May 10^th, 2006

Bovespa: CPFE3 R$ 34.00 / share
NYSE: CPL US$ 49.40 / ADR (1 ADR = 3 shares)
Total Shares = 479.8 million
Market Value: R$ 16.3 billion
Closing price: 05/09/2006

Portuguese Conference Call with Simultaneous Translation into English Bilingual Q&A Thursday, May 11, 2006 Time: 2:00 PM (SP), 1:00 PM (US-ET) Portuguese: (11) 2101-1490 English: (1-973) 935-2403 Code: CPFL or 7285232  *Webcast: http://ri.cpfl.com.br	CPFL ENERGIA ANNOUNCES 1Q06 NET INCOME OF R$ 306.5 MILLION São Paulo, May 10th. , 2006 – CPFL Energia S.A. (Bovespa: CPFE3 e NYSE: CPL), announces today its results for the first quarter of 2006. Unless otherwise stated, the financial and operational results herein are presented on a consolidated basis in accordance to the Brazilian Corporate Law and all comparisons are with the 1Q05.
	1Q06 HIGHLIGHTS
	Net income of R$ 306.5 million for the 1Q06, up by 85.0%.  Gross revenues of R$ 2.789 billion, an increase of 11.6%.  EBITDA(1) of R$ 654.2 million, a 29.1% improvement.  Total energy sales (GWh) growth of 7.5% and free market sales growth of 65.9%.  CPFL Piratininga debentures issue of R$ 400 million with a 5 year maturity at 104% of CDI.  Conclusion of CPFL Piratininga’s crossed holdings unbundling process.  Conclusion of the Barra Grande Hydro Plant, considering the start up of the last generator unit on May 1st. , 2006, representing an increase of 172.5 MW and average 95.2 MW to the Group´s capacity, showing an annual estimated revenue of R$ 102 million.  Acquisition of 32.69% share of RGE by CPFL Energia, in May 2006.  (1) EBITDA is the sum of net income, taxes, financial result, depreciation/ amortization and private pension fund, plus adjustments related to the extraordinary item and non-recurring transactions.

PERFORMANCE OF ON SHARES / ADRs OVER 1Q06

In the first quarter of 2006, CPFL Energia’s ON shares appreciated by 9.5% on the Bovespa and its ADRs moved up 21.5% on the NYSE, outperforming the main comparative indexes, the DJIA and DJBR20.

CPFL Stocks x Main Comparative Indexes – 1Q06

Since 2005, CPFL Energia’s shares have been part of the reference indexes for Brazilian shares traded on the national and international markets, including the main indexes related to the best practices of differentiated corporate governance.

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CORPORATE STRUCTURE

CPFL Energia is a holding company which depends directly on the results of its subsidiary companies, CPFL Paulista (100%)⁽¹⁾, CPFL Piratininga (100%)⁽¹⁾, CPFL Geração (100%) and CPFL Brasil (100%).

(1) In this document, we shall be analyzing the consolidated distribution business.

Changes in Shareholding Structure

The Extraordinary Shareholders´ Meeting as of April 13, 2006, approved the implementation of the first stage of the corporate restructuring process, aimed at segregating the shareholding interests maintained by CPFL Paulista, as determined by Law nº 10,848/04.

This first stage involved reducing CPFL Paulista’s capital by assets worth R$ 413.3 million, which were then transferred to CPFL Energia. These assets comprised:

(i) all the shares of CPFL Piratininga, representing 100% of CPFL Piratininga’s capital stock, amounting to R$ 385.4 million;

(ii) all the shares of Companhia de Gás de São Paulo – COMGAS, equivalent to 3.08% of COMGAS’s capital stock, amounting to R$ 27.2 million; and

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(iii) all the shares of Energias do Brasil S.A., representing 0.05% of Energias do Brasil’s capital stock, amounting to R$ 772.2 thousand.

As a result of this first stage reorganization, CPFL Piratininga became a direct subsidiary of CPFL Energia. The main benefits of the reorganization were: (i) the direct flow of dividends to the holding company; and (ii) the booking of the goodwill from the acquisition of CPFL Piratininga by CPFL Energia.

