The California Independent System Operator said there is a ?fundamental misunderstanding? about its annual market issues report for 2004 after power traders publicly dashed the analysis last month. Through the Western Power Trading Forum, traders disputed CAISO?s claim that markets were ?healthy? and ?stable? last year. Markets, they said, have failed to spur new power plant construction and provide sufficient revenue to invest in new infrastructure. In a letter to the grid operator, Gary Ackerman, WPTF executive director, called for immediate reforms to attract new investment. The grid operator has a $250\/MWh soft cap on bids in its spot market. If power suppliers show their costs warrant more, they can petition for higher prices. While the price cap may be perceived as keeping potential profits down, the limit is hit only in isolated incidents, according to CAISO?s Department of Market Analysis. Prices rarely exceed $175\/MWh even when there are large imbalances, noted the group. WPTF also maintains that reserve margins have declined because of the lack of power plant incentives. Reserve margins did decline, acknowledged Anjali Sheffrin, CAISO director of market analysis, but ?they did not drop to a point that made the short-term energy markets uncompetitive or create shortage conditions during 2004,? she noted in a report to the grid operator?s board.