EVRAZ wants assurances of low electricity prices before committing to a $500 million upgrade and expansion of its Pueblo steel mill, according to publicly available comments by utility and state officials.

Without the guarantee, EVRAZ could pick another state for the project and eventually close the Pueblo mill, according to officials. The mill employs an estimated 1,000 workers.

David Eves, the Colorado president of Xcel Energy, outlines much of the situation in his Nov. 28 written testimony filed with the state Public Utilities Commission as part of Xcel's latest rate case before the PUC.

EVRAZ is Xcel's largest retail customer in Colorado.

"Evraz has been considering its future in Pueblo for some time with potential outcomes ranging from making substantial new capital investments to relocating (the) Pueblo operation to another location outside of Colorado," Eves states in his testimony.

A copy of his full statement is available online at Public Utilities Commission E-Filing website at dora.state.co.us/pls/efi/EFI.homepage.

The proposed EVRAZ expansion recently was disclosed as part of the state Economic Development Commission's pledge of up to $17.3 million in economic development incentives toward the project.

The state panel did not identify EVRAZ by name, but its description of the $500 million project fits only the Pueblo mill. The project seeks to enable the mill to add an undisclosed product line and would add 200 jobs, according to state documents.

EVRAZ has offered little public comment on the expansion proposal or its talks with Xcel. Pueblo Economic Development Corp. officials declined to comment, citing the organization's confidentiality policies.

On Friday, EVRAZ North America, based in Chicago, repeated its statement from a week ago: "Evraz North America assesses growth options and asset upgrades on a regular basis but has no specific announcements at this time."

Complicating the negotiations, the talks come amid Xcel's proposal to demolish two of the three Comanche Power Station coal-fired power generation units and replace them with natural gas-, wind- and solar-powered energy.

The Comanche station is located close to the EVRAZ Pueblo plant and its location and use of coal was chosen in part to benefit EVRAZ and keep its electricity costs competitive.

Eves, in his written testimony to the PUC, sought to offer assurances that Xcel can accomplish the estimated $2.5 billion switch to natural gas, wind and solar and also guarantee EVRAZ low electricity prices in the future.

One idea calls for the construction of a 175-megawatt solar farm on EVRAZ Pueblo's property, Eves said. The project was loosely referenced at a PUC public hearing about Xcel's general plans on Thursday night in Pueblo.

The proposed EVRAZ solar farm appears to be separate from another proposed solar project: An unnamed India company's interest in building a 700-worker solar panel factory and large solar farm in Pueblo. The state panel also recently awarded state economic development incentives in hopes of landing that project.

An additional complication comes from Colorado's electricity regulation framework.

In Colorado, final decisions on rates, plant construction and energy sources at Xcel Energy and Black Hills Energy -- the state's two regulated utilities -- rest with the governor-appointed three-person PUC and not with the two utilities. In the case of Xcel's request, the PUC also will weigh the feedback and any potential rate challenges it receives from Denver metro-area residents and businesses, which are the utility's other primary customers.

The PUC review process generally moves slowly, often taking months or years to study and consider major projects and resolve any legal challenges. Xcel itself isn't yet ready with a firm plan: Eves said it will likely be mid-2018 before Xcel presents the PUC with more details and any possible EVRAZ rate agreement.

The stakes are high for Xcel as well.

If EVRAZ were to close the Pueblo mill, the move would not only represent the loss of Xcel's largest Colorado customer but also would require the utility to re-examine its long-term electricity supply needs, including the scope of its current planning, Eves said.

The loss of EVRAZ also could impact Xcel's rates in the Denver area.

EVRAZ is open to considering Xcel's plans but isn't yet ready to commit, Eves said in his testimony.

"While it is early in the confidential discussions and EVRAZ's feasibility investigation, EVRAZ is potentially interested in installing a solar generation resource at is facility in Pueblo," Eves said.

In general, federal tax credits along with improved efficiency in wind and solar power generation are making renewable energy options more cost-effective and competitive with coal and natural gas, energy industry analysts said.

For its part, Minnesota-based Xcel, the nation's leading utility in the switch to renewable energy, has said that it seeks to move more quickly than usual to close the two Comanche units and boost its renewable energy portfolio in order to capture the available tax credits, some of which are set to expire within a few years.

The utility is confident it can make the switch workable and cost-effective for EVRAZ, Eves said.

"Today we are looking at a potential solar facility designed to meet this large customer's needs. It is indicative of our move away from coal-fired power and toward zero-emission resources to serve our customers," he said.

ddarrow@chieftain.com