It is important to point out that this corporate restructuring was recorded in the accounts as of January 1^st., 2006, based on the appraisal report drawn up by Deloitte Touche Tohmatsu, on the base date of December 31, 2005.

The next and final stage, involving the segregation of CPFL Paulista’s holdings in RGE, shall place by March, 2007, as determined by Law nº 10,848/04 and ANEEL Resolution nº 305/05.

In May 10, 2006, CPFL Energia signed a purchase agreement with PSEG today for the direct acquisition of 100% of Ipê Energia Ltda., PSEG Brasil Ltda. and PSEG Trader S.A.

After the acquisition, the CPFL Group will own a total of 99.76% ⁽¹⁾ of RGE and 99.95% of Sul Geradora. The company already owns 67.07% ⁽¹⁾ of RGE and 67.20% of Sul Geradora through two of its subsidiaries, CPFL Paulista and CPFL Brasil. Through its acquisition of Ipê Energia Ltda., CPFL Energia will acquire a 32.69% ⁽¹⁾ share of RGE and a 32.75% share of Sul Geradora.

The transaction is still pending regulatory authorities approval. More details can be found in the Press Release published in this date.

¹ Not including shares held in treasury.

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DIVIDENDS AND INTEREST ON CAPITAL

The CPFL Energia policy on dividend payment stipulates that a minimum of 50% of adjusted net income be distributed on a half-yearly basis.

Total dividends for 2005 amounted to R$ 899.1 million. In April, 2006, the Company paid out R$ 498.5 million relative to the second half of 2005. The remaining R$ 400.6 million, relative to the first half of 2005, was paid in September, 2005.

Dividend payments over the last two years have involved 95% of adjusted net income, well above the stipulated 50% minimum. In absolute terms, pay-outs exceeded the minimum by R$ 551.4 million.

⁽¹⁾ Consider half-year dividend compared to the average share quotation at the close of the half-year – sum of first and second halves.

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MAIN ECONOMIC AND FINANCIAL DATA - BY BUSINESS SEGMENT AND CONSOLIDATED

Comparison 1Q05 vs. 1Q06

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ENERGY MARKET

The energy sold by CPFL group through the distribution and commercialization segments to end-customers totaled 9,962 GWh for the 1Q06, representing increase of 7.5% .

The highlights were the residential and commercial segments, which recorded respective growth of 4.9% and 8.3%, owing to improvements in employment levels and earning power and to higher seasonal temperatures.

Energy Sales Evolution

Owing to the evolution of verified sales over the period, the customer mix of the consolidated group was subjected to alterations, including the decrease in the participation of the industrial class from 46.3%, in 1Q05, to 44.1% in 1Q06, resulting in the increase of the other classes.

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It is worth noting that 1Q06 demand in CPFL distributors’ concession area increased by 4.1% year-on-year. CPFL Brasil played an important role in energy sales, particularly in those to the free market, which totaled 2,419 GWh for the 1Q06, growth of 65.9% .

ECONOMIC AND FINANCIAL PERFORMANCE

Gross Revenues

Gross operating revenues for the 1Q06 totaled R$ 2.8 billion, 11.6% up on the first quarter of 2005.

The main contributing factors for this growth at CPFL Energia and its subsidiaries were:

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Cost of Energy Service

The cost of electric energy service which is comprised of cost of purchased energy and overheads for the use of the system, totaled R$ 934.2 million in the 1Q06, down by 0.6% .

The main variations for the 1Q06 are listed bellow:

Costs and Operating Expenses

Cost and operating expenses totaled R$ 531.7 million for the 1Q06, 24.3% up year-on-year. The main contributing factors to these variations can be examined in the table below:

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Manageable costs stood at R$ 235.1 million for the 1Q06, 26.3% more than in the first three months of 2005 despite the continuity of the cost control program, management of expenses and harnessing of operational synergies within the group companies. The increase was due to the following factors:

• Private Pension Fund

Total expenses from the private pension fund, i.e., operating costs and expenses plus the extraordinary item, totaled R$ 10.5 million for the 1Q06, 69.8% down on the 1Q05.

