Table
      of
      Contents





UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      DC 20549





FORM
      10-K


(Mark
      One)


x
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      fiscal year ended December 31, 2006





o
            TRANSITION
                REPORT PURSUANT TO
                SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
                1934




For
      the
      transition period from ________ to _______





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 of
              Incorporation
                or Organization)
            
            (IRS
                Employer Identification Number)





1314
                King Street, Wilmington, DE 19801(Address
                of Principal Executive Offices, including Zip Code)





(302)
                888-7444(Registrant’s
                telephone number, including area code)





SECURITIES
                REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:None





SECURITIES
                REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:Investor
                Shares of Beneficial Interest(Title
                of Class)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes
oNo
x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Act. Yes
oNo
x




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 oNo x




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. o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):




Large
      accelerated filer o  Accelerated
      filer  o Non-accelerated
      filer
x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange) Act.    Yes  oNo x




There
      is no market for the Investor
      Shares. The number of Investor Shares outstanding at December 31, 2007 was
      235.3775.









Table
          of Contents


FORM
              10-KTABLE
              OF CONTENTSPART
                IItem
                1.
            Business
            1Item
                1A.
            Risk
                Factors
            4Item
                1B.
            Unresolved
                Staff Comments
            7Item
                2.
            Properties
            7Item
                3.
            Legal
                Proceedings
            7Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            8PART
                IIItem
                5.
            Market
                for Registrant’s Common Equity, Related Security
                Holder Matters andIssuer
                Purchases of Equity Securities
            8Item
                6.
            Selected
                Financial Data
            9Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of Operations
            9Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            13Item
                8.
            Financial
                Statements and Supplementary
                Data
            13Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting
                and Financial Disclosure
            13Item
                9A.
            Controls
                and Procedures
            13Item
                9B.
            Other
                Information
            14PART
                IIIItem
                10.
            Directors,
                Executive Officers and Corporate
                Governance
            15Item
                11.
            Executive
                Compensation
            16Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management andRelated
                Stockholder Matters
            17Item
                13.
            Certain
                Relationships and Related Transactions, and
                Director Independence
            18Item
                14.
            Principal
                Accountant Fees and Services
            19PART
                IVItem
                15.
            Exhibits
                and Financial Statement
                Schedules
            19SIGNATURES
            21


Table
          of Contents





Forward-Looking
      Statements




Certain
      statements discussed in Part I, Item 1. “Business”, Part I, Item 3. “Legal
      Proceedings”, Part II, Item 7. “Management’s Discussion and Analysis of
      Financial Condition and Results of Operations” and elsewhere in this Annual
      Report on Form 10-K constitute forward-looking statements within the meaning
      of
      the Private Securities Litigation Reform Act of 1995.




These
      forward-looking statements generally relate to Ridgewood Electric Power Trust
      II’s (the “Trust”) plans, objectives and expectations for future events and
      include statements about the Trust’s expectations, beliefs, plans, objectives,
      intentions, assumptions and other statements that are not historical
      facts.  These statements are based upon management’s opinions and
      estimates as of the date they are made.  Although management believes
      that the expectations reflected in these forward-looking statements are
      reasonable, such forward-looking statements are subject to known and unknown
      risks and uncertainties that may be beyond the Trust’s control, which could
      cause actual results, performance and achievements to differ materially from
      the
      results, performance and achievements projected, expected, expressed or implied
      by the forward-looking statements. Examples of events that could cause actual
      results to differ materially from historical results or those anticipated
      include the outcome of litigation described in Item 3. "Legal Proceedings",
      changes in political and economic conditions, federal or state regulatory
      structures, government mandates, the ability of customers to pay for energy
      received, supplies and prices of fuels, operational status of generating plants,
      mechanical breakdowns, volatility in the price for electric energy, natural
      gas,
      or renewable energy.  Additional information concerning the factors
      that could cause actual results to differ materially from those in the
      forward-looking statements is contained in Part I, Item 1A. “Risk
      Factors” and Part II, Item 7. “Management’s Discussion and Analysis of
      Financial Condition and Results of Operations”, and elsewhere in this Annual
      Report on Form 10-K.  The Trust undertakes no obligation to publicly
      revise any forward-looking statements or cautionary factors, except as required
      by law.




PART
      I





ITEM
      1.  BUSINESS





Overview





The
      Trust
      is a Delaware trust formed on November 20, 1992 primarily to make investments
      in
      projects and businesses in the energy and infrastructure sectors. Ridgewood
      Renewable Power LLC (“RRP” or the “Managing Shareholder”), a New Jersey limited
      liability company, is the Managing Shareholder. As the Managing Shareholder,
      RRP
      has direct and exclusive control over the management and operations of the
      Trust.




The
      Trust
      has focused primarily on small-scale electricity generation projects. These
      projects allow the Trust to develop secure long-term positions in attractive
      specialty markets for products and services provided by its projects and
      companies. As of December 31, 2006, the Trust had one non-operating investment,
      located in California and 100% owned by the Trust.  This investment is
      a 5.5 megawatt (“MW”) cogeneration project which suspended operations in early
      2006 due to a contract dispute with its customer. See Item 3. “Legal
      Proceedings” for further discussion. In January 2006, the Trust sold its other
      operating investment for $1. This investment was a collection of irrigation
      service engines with a production capacity of 2MW. Additionally, at December
      31,
      2006, the Trust had long-term notes receivable, which were paid in full on
      October 31, 2007.




Based
      on
      the status of these assets, the operating results of the Trust for future
      periods are expected to be materially reduced from levels that existed at or
      prior to December 31, 2006.




The
      Trust
      initiated its private placement offering in November 1992 selling whole and
      fractional investor shares of beneficial interests of $100,000 per share
      (“Investor Shares”). There is no public market for Investor Shares and one is
      not likely to develop. In addition, Investor Shares are subject to significant
      restrictions on transfer and resale and cannot be transferred or resold except
      in accordance with the Trust’s Declaration of Trust (“Declaration of Trust”) and
      applicable federal and state securities laws. The offering was concluded in
      January 1994 and after payment of offering fees, commissions and investment
      fees, the Trust had $19.4 million available for investments and operating
      expenses. As of December 31, 2007, the Trust had 235.3775 Investor Shares
      outstanding, held by 534 shareholders.





Managing
      Shareholder




RRP,
      via
      a predecessor corporation, was founded in 1991 by Robert E. Swanson. As the
      Managing Shareholder, RRP has direct and exclusive control over the management
      of the Trust’s operations. With respect to project investment, RRP locates
      potential projects, conducts appropriate due diligence and negotiates and
      completes the transactions in which the investments are made by the
      Trust.


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In
      addition, RRP performs (or arranges for the performance of) the operation and
      maintenance of the projects owned by the Trust and the management and
      administrative services required for Trust operations. Among other services,
      RRP
      administers the accounts and handles relations with the shareholders, including
      tax and other financial information. RRP also provides the Trust with office
      space, equipment and facilities and other services necessary for its
      operation.




As
      compensation for its management services, the Managing Shareholder is entitled
      to (i) an annual management fee, payable monthly, equal to 1.5% of the net
      asset
      value of the Trust and (ii) a 20% interest in the cash distributions made by
      the
      Trust in excess of certain threshold amounts expressed in terms of shareholder
      returns. The Managing Shareholder is also entitled to receive reimbursement
      from
      the Trust for operating expenses incurred by the Trust, or on behalf of the
      Trust and paid by RRP, as the Managing Shareholder. RRP has arranged for
      administrative functions required to be performed for the Trust to be performed
      by an affiliate, Ridgewood Power Management LLC (“RPM”), and at RPM’s costs,
      which costs are reimbursed to RPM by the Trust. RRP also serves as the managing
      shareholder (or managing member, as appropriate) of a number of affiliated
      Trusts and investment vehicles similar to the Trust and, through RPM, provides
      services to those entities similar to those provided to the Trust.




Affiliates
      of RRP act on behalf of a number of investment vehicles in the oil and gas
      and
      venture capital sectors in a manner similar to that for which RRP serves on
      behalf of the Trust.




Business
      Strategy




The
      Trust’s primary investment objective is to generate cash flow for distribution
      to shareholders and capital appreciation from one or more of the acquisition,
      development, ownership and operation of interests in electricity generation
      and
      other infrastructure projects and companies. The Trust generally seeks to invest
      in projects and companies that provide products or services through a number
      of
      small facilities and that offer opportunities for expansion either through
      increasing production at existing sites or through the establishment of
      additional sites. These projects often involve development, construction and
      operating risk but, once established, may be able to effectively “lock-in” the
      customer (or customers) served by the project, which would prevent competitors
      from dislodging the Trust’s project. The Trust focuses on markets in which
      projects can be developed and built quickly and can be standardized as to their
      design, equipment and construction. By following this strategy, the Trust seeks
      to take advantage of attractive market opportunities while streamlining the
      development process and diversifying across a number of projects in order to
      contain the exposure of the Trust to the risks inherent in such projects. As
      of
      December 31, 2006, all of the Trust’s projects are 100% owned through investment
      vehicles managed by the Managing Shareholder.




Projects
      and Properties




Monterey




In
      January 1995, the Trust purchased 100% of the equity interests in Sunnyside
      Cogeneration Partners, L.P., which owns a 5.5MW cogeneration project located
      in
      Salinas, Monterey County, California (“Monterey"). The aggregate purchase price
      was $5.2 million.  Monterey began operations in 1991 using 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"). PG&E is also obligated to pay Monterey capacity payments
      based on its net electrical output or its available capacity. Thermal energy
      from Monterey’s operations provides warm water to an adjacent greenhouse under a
      long-term contract that also terminates in 2020. Monterey is operated on behalf
      of the Trust by RPM on an at-cost basis.





Monterey’s
      contract prices with PG&E were 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 natural gas price index; referred to as the Short Run Avoided Cost
      Methodology (“SRAC”).  At December 31, 2005, however, Monterey was
      operating pursuant to a 2001 amendment to the Power Contract with PG&E,
      which provided, among other things, that Monterey would receive a fixed energy
      payment (as well as the required capacity payment) for a term of five years,
      until approximately August 2006.  Upon expiration of the amendment,
      through the remainder of the term of the contact, the formula contained in
      the
      original contract was to be used to determine the energy price paid by
      PG&E.





Monterey
      has a non-cancelable operating lease covering its site, which expires in May
      2021 with minimum annual lease payments, including the delivery of cogeneration
      steam.





In
      August 2001, Monterey entered into
      an agreement with Coral Energy Services, Inc. (“Coral”), a subsidiary of Shell
      Oil, to procure its natural gas fuel at a fixed price through August
      2006.  Coral and Monterey also had a master re-sale agreement, which
      also expired in August 2006.  Such agreement enabled Monterey to not
      take delivery of, and sell back to Coral, certain amounts of natural gas once
      predetermined prices have been established. During the contract, Monterey
      re-sold gas back to Coral.




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Monterey
      received notice on December 1, 2005 from PG&E directing Monterey to increase
      its operations from 13 hours, 5 days a week to 24 hours, 7 days a week. However,
      PG&E had been operating or "dispatching" Monterey on a 5 by 13 basis for
      over 15 years.  Monterey determined that it could not operate
      profitably on such a 24 by 7 schedule and was concerned that if it only operated
      on a 5 by 13 basis, PG&E might refuse to pay for delivered electricity.
      Monterey requested from PG&E to limit its operations to the 5 by 13 basis,
      but this request was denied. As a result, effective January 9, 2006, Monterey
      ceased its operations. Monterey and PG&E have each filed lawsuits against
      the other for breach of contract. For further discussion, see Item 3. “Legal
      Proceedings”. The Monterey project remains closed as of the date of this
      filing.  Additionally, as a result of the shutdown, the project has
      not delivered by-product steam since it was shutdown in January 2006. As a
      result, it may be subject to penalties from the lessor.





Pumping
      Project





In
      1995,
      the Trust purchased a package of irrigation service engines (the “Pumping
      Project") located in Ventura County, California.  The purchase price
      was approximately $1 million.  RPM operated and managed the Pumping
      Project. The Pumping Project had been operating since 1992 and had 10
      natural-gas-fired reciprocating engines with a maximum rated equivalent capacity
      of 2MW to provide power for irrigation wells that furnish water for citrus
      orchards. The power was purchased by local farmers and farmers' co-operatives
      pursuant to electric services contracts. In January 2006, the engines were
      sold
      for $1 to the local operator.




Other
      Investments





In
      January 1994, the Trust made an equity investment of $2.3 million in Pittsfield
      Investors Limited Partnership (“PILP”), which was formed to acquire a
      waste-to-energy project designed and built to burn municipal solid waste
      supplied by the City of Pittsfield, Massachusetts, surrounding communities
      and
      other waste providers as well as to supply steam to a nearby paper
      mill.  The PILP project originally began operating in 1981 and was
      operated and co-owned with the Trust by subsidiaries of Energy Answers
      Corporation (“EAC”). The Trust made an additional investment with affiliates of
      EAC in August 1994 when it purchased an interest in the B-3 Limited Partnership
      (“B-3”) for $4 million.  The business of B-3 was the construction and
      operation of a municipal waste transfer station in Columbia County, New
      York.  In September 2002, the Trust sold its interests in PILP and B-3
      to EAC for $1.2 million in cash and $5 million of promissory notes. The notes
      bore interest at a rate of 10% per annum, and were to be repaid over a 17-year
      term. The notes were collateralized solely by the assets of the projects and
      are
      without recourse to EAC. The note payments remained current until the notes
      were
      paid in full on October 31, 2007.





Significant
      Customers and Supplier





During
      2006, 2005 and 2004, the Trust’s largest customer, Pacific Gas and Electric
      Company, accounted for 100%, 88% and 87%, respectively, of total revenues.
      During 2006, 2005 and 2004, Monterey purchased 100% of its natural gas from
      Coral.





Business
      Segments





Power
      generation is the only business segment within which the Trust manages and
      evaluates its operations.





Competition





Monterey
      is currently bound under a long-term sale contract. Based on this, the Trust
      does not generally face direct competition in the sale of the electricity it
      generates.





Government
      Incentives and Regulation




Projects
      of the Trust have been 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. Monterey also operates under
      the
      terms of the Federal Energy Regulatory Commission (“FERC”) licenses issued to
      it. The Trust considers these regulations to be routine and does not consider
      the cost of compliance to be material.


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Insurance




The
      Trust
      has in place, either directly or through investee companies, insurance typical
      for activities such as those conducted by the Trust. These policies include
      property and casualty, business interruption and workman’s compensation
      insurance, which the Trust believes to be appropriate. Certain of the insurance
      carried by the Trust is required by the lenders of certain investee
      companies.




