1) SHAREHOLDING STRUCTURE¹

CPFL Energia is a publicly-held holding company whose results depend directly upon the results of the controlled companies, the foremost of which are: CPFL Paulista (100%), CPFL Piratininga (100%), CPFL Geração (100%) and CPFL Brasil (100%)

Notes: (1) The stock acquisition of 99.99% of Companhia Luz e Força Santa Cruz and the additional stock acquisition of 11% in Consórcio Energético Foz do Chapecó are still awaiting approval from the pertinent regulatory authorities; (2) Market includes 0.01% of others; (3) Considering combined stakes in Foz do Chapecó Energia S.A (85%) and Consórcio Energético Foz do Chapecó (60%).

1.1) Changes in Stockholding Structure

Acquisition of Companhia Luz e Força Santa Cruz

On October 2^nd 2006, CPFL Energia formalized the purchase contract, expediting the direct acquisition of 99.99% of the Companhia Luz e Força Santa Cruz.

Santa Cruz is an electric power distribution, public service concessionaire, active in 24 municipalities in São Paulo State and 3 in the State of Paraná, covering an area of 11,849.5 km², and serving more than 161 thousand consumers. Its domestic market share is 0.3% . This transaction will boost CPFL Energia’s domestic market share to12.7% .

In 2005, Santa Cruz sold 746 GWh of power, which generated net revenue of R$ 154 million, EBITDA of R$ 30 million and net income of R$ 14 million. During the first half-year of 2006 net revenue reached R$ 91 million, EBITDA was R$ 18 million and net income were R$ 10 million.

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This R$ 203 million business acquisition is in line with the CPFL Energia strategy which foresees successive consolidation activity in energy distribution, with a view to optimize returns from the current portfolio of the CPFL Group. The following are the financial indicators implicit in this acquisition: considering 2005 indicators for the 2 companies, we obtain an EV/EBITDA index and P/VPA of 7.1x and 2.4x for Santa Cruz, against 8.7x and 2.8x for CPFL Energia respectively.

The stock acquisition of 99,99% of Companhia Luz e Força Santa Cruz is still awaiting approval from the pertinent regulatory authorities.

Sale of Stockholding in Companhia de Gás de São Paulo

On September 4^th 2006, CPFL Energia sold 369,121,217 ordinary nominal shares, corresponding to 3.08% of Companhia de Gás de São Paulo stock (Comgás). The net value of the sale was R$ 89.9 million.

The shares had a book value of R$ 27.2 million. The operation generated gross income of R$ 62.7 million (difference between net value of the sale and book value) and net income of R$ 41.4 million, as registered in the 3^rd quarter 2006.

2) STOCK MARKET PERFORMANCE – 3Q06

CPFL Energia, currently with 17.75% free float, trades shares in Brazil (Bovespa) and on the New York Stock Exchange (NYSE).

In the 3Q06, CPFL shares displayed variations of 10.0% on Bovespa and 10.1% on NYSE, closing the quarter quoted at R$ 27.80 and US$ 38.43 respectively. Since the IPO, share appreciation has been 84.7% on Bovespa and 144.3% on NYSE.

The average daily trading volume during the quarter was R$ 16.0 million, of which, R$ 8.1 million was on Bovespa and R$ 7.9 million was on the NYSE. This represents a 132.6% increase over the average daily trading volume over 2005.

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3) DIVIDENDS AND INTEREST ON OWN CAPITAL

On September 29^th 2006, payments were made with reference to the first half-year 2006 in the amount of R$ 612 million, which corresponds to 100% of net income for the period, and an effective share value of R$ 1.275606865 per share.

The half-yearly dividend yield, related to the first half-year 2006, based on the average price of shares for the period (R$ 30.05) is of 4.3% . When considering the final price of the period (R$ 26.46), the half-yearly dividend yield is of 4.8% .

The “dividend policy” establishes that the distribution of income – in the form of dividends and/or interest on own capital (JCP) – must be at least 50% of net income based on half-yearly adjustments.

