SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2000

                         Commission file number 0-21304

                        RIDGEWOOD ELECTRIC POWER TRUST II
             (Exact Name of Registrant as Specified in Its Charter)

         Delaware                                 22-3206429
  (State or Other Jurisdiction            (I.R.S. Employer Identification No.)
of Incorporation or Organization)

c/o Ridgewood Power LLC, 947 Linwood Avenue,
 Ridgewood, New Jersey                                     07450
 (Address of Principal Executive Offices)               (Zip Code)

Registrant's Telephone Number, including Area Code:  (201) 447-9000

Securities Registered Pursuant to Section 12(b) of the Act:  None

Securities Registered Pursuant to Section 12(g) of the Act:

Shares of Beneficial Interest (Title of Class)

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ X ]

     There is no market for the Shares. The aggregate capital contributions made
for the Registrant's  voting Shares held by  non-affiliates of the Registrant at
March 30, 2001 was $23,537,750.

Exhibit Index is located on Page 39.
<PAGE>

PART I

Item 1.  Business.

Forward-looking statement advisory

         This Annual Report on Form 10-K, as with some other  statements made by
the Trust from time to time, has  forward-looking  statements.  These statements
discuss business trends and other matters relating to the Trust's future results
and the business  climate and are found,  among other places,  at Items 1(c)(3),
1(c)(4), 1(c)(6)(ii) and 7. In order to make these statements, the Trust has had
to make assumptions as to the future.  It has also had to make estimates in some
cases about events that have already  happened,  and to rely on data that may be
found to be inaccurate at a later time. Because these forward-looking statements
are based on assumptions, estimates and changeable data, and because any attempt
to predict the future is subject to other  errors,  what happens to the Trust in
the future may be materially different from the Trust's statements here.

         The Trust therefore warns readers of this document that they should not
rely on these  forward-looking  statements without considering all of the things
that could make them  inaccurate.  The Trust's other filings with the Securities
and Exchange  Commission and its Confidential  Memorandum  discuss many (but not
all) of the risks and  uncertainties  that might  affect  these  forward-looking
statements.

         Some of these are changes in political and economic conditions, federal
or state  regulatory  structures,  government  taxation,  spending and budgetary
policies,  government  mandates,  demand for electricity and thermal energy, the
ability of customers to pay for energy  received,  supplies and prices of fuels,
operational status of plant,  mechanical  breakdowns,  availability of labor and
the  willingness  of  electric  utilities  to perform  existing  power  purchase
agreements in good faith.  Some of these cautionary  factors that readers should
consider are  described  below at Item 1(c)(4) - Trends in the Electric  Utility
and Independent Power Industries.

         By making these  statements now, the Trust is not making any commitment
to revise these  forward-looking  statements to reflect events that happen after
the date of this document or to reflect unanticipated future events.

(a)  General Development of Business.

         Ridgewood  Electric  Power Trust II (the  "Trust")  was  organized as a
Delaware  business trust on November 20, 1992 to participate in the development,
construction   and  operation  of  independent   power   generating   facilities
("Independent   Power  Projects"  or  "Projects").   Ridgewood   Energy  Holding
Corporation  (Ridgewood  Holding"),  a Delaware  corporation,  is the  Corporate
Trustee of the Trust.

         The Trust sold shares of  beneficial  interest in the Trust  ("Investor
Shares") in a private placement offering (the "Offering") which ended on January
31,  1994,  at which  time it had raised  approximately  $23.5  million.  Net of
offering fees,  commissions and expenses,  the Offering  provided  approximately
$19.4 million of net funds  available for  investments  in the  development  and
acquisition  of Projects.  The Trust has 483 record  holders of Investor  Shares
(the  "Investors").  As  described  below in Item  1(c)(2),  the Trust  (and its
subsidiaries)  owns equity  interests in four  Projects  and a debt  interest in
another.

         The Trust made an  election  to be treated as a  "business  development
company" under the Investment  Company Act of 1940, as amended (the "1940 Act").
On February 27, 1993, the Trust notified the Securities and Exchange  Commission
of such  election  and  registered  the  Investor  Shares  under the  Securities
Exchange  Act of 1934,  as amended  (the "1934  Act").  On April 29,  1993,  the
election and registration became effective.

         The Trust is organized  similarly to a limited  partnership.  Ridgewood
Power LLC (the "Managing Shareholder"), a Delaware limited liability company, is
the Managing  Shareholder of the Trust. For information  about the merger of the
prior Managing  Shareholder,  Ridgewood Power Corporation,  into Ridgewood Power
LLC,  see Item 10(b) - Directors  and  Executive  Officers of the  Registrant  -
Managing Shareholder.

         In  general,  the  Managing  Shareholder  has the  powers  of a general
partner  of a limited  partnership.  It has  complete  control of the day to day
operation of the Trust and as to most acquisitions.  The Managing Shareholder is
not regularly  elected by the owners of the Investor  Shares (the  "Investors").
The Managing Shareholder and the Independent Trustees of the Trust meet together
as the Board of the  Trust and take the  actions  that the 1940 Act  requires  a
board of directors to take for a business  development company. The Board of the
Trust also provides general supervision and review of the Managing  Shareholder,
but does not have the power to take action on its own. The Independent  Trustees
do not  have any  management  or  administrative  powers  over the  Trust or its
property  other than as expressly  authorized or required by the  Declaration of
Trust of the Trust (the "Declaration") or the 1940 Act.

         Ridgewood  Holding is the Corporate Trustee of the Trust. The Corporate
Trustee  acts  on  the  instructions  of  the  Managing  Shareholder  and is not
authorized to take independent  discretionary action on behalf of the Trust. See
Item 10. -  Directors  and  Executive  Officers  of the  Registrant  below for a
further description of the management of the Trust.

The following chart summarizes some of these relationships.

         Robert E.  Swanson and certain  Swanson  family  trusts own 100% of the
equity of the following entities:

o Ridgewood Securities Corporation - Placement Agent ("Ridgewood Securities");
o Ridgewood Power  Management,  LLC - Operates the Trust's Projects and those of
the other six trusts ("RPM");
o  Ridgewood  Power  LLC -  Managing  Shareholder  of seven  trusts  ("Ridgewood
Power");
o Ridgewood Energy Holding  Corporation - Corporate  Trustee for all six trusts;
and
o Ridgewood  Capital  Management LLC - A marketing  affiliate and manager of six
venture capital funds ("Ridgewood Capital")

     Mr.  Swanson has sole voting and  investment  power over the Swanson family
trusts and is the sole manager, chief executive officer of the above entities.

         In  addition,  the  Trust  is  affiliated  with  the  following  trusts
organized by the Managing Shareholder:

o Ridgewood Electric Power Trust I ("Power I");
o Ridgewood Electric Power Trust III ("Power III");
o Ridgewood Electric Power Trust IV ("Power IV");
o Ridgewood Electric  Power  Trust V ("Power  V");
o The  Ridgewood  Power  Growth Fund (the "Growth Fund"); and
o Ridgewood/Egypt Fund ("Egypt Fund")

(b)  Financial Information about Industry Segments.

     The Trust operates in only one industry  segment:  investing in independent
power generation and similar energy projects.

(c)  Narrative Description of Business.

(1)  General Description.

         The Trust was formed to  participate in the  development,  construction
and operation of Projects that generate  electricity  or related forms of energy
for sale to manufacturers,  utilities and other users. The Trust also may invest
in facilities related to those Projects.

         The Trust has made  equity  investments  totaling  approximately  $10.8
million in four Projects:  (i) a waste-to-energy  generating facility located in
Pittsfield,  Massachusetts  (the  "Berkshire  Project");  (ii) a municipal waste
transfer  station  located in  Columbia  County,  New York,  near the  Berkshire
Project  (the  "Columbia  Project");  (iii)  a  natural  gas-fired  cogeneration
facility  located in Monterey  County,  California (the "Monterey  Project") and
(iv) various diesel and natural gas-fueled engines used to power irrigation well
pumps in Ventura County, California (the "California Pumping Project").

         The Trust also  invested  $3.5 million in a district  cooling  facility
located in downtown  San Diego,  California,  that  supplies  chilled  water for
office building central air conditioning systems (the "San Diego Project").  The
Trust sold its interest in the San Diego  Project in June 1997 for $6.15 million
to a subsidiary of a  Minnesota-based  utility.  A portion ($2.7 million) of the
sale price is represented by an 8% secured  promissory note of the buyer payable
monthly through June 25, 2003.

         In  accounting  for its  Projects,  the Trust  treats each Project as a
portfolio  investment  that  is not  consolidated  with  the  Trust's  accounts.
Accordingly,  the revenues and expenses of each Project are not reflected in the
Trust's financial statements and only distributions are included as revenue when
declared.  Accordingly, the recognition of revenue from Projects by the Trust is
dependent upon the timing of a declaration of distributions from Projects by the
Managing Shareholder.  As discussed below and at Item 5. Market for Registrant's
Common Equity and Related Stockholder  Matters,  distributions from Projects may
include both income and capital components.

(2)  The Trust's Investments.

         (i)  Berkshire Project.

         On January 4, 1994, the Trust made an approximately $2.3 million equity
investment  in Pittsfield  Investors  Limited  Partnership,  which was formed to
acquire the Berkshire  Project,  including the assets and business of Pittsfield
Resource  Recovery  Facility,  from Vicon  Recovery  Associates  ("Vicon"),  the
developer and former operator of the facility.  The Berkshire Project is a waste
to energy plant located in  Pittsfield,  Massachusetts.  The Berkshire  Project,
which has been operating since 1981, burns municipal solid waste supplied by the
City of Pittsfield ("Pittsfield"), surrounding communities and other providers.

         The Trust's  partners in the  Berkshire  Project  are  subsidiaries  of
Energy  Answers   Corporation   ("EAC").   EAC  made  an  equity  investment  of
approximately  $1.3  million in the  Berkshire  Partnership  and also  serves as
manager and operator of the facility.

         The  investment  structure  afforded  the Trust a preferred  15% annual
return on its investment  plus a potential  share of any  additional  cash flow.
More specifically,  the Trust is entitled to an annual preferred distribution of
available cash flow,  representing  revenue from the Berkshire  Project,  (after
funding debt  service,  debt  service  reserves and  operating  and  maintenance
expenses)  in an  amount  equal  to 15% of its  investment.  In the  event  that
distributions  are  insufficient  to pay the 15% preferred  distribution  in any
given  year,  the  shortfall  will be payable out of  distributions,  if any, in
subsequent years. After the Trust has received its 15% preferred distribution in
any given year,  EAC is entitled to an annual  management  fee for operating and
managing the facility in an amount equal to $300,000, escalating with inflation.
After  these  initial  distributions  have been made,  the Trust is  entitled to
receive  an  additional  amount  equal to 5% of its  investment  and then EAC is
entitled to receive an additional  amount equal to 10% of the amount  previously
distributed  to it. Any remaining  distributable  cash flow for the year will be
shared equally by the Trust and EAC.

         Ownership  rights to the  Berkshire  project are held under a long term
lease  purchase  agreement  and related non  recourse  industrial  revenue  bond
financing  agreements  among  the  Berkshire  Project,  Pittsfield's  industrial
development authority and others.

         Distributions from the Berkshire Project ceased in the third quarter of
1998 and have not resumed.  In the third quarter of 1998, EAC informed the Trust
that  significant  and undisclosed  cost overruns in the  construction of an ash
handling  system for the  Berkshire  Project had depleted the  Project's  funds,
including  reserve funds for closure of a landfill and other cash reserves.  EAC
believed  that the  Berkshire  Project  could not  continue  operations  without
significant capital injections from its two limited partners, one of whom is the
Trust.  EAC further  advised the Trust that even if the Project were to continue
operations with additional contributed capital,  distributions from Berkshire to
the Trust would cease for an indefinite period. This resulted in large part from
the 1998  closure  of the  Pittsfield  landfill,  which  forced  the  Project to
transport ash to a distant landfill site. Accordingly,  the Trust wrote down the
estimated fair value of the Project to zero as of December 31, 1998.

         The  Berkshire  Project  receives  "tipping  fees"  paid  by the  waste
suppliers  based on the  number  of tons of  waste  delivered  to the  facility.
Tipping fees paid by Pittsfield  are determined  under a long-term  waste supply
agreement,  which  will  remain in effect  until  November  2004,  although  the
agreement  may be cancelled  by either party in June 2002.  Tipping fees paid by
other  waste  suppliers  are  based on the spot  market  (i.e.,  current  market
prices).  The facility  generates  additional  revenue by selling steam produced
from the waste burning process to a nearby paper mill owned by Crane & Co., Inc.
("Crane") under a long-term  contract which will remain in effect until November
2004.  The Crane  paper mill  manufactures  currency  paper  stock used to print
United States currency (as well as currency paper stock for other governments).

     (ii)  Columbia Project.

         On August 31, 1994, the Trust entered into the B-3 Limited Partnership,
with  affiliates of EAC, the same firm with which the Trust  participates in the
Berkshire Project. The Trust made an investment of approximately $4 million into
the B-3 Limited  Partnership  to construct a municipal  waste  transfer  station
located in Columbia County, New York.

         The  purpose  of a transfer  station  like the  Columbia  Project is to
provide a facility where municipal waste collected from nearby towns by smaller,
short  haul  trucks can be  transferred  to  larger,  long haul  trucks for more
efficient  transportation  of  the  waste  to  distant  landfills.  The  primary
customers for the Columbia  Project are local waste haulers who dispose of waste
at local landfills scheduled for closing under state and federal requirements.

         During the  construction  period,  the Trust  received  interest on its
investment  at the  rate  of 12%  per  annum.  The  Columbia  Project  commenced
operations  in January  1995.  The Trust is  entitled  to  receive a  cumulative
priority  return on the Trust  investment of 18% per annum,  with any shortfalls
being carried forward into subsequent years. Thereafter,  EAC affiliates will be
entitled to receive a management fee of $175,000 escalating with inflation.  Any
additional cash flow will be split 50/50 between the Trust and EAC affiliates.

         Returns  at  the  Columbia  Project  have  been  impaired  by  repeated
extensions of the closing  deadlines for some local  landfills.  If waste can be
cheaply deposited at local landfills, there is less demand for consolidating the
waste for transfer to distant sites.  See Item 7 -  Management's  Discussion and
Analysis  of  Financial  Condition  and  Results of  Operations  for  additional
information.

(iii)  Monterey Project.

         On January 9, 1995, the Trust purchased 100% of the equity interests in
the Monterey Project,  which is a 5.5 megawatt  cogeneration  project located in
the City of Salinas, Monterey County, California. The Trust paid a cash purchase
price of approximately $3.8 million and contributed four engine/generator  sets,
valued at $1.3  million,  which were  owned by the Trust and cost  approximately
$1.6  million.  The  Monterey  Project  has been  operating  since 1991 and uses
natural  gas fired  reciprocating  engines to generate  electricity  for sale to
Pacific Gas and Electric Company ("PG&E") under a long term contract expiring in
2020 (the "Power Contract"). Thermal energy from the Monterey Project is used to
provide warm water to an adjacent  greenhouse  under a long- term  contract that
also terminates in 2020.

         The  Monterey  Project is operated on behalf of the Trust by  Ridgewood
Power Management LLC, a New Jersey limited liability  company ("RPM").  RPM is a
service company affiliated with the Managing  Shareholder,  as further described
at Item 10(g) - Directors and Executive Officers of the Registrant RPM.

         The  Monterey  Project  is a  "Qualifying  Facility"  under the  Public
Utility Regulatory  Policies Act of 1978, as amended ("PURPA"),  because it is a
cogeneration  facility that meets PURPA  standards.  Historically,  producers of
electric  power in the United States  consisted of regulated  utilities  serving
end-use retail customers and certain industrial users that produced  electricity
to satisfy their own needs. The independent  power industry in the United States
was created by federal  legislation  passed in response to the energy  crises of
the 1970s.  PURPA,  among other things,  requires utilities to purchase electric
power from Qualifying Facilities, including "cogeneration facilities" and "small
power producers," and also exempts these Qualifying Facilities from most federal
and state  utility  regulatory  requirements.  In  addition,  the price  paid by
electric utilities under PURPA for electricity produced by Qualifying Facilities
is the utility's  avoided cost of producing  electricity  (i.e., the incremental
costs  the  utility  would  otherwise  face to  generate  electricity  itself or
purchase  electricity  from  another  source).  Pursuant  to  PURPA,  and  state
implementation  of PURPA,  many electric  utilities  have entered into long-term
Power Contracts with rates set by contract  formula approved by state regulatory
commissions.  The  Monterey  Project  sells its  output to PG&E  under the Power
Contract with a capacity and energy  payment  determined  pursuant to a contract
formula approved by the California  Public Utilities  Commission  ("CPUC").  The
capacity  and  energy  price paid by PG&E  pursuant  to the Power  Contract  was
determined  pursuant to a contract  formula  approved by the  California  Public
Utilities  Commission  ("CPUC") with the energy payment  originally based upon a
benchmark  energy price  adjusted  for changes over time in a gas index;  the so
called "Short Run Avoided Cost Methodology" or SRAC. Historically,  the contract
formula rates in most Power  Contracts have been  significantly  higher than the
rates the utility  could obtain in a  competitive  market.  In some areas of the
country this still may be true. However,  beginning during the summer of 2000 in
California,  where the Monterey  Project is located,  due to the electric energy
crisis,  competitive  market rates where  significantly  higher than the formula
rates contained in many Qualifying Facilities' Power Contract.

         The  deregulation  legislation  in  California  passed in 1996  allowed
Qualifying  Facilities  to  exercise  a one-time  option to elect to  thereafter
receive  energy  payments  based on the energy  clearing price on the California
Power Exchange ("CalPx"),  a short term day-ahead and day-of energy spot market,
which was created by the  deregulation  legislation.  On September 1, 2000,  the
Monterey   Project   exercised  such  option  and  switched  from  SRAC  payment
methodology to the CalPx energy-clearing  price. Thus, the energy payment earned
by the Project  subsequent  to the  election was  significantly  higher than the
energy payment incorporated in the SRAC formula.  However,  subsequent events in
California,  including  certain orders issued by the Federal  Energy  Regulatory
Commission  ("FERC") have caused the CalPx to suspend  trading as of January 31,
2001 such that no CalPx "energy  clearing price"  currently  exists.  Therefore,
even though the Monterey Project is currently  off-line (see below),  the energy
price that PG&E would pay the Project if  currently  operating  is unclear.  See
Item  1(c)4  for  further   discussion   regarding   current  issues  raised  by
California's electricity crises.