Employees




The
      Trust
      does not have employees. The activities of the Trust are performed either by
      employees of the Managing Shareholder, its affiliates or those of the specific
      investments of the Trust.




Offices




The
      principal office of the Trust is located at 1314 King Street, Wilmington,
      Delaware, 19801 and its phone number is 302-888-7444. The Managing Shareholder’s
      principal office is located at 947 Linwood Avenue, Ridgewood, New Jersey, 07450
      and its phone number is 201-447-9000.




Available
      Information




The
      Trust’s shares are registered under Section 12(g) of the Securities Exchange Act
      of 1934, as amended, (the “Exchange Act”). The Trust must therefore comply with,
      among other things, the periodic reporting requirements of Section 13(a) of
      the
      Exchange Act. As a result, the Trust prepares and files annual reports with
      the
      Securities and Exchange Commission (“SEC”) on Form 10-K, quarterly reports on
      Form 10-Q and, from time to time, current reports on Form 8-K. Moreover, the
      Managing Shareholder maintains a website at http://www.ridgewoodpower.com that
      contains important information about the Managing Shareholder, including
      biographies of key management personnel, as well as information about the
      investments made by the Trust and the other investment programs managed by
      the
      Managing Shareholder.




Where
      You Can Get More Information




The
      Trust
      files annual, quarterly and current reports and certain other information with
      the SEC. Persons may read and copy any documents the Trust files at the SEC’s
      public reference room at 100 F Street, NE, Washington D.C. 20549. You may obtain
      information on the operation at the public reference room by calling the SEC
      at
      1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy
      and information statements, and other information regarding issuers that file
      electronically with the SEC at http://www.sec.gov. A copy of any such filings
      will be provided free of charge to any shareholder upon written request to
      the
      Managing Shareholder at its business address - 947 Linwood Avenue, Ridgewood,
      New Jersey 07450, ATTN: General Counsel.




Reports
      to Shareholders




The
      Trust
      does not anticipate providing annual reports to shareholders but will make
      available upon request copies of the Trust’s periodic reports to the SEC on Form
      10-K and on Form 10-Q.




ITEM
      1A. RISK FACTORS




In
      addition to the other information set forth elsewhere in this report, you should
      carefully consider the following factors when evaluating the Trust:




RISKS
      INHERENT IN THE BUSINESSES OF THE TRUST




The
      Trust has material weaknesses in its disclosure controls and
      procedures.




Material
      weaknesses in disclosure controls and procedures have been identified by
      management of the Trust. These weaknesses primarily relate to the Trust’s
      inability to complete its reporting obligations on a timely basis as a result
      of
      deficient disclosure controls and procedures. See Item 9A. “Controls and
      Procedures” in this report. The inability of the Trust to timely report its
      results could impact the ability of an investor to adequately understand its
      investment, restrict the Trust’s ability to conduct its activities and subject
      the Trust to fines and penalties. Upon further review, the Trust may also
      determine that it has material weaknesses in its internal control over financial
      reporting.


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The
      Trust’s remaining operating asset, Monterey, has not operated since January
      2006.




If
      Monterey is unable to satisfactorily resolve its dispute with PG&E, its only
      customer, it is likely that the plant will remain closed. Other than the Trusts’
collection of its long-term notes receivable in October 2007, the Monterey
      project is the only remaining operating asset of the Trust. Continued closure
      of
      the Monterey project significantly reduces revenue and cash flows to the Trust.
      See Item 3. “Legal Proceedings” for a description of the dispute with
      PG&E.




The
      project of the Trust depends on the near-continuous operation of its equipment.
      Should the productivity of some or all of this equipment be compromised or
      should the equipment fail altogether, the Trust would be adversely affected.
      The
      Trust may also experience difficulty in hiring qualified operating
      personnel.




The
      primary equipment of the Trust is subject to mechanical failure that the Trust
      may not be able to predict and that can render specific projects inoperable
      for
      considerable periods of time. This risk also extends to failures of the
      electricity grid near the Trust’s projects that could prevent the affected
      project from delivering its electricity. In addition, the Trust may experience
      price increases for, or difficulty in obtaining, spare parts for its projects
      and in identifying and hiring personnel qualified to operate, maintain and
      repair the specialized equipment that make up parts of its
      projects.




The
      project of the Trust is subject to regulatory changes (including changes in
      environmental regulations) that could significantly reduce revenues or increase
      expenses of the Trust.




This
      area
      of risk is inherently difficult to predict but could include matters such as
      emission control changes. Such changes could increase costs at the affected
      project or prevent the project from operating.  The
        Trust is, and may in the future become, involved in litigation that may be
        resolved unfavorably.
 
 The
        Trust
        faces an inherent business risk of exposure to various types of claims and
        lawsuits that may arise in the ordinary course of business. Although it is
        not
        possible to predict the timing, nature or outcome of such claims or lawsuits
        should they arise, any such claims or proceedings, or any claim or proceeding
        discussed herein under Item 3. “Legal Proceedings”, may be disposed of
        unfavorably to the Trust. An unfavorable ruling could include money damages
        or
        injunctive relief and could result in a material adverse impact on the Trust's
        business or financial condition. Generally, for accounting purposes, the
        Trust's
        results of operations would be impacted for the period in which the matter
        is
        ultimately resolved unfavorably to the Trust or an unfavorable outcome becomes
        probable and reasonably estimable. In addition, while the Trust maintains
        insurance coverage with respect to certain claims, the Trust may not be able
        to
        obtain such insurance on acceptable terms in the future, if at all, and any
        such
        insurance may not provide adequate coverage against any such
        claims.


While
      the
      Trust no longer has any assets currently operating, the Trust may need to
      remain in existence until such time as its litigation, as well as its
      contractual obligations, are resolved.




RISKS
      RELATED TO THE NATURE OF THE TRUST’S SHARES




The
      Trust’s shares have severe restrictions on transferability and liquidity and
      shareholders are required to hold the shares indefinitely.




The
      Trust’s shares are illiquid investments. There is currently no market for these
      shares and one is not likely to develop. Because there may be only a limited
      number of persons who purchase shares and because there are significant
      restrictions on the transferability of such shares under the Trust’s Declaration
      of Trust and under applicable federal and state securities laws, it is expected
      that no public market will develop. Moreover, neither the Trust nor the Managing
      Shareholder will provide any market for the shares. Shareholders are generally
      prohibited from selling or transferring their shares except in the circumstances
      permitted under the Declaration of Trust and applicable law, and all such sales
      or transfers require the Trust’s consent, which it may withhold at its sole
      discretion. Accordingly, shareholders have no assurance that an investment
      can
      be transferred and must be prepared to bear the economic risk of the investment
      indefinitely.




Shareholders
      are not permitted to participate in the Trust’s management or operations and
      must rely exclusively on the Managing Shareholder.




Shareholders
      have no right, power or authority to participate in the Trust’s management or
      decision making or in the management of the Trust’s projects. The Managing
      Shareholder has the exclusive right to manage, control and operate the Trust’s
      affairs and business and to make all decisions relating to its
      operation.




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The Trust’s
      assets are generally illiquid and any disposition of Trust assets is at the
      discretion of the Managing Shareholder.


The
      Trust’s interest in projects is illiquid. However, if the Trust were to attempt
      to sell any such interest, a successful sale would depend upon, among other
      things, the operating history and prospects for the project or interest being
      sold, the number of potential purchasers and the economics of any bids made
      by
      them. The Managing Shareholder has full discretion to determine whether any
      project, or any partial interest, should be sold and the terms and conditions
      under which such project would be sold. Consequently, shareholders will
      depend on the Managing Shareholder for the decision to sell all or a portion
      of
      an asset, or retain it, for the benefit of the shareholders and for negotiating
      and completing the sale transaction.





The
      Trust indemnifies its officers, as well as the Managing Shareholder and its
      employees, for certain actions taken on its behalf. Therefore, the Trust has
      limited recourse relative to these actions.




The
      Declaration of Trust provides that the Trust’s officers and agents, the Managing
      Shareholder, the affiliates of the Managing Shareholder and their respective
      directors, officers and agents when acting on behalf of the Managing Shareholder
      or its affiliates on the Trust’s behalf, will be indemnified and held harmless
      by the Trust from any and all claims rising out of the Trust’s management,
      except for claims arising out of bad faith, gross negligence or willful
      misconduct or a breach of the Declaration of Trust. Therefore, the Trust may
      have difficulty sustaining an action against the Managing Shareholder, or its
      affiliates and their officers based on breach of fiduciary responsibility or
      other obligations to the shareholders.




The
      Managing Shareholder is entitled to receive a management fee regardless of
      the
      Trust’s profitability and also receives cash distributions.




The
      Managing Shareholder is entitled to receive an annual management fee from the
      Trust regardless of whether the Trust is profitable in that year. The annual
      fee, payable monthly, is equal to 1.5% of the Trust’s prior years' net asset
      value. In addition to its annual management fee, the Managing Shareholder,
      as
      compensation for its management services, will receive 20% of the Trust’s cash
      distributions to shareholders upon the shareholders having received a certain
      minimum level of distributions as set out in the Declaration of Trust, even
      though the Managing Shareholder has not contributed any cash to the Trust.
      Accordingly, shareholders contribute all of the cash utilized for the Trust’s
      investments and activities. If the Trust’s projects are unsuccessful, the
      shareholders may lose 100% of their investment while the Managing Shareholder
      will not suffer any investment losses because it did not contribute any capital.
      None of the compensation to be received by the Managing Shareholder has been
      derived as a result of arm’s length negotiations.




Cash
      distributions are not guaranteed and may be less than anticipated or
      estimated.




Distributions
      depend primarily on available cash from project operations. At times,
      distributions have been delayed to repay the principal and interest on project
      or Trust borrowings, if any, or to the Trust’s other costs. The Trust’s taxable
      income will be taxable to the shareholders in the year earned, even if cash
      is
      not distributed.




Because
      the Managing Shareholder manages other electricity generation and infrastructure
      trusts, it may have conflicts of interest in its management of the Trust’s
      operations.




Shareholders
      will not be involved in the management of the Trust’s operations. Accordingly,
      they must rely on the Managing Shareholder’s judgment in such matters. Inherent
      with the exercise of its judgment, the Managing Shareholder will be faced with
      conflicts of interest. While neither the Trust nor the Managing Shareholder
      have
      specific procedures in place in the event of any such conflicting
      responsibilities, the Managing Shareholder recognizes that it has fiduciary
      duties to the Trust in connection with its position and responsibilities as
      Managing Shareholder and it intends to abide by such fiduciary responsibilities
      in performing its duties. Therefore, the Managing Shareholder and its affiliates
      will attempt, in good faith, to resolve all conflicts of interest in a fair
      and
      equitable manner with respect to all parties affected by any such conflicts
      of
      interest. However, the Managing Shareholder is not liable to the Trust for
      how
      conflicts of interest are resolved unless it has acted in bad faith, or engaged
      in gross negligence or willful misconduct.




TAX
      RISKS ASSOCIATED WITH AN INVESTMENT IN SHARES




The
      Trust
      is organized as a Delaware trust and the Managing Shareholder has qualified
      the
      Trust as a partnership for federal tax purposes. The principal tax risks to
      shareholders are that:




·
            The
                Trust may recognize income taxable to the shareholders but may not
                distribute enough cash to cover the income taxes owed by shareholders
                on
                the Trust’s taxable income.





·
            The
                allocation of Trust items of
                income, gain, loss, and deduction may not be recognized for federal
                income
                tax purposes.


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·
            All
                or a portion of the Trust’s
                expenses could be considered either investment expenses (which would
                be
                deductible by a shareholder only to the extent the aggregate of such
                expenses exceeded 2% of such shareholder’s adjusted gross income) or as
                nondeductible items that must be
                capitalized.





·
            All
                or a substantial portion of
                the Trust’s income could be deemed to constitute unrelated business
                taxable income, such that tax-exempt shareholders could be subject
                to tax
                on their respective portions of such
                income.





·
            If
                any Trust income is deemed to
                be unrelated business taxable income, a shareholder that is a charitable
                remainder trust could have all of its income from any source deemed
                to be
                taxable.





·
            All
                or a portion of the losses,
                if any, allocated to the shareholders will be passive losses and
                thus
                deductible by the shareholder only to the extent of passive
                income.





·
            The
                shareholders could have
                capital losses in excess of the amount that is allowable as a deduction
                in
                a particular year.




Although
      the Trust has obtained an opinion of counsel regarding the matters described
      in
      the preceding paragraph, it will not obtain a ruling from the IRS as to any
      aspect of the Trust’s tax status. The tax consequences of investing in the Trust
      could be altered at any time by legislative, judicial, or administrative
      action.





If
      the IRS audits the Trust, it could require investors to amend or adjust their
      tax returns or result in an audit of their tax returns.




The
      IRS
      may audit the Trust’s tax returns. Any audit issues will be resolved at the
      Trust level by the Managing Shareholder. If adjustments are made by the IRS,
      corresponding adjustments will be required to be made to the federal income
      tax
      returns of the shareholders, which may require payment of additional taxes,
      interest, and penalties. An audit of the Trust’s tax return may result in the
      examination and audit of a shareholder’s return that otherwise might not have
      occurred, and such audit may result in adjustments to items in the shareholder’s
      return that are unrelated to the Trust’s operations. Each shareholder bears the
      expenses associated with an audit of that shareholder’s return.




In
      the
      event that an audit of the Trust by the IRS results in adjustments to the tax
      liability of a shareholder, such shareholder will be subject to interest on
      the
      underpayment and may be subject to substantial penalties.




The
      tax
      treatment of the Trust cannot be guaranteed for the life of the Trust. Changes
      in laws or regulations may adversely affect any such tax treatment.




Deductions,
      credits or other tax consequences may not be available to shareholders.
      Legislative or administrative changes or court decisions could be forthcoming
      which would significantly change the statements herein. In some instances,
      these
      changes could have substantial effect on the tax aspects of the Trust. Any
      future legislative changes may or may not be retroactive with respect to
      transactions prior to the effective date of such changes. Bills have been
      introduced in Congress in the past and may be introduced in the future which,
      if
      enacted, would adversely affect some of the tax consequences of the
      Trust.




ITEM
      1B.  UNRESOLVED STAFF COMMENTS




Not
      applicable.




ITEM
      2.  PROPERTIES




Information
      regarding the Trust’s properties is contained in Item 1. “Business”, under the
      heading “Projects and Properties”.