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4) ENERGY SALES

4.1) Energy Sales to End Consumers

During the 3Q06, CPFL Group energy sales to end consumers through the distribution and commercialization segments totaled 10,488 GWh, an increase of 11.5% in relation to the same period the previous year. This increase is mainly due to the acquisition of 32.7% of RGE. Deducting this effect, growth would have been 6.7% .

Sales to the captive market totaled 8,166 GWh, which represents an increase of 6.2%, compared to 3Q05. This increase is also due to the purchase of RGE. Without this effect there would have been a reduction of 0.9% .

In the free market, sales reached 2,322 GWh, increasing 35.6% in relation to the same period the previous year. This increase is owed to the success of the group’s commercializing arm in winning captive clients which had migrated to the free market, and also to the increase in consumption from clients’ base of CPFL Brasil.

4.2) Captive Market

In the captive market we have commented the evolution of the following classes: industrial, residential, commercial and rural. It should be emphasized that these evolutions are also influenced by the acquisition of 32.7% of RGE:

• Industrial class: reduction of 5.4% due to the migration of clients to the free market
  
  
• Residential and commercial classes: increases of 11.9% and 11.5%, respectively, due to the real increase in salary levels, stimulated by low inflation and the increase in the minimum wage, plus the acceleration in domestic appliance sales.
  
  
• Rural: due to the lowest ever precipitation rate for the period (below the historic average) which forced the higher use of irrigation.

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Deducting the effect of the purchase of RGE, the industrial class would show a reduction of 12.5% and the residential, commercial and rural classes would show an increase of 6.2%, 6.1% and 15.7%, respectively.

4.3) Sales by Consumption Class

5) ECONOMIC AND FINANCIAL PERFORMANCE

5.1) Operating Revenue

Gross operating revenue in the 3Q06 reached R$ 3,220 million, representing growth of 16.5% in relation to the same period the previous year. Net operating revenue showed an increase of 19.8% (R$ 387 million), compared to 3Q05.

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The main contributing factors for this evolution of net revenue were:

(i) Increase in energy sales to end consumers by 11.5%, coupled with distributors tariff adjustments (R$ 350 million)
(ii) Increase of 41.3% (R$ 53 million) in TUSD revenue.
(iii) Cessation of emergency charges levied by ANEEL (R$ 49 million)

The evolution of net revenue was partially offset by the increase of 15.8% (R$ 118 million) in ICMS and PIS/COFINS.

5.2) Electric Energy Costs

Electric energy costs, which consists of the cost of purchased energy and charges for the use of the system, totaled R$ 1,106 million in the 3Q06, representing an increase of 11.0% (R$ 110 million) in relation to the same period the previous year.

• The cost of purchased energy during 3Q06 was R$ 903 million, an increase of 10.0% (R$ 82 million) compared to 3Q05. These increases can be explained by the following factors:
  
  (i) Increase of 15.3% (R$ 132 million) in the cost of purchased energy, due mainly to the increase in volume sold
  (ii) Reduction of 107.5% (R$ 38 million) in the value referring to the net effect of the amortization and deferral of CVA
  (iii) Reduction of R$ 16 million in the transfer of Pis/Cofins to the generators
  (iv) Increase of R$ 12 million due to changes in spare energy accounting procedures

• Charges for the use of the transmission and distribution system reached R$ 203 million during 3Q06, an increase of 15.7% (R$ 27 million) compared to the same period the previous year

5.3) Operating Costs

Operating costs reached R$ 592 million in the 3Q06, registering an increase of 23.3% (R$ 112 million) in relation to the same period in 2005. The main contributing factors for this increase are:

(i) PMSO: the main variations on this item occurred due to the following factors:

• Personnel costs, which registered an increase of 16.7% (R$ 14 million) in the 3Q06, which, among other factors, were due to the annual increase in payroll, as a result of salary readjustment, and the advance payment of the special profit sharing scheme in accordance with the 2006 collective agreement, pending the decision of the TRT
  
