By Cy Ryan (contact)

Fri, Apr 11, 2008 (2 a.m.)

Carson City — An $8.3 million biomass plant that was supposed to generate electricity by burning wood at a state prison in Carson City has been a failure so far.

The staff at the Northern Nevada Correctional Center is not qualified to run the plant and the prison has not been able to collect enough wood to keep it operating, officials said.

When the plant is shut down, the prison loses $200,000 a month — the cost of buying energy and paying off the construction loan.

The Legislature’s fiscal analysis division estimates the plant will lose money for 17 years. But Lorraine Bagwell, deputy director of support services for the Corrections Department, said the plant “should pay for itself in two years.”

The department asked the Legislative Interim Finance Committee on Wednesday to accept $540,000 from APS Energy Services, the company that built the plant, to hire Universal Energy to run the facility until June 2009.

Howard Skolnik, director of the Corrections Department, said part of the problem is that “nobody was in charge” at the plant.

“It was run by a committee,” he said. “No single person was accountable.”

The plant, opened in September, was supposed to replace existing electric and natural gas service at the prison and the nearby Stewart Conservation Camp, with excess power to be sold to Sierra Pacific Power Co.

In a letter to the state Budget Division in February, Bagwell said the operation had been shut down for two months, “causing deteriorating conditions of the plant equipment.” The closure also left the state in danger “of breaching our contract with Sierra Pacific ... for the delivery of renewable energy credits.”

Although the Interim Finance Committee accepted the $540,000 payment, some legislators said they doubt the plant will ever pay for itself.

•••

A 1971 law that treats in-state and out-of-state insurance agents differently is unconstitutional, a federal appeals court has ruled.

State Insurance Commissioner Alice Molasky-Arman said the 9th U.S. Circuit Court of Appeals decision will harm consumer protection in areas from auto policies to workers compensation.

The law at issue requires out-of-state insurance agents who sell policies to Nevadans to get the documents countersigned by a Nevada agent, who then receives 5 percent of the premium.

The law is unconstitutional, the court said, because it discriminates against licensed insurance agents in other states simply because they do not live in Nevada.

The suit to invalidate the law was filed by the Council of Insurance Agents & Brokers, a national trade association that represents more than 250 of the nation’s largest insurance agencies and brokerage firms.

Upholding a decision by U.S. District Judge James Mahan in Las Vegas, a three-judge panel of the 9th Circuit court rejected Molasky-Arman’s argument that the law would help the state collect the insurance tax and protect consumers.

The insurance tax, which generates more than $600 million during a two-year period, is the third-largest contributor to the state treasury. The tax — 3.5 percent of the premium — is passed on to consumers.

Molasky-Arman said the law benefits Nevada by creating a record of all transactions so the state can collect the premium tax. But in his ruling, Mahan noted: “Modern technology and business practices make records in the possession of nonresident agents and brokers just as accessible as records in the possession of resident agents.”

Molasky-Arman could ask that the case be heard by the entire 9th Circuit, but has not yet decided whether to do so.