ITEM
      3.  LEGAL PROCEEDINGS




As
      discussed in Item 1. “Business” under the heading Projects and Properties
      -
      Monterey, for the first 15 years of operation, PG&E “dispatched” the
      Monterey facility to produce and deliver electricity up to its contract capacity
      on a 13 hour per day, five day per week basis (“13x5”).  However, on
      December 1, 2005, PG&E dispatched Monterey on a 24 hour per day, seven day
      per week basis (“24x7”) for an indefinite period, effective January 1,
      2006.  Monterey advised PG&E that its 24x7 dispatch order was a breach
      of the parties’ power purchase agreement.  Management of Monterey was also
      concerned that if Monterey continued to produce and supply power consistent
      with
      the parties’ prior course of performance, PG&E would refuse to pay. 
Accordingly, Monterey demanded that PG&E provide
      adequate assurances that it would continue to pay Monterey for its capacity
      and
      its electricity produced and delivered in accordance with the parties’
longstanding 13x5 operations.  PG&E did not provide such
      assurances.  In the absence of such assurances, Monterey suspended
      operations on or about January 9, 2006.  Monterey filed a Complaint against
      PG&E in the San Francisco Superior Court on May 16, 2006 (the “Monterey
      Complaint”).  The Monterey Complaint seeks damages for breach of contract,
      damages for PG&E’s breach of the implied covenant of good faith and fair
      dealing, and a claim for declaratory relief against PG&E, seeking a judicial
      determination that PG&E’s conduct materially breached the parties’ agreement
      and justified Monterey’s suspension of performance.  Monterey is
      seeking damages against PG&E estimated at approximately $5 million. A Jury
      Trial with regard to this matter, previously set for February 8, 2008, was
      postponed, and no new date has been set.


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On
      May
      14, 2007, PG&E filed a Complaint in San Francisco Superior Court against
      Monterey (the “PG&E Complaint”).  The PG&E Complaint arises out of
      the same transactions and occurrences that gave rise to the Monterey Complaint
      against PG&E.  PG&E asserted claims for compensatory damages for
      breach of contract and breach of the implied covenant of good faith and fair
      dealing, as well as “restitution” of capacity payments made to Monterey on a
      theory of unjust enrichment, and declaratory relief for repayment of capacity
      payments made to Monterey.  PG&E is seeking restitution damages against
      Monterey estimated at approximately $4.8 million.





The
      claims made by PG&E have been made solely against Monterey and do not
      involve any claims against the Trust. Both of the above litigation matters
      are
      currently in discovery.





On
      August
      16, 2006, the Trust and several affiliated entities, including the Managing
      Shareholder, filed a lawsuit against the former independent registered public
      accounting firm for the Trust and several affiliated entities, Perelson Weiner
      LLP (“Perelson Weiner”), in New Jersey Superior Court. The suit alleged
      professional malpractice and breach of contract in connection with audit and
      accounting services performed for the Trust and the other plaintiffs by Perelson
      Weiner. On October 20, 2006, Perelson Weiner filed a counterclaim against the
      Trust and the other plaintiffs, alleging breach of contract due to unpaid
      invoices in the total amount of approximately $1,188,000. Discovery is ongoing
      and no trial date has been set.




ITEM
      4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS





None.





PART
      II





ITEM
      5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
      SECURITY HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES




Market
      Information





There
      has
      never been an established public trading market for the Trust’s Investor
      Shares.





Holders





As
      of
      December 31, 2007 and 2006 there were 534 and 533 holders of Investor Shares,
      respectively.





Dividends





Trust
      distributions for the years ended December 31, 2006 and 2005 were as follows
      (in
      thousands, except per share data):





2006
            
            
            2005Distributions
                to Investors
            
            $
            -
            
            
            $
            1,177Distributions
                per Investor Share
            
            
            -
            
            
            
            5,000Distributions
                to Managing Shareholder
            
            
            -
            
            
            
            12


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  ITEM
        6.  SELECTED FINANCIAL DATA





The
      following selected consolidated financial data should be read in conjunction
      with the Trust’s consolidated financial statements and related notes and Item 7.
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations” of this Form 10-K.




The
      consolidated statement of operations data for the years ended December 31,
      2006,
      2005 and 2004 and the consolidated balance sheet data as of December 31, 2006
      and 2005, are derived from audited financial statements included in this Form
      10-K. The consolidated statement of operations data for the years ended December
      31, 2003 and 2002 and the consolidated balance sheet data as of December 31,
      2004, 2003 and 2002 are derived from audited consolidated financial statements
      not included in this Form 10-K.  The consolidated statement of
      operations and the consolidated balance sheet data for the year ended December
      31, 2002 are derived from audited consolidated financial statements that have
      not been restated, and as a result, may not be comparable to subsequent
      periods.





(in
                thousands, except per share data)
            
            December
                31,2006
            
            
            2005
            
            
            2004
            
            
            2003
            
            
            2002Consolidated
                Statement of
                Operations Data(1):Revenues
            
            $
            91
            
            
            $
            2,817
            
            
            $
            2,826
            
            
            $
            3,009
            
            
            $
            3,075Net
                (loss) income
            
            
            (3,364
            )
            
            
            265
            
            
            
            361
            
            
            
            340
            
            
            
            256Net
                (loss) income per Investor Share
            
            
            (14,149
            )
            
            
            1,116
            
            
            
            1,516
            
            
            
            1,432
            
            
            
            1,086Consolidated
                Balance
                Sheet Data(1):Plant
                and equipment, net
            
            $
            -
            
            
            $
            1,132
            
            
            $
            1,258
            
            
            $
            1,381
            
            
            $
            1,798Total
                assets
            
            
            563
            
            
            
            4,384
            
            
            
            4,964
            
            
            
            6,060
            
            
            
            7,561Shareholders'
                equity
            
            
            555
            
            
            
            3,878
            
            
            
            4,802
            
            
            
            5,867
            
            
            
            7,227




(1)
      The
      Monterey facility has been closed since January 2006, resulting in the 2006
      decrease in revenues. As a result of the closing, the Trust fully impaired
      the
      related assets, which decreased assets and increased net loss.





ITEM
      7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The
      following discussion and analysis should be read in conjunction with the Trust’s
      Consolidated Financial Statements and Notes which appear elsewhere in this
      Annual Report on Form 10-K. This discussion contains forward-looking
      statements that involve risks, uncertainties and assumptions. The Trust’s actual
      results could differ materially from those anticipated in these forward-looking
      statements as a result of various factors, including those set forth in
      Part I, Item 1A. “Risk Factors” and elsewhere in this Annual Report on
      Form 10-K.




Overview





The
      Trust
      is a Delaware trust formed on November 20, 1992 primarily to make investments
      in
      projects and businesses in the energy and infrastructure sectors. RRP, a New
      Jersey limited liability company, is the Managing Shareholder. As the Managing
      Shareholder, RRP has direct and exclusive control over the management and
      operations of the Trust.




The
      Trust
      has focused primarily on small-scale electricity generation projects. These
      projects allow the Trust to develop secure long-term positions in attractive
      specialty markets for products and services provided by its projects and
      companies. As of December 31, 2006, the Trust had one non-operating investment,
      located in California and 100% owned by the Trust.  This investment is
      a 5.5MW cogeneration project which suspended operations in early 2006 due to
      a
      contract dispute with its customer. See Item 3. “Legal Proceedings” for further
      discussion. In January 2006, the Trust sold its other investment for $1, which
      was a collection of irrigation service engines with a production capacity of
      2MW. Additionally, at December 31, 2006, the Trust had long-term notes
      receivable, which were paid in full on October 31, 2007.




Based
      on
      the status of these assets, the financial statement results for future periods
      are expected to be materially different than historical periods. Since the
      closing of the Monterey facility in January 2006, the Trust has not had any
      operating revenues, though it continued to have contractual obligations through
      August 2006 related to the gas purchase agreement with Coral. Upon the repayment
      of the Trust’s long term receivable in October 2007, the Trust no longer had any
      income producing assets in operation and may not in the future, subject to
      the
      resolution of litigation relating to the Monterey facility. During the first
      quarter of 2006, the Trust recorded an asset impairment of Monterey’s remaining
      net book value. Monterey remains closed as of the date of this
      filing.




Critical
      Accounting Policies and Estimates





The
      discussion and analysis of the Trust’s financial condition and results of
      operations are based upon the Trust’s consolidated
      financial statements, which have been prepared in conformity with accounting
      principles generally accepted in the United States of America. In preparing
      these financial statements, the Trust is required to make certain estimates,
      judgments and assumptions. These estimates, judgments and assumptions affect
      the
      reported amounts of the Trust’s assets and liabilities, including the disclosure
      of contingent assets and liabilities, at the date of the financial statements
      and the reported amounts of the Trust’s revenues and expenses during the periods
      presented. The Trust evaluates these estimates and assumptions on an ongoing
      basis. The Trust bases its estimates and assumptions on historical experience
      and on various other factors that the Trust believes to be reasonable at the
      time the estimates and assumptions are made. However, future events and their
      effects cannot be predicted with absolute certainty. Therefore, the
      determination of estimates requires the exercise of judgment. Actual results
      may
      differ from these estimates and assumptions under different circumstances or
      conditions, and such differences may be material to the financial statements.
      The Trust believes the following critical accounting policies affect the more
      significant estimates and judgments in the preparation of the Trust’s
      consolidated financial statements.


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Revenue
      Recognition





Power
      generation revenue is recorded in the month of delivery, based on the estimated
      volumes sold to customers at rates stipulated in the electric power sales
      contract. Adjustments are made to reflect actual volumes delivered when the
      actual volumetric information subsequently becomes available. Billings to
      customers for power generation generally occurs during the month following
      delivery. Final billings do not vary significantly from estimates.





Accounts
      Receivable





Accounts
      receivable are recorded at invoice price in the period the related revenues
      are
      earned, and do not bear interest. No allowance for bad debt expense was provided
      based upon historical write-off experience, evaluation of customer credit
      condition and the general economic status of the customers.





Plant
      and Equipment





Plant
      and
      equipment, consisting principally of electrical generating equipment, is stated
      at cost less accumulated depreciation. Renewals and betterments that increase
      the useful lives of the assets are capitalized. Repair and maintenance
      expenditures are expensed as incurred. Upon retirement or disposal of assets,
      the cost and related accumulated depreciation are removed from the consolidated
      balance sheets. The difference, if any, between the net asset value and any
      proceeds from such retirement or disposal is recorded as a gain or loss in
      the
      consolidated statement of operations.





Depreciation
      is recorded using the straight-line method over the useful lives of the assets,
      which ranges from 3 to 20 years.





Impairment
      of Intangibles and Long-Lived Assets





The
      Trust
      evaluates intangible assets and long-lived assets, such as plant and equipment,
      when events or changes in circumstances indicate that the carrying value of
      such
      assets may not be recoverable. The determination of whether impairment has
      occurred is made by comparing the carrying value of an asset to the estimated
      undiscounted cash flows attributable to that asset. If impairment has occurred,
      the impairment loss recognized is the amount by which the carrying value exceeds
      the estimated fair value of the asset, which is based on the estimated future
      cash flows discounted at the estimated cost of capital. The analysis requires
      estimates of the amount and timing of projected cash flows and, where
      applicable, judgments associated with, among other factors, the appropriate
      discount rate. Such estimates are critical in determining whether any impairment
      charge should be recorded and the amount of such charge if an impairment loss
      is
      deemed to be necessary.





Gas Contract





In
      August
      2001, Monterey entered into an agreement to purchase natural gas, at fixed
      prices, over a five-year term in connection with entering into an amendment
      fixing the sales price of electric power sales contracts for a similar term.
      This contract was entered into in order to minimize the impact of fluctuating
      energy prices. The Trust has determined that this contract is a derivative
      as
      defined under Statement of Financial Accounting Standards (“SFAS”) No. 133,
      "Accounting for Derivative Instruments and Hedging Activities", as amended.
      The
      Trust has designated the derivative as a non-hedge instrument. Accordingly,
      the
      value of the contract based on the differences between contract prices and
      market value prices is recognized as an asset or a liability in the consolidated
      balance sheets. Changes in the carrying value of the contract are reflected
      as a
      component of cost of revenues in the consolidated statements of operations.
      During the third quarter of 2006, the Trust completed its contractual agreement
      to resell the purchased gas back to Monterey’s gas supplier and therefore, there
      is no longer any value recorded on the consolidated balance sheets associated
      with this contract.




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Notes
      Receivable





Recovery
      of interest and principal under the promissory notes issued in connection with
      the sale of the Trust’s interest in PILP and B-3 were dependent upon the
      operations of the partnership investment transferred. Consequently, the Trust
      deferred its gain on the sale of its ownership interest until the carrying
      value
      of the investments was fully recovered. The cash proceeds received for the
      interest and principal were recorded as a reduction of the Trust’s investment in
      the partnership transferred under contractual agreement through June 30,
      2005.  Subsequent payments were recorded as a component of other
      income. The note payments remained current until the notes were paid in full
      on
      October 31, 2007.





Income
      Taxes





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





Results
      of Operations





Year
      ended December 31, 2006 compared to the year ended December 31,
      2005





Total
      revenues decreased $2.7 million, or 96.8%, from $2.8 million in 2005 to $0.1
      million in 2006. This decrease was due to the ceasing of Monterey’s operations
      and sale of the Pumping Project in January 2006. Revenues in 2006 are Monterey’s
      revenues prior to suspension of its operations.





Cost
      of
      revenues decreased approximately $1.7 million, or 60.4%, from $2.7 million
      in
      2005 to $1 million in 2006. This decrease was mainly due to the closing of
      Monterey’s operations and the sale of the Pumping Project in January 2006.
      Additionally, natural gas prices declined in 2006, resulting in reductions
      in
      the carrying value of gas supply contracts and an increase in cost of
      revenues.





Gross
      loss was $1 million in 2006 as compared to gross profit of $0.2 million in
      2005.
      This decrease of approximately $1.2 million was primarily due to decreased
      revenue as a result of the closing of Monterey’s operations and lower natural
      gas prices.





During
      the first quarter of 2006, the Trust recorded a $2.8 million impairment of
      Monterey’s plant and equipment and its intangible assets as a result of closing
      the Monterey operations.





The
      Trust
      recorded a gain on sale of investments of $0.7 million from collection of its
      notes receivable during 2006 and $0.3 million during 2005. Cash receipts from
      the notes receivable for a portion of 2005 reduced the carrying value of the
      notes with no gain recognized for that portion.





Year
      ended December 31, 2005 compared to the year ended December 31,
      2004





Revenues
      of $2.8 million in 2005 were comparable to the same period in 2004.