  
• Outsourced service expenses, which registered an increase of 20.1% (R$ 13 million) during the period, due mainly to the operational start-up of the Barra Grande Hydroelectric Plant and the 32.7% acquisition of RGE

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• Expenses with other operational costs increased 43.7% (R$ 20 million) during the period due to the increase in bad debt provision, in relation to credit with some City Halls, and the increase in expenditure related to the Barra Grande Hydroelectric Plant and the acquisition of RGE
  

    Note: PMSO considers Personnel, Material, Outsourced Services and Others

(ii) Fuel Consumption Account (CCC) and Energy Development Account (CDE): spending on CCC and CDE increased 41.7% and 46.7% respectively (R$ 76 million). It should be noted that the company has no management control over these expenses, as they are defined by ANEEL      

The increase of operating costs was partially offset by the Private Pension Fund item, which showed a reduction of 108.9% (R$ 24 million). This expense represented a cost of R$ 22 million in 3Q05 but in 3Q06 has turned into revenue of R$ 2 million. This variation is due mainly to the increase in expected rate of return on plan assets, as defined in the last Actuary Report.

5.4) EBITDA

Based on the factors described above, EBITDA of CPFL Energia during the 3Q06, was R$ 792 million, registering an increase of 38.8% (R$ 221 million) in relation to 3Q05.

The sale of stock in Comgas also contributed to this increase, with CPFL obtaining gross income of R$ 62.7 million (detailed in item 1.1, page 3). When taking into account this operation, the non-operating result was transformed from R$ 0.5 million in 3Q05 to R$ 61 million in 3Q06.

5.5) Financial Result

During 3Q06, the financial result showed an improvement of 101.5% (R$ 72 million). The result was negative by R$ 71 million in 3Q05 but turned positive by R$ 1 million in 3Q06, due basically to the increase of 76.3% in financial revenues (R$ 94 million), up from R$ 124 million in 3Q05 to R$ 218 million in 3Q06, due mainly to the favorable decision for the company regarding the legality of the broader base for the calculation of PIS/Cofins.

The financial result was partially offset by the increase of 11.3% in financial expenses (R$ 22 million), up from R$ 195 million in 3Q05 to R$ 217 million in 3Q06, which can be explained by the increase in the group’s indebtedness, up from R$ 4.6 billion in 3Q05 to R$ 5.1 billion in 3Q06, and from the maintenance of the nominal cost of the debt.

5.6) Net Income

Net Income in the 3Q06, was R$ 447 million, gaining 86.2% (R$ 207 million) over the same period of 2005.

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6) INDEBTEDNESS

CPFL Energia indebtedness totaled R$ 5,098 million in 3Q06, an increase of 9.7%, compared to the same period the previous year. Although the debt has risen in nominal terms, its cost has remained practically unaltered.

The increase of indebtedness is mainly due to the net effect of incorporation of the portion of RGE’s debt, after the acquisition of 32.7% of RGE. Also contributed to debt balance variation, the following factors:

(i) Liquidation of Floating Rate Notes; and of CPFL Paulista debentures
(ii) Emission of debentures by CPFL Piratininga; RGE debt contracts indexed to CDI; and BNDES funds for CPFL Paulista, CPFL Piratininga and generation projects

The cost of debt remained practically unaltered when compared to 3Q05, as the fall in the CDI and TJLP indexes during the period were compensated by the rise in the IGP-M/IGP-DI

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It should be emphasized that R$ 3.8 billion of CPFL Energia’s financial debt, or 74.4% of the total, is considered long term.

A consequence of the increase in financial debt, was a marked increase in adjusted net debt, based on total debt (loans and financing and derivatives summed to private pension fund debt), excluding regulatory assets / CVA and cash availabilities, showing an increase of 15.0% in 3Q06 in relation to 3Q05, attaining a total of R$ 4,443 million. It should be emphasized that the Debt/EBITDA index of 1.7x remained unaltered.

