.

Power to back up the solar facility will come from the grid. Under the agreement, Xcel Energy will provide electric service to Evraz under new fixed rates for 23 years, but the discounted pricing will not be below the cost of providing that service, nor will the agreement negatively impact other customers, the utility said.

The agreement allows the utility to interrupt its own electric service to the mill if needed for grid support during peak use periods, while the solar facility would continue to supply the plant. At other times, Xcel Energy will take excess power from the behind-the-meter solar plant to supply other customers.

The deal will also benefit other customers because they will avoid cost increases that would occur if Evraz were to leave Colorado, according to the utility's application.

EVRAZ'S LONG HISTORY

Alice Jackson, president of Xcel Energy's Colorado subsidiary, known legally as Public Service Co. of Colorado, testified that Evraz has plenty of land at the 1,600-acre mill site for the customer-sited solar facility. Using the utility's net energy metering tariff, the proposed solar facility is the foundation for Evraz's ability to stabilize its electrical rates, she said.

If Evraz were to leave Colorado, about $400 million annually in direct economic benefits would be lost from Pueblo, where the mill employs about 1,000 workers, Jackson said.

A third-party independent power provider will build, own and operate the solar plant, according to Aguayo. The builder was the winning bidder in a competitive process that Xcel Energy jointly undertook with Evraz specifically for that project, but the selected company and other bid information have not yet been made public, she said. The Evraz mill's electric load was also not disclosed.

Evraz Executive Vice President Jerry Reed testified separately that Evraz and its predecessors have supplied iron and steel from the Pueblo site since 1881, when the millworks started producing rails to help open the western US. Today the company recycles metals by melting the equivalent of more than a million cars every year in its massive electric arc furnace, Reed said. The company plans to expand but will move its operations to the southeastern US, where it is promised low, stable electric rates if it cannot secure the solar and stable rate arrangement with Xcel Energy.

"If Evraz makes the investment in Pueblo, it will remain in Colorado for at least the next 50 years," Reed said.

Colorado Governor John Hickenlooper urged support for Evraz's solar project in his January state of the state address, and Xcel Energy noted that state and local government agencies have provided economic incentives for the company to keep its operations in Pueblo.

-- Jeff Stanfield, S&P Global Market Intelligence, and Mark Watson, newsdesk@spglobal.com

-- Edited by Gail Roberts, newsdesk@spglobal.com