Cost
      of
      revenues increased approximately $0.5 million, or 18.2%, from $2.2 million
      for
      the year ended December 31, 2004 to $2.7 million for the year ended December
      31,
      2005. This increase was primarily attributable to the impact of the Monterey
      gas
      supply contract as natural gas prices decreased during 2005.





Gross
      profit decreased by $0.4 million, or 71.4%, from $0.6 million in 2004 to $0.2
      million in 2005. This decrease was primarily due to lower natural gas prices
      in
      2005.





In
      2005,
      the Trust recorded gains of $0.3 million from collection on notes receivable
      from the sale of its investment in B-3 and PILP.





Net
      income for 2005 totaled $0.3 million, a decrease of $0.1 million from $0.4
      million in 2004. This decrease was due to the decrease in gross profit,
      partially offset by the gains recorded during 2005 from collection of notes
      receivable.





Liquidity
      and Capital Resources





Year
      ended December 31, 2006 compared to the year ended December 31,
      2005





At
      December 31, 2006, the Trust had cash and cash equivalents of $0.4 million,
      an
      increase of $0.2 million from December 31, 2005. The cash
      flows for 2006 consisted of $0.2 million provided by operating activities.
      There
      were no cash flows from either investing or financing activities in
      2006.


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In
      2006,
      the Trust’s operating activities provided cash of $0.2 million as compared to
      $0.6 million in 2005, a decrease of approximately $0.4 million, primarily due
      to
      decreased cash flows from ongoing operations.





In
      2005,
      the Trust’s investing activities provided $0.4 million from collection of notes
      receivable related to the sale of investments in B-3 and PILP. There were no
      cash flows from investing activities in 2006.





In
      2005,
      the Trust used $1.2 million in financing activities for cash distributions
      to
      shareholders. There were no cash flows from financing activities in
      2006.





Year
      ended December 31, 2005 compared to the year ended December 31,
      2004





At
      December 31, 2005, the Trust had cash and cash equivalents of $0.2 million,
      a
      decrease of $0.2 million from December 31, 2004. The cash flows for 2005
      consisted of $0.6 million provided by operating activities, $0.4 million
      provided by investing activities and $1.2 million used in financing
      activities.





In
      2005,
      the Trust’s operating activities provided cash of $0.6 million as compared to
      $0.2 million in 2004, an increase of approximately $0.4 million, primarily
      due
      to increased cash flows from ongoing operations.




In
      2005,
      the Trust used $1.2 million in financing activities as compared to $1.4 million
      in 2004, both of which were cash distributions to shareholders.





Off-Balance
      Sheet Arrangements





During
      the third quarter of 2006, the Trust completed its obligations under its gas
      supply contract. The associated letter of credit expired upon completion of
      these obligations.





Future
      Liquidity and Capital Resource Requirements





The
      Trust expects cash flows from
      operating activities to be significantly less in the future periods than in
      previous periods since the operation of Monterey has ceased.





Contractual
      Obligations and Commitments





At
      December 31, 2006, the Trust’s contractual obligations are as follows (in
      thousands):





Payments
                due by periodContractual
                obligations
            
            Total
            
            
            Less
                than 1
              year
            
            
            1 -
                3 years
            
            
            3
                -
                5 years
            
            
            More
                than 5
              yearsGround
                lease *
            
            $
            177
            
            
            $
            12
            
            
            $
            24
            
            
            $
            24
            
            
            $
            117* Excludes
                payments for delivered steam per
                contract.





In
      connection with the ground lease, Monterey has not delivered by-product steam
      since it was shut down in January 2006. As a result, it may be subject to
      penalties from the lessor.





Recent
      Accounting Pronouncements





FIN
      48





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, Accounting for Uncertainty
      in Income
      Taxes (“FIN 48”) an interpretation of SFAS 109, Accounting for
      Income
      Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in
      accordance with SFAS 109 and prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return. FIN 48 also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition. FIN 48 will be effective for the
      Trust beginning January 1, 2007. The Trust does not believe that the adoption
      of
      FIN 48 will have a material impact on its consolidated financial
      statements.


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 Table
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SFAS
      157





In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
      ("SFAS 157"), to define fair value, establish a framework for measuring fair
      value in accordance with generally accepted accounting principles (GAAP) and
      expand disclosures about fair value measurements. SFAS 157 requires quantitative
      disclosures using a tabular format in all periods (interim and annual) and
      qualitative disclosures about the valuation techniques used to measure fair
      value in all annual periods. SFAS 157 will be effective for the Trust beginning
      January 1, 2008. The Trust is currently evaluating the impact of adopting SFAS
      157 on its consolidated financial statements.





SAB
      108





In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects
      of Prior
      Year Misstatements When Quantifying Misstatements in Current Year Financial
      Statements ("SAB 108"). SAB 108 requires analysis of misstatements using
      both an income statement (rollover) approach and a balance sheet (iron curtain)
      approach in assessing materiality and provides for a one-time cumulative effect
      transition adjustment. SAB 108 is effective for fiscal years ending on or after
      November 15, 2006. The adoption of this standard did not have a material impact
      on its consolidated financial statements.





SFAS
      159





In
      February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
      Financial
      Assets and Financial Liabilities (“SFAS 159”). SFAS 159 expands
      opportunities to use fair value measurements in financial reporting and permits
      entities to choose to measure many financial instruments and certain other
      items
      at fair value. SFAS 159 will be effective for the Trust on January 1,
      2008. The Trust is currently evaluating the impact of adopting SFAS 159 on
      its consolidated financial statements.





SFAS
      160





In
      December 2007, the FASB issued
      SFAS No. 160, Noncontrolling Interests
      in
      Consolidated Financial Statements — an amendment of ARB No. 51
      (“SFAS 160”).  SFAS 160 requires that ownership interests in subsidiaries
      held by parties other than the parent, and the amount of consolidated net
      income, be clearly identified, labeled, and presented in the consolidated
      financial statements within equity, but separate from the parent’s equity.
 It also requires once a subsidiary is deconsolidated, any retained
      noncontrolling equity investment in the former subsidiary be initially measured
      at fair value. Sufficient disclosures are required to clearly identify and
      distinguish between the interests of the parent and the interests of the
      noncontrolling owners. SFAS 160 will be effective for the Trust beginning
      January 1, 2009. The Trust is currently evaluating the impact of adopting
      SFAS 160 on its consolidated financial statements.




ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK




The
      disclosure required by this Item is omitted pursuant to Item 305(e) of
      Regulation S-K.




ITEM
      8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY
      DATA




The
      consolidated financial statements of the Trust, including the notes thereto
      and
      the report thereon, are presented beginning at page F-1 of this Form
      10-K.




ITEM
      9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
      ON ACCOUNTING AND FINANCIAL DISCLOSURE




None.




ITEM
      9A.  CONTROLS AND PROCEDURES




In
      accordance with Rule 13a-15(b) of the Exchange Act, the Trust’s Chief Executive
      Officer and Chief Financial Officer evaluates the effectiveness of the Trust’s
      disclosure controls and procedures. A system of disclosure controls and
      procedures is designed to ensure that information required to be disclosed
      by a
      registrant in reports filed with the Exchange Act are recorded, processed,
      summarized and reported within the time periods specified in the applicable
      rules and forms. This includes disclosure controls and procedures designed
      to
      ensure that information required to be disclosed by a registrant is accumulated
      and communicated to senior management so as to allow timely
      decisions regarding required disclosure. A review of these controls and
      procedures was done by the Trust as of December 31, 2006, which revealed that
      the following material weaknesses previously identified, continue to
      exist:


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(i)
            a
                lack of sufficient personnel
                with relevant experience to develop, administer and monitor disclosure
                controls and procedures to enable the Trust to comply efficiently,
                or on a
                timely basis, with its financial reporting
                obligations,


(ii)
            inadequate
                disclosure controls
                and procedures, including inadequate record retention and review
                policies, that would enable the Trust to meet its financial reporting
                and disclosure obligations in an efficient and timely
                manner.




As
      a
      result of these weaknesses, the Trust has not timely met its reporting
      obligations under the Exchange Act.





The
      Trust’s Chief Executive Officer and Chief Financial Officer have concluded that
      there was no change in the Trust's internal control over financial reporting
      (as
      such term is defined in Rule 13a-15(f) under the Exchange Act, as amended)
      that
      occurred during the quarter ended December 31, 2006 that has materially
      affected, or is reasonably likely to materially affect, the Trust’s internal
      control over financial reporting.





Since
      December 31, 2006, the Trust has implemented the following to address the above
      weaknesses:




·
            Increased
                the number of degreed accountants. Additional staff expansion is
                underway.





·
            In
                May 2007, the Trust appointed
                a new Chief Financial Officer who is a Certified Public Accountant
                with
                approximately 29 years of professional accounting experience, including
                prior experiences as a financial officer of publicly traded
                companies.





·
            During
                the fourth quarter of 2007, the Trust expanded its internal control
                over
                financial reporting. The Trust documented many existing informal
                internal
                controls of the Trust, improved disclosure controls and procedures
                primarily by establishing a compliance-focused disclosure committee
                and
                formalizing monthly closing procedures and implemented a corporate
                whistleblower policy.




The
      Trust
      believes that the completion of the expansion of the accounting and financial
      reporting staff and implementation of recommended procedures will mitigate
      the
      above weaknesses. However, due to the Trust’s delinquencies in meeting its
      filing deadlines under the Exchange Act, the Trust expects these deficiencies
      to
      continue to be material weaknesses at least until such time as the Trust is
      no
      longer delinquent in its Exchange Act filings.




The
      Trust’s Chief Executive Officer and Chief Financial Officer have evaluated the
      effectiveness of the Trust’s disclosure controls and procedures as of the end of
      each of the periods covered by this report pursuant to Rule 13a-15(b) under
      the
      Exchange Act and concluded that, as of the end of the period covered by this
      report, because of the material weaknesses noted above, the Trust’s disclosure
      controls and procedures were not effective.





Because
      the Trust is not an “Accelerated Filer” as defined in Rule 12b-2 of the Exchange
      Act, the Trust is not presently required to file Management’s annual report on
      internal control over financial reportingand the Attestation report
      of the registered public
      accounting firm
      required by Item 308(a) and (b) of Regulation S-K promulgated under the
      Securities Act of 1933, as amended.  Under current rules, because the
      Trust is neither a “large accelerated filer” nor an “accelerated filer”, the
      Trust is not required to provide management’s report on internal control over
      financial reporting until the Trust files its annual report for 2007 and
      compliance with the auditor’s attestation report requirement is not required
      until the Trust files its annual report for 2008.  The Trust currently
      expects to comply with these requirements at such time as the Trust is required
      to do so.





ITEM
      9B.  OTHER INFORMATION




None.




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PART
      III





ITEM
      10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
      GOVERNANCE




The
      Trust’s Managing Shareholder, Ridgewood Renewable Power, LLC, was originally
      founded in 1991. The Managing Shareholder has very broad authority, including
      the authority to elect executive officers of the Trust.




Each
      of
      the executive officers of the Trust also serves as an executive officer of
      the
      Managing Shareholder. The executive officers of the Trust are as
      follows:




Name,
                Age and Position with Registrant
            Officer
                SinceRandall
                D. Holmes, 60President
                and Chief Executive Officer
            2004Robert
                E. Swanson, 60Chairman
            1997Jeffrey
                H. Strasberg, 50Executive
                Vice President and Chief Financial Officer (1)
            2007Daniel
                V. Gulino, 47Senior
                Vice President, General Counsel and Secretary
            2000Douglas
                R. Wilson, 48Executive
                Vice President and Chief Financial Officer (1)
            2005




(1)
      Mr.
      Strasberg replaced Mr. Wilson as Executive Vice President and Chief Financial
      Officer on May 2, 2007.




Set
      forth
      below is the name of and certain biographical information regarding the
      executive officers of the Trust:




Randall
      D. Holmes has served
      as President and Chief Executive Officer of the Trust, the Managing Shareholder
      and affiliated Power Trusts and LLCs since January 2006 and served as Chief
      Operating Officer of the Trust, the Managing Shareholder and affiliated Power
      Trusts and LLCs from January 2004 until January 2006. Prior to such time,
      Mr. Holmes served as the primary outside counsel to and has represented the
      Managing Shareholder and its affiliates since 1991. Immediately prior to
      being appointed Chief Operating Officer, Mr. Holmes was counsel to Downs Rachlin
      Martin PLLC (“DRM”). DRM is one of the primary outside counsel to the Trust, the
      Managing Shareholder and its affiliates. He has maintained a minor consulting
      relationship with DRM in which he may act as a paid advisor to DRM on certain
      matters that are unrelated to the Trust. Such relationship will not require
      a
      significant amount of Mr. Holmes’ time and it is expected that such relationship
      will not adversely affect his duties as President and Chief Executive Officer.
      Mr. Holmes is a graduate of Texas Tech University and the University of Michigan
      Law School. He is a member of the New York State bar.




Robert
      E. Swanson has served
      as Chairman of the Trust, the Managing Shareholder and affiliated Power Trusts
      and LLCs since their inception. From their inception until January 2006, Mr.
      Swanson also served as their Chief Executive Officer. Mr. Swanson is the
      controlling member of the Managing Shareholder, as well as Ridgewood Energy
      and
      Ridgewood Capital, affiliates of the Trust. Mr. Swanson has been President
      and
      registered principal of Ridgewood Securities since its formation in 1982, has
      served as the Chairman of the Board of Ridgewood Capital since its organization
      in 1998 and has served as President and Chief Executive Officer of Ridgewood
      Energy since its inception in 1982. Mr. Swanson is a member of the New York
      State and New Jersey State 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.




Jeffrey
      H. Strasberg has
      served as Executive Vice President of the Trust, the Managing Shareholder,
      and
      affiliated Power Trusts and LLCs since May 2007. Mr. Strasberg also serves
      as
      Senior Vice President and Chief Financial Officer of Ridgewood Capital and
      affiliated LLCs and Ridgewood Securities and has done so since April 2005.
      Mr.
      Strasberg joined Ridgewood Capital in 1998 where his initial responsibilities
      were to serve as interim Chief Financial Officer of various portfolio companies
      in which Ridgewood Capital Trusts had interests. Mr. Strasberg is a Certified
      Public Accountant and a graduate of the University of Florida.





Daniel
      V. Gulino has served as
      Senior Vice President and General Counsel of the Trust, the Managing Shareholder
      and affiliated Power Trusts and LLCs since 2000 and was appointed Secretary
      in
      February 2007. Mr. Gulino also serves as Senior Vice President, General Counsel
      and Secretary of Ridgewood Energy, Ridgewood Capital, Ridgewood Securities
      and
      affiliated Trusts and LLCs and has done so since 2000. Mr. Gulino is a member
      of
      the New Jersey State and Pennsylvania State Bars. He is a graduate of Fairleigh
      Dickinson University and Rutgers University School of Law.