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7) INVESTMENTS

During 3Q06, investments of R$ 194 million were made on maintenance and business expansion of which R$ 139 million was channeled to distribution, R$ 0.4 million to commercialization and R$ 55 million to generation. Altogether, CPFL Energia has invested R$ 557 million during the first nine months of 2006.

Among the main investments by CPFL Energia, the following should be highlighted:

• Distribution Segment: Investments were made in the expansion of the electric system to better serve the growth of the consumer market. In 3Q06 alone, 52,326 new connections were made. Investments were also earmarked for maintenance and improvements in the electric system, operational infrastructure, operational support systems and to the research and development program
  
  
• Commercialization Segment: Improvements in portfolio and risk management systems
  
  
• Generation Segment: Investments were made mainly for projects under construction. – Ceran Complex and Campos Novos Hydroelectric Plant

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8) CASH FLOW

The table below demonstrates the evolution of cash flow in the 9M05 and 9M06, with the following comments referring to the evolution of cash flow during 9M06:

The final balance of 9M06 reached R$ 335 million, representing a reduction of 50.7% (R$ 344 million) compared to the cash flow starting balance.

Besides the cash generated from the company’s operations, the following factors also contributed to the cash flow variation:

(i) Income payout relating to 2H05 and 1H06
(ii) Acquisition of 32.7% of RGE

The evolution of the cash flow was partially offset by sale of Comgás stock (comment in item 1.1, page 3).

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9) PERFORMANCE OF BUSINESS SEGMENTS

9.1) Distribution Segment

Operating Revenue

During 3Q06, gross revenue was R$ 2,952 million, an increase of 15.4% (R$ 394 million) compared to the same quarter of 2005. Net operational revenue showed growth of 18.5% (R$ 330 million) compared to 3Q05.

The main contributing factors for this evolution of net revenue were:

(i) Increase in energy sales to end consumers by 6.2%, coupled with distributors tariff adjustments (R$ 318 million)

(ii) Increase of 41.8% (R$ 53 million) in TUSD revenue

(iii) Cessation of emergency charges levied by ANEEL (R$ 49 million)

The evolution of net revenue was partially offset by the increase of 8.2% (R$ 112 million) in ICMS and PIS/COFINS.

Electric Energy Costs

Electric energy total costs, which consists of the cost of purchased energy and charges for the use of the system, during the 3Q06 were R$ 1,058 million, representing an increase of 7.9% compared to the same period the previous year:

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Operating Costs

Operating costs in 3Q06 reached R$ 555 million, representing an increase of 22.0% (R$ 100 million) in relation to 3Q05. The main causes for this increase were:

The increase of operating costs was partially offset by the Private Pension Fund item, which showed a reduction of 108.8% (R$ 24 million). This variation is due mainly to the increase in expected rate of return on plan assets, as defined in the last Actuary Report.

EBITDA

Based on the factors described above, EBITDA, during 3Q06, was R$ 572 million, registering an increase of 29.0% (R$ 129 million) compared to 3Q05.

Financial Result

During 3Q06, the financial result showed an improvement of 224.9% (R$ 94 million). In 3Q05 this result was R$ 42 million negative which in 3Q06 rose to R$ 52 million positive, due basically to the increase of 100.2% in financial revenues (R$ 100 million), up from R$ 100 million in 3Q05 to R$ 200 million in 3Q06, mostly due to the favorable decision regarding the legality of the broader base for the calculation of PIS/Cofins.

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The financial result was partially offset by the increase of 4.5% in financial expenses (R$ 6 million), up from R$ 142 million in 3Q05 to R$ 148 million in 3Q06, explained mainly by the variation of the IGP-M during the period.

Net Income

Net Income in the 3Q06, was R$ 346 million, representing an increase of 81.9% (R$ 156 million) compared to same period in 2005.