         Currently, and as a result of the deregulation of the California energy
market,  PG&E has  allegedly  suffered  billions of dollars in losses during the
latter  part of  2000  and to date in 2001  and is  teetering  on the  brink  of
bankruptcy.  This  has  resulted  in part  because  PG&E,  like  the  other  two
investor-owned  electric utilities  ("IOUs") in California,  was required by the
1996  deregulation  law  to  sell  50% of its  fossil-fuel  electric  generation
resources  located in California to  unaffiliated  third parties,  although PG&E
sold more than such 50% amount. In addition, the law required that PG&E sell all
the electricity  produced by its remaining electric generation resources to, and
purchase all of its  electric  energy  needs from,  the CalPx.  During the early
years of  deregulation,  this framework  worked well and was profitable for PG&E
because  the  wholesale  price  of  electricity  purchased  from the  CalPx  was
substantially  lower than the  "frozen"  retail price of  electricity  that PG&E
charged its end-use customers. The difference between the two prices was used by
PG&E to recoup  stranded  investments  and pay  dividends  to its  parent,  PG&E
Corporation,  which dividends were then invested in unregulated subsidiaries and
used for other corporate purposes. However, beginning in the summer of 2000, due
to explosive growth of power consumption in California, the lack of new electric
generation,  water and fuel shortages,  and other reasons, the situation changed
dramatically and the CalPx price for electricity was  substantially  higher than
the  retail  price that PG&E was  permitted  by law to  charge.  Therefore,  the
difference  between what PG&E paid for electricity and what it could resell such
electricity for resulted in huge losses. See, Section 4 - Trends in the Electric
Utility and Independent Power Industries.

         Due to the  California  energy  crisis,  PG&E has been unable to pay in
full for electrical  energy and capacity  delivered in December 2000 and January
2001.  Accordingly,  the  Monterey  Project  was unable to pay its  natural  gas
supplier  for the gas  delivered  for  that  months.  In late  January,  the gas
supplier requested assurance of payment before it would agree to provide natural
gas during  February.  Due to PG&E's  financial crises and its inability to pay,
the Monterey Project was unable on its own to provide an acceptable assurance or
to pay the arrears and, as a result, the supplier refused to provide natural gas
beyond February 6, 2001. A number of other small  cogeneration  projects selling
electrical energy and capacity to California utilities have similar problems and
have shut down or expect to shut down their facilities shortly.

         On February 1, 2000,  PG&E made a partial  payment  equal to 15% of the
amount due for  December  2000.  On March 5,  2001,  PG&E made  another  partial
payment  equal  to 15%  of the  amount  due  January  2001.  Those  amounts  are
insufficient,  after  payroll  costs are met,  to cover the  amount  owed to the
natural gas supplier. PG&E effectively acknowledges that it owes the Project for
December and January by virtue of announcing and making a 15% partial  payments.
On Tuesday,  February 6, 2001, the Trust shut down the Monterey  Project because
the  supplier of natural  gas  terminated  deliveries  of natural gas as of that
date. The shut down will be for an indefinite time.

         In addition to its failure to pay the full amount due for December 2000
and January  2001  deliveries,  PG&E has  indicated  in letters to the  Monterey
Project, as well as documents filed with the Securities and Exchange Commission,
that it is unable or unwilling to make future payments to Qualifying Facilities,
such as the  Project.  The Trust  believes  that  PG&E's  ability to pay for the
electrical  energy and  capacity  it  received  or will  receive in the  future,
depends upon, among other things, positive action by the California governor and
legislature to fund  approximately  $12 billion of losses allegedly  suffered by
California  utilities  during the last eight months.  The Trust expects that any
such  political  solution  may  be  accompanied  by  executive,  legislative  or
regulatory  attempts  to  reduce  unilaterally  the  amounts  owed  by  PG&E  to
Qualifying Facilities. In an effort to resolve the California crises, there have
been  numerous  proposals  by the CPUC,  as well as the  legislature,  to adjust
downward the prices paid by California utilities to Qualifying  Facilities.  The
Trust expects that any regulatory  proceeding to set an energy price  applicable
to Qualifying  Facilities  will be extremely  protracted  and that a legislative
solution,  if one were to be enacted and approved by the governor,  is likely to
be arbitrary and significantly below the avoided cost of the energy to PG&E.

         PG&E has  attempted to justify its  non-payment  by invoking the "force
majeure"  provisions of the Power Contract.  In essence,  PG&E argues that it is
excused from its payment obligations because its failure to pay is the result of
the California  Public Utilities  Commission  actions in failing to increase its
rates to retail  customers  and is beyond its control.  The Trust  disagrees and
believes that PG&E has breached the contract.  The Project, along with the Byron
and San Joaquin Projects owned by Power III, filed a lawsuit on February 6, 2001
against PG&E to that effect and are seeking  damages  equal to lost net revenues
for the remaining term of the Power Contract. By this lawsuit the Trust seeks to
have the Power  Contract  with PG&E  declared  null and void so that the Project
will be able to sell  its  electric  power  on the open  market  to third  party
purchasers who will be able to pay currently for such electric power.  The Trust
expects  that it will be able  purchase  natural gas if it is free from the PG&E
contract and able to sell to credit worthy  purchasers.  The Trust is seeking an
accelerated  determination by the California court. The Trust is hopeful that an
accelerated  determination  by the court is a possibility  considering the power
emergency  in  California,  which may get worse as warm weather  approaches  and
power demand increases  dramatically.  Finally,  PG&E currently has a proceeding
pending before the Federal Energy Regulatory  Commission  ("FERC") alleging that
the Monterey Project previously breached the Power Contract because it allegedly
failed to meet  federal  standards  for  being a  Qualifying  Facility.  If that
proceeding  before the  Commission  were  determined  adversely  to the Monterey
Project,  its ability to recover  damages in the recently filed lawsuit  against
PG&E may be  compromised.  Also,  in an attempt to get the Project  back on-line
quickly, on March 8, 2001, the Managing Shareholder,  on behalf of the Trust and
Power III,  filed with FERC a "Request  For  Emergency  Relief and  Extension of
Waiver of Qualifying  Facility  Regulations"  in which the Managing  Shareholder
likewise seeks an order from FERC  permitting  Qualifying  Facilities to sell to
third parties.

         See Item 1(a)(3) - Project  Operations,  Item 1(a)(4) - Developments in
the  Power  Industry,  and  Item 3 -  Legal  Proceedings  below  for  additional
information  concerning the potential  effect of  California's  electric  energy
crises and the litigation proceedings against PG&E.

(iv) California Pumping Project

         In March 1995, the Trust purchased 100% of the equity  interests in the
California  Pumping Project,  which is an irrigation  service Project located in
Ventura County, California, for a cash purchase price of approximately $732,000.
The Trust has made  additional  investments  of $220,000 to purchase  additional
engines and expand the Project.  The California  Pumping Project  provides power
equivalent to approximately 3 megawatts. The California Pumping Project has been
operating since 1992 and uses diesel and natural gas fired reciprocating engines
to provide power for irrigation wells, which furnish water for orchards of lemon
and other citrus  trees.  The power is  purchased by local  farmers and farmers'
co-operatives.  Until recently,  the price charged to the farmers  represented a
discount from the  equivalent  price the  customers  would have paid to purchase
electric  power.  However,  due to the  dramatic  increase  in  energy  costs in
California  resulting  from the state's  deregulation  attempt and the  dramatic
increase in the cost of natural gas and diesel fuel,  it was  apparent  that the
California  Pumping Project could not sustain a discounted price to the farmers.
As a result,  the California  Pumping  Project wrote to all of the farmers under
contract with it and informed  them that  effective  February 1, 2001,  the flat
percentage discount for electric power was being eliminated and a fuel-surcharge
was being  implemented in which the actual fuel costs would be passed on in full
to the farmers.  In addition,  the  California  Pumping  Project also offered to
remove its engines if any farmer so requested as a result of the price  increase
and fuel pass-through. To date, no farmer has so requested.

         Until October 1998, the Trust had a management  contract with the prior
operator of the Project.  In October 1998, the Trust and the operator terminated
the management agreement and the Project paid the operator $105,840 to reimburse
it for installation costs advanced by the operator. RPM has operated the project
since that time and the Trust reimburses it for its costs and expenses.

         Power IV owns a package of similar  engines  located on different sites
and operated under  identical  terms by the same operator.  The engines  operate
independently  of each  other  and  revenues  and  expenses  for each  Trust are
segregated from those of the other.

 (v)  San Diego Project.

         The Trust  acquired its interest in the San Diego  Project on March 21,
1994, when it made an investment of approximately $2.3 million to acquire an 80%
interest  in the  Project.  The Trust  made  additional  capital  contributions,
totaling  approximately $1.2 million, to the Project to fund working capital and
to purchase various leased equipment.

         On June 25,  1997 the Trust sold its entire  interest  in its San Diego
Project to subsidiaries of NRG Energy,  Inc. of Minneapolis,  Minnesota ("NRG").
The San Diego  Project is a district  cooling  system  located in  downtown  San
Diego, California,  that generated and supplied chilled water through sub-street
piping to approximately 10 large office  buildings.  The sale took the form of a
sale  of  all  of the  Trust's  limited  partnership  interest  in  the  limited
partnership that owned the Project and its interest in the general partner.  The
sale price was $6,200,000,  of which $3,500,000 was paid in cash at the closing.
The  remaining  $2,700,000  was paid by  delivery of a secured,  purchase  money
promissory note of the principal NRG subsidiary purchasing the Project. The note
bears  interest at 8% per year and is payable in equal monthly  installments  of
principal  and  interest  through  its  maturity on June 25,  2003.  The note is
secured by the partnership interests sold by the Trust to the NRG subsidiaries.

         NRG and its  subsidiaries  participating  in the  transaction  were not
affiliated with and had no material  relationships  with the Trust, its Managing
Shareholder  or their  affiliates,  directors,  officers or  associates of their
directors and officers.  The sales price and the terms of the  acquisition  were
determined in arm's length negotiations  between the Managing Shareholder of the
Trust and NRG.

 (3) Project Operations.

         The Monterey  Project's revenue from its Power Contract consists of two
components,  energy payments and capacity payments. Energy payments are based on
a facility's net electric output, with payment rates usually indexed to the fuel
costs of the  purchasing  utility  or to  general  inflation  indices.  Capacity
payments are based on either a facility's  net electric  output or its available
capacity.  Capacity  payment  rates  vary  over  the  term of a  Power  Contract
according to various schedules.

         The Berkshire Project obtains waste for fuel under a long term contract
providing it with revenues  from tipping fees,  which are subject to the default
risks of dealing with municipalities and small trash haulers, and sells steam to
Crane under a long-term contract. The Columbia Project obtains its revenues from
spot and contract  sales of transfer  station  services which are dependent upon
the volume of waste  delivered  to it and which are  sensitive  to the prices of
alternative disposal methods and local economic activity.

         The California  Pumping Project sells its power to the farmers on whose
land its engines are situated under contracts terminable at any time on 60 days'
prior notice to the Trust.  Although the Trust thus is at risk if many customers
concurrently  terminate  contracts,  as might  happen if an electric  utility or
other supplier were to offer substantially  discounted rates, the Trust believes
that it is currently a competitive  supplier and that alternate customers can be
secured in the event contracts are terminated.

         The major costs of a Project  while in  operation  will be debt service
(if applicable),  fuel,  taxes,  maintenance and operating labor. The ability to
reduce operating  interruptions  and to have a Project's  capacity  available at
times  of  peak  demand  are  critical  to  the   profitability  of  a  Project.
Accordingly,  skilled management is a major factor in the Trust's business.  The
Berkshire  and Columbia  Projects are managed by EAC,  which has a  subordinated
equity or an income  interest in the  Projects,  which may create an  additional
incentive  for the  manager.  The Trust  monitors  their  performance  using RPM
personnel and outside consultants.

         Electricity produced by a Project is delivered to the purchaser through
transmission  lines that are built to interconnect  with the utility's  existing
power grid. Steam produced by the Berkshire  Project is conveyed directly to the
user by  pipeline  and the energy  produced  by the  engines  in the  California
Pumping Project is applied directly to pumps.

         The overall demand for  electrical  energy is somewhat  seasonal,  with
demand usually peaking in the summertime as a result of the increased use of air
conditioning. Greenhouse demand for hot water from the Monterey Project peaks in
the winter and spring months. The impact of fluctuations in the demand or supply
of electrical or thermal products  generated upon the revenues of any particular
Project is usually  dependent  on the terms of the Power  Contract  pursuant  to
which the energy is purchased.

         Generally,   revenues  from  the  sales  of  electric   energy  from  a
cogeneration  facility  will  represent  the  most  significant  portion  of the
facility's  total  revenue.  However,  to  maintain  its status as a  Qualifying
Facility under PURPA,  it is imperative  that the Monterey  Project  continue to
satisfy PURPA  cogeneration  requirements  as to the amount of thermal  products
generated.  See Item 1(c)(6) - Regulatory  Matters,  for an explanation of these
requirements.  Therefore, since the Monterey Project has only two customers (the
electric energy purchaser and the thermal products purchaser), loss of either of
these customers would have a material adverse effect on the Monterey Project.

         From time to time since 1992 PG&E has  questioned  whether the Monterey
Project is delivering  sufficient  thermal energy to the greenhouse  customer to
meet  PURPA  efficiency  requirements  for  Qualifying  Facility  status and has
installed  metering  devices to provide data.  These inquiries are in large part
based on data from the  monitoring  program that PG&E  undertakes as required by
the CPUC for data on thermal deliveries.

         In February  1999,  PG&E notified the Trust that it had concluded  that
the Monterey Project had not met those efficiency requirements by an unspecified
amount and on April 1, 1999 it brought legal  proceedings  in  California  state
court against the Trust's subsidiary that owns the Project, as described at Item
3 - Legal Proceedings.  The complaint only requested that the Project refund the
gas price  discounts  received from 1991 to 1998, but an adverse  decision might
affect  subsequent years and might also serve as the basis for refund to PG&E by
the  Monterey  Project  of  certain  payments  made by PG&E as a  result  of the
Monterey  Project's status as a Qualifying  Facility and an action to invalidate
the Power Contract.

         The Trust has  vigorously  defended the lawsuit.  In February 2000, the
parties  agreed that the lawsuit in the State of  California  would be dismissed
without prejudice and the matter  transferred before FERC. The evidence obtained
in the state proceeding could be used in the FERC proceeding. In late 2000, PG&E
filed a petition  at FERC  seeking,  among other  things,  a  revocation  of the
Monterey Project's  Qualifying  Facility status and a refund of what PG&E claims
are overpayments made by PG&E to the Project. After an exhaustive investigation,
the Trust  believes that the Monterey  Project has met and continues to meet the
PURPA  requirements  and that PG&E is relying on an  incorrect  legal theory and
incorrect data. In particular, the Trust believes that PG&E has chosen the wrong
location for metering  and  computing  efficiency  standards.  That  location is
materially different from the location at which efficiency was measured from the
inception of the Project and is located at a point where efficiency measurements
necessarily  would  be  materially  lower.  The  Trust  also  believes  that the
utility's gas meter was out of adjustment  during 1998.  During 2000,  the Trust
incurred  significant  legal fees in defending this proceeding and preparing for
action before FERC. All of the required and permitted filings have been prepared
and submitted to FERC by both Parties and the Trust expects that legal  expenses
for 2001  applicable to this matter will be  significantly  less than 2000. FERC
has not  rendered a decision  in the  matter,  however,  and when FERC rules the
non-prevailing  party may seek rehearing of, or appeal, the FERC decision;  thus
causing legal fees to increase significantly.  The legal expenses are being paid
by the Trust's subsidiary that owns the Monterey Project and accordingly they do
not appear on the Trust's financial statements.

         If it is  determined  that the Monterey  Project did not meet PURPA and
California efficiency standards,  it would be required to refund the discount to
PG&E for the  period of  non-compliance.  Depending  on the  results of the FERC
proceeding, if it were determined that the Monterey Project did not comply for a
substantial  period of time, the possible refund could be extremely large. It is
also possible that the Power Contract could be invalidated, which might make the
Project  uneconomic  to operate,  but given the need for electric  generation in
California and the relative  economic price of the Monterey  Project's  electric
generation,  PG&E may ultimately  decide to retain the Power Contract.  See Item
1(c)(4) - Trends in the Electric  Utility and Independent  Power  Industries for
further information.

     Major  customers  of Projects  that  accounted  for more than 10% of annual
distributions  to the Trust  from  operating  sources  in each of the last three
fiscal years are:

                             Calendar year
                                    2000         1999          1998

Pacific Gas & Electric Co.          44.5%        0.0%*         54.0%
Crane & Co., Inc.                    0.0%        0.0%          18.0%

* All of the  $326,000 of net cash flow earned by the  Monterey  Project in 1999
was retained to defray legal expenses.

         The Columbia and California  Pumping  Projects have many customers.  No
one customer accounted for 10% or more of the total received by the Trust during
the year.

         The technology  involved in conventional  power plant  construction and
operations  as well as electric  and heat energy  transfers  and sales is widely
known  throughout the world.  There are usually a variety of vendors  seeking to
supply the necessary  equipment  for any Project.  So far as the Trust is aware,
there are no  limitations  or  restrictions  on the  availability  of any of the
components,  which would be  necessary  to complete  construction  and  commence
operations of any Project.  Generally,  working capital  requirements  are not a
significant  item in the  independent  power  industry.  The cost of maintaining
adequate  supplies  of fuel  sources is usually the most  significant  factor in
determining working capital needs.

         Hydrocarbon  fuels,  such as natural gas,  coal and fuel oil, have been
generally  available  in recent  years for use by  Independent  Power  Projects,
although there have been serious supply impairments for both oil and natural gas
at times during the last 20 years.  Market prices for natural gas, oil and, to a
lesser extent,  coal have fluctuated  significantly  over the last few years and
have increased  significantly  during 2000.  Such increase in natural gas prices
may directly  inhibit the  development  of Projects  because of the  anticipated
effects on Project  profitability and may deter lenders to Projects or result in
higher costs of financing.  The Berkshire  Project uses municipal wastes as fuel
and  the  Columbia  Project  charges  on the  basis  of  volume  of  waste.  The
availability  of spot waste  (waste  delivered  otherwise  than under  contract)
depends on the costs of other disposal alternatives.

         In order to commence  operations,  most  Projects  require a variety of
permits,  including zoning and environmental  permits.  Inability to obtain such
permits will likely mean that a Project will not be able to commence operations,
and even if  obtained,  such  permits must usually be kept in force in order for
the Project to continue its operations.

         Compliance  with  environmental  laws is also a material  factor in the
independent power industry. The Trust believes that capital expenditures for and
other costs of environmental  protection have not materially  disadvantaged  its
activities  relative to other competitors and will not do so in the future.  The
Trust  currently  does  not  anticipate  that  it will  have  to  make  material
additional  investments for environmental  compliance.  The process of preparing
the new Title V applications for air pollution licensing of existing facilities,
however,   is  protracted  and  requires  modest  additional   expenditures  for
consultants.  If future  environmental  standards  require that a Project  spend
increased  amounts for  compliance,  such increased  expenditures  could have an
adverse  effect  on the Trust to the  extent  it is a holder  of such  Project's
equity  securities.  See Item  1(c)(6) - Business  -  Narrative  Description  of
Business - Regulatory Matters.