Douglas
      R. Wilson served as
      Executive Vice President and Chief Financial Officer of the Trust, the Managing
      Shareholder and affiliated Power Trusts and LLCs from April 2005 until May
      2007.
      Mr. Wilson continues to serve the Managing Shareholder as Executive Vice
      President and Chief Development Officer. Mr. Wilson has been associated with
      the
      Ridgewood group of companies as a consultant and advisor since 1996 performing
      investment evaluation, structuring and execution services for the trusts and
      entities managed by Ridgewood Capital LLC. From May of 2002,
      until its sale in 2007, Mr. Wilson has served as a Director, CEO and Finance
      Director for CLPE Holdings. Mr. Wilson is a graduate of the University of Texas
      at Arlington and has an MBA from the Wharton School at the University of
      Pennsylvania.


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Board
      of Directors and Board Committees




The
      Trust
      does not have its own board of directors or any board committees. The Trust
      relies upon the Managing Shareholder to perform the function that a board of
      directors or its committees would otherwise perform. Officers of the Trust
      are
      not directly compensated by the Trust, and all compensation matters are
      addressed by the Managing Shareholder, as described in Item 11. “Executive
      Compensation”. Because the Trust does not maintain a board of directors and
      because officers of the Trust are compensated by the Managing Shareholder,
      the
      Managing Shareholder believes that it is appropriate for the Trust to not have
      a
      nominating or compensation committee.




Managing
      Shareholder





The
      Trust’s management agreement with the Managing Shareholder details how the
      Managing Shareholder is to render management, administrative and investment
      advisory services to the Trust. Specifically, the Managing Shareholder performs
      (or may arrange for the performance of) the management and administrative
      services required for the operation of the Trust. Among other services, the
      Managing Shareholder administers the accounts and handles relations with
      shareholders, provides the Trust with office space, equipment and facilities
      and
      other services necessary for its operation, and conducts the Trust’s relations
      with custodians, depositories, accountants, attorneys, brokers and dealers,
      corporate fiduciaries, insurers, banks and others, as required.





The
      Managing Shareholder is also responsible for making investment and divestment
      decisions, subject to the provisions of the Declaration of Trust. The Managing
      Shareholder is obligated to pay the compensation of the personnel and
      administrative and service expenses necessary to perform the foregoing
      obligations. The Trust pays all other expenses of the Trust, including
      transaction expenses, valuation costs, expenses of preparing and printing
      periodic reports for shareholders and the SEC, postage for Trust mailings,
      SEC
      fees, interest, taxes, legal, accounting and consulting fees, litigation
      expenses and other expenses properly payable by the Trust. The Trust reimburses
      the Managing Shareholder for all such Trust expenses paid by the Managing
      Shareholder.




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 in Item 13. “Certain Relationships and Related
      Transactions, and Director Independence”.




Each
      investor in the Trust consented to the terms and conditions of the Management
      Agreement by subscribing to acquire Investor Shares in the Trust. The Management
      Agreement is subject to termination at any time on 60 days prior notice by
      a
      majority in interest of the shareholders or the Managing Shareholder. The
      Management Agreement is subject to amendment by the parties upon the approval
      of
      a majority in interest of the investors.





Section
      16(a) Beneficial Ownership Reporting Compliance




Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires the Trust’s
      executive officers and directors, and persons who own more than 10% of a
      registered class of the Trust’s equity securities, to file reports of ownership
      and changes in ownership with the SEC. Based on a review of the copies of
      reports furnished or otherwise available to the Trust, the Trust believes that
      the filing requirements were not met by Robert E. Swanson during the year
      ended December 31, 2006 as he failed to timely file a Form 4. This report
      has since been filed with the SEC.





Code
      of Ethics




In
      March
      2004, the Managing Shareholder, for itself and for the Trust and its affiliates
      adopted a Code of Ethics applicable to the principal executive officer,
      principal financial officer, principal accounting officer or controller (or
      any
      persons performing similar functions) of each such entity. A copy of the Code
      of
      Ethics is filed as Exhibit 14 to this Annual Report on Form 10-K.




ITEM
      11.  EXECUTIVE COMPENSATION




The
      executive officers of the Trust do not receive compensation directly from the
      Trust or any of its subsidiaries. They provide managerial services to the Trust
      in accordance with the terms of the Trust’s Declaration of Trust. The Managing
      Shareholder, or affiliated management companies, determines and pays the
      compensation of these officers. Each of the executive officers of the Trust
      also
      serves as an executive officer of the Managing Shareholder and other trusts
      managed by the Managing Shareholder and its affiliates.


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Compensation
      Discussion and Analysis





The
      executive officers of the Trust, Mr. Holmes, Mr. Swanson, Mr. Strasberg, Mr.
      Gulino and Mr. Wilson, are employed by, and are executive officers of, the
      Managing Shareholder and provide managerial services to the Trust in accordance
      with the terms of the Trust’s Declaration of Trust. The Trust does not have any
      other executive officers. The Managing Shareholder determines and pays the
      compensation of these officers. Each of the executive officers of the Trust
      also
      serves as an executive officer of each of the other investment trust managed
      by
      the Managing Shareholder. Messrs. Swanson, Strasberg and Gulino also serve
      in
      similar capacities for trusts managed by affiliates of the Managing Shareholder.
      Because the executive officers are not employees of the Trust and provide
      managerial services to all of the trusts managed by the Managing Shareholder
      and
      its affiliates in the course of such employment, they do not receive additional
      compensation for providing managerial services to the Trust.





The
      Managing Shareholder is fully responsible for the payment of compensation to
      the
      executive officers, and the Trust does not pay any compensation to its executive
      officers and does not reimburse the Managing Shareholder for the compensation
      paid to executive officers. The Trust does, however, pay the Managing
      Shareholder a management fee and the Managing Shareholder may determine to
      use a
      portion of the proceeds from the management fee to pay compensation to executive
      officers of the Trust. See Item 13. “Certain Relationships and Related
      Transactions, and Director Independence” for more information regarding Managing
      Shareholder compensation and payments to affiliated entities.





Report
      of the Managing Shareholder





Because
      the Trust is managed by the Managing Shareholder and does not have a Board
      of
      Directors or a Compensation Committee, the Managing Shareholder reviewed and
      discussed with management the Compensation Discussion and Analysis included
      in
      this Annual Report on Form 10-K. Based on such review and discussion, the
      Managing Shareholder determined that the Compensation Discussion and Analysis
      be
      included in this Annual Report on Form 10-K for filing with the Securities
      and
      Exchange Commission.




Submitted
      by the Managing Shareholder





Robert
      E. Swanson, Chairman




ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT AND RELATED STOCKHOLDER MATTERS




The
      following table sets forth information with respect to the beneficial ownership
      of the Trust’s Investor Shares as of December 31, 2006 (no person owns more than
      5%) by:




·
            each
                executive officer (there are no directors) of the Trust; and


·
            all
                of the executive officers of the Trust as a group.





Beneficial
      ownership is determined in accordance with SEC rules and includes voting or
      investment power with respect to the securities. Except as indicated by
      footnote, and subject to applicable community property laws, the persons named
      in the table below have sole voting and investment power with respect to all
      Investor Shares shown as beneficially owned by them. Percentage of beneficial
      ownership is based on 235.3775 Investor Shares outstanding at December 31,
      2006.
      Other than as set forth below, no officer of the Trust owns any shares of the
      Trust.





Name
                of beneficial owner
            Number
              of
                shares (1)
            PercentRidgewood
                Renewable Power LLC (Managing Shareholder)
              Robert
                E. Swanson,  controlling member
            1.45
            *Executive
                officers as a group
            1.45
            *




*             
      Represents less than one percent.





(1)
            Does
                not include a Management Share in the Trust representing the beneficial
                interests and management rights of the Managing Shareholder in its
                capacity as the Managing Shareholder. The management share owned
                by the
                Managing Shareholder is the only issued and outstanding management
                share
                of the Trust. The management rights of the Managing Shareholder are
                described in further detail in Item 1. “Business”. 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, and Director Independence”.


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ITEM
      13.  CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS, AND DIRECTOR INDEPENDENCE





Under
      the
      terms of the Management Agreement, the Managing Shareholder provides certain
      management, administrative and advisory services, and office space to the Trust.
      In return, the Trust is obligated to pay the Managing Shareholder an annual
      management fee equal to 1.5% of the Trusts’ prior year net asset value, which
      equals $58,000 for the year ended December 31, 2006, as compensation for such
      services. The management fee is to be paid in monthly installments and, to
      the
      extent that the Trust does not pay the management fee on a timely basis, the
      Trust accrues interest at an annual rate of 10% on the unpaid
      balance.





For
      the
      year ended December 31, 2006, the Trust made management fee payments to the
      Managing Shareholder of $19,000.  In the fourth quarter of 2006, the
      Managing Shareholder forgave $39,000 of 2006 unpaid accrued management fees
      and
      $2,000 of related accrued interest expense, which were recorded as capital
      contributions in the period waived. The shareholders of the Trust other than
      the
      Managing Shareholder were allocated 99% of each contribution and the Managing
      Shareholder was allocated 1% so that the amount of the contribution allocated
      offset the amount of the expense initially accrued.





Under
      the
      Management Agreement with the Managing Shareholder, RPM, an entity related
      to
      the Managing Shareholder through common ownership, provides management,
      purchasing, engineering, planning and administrative services to the projects
      operated by the Trust. RPM charges the projects 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 or in proportion to amounts invested
      in projects managed by RPM. For the year ended December 31, 2006, RPM charged
      the projects approximately $128,000, for overhead items allocated in proportion
      to the amount invested in projects managed. In addition, RPM charged the
      projects approximately $1,104,000, for all of the direct operating and
      non-operating expenses incurred during 2006.




Under
      the
      Declaration of Trust, the Managing Shareholder is entitled to receive,
      concurrently with the shareholders of the Trust other than the Managing
      Shareholder, 1% of all distributions from operations made by the Trust in a
      year
      until the shareholders have received distributions in that year equal to 14%
      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
      property until the shareholders other than the Managing Shareholder, 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. There were no distributions to the
      Managing Shareholder for the year ended December 31, 2006. The Trust has not
      yet
      reached Payout.




Income
      is
      allocated to the Managing Shareholder until the profits so allocated equal
      distributions to the Managing Shareholder. Thereafter, income is allocated
      among
      the shareholders other than the Managing Shareholder in proportion to their
      ownership of Investor Shares. If the Trust has net losses for a fiscal period,
      the losses are allocated 99% to the shareholders other than the Managing
      Shareholder and 1% to the Managing Shareholder, subject to certain limitations
      as set forth in the Declaration of Trust. Amounts allocated to shareholders
      other than the Managing Shareholder are apportioned among them in proportion
      to
      their capital contributions.





Under
      the
      terms of the Declaration of Trust, if the Adjusted Capital Account (as defined
      in the Declaration of Trust) of a shareholder other than the Managing
      Shareholder would become negative using General Allocations (as defined in
      the
      Declaration of Trust), losses and expenses will be allocated to the Managing
      Shareholder. Should the Managing Shareholder’s Adjusted Capital Account become
      negative and items of income or gain occur, then such items of income or gain
      will be allocated entirely to the Managing Shareholder until such time as the
      Managing Shareholder’s Adjusted Capital Account becomes positive. This mechanism
      does not change the allocation of cash, as discussed above.





On
      June
      26, 2003, the Managing Shareholder entered into a Revolving Credit and Security
      Agreement with Wachovia Bank, National Association. The agreement, as amended,
      allows the Managing Shareholder to obtain loans and letters of credit of up
      to
      $6,000,000 for the benefit of the Trust and other trusts that it manages. As
      part of the agreement, the Trust agreed to limitations on its ability to incur
      indebtedness, liens and to provide guarantees.





Related
      Persons Transactions





The
      Trust
      relies upon the Managing Shareholder to review and approve all transactions
      with
      related persons required to be reported under the rules of the SEC (“related
      person transactions”). Prior to approving a related person transaction, the
      Managing Shareholder considers the relevant facts and circumstances, including,
      to the extent applicable, the relationships between all parties that would
      qualify as “related persons” under the rules of the SEC and such person’s or
      entity’s relationship to the Trust, such person’s or entity’s interest in the
      transaction, and the material facts and terms of the transaction. The Managing
      Shareholder approves those transactions that it determines are entered into
      in
      good faith and on fair and reasonable terms for, and in the best interests
      of,
      the Trust. The Trust does not maintain a written policy in connection with
      this
      process. Instead, the Managing Shareholder’s determinations regarding which related person transactions to enter
      into on behalf of
      the Trust are evidenced in the business records of the Trust and the Managing
      Shareholder.


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ITEM
      14.  PRINCIPAL ACCOUNTANT FEES AND
      SERVICES




The
      following table presents fees and services rendered by Grant Thornton LLP,
      the
      Trust’s principal accountant, for the years ended December 31, 2006 and 2005 (in
      thousands).




2006
            
            2005Audit
                Fees*
            
            $
            157
            
            
            $
            116Audit-Related
                Fees
            
            
            -
            
            
            
            -Tax
                Fees
            
            
            18
            
            
            
            -All
                Other Fees
            
            
            -
            
            
            
            -Total
            
            $
            175
            
            
            $
            116*
                2005 fees were borne by the Managing
                Shareholder.





Audit
      Committee Pre-Approval Policy




The
      Managing Shareholder pre-approves on an annual basis all audit and permitted
      non-audit services that may be performed by the Trust’s independent registered
      public accounting firm, including the audit engagement terms and fees, and
      also
      pre-approves any detailed types of audit-related and permitted tax services
      to
      be performed during the year. The Managing Shareholder pre-approves permitted
      non-audit services on an engagement-by-engagement basis.




PART
      IV




ITEM
      15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES




(a)           Financial
      Statements




See
      the
      Index to Financial Statements on page F-1 of this report.




(b)           Exhibits





Exhibits
      required by Section 601 of Regulation S-K:




Exhibit
              No.
            