The fund’s operating costs and expenses dropped by 108.0%, recording a credit of R$ 1.8 million for the 1Q06, reflecting changes in actuarial calculations due to the increase in the expected rate of return on the fund’s assets, which occurred as of the first quarter of 2006. This is shown in the table below.

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• CCC and CDE Subsidies

CCC and CDE subsidies amounted to R$ 202.2 million for the 1Q06, 47.4% up year-on-year chiefly due to contribution adjustments.

These costs are determined by the regulatory body ANEEL and their impact is neutralized on the balance sheets due to the CVA registry mechanism which compensates the shortfall in the subsequent tariff readjustment.

• Free Energy Losses

Operating expenses of R$ 339.0 thousand were recorded in the 1Q06 due to provisions for losses from the realization of free energy assets by RGE.

• Energy Efficiency Program and R&D

Due to changes in the accounting criteria for the Energy Efficiency Program and R&D, caused by the application of ANEEL Resolution nº 176 of December 15^th, 2005, as from 4Q05 these registries will now be accounted for in the act of billing and not at implementation, generating additional expenses of R$ 11.3 million in the 1Q06, a year-on-year increase of 204.5% .

Income from Electric Energy Service

The results for income from electric energy service totaled R$ 578.6 million for the 1Q06, 38.6% up year-on-year due to higher revenues and the impact of the alteration in the PIS/COFINS tax rates, determined by Law nº 11,196/2005, as well as reduced expenses from the private pension fund.

EBITDA

Consolidated EBITDA totaled R$ 654.2 million for the 1Q06, 29.1% more than in the first three months of 2005, primarily due to the 11.6% increase in revenues.

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EBITDA is the calculation made from the sum of net income, taxes, net financial result of interest on capital, depreciation, amortization, private pension fund and other adjustments relating to extraordinary items and non-recurring transactions when applicable.

Financial Result

The financial result, composed of a net financial expense of R$ 82.0 million in the 1Q06, presented a reduction of 31.3% due to the following factors:

Net Income

The net income for the 1Q06 of R$ 306.5 million, represented 85.0% up year-on-year. The increase was a direct consequence of the increase in EBITDA and the improved financial result.

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INDEBTEDNESS

The CPFL Energia’s debt totaled R$ 5.0 billion for the 1Q06, reduction of 1.2% compared to the same period of the previous year.

It is worth noting the improvement in the debt’s profile. Measures initiated in 2004 allowed CPFL to increase its debt harnessed to the IGP and TJLP (representing 67% of the total debt for the 1Q06). This change in debt profile coupled to the reduction of the main indicators generated a cost of debt reduction from 15.6% p.a. to 13.8% p.a.. In addition, in January 2006, Standard & Poors raised the CPFL group companies credit rating to BrA+.

⁽¹⁾ Excluding RTE

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In December 2004, BNDES approved the inclusion of CPFL Paulista and CPFL Piratininga in the FINEM (program of expansion and modernization of the electric system), resulting in credits of R$ 241 million and R$ 89 million, respectively, both indexed to the TJLP (long-term interest rate) on 6 year terms. In 2005, CPFL Paulista obtained R$ 139 million and CPFL Piratininga, R$ 66 million, followed by R$ 34.9 million and R$ 13.3 million, respectively, in the first quarter of 2006. The remaining balance will be freed throughout 2006.

In February 2006, the R$ 400 million subordinated debentures issue was fully subscribed. The debentures are five-year maturity and will yield 104% of CDI. In the bookbuilding process, demand exceeded R$ 1 billion.

As in previous periods, the improvement in the debt’s profile was mainly due to the change in the composition of the indexing units over the last 12 months, in particular the increase in the portion indexed to the TJLP following the release of funds from FINEM and financings obtained for power plant construction.

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The adjusted net debt, calculated as total debt (loans and financings plus derivatives and private pension fund costs) excluding regulatory assets/CVA and available cash flow, showed a decrease of 7.8% in 2005 reaching R$ 3.4 billion. The net debt/EBITDA ratio stood at 1.5x at the close of the 1Q06, versus 2.1x at the end of the 1Q05.