 (4) Trends in the Electric Utility and Independent Power Industries

         In September 1996,  California  enacted Assembly Bill 1890 ("AB 1890"),
which totally restructured  California's  existing monopolistic electric utility
industry into a market-based  competitive industry.  Among other things, AB 1890
required that California's  investor-owned  utilities ("IOUs") sell 50% of their
fossil-fueled  electric  generation  assets to unaffiliated  third parties.  The
money  received  for these  assets was used,  among  other  purposes,  to reduce
stranded  investments.  The IOUs,  however,  were  permitted  to retain  certain
generation  assets,  including  generation from Qualifying  Facilities,  certain
hydroelectric  generation  facilities,  fossil-fueled  generation  not sold, and
nuclear generation facilities ("IOU Retained Generation").  In addition, AB 1890
created the CalPx, a day-ahead and day-of energy spot market,  and required that
the IOUs sell all of the electric  generation from their IOU Retained Generation
to, and  purchase  all of their  electric  supply  needs  from,  the  CalPx.  In
addition,  the rates that the IOUs were permitted to charge their retail end-use
customers were frozen at certain levels until the end of the transition  period,
which for PG&E was anticipated to end in approximately 2003.

         From the passage of AB 1890 until approximately the summer of 2000, the
framework  instituted  by AB 1890  worked well in that the  wholesale  price for
electricity   purchased   from  the  CalPx  by  PG&E  and  the  other  IOUs  was
significantly  lower than the frozen  retail  rates that PG&E was  permitted  to
charge to retail customers.  The resulting "profit" made by PG&E was used, among
other things,  to recoup  PG&E's  stranded  investments  and to pay dividends to
PG&E's corporate parent,  PG&E Corporation ("PG&E Corp.").  PG&E Corp. then used
such  funds  to  invest  in  unregulated  assets  as well as for  other  general
corporate  purposes.  However,  during the summer of 2000 the situation  changed
dramatically.  The CalPx wholesale price of electricity increased  significantly
due in  large  part to  California's  explosive  growth  in  power  consumption,
environmental regulation, natural gas shortages, the failure of the state to add
any significant  electric generation  facilities for over a decade, and the lack
of  available  electric  energy  from  other  areas  of the  West.  PG&E was now
purchasing its electric generation needs at wholesale prices significantly above
the  frozen  retail  rates  it was  permitted  by AB 1890 to  charge  to  retail
customers.  As a result, PG&E has incurred  substantial losses and, as described
above, has suspended payments to Qualifying Facilities,  as well as to the CalPx
and other  creditors.  Unless some resolution is worked out, PG&E may ultimately
declare bankruptcy. In such event, the Power Contract with PG&E would be subject
to modification or rejection and given the situation in California  there can be
no assurance that PG&E will not declare bankruptcy.

         There have been  numerous  proposals  and actions taken by a variety of
parties in California in an attempt to find a reasonable  and workable  solution
to the electric crises. For example,  FERC removed the requirement that the IOUs
purchase all of their electricity needs from the CalPx. In addition, a wholesale
rate soft cap or  "breakpoint"  of $150 Mwh has been  imposed by FERC,  however,
most believe it is a short-term  measure as such cap may provide a  disincentive
to the  construction of new power plants and transmission  facilities.  Although
the market cap is a short-term solution,  there is a reasonable probability that
such wholesale rate caps may be continued for an indefinite  period of time. The
CalPx was unable to institute and operate under the $150 Mwh breakpoint  and, as
a result of this and certain other FERC orders,  suspended trading as of January
31, 2001.

         The IOUs in  California  have also  sought to remedy  the  problems  by
seeking regulatory and legal relief from the losses they have incurred. PG&E and
Southern  California  Edison  Company  ("SCE") each  petitioned the CPUC seeking
relief  from the retail rate  freeze and an  increase  of  approximately  30% in
retail rates.  The CPUC approved  only a 10% increase,  significantly  less than
requested and far below what was  necessary for PG&E and SCE to remain  solvent.
PG&E and SCE have also  instituted  separate  court actions  seeking to have the
court rule that the high  wholesale  power costs they have incurred in obtaining
power for their  retail  load must by law be  allowed  to be passed  through  to
retail rate payers.

         In  addition,  the CPUC gave IOUs  permission  to enter into  long-term
bilateral power contracts with independent energy producers  ("IPPs").  However,
due to PG&E's failure to make payments to the CalPx for past energy  deliveries,
which in turn meant that the CalPx could not pay such IPPs, many large IPPs were
reluctant to make  further  energy  deliveries  to the CalPx or directly to PG&E
without  being  paid for past  deliveries  and  receiving  assurances  of future
payments.  PG&E  could do  neither  and  during the later part of 2000 and early
2001,  such IPPs were  ordered  either by the  Secretary  of the  United  States
Department of Energy or by the federal courts to continuing selling power. These
orders  essentially  required  the  IPPs  to  sell to the  CalPx,  prior  to its
suspension of trading,  the California  Independent  System  Operator,  which is
still operating,  but primarily to the California  Department of Water Resources
("DWR"),  a state agency that has been  purchasing  power at wholesale from IPPs
(but not from Qualifying Facilities) and reselling it to the IOUs at prices that
approximate the IOUs retail rate  authorization,  which is  significantly  lower
that the wholesale price. As a result,  the California DWR is losing substantial
sums of money such that approximately every month the California legislature has
to  appropriate  more funds for the DWR to  continue  purchasing.  None of those
orders forcing electric sales, however, applied to Qualifying Facilities.

         Finally,  the  California  legislature  has  been  considering  certain
proposals to substitute an arbitrarily  derived price for the energy price to be
paid to Qualifying Facilities.  Any regulatory proceeding to set an energy price
applicable  to  Qualifying   Facilities  will  be  extremely  protracted  and  a
legislative solution, if one were to be enacted and approved by the governor, is
likely to be  arbitrary  and below the  avoided  cost of the energy to the IOUs.
Because  federal law requires  that  Qualifying  Facilities be paid at least the
avoided  cost to IOUs of  obtaining  the same  amount of energy  from a marginal
supplier,  if the energy price set by California is less than that avoided cost,
Qualifying  Facilities  will have the right to sue for the correct  avoided cost
price in  federal  court or before  the FERC.  Such  proceedings  could  also be
protracted  and  expensive  unless the FERC acts on its own or other  generators
bring a proceeding before the Commission or a court.

         Prior to the summer of 2000,  many IOUs were attempting to purchase and
terminate the Power Contracts of Qualifying  Facilities  because,  historically,
the electric rates paid to Qualifying  Facilities have been  significant  higher
than wholesale  power rates.  Currently,  however,  the rates paid to Qualifying
Facilities by California IOUs are lower than current  wholesale power rates and,
if the legislation  proposed to substitute a legislatively  derived energy price
is enacted and  survives  legal  challenges,  Qualifying  Facilities  will be an
attractive generating asset for California's IOUs.

         Finally,  the Power  Contracts are subject to modification or rejection
in the event  that the  utility  purchaser  enters  bankruptcy.  There can be no
assurance that the utility purchaser will not declare bankruptcy.

         After  the  Power  Contract  expires  in 2020 or  terminates  for other
reasons,  the Monterey Project under currently  anticipated  conditions would be
free to sell its output on the  competitive  electric  supply market,  either in
spot, auction or short-term  arrangements or under long-term  contracts if those
Power Contracts could be obtained.  There is no assurance that the Project could
sell its output or do so  profitably.  Because  the Project is fueled by natural
gas   purchased  at  market  prices  and  because  the  Projects  is  relatively
small-scale,  it might  have cost  disadvantages  in  competing  against  larger
competitors  that  would  enjoy  economies  of  scale.  The  Trust is  unable to
anticipate  whether  thermal sales from  cogeneration  would offset any possible
cost  disadvantages in electric  generation or whether in fact the Project would
have  cost  disadvantages  after  the Power  Contract  ends in 2020.  It is thus
impossible  to predict  the  profitability  of the Project  after the  scheduled
termination  of the Power  Contract.  However,  if the Power Contract were to be
terminated  now, the shortage of electric  generation in California  would allow
the Trust to market the electric energy and capacity from the Monterey  Project.
In such  event,  the Trust  believes  that in the near  term,  until  additional
generation resources are completed and brought on-line, it could sell its output
in  California  profitably,  although  for a variety of factors,  including  the
volatility of natural gas prices,  unexpected legislation and litigation,  there
is no guarantee  that it may be able to do so if the Power  Contract  were to be
terminated.

         The Berkshire  Project's  contract to supply steam  terminates in 2004,
although it may be terminated  in June 2002 by the Project or Crane.  Because it
is  normally  inefficient  to  transport  steam over long  distances,  the Trust
believes  that  so long  as the  cost  of  suitable  municipal  waste  does  not
substantially  increase or the costs of  alternate  fuels does not  decrease far
below current levels, the Berkshire Project should be able to renew its contract
at a price  comparable  to or lower than the cost to Crane & Co. of running  its
own boilers or using a new cogeneration facility. There is no assurance that the
Project can do so or that the customer will be financially capable of doing so.

         The  Columbia and  California  Pumping  Projects do not have  long-term
contracts  with  any of  their  customers  and are thus  exposed  to  short  and
long-term market fluctuations.

(5)  Competition

         The Monterey Project is not currently subject to competition because it
has entered into  long-term  agreements to sell its output at specified  prices.
However,  the Monterey Project could be subject to future  competition to market
its electricity output if its Power Contract expires or is terminated because of
a default or failure to pay by the purchasing utility or other purchaser; due to
bankruptcy or insolvency of the  purchaser;  because of the failure of a Project
to comply with the terms of the Power  Contract;  regulatory  changes;  or other
reasons. The Monterey Project would then face competition to market its capacity
and energy  output.  However,  the Trust  believes that in the near term,  until
additional generation resources are completed and brought on-line, it could sell
its  output  in  California  profitably,  although  for a  variety  of  factors,
including  the  volatility  of natural gas prices,  unexpected  legislation  and
litigation,  there is no guarantee  that it may be able to do so. The  Berkshire
Project may face competition after 2002 from fuel suppliers offering alternative
means  of  providing  energy  and from  other  cogeneration  or  waste-to-energy
providers.

         There  are a large  number of  participants  in the  independent  power
industry.  Several large  corporations  specialize in  developing,  building and
operating Independent Power Projects. Equipment manufacturers, including many of
the largest  corporations in the world,  provide equipment and planning services
and provide  capital through finance  affiliates.  Many regulated  utilities are
preparing for a  competitive  market,  and a significant  number of them already
have  organized   subsidiaries  or  affiliates  to  participate  in  unregulated
activities such as planning, development, construction and operating services or
in  owning  exempt  wholesale  generators  or up to  50%  of  Independent  Power
Projects.  In  addition,  there are many  smaller  firms  whose  businesses  are
conducted  primarily on a regional or local basis. Many of these companies focus
on limited segments of the  cogeneration  and independent  power industry and do
not  provide  a wide  range of  products  and  services.  There  is  significant
competition among non-utility producers, subsidiaries of utilities and utilities
themselves  in  developing  and  operating   energy-producing  projects  and  in
marketing the power produced by such projects.

         The Trust is unable to  accurately  estimate the number of  competitors
but believes that there are many competitors at all levels and in all sectors of
the industry. Many of those competitors,  especially affiliates of utilities and
equipment manufacturers, may be far better capitalized than the Trust.

         The Columbia  Project,  as described  above,  faces  competition from a
national waste management  company much larger than itself,  from local landfill
operators (if their  permits to receive  waste are again  extended) and possibly
from other  local  entrepreneurs.  There are few  barriers to entry in the waste
transfer and management  industry.  The California Pumping Project is subject to
competition  from the local  electric  utility,  which  serves  much of Southern
California and which offers  electricity at discounted rates to operate electric
pumps  rather than the natural  gas-fueled  pumps  operated by the  Project.  As
deregulation of the electricity market proceeds in California,  the Project will
also face competition from power marketers and independent generating companies.
Barriers to entry into the electric or gas-fueled  irrigation  pumping  industry
are also low.

(6)  Regulatory Matters.

         Projects are subject to energy and  environmental  laws and regulations
at  the  federal,  state  and  local  levels  in  connection  with  development,
ownership,  operation,  geographical location,  zoning and land use of a Project
and  emissions  and other  substances  produced by a Project.  These  energy and
environmental  laws and  regulations  generally  require  that a wide variety of
permits and other approvals be obtained before the  commencement of construction
or operation of an energy-producing facility and that the facility then operates
in compliance  with such permits and  approvals.  Since the Trust  operates as a
"business  development  company"  under  the 1940  Act,  it is also  subject  to
provisions of that act pertaining to such companies.

(i)  Energy Regulation.

         (i)  Energy Regulation.

         (A)  PURPA.  The  enactment  in  1978 of  PURPA  and  the  adoption  of
regulations  thereunder  by FERC  provided  incentives  for the  development  of
cogeneration  facilities and small power production  facilities  meeting certain
criteria.  Qualifying  Facilities  under  PURPA are  generally  exempt  from the
provisions of the Public  Utility  Holding  Company Act of 1935, as amended (the
"Holding  Company  Act"),  the Federal  Power Act, as amended (the "FPA"),  and,
except  under  certain  limited  circumstances,  state  laws  regarding  rate or
financial  regulation.  In order to be a  Qualifying  Facility,  a  cogeneration
facility must (a) produce not only  electricity  but also a certain  quantity of
heat  energy  (such as  steam)  which is used for a  purpose  other  than  power
generation, (b) meet certain energy efficiency standards when natural gas or oil
is used as a fuel source and (c) not be  controlled or more than 50% owned by an
electric utility or electric utility holding company. Other types of Independent
Power Projects,  known as "small power production facilities," can be Qualifying
Facilities if they meet regulations  respecting maximum size (in certain cases),
primary energy source and utility ownership.

         The exemptions from extensive federal and state regulation  afforded by
PURPA to Qualifying  Facilities are important to the Trust and its  competitors.
The Trust  believes  that each of its  Projects is a Qualifying  Facility.  If a
Project loses its Qualifying  Facility status,  the utility can reclaim payments
it made for the Project's non-qualifying output to the extent those payments are
in excess of  current  avoided  costs or the  Project's  Power  Contract  can be
terminated by the electric utility.

         (B) The 1992 Energy Act. The  Comprehensive  Energy  Policy Act of 1992
(the "1992 Energy Act")  empowered  FERC to require  electric  utilities to make
available their transmission facilities to and wheel power for Independent Power
Projects  under  certain  conditions  and  created  an  exemption  for  electric
utilities,  electric  utility  holding  companies  and other  independent  power
producers from certain restrictions imposed by the Holding Company Act. Although
the Trust believes that the exemptive provisions of the 1992 Energy Act will not
materially  and  adversely  affect its  business  plan,  the 1992 Energy Act may
result in increased competition in the sale of electricity.

         The 1992 Energy Act created the "exempt wholesale  generator"  category
for  entities  certified  by FERC as being  exclusively  engaged  in owning  and
operating  electric  generation  facilities  producing  electricity  for resale.
Exempt  wholesale  generators  remain  subject to FERC  regulation in all areas,
including  rates, as well as state utility  regulation,  but electric  utilities
that  otherwise  would be  precluded  by the  Holding  Company  Act from  owning
interests in exempt wholesale generators may do so. Exempt wholesale generators,
however,  may not sell  electricity  to affiliated  electric  utilities  without
express  state  approval  that  addresses  issues of fairness to  consumers  and
utilities and of reliability.

         (C) The Federal  Power Act. The FPA grants FERC  exclusive  rate-making
jurisdiction over wholesale sales of electricity in interstate commerce.  Again,
this will not affect the Trust's  Projects  unless they were to attempt sales to
other customers.

         (D) Fuel Use Act.  Projects  may also be  subject  to the Fuel Use Act,
which  limits  the  ability  of  power  producers  to  burn  natural  gas in new
generation  facilities unless such facilities are also  coal-capable  within the
meaning of the Fuel Use Act. The Trust  believes  that the  Monterey  Project is
coal-capable and thus qualifies for exemption from the Fuel Use Act.

         (E) State Regulation.  State public utility regulatory commissions have
broad  jurisdiction  over  Independent  Power  Projects which are not Qualifying
Facilities  under  PURPA,  and which are  considered  public  utilities  in many
states.  In states where the  wholesale  or retail  electricity  market  remains
regulated,  Projects that are not Qualifying  Facilities may be subject to state
requirements  to obtain  certificates  of public  convenience  and  necessity to
construct a facility and could have their organizational,  accounting, financial
and other  corporate  matters  regulated  on an  ongoing  basis.  Although  FERC
generally has exclusive  jurisdiction over the rates charged by a non-Qualifying
Facility to its wholesale customers, state public utility regulatory commissions
have the  practical  ability to  influence  the  establishment  of such rates by
asserting jurisdiction over the purchasing utility's ability to pass through the
resulting cost of purchased power to its retail customers.  In addition,  states
may  assert  jurisdiction  over the siting and  construction  of  non-Qualifying
Facilities  and,  among other  things,  issuance of  securities,  related  party
transactions  and sale and transfer of assets.  The actual scope of jurisdiction
over  non-Qualifying  Facilities by state public utility regulatory  commissions
varies from state to state.

(ii)  Environmental Regulation.

         The  construction  and  operation  of  Independent  Power  Projects are
subject to extensive federal,  state and local laws and regulations  adopted for
the protection of human health and the environment and to regulate land use. The
laws and  regulations  applicable  to the Trust and Projects in which it invests
primarily  involve the  discharge  of  emissions  into the water and air and the
disposal  of  waste,  but can  also  include  wetlands  preservation  and  noise
regulation.  These  laws and  regulations  in many cases  require a lengthy  and
complex process of renewing licenses,  permits and approvals from federal, state
and local agencies.  Obtaining  necessary  approvals  regarding the discharge of
emissions  into the air is critical to the  development  of a Project and can be
time-consuming  and difficult.  Each Project requires  technology and facilities
that comply with federal,  state and local requirements,  which sometimes result
in extensive negotiations with regulatory agencies.  Meeting the requirements of
each  jurisdiction  with authority over a Project may require  modifications  to
existing Projects.

         Title  V of  the  Clean  Air  Act  Amendments  added  a new  permitting
requirement for existing  sources that requires all  significant  sources of air
pollution to submit new  applications to state agencies.  Title V implementation
by the states generally does not impose significant  additional  restrictions on
the Trust's  Projects,  other than  requirements to continually  monitor certain
emissions and document  compliance.  The  permitting  process is voluminous  and
protracted  and the costs of fees for Title V  applications,  of testing  and of
engineering  firms to prepare the necessary  documentation  have increased.  The
Trust believes that all of its facilities, which require Title V compliance, are
or will be in compliance with such requirements.

         The Trust's  Projects  must comply with many federal and state laws and
regulations  governing  wastewater and storm water discharges from the Projects.
These are generally  enforced by states under "NPDES"  permits for point sources
of  discharges  and by storm water  permits.  Under the Clean  Water Act,  NPDES
permits  must be renewed  every  five years and permit  limits can be reduced at
that time or under  re-opener  clauses at any time.  The  Projects  have not had
material difficulty in complying with their permits or obtaining  renewals.  The
Projects use  closed-loop  engine  cooling  systems,  which do not require large
discharges of coolant except for periodic  flushing to local sewer systems under
permit and do not make other material discharges to groundwater or streams.