IRT of CPFL Piratininga

CPFL Piratininga electricity tariffs were readjusted by an average of 10.79% on October 23^rd 2006. This price adjustment to energy supply was differentiated according to the category of consumption. For residential and small scale commercial customers, connected to low voltage (less than 2.3 kV), the average index was 6.96% . For high voltage consumers, which include mid-sized and large industries, the average readjustment was 14.08% . The readjustment was ratified throughout the CPFL Piratininga market area, of 1.3 million customers.

9.2) Commercialization Segment

Operating Revenue

During the 3Q06, gross revenue was R$ 464 million, an increase 24.4% (R$ 91 million) compared to the same quarter of 2005. This increase is mainly due to the growth of 35.6% in volume sold.

EBITDA

During 3Q06, EBITDA was R$ 53 million, an increase of 7.9% (R$ 4 million) compared to the same period of 2005.

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Net Income

Net Income from 3Q06 was R$ 37 million, an increase of 8.7% (R$ 3 million) in relation to 3Q05.

9.3) Generating Segment

Operating Revenue

During 3Q06, gross revenue was R$ 124 million, an increase of 12.3% (R$ 14 million) compared to the same quarter of 2005. This increase is primarily due to the operational start-up of the Barra Grande Hydroelectric Facility, in November 2005, which contributed with R$ 19 million and 261 GWh.

Cost of Electric Energy Service

The cost of energy service in 3Q06 was R$ 3 million, up 19.0% (R$ 430 thousand) in comparison to the same period the previous year. This increase is mainly due to the operational start-up of the Barra Grande Hydroelectric Facility, in November 2005, which contributed with R$ 743 thousand.

Operating Costs

Operating costs during 3Q06 reached R$ 24 million, which represents an increase of 42.0% (R$ 7 million) in comparison to 3Q05. This increase is mainly due to the following PMSO variations: the increase of 58.0% (R$ 2 million) from additional personnel costs of Baesa (Barra Grande Hydroelectric Facility), resulting from their operational start-up and from the 72.4% (R$ 2 million) increase on outsourced spending.

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EBITDA

As a result of the factors described above, EBITDA, during 3Q06, reached R$ 100 million, an increase of 12.4% (R$ 11 million) in relation to 3Q05.

Financial Result

During the 3Q06, the financial result was negative by R$ 36 million, representing an increase on the 3Q05 of 22.4% (R$ 7 million), due mainly to the increase of 20.1% (R$ 7 million) on financial expenses, due mainly to the start of payments of financial expenses from the operational start-up, in November 2005, of Barra Grande Hydroelectric Facility.

Net Income

Net Income from 3Q06 was R$ 34 million, up 7.3% (R$ 2 million) in relation to the same period in 2005.

Status of Generation Projects

Campos Novos

Following up on the Explanatory Note on Campos Novos Hydroelectric Plant, released on June 20^th 2006, CPFL Energia informs that repairs on the re-routing tunnels are in process of conclusion. The finalization of the works and the resumption of reservoir filling are forecast for beginning of December. The start-up of commercial operation of the undertaking is estimated to take place in the first quarter of 2007.

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Investor Relations

Tel.: (55) (19) 3756-6083

Fax: (55) (19) 3756-6089

E-mail: ri@cpfl.com.br

Site: http://ri.cpfl.com.br

CPFL Energia is the largest private group in the Brazilian electricity sector operating in the distribution commercialization and generation segments. CPFL is the only publicly-held company in the Brazilian electric sector whose shares are simultaneously traded on the Novo Mercado – Bovespa and the New York Stock Exchange as level III ADR’s. The company strategy is focused on operational efficiency and synergy-driven business growth, grounded on financial discipline, sustainability, social responsibility and differentiated corporate governance practices.

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Statement of Assets
(R$ Thousands)

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Statement of Liabilities
(R$ Thousands)

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Annual Income Statement
(R$ Thousands)

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Income Statement – Consolidated Distribution (Pro-forma)
(R$ Thousands)

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Income Statement
(R$ Thousands)

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This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.