CAPEX

In 1Q06, expansion and maintenance investments totaled R$ 143.4 million, of which R$ 98.7 million went to distribution, R$ 658.0 thousand to commercialization and R$ 44.1 million to generation.

The main investments made by CPFL Energia over the last years have been concentrated on the following items:

• Distribution Segment: Expansion of the system to meet growing consumer demand. In the 1Q06, 50,135 new connections were added. Investments have also been made in system maintenance and improvements, operational infrastructure, operational support systems and the R&D program.

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• Commercialization Segment: The Improvement of management systems and risk portfolio;
  
  
• Generation Segment: Conclusion of the Barra Grande Hydro Plant and investments in the ongoing construction - CERAN Complex and the Campos Novos Hydro Plant, as well as repowering of the Gavião Peixoto PCH.

PERFORMANCE OF BUSINESSES UNITS

Distribution Segment

Gross Revenues

Gross operating revenues totaled R$ 2.6 billion in the 1Q06, 10.3% up year-on-year, mostly fueled by the distributor tariff adjustments and revisions - CPFL Paulista and RGE in April 2005 and CPFL Piratininga in October 2005, amounting to 17.74%, 21.93% and 1.54% ⁽¹⁾ respectively, plus the 62.0% year-on-year upturn in revenues from the use of the electricity network (TUSD).

(¹) Already excluding PIS/COFINS.

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Moreover, reduced commercial losses by distributors, mainly CPFL Paulista and CPFL Piratininga, which evolved from 2.81% and 1.99% to 2.61% and 1.80%, respectively, contributed to additional revenues of R$ 33.5 million⁽¹⁾ in the 1Q06.

In fact, the revenue increase would have been even higher but for the migration of some captive customers to the free market, which led to a 15.6% year-on-year decline in industrial sales volume, reducing the 1Q06 total by 3.4% .

⁽¹⁾ Considering 100% of RGE

Sales Comparison

Owing to the evolution of verified sales over the period, the customer mix of the consolidated group was subjected to alterations, including in the decrease in the participation of the industrial class from 39.2%, in the first three months of 2005, to 34.1% in 1Q06, in compensation there was an increase in the other classes.

The impact of the migration of captive customers to the free market was partially offset by the 62.0% year-on-year increase in TUSD revenues to R$ 154.4 million in 1Q06.

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The energy consumed by free customers in the distributors’ concession area totaled 2,181 GWh for the 1Q06, up by 40.0% year-on-year.

TUSD⁽¹⁾ – Sales Comparison

Considering the consolidated sales⁽¹⁾ in the group distributor´s concession area (captive customers + free customers), the increase in sales would be 4.1% in the 1Q06.

• Annual Tariff Readjustments – CPFL Paulista and RGE

In April 2006, ANEEL authorized tariff increases of 10.83% and 10.19%, respectively, for CPFL Paulista and RGE.

The total tariff readjustment is composed of the “pure IRT” (adjustment index), which includes the cost variations of Parcel A and Parcel B, in turn reflecting the accumulated variation in the IGP-M general market price index from April 2005 to March 2006, adjusted by Factor X. This index also includes all the financial effects, mainly composed of the CVA.

In addition to the revenues increase of 7.12% and 5.07% on CPFL Paulista and RGE, respectively, it is worth noting the alteration in the generators’ PIS/ COFINS tax rates. This alteration generated liabilities of R$ 32.9 million for CPFL Paulista and R$ 3.6 million for RGE, which will be returned to the concessionaires over the next 12 months.

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EBITDA

EBITDA for the distribution segment totaled R$ 446.4 million for the 1Q06, an 18.6% year-on-year improvement. The main reasons for the upturn were the increase in revenues, primarily from the distributors´ tariff readjustments and revisions, and the reduction in expenses from the private pension fund.

Net Income

Consolidated net income from the distribution segment stood at R$ 203.2 million for the 1Q06, 67.2% more than in the first quarter of 2005.

Main Economic and Financial Data for Distribution Companies

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Commercialization Segment

Gross Revenues

CPFL Brasil posted 1Q06 gross revenues of R$ 450.0 million, 51.9% up year-on-year, mostly fueled by higher energy sales to free customers and other concessionaires.