         The  Berkshire  Project  is not a  Qualifying  Facility  and  does  not
generate  electricity.  However, it was operating prior to November 15, 1990 and
is  thus  currently  exempt  from  the  requirement  to  obtain  sulfur  dioxide
allowances.

         The Trust's  Monterey,  Berkshire and Columbia  Projects are subject to
the reporting requirements of the Emergency Planning and Community Right-to-Know
Act that require the Projects to prepare toxic release  inventory release forms.
These  forms  list all  toxic  substances  on site  that are used in  excess  of
threshold  levels so as to allow  governmental  agencies and the public to learn
about the  presence  of those  substances  and to assess  potential  hazards and
hazard  responses.  The Trust does not  anticipate  that this will result in any
material adverse effect on it.

         The  Managing  Shareholder  expects  that  environmental  and  land use
regulations  may become more stringent.  The Trust and the Managing  Shareholder
have  developed  a certain  expertise  and  experience  in  obtaining  necessary
licenses,  permits  and  approvals,  but will  nonetheless  rely upon  qualified
environmental  consultants and environmental counsel retained by it to assist in
evaluating the status of Projects regarding such matters.

(iii)  The 1940 Act

         Since its  Shares  are  registered  under  the 1934  Act,  the Trust is
required to file with the  Commission  certain  periodic  reports (such as Forms
10-K  (annual  report),  10-Q  (quarterly  report) and 8-K  (current  reports of
significant  events)) and to be subject to the proxy rules and other  regulatory
requirements  of that act that are  applicable  to the  Trust.  The Trust has no
intention to and will not permit the creation of any form of a trading market in
the Shares in connection with this registration.

         As a "business  development company," the Trust is a closed-end company
(defined  by the 1940 Act as a  company  that  does not  offer  for sale or have
outstanding  any redeemable  security) that is regulated under the 1940 Act only
as  a  business  development   company.   The  act  contains   prohibitions  and
restrictions on transactions  between business  development  companies and their
affiliates  as defined in that act, and requires that a majority of the board of
the company be persons  other than  "interested  persons" as defined in the act.
The board of the Trust is comprised of  Ridgewood  Power and three  individuals,
Ralph O. Hellmold,  Jonathan C. Kaledin and Joseph Ferrante, Jr., who also serve
as independent  trustees of Power III, and who are Independent Panel Members for
Power V but who are not otherwise affiliated with the Trust,  Ridgewood Power or
any of their affiliates.  See Item 10 - Directors and Executive  Officers of the
Registrant.

         Under  the 1940  Act,  Commission  approval  is  required  for  certain
transactions   involving   certain  closely   affiliated   persons  of  business
development companies, including many transactions with the Managing Shareholder
and the other investment programs sponsored by the Managing  Shareholder.  There
can be no  assurance  that such  approval,  if required,  would be obtained.  In
addition,  a  business  development  company  may not  change  the nature of its
business  so as to cease to be,  or to  withdraw  its  election  as, a  business
development  company  unless  authorized to do so by at least a majority vote of
its outstanding voting securities.

         The 1940 Act restricts the kind of  investments a business  development
company may make. A business development company may not acquire any asset other
than a  "Qualifying  Asset"  unless,  at  the  time  the  acquisition  is  made,
Qualifying  Assets comprise at least 70% of the company's total assets by value.
The principal  categories of Qualifying  Assets that are relevant to the Trust's
activities are:

         (A)  Securities  issued  by  "eligible  portfolio  companies"  that are
purchased by the Trust from the issuer in a transaction not involving any public
offering  (i.e.,  private  placements  of  securities).  An "eligible  portfolio
company"  (1) must be organized  under the laws of the United  States or a state
and have its principal place of business in the United States; (2) may not be an
investment  company other than a small business  investment  company licensed by
the Small Business  Administration and wholly-owned by the Trust and (3) may not
have issued any class of  securities  that may be used to obtain  margin  credit
from a broker or dealer in securities. The last requirement essentially excludes
all issuers that have securities listed on an exchange or quoted on the National
Association of Securities  Dealers,  Inc.'s national  market system,  along with
other companies  designated by the Federal  Reserve Board.  Except for temporary
investments of the Trust's  available  funds,  substantially  all of the Trust's
investments are expected to be Qualifying Assets under this provision.

         (B)  Securities  received in  exchange  for or  distributed  on or with
respect to securities  described in paragraph  (A) above,  or on the exercise of
options, warrants or rights relating to those securities.

         (C) Cash, cash items, U.S.  Government  securities or high quality debt
securities maturing not more than one year after the date of investment.

         A  business  development  company  must  make  available   "significant
managerial  assistance"  to  the  issuers  of  Qualifying  Assets  described  in
paragraphs (A) and (B) above, which may include without limitation  arrangements
by which the business  development  company (through its directors,  officers or
employees) offers to provide (and, if accepted,  provides)  significant guidance
and counsel concerning the issuer's management, operation or business objectives
and policies.

         A business development company also must be organized under the laws of
the United States or a state, have its principal place of business in the United
States and have as its purpose the making of  investments  in Qualifying  Assets
described in paragraph (A) above.

         The Managing  Shareholder  believes  that it may no longer be necessary
for the Trust to continue its status as a business development company,  because
of the Managing  Shareholder's  active involvement in operating Projects through
the Trust and other  investment  programs.  Although  the  Managing  Shareholder
believes  it would be  beneficial  to the Trust to end the  election  and reduce
costs of legal  compliance  that do not  contribute  to income,  the  process of
withdrawing  the  business   development   company  election  requires  a  proxy
solicitation and a special vote of investors, which is also costly. Accordingly,
the Managing  Shareholder does not intend at this time to request the Investors'
consent to withdrawing the business development company election.  Any change in
the Trust's status will be effected only with the Investors' consent.

(iv)  Potential Legislation and Regulation.

         All federal,  state and local laws and  regulations,  including but not
limited to PURPA,  the Holding Company Act, the 1992 Energy Act and the FPA, are
subject to amendment or repeal.  Future legislation and regulation is uncertain,
and could have material effects on the Trust.

     (d) Financial  Information about Foreign and Domestic Operations and Export
Sales.

         The Trust has invested in Projects located in California, Massachusetts
and New York and has no foreign operations.

(e)  Employees.

         The operating personnel of the Monterey and California Pumping Projects
are  employed by RPM and  accordingly  the Trust has no  employees.  The persons
described below at Item 10 - Directors and Executive  Officers of the Registrant
serve as executive  officers of the Trust and have the duties and powers usually
applicable  to similar  officers of a Delaware  corporation  in carrying out the
Trust business.

Item 2.  Properties.

         Pursuant to the Management Agreement between the Trust and the Managing
Shareholder  (described at Item 10(c) - Directors and Executive  Officers of the
Registrant - Management Agreement),  the Managing Shareholder provides the Trust
with  office  space  at  the  Managing  Shareholder's  principal  office  at The
Ridgewood Commons, 947 Linwood Avenue, Ridgewood, New Jersey 07450.

         The  following  table  shows  the  material  properties   (relating  to
Projects)  owned or leased by the Trust's  subsidiaries or partnerships in which
the Trust has an interest.  Ownership rights to the property associated with the
Berkshire  Project  are held  under a  long-term  lease-purchase  agreement  and
related   non-recourse   industrial  revenue  bond  financing  agreements  among
Pittsfield's  industrial development authority and others. Upon repayment of the
bonds and the satisfaction of other  conditions,  the partnership which operates
the facility  and in which the Trust owns an  interest,  will have the option to
acquire the facility for nominal  consideration.  The other  properties  are not
subject  to any  mortgages,  liens  or  encumbrances.  All of the  Projects  are
described in further detail at Item 1(c)(2).

                                                        Square
                       Ownership  Ground  Approximate  Footage of   Description
                       Interests  Lease    Acreage    Project(Actual   of
Project      Location   in Land  Expiration of Land  or Projected)   Project

Berkshire   Pittsfield,
            MA           Leased     2004      5      30,000     Waste-to energy

Columbia    Columbia,
            NY           Owned       N/A      44     25,000     Municipal waste

Monterey    Monterey,
            CA           Leased     2020      2      10,000     Gas-fired


California  Ventura Cy,  Leased N/A       N/A        N/A        Natural gas
Pumping     CA            or                                    engines powering
                         licensed                               irrigation pumps

Item 3.  Legal Proceedings.

         On April 1,  1999,  PG&E  sued the  Trust's  subsidiary  that  owns the
Monterey  Project in the Superior Court of California for the City and County of
San  Francisco.  PG&E  alleged  that the Project did not meet  federal and state
efficiency requirements and that accordingly the Project was not entitled to the
benefit  of   discounted   natural  gas  fuel  rates   allowable  to  qualifying
cogeneration  facilities.  The lawsuit claimed an unspecified amount of damages.
The State  lawsuit was  dismissed  without  prejudice  and by  agreement  of the
parties  and the  matter  was  brought  by PG&E to the  FERC by  petition  for a
determination.  PG&E  filed  with FERC a petition  seeking a  revocation  of the
Monterey  Project's   Qualifying   Facility  status  and  a  refund  of  certain
overpayments PG&E claims it made to the Project, which were not justified due to
the  Project's  failure  to  maintain   Qualifying  Facility  status.  The  FERC
proceeding  generally  involves  a  determination  of the  proper  location  for
metering  and  computing  efficiency  standards.  The  Trust  believes  that its
location of the meter is correct for determining such standards and that it will
succeed at FERC and retain its  Qualifying  Facility  status and that no refunds
will be required.  All of the required or permitted  filings have been  prepared
and  submitted  to the FERC and the  parties are  awaiting a decision.  No other
activity on this matter is anticipated until such FERC decision.

         As described  above, on February 6, 2001, the Monterey  Project,  along
with the Byron and San Joaquin  Projects  owned by Power III, filed an action in
the  Superior  Court of  California  for the City and  County  of San  Francisco
against PG&E seeking, among other things, that PG&E's failure to pay is a breach
of the Power  Contract and not excused by the force  majeure  provisions  of the
Power  Contract.  In  addition,  the suit seeks an expedited  determination  and
declaration  that PG&E has breached the Power  Contract,  that it therefore null
and void and PG&E is liable for damages to the Trust including,  but not limited
to, the lost net revenues for the remaining term of the Power Contract

         On December  31, 1998 the Trust,  through  subsidiaries,  filed a legal
complaint in the  Superior  Court of  California  for  Monterey  County  against
Waukesha-Pierce,  Inc. and subsidiaries,  alleging that the subsidiaries had not
disclosed the existence of an obligation of the Monterey  Project to Pacific Gas
and  Electric  Company  and  therefore  breached a warranty  in the  acquisition
agreement.  The claim was for approximately $273,000 plus interest and expenses.
Waukesha-Pierce, Inc. was included in the proceeding as a contractual guarantor.
On January 17, 1999, a separate action against  Waukesha-Pierce,  Inc. was filed
by the Trust's subsidiaries in the United States District Court for the Northern
District of Texas to enforce  the  guaranty.  The parties  agreed to dismiss the
Texas  case  without  prejudice  before  material  proceedings   resulted.   The
California  case was settled in March 2000;  Waukesha-Pierce  Inc. agreed to pay
the Project  $175,000 and to cooperate  with the Project in the  potential  FERC
proceedings  involving  the  Monterey  Project and the Trust agreed to cooperate
with Waukesha-Pierce in releasing funds due from PG&E to Waukesha-Pierce.

     Item 4. Submission of Matters to a Vote of Security Holders.  The Trust did
not submit any matters to a vote of the Investors  during the fourth  quarter of
2000.

PART  II

     Item 5.  Market for  Registrant's  Common  Equity and  Related  Stockholder
Matters.

(a)  Market Information.

         The Trust sold 235.3775  Investor Shares of beneficial  interest in the
Trust in its  private  placement  offering of Investor  Shares  which  closed on
January 31, 1994.  There is currently no  established  public trading market for
the Investor Shares.  As of the date of this Form 10-K, all such Investor Shares
have been  issued  and are  outstanding.  There are no  outstanding  options  or
warrants to purchase,  or securities  convertible into,  Investor Shares and the
Trust has no intention to make any public offering of Investor Shares.

         Investor  Shares  are  restricted  as  to  transferability   under  the
Declaration,  and  are  restricted  under  federal  and  state  laws  regulating
securities   when  the  Investor  Shares  are  held  by  persons  in  a  control
relationship  with the Trust.  Investors  wishing to transfer Shares should also
consider the  applicability  of state  securities laws. The Investor Shares have
not been and are not expected to be registered under the Securities Act of 1933,
as amended  (the "1933  Act"),  or under any other  similar  law of any state in
reliance  upon what the Trust  believes to be exemptions  from the  registration
requirements  contained  therein.  Because  the  Investor  Shares  have not been
registered,  they are  "restricted  securities" as defined in Rule 144 under the
1933 Act.

         The  Managing   Shareholder  is  considering   the   possibility  of  a
combination  of the Trust and six other  investment  programs  sponsored  by the
Managing  Shareholder  into a publicly  traded  entity.  This would  require the
approval  of the  Investors  in the  Trust and the other  programs  after  proxy
solicitations  complying  with  requirements  of  the  Securities  and  Exchange
Commission,  compliance  with the "rollup"  rules of the Securities and Exchange
Commission and other regulations,  and a change in the federal income tax status
of the Trust from a partnership  (which is not subject to tax) to a corporation.
The process of considering and effecting a combination,  if the decision is made
to do so,  will be  very  lengthy.  There  is no  assurance  that  the  Managing
Shareholder  will  recommend a  combination,  that the Investors of the Trust or
other programs will approve it, that economic conditions or the business results
of the  participants  will be favorable for a combination,  that the combination
will be effected or that the  economic  results of a  combination,  if effected,
will be favorable to the Investors of the Trust or other programs.

(b)  Holders

         As of the date of this Form  10-K,  there  are 483  record  holders  of
Investor Shares.

(c)  Dividends

     The Trust made distributions as follows for the years 2000 and 1999:

                                          Year ended             Year ended
                                          December 31,           December 31,
                                             2000                   1999

Total distributions to Investors           $  706,925             $282,456
Distributions per Investor Share           $    3,003             $  1,200
Distributions to Managing Shareholder      $    7,141             $  2,853

         The Trust suspended  distributions in April 1999 to create a reserve at
the  Monterey  Project  level  for  the  costs  of the  Monterey  Project  legal
proceedings.  The Managing  Shareholder resumed limited quarterly  distributions
from the Trust  beginning  in April 2000 and then  discontinued  them  effective
January 1, 2001. The Trust's  decision  whether to make future  distributions to
Investors and their timing will depend on, among other things, the net cash flow
of the Trust, the expenses of the legal proceedings for the Monterey Project and
retention  of  reasonable  reserves  as  determined  by the  Trust to cover  its
anticipated expenses. See Item 7 Management's Discussion and Analysis.

         The Trust's cash flow comes primarily from distributions from Projects.
Those distributions are from cash flow of the Projects, which includes income of
Projects plus funds representing  depreciation and amortization charges taken by
the Projects.  Nevertheless,  because the Projects are not consolidated with the
Trust for accounting  purposes,  all funds received from Projects are considered
to be revenue to the Trust for accounting purposes. Occasionally,  distributions
may also include funds derived from operating or debt service  reserves or other
non-cash charges against  earnings.  Investors should be aware that the Trust is
organized to return net cash flow rather than accounting income to Investors.

Item 6.  Selected Financial Data.

     The following data is qualified in its entirety by the financial statements
presented elsewhere in this Annual Report on Form 10-K.

Supplemental Information Schedule

Selected Financial Data         As of and for the years ended December 31,
 (amounts in $)             2000      1999       1998      1997        1996
Total Fund Information:
Net revenue from
 operating projects     $   556,079 $  131,859 $  953,576 $1,715,860 $2,371,208
Net income (loss)           594,935     94,608(1,704,811)  3,591,765  1,907,401
Net assets
 (shareholders' equity)  11,822,573 11,941,704 12,132,405 15,263,754 16,353,759
Investments in Project
 development and power
 generation limited
 partnerships            10,751,582 10,274,790 10,594,402 12,733,179 16,116,582
Note receivable           1,283,327  1,729,181  2,140,866          0          0
Total assets             12,135,310 12,544,818 12,747,675 15,432,434 16,466,241
Per Investor Share:
  Project Revenues          $ 2,362   $    560   $  4,051    $ 7,289    $10,074
  Expenses                      500        849     12,129      3,415      1,705
  Net income (loss)           2,528        402     (7,243)    15,260      8,371
  Net asset value            50,581     51,082     51,884     65,054     69,639
Distributions per
  Investor Share             $3,003    $ 1,200    $ 6,000    $19,692    $ 8,849


     Item 7.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations.

Introduction

         The following  discussion  and analysis  should be read in  conjunction
with the Trust's financial  statements and the notes thereto presented elsewhere
herein.  The Trust's financial  statements are prepared under generally accepted
accounting principles applicable to business development companies. Accordingly,
the Trust carries its  investment in the Projects it owns at fair value and does
not  consolidate its financial  statements with the financial  statements of the
Projects.

         Revenue is recorded by the Trust as cash  distributions are declared by
the Projects.  Trust revenues may fluctuate  from period to period  depending on
the  operating  cash  flow  generated  by the  Projects  and the  amount of cash
retained to fund capital  expenditures.  Dollar  amounts in this  discussion are
generally rounded to the nearest $1,000.

Outlook

         The U.S.  electricity  markets  are being  restructured  and there is a
trend away from regulated  electricity systems towards deregulated,  competitive
market structures.  California, where the Trust's Monterey Project operates, has
passed  new  legislation   that  permits  utility   customers  to  choose  their
electricity  supplier in a competitive  electricity market. The Monterey Project
is a  "Qualifing  Facility"  as  defined  under the  Public  Utility  Regulatory
Policies Act of 1978 and currently  sells its electric output to a utility under
a long-term  contract  expiring in 2021.  During the term of the  contract,  the
utility may or may not attempt to buy out the contract prior to  expiration.  At
the end of the contract,  the Monterey  Project will become a merchant plant and
may be able to sell the electric output at then current market prices. There can
be no  assurance  that  future  market  prices will be  sufficient  to allow the
Monterey Project to operate profitably.  See Item 1(c)(3) - Plant Operations for
information concerning a potential challenge to the Project's Power Contract.

         The Berkshire  Project receives revenue in the form of tipping fees for
waste delivered to the facility and from steam sold under a long-term  contract,
which expires in 2004.  Tipping fees are based on spot market prices,  which may
fluctuate from time to time. The Project's  steam customer may or may not extend
its purchases beyond the year 2004.

         The Columbia  Project  receives revenue in the form of tipping fees for
waste  delivered to the facility by local waste haulers and  transferred to long
haul trucks for delivery to distant landfills.  The Project's profit margins are
affected by the level of competition  from national waste  management  companies
operating  in the same  region and the  availability  of other  sources of waste
disposal.

         The California  Pumping  Project owns  irrigation well pumps in Ventura
County,  California,  which supply water to farmers. The demand for water pumped
by the project varies inversely with rainfall in the area.