            Description3
            (i)(A)
            
            Certificate
                of Trust of the Registrant (incorporated by reference to the Registrant’s
                Registration Statement on Form 10 filed with the SEC on February
                27,
                1993).3
            (i)(B)
            
            Certificate
                of Amendment to the Certificate of Trust of the Registrant filed
                with the
                Delaware Secretary of State on December 18, 2003 (incorporated by
                reference to the Registrant’s Annual Report on Form 10-K filed with the
                SEC on December 14, 2007).3
            (ii)(A)
            
            Amended
                and Restated Declaration of Trust of the Registrant (incorporated
                by
                reference to Exhibit 4 to the Registrant’s Report on Form 10-Q-A for the
                quarter ended September 30, 1993 filed with the SEC on November 17,
                1993,
                SEC File No. 000-21034).3
            (ii)(B)
            
            January
                2000 Amendment to Declaration of Trust by Consent of the Registrant
                (incorporated by reference to the Registrant’s Annual Report on Form 10-K
                filed with the SEC on December 14, 2007).3
            (ii)(C)
            
            Amendment
                No. 1 to the Declaration of Trust of the Registrant (incorporated
                by
                reference to Exhibit A to the Registrant’s Proxy Statement filed with the
                SEC on November 5, 2001, SEC File No.
                000-21304).


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Exhibit
                No.
            
            Description10.1
            #
            
            Management
                Agreement between the Trust and Managing Shareholder (incorporated
                by
                reference to the Registrant’s Registration Statement on Form 10 filed with
                the SEC on February 27, 1993).10.2
            
            
            Long-Term
                Energy and Capacity Power Purchase Agreement between Sunnyside
                Cogeneration Partners L.P. and Pacific Gas and Electric Company dated
                May
                1984 (as amended) (incorporated by reference to the Registrant’s Annual
                Report on Form 10-K filed with the SEC on December 14,
                2007).10.3
            
            
            Limited
                Recourse Term Note issued by EAC Operations, Inc. to the Registrant
                dated
                September 20, 2002 for $3,000,000 as payment for the B-3 Limited
                Partnership interests (incorporated by reference to the Registrant’s
                Annual Report on Form 10-K filed with the SEC on December 14,
                2007).10.4
            
            
            Limited
                Recourse Term Note issued by EAC Operations, Inc. to the Registrant
                dated
                September 20, 2002 for $2,000,000 as payment for the Pittsfield Investors
                Limited Partnership interests (incorporated by reference to the
                Registrant’s Annual Report on Form 10-K filed with the SEC on December 14,
                2007).


14
            
            
            Code
                of Ethics, adopted on March 1, 2004 (incorporated by reference to
                the
                Annual Report on Form 10-K filed by The Ridgewood Power Growth Fund
                with
                the SEC on March 1, 2006).21
            *
            
            Subsidiaries
                of the Registrant.31.1
            *
            
            Certification
                of Randall D. Holmes, Chief Executive Officer of the Registrant,
                pursuant
                to Securities Exchange Act Rule 13a-14(a).31.2
            *
            
            Certification
                of Jeffrey H. Strasberg, Chief Financial Officer of the Registrant,
                pursuant to Securities Exchange Act Rule 13a-14(a).32
            *
            
            Certifications
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                The Sarbanes-Oxley Act of 2002, signed by Randall D. Holmes, Chief
                Executive Officer of the Registrant, and Jeffrey H. Strasberg, Chief
                Financial Officer of the
                Registrant.


_____________________


#             
      A management contract or compensatory plan or arrangement required to be filed
      as an exhibit pursuant to Item 15(a)(3) of Form 10-K.





*
            
            Filed
                herewith.





(c)           
      Financial Statement
      Schedules





See
      Financial Statements and accompanying notes included in this
      report.




20
 Table
          of Contents


SIGNATURES





Pursuant
      to the requirements 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.




RIDGEWOOD
                ELECTRIC POWER TRUST IIDate:
                January 25, 2008
            By:
            /s/ Randall
                D. HolmesRandall
                D. HolmesChief
                Executive Officer(Principal
                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.




Signature
            
            Capacity
            
            Date/s/
                Randall D. Holmes
            
            Chief
                Executive Officer
            
            January
                25, 2008Randall
                D. Holmes
            
            (Principal
                Executive Officer)/s/
                Jeffrey H. Strasberg
            
            Executive
                Vice President and Chief Financial Officer
            
            January
                25, 2008Jeffrey
                H. Strasberg
            
            (Principal
                Financial and Accounting Officer)RIDGEWOOD
                RENEWABLE POWER LLC(Managing
                Shareholder)By:
                /s/ Randall D. Holmes
            
            Chief
                Executive Officer of Managing Shareholder
            
            January
                25, 2008Randall
                D. Holmes





21





RIDGEWOOD
                ELECTRIC POWER TRUST IIINDEX
                TO CONSOLIDATED FINANCIAL
                STATEMENTSPageReport
                of Independent Registered Public Accounting
                Firm
            F-2Consolidated
                Balance Sheets at December 31, 2006 and
                2005
            F-3Consolidated
                Statements of Operations for the three years
                ended December 31, 2006
            F-4Consolidated
                Statements of Changes in Shareholders’ Equity
                (Deficit) for the three years ended December 31, 2006
            F-5Consolidated
                Statements of Cash Flows for the three years
                ended December 31, 2006
            F-6Notes
                to Consolidated Financial
                Statements
            F-7


F-1
 Table
            of Contents




REPORT
      OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING
      FIRM








The
      Managing Shareholder and Shareholders


Ridgewood
      Electric Power Trust II








We
      have
      audited the accompanying consolidated balance sheets of Ridgewood Electric
      Power
      Trust II (a Delaware trust) and subsidiaries as of December 31, 2006 and 2005,
      and the related consolidated statements of operations, changes in shareholders’
equity (deficit), and cash flows for each of the three years in the period
      ended
      December 31, 2006.  These consolidated financial statements are the
      responsibility of the Trust’s management.  Our responsibility is to
      express an opinion on these consolidated financial statements based on our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States).  Those standards require
      that we plan and perform the audit to obtain reasonable assurance about whether
      the consolidated financial statements are free of material
      misstatement.  The Trust is not required to have, nor were we engaged
      to perform an audit of its internal control over financial reporting. Our audits
      included consideration of internal control over financial reporting as a basis
      for designing audit procedures that are appropriate in the circumstances, but
      not for the purpose of expressing an opinion on the effectiveness of the Trust’s
      internal control over financial reporting. Accordingly, we express no such
      opinion. 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, as well as
      evaluating the overall financial statement presentation.  We believe
      that our audits provide a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Ridgewood Electric Power
      Trust II as of December 31, 2006 and 2005, and the results of its operations
      and
      its cash flows for each of the three years in the period ended December 31,
      2006
      in conformity with accounting principles generally accepted in the United States
      of America.





As
      discussed in Note 3 to the consolidated financial statements, as of December
      31,
      2006, the Trust no longer has any income producing assets in operation, and
      may
      not in the future.





/s/GRANT
      THORNTON
      LLP


Edison,
      New Jersey


January
      25, 2008





F-2
 Table
          of Contents




RIDGEWOOD
                  ELECTRIC POWER TRUST
                  IICONSOLIDATED
                  BALANCE SHEETS(in
                  thousands, except share
                  data)December
                  31,2006
              
              
              2005ASSETSCurrent
                  assets:Cash
                  and
                  cash equivalents
              
              $
              395
              
              
              $
              196Accounts
                  receivable
              
              
              118
              
              
              
              420Due
                  from
                  affiliates
              
              
              21
              
              
              
              1Gas
                  forward contract
              
              
              -
              
              
              
              898Other
                  current assets
              
              
              29
              
              
              
              39Total
                  current
                  assets
              
              
              563
              
              
              
              1,554Plant
                  and equipment,
                  net
              
              
              -
              
              
              
              1,132Intangibles,
                  net
              
              
              -
              
              
              
              1,698Total
                  assets
              
              $
              563
              
              
              $
              4,384LIABILITIES
                  AND SHAREHOLDERS'
                  EQUITYCurrent
                  liabilities:Accounts
                  payable
                  and accrued expenses
              
              $
              8
              
              
              $
              152Due
                  to
                  affiliates
              
              
              -
              
              
              
              354Total
                  current
                  liabilities
              
              
              8
              
              
              
              506Commitments
                  and
                  contingenciesShareholders’
equity
                  (deficit):Shareholders’
                  equity (235.3775 Investor Shares issued andoutstanding)
              
              
              751
              
              
              
              4,040Managing
                  shareholder’s accumulated deficit(1
                  management share issued and outstanding)
              
              
              (196
              )
              
              
              (162
              )Total
                  shareholders’
                  equity
              
              
              555
              
              
              
              3,878Total
                  liabilities and shareholders’ equity
              
              $
              563
              
              
              $
              4,384


The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-3
 Table
            of Contents




RIDGEWOOD
                  ELECTRIC POWER TRUST
                  IICONSOLIDATED
                  STATEMENTS OF OPERATIONS(in
                  thousands, except per share
                  data)Years
                  Ended December
                  31,2006
              
              
              2005
              
              
              2004Revenues
              
              $
              91
              
              
              $
              2,817
              
              
              $
              2,826Cost
                  of
                  revenues
              
              
              1,049
              
              
              
              2,650
              
              
              
              2,242Gross
                  (loss)
                  profit
              
              
              (958
              )
              
              
              167
              
              
              
              584Operating
                  expenses:General
                  and administrative
                  expenses
              
              
              184
              
              
              
              138
              
              
              
              152Impairment
                  of plant, equipment and
                  intangibles
              
              
              2,830
              
              
              
              -
              
              
              
              -Management
                  fee to the Managing
                  Shareholder
              
              
              58
              
              
              
              72
              
              
              
              91Total
                  operating
                  expenses
              
              
              3,072
              
              
              
              210
              
              
              
              243(Loss)
                  income from
                  operations
              
              
              (4,030
              )
              
              
              (43
              )
              
              
              341Other
                  income
                  (expense):Gain
                  on sale of
                  investment
              
              
              668
              
              
              
              304
              
              
              
              -Interest
                  income
              
              
              -
              
              
              
              4
              
              
              
              6Interest
                  expense
              
              
              (2
              )
              
              
              -
              
              
              
              -Other
                  income
              
              
              -
              
              
              
              -
              
              
              
              14Total
                  other income,
                  net
              
              
              666
              
              
              
              308
              
              
              
              20Net
                  (loss)
                  income
              
              $
              (3,364
              )
              
              $
              265
              
              
              $
              361Managing
                  Shareholder - Net (loss)
                  income
              
              $
              (34
              )
              
              $
              3
              
              
              $
              4Shareholders
                  - Net (loss)
                  income
              
              
              (3,330
              )
              
              
              262
              
              
              
              357Net
                  (loss) income per Investor
                  Share
              
              
              (14,149
              )
              
              
              1,116
              
              
              
              1,516


The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-4
 Table
            of Contents




RIDGEWOOD
                  ELECTRIC POWER TRUST
                  IICONSOLIDATED
                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  (DEFICIT)YEARS
                  ENDED DECEMBER 31, 2004,
                  2005 AND 2006(in
                thousands)Shareholders'
                Equity
              
              Managing
                Shareholder
                (Deficit)
              
              Total
                Shareholders'
                EquityBalance
                  at December 31,
                  2003
              
              $
              6,010
              
              
              $
              (143
              )
              
              $
              5,867Net
                  income
              
              
              357
              
              
              
              4
              
              
              
              361Cash
                  distributions
              
              
              (1,412
              )
              
              
              (14
              )
              
              
              (1,426
              )Balance
                  at December 31,
                  2004
              
              
              4,955
              
              
              
              (153
              )
              
              
              4,802Net
                  income
              
              
              262
              
              
              
              3
              
              
              
              265Cash
                  distributions
              
              
              (1,177
              )
              
              
              (12
              )
              
              
              (1,189
              )Balance
                  at December 31,
                  2005
              
              
              4,040
              
              
              
              (162
              )
              
              
              3,878Net
                  loss
              
              
              (3,330
              )
              
              
              (34
              )
              
              
              (3,364
              )Capital
                  contribution
              
              
              41
              
              
              
              -
              
              
              
              41Balance
                  at December 31,
                  2006
              
              $
              751
              
              
              $
              (196
              )
              
              $
              555




The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-5
 Table
            of Contents





RIDGEWOOD
                  ELECTRIC POWER TRUST
                  IICONSOLIDATED
                  STATEMENTS OF CASH FLOWS(in
                  thousands)Years
                  Ended December
                  31,2006
              
              
              2005
              
              
              2004Cash
                  flows from operating
                  activities:Net
                  (loss)
                  income
              
              $
              (3,364
              )
              
              $
              265
              
              
              $
              361Adjustments
                  to reconcile net
                  (loss) income to net cashprovided
                  by
                  operating activities:Depreciation
                  and
                  amortization
              
              
              -
              
              
              
              247
              
              
              
              245Impairment
                  of plant, equipment and
                  intangibles
              
              
              2,830
              
              
              
              -
              
              
              
              -Gas
                  forward
                  contract
              
              
              898
              
              
              
              (72
              )
              
              
              (395
              )Forgiveness
                  of unpaid and accrued
                  interest on management fees
              
              
              41
              
              
              
              -
              
              
              
              -Change
                  in operating assets and
                  liabilities:Accounts
                  receivable
              
              
              301
              
              
              
              (204
              )
              
              
              9Other
                  current
                  assets
              
              
              10
              
              
              
              14
              
              
              
              (11
              )Accounts
                  payable and accrued
                  expenses
              
              
              (143
              )
              
              
              51
              
              
              
              (10
              )Due
                  to/from affiliates,
                  net
              
              
              (374
              )
              
              
              291
              
              
              
              (6
              )Total
                  adjustments
              
              
              3,563
              
              
              
              327
              
              
              
              (168
              )Net
                  cash provided by operating
                  activities
              
              
              199
              
              
              
              592
              
              
              
              193Cash
                  flows from investing
                  activities:Proceeds
                  from investment in
                  partnership transferred undercontractual
                  agreement
              
              
              -
              
              
              
              363
              
              
              
              445Cash
                  flows from financing
                  activities:Cash
                  distributions to shareholders
              
              
              -
              
              
              
              (1,189
              )
              
              
              (1,426
              )Net
                  increase (decrease) in cash
                  and cash equivalents
              
              
              199
              
              
              
              (234
              )
              
              
              (788
              )Cash
                  and cash equivalents,
                  beginning of year
              
              
              196
              
              
              
              430
              
              
              
              1,218Cash
                  and cash equivalents, end of
                  year
              
              $
              395
              
              
              $
              196
              
              
              $
              430





The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-6
 Table
            of Contents
  RIDGEWOODELECTRIC
        POWER TRUST
        II
 NOTES
        TO CONSOLIDATEDFINANCIAL STATEMENTS
 (dollar
        amounts in thousands, except per
        share data)




1.     DESCRIPTION
        OF
        BUSINESS


Ridgewood
      Electric Power Trust II (the “Trust”) was formed as a Delaware trust on November
      20, 1992.  The Trust began offering shares on January 4, 1993 and
      concluded its offering on January 31, 1994. The objective of the Trust is to
      provide benefits to its shareholders through a combination of distributions
      of
      operating cash flow and capital appreciation. The Managing Shareholder of the
      Trust is Ridgewood Renewable Power LLC (“RRP” or the “Managing Shareholder”).
      The Trust has been organized to invest primarily in power generation facilities
      located in the US. The projects of the Trust have characteristics that qualify
      the projects for government incentives.