The company performed exceptionally well on the free market, achieving a 28% market share for the 1Q06.

CPFL Brasil – Comparison of Sales to End-Customers

EBITDA

CPFL Brasil’s EBITDA totaled R$ 100.2 million for the 1Q06, 75.0% more than in the first quarter of 2005, mainly thanks to growth in energy sales and overall services.

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Net Income

CPFL Brasil recorded 1Q06 net income of R$ 68.3 million, a 75.8% year-on-year improvement.

Generation Segment

Gross Revenues

CPFL Geração obtained gross revenues of R$ 107.7 million, 6.7% up on the 1Q05. The increase was due to the following factors:

i. The operational start-up of the Barra Grande Hydro Plant and the CPFL Sul PCHs, adding 166 GWh and consequent revenues of R$ 16.5 million for the 1Q06;

ii. The 11.12% contract readjustment of CPFL Centrais Elétricas, in April 2005, and the migration of the initial contracts with increase of its average prices;

iii. Alteration in Semesa´s and CPFL Centrais Elétricas´ PIS/COFINS tax rates, resulting in a R$ 17.4 million reduction.

EBITDA

CPFL Geração posted 1Q06 EBITDA of R$ 110.7 million, 35.5% up year-on-year mainly due to the following factors:

i. the 6.7% increase in gross revenues;
ii. Alteration in the PIS/COFINS tax rates, generating a R$ 11.9 million EBITDA net effect, considering R$ 31.0 million of this total amount as operating revenues deductions and R$ 1.7 million as operating expenses.

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Net Income

Generation segment net income stood at R$ 45.0 million in the 1Q06, 86.1% more than in the first three months of 2005.

Generation Project Schedule

To give continuity to developments since December 2004, considering the start up of commercial operations of the Monte Claro Hydro Plant, the first of the three CERAN Complex plants, the following events highlight the progress in relation to the schedule of the projects:

i. The first generating unit of the Barra Grande Hydro Plant began commercial operations on November 1^st, 2005, the second on February, 2006 and the third and last on May 1^st, 2006.

ii. The filling of the Campos Novos Hydro Plant reservoir began in October, 2005, reaching the current level of 641.0 meters. The start-up of commercial operations of the first turbine, which was scheduled for the first half of 2006, may be concluded by July 2006. This delay occurred due to a leakage in one of the three interspaces of the Rerouting Tunnel nº 2, which is already being repaired through the positioning of rocks and bags of concrete. It is important to stress out that Enercan has insurances that cover the repair works.

iii. The first unit of the Castro Alves Hydro Plant is scheduled to begin commercial operations in 2007, representing 63% of assured power, and the first unit of the 14 de Julho Hydro Plant in 2008, representing 93% of assured power, both belonging to the CERAN Complex;

iv. Construction of the Foz do Chapecó Hydro Plant is scheduled to begin in the fourth quarter of 2006 and start-up of commercial operations estimated for 2010.

The start-up of Barra Grande and Campos Novos will increase CPFL Geração’s installed capacity by 65% between 2005 and the first half of 2006 and by a further 33% through 2010.

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ri.cpfl.com.br

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CPFL Energia S.A.
Balance Sheets as of March 31, 2006 and December 31, 2005
(in thousands of Brazilian Reais)

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CPFL Energia S.A.
Balance Sheets as of March 31, 2006 and December 31, 2005
(in thousands of Brazilian Reais)

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CPFL Energia S.A.
Income Statements for the Years ended March 31, 2006 and 2005
(In thousands of Brazilian Reais)

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DISTRIBUTION-CONSOLIDATED*
Income Statement for the Quarters ended on March 31, 2006 and 2005
(In Thousands of Brazilian Reais)

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CPFL Geração de Energia S.A.
Income Statement for the Quarters ended on March 31, 2006 and 2005
(In Thousands of Brazilian Reais)

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CPFL Comercialização Brasil S.A.
Income Statement for the Quarters ended on March 31, 2006 and 2005
(In Thousands of Brazilian Reais)

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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.