         Additional  trends affecting the independent  power industry  generally
are described at Item 1 - Trends  Affecting the Electric Utility and Independent
Power Industries.

Results of Operations

Year ended December 31, 2000 compared to year ended December 31, 1999

         Total revenue increased 141.7% to $713,000 in 2000 compared to $295,000
in 1999, due to increased income from power generation.

Project                      2000          1999
                          ---------      --------
Monterey ...............  $247,000         $  --
Columbia ...............   300,000       100,000
California Pumping .....     9,000        32,000
                           --------      --------
Total ..................  $556,000       132,000
                           --------      --------

         The increase in income from the Monterey Project was attributable to an
increase in revenue due to the  Project's  election to switch the pricing of its
electricity  sales from a cost based price to a market  based price in the third
quarter of 2000.

         The  increase  in income from the  Columbia  Project was due to both an
increase  in the volume of waste  received by the project as well as increase in
the tipping fee per ton of waste received.

         Total  expenses  decreased  $82,000  (41.0%) to  $118,000  in 2000 from
$200,000 in 1999  primarily due to a reduction in the management fee of $56,000.
This decrease was a result of the Manager Shareholder waiving its management fee
beginning  in April 1999.  Interest  expense  decreased  from $27,000 in 1999 to
$9,000 in 2000 as a result of lower  average  outstanding  borrowings  under its
line of credit agreement. Other 2000 Trust expenses were comparable to 1999.

Year ended December 31, 1999 compared to year ended December 31, 1998

         Total  revenue   decreased  74.3%  to  $295,000  in  1999  compared  to
$1,150,000  in 1998,  due to lower income from power  generation.  As summarized
below, income from power generation projects decreased 86.2% to $132,000 in 1999
compared to $954,000 in 1998:

Project                        1999        1998
                          ---------      --------
Monterey ...............     $  --      $515,000
Berkshire ..............        --       176,000
Columbia ...............   100,000       250,000
California Pumping .....    32,000        13,000
                           --------      --------
Total ..................  $132,000      $954,000
                           --------      --------

         The decline from the Monterey Project was attributable to the Project's
increased  legal  costs  associated  with  the  litigation  with  Pacific  Gas &
Electric.

         The decline in revenue at Berkshire was a result of distributions  from
the project  ceasing in the third quarter of 1998. In the third quarter of 1998,
the manager of Berkshire  informed the Trust that  significant  cost overruns in
the  construction  of an ash  handling  system  for the  Berkshire  project  had
depleted  Berkshire's  funds,  including reserve funds for closure of a landfill
and other  reserves.  The project  manager  believed  that  Berkshire  could not
continue long-term  operations without  significant  capital injections from its
two limited  partners,  one of whom is the Trust.  The project  manager  further
advised the Trust that  distributions  from  Berkshire to the Trust would cease.
The Trust's managing shareholder requested detailed additional information and a
revised operating plan from the project manager and conducted on-site reviews by
its financial and engineering  personnel.  The Trust has reviewed the short-term
and  long-term  viability of the  Berkshire  project and wrote down the carrying
value of the investment from $2,347,000 to zero.

         Distributions  from  the  California  Pumping  Project  increased  from
$13,000 in 1998 to  $32,000  in 1999.  The  increase  was a result of  increased
demand for water pumping due to the absence of the  extraordinary  rainfall that
occurred in California in the first half of 1998. In addition, 1998 results were
negatively  impacted by the cost of terminating the operating agreement with the
third party  manager.  The Trust paid  $106,000  to the third  party  manager to
terminate the operating  agreement.  However,  the increased revenue in 1999 and
absence of the 1998 contract termination cost were partially offset by increased
costs caused by rising fuel prices.

         Although 1999 operating results at the Columbia Project were consistent
with 1998 results,  cash received from the project decreased to $100,000 in 1999
from  $250,000 in 1998  because the project  manager  reduced  distributions  to
increase the project's cash reserves.

         Total  expenses  decreased  $2,655,000  (93.0%)  to  $200,000  in  1999
compared to  $2,855,000  in 1998,  primarily  due to the absence of a $2,347,000
writedown of the Berkshire  Project in 1998.  In addition,  the  management  fee
decreased  from  $382,000  in  1998  to  $56,000  in 1999  because  the  Manager
Shareholder waived its management fee beginning in April 1999.  Interest expense
increased  from $7,000 in 1998 to $27,000 in 1999 as a result of higher  average
outstanding borrowings under its line of credit agreement.  All other 1999 Trust
expenses were comparable to 1998.

Liquidity and Capital Resources

         During 2000, the Trust's  operating  activities  generated  $666,000 of
cash  compared  to  $723,000  of cash  during  1999.  The  change  is  primarily
attributable to increased  working capital  requirements at the Monterey project
due to higher fuel  prices.  Cash  distributions  to  shareholders  increased to
$714,000 in 2000 from $285,000 in 1999. The Trust ceased making distributions to
shareholders in the second quarter of 1999 and resumed making them in the second
quarter of 2000.  Then,  in the first  quarter of 2001,  the Trust again  ceased
making distributions to shareholders.

         In 1997,  the Trust and Fleet Bank,  N.A.  (the "Bank")  entered into a
revolving  line of credit  agreement,  whereby  the Bank  provides a  three-year
committed  line of credit  facility of  $750,000.  The credit line was  extended
until March 2001.  Outstanding borrowings bear interest at the Bank's prime rate
or, at the Trust's choice, at LIBOR plus 2.5%. The credit agreement requires the
Trust to maintain a ratio of total debt to tangible  net worth of no more than 1
to 1 and a minimum debt service  coverage  ratio of 2 to 1. The credit  facility
was  obtained in order to allow the Trust to operate  using a minimum  amount of
cash,  maximize the amount invested in Projects and maximize cash  distributions
to shareholders.  The Trust borrowed $300,000 in 1998 and an additional $100,000
in 1999. The Trust repaid the outstanding borrowings in March 2000.

         Obligations  of the Trust are  generally  limited to payment of Project
operating  expenses,  payment of a management  fee to the Managing  Shareholder,
payments  for  certain  accounting  and  legal  services  to third  persons  and
distributions to shareholders. Accordingly, the Trust has not found it necessary
to retain a material amount of working capital.

         The Trust  anticipates  that during 2001 its cash flow from  operations
will meet its obligations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Qualitative Information About Market Risk.

         The  Trust's  investments  in  financial   instruments  are  short-term
investments of working capital or excess cash. Those short-term  investments are
limited by its  Declaration of Trust to investments in United States  government
and agency  securities or to  obligations of banks having at least $5 billion in
assets.  Because  the Trust  invests  only in  short-term  instruments  for cash
management,  its exposure to interest rate changes is low. The Trust has limited
exposure to trade accounts  receivable and believes that their carrying  amounts
approximate fair value.

         The Trust's primary market risk exposure is limited  interest rate risk
caused  by  fluctuations  in  short-term  interest  rates.  The  Trust  does not
anticipate  any changes in its primary market risk exposure or how it intends to
manage it. The Trust does not trade in market risk sensitive instruments.

Quantitative Information About Market Risk

         This table provides information about the Trust's financial instruments
that are  defined by the  Securities  and  Exchange  Commission  as market  risk
sensitive instruments.  These include only short-term U.S. government and agency
securities and bank  obligations.  The table  includes  principal cash flows and
related weighted average interest rates by contractual maturity dates.

                         December 31, 2000
                      Expected Maturity Date
                                  2003
                                 (U.S. $)

Note receivable from NRG                     $ 1,283,000
 Interest rate                                        8%

                       Expected Maturity Date
                                 2001
                                 (U.S. $)

Bank Deposits and Certificates of Deposit       $ 90,000
Average interest rate                                5.6%

Item 8.  Financial Statements and Supplementary Data.

Index to Financial Statements

Report of Independent Accountants                            F-2
Balance Sheet at December 31, 2000 and 1999                  F-3
Statement of Operations For the Three Years
  Ended December 31, 2000                                    F-4
Statement of Changes in Shareholders' Equity For
  the Three Years Ended December 31, 2000                    F-5
Statement of Cash Flows For the Three Years
  Ended December 31, 2000                                    F-6
Notes to Financial Statements                         F-7 to F-13

         All  schedules  are  omitted  because  they are not  applicable  or the
required information is shown in the financial statements or notes thereto.

         The financial  statements  are presented in accordance  with  generally
accepted accounting  principles and Securities and Exchange Commission rules and
regulations  applicable  to business  investment  companies,  which  require the
Trust's investments in Projects to be presented on the cash method,  rather than
on the equity method.

     Item 9. Changes in and  Disagreements  with  Accountants  on Accounting and
Financial Disclosure.

         Neither the Trust nor the Managing  Shareholder  has had an independent
accountant  resign  or  decline  to  continue  providing  services  since  their
respective inceptions and neither has dismissed an independent accountant during
that period.  During that period of time no new independent  accountant has been
engaged by the Trust or the Managing Shareholder, and the Managing Shareholder's
current accountants, PricewaterhouseCoopers LLP, have been engaged by the Trust.

PART III

Item 10.  Directors and Executive Officers of the Registrant.

(a)  General.

         As Managing  Shareholder of the Trust,  Ridgewood  Power LLC has direct
and exclusive  discretion in management  and control of the affairs of the Trust
(subject to the general  supervision and review of the Independent  Trustees and
the  Managing  Shareholder  acting  together  as the  Board of the  Trust).  The
Managing  Shareholder will be entitled to resign as Managing  Shareholder of the
Trust  only  (i)  with  cause   (which  cause  does  not  include  the  fact  or
determination  that  continued  service  would be  unprofitable  to the Managing
Shareholder) or (ii) without cause with the consent of a majority in interest of
the  Investors.  It may be removed from its capacity as Managing  Shareholder as
provided in the Declaration.

         Ridgewood  Holding,  which  was  incorporated  in  April  1992,  is the
Corporate Trustee of the Trust.

(b)  Managing Shareholder.

         Ridgewood  Power  Corporation  was  incorporated  in February 1991 as a
Delaware corporation for the primary purpose of acting as a managing shareholder
of business  trusts and as a managing  general  partner of limited  partnerships
which  are  organized  to  participate  in  the  development,  construction  and
ownership of  Independent  Power  Projects.  It organized the Trust and acted as
managing  shareholder until April 1999. On or about April 21, 1999 it was merged
into the current Managing Shareholder,  Ridgewood Power LLC. Ridgewood Power LLC
was  organized in early April 1999 and has no business  other than acting as the
successor to Ridgewood Power Corporation.

         Robert  E.  Swanson  has been the  President,  sole  director  and sole
stockholder of Ridgewood Power  Corporation since its inception in February 1991
and is now the  controlling  member,  sole manager and President of the Managing
Shareholder.  All of the equity in the Managing  Shareholder is or will be owned
by Mr. Swanson or by family trusts. Mr. Swanson has the power on behalf of those
trusts to vote or dispose of the membership equity interests owned by them.

         The Managing  Shareholder  has also organized Power I, Power III, Power
IV, Power V, the Growth Fund and the Egypt Fund as Delaware  business  trusts to
participate in the independent  power industry.  Ridgewood Power LLC is now also
their  managing  shareholder.  The business  objectives  of these six trusts are
similar to those of the Trust.

         A number of other  companies  are  affiliates  of Mr.  Swanson  and the
Managing Shareholder. Each of these also was organized as a corporation that was
wholly-owned  by Mr.  Swanson.  In April  1999,  most of them were  merged  into
limited  liability  companies with similar names and Mr. Swanson became the sole
manager  and  controlling   owner  of  each  limited  liability   company.   For
convenience,  the  remainder  of  this  Memorandum  will  discuss  each  limited
liability company and its corporate predecessor as a single entity.

         The  Managing   Shareholder   is  an  affiliate  of  Ridgewood   Energy
Corporation  ("Ridgewood  Energy"),  which has organized and operated 48 limited
partnership  funds and one  business  trust  over the last 17 years (of which 25
have  terminated)  and which had total capital  contributions  in excess of $190
million.  The  programs  operated by Ridgewood  Energy have  invested in oil and
natural  gas  drilling  and  completion  and  other  related  activities.  Other
affiliates of the Managing Shareholder include Ridgewood Securities  Corporation
("Ridgewood Securities"),  an NASD member which has been the placement agent for
the private  placement  offerings  of the six trusts  sponsored  by the Managing
Shareholder  and the funds  sponsored by  Ridgewood  Energy;  Ridgewood  Capital
Management  LLC  ("Ridgewood  Capital"),  which assists in offerings made by the
Managing  Shareholder and which is the sponsor of six privately  offered venture
capital funds (the Ridgewood Capital Venture Partners, Ridgewood Capital Venture
Partners II and Ridgewood  Capital Venture Partners III funds);  Ridgewood Power
VI LLC ("Power VI"),  which is a managing  shareholder  of the Growth Fund,  and
RPM. Each of these  companies is  controlled by Robert E. Swanson,  who is their
sole director or manager.

         Set forth below is certain information concerning Mr. Swanson and other
executive officers of the Managing Shareholder.

         Robert E.  Swanson,  age 54, has also served as  President of the Trust
since its inception in 1991 and as President of RPM,  Power I, Power III,  Power
IV, Power V and the Growth Fund, since their respective inceptions.  Mr. Swanson
has been President and registered  principal of Ridgewood  Securities and became
the Chairman of the Board of Ridgewood  Capital on its  organization in 1998. He
also is Chairman of the Board of the Ridgewood  Capital  Venture  Partners I, II
and III venture  capital  funds.  In addition,  he has been  President  and sole
stockholder  of Ridgewood  Energy since its inception in October 1982.  Prior to
forming  Ridgewood  Energy in 1982,  Mr. Swanson was a tax partner at the former
New York and Los  Angeles law firm of Fulop & Hardee and an officer in the Trust
and Investment  Division of Morgan  Guaranty Trust Company.  His specialty is in
personal tax and financial planning,  including income, estate and gift tax. Mr.
Swanson is a member of the New York State and New Jersey bars,  the  Association
of the Bar of the City of New York and the New York State Bar Association. He is
a graduate of Amherst College and Fordham University Law School.

         Robert L. Gold,  age 42, has served as Executive  Vice President of the
Managing Shareholder, RPM, the Trust, Power I, Power III, Power IV, Power V, the
Growth Fund, and the Egypt Fund since their respective inceptions,  with primary
responsibility  for  marketing  and  acquisitions.  He  has  been  President  of
Ridgewood  Capital since its  organization  in 1998. As such, he is President of
the Ridgewood  Capital  Venture  Partners I, II and III funds.  He has served as
Vice President and General Counsel of Ridgewood Securities  Corporation since he
joined the firm in December  1987.  Mr. Gold has also served as  Executive  Vice
President of Ridgewood Energy since October 1990. He served as Vice President of
Ridgewood  Energy from December 1987 through  September  1990. For the two years
prior to joining Ridgewood Energy and Ridgewood Securities Corporation, Mr. Gold
was a corporate attorney in the law firm of Cleary,  Gottlieb,  Steen & Hamilton
in New York City where his experience  included  mortgage  finance,  mergers and
acquisitions, public offerings, tender offers, and other business legal matters.
Mr.  Gold is a member of the New York  State bar.  He is a  graduate  of Colgate
University and New York University School of Law.

         Martin V. Quinn,  age 53, has been the  Executive  Vice  President  and
Chief Operating Officer of Ridgewood Power since April 2000. Before that, he had
assumed the duties of Chief  Financial  Officer of  Ridgewood  Power in November
1996 under a  consulting  arrangement.  In April  1997,  he became a Senior Vice
President and Chief Financial Officer of Ridgewood Power and the Fund.

         Mr. Quinn has over 30 years of experience in financial  management  and
corporate mergers and acquisitions, gained with major, publicly traded companies
and an  international  accounting  firm. He formerly served as Vice President of
Finance  and Chief  Financial  Officer of  NORSTAR  Energy,  an energy  services
company,  from February 1994 until June 1996. From 1991 to March 1993, Mr. Quinn
was  employed by  Brown-Forman  Corporation,  a  diversified  consumer  products
company and distiller, where he was Vice President-Corporate  Development.  From
1981 to 1991, Mr. Quinn held various officer-level positions with NERCO, Inc., a
mining and natural resource  company,  including Vice President-  Controller and
Chief  Accounting  Officer  for his last six years and Vice  President-Corporate
Development.  Mr.  Quinn's  professional  qualifications  include his  certified
public  accountant  qualification in New York State,  membership in the American
Institute of Certified  Public  Accountants,  six years of  experience  with the
international accounting firm of PricewaterhouseCoopers,  LLP, and a Bachelor of
Science degree in Accounting and Finance from the University of Scranton (1969).

         Daniel V. Gulino,  age 40, has been Senior Vice  President  and General
Counsel of the Managing Shareholder since August 2000. He began his legal career
as an associate for Pitney,  Hardin,  Kipp & Szuch, a large New Jersey law firm,
where his experience included corporate acquisitions and transactions.  Prior to
joining  Ridgewood,  Mr. Gulino was in-house  counsel for several large electric
utilities,  including GPU, Inc.,  Constellation Power Source, and PPL Resources,
Inc., where he specialized in non-utility generation projects, independent power
and power  marketing  transactions.  Mr.  Gulino  also has  experience  with the
electric and natural gas purchasing of industrial  organizations,  having worked
as  in-house  counsel  for  Alumax,  Inc.  (now  part  of  Alcoa)  where  he was
responsible  for,  among  other  things,   Alumax's  electric  and  natural  gas
purchasing  program.  Mr.  Gulino  is a member of the New  Jersey  State Bar and
Pennsylvania State Bar. He is a graduate of Fairleigh  Dickinson  University and
Rutgers University School of Law - Newark.

         Christopher  I.  Naunton,  36,  has been the Vice  President  and Chief
Financial  Officer of the Managing  Shareholder  since April 2000. From February
1998 to April 2000,  he was Vice  President  of Finance of an  affiliate  of the
Managing  Shareholder.  Prior  to that  time,  he was a  senior  manager  at the
predecessor  accounting  firm  of  PricewaterhouseCoopers   LLP.  Mr.  Naunton's
professional    qualifications   include   his   certified   public   accountant
qualification in Pennsylvania, membership in the American Institute of Certified
Public  Accountants and a Bachelor of Science degree in Business  Administration
from Bucknell University (1986).

         Mary Lou Olin,  age 48, has served as Vice  President  of the  Managing
Shareholder,  RPM, Ridgewood  Capital,  the Trust, Power I, Power III, Power IV,
Power V, the Growth Fund, and the Egypt Fund since their respective  inceptions.
She has also served as Vice  President of Ridgewood  Energy since  October 1984,
when she joined the firm.  Her  primary  areas of  responsibility  are  investor
relations,  communications  and  administration.  Prior  to  her  employment  at
Ridgewood Energy, Ms. Olin was a Regional  Administrator at McGraw-Hill Training
Systems where she was employed for two years. Prior to that, she was employed by
RCA Corporation. Ms. Olin has a Bachelor of Arts degree from Queens College.

(c)  Management Agreement.

         The Trust has entered  into a  Management  Agreement  with the Managing
Shareholder  detailing  how the  Managing  Shareholder  will render  management,
administrative and investment advisory services to the Trust. Specifically,  the
Managing  Shareholder  will  perform  (or arrange  for the  performance  of) the
management and administrative  services required for the operation of the Trust.
Among other services,  it will administer the accounts and handle relations with
the Investors, provide the Trust with office space, equipment and facilities and
other  services  necessary for its  operation and conduct the Trust's  relations
with  custodians,  depositories,  accountants,  attorneys,  brokers and dealers,
corporate  fiduciaries,  insurers,  banks and others, as required.  The Managing
Shareholder  will also be  responsible  for  making  investment  and  divestment
decisions, subject to the provisions of the Declaration.

         The Managing  Shareholder  will be obligated to pay the compensation of
the personnel and all  administrative  and service expenses necessary to perform
the foregoing  obligations.  The Trust will pay all other expenses of the Trust,
including  transaction  expenses,  valuation  costs,  expenses of preparing  and
printing  periodic  reports for Investors and the Commission,  postage for Trust
mailings,  Commission fees,  interest,  taxes, legal,  accounting and consulting
fees,  litigation expenses and other expenses properly payable by the Trust. The
Trust will reimburse the Managing  Shareholder  for all such Trust expenses paid
by it.

         As compensation for the Managing  Shareholder's  performance  under the
Management Agreement,  the Trust is obligated to pay the Managing Shareholder an
annual  management fee described below at Item 13 -- Certain  Relationships  and
Related Transactions.

         The Board of the Trust (including  Independent  Trustees) have approved
the initial  Management  Agreement and its renewals.  Each Investor consented to
the terms and conditions of the initial  Management  Agreement by subscribing to
acquire  Investor Shares in the Trust.  The Management  Agreement will remain in
effect year to year  thereafter  as long as it is approved at least  annually by
(i) either the Board of the Trust or a majority in interest of the Investors and
(ii) a  majority  of the  Independent  Trustees.  The  agreement  is  subject to
termination  at any time on 60 days'  prior  notice by the Board,  a majority in
interest of the Investors or the Managing Shareholder.  The agreement is subject
to  amendment  by the  parties  with the  approval  of (i) either the Board or a
majority  in interest of the  Investors  and (ii) a majority of the  Independent
Trustees.

(d) Executive Officers of the Trust.

         Pursuant to the  Declaration,  the Managing  Shareholder  has appointed
officers of the Trust to act on behalf of the Trust and sign documents on behalf
of the Trust as authorized  by the Managing  Shareholder.  Mr.  Swanson has been
named the President of the Trust and the other  executive  officers of the Trust
are identical to those of the Managing Shareholder.

         The officers have the duties and powers  usually  applicable to similar
officers of a Delaware  business  corporation  in carrying  out Trust  business.
Officers  act under the  supervision  and control of the  Managing  Shareholder,
which is entitled to remove any officer at any time. Unless otherwise  specified
by the Managing Shareholder, the President of the Trust has full power to act on
behalf of the Trust. The Managing Shareholder expects that most actions taken in
the name of the  Trust  will be taken by Mr.  Swanson  and the  other  principal
officers in their capacities as officers of the Trust under the direction of the
Managing Shareholder rather than as officers of the Managing Shareholder.

(e)  The Trustees.

         The 1940 Act requires the  Independent  Trustees to be individuals  who
are not  "interested  persons"  of the  Trust  as  defined  under  the  1940 Act
(generally,  persons who are not affiliated with the Trust or with affiliates of
the Trust).  There must always be at least two  Independent  Trustees;  a larger
number may be specified by the Board from time to time. Each Independent Trustee
has an  indefinite  term.  Vacancies  in the  authorized  number of  Independent
Trustees will be filled by vote of the remaining  Board members so long as there
is at least one Independent  Trustee;  otherwise,  the Managing Shareholder must
call a special  meeting of Investors to elect  Independent  Trustees.  Vacancies
must be filled within 90 days. An  Independent  Trustee may resign  effective on
the  designation  of a  successor  and may be  removed  for  cause  by at  least
two-thirds of the remaining  Board members or with or without cause by action of
the  holders  of at least  two-thirds  of Shares  held by  Investors.  Under the
Declaration,  the  Independent  Trustees are  authorized to act only where their
consent is required under the 1940 Act and to exercise a general power to review
and oversee the Managing Shareholder's other actions. They are under a fiduciary
duty similar to that of corporate  directors to act in the Trust's best interest
and are entitled to compel action by the Managing  Shareholder to carry out that
duty, if  necessary,  but  ordinarily  they have no duty to manage or direct the
management of the Trust outside their enumerated responsibilities.

         The Independent  Trustees of the Trust are Ralph O. Hellmold,  Jonathan
C.  Kaledin  and Joseph  Ferrante,  Jr. Set forth  below is certain  information
concerning the Independent  Trustees,  who also serve as independent trustees of
Ridgewood Power III and as independent  panel members of Ridgewood Power V. Both
are independent power programs  sponsored by Ridgewood Power.  Independent panel
members  must  approve  transactions  between  their  program  and the  Managing
Shareholder or companies affiliated with the Managing  Shareholder,  but have no
other responsibilities. Neither Mr. Hellmold nor Mr. Kaledin nor Mr. Ferrante is
otherwise  affiliated with the Trust, any of the Trust's officers or agents, the
Managing  Shareholder,  any  other  Trustee,  any  affiliates  of  the  Managing
Shareholder and any other Trustees, or any director,  officer or agent of any of
the foregoing.

         Ralph O.  Hellmold,  age 60,  is  Chairman  of The  Private  Investment
Banking  Company  ("PIBC") and President of Hellmold  Associates,  Inc., both of
which are financial  advisory firms that assist companies raise capital,  divest
or acquire businesses or restructure  corporate  organizations.  Other financial
advisory services provided by PIBC and Hellmold Associates, Inc. include mergers
and  acquisitions  advice,  valuations,  fairness  opinions  and expert  witness
testimony.  In addition to working with troubled  companies or their  creditors,
Hellmold  Associates,  Inc. also acts as general partner of funds that invest in
the securities of financially distressed companies.

         From  1987 to 1990,  when he  formed  Hellmold  Associates,  Inc.,  Mr.
Hellmold was a Managing Director at Prudential-Bache  Capital Funding,  where he
served as co-head of the  Corporate  Finance  Group,  co-head of the  Investment
Banking  Committee and head of the Financial  Restructuring  Group. From 1974 to
1987, Mr. Hellmold was a partner at Lehman Brothers and its successors, where he
worked in the General  Corporate  Finance  Group and  co-founded  the  Financial
Restructuring Group. Prior thereto, he was a research analyst at Lehman Brothers
and at Francis I. du Pont & Company. He received his undergraduate  degree magna
cum laude from Harvard College and an M.I.A. from Columbia  University.  He is a
Chartered  Financial  Analyst  and a member of the New York  Society of Security
Analysts.  Mr.  Hellmold is the holder of one- half share in each of Power I and
Power II, a shareholder of one-half Share in the Trust and a limited  partner or
shareholder in numerous  limited  partnerships and a business trust sponsored by
Ridgewood  Energy to invest in oil and gas development  and related  businesses.
Mr. Hellmold is a director of Core Materials Corporation,  Columbus, Ohio and of
International Aircraft Investors, Torrance, California.

         Jonathan C. Kaledin,  age 43, has been New York Regional Counsel of The
Nature  Conservancy,  the international  land conservation  organization,  since
September  1995.  From 1990 to June 1995, he was the  Executive  Director of the
National  Water  Funding  Council  ("NWFC"),  an  advocacy  and  public  affairs
organization representing municipalities, businesses, financial institutions and
others on the financial aspects of clean water infrastructure  projects required
by the federal Clean Water Act and the federal Safe Drinking  Water Act..  Prior
to running the NWFC,  Mr.  Kaledin  practiced law in both the private and public
sectors,  specializing in  environmental  and real estate  matters.  Mr. Kaledin
received his undergraduate degree magna cum laude from Harvard College and a law
degree from New York University.

         The  Independent  Trustees  and the Managing  Shareholder  expanded the
number of  Independent  Trustees  to three in January  2000 and  elected  Joseph
Ferrante,  Jr. as the additional  Independent Trustee. Mr. Ferrante, age 56, has
been a lawyer in private  practice in  Ridgewood,  New Jersey for more than five
years specializing in business and taxation matters.  He received a Juris Doctor
degree in law from the George Washington University and his undergraduate degree
from the Johns  Hopkins  University.  He advises a large  number of start-up and
entrepreneurial companies.

         The Corporate Trustee of the Trust is Ridgewood Holding. Legal title to
Trust  Property  is now and in the future  will be in the name of the Trust,  if
possible,  or Ridgewood Holding as trustee.  Ridgewood Holding is also a trustee
of Power I, Power III,  Power IV, Power V, the Growth Fund,  the Egypt Fund, and
of an oil and gas business trust  sponsored by Ridgewood  Energy and is expected
to be a trustee of other similar  entities that may be organized by the Managing
Shareholder  and  Ridgewood  Energy.  The  President,  sole  director  and  sole
stockholder  of  Ridgewood  Holding is Robert E.  Swanson;  its other  executive
officers are  identical to those of the  Managing  Shareholder.  See -- Managing
Shareholder.  The principal office of Ridgewood  Holding is at 1105 North Market
Street, Suite 1300, Wilmington, Delaware 19899.

         The Trustees are not liable to persons other than  Shareholders for the
obligations of the Trust.

         The  Trust  has  relied  and  will  continue  to rely  on the  Managing
Shareholder and engineering,  legal,  investment  banking and other professional
consultants  (as needed) and to monitor and report to the Trust  concerning  the
operations of Projects in which it invests,  to review  proposals for additional
development or financing, and to represent the Trust's interests. The Trust will
rely on such persons to review  proposals  to sell its  interests in Projects in
the future.

(f)  Section 16(a) Beneficial Ownership Reporting Compliance

         To  the  knowledge  of the  Trust,  there  were  no  violations  of the
reporting  requirements  of  section  16(a)  of the  1934  Act by  officers  and
directors of the Trust in the last fiscal year.

(g)  RPM.

         As  discussed  above at Item 1 - Business,  RPM has assumed  day-to-day
management  responsibility  for the Monterey Project,  effective January 1, 1996
and operating  responsibility for the California Pumping Project in October 1998
and had assumed certain responsibilities for the San Diego Project in early 1997
until its sale.  Like the Managing  Shareholder,  RPM is controlled by Robert E.
Swanson.  It has  entered  into an  "Operation  Agreement"  with  certain of the
Trust's  subsidiaries,  effective  January 1, 1996,  under which RPM,  under the
supervision of the Managing  Shareholder,  provides the management,  purchasing,
engineering,  planning and administrative  services for those Projects that were
previously furnished by employees of the Trust or by unaffiliated  professionals
or  consultants  and that  were  borne by the  Trust or  Projects  as  operating
expenses.  To the extent  that those  services  were  provided  by the  Managing
Shareholder  and related  directly to the operation of the Project,  RPM charges
the Trust at its cost for these services and for the Trust's allocable amount of
certain  overhead  items.  RPM shares  space and  facilities  with the  Managing
Shareholder  and its  Affiliates.  To the extent  that  common  expenses  can be
reasonably  allocated to RPM, the Managing  Shareholder may, but is not required
to, charge RPM at cost for the allocated amounts and such allocated amounts will
be borne by the  Trust  and  other  programs.  Common  expenses  that are not so
allocated are borne by the Managing Shareholder.

         Initially,  the Managing  Shareholder does not anticipate  charging RPM
for the full amount of rent,  utility supplies and office expenses  allocable to
RPM.  As a  result,  both  initially  and  on  an  ongoing  basis  the  Managing
Shareholder believes that RPM's charges for its services to the Trust are likely
to be  materially  less  than its  economic  costs  and the  costs  of  engaging
comparable  third persons as managers.  RPM will not receive any compensation in
excess of its costs.

         Allocations  of costs will be made either on the basis of  identifiable
direct costs,  time records or in proportion to each  program's  investments  in
Projects  managed by RPM; and  allocations  will be made in a manner  consistent
with generally accepted accounting principles.

         RPM will not provide any services related to the  administration of the
Trust, such as investment, accounting, tax, investor communication or regulatory
services,  nor will it  participate  in  identifying,  acquiring or disposing of
Projects.  RPM will not have the power to act in the Trust's name or to bind the
Trust,  which will be  exercised  by the  Managing  Shareholder  or the  Trust's
officers,  although it may be  authorized  to act on behalf of the  subsidiaries
that own Projects.

         The Operation Agreement does not have a fixed term and is terminable by
RPM,  by the  Managing  Shareholder  or by vote of a  majority  of  interest  of
Investors,  on 60 days' prior notice. The Operation  Agreement may be amended by
agreement of the  Managing  Shareholder  and RPM;  however,  no  amendment  that
materially  increases the obligations of the Trust or that materially  decreases
the  obligations  of RPM shall  become  effective  until at least 45 days  after
notice of the amendment,  together with the text thereof,  has been given to all
Investors.

     The  executive  officers  of RPM  are Mr.  Swanson  (President),  Mr.  Gold
(Executive  Vice  President),  Mr. Quinn  (Executive  Vice  President  and Chief
Operating Officer),  Mr. Gulino (Senior Vice President and General Counsel), Mr.
Naunton  (Vice  President  and  Chief  Financial  Officer)  and Ms.  Olin  (Vice
President).

Item 11.  Executive Compensation.

         Through  1995,  the  executive  officers of the Trust and the  Managing
Shareholder were compensated by Ridgewood Energy.  The Trust was not charged for
their compensation; the Managing Shareholder remitted a portion of the fees paid
to it by the Trust to reimburse  Ridgewood  Energy for employment costs incurred
on  the  Managing  Shareholder's  business.  Beginning  in  1996,  the  Managing
Shareholder  compensates these persons without additional  payments by the Trust
and will be  reimbursed  by  Ridgewood  Energy for costs  related  to  Ridgewood
Energy's  business.  The Trust  reimburses  RPM at  allocable  cost for services
provided by RPM's employees; no such reimbursement per employee exceeded $60,000
in 2000 or 1999.  Information as to the fees payable to the Managing Shareholder
and certain  affiliates  is  contained at Item 13 -- Certain  Relationships  and
Related Transactions.

         As  compensation  for services  rendered to the Trust,  pursuant to the
Declaration,  each  Independent  Trustee is entitled to be paid by the Trust the
sum of $5,000  annually and to be reimbursed  for all  reasonable  out-of-pocket
expenses  relating to attendance at Board  meetings or otherwise  performing his
duties  to the  Trust.  The  Board  of the  Trust  is  entitled  to  review  the
compensation  payable to the  Independent  Trustees  annually  and  increase  or
decrease it as the Board sees  reasonable.  The Trust is not entitled to pay the
Independent Trustees  compensation for consulting services rendered to the Trust
outside the scope of their duties to the Trust without prior Board approval.

         Ridgewood Holding,  the Corporate Trustee of the Trust, is not entitled
to compensation  for serving in such capacity,  but is entitled to be reimbursed
for Trust  expenses  incurred by it which are  properly  reimbursable  under the
Declaration.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

         The Trust sold 235.3775 Investor Shares (approximately $23.5 million of
gross  proceeds)  of  beneficial  interest  in the Trust  pursuant  to a private
placement  offering under Rule 506 of Regulation D under the Securities Act. The
offering closed on January 31, 1994. Further details concerning the offering are
set forth above at Item 1 -- Business.

         The  Managing  Shareholder  purchased  for  cash in the  offering  1.45
Investor  Shares  (.6  of 1% of  the  outstanding  Investor  Shares).  Ralph  O.
Hellmold,  an  Independent  Trustee  of the  Trust,  purchased  for  cash in the
offering  one-half of a full  Investor  Share.  By virtue of their  purchases of
Investor Shares,  the Managing  Shareholder and Mr. Hellmold are entitled to the
same ratable  interest in the Trust as all other  purchasers of Investor Shares.
No other Trustees or executive officers of the Trust acquired Investor Shares in
the Trust's offering.

         The Managing  Shareholder was issued one Management  Share in the Trust
representing  the  beneficial  interests and  management  rights of the Managing
Shareholder  in its  capacity  as such  (excluding  its  interest  in the  Trust
attributable  to  Investor  Shares  it  acquired  in the  offering).  Additional
information  concerning the management rights of the Managing  Shareholder is at
Item 1 - Business  and at Item 10 --  Directors  and  Executive  Officers of the
Registrant.  Its beneficial  interest in cash distributions of the Trust and its
allocable  share of the  Trust's  net  profits  and net losses  and other  items
attributable  to the  Management  Share are described in further detail below at
Item 13 - Certain Relationships and Related Transactions.

Item 13.  Certain Relationships and Related Transactions.

         The Declaration  provides that cash flow of the Trust,  less reasonable
reserves which the Trust deems necessary to cover anticipated Trust expenses, is
to be distributed to the Investors and the Managing  Shareholder  (collectively,
the "Shareholders"),  from time to time as the Trust deems appropriate. Prior to
Payout (the point at which  Investors  have  received  cumulative  distributions
equal to the amount of their capital contributions), each year all distributions
from the Trust,  other than  distributions of the revenues from  dispositions of
Trust Property,  are to be allocated 99% to the Investors and 1% to the Managing
Shareholder  until  Investors  have been  distributed  during the year an amount
equal  to  15%  of  their  total   capital   contributions   (a  "15%   Priority
Distribution"), and thereafter all remaining distributions from the Trust during
the year, other than  distributions  of the revenues from  dispositions of Trust
Property,  are  to be  allocated  80% to  Investors  and  20%  to  the  Managing
Shareholder.  Revenues from dispositions of Trust Property are to be distributed
99% to Investors and 1% to the Managing  Shareholder until Payout. In all cases,
after Payout,  Investors are to be allocated  80% of all  distributions  and the
Managing Shareholder 20%.

         For any fiscal  period,  the Trust's net  profits,  if any,  other than
those  derived from  dispositions  of Trust  Property,  are allocated 99% to the
Investors  and 1% to the  Managing  Shareholder  until the profits so  allocated
offset (1) the aggregate 15% Priority  Distribution to all Investors and (2) any
net losses from prior periods that had been allocated to the  Shareholders.  Any
remaining  net  profits,  other than those  derived from  dispositions  of Trust
Property,   are  allocated  80%  to  the  Investors  and  20%  to  the  Managing
Shareholder.  If the Trust  realizes  net losses for the period,  the losses are
allocated  80% to the Investors  and 20% to the Managing  Shareholder  until the
losses so allocated  offset any net profits from prior periods  allocated to the
Shareholders. Any remaining net losses are allocated 99% to the Investors and 1%
to the Managing  Shareholder.  Revenues from  dispositions of Trust Property are
allocated in the same manner as distributions  from such  dispositions.  Amounts
allocated to the  Investors  are  apportioned  among them in proportion to their
capital contributions.

         On  liquidation of the Trust,  the remaining  assets of the Trust after
discharge  of its  obligations,  including  any  loans  owed by the Trust to the
Shareholders, will be distributed, first, 99% to the Investors and the remaining
1% to the  Managing  Shareholder,  until  Payout,  and  any  remainder  will  be
distributed to the Shareholders in proportion to their capital accounts.

         In 2000 and 1999, as stated at Item 5 - Market for Registrant's  Common
Equity and Related  Stockholder  Matters,  as well as in prior years,  the Trust
made  distributions to the Managing  Shareholder (which is a member of the Board
of the Trust) as stated at Item 5 - Market for  Registrant's  Common  Equity and
Related Stockholder  Matters.  In addition,  the Trust and its subsidiaries paid
fees and  reimbursements  to the  Managing  Shareholder  and its  affiliates  as
follows:


                     2000     1999       1998        1997        1996

Managing
Shareholder  $       -0-     55,607     381,594     401,085   328,952

RPM Cost
Reimbursements  $  3,032,954  2,841,952  1,470,207  1,610,806  1,207,252

     The  investment  fee equaled 2% of the proceeds of the offering of Investor
Shares and was payable for the Managing  Shareholder's services in investigating
and evaluating investment  opportunities and effecting investment  transactions.
The placement agent fee (1% of the offering proceeds) and sales commissions were
also paid from proceeds of the offering, as was the organizational, distribution
and offering fee (5% of offering  proceeds) for legal,  accounting,  consulting,
filing, printing,  distribution,  selling, closing and organization costs of the
offering.

         The management fee,  payable monthly under the Management  Agreement at
the annual rate of 2.5% of the Trust's  net asset  value,  began on the date the
first Project was acquired and compensates the Managing  Shareholder for certain
management,  administrative  and  advisory  services  for the  Trust.  Under the
Declaration of Trust,  the annual rate fell to 1.5% per year beginning  February
1,  1999.  Beginning  April,  1999,  the  Managing  Shareholder  waived the fee.
Effective  January 1, 2001, it resumed payment of the management fee at the 1.5%
of net asset value annual rate.

         In  addition  to the  foregoing,  the  Trust  reimbursed  the  Managing
Shareholder at cost for expenses and fees of unaffiliated persons engaged by the
Managing Shareholder for Trust business and in years before 1996 for payroll and
other costs of operation of the Monterey and  California  Pumping  Projects.  In
1996 and 1997, these reimbursements were paid to RPM. The reimbursements to RPM,
which do not exceed its actual costs and  allocable  overhead,  are described at
Item 10(g) - Directors and Executive Officers of the Registrant -- RPM.

         Other  information  in response to this item is reported in response to
Item  11  --  Executive  Compensation,  which  information  is  incorporated  by
reference into this Item 13.

PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)  Financial Statements.

     See the Index to Financial Statements in Item 8 hereof.

(b) Reports on Form 8-K.

     No Forms 8-K were filed with the  Commission by the  Registrant  during the
quarter ending December 31, 2000.

(c)  Exhibits

     3A.   Certificate of Trust of the Registrant,  is incorporated by reference
           to Exhibit 3A to the Registrant's  Registration  Statement on Form 10
           filed with the Commission on February 27, 1993.

     3B.   Amended  and  Restated  Declaration  of Trust of the  Registrant,  is
           incorporated  by  reference to Exhibit 4 to the  Quarterly  Report on
           Form 10Q of the Registrant for the quarter ended September 30, 1993.

     10A.   Management  Agreement  dated  as of  January  4,  1993  between  the
            Registrant  and Ridgewood  Power  Corporation,  is  incorporated  by
            reference to Exhibit 10 to the Registrant's  Registration  Statement
            on Form 10 filed with the Commission on February 27, 1993.

     10B.   Limited  Partnership   Agreement  of  Pittsfield  Investors  Limited
            Partnership  (without  exhibits),  is  incorporated  by reference to
            Exhibit 2(i) to the Form 8-K of Registrant filed with the Commission
            on January 19, 1994.

     10C.   Asset  Purchase  Agreement  between  EAC  Systems,  Inc.  and  Vicon
            Recovery  Associates  ("Vicon")  dated as of December  23, 1992 (the
            "Asset Purchase Agreement")  (without exhibits),  is incorporated by
            reference to Exhibit 2(ii) to the Form 8-K of Registrant  filed with
            the Commission on January 19, 1994.

     10D.   First Amendment of Asset Purchase Agreement dated as of December 30,
            1993 (without  exhibits),  is  incorporated  by reference to Exhibit
            2(ii) to the Form 8-K of  Registrant  filed with the  Commission  on
            January 19, 1994.

     10E.   Lease dated as of September 1, 1979 between the City of  Pittsfield,
            Massachusetts  (acting by and  through  its  Industrial  Development
            Financing Authority),  is incorporated by reference to Exhibit 2(iv)
            to the Form 8-K of Registrant  filed with the  Commission on January
            19, 1994.

     10F.   Amended and Restated  Solid Waste  Disposal  and  Resource  Recovery
            Agreement  dated August 6, 1979 by and among the City of Pittsfield,
            Vicon and others  (together with amendments  dated October 26, 1984,
            July 28, 1989 and December 29, 1993),  is  incorporated by reference
            to  Exhibit  2(v) to the  Form  8-K of  Registrant  filed  with  the
            Commission on January 19, 1994.

     10G.   Steam Purchase  Agreement by and between Crane & Co., Inc. and Vicon
            dated as of February 1, 1979 (with  amendments),  is incorporated by
            reference to Exhibit 2(vi) to the Form 8-K of Registrant  filed with
            the Commission on January 19, 1994.

     The  Registrant  is no longer a party to former  Exhibits  10H  through 10M
because of its sale of the San Diego Project. See Exhibits 10P-R.

     10N.   Acquisition  Agreement  dated as of January 9, 1995 among  Sunnyside
            Cogen, Inc., and NorCal Sunnyside Inc., as Sellers, and RW Monterey,
            Inc.  and  Ridgewood  Electric  Power  Trust II, as  Purchasers,  is
            incorporated  by  reference  to  Exhibit  2(i)  to  the  Form  8K of
            Registrant filed with the Commission on February 16, 1995.

     10O.   Acquisition Agreement,  dated as of March 31, 1995, by and among the
            Trust and its subsidiary,  Pump Services Corporation,  as purchasers
            and Donald C. Stewart,  Union Energy Corp.  and Donald A. Sherman as
            sellers.  Incorporated  by  reference  to Exhibit  10O to the Annual
            Report on Form 10-K of the  Registrant  for the year ended  December
            31, 1995.

        10P.      Partnership Interest Purchase Agreement,  dated as of June 25,
                  1997, by and among the Trust,  RSD Power Corp., NRG San Diego,
                  Inc., and NRG del Coronado,  Inc. Incorporated by reference to
                  Exhibit  2.A.  of  the  Current  Report  on  Form  8-K  of the
                  Registrant,  dated June 25, 1997.  Exhibits and  schedules are
                  omitted,  and a list of the omitted documents is found at page
                  20  of  the  agreement.   The  Registrant  agrees  to  furnish
                  supplementally  a copy of any  omitted  exhibit or schedule to
                  the Partnership  Interest Purchase Agreement to the Commission
                  upon request.

         10Q.  Purchase Money  Promissory  Note.  Incorporated  by reference to
               Exhibit 2.B. of the Current Report on Form 8-K of the Registrant,
               dated June 25, 1997.

     10R.   Security and Pledge  Agreement,  dated as of June 25,  1997,  by and
            among the Trust, RSD Power Corp.,  NRG San Diego,  Inc., and NRG del
            Coronado,  Inc.  Incorporated  by  reference  to Exhibit 2.C. of the
            Current Report on Form 8-K of the Registrant, dated June 25, 1997.


     21.   Subsidiaries of the Registrant.           Page 66

     24.   Powers of Attorney                        Page 67

     27.   Financial Data Schedule                   Page 69

<PAGE>

SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Signature                         Title                     Date

RIDGEWOOD ELECTRIC POWER TRUST II (Registrant)

By: /s/Robert E. Swanson    President and Chief       March 30, 2001
     Robert E. Swanson       Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

By: /s/Robert E. Swanson    President and Chief       March 30, 2001
     Robert E. Swanson       Executive Officer

By: /s/Christopher I. Naunton  Vice President and    March 30, 2001
     Christopher I. Naunton     Chief Financial Officer

RIDGEWOOD POWER LLC        Managing Shareholder             March 30, 2001

By: /s/Robert E. Swanson    President
      Robert E. Swanson

/s/Robert E. Swanson   *    Independent Trustee             March 30, 2001
   Ralph O. Hellmold

 /s/Robert E. Swanson  *    Independent Trustee             March 30, 2001
    Jonathan C. Kaledin

 /s/Robert E. Swanson  *    Independent Trustee             March 30, 2001
    Joseph Ferrante, Jr.

*  Robert E. Swanson, as attorney-in-fact for the Independent Trustee

<PAGE>

                        Ridgewood Electric Power Trust II

                              Financial Statements

                        December 31, 2000, 1999 and 1998


<PAGE>




                        Report of Independent Accountants


To the Shareholders and Trustees of
Ridgewood Electric Power Trust II:

In  our  opinion,   the  accompanying  balance  sheets  and  the  statements  of
operations, changes in shareholders' equity and of cash flows present fairly, in
all material respects,  the financial position of Ridgewood Electric Power Trust
II (the  "Trust")  at  December  31,  2000  and  1999,  and the  results  of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 2000, in conformity with accounting  principles  generally accepted
in  the  United  States  of  America.   These   financial   statements  are  the
responsibility of the Trust's  management;  our  responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements in  accordance  with  auditing  standards  generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.

As explained in Note 2, the financial  statements include  investments valued at
$10,751,582 and $10,274,790 (91% and 86% of shareholders' equity,  respectively)
as of December 31, 2000 and 1999, respectively, whose values have been estimated
by management in the absence of readily  ascertainable  market  values.  We have
reviewed the  procedures  used by  management  in arriving at their  estimate of
value and have inspected underlying documentation, and, in the circumstances, we
believe  the  procedures  are  reasonable  and  the  documentation  appropriate.
However,  because of the inherent  uncertainty  of  valuation,  those  estimated
values may differ  significantly from the values that would have been used had a
ready  market  for  those  investments  existed,  and the  differences  could be
material to the financial statements.


PricewaterhouseCoopers LLP
New York, NY
March 23, 2001

<PAGE>
Ridgewood Electric Power Trust II
Balance Sheet
--------------------------------------------------------------------------------

                                                      December 31,
                                               ----------------------------
                                                   2000            1999
                                               ------------    ------------
Assets:
Investments in power generation projects ...   $ 10,751,582    $ 10,274,790
Cash and cash equivalents ..................         89,829         537,541
Notes receivable from sale of investment ...      1,283,327       1,729,181
Due from affiliates ........................          6,174            --
Other assets ...............................          4,398           3,306
                                               ------------    ------------
  Total assets .............................   $ 12,135,310    $ 12,544,818
                                               ------------    ------------
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable and accrued expenses ......   $     41,972    $     49,923
Borrowings under line of credit facility ...           --           400,000
Due to affiliates ..........................        270,765         153,191
                                               ------------    ------------
  Total liabilities ........................        312,737         603,114
                                               ------------    ------------
Commitments and contingencies

Shareholders' equity:
Shareholders' equity (235.3775
shares issued and outstanding)
                                                 11,905,591      12,023,530
Managing shareholder's accumulated deficit .        (83,018)        (81,826)
                                               ------------    ------------
  Total shareholders' equity ...............     11,822,573      11,941,704
                                               ------------    ------------
  Total liabilities and shareholders' equity   $ 12,135,310    $ 12,544,818
                                               ------------    ------------









                 See accompanying notes to financial statements.
<PAGE>

Ridgewood Electric Power Trust II
Statement of Operations
--------------------------------------------------------------------------------

                                                    Year Ended December 31,
                                        ---------------------------------------
                                           2000          1999          1998
                                        -----------   -----------   -----------

Revenue:
Income from power generation projects   $   556,079   $   131,859   $   953,576
Other income ........................        22,416          --            --
Interest income .....................       134,135       162,686       196,480
                                        -----------   -----------   -----------
 Total revenue ......................       712,630       294,545     1,150,056
                                        -----------   -----------   -----------
Expenses:
Writedown of investment in Pittsfield
 Investors Limited Partnership ......          --            --       2,347,330
Management fee ......................          --          55,607       381,594
Accounting and legal fees ...........        66,342        52,721        75,111
Interest ............................         9,063        27,378         7,081
Miscellaneous .......................        42,290        64,231        43,751
                                        -----------   -----------   -----------
 Total expenses .....................       117,695       199,937     2,854,867
                                        -----------   -----------   -----------

 Net income (loss) ..................   $   594,935   $    94,608   $(1,704,811)
                                        -----------   -----------   -----------










                 See accompanying notes to financial statements.

<PAGE>
Ridgewood Electric Power Trust II
Statement of Changes in Shareholders' Equity
For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------

                                          Managing
                        Shareholders    Shareholder       Total
                        -------------   ------------    ------------
Shareholders' equity,
 January 1, 1998 ....   $ 15,312,360    $    (48,606)   $ 15,263,754

Cash distributions ..     (1,412,273)        (14,265)     (1,426,538)

Net income ..........     (1,687,763)        (17,048)     (1,704,811)
                        ------------    ------------    ------------
Shareholders' equity,
 December 31, 1998 ..     12,212,324         (79,919)     12,132,405

Cash distributions ..       (282,456)         (2,853)       (285,309)

Net loss ............         93,662             946          94,608
                        ------------    ------------    ------------
Shareholders' equity,
 December 31, 1999 ..     12,023,530         (81,826)     11,941,704

Cash distributions ..       (706,925)         (7,141)       (714,066)

Net income ..........        588,986           5,949         594,935
                        ------------    ------------    ------------
Shareholders' equity,
 December 31, 2000 ..   $ 11,905,591    $    (83,018)   $ 11,822,573
                        ------------    ------------    ------------



















                 See accompanying notes to financial statements.
<PAGE>
Ridgewood Electric Power Trust II
Statement of Cash Flows
--------------------------------------------------------------------------------

                                               Year Ended December 31,
                                     -----------------------------------------
                                        2000           1999           1998
                                     -----------    -----------    -----------
Cash flows from operating
 activities:
Net income (loss) ................   $   594,935    $    94,608    $(1,704,811)
                                     -----------    -----------    -----------
Adjustments  to  reconcile
  net income  (loss) to cash
  flows from  operating
  activities
Writedown of investment in
 Pittsfield Investors Limited
 Partnership .....................          --             --        2,347,330
Proceeds from note receivable ....       445,854        411,685        380,135
Investments in power
 generation projects .............      (476,792)          --         (208,553)
Return of investments in
 power generation projects .......          --          319,612           --
Changes in assets and liabilities:
 (Increase) decrease in other
  assets .........................        (1,092)           282         (1,152)
 (Increase) decrease in due
  from affiliates ................        (6,174)         8,819         (8,819)
 (Decrease) increase in accounts
  payable and accrued expenses ...        (7,951)       (50,974)        68,711
 Increase (decrease) in due
  to affiliates ..................       117,574        (61,182)        77,879
                                     -----------    -----------    -----------
Total adjustments ................        71,419        628,242      2,655,531
                                     -----------    -----------    -----------
Net cash provided by
 operating activities ............       666,354        722,850        950,720
                                     -----------    -----------    -----------
Cash flows from financing
 activities:
Borrowings under line of
 credit facility .................          --          550,000        300,000
Repayments under line of
 credit facility .................      (400,000)      (450,000)          --
Cash distributions to
 shareholders ....................      (714,066)      (285,309)    (1,426,538)
                                     -----------    -----------    -----------
Net cash used in
 financing activities ............    (1,114,066)      (185,309)    (1,126,538)
                                     -----------    -----------    -----------
Net (decrease) increase
 in cash and cash equivalents ....      (447,712)       537,541       (175,818)
Cash and cash equivalents,
 beginning of year ...............       537,541           --          175,818
                                     -----------    -----------    -----------
Cash and cash equivalents,
 end of year .....................   $    89,829    $   537,541    $      --
                                     -----------    -----------    -----------



                 See accompanying notes to financial statements.

<PAGE>
Ridgewood Electric Power Trust II
Notes to Financial Statements
--------------------------------------------------------------------------------

1.       Organization and Purpose

     Nature of business
     Ridgewood  Electric  Power Trust II (the  "Trust") was formed as a Delaware
     business   trust  on  November  20,  1992,  by  Ridgewood   Energy  Holding
     Corporation  acting as the Corporate Trustee.  The managing  shareholder of
     the Trust is Ridgewood Power LLC (formerly  Ridgewood  Power  Corporation).
     The Trust began  offering  shares on January 4, 1993 and  discontinued  its
     offering of shares on January 31, 1994.

     The  Trust  was  organized  to  invest  in  independent   power  generation
     facilities and in the development of these  facilities.  These  independent
     power generation  facilities include cogeneration  facilities which produce
     electricity and thermal energy and other power plants that use various fuel
     sources (except  nuclear).  The power plants sell  electricity and, in some
     cases,  thermal  energy to utilities and industrial  users under  long-term
     contracts.

     "Business Development Company" election
     Effective  April 29, 1993,  the Trust  elected to be treated as a "Business
     Development   Company"  under  the  Investment  Company  Act  of  1940  and
     registered its shares under the Securities Exchange Act of 1934.

2.       Summary of Significant Accounting Policies

     Use of estimates
     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities, and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reporting  period.   Actual  results  could  differ  from  the
     estimates.

     Investments in power generation projects
     The Trust holds  investments in power generation  projects which are stated
     at fair value.  Due to the  illiquid  nature of the  investments,  the fair
     values  of the  investments  are  assumed  to equal  cost,  unless  current
     available  information provides a basis for adjusting the carrying value of
     the investments.

     Revenue recognition
     Income  from  investments  is recorded  when  distributions  are  declared.
     Interest income is recorded as earned.

     Cash and cash equivalents
     The Trust  considers all highly liquid  investments  with  maturities  when
     purchased of three months or less as cash and cash equivalents.

     Income taxes
     No  provision  is made  for  income  taxes  in the  accompanying  financial
     statements  as the  income or losses of the Trust are  passed  through  and
     included in the tax returns of the individual shareholders of the Trusts.

3.       Investments in Power Generation Projects

     The Trust  had the  following  investments  in power  generation  and other
     projects:

                                             December 31,
                                        -------------------------
                                          2000           1999
                                        -----------   -----------
B-3 Limited Partnership .............   $ 4,001,843   $ 4,001,843
Sunnyside Cogeneration Partners, L.P.     5,500,597     5,170,812
California Pumping Project ..........     1,249,142     1,102,135
                                        -----------   -----------
                                        $10,751,582   $10,274,790
                                        -----------   -----------

     The Trust's distribution income from the projects was as follows:

                                           For the Year Ended December 31,
                                           ------------------------------
                                              2000     1999        1998
                                           --------   --------   --------
Pittsfield Investors Limited Partnership   $   --     $   --     $175,725
B-3 Limited Partnership ................    300,014    100,000    250,000
Sunnyside Cogeneration Partners, L.P. ..    247,303       --      515,403
California Pumping Project .............      8,762     31,859     12,448
                                           --------   --------   --------
                                           $556,079   $131,859   $953,576
                                           --------   --------   --------

     Pittsfield Investors Limited Partnership (known as the Berkshire project)
     On January 4, 1994, the Trust made a limited partnership investment in this
     partnership,  which was formed to acquire an operating facility, located in
     Pittsfield,  Massachusetts.  The facility,  which has been operating  since
     1981,  burns  municipal  solid waste supplied by the City of Pittsfield and
     surrounding communities. The facility has a long-term supply agreement with
     the City of  Pittsfield,  which expires in November  2004,  under which the
     City makes  payments to the facility for receiving the waste.  The facility
     generates  additional  revenue by  selling  steam  produced  from the waste
     burning  process to a nearby paper mill under a long-term  contract,  which
     also expires in November 2004.

     In exchange for its investment, the Trust is entitled to receive annually a
     preferred  distribution  from available cash from the facility equal to 15%
     of its  investment.  In the event that in any given year available net cash
     flow from the project  does not at least equal the amount of the  preferred
     minimum return, the amount of such shortfall is payable on a priority basis
     out of any available net cash flow in subsequent  years. The Trust may also
     be entitled to receive  additional  distributions from any net cash flow in
     excess  of the 15%  return on its  investment.  The  aggregate  cost of the
     Trust's  investment in the partnership  was $2,347,330.  The Trust received
     distributions  of $175,725 from the project for the year ended December 31,
     1998.

     In 1998,  the City of  Pittsfield  closed the nearby  landfill to which the
     project had sent the ash residue  from the burning of the  municipal  solid
     waste.  The additional cost of transporting  the ash to other landfills has
     significantly reduced the cash flows generated by the project. Although the
     project manager is actively seeking ways to enhance the project's  revenue,
     the ability of the project to make distributions to the Trust in the future
     is  questionable.  Accordingly,  in 1998 the Trust  recorded a writedown of
     $2,347,330 to reduce the estimated fair value of the project to zero.

     B-3 Limited Partnership (known as the Columbia project)
     On August 31, 1994, the Trust made a limited partnership investment in this
     partnership,  which was formed to construct  and operate a municipal  waste
     transfer  station,  located  in  Columbia  County,  New York.  The  project
     commenced operations in January 1995.

     In exchange for its investment, the Trust is entitled to receive annually a
     preferred  distribution  of available net cash flow from the facility equal
     to 18% of its investment. In the event that in any given year available net
     cash  flow  from the  project  does not at least  equal  the  amount of the
     preferred  minimum  return,  the amount of such  shortfall  is payable on a
     priority basis out of any available net cash flow in subsequent  years. The
     Trust may also be entitled to receive additional distributions from any net
     cash flow in excess of the 18% return on its investment. The aggregate cost
     of the Trust's  investment in the  partnership  was  $4,001,843.  The Trust
     received distributions of $300,014,  $100,000 and $250,000 from the project
     for the years ended December 31, 2000, 1999, and 1998, respectively.

     Sunnyside Cogeneration Partners, L.P. (known as the Monterey project)
     On January 9, 1995,  the Trust  acquired  100% of the existing  partnership
     interests of Sunnyside Cogeneration Partners, L.P., which owns and operates
     a 5.5 megawatt electric cogeneration facility,  located in Monterey County,
     California.  Electricity  is sold to the Pacific Gas and  Electric  Company
     ("PG&E") under a long term contract expiring in 2020. The aggregate cost of
     the Trust's  investment  at December 31, 2000 and 1999 was  $5,500,597  and
     $5,170,812,  respectively. The Trust received distributions of $247,303 and
     $515,403  from the project for the years ended  December 31, 2000 and 1998,
     respectively.

     On April 1, 1999,  PG&E sued the Trust's  subsidiary that owns the Monterey
     project in the Superior  Court of California for the City and County of San
     Francisco.  PG&E  alleged  that the Project did not meet  federal and state
     efficiency  requirements  and that accordingly the Project was not entitled
     to the benefit of discounted natural gas fuel rates allowable to qualifying
     cogeneration  facilities.  The  lawsuit  claimed an  unspecified  amount of
     damages. The State lawsuit was dismissed without prejudice and by agreement
     of the parties  and the matter was  brought by PG&E to the  Federal  Energy
     Regulatory Commission ("FERC") by petition for a determination.  PG&E filed
     with  FERC a  petition  seeking  a  revocation  of the  Monterey  project's
     Qualifying Facility status and a refund of certain overpayments PG&E claims
     it made to the  Project,  which  were not  justified  due to the  Project's
     failure  to  maintain  Qualifying  Facility  status.  The  FERC  proceeding
     generally  involves a determination of the proper location for metering and
     computing efficiency standards. The Trust believes that its location of the
     meter is correct for determining such standards and that it will succeed at
     FERC and retain its Qualifying  Facility status and that no refunds will be
     required.  All of the required or permitted  filings have been prepared and
     submitted  to the FERC and the  parties are  awaiting a decision.  No other
     activity on this matter is anticipated until such FERC decision.

     On  December  31,  1998  the  Trust,  through  subsidiaries,  filed a legal
     complaint in the Superior Court of California  for Monterey  County against
     Waukesha-Pierce,  Inc. and subsidiaries, alleging that the subsidiaries had
     not disclosed  the  existence of an  obligation of the Monterey  project to
     Pacific Gas and Electric  Company and therefore  breached a warranty in the
     acquisition  agreement.  The  claim  was for  approximately  $273,000  plus
     interest and expenses. Waukesha-Pierce, Inc. was included in the proceeding
     as a contractual guarantor.  On January 17, 1999, a separate action against
     Waukesha-Pierce,  Inc. was filed by the Trust's  subsidiaries in the United
     States  District  Court for the  Northern  District of Texas to enforce the
     guaranty.  The parties  agreed to dismiss the Texas case without  prejudice
     before material  proceedings  resulted.  The California case was settled in
     March 2000;  Waukesha-Pierce Inc. agreed to pay the Project $175,000 and to
     cooperate with the Project in the potential FERC proceedings  involving the
     Monterey project and the Trust agreed to cooperate with  Waukesha-Pierce in
     releasing  funds due from PG&E to  Waukesha-Pierce.  The settlement has not
     yet been completed as the funds due from PG&E to  Waukesha-Pierce  have not
     yet been released by PG&E.

     California Pumping Project
     On March 31, 1995,  the Trust  acquired a package of natural gas and diesel
     engines,  which  drive  deep  irrigation  well  pumps  in  Ventura  County,
     California.  The engines' shaft horsepower-hours are sold to farmers. Prior
     to September  30, 1998,  the project was operated by a third party  manager
     and the Trust received a distribution  of $0.02 per equivalent  kilowatt up
     to 3,000 running hours per year and $0.01 per equivalent  kilowatt for each
     additional  running hour per year. On October 1, 1998, the Trust terminated
     the operating  agreement  with the third party manager and Ridgewood  Power
     Management LLC ("Ridgewood Management", formerly Ridgewood Power Management
     Corporation), an affiliate of the managing shareholder, began operating the
     project.  The project paid $105,840 to the third party manager to terminate
     the operating  agreement.  The total  investment in the project at December
     31, 2000 and 1999 was  $1,249,142  and  $1,102,135,  respectively,  and the
     project has an  equivalent  of 3 megawatts of power.  The operator pays for
     fuel, maintenance, repair and replacement. The Trust received distributions
     of  $8,762,  $31,859  and  $12,448  from the  project  for the years  ended
     December 31, 2000, 1999 and 1998, respectively.

4.   Note Receivable from Sale of Investment

     On June 25,  1997,  the Trust sold its entire  interest in a chilled  water
     facility to subsidiaries of NRG Energy, Inc. of Minneapolis,  Minnesota. As
     part of the consideration,  the Trust received an 8% promissory note in the
     amount of $2,700,000 payable monthly over six years.

5.   Line of Credit Facility

     During  the  fourth  quarter  of 1997,  the  Trust and its  principal  bank
     executed  a  revolving  line of  credit  agreement,  whereby  the bank will
     provide a three year  committed  line of credit  facility of  $750,000.  In
     December  2000,  the credit  facility was extended  until March 5, 2001. At
     December 31, 1999,  borrowings under this credit facility equaled $400,000.
     The balance  outstanding  at December 31, 1999 was repaid on March 6, 2000.
     Outstanding borrowings bear interest at LIBOR plus 2.5% (9.07% and 7.81% at
     December 31, 2000 and 1999, respectively). The amount outstanding under the
     line of credit  facility  must be  reduced  to zero for a thirty day period
     each year. The credit  agreement will require the Trust to maintain a ratio
     of total  debt to  tangible  net worth of no more than 1 to 1 and a minimum
     debt service coverage ratio of 2 to 1.

6.   Transactions with Managing Shareholder and Affiliates

     The  Trust   entered  into  a  management   agreement   with  the  managing
     shareholder,   under  which  the  managing   shareholder   renders  certain
     management,  administrative and advisory services and provides office space
     and  other  facilities  to the  Trust.  As  compensation  to  the  managing
     shareholder,   the  Trust  paid  to  the  managing  shareholder  an  annual
     management  fee equal to 2.5% of the net asset  value of the Trust  payable
     monthly  upon the closing of the Trust.  Under the terms of the  management
     agreement,  the annual  management  fee  decreased to 1.5% of the net asset
     value of the Trust effective February 1, 1999. For the years ended December
     31,  1999  and  1998,  the  Trust  paid  management  fees  to the  managing
     shareholder of $55,607 and $381,594, respectively. Beginning in April 1999,
     the managing shareholder waived the management fee to which it is entitled.

     Under the  Declaration  of Trust,  the managing  shareholder is entitled to
     receive  each year 1% of all  distributions  made by the Trust  (other than
     those  derived  from  the   disposition  of  Trust   property)   until  the
     shareholders  have been  distributed  a cumulative  amount equal to 15% per
     annum of their equity contribution. Thereafter, the managing shareholder is
     entitled to receive 20% of the distributions for the remainder of the year.
     The managing  shareholder  is entitled to receive 1% of the  proceeds  from
     dispositions  of Trust  properties  until the  shareholders  have  received
     cumulative  distributions  equal to their original  investment  ("Payout").
     After Payout,  the managing  shareholder  is entitled to receive 20% of all
     remaining distributions of the Trust.

     Where  permitted,  in the event the  managing  shareholder  or an affiliate
     performs  brokering  services in respect of an  investment  acquisition  or
     disposition  opportunity  for the Trust,  the managing  shareholder or such
     affiliate may charge the Trust a brokerage  fee. Such fee may not exceed 2%
     of the gross proceeds of any such acquisition or disposition.  No such fees
     have been incurred through December 31, 2000.

     The  managing  shareholder  owns 1.45  shares  of the Trust  with a cost of
     $121,800.

     In 1996, under an Operating Agreement with the Trust,  Ridgewood Management
     provides management,  purchasing,  engineering, planning and administrative
     services to the power generation  project operated by the Trust.  Ridgewood
     Management  charges the project at its cost for these  services and for the
     allocable amount of certain overhead items. Allocations of costs are on the
     basis of identifiable direct costs, time records or in proportion to amount
     invested in projects managed by Ridgewood Management. During the year ended
     December 31, 2000, 1999 and 1998,  Ridgewood  Management  charged Sunnyside
     Cogeneration Partners $109,148,  $150,711 and $119,823,  respectively,  for
     overhead items  allocated in proportion to the amount  invested in projects
     managed.  During the years ended  December  31, 2000 and 1999 and the three
     month period ended  December 31,  1998,  Ridgewood  Management  charged the
     California Pumping Project $70,118, $75,818 and $25,973,  respectively, for
     overhead items  allocated in proportion to the amount  invested in projects
     managed.  Ridgewood Management also charged Sunnyside Cogeneration Partners
     and the  California  Pumping  Project for all of the direct  operating  and
     non-operating expenses incurred during the periods.

7.   Subsequent Event - Pacific Gas and Electric Company Financial Crisis

     All energy  generated by the Monterey project is sold to PG&E under a power
     contract.  Currently, and as a result of the deregulation of the California
     energy market,  PG&E has allegedly  suffered  billions of dollars in losses
     during  the later part of 2000 and to date in 2001.  Due to the  California
     energy crisis,  PG&E has been unable to pay in full for  electrical  energy
     and capacity delivered in December 2000 and January 2001. Accordingly,  the
     Monterey  project was unable to pay its natural  gas  supplier  for the gas
     delivered for those months.  In late  January,  the gas supplier  requested
     assurance  of payment  before it would agree to provide  natural gas during
     February.  Due to PG&E's  financial  crisis and its  inability  to pay, the
     Monterey  project was unable on its own to provide an acceptable  assurance
     or to pay the arrears  and, as a result,  the  supplier  refused to provide
     natural gas beyond February 6, 2001.

     On February 1, 2000, PG&E made a partial payment equal to approximately 15%
     of the amount due for December  2000.  On March 5, 2001,  PG&E made another
     partial payment equal to approximately  15% of the amount due January 2001.
     Those amounts are  insufficient,  after payroll costs are met, to cover the
     amount owed to the natural gas supplier. PG&E effectively acknowledges that
     it owes the project for  December and January by virtue of  announcing  and
     making a 15% partial payments. On February 6, 2001, the Trust shut down the
     Monterey project because the supplier of natural gas terminated  deliveries
     of  natural  gas as of that date.  The shut down will be for an  indefinite
     time.

     In addition to its failure to pay the full amount due for December 2000 and
     January  2001  deliveries,  PG&E has  indicated  in letters to the Monterey
     project,  as well as  documents  filed  with the  Securities  and  Exchange
     Commission,  that it is unable or  unwilling  to make  future  payments  to
     Qualifying Facilities,  such as the project. The Trust believes that PG&E's
     ability to pay for the  electrical  energy and capacity it received or will
     receive in the future, depends upon, among other things, positive action by
     the California  governor and legislature to fund  approximately $12 billion
     of losses allegedly suffered by California  utilities during the last eight
     months.  The  Trust  expects  that  any  such  political  solution  may  be
     accompanied  by executive,  legislative  or  regulatory  attempts to reduce
     unilaterally  the  amounts  owed by PG&E to  Qualifying  Facilities.  In an
     effort to resolve the California crisis, there have been numerous proposals
     by the California  Public  Utilities  Commission  ("CPUC"),  as well as the
     legislature,  to adjust downward the prices paid by California utilities to
     Qualifying Facilities.  The Trust expects that any regulatory proceeding to
     set an energy price  applicable to Qualifying  Facilities will be extremely
     protracted and that a legislative  solution,  if one were to be enacted and
     approved by the governor, is likely to be arbitrary and significantly below
     the avoided cost of the energy to PG&E.

     PG&E has  attempted  to justify  its  non-payment  by  invoking  the "force
     majeure" provisions of the power contract.  In essence, PG&E argues that it
     is excused from its payment  obligations  because its failure to pay is the
     result of the CPUC  actions  in  failing  to  increase  its rates to retail
     customers and is beyond its control.  The Trust disagrees and believes that
     PG&E has breached the contract.  The Monterey project, along with the Byron
     and San  Joaquin  projects  owned by  Ridgewood  Electric  Power  Trust III
     ("Trust  III"),  filed a lawsuit on February 6, 2001  against  PG&E to that
     effect and are seeking damages equal to lost net revenues for the remaining
     term of the power  contract.  By this  lawsuit  the Trust seeks to have the
     power  contract  with  PG&E  declared  null and  void so that the  Monterey
     project will be able to sell its electric power on the open market to third
     party purchasers who will be able to pay currently for such electric power.
     The Trust expects that it will be able  purchase  natural gas if it is free
     from the PG&E  contract and able to sell to credit worthy  purchasers.  The
     Trust is seeking an accelerated  determination by the California court. The
     Trust  is  hopeful  that an  accelerated  determination  by the  court is a
     possibility  considering the power  emergency in California,  which may get
     worse as warm weather  approaches and power demand  increases.  Also, in an
     attempt to get the project  back  on-line  quickly,  on March 8, 2001,  the
     managing shareholder, on behalf of the Trust and Trust III, filed with FERC
     a "Request  For  Emergency  Relief and  Extension  of Waiver of  Qualifying
     Facility  Regulations" in which the managing  shareholder likewise seeks an
     order from FERC permitting Qualifying Facilities to sell to third parties.

     Until the  Monterey  project  can restart  profitably,  it will remain shut
     down,  it will  incur  payroll  and  shutdown  costs  and it will  not earn
     revenue. For the reasons described above, the Trust cannot estimate when it
     will  restart the Monterey  project or what its  short-term  and  long-term
     prospects may be. At this time, the Trust does not believe that a long-term
     impairment of the Monterey Project's value has occurred.



<PAGE>

POWER OF ATTORNEY

         KNOW ALL  PERSONS BY THESE  PRESENTS,  that the  undersigned,  Ralph O.
Hellmold,  appoints Robert E. Swanson and Martin V. Quinn,  and each of them, as
his true and lawful  attorneys-in-fact  with full power to act and do all things
necessary,  advisable or  appropriate,  in their  discretion,  to execute on his
behalf as an  Independent  Trustee of Ridgewood  Electric  Power Trust II and of
Ridgewood Electric Power Trust III, the Annual Reports on Form 10-K for the year
ended December 31, 2000 for each of the above-named  trusts,  and all amendments
or documents relating thereto.

         IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 24th day of March, 2001, at Carlsbad, California.

                                                    /s/Ralph O. Hellmold
                                                       Ralph O. Hellmold

POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENTS,  that the undersigned,  Jonathan C.
Kaledin,  appoints  Robert E. Swanson and Martin V. Quinn,  and each of them, as
his true and lawful  attorneys-in-fact  with full power to act and do all things
necessary,  advisable or  appropriate,  in their  discretion,  to execute on his
behalf as an  Independent  Trustee of Ridgewood  Electric  Power Trust II and of
Ridgewood Electric Power Trust III, the Annual Reports on Form 10-K for the year
ended December 31, 2000 for each of the above-named  trusts,  and all amendments
or documents relating thereto.

         IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 24th day of March, 2001, at Carlsbad, California

                                                     /s/Jonathan C. Kaledin
                                                        Jonathan C. Kaledin

POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned,  Joseph Ferrante,
Jr.,  appoints  Robert E. Swanson and Martin V. Quinn,  and each of them, as his
true and  lawful  attorneys-in-fact  with  full  power to act and do all  things
necessary,  advisable or  appropriate,  in their  discretion,  to execute on his
behalf as an  Independent  Trustee of Ridgewood  Electric  Power Trust II and of
Ridgewood Electric Power Trust III, the Annual Reports on Form 10-K for the year
ended December 31, 2000 for each of the above-named  trusts,  and all amendments
or documents relating thereto.

         IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 24th day of March, 2001, at Carlsbad, California

                                                     /s/ Joseph Ferrante, Jr.
                                                         Joseph Ferrante, Jr.