As
      of
      December 31, 2006, the Trust had one non-operating investment, located in
      California and 100% owned by the Trust (“Monterey”). The investment is a 5.5
      megawatt (“MW”) cogeneration project which suspended operations in January 2006
      due to a contract dispute with its customer. Since the closing of the Monterey
      facility in January 2006, the Trust has not had any operating revenues, though
      it continued to have contractual obligations through August 2006 related to
      its
      gas purchase agreement with Coral Energy Services, Inc. During the first quarter
      of 2006, the Trust recorded an asset impairment of Monterey’s net book value of
      its plant, equipment and intangibles (see Note 3). The Monterey project remains
      closed as of January 25, 2008.





The
      other
      operating investment of the Trust was a collection of irrigation service engines
      with a production capacity of 2MW (the “Pumping Project”), which was sold in
      January 2006 for an insignificant amount. The sale of the Pumping Project did
      not impact the Trust’s results of operations in 2006, as the assets were
      previously fully impaired. Additionally, the Trust had long-term notes
      receivable, which were paid in full on October 31, 2007. Upon the repayment
      of the Trust’s long term receivables in October 2007, the Trust no longer had
      any income producing assets in operation and may not in the future, subject
      to
      the resolution of litigation relating to the Monterey facility.





The
      Managing Shareholder performs (or arranges for the performance of) the operation
      and maintenance of the projects invested in by the Trust and the management
      and
      administrative services required for Trust operations. Among other services,
      the
      Managing Shareholder administers the accounts and handles relations with the
      shareholders, including tax and other financial information. The Managing
      Shareholder also provides the Trust with office space, equipment and facilities
      and other services necessary for its operation.





2.     SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





a)
      Principles of Consolidation





The
      consolidated financial statements include the accounts of the Trust and its
      wholly-owned subsidiaries.  All material intercompany transactions
      have been eliminated in consolidation.





b)
Use
      of Estimates





The
      preparation of consolidated financial statements in accordance with accounting
      principles generally accepted in the United States of America requires the
      Trust
      to make estimates and judgments that affect the reported amounts of assets,
      liabilities, revenues and expenses, and related disclosure of contingent assets
      and liabilities. On an ongoing basis, the Trust evaluates its estimates,
      including accounts receivable, investments, recoverable value of plant and
      equipment, intangibles and recordable liabilities for litigation and other
      contingencies. The Trust bases its estimates on historical experience, current
      and expected conditions and various other assumptions that are believed to
      be
      reasonable under the circumstances, the results of which form the basis for
      making judgments about the carrying values of assets and liabilities that are
      not readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions.





c)
      Revenue Recognition





Power
      generation revenue is recorded in the month of delivery, based on the estimated
      volumes sold to customers at rates stipulated in the power sales contract.
      Adjustments are made to reflect actual volumes delivered when the actual
      information subsequently becomes available. Billings to customers for power
      generation generally occurs during the month following delivery. Final billings
      do not vary significantly from estimates.


F-7
 Table
            of Contents
  RIDGEWOODELECTRIC
        POWER TRUST
        II
 NOTES
        TO CONSOLIDATED FINANCIAL
        STATEMENTS
 (dollar
        amounts in thousands, except per
        share data)





d)
      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.  Cash and cash
      equivalents at December 31, 2006 consist of funds deposited in bank accounts.
      Cash balances with banks as of December 31, 2006 and 2005 exceed insured limits
      by approximately $295 and $96, respectively.





e)
      Accounts Receivable





Accounts
      receivable are recorded at invoice price in the period in which the related
      revenues are earned, and do not bear interest. No allowance for bad debt expense
      was provided based upon historical write-off experience, evaluation of customer
      credit condition and the general economic status of the customers.





f)
      Plant and Equipment





Plant
      and
      equipment, consists of equipment, leasehold improvements, and building
      which are stated at cost less accumulated depreciation. Renewals and betterments
      that increase the useful lives of the assets are capitalized.  Repair
      and maintenance expenditures are expensed as incurred.  Upon
      retirement or disposal of assets, the cost and related accumulated depreciation
      are removed from the consolidated balance sheets.  The difference, if
      any, between the net asset value and any proceeds from such retirement or
      disposal is recorded as a gain or loss in the consolidated statement of
      operations.




Depreciation
      is recorded using the straight-line method over the estimated useful lives
      of
      the assets.





Equipment
            3
                -
                20 yearsLeasehold
                improvements
            15
                yearsBuilding
            20
                years




g)
      Impairment of
      Long-Lived Assets and Intangibles




The
      Trust
      evaluates intangible assets and long-lived assets, such as plant and equipment,
      when events or changes in circumstances indicate that the carrying value of
      such
      assets may not be recoverable. The determination of whether impairment has
      occurred is made by comparing the carrying value of an asset to the estimated
      undiscounted cash flows attributable to that asset. If impairment has occurred,
      the impairment loss recognized is the amount by which the carrying value exceeds
      the estimated fair value of the asset, which is based on the estimated future
      cash flows discounted at the estimated cost of capital.  The analysis
      requires estimates of the amount and timing of projected cash flows and, where
      applicable, judgments associated with, among other factors, the appropriate
      discount rate.  Such estimates are critical in determining whether any
      impairment charge should be recorded and the amount of such charge if an
      impairment loss is deemed to be necessary.





h)
      Gas Contract





In
      August
      2001, Monterey entered into an agreement to purchase natural gas, at fixed
      prices, over a five-year term in connection with entering into an amendment
      fixing the sales price of electric power sales contracts for a similar term.
      This contract was entered into in order to minimize the impact of fluctuating
      energy prices. The Trust has determined that this contract is a derivative
      as defined under Statement of Financial Accounting Standards (“SFAS”) No. 133,
“Accounting for Derivative Instruments and Hedging Activities”, as amended. The
      Trust has designated the derivative as a non-hedge instrument. Accordingly,
      the
      value of the contract based on the differences between contract prices and
      market value prices is recognized as an asset or a liability in the balance
      sheet. Changes in the carrying value of the contract are reflected as a
      component of cost of revenues in the consolidated statements of operations.
      During the third quarter of 2006, the Trust completed its contractual agreement
      to resell the purchased gas back to Monterey’s gas supplier and therefore, there
      is no longer any value recorded on the consolidated balance sheets associated
      with this contract.




During the year
      ended
      December 31, 2006, the Trust recorded a loss as a component of cost of revenues
      from a change in its gas supply contracts of $554.  During the years
      ended December 31, 2005 and 2004, the Trust recorded, as a component of cost
      of
      revenues, gains from changes in its gas supply contracts of $72 and $393,
      respectively.




i)
        Notes Receivable
 
 Recovery
        of interest and principal under the promissory notes issued in connection
        with
        the sale of the Trust’s interest in PILP and B-3 were dependent upon the
        operations of the partnership investment transferred. Consequently, the Trust
        deferred its gain on the sale of its ownership interest until the carrying
        value
        of the investments was fully recovered. The cash proceeds received for the
        interest and principal were recorded as a reduction of the Trust’s investment in
        the partnership transferred under contractual agreement through June 30,
        2005.  Subsequent payments were recorded as a component of other
        income. The note payments remained current until the notes were paid in full
        on
        October 31, 2007.




j)
      Income Taxes





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


F-8
 Table
            of Contents
  RIDGEWOODELECTRIC
        POWER TRUST
        II
 NOTES
        TO CONSOLIDATED FINANCIAL
        STATEMENTS
 (dollar
        amounts in thousands, except per
        share data)




k)
      Comprehensive (Loss) Income





The
      Trust’s comprehensive (loss) income consists only of net (loss)
      income.





l)
      Significant Customer and Supplier





During
      2006, 2005 and 2004, the Trust’s largest customer, Pacific Gas and Electric
      Company (“PG&E”), accounted for 100%, 88% and 87%, respectively, of total
      revenues.  During 2006, 2005 and 2004, the Trust purchased all of
      its gas supply from one supplier.





m)
      Fair Value of Financial Instruments





At
      December 31, 2006 and 2005, the carrying value of the Trust’s cash and cash
      equivalents, accounts receivable, accounts payable and accrued expenses
      approximates their fair value.





n)
      Recent Accounting Pronouncements





FIN
      48





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, Accounting for Uncertainty
      in Income
      Taxes (“FIN 48”) an interpretation of SFAS No. 109, Accounting for
      Income Taxes (“SFAS 109”).FIN
      48 clarifies the accounting for
      uncertainty in income taxes recognized in an enterprise’s financial statements
      in accordance with SFAS 109 and prescribes a recognition threshold and
      measurement attribute for the financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a tax return. FIN 48 also
      provides guidance on derecognition, classification, interest and penalties,
      accounting in interim periods, disclosure and transition. FIN 48 will be
      effective for the Trust beginning January 1, 2007. The Trust does not believe
      that the adoption of FIN 48 will have a material impact on its consolidated
      financial statements.





SFAS
      157





In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
      ("SFAS 157"), to define fair value, establish a framework for measuring fair
      value in accordance with generally accepted accounting principles (GAAP) and
      expand disclosures about fair value measurements. SFAS 157 requires quantitative
      disclosures using a tabular format in all periods (interim and annual) and
      qualitative disclosures about the valuation techniques used to measure fair
      value in all annual periods. SFAS 157 will be effective for the Trust beginning
      January 1, 2008. The Trust is currently evaluating the impact of adopting SFAS
      157 on its consolidated financial statements.





SAB
      108





In
      September 2006, the Securities and Exchange Commission (“SEC”) issued Staff
      Accounting Bulletin No. 108, Considering the Effects
      of Prior
      Year Misstatements When Quantifying Misstatements in Current Year Financial
      Statements ("SAB 108"). SAB 108 requires analysis of misstatements using
      both an income statement (rollover) approach and a balance sheet (iron curtain)
      approach in assessing materiality and provides for a one-time cumulative effect
      transition adjustment. SAB 108 is effective for fiscal years ending on or after
      November 15, 2006. The adoption of this standard did not have a material impact
      on its consolidated financial statements.





SFAS
      159





In
      February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
      Financial
      Assets and Financial Liabilities (“SFAS 159”). SFAS 159 expands
      opportunities to use fair value measurements in financial reporting and permits
      entities to choose to measure many financial instruments and certain other
      items
      at fair value. SFAS 159 will be effective for the Trust on January 1,
      2008. The Trust is currently evaluating the impact of adopting SFAS 159 on
      its consolidated financial statements.





SFAS
      160




In
      December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests
      in
      Consolidated Financial Statements — an amendment of ARB No. 51
      (“SFAS 160”).  SFAS 160 requires that ownership interests in subsidiaries
      held by parties other than the parent, and the amount of consolidated net
      income, be clearly identified, labeled, and presented in the consolidated
      financial statements within equity, but
      separate from the parent’s equity.  It also requires once a subsidiary is
      deconsolidated, any retained noncontrolling equity investment in the former
      subsidiary be initially measured at fair value. Sufficient disclosures are
      required to clearly identify and distinguish between the interests of the parent
      and the interests of the noncontrolling owners. SFAS 160 will be effective
      for
      the Trust beginning January 1, 2009. The Trust is currently evaluating the
      impact of adopting SFAS 160 on its consolidated financial
      statements.


F-9
 Table
          of Contents




RIDGEWOODELECTRIC
      POWER TRUST
      II


NOTES
      TO CONSOLIDATED FINANCIAL
      STATEMENTS


(dollar
      amounts in thousands, except per
      share data)





3.    
      PROJECTS AND IMPAIRMENT OF LONG-LIVED ASSETS





Sunnyside
      Cogeneration Partners,  L.P.





On
      January 9, 1995, the Trust acquired 100% of the existing partnership interests
      of Sunnyside Cogeneration Partners, L.P., which owns and operates a 5.5MW
      electric cogeneration facility, located in Monterey County, California. The
      aggregate purchase price was $5,198, including transaction costs. Electricity
      is
      sold to PG&E under a long term contract expiring in 2020.





The
      acquisition of Monterey was accounted for as a purchase and the results of
      operations of Monterey have been included in the Trust’s consolidated financial
      statements since the acquisition date.  The purchase price was
      allocated to the net assets acquired, based on their respective fair
      values.  Of the purchase price, $3,032 was allocated to the electric
      power sales contract and was being amortized over the life of the contract
      of 25
      years.





Monterey
      received notice on December 1, 2005 from PG&E directing Monterey to increase
      its operations from 13 hours, 5 days a week to 24 hours, 7 days a week. However,
      PG&E had been operating or "dispatching" Monterey on a 5 by 13 basis for
      over 15 years.  Monterey determined that it could not operate
      profitably on such a 24 by 7 schedule and was concerned that if it only operated
      on a 5 by 13 basis, PG&E might refuse to pay for delivered electricity.
      Monterey requested from PG&E to limit its operations to the 5 by 13 basis,
      but this request was denied. As a result, effective January 9, 2006, Monterey
      ceased its operations. Monterey and PG&E have filed lawsuits against the
      other for breach of contract. The Monterey project remains closed as of the
      date
      of this filing.  Additionally, as a result of the shutdown, the
      project has not delivered by-product steam since it was shutdown in January
      2006. As a result, it may be subject to penalties from the lessor. Since the
      closing of the Monterey facility, the Trust has not had any operating revenues,
      though it continued to have contractual obligations through August 2006 related
      to its gas purchase agreement with Coral Services Energy, Inc. During the first
      quarter of 2006, the Trust recorded an asset impairment of Monterey’s net book
      value of its remaining plant and equipment and intangibles of $1,132 and $1,698,
      respectively.





Pump
      Services Company, LP





In
      1995,
      the Trust purchased a package of irrigation service engines located in Ventura
      County, California.  The purchase price was $952.  The Trust
      performed an impairment assessment in 2003 using a discounted cash flow
      valuation methodology, and noted the carrying value of the Pumping Project
      exceeded its estimated fair value. As a result, the Trust recorded an impairment
      of the remaining net book value of the equipment for $190 in
      2003.  The engines were sold in January 2006 for an insignificant
      amount.





