MIDAMERICAN ENERGY CO, 10-Q, 1999-08-13

MIDAMERICAN ENERGY CO
10-Q, 1999-08-13
ELECTRIC SERVICES

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1999
-------------

Commission Registrant's Name, State of Incorporation, IRS Employer
File Number Address and Telephone Number Identification No.
- ----------- ------------------------------------------ -----------------
1-11505 MIDAMERICAN ENERGY COMPANY 42-1425214
(AN IOWA CORPORATION)
666 GRAND AVE. PO BOX 657
DES MOINES, IOWA 50303
515-242-4300

Securities registered pursuant to Section 12(b) of the Act:

Name of each Exchange
Title of Each Class On which Registered
------------------- -----------------------
7.98% MidAmerican Energy Company - Obligated
Preferred Securities of Subsidiary Trust New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

Preferred Stock, $3.30 Series, no par value
Preferred Stock, $3.75 Series, no par value
Preferred Stock, $3.90 Series, no par value
Preferred Stock, $4.20 Series, no par value
Preferred Stock, $4.35 Series, no par value
Preferred Stock, $4.40 Series, no par value
Preferred Stock, $4.80 Series, no par value
Preferred Stock, $5.25 Series, no par value
Preferred Stock, $7.80 Series, no par value
- -------------------------------------------------------------------------------
Title of each Class

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

As of July 31, 1999, all 70,980,203 outstanding shares of MidAmerican Energy
Company's voting stock were held by its parent company, MHC Inc.

<PAGE>

MIDAMERICAN ENERGY COMPANY

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION PAGE NO.

ITEM 1. Financial Statements

Independent Accountants' Report.............................. 3
Consolidated Statements of Income............................ 4
Consolidated Balance Sheets.................................. 5
Consolidated Statements of Cash Flows........................ 6
Notes to Consolidated Financial