B-3
      Limited Partnership and Pittsfield Investor Limited Partnership





In
      January 1994, the Trust made an equity investment of $2,300 in Pittsfield
      Investors Limited Partnership (“PILP”), which was formed to acquire a
      waste-to-energy project designed and built to burn municipal solid waste
      supplied by the City of Pittsfield, Massachusetts, surrounding communities
      and
      other waste providers as well as to supply steam to a nearby paper
      mill.  The PILP project originally began operating in 1981 and was
      operated and co-owned with the Trust by subsidiaries of Energy Answers
      Corporation (“EAC”). The Trust made an additional investment with affiliates of
      EAC in August 1994 when it purchased an interest in the B-3 Limited Partnership
      (“B-3”) for $3,975.  The business of B-3 was the construction and
      operation of a municipal waste transfer station in Columbia County, New
      York.  In September 2002, the Trust sold its interests in PILP and B-3
      to EAC for $1,200 in cash and $5,000 of promissory notes. The notes bore
      interest at a rate of 10% per annum, and were to be paid over a 17-year term.
      The notes were collateralized solely by the assets of the projects and are
      without recourse to EAC.





Recovery
      of interest and principal under the promissory notes were dependent upon the
      operations of the partnership investment transferred. Consequently, the Trust
      deferred its gain on the sale of its ownership interest until the carrying
      value
      of the investments was fully recovered. The cash proceeds received for the
      interest and principal were recorded as a reduction of its investment in
      partnership transferred under contractual agreement through June 30, 2005,
      the
      date at which the recorded balance reached zero.  Subsequent payments
      were recorded as a component of other income as collected. The note payments
      remained current until the notes were paid in full on October 31,
      2007.


F-10
 Table
          of Contents




RIDGEWOODELECTRIC
      POWER TRUST
      II


NOTES
      TO CONSOLIDATED FINANCIAL
      STATEMENTS


(dollar
      amounts in thousands, except per
      share data)




4.    
      PLANT AND EQUIPMENT





At
      December 31, 2006 and 2005, plant and equipment at cost and accumulated
      depreciation were:





2006
            
            
            2005Equipment
            
            $
            -
            
            
            $
            2,935Leasehold
                improvements
            
            
            -
            
            
            
            166Building
            
            
            -
            
            
            
            150-
            
            
            
            3,251Less:
                accumulated depreciation
            
            
            -
            
            
            
            (2,119
            )$
            -
            
            
            $
            1,132




As
      a
      result of Monterey operations being suspended in January 2006, the Trust
      recorded an asset impairment for its remaining net book value of plant and
      equipment of $1,132.





For
      the
      years ended December 31, 2006, 2005 and 2004, depreciation expense was $0,
      $126
      and $124, respectively, which is included in cost of revenues.





5.    
      INTANGIBLE ASSETS





At
      December 31, 2006 and 2005, the gross and net carrying amounts of intangible
      assets were:





2006
            
            
            2005Electricity
                power sales contract - gross
            
            $
            -
            
            
            $
            3,032Less:
                accumulated amortization
            
            
            -
            
            
            
            (1,334
            )Intangibles,
                net
            
            $
            -
            
            
            $
            1,698


A
        portion
        of the purchase price of Monterey was assigned to electric power sales contract
        and was being amortized over the life of the contract on a straight-line
        basis.
        In January 2006 Monterey suspended operations indefinitely, and as a result,
        the
        Trust recorded an asset impairment for the remaining net book value of its
        intangibles of $1,698. During 2006, 2005 and 2004, the Trust recorded
        amortization expense of $0, $121 and $121, respectively.


6.
            COMMITMENTS
                AND
                CONTINGENCIES





Monterey
      has a non-cancelable operating lease which expires in May 2021. Future minimum
      lease payments as of December 31, 2006 are approximately $12 per annum along
      with the delivery of by-product steam.  In connection with this lease,
      Monterey has not delivered by-product steam since it was shut down in January
      2006. As a result, Monterey may be subject to penalties by the lessor. Rent
      expense for the years ended December 31, 2006, 2005 and 2004 was $12, $417
      and
      $338, respectively, which is included in cost of revenues.




Monterey
      received notice on December 1, 2005 from PG&E directing Monterey to increase
      its operations from 13 hours, 5 days a week to 24 hours, 7 days a week. However,
      PG&E had been operating or "dispatching" Monterey on a 5 by 13 basis for
      over 15 years.  Monterey determined that it could not operate
      profitably on such a 24 by 7 schedule and was concerned that if it only operated
      on a 5 by 13 basis, PG&E might refuse to pay for delivered electricity.
      Monterey requested from PG&E to limit its operations to the 5 by 13 basis,
      but this request was denied. As a result, effective January 9, 2006, Monterey
      ceased its operations. Monterey and PG&E have filed lawsuits against the
      other for breach of contract. The Monterey project remains closed as of the
      date
      of this filing.  Additionally, as a result of the shutdown, the
      project has not delivered by-product steam since it was shutdown in January
      2006. As a result, it may be subject to penalties from the lessor. Since the
      closing of the Monterey facility, the Trust has not had any operating revenues,
      though it continued to have contractual obligations through August 2006 related
      to its gas purchase agreement with Coral Services Energy, Inc. Monterey filed
      a
      Complaint against PG&E in the San Francisco Superior Court on May 16, 2006
      (the “Monterey
      Complaint”).  The Monterey Complaint seeks damages for breach of contract,
      damages for PG&E’s breach of the implied covenant of good faith and fair
      dealing, and a claim for declaratory relief against PG&E, seeking a judicial
      determination that PG&E’s conduct materially breached the parties’ agreement
      and justified Monterey’s suspension of performance. Monterey is seeking
      damages against PG&E estimated at approximately $5,000.  A Jury
      Trial with regard to this matter has not been set.


F-11
 Table
          of Contents


RIDGEWOODELECTRIC
        POWER TRUST
        II
 NOTES
        TO CONSOLIDATED FINANCIAL
        STATEMENTS
 (dollar
        amounts in thousands, except per
        share data)


On
      May
      14, 2007, PG&E filed a Complaint in San Francisco Superior Court against
      Monterey (the “PG&E Complaint”).  The PG&E Complaint arises out of
      the same transactions and occurrences that gave rise to the Monterey Complaint
      against PG&E.  PG&E asserted claims for compensatory damages for
      breach of contract and breach of the implied covenant of good faith and fair
      dealing as well as “restitution” of capacity payments made to Monterey on a
      theory of unjust enrichment, and declaratory relief for repayment of capacity
      payments made to the Monterey. PG&E is seeking restitution damages
      against Monterey estimated at approximately $4,800.





The
      claims made by PG&E have been made solely against Monterey and do not
      involve any claims against the Trust. Both of the above litigation matters
      are
      currently in discovery.




On
      August
      16, 2006, the Managing Shareholder of the Trust and affiliates of the Trust,
      filed lawsuits against the former independent registered public accounting
      firm
      for the Trust, Perelson Weiner, LLP (“Perelson Weiner”), in New Jersey Superior
      Court.  The suits alleged professional malpractice and breach of contract
      in connection with audit and accounting services performed by Perelson Weiner.
      On October 20, 2006, Perelson Weiner filed a counterclaim against the Trust,
      and
      its affiliates alleging breach of contract due to unpaid invoices. Discovery
      is
      ongoing and no trial date has been set. The costs and expenses of the litigation
      are being paid for by the Managing Shareholder and affiliated management
      companies and not the underlying investment funds, including the
      Trust.




The
      following table provides the contractual obligations and commitments of the
      Trust for the future minimum payments of its ground lease as of December 31,
      2006, which excludes payments for delivered steam per contract.




Years
                Ended December
                31,2007
            
            $
            122008
            
            
            122009
            
            
            122010
            
            
            122011
            
            
            12




The
        Trust
        is subject to legal proceedings involving ordinary and routine claims related
        to
        its business. The ultimate legal and financial liability with respect to
        such matters cannot be estimated with certainty and requires the use of
        estimates in recording liabilities for potential litigation settlements.
        Estimates for losses from litigation are disclosed if considered reasonably
        possible and accrued if considered probable after consultation with outside
        counsel. If estimates of potential losses increase or the related facts and
        circumstances change in the future, the Trust may be required to record
        additional litigation expense. While
        it
        is not possible to predict the outcome of the litigation discussed above
        with
        certainty and some lawsuits, claims or proceedings may be disposed of
        unfavorably to the Trust, based on its evaluation of matters which are pending
        or asserted, the Trust's management believes the disposition of such matters
        will not have a material adverse effect on the Trust's business or financial
        statements.





7.
            TRANSACTION
                WITH MANAGING
                SHAREHOLDER AND AFFILIATES





The
      Trust
      operates pursuant to the terms of a management agreement (“Management
      Agreement”). Under the terms of the Management Agreement, the Managing
      Shareholder provides certain management, administrative and advisory services
      and office space and other facilities to the Trust. In return, the Trust is
      obligated to pay the Managing Shareholder an annual management fee, equal to
      1.5% of the Trust’s shareholders’ equity as of the beginning of the year, which
      totaled $58, $72 and $91, respectively, for the years ended December 31, 2006,
      2005 and 2004. During 2006, 2005 and 2004, the Trust paid management fees to
      the
      Managing Shareholder of $19, $72, and $91, respectively, as compensation for
      such services. The management fee is to be paid in monthly installments and,
      to
      the extent that the Trust does not pay the management fee on a timely basis,
      the
      Trust accrues interest at an annual rate of 10% on the unpaid
      balance.





In
      the
      fourth quarter of 2006, the Managing Shareholder forgave $39 and $2 of 2006
      unpaid accrued management fees and related accrued interest expense,
      respectively, which were recorded as capital
      contributions.


F-12
 Table
          of Contents


RIDGEWOODELECTRIC
        POWER TRUST
        II
 NOTES
        TO CONSOLIDATED FINANCIAL
        STATEMENTS
 (dollar
        amounts in thousands, except per
        share data)


Under
      the
      Declaration of Trust, the Managing Shareholder receives 100% of current year
      operating profits until cumulative profits equal cumulative losses allocated
      to
      the Managing Shareholder.  The Managing Shareholder then receives 1%
      of operating profits until the shareholders have received 14% per annum of
      their
      equity contribution (“Payout”).  After Payout, the Managing
      Shareholder is entitled to receive 20% of the distributions for the remainder
      of
      the year.  Losses incurred in any given year are allocated 1% to the
      Managing Shareholder, provided the allocation of losses to the shareholders
      shall be limited to prevent the shareholder from having a negative capital
      account. These allocations do not affect the allocation of cash distributions
      discussed below.





The
      Managing Shareholder is also entitled to receive 1% of all annual distributions
      made by the Trust (other than those derived from the disposition of Trust
      property) until Payout.  Once Payout is reached, the Managing
      Shareholder is entitled to receive 20% of all future
      distributions.  During 2006, 2005 and 2004, cash distributions to the
      Managing Shareholder were $0, $12 and $14, respectively. The Trust has not
      yet
      reached Payout.





The
      Managing Shareholder owns 1.45 investor shares. The Trust granted the Managing
      Shareholder a single Management Share representing the Managing Shareholder's
      management rights and rights to distributions of cash flow.




Under
      the
      Management Agreement with the Managing Shareholder, Ridgewood Power Management
      ("RPM"), an entity related to the Managing Shareholder through common ownership,
      provides management, purchasing, engineering, planning and administrative
      services to the projects operated by the Trust. RPM charges the projects 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 or in
      proportion to amounts invested in projects managed by RPM. During the years
      ended December 31, 2006, 2005 and 2004, RPM charged the projects $128, $157
      and
      $138, respectively, for overhead items allocated in proportion to the amount
      invested in projects managed. In addition, for the years ended December 31,
      2006, 2005 and 2004, RPM charged the projects $1,104, $2,383 and $2,012,
      respectively, for all of the direct operating and non-operating expenses
      incurred during such periods. These charges may not be indicative of costs
      incurred if the Trust were not operated by RPM.





On
      June
      26, 2003, the Managing Shareholder entered into a Revolving Credit and Security
      Agreement with Wachovia Bank, National Association.  The agreement, as
      amended, allows the Managing Shareholder to obtain loans and letters of credit
      of up to $6,000 for the benefit of the trusts and funds that it manages. 
As part of the agreement, the Trust agreed to limitations on its ability to
      incur indebtedness and liens, and to provide guarantees.  The Managing
      Shareholder and Wachovia Bank agreed to extend the Managing Shareholder’s line
      of credit through May 31, 2008. In August 2003, the Trust issued through
      its bank a standby letter of credit, in the amount of $504 to secure the gas
      purchases for Monterey.  In August of 2004, the supplier of natural
      gas to Monterey agreed to reduce the standby letter of credit to
      $230.  The standby letter of credit remained at $230 until it expired
      and was reduced to zero at August 31, 2006.





The
      Trust
      records short-term payables to and receivables from other affiliates in the
      ordinary course of business. The amounts payable to and receivable from the
      other affiliates do not bear interest.





8.
            SELECTED
                UNAUDITED QUARTERLY
                FINANCIAL DATA





2006
                Quarters1st
            
            
            2nd
            
            
            3rd
            
            
            4thRevenues
            
            $
            91
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Gross
                loss
            
            
            (550
            )
            
            
            (226
            )
            
            
            (63
            )
            
            
            (119
            )Loss
                from operations
            
            
            (3,425
            )
            
            
            (277
            )
            
            
            (133
            )
            
            
            (195
            )Net
                (loss) income
            
            
            (3,258
            )
            
            
            (110
            )
            
            
            33
            
            
            
            (29
            )Net
                (loss) income per Investor Share
            
            
            (13,703
            )
            
            
            (463
            )
            
            
            139
            
            
            
            (122
            )


F-13
 Table
            of Contents
 RIDGEWOODELECTRIC
              POWER TRUST
              II
 NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS
 (dollar
              amounts in thousands, except per
              share data)







2005
                Quarters1st
            
            
            2nd
            
            
            3rd
            
            
            4thRevenues
            
            $
            664
            
            
            $
            651
            
            
            $
            792
            
            
            $
            710Gross
                profit (loss)
            
            
            380
            
            
            
            (226
            )
            
            
            703
            
            
            
            (690
            )Income
                (loss) from operations
            
            
            317
            
            
            
            (271
            )
            
            
            651
            
            
            
            (740
            )Net
                income (loss)
            
            
            318
            
            
            
            (244
            )
            
            
            819
            
            
            
            (628
            )Net
                income (loss) per Investor Share
            
            
            1,344
            
            
            
            (1,028
            )
            
            
            3,446
            
            
            
            (2,646
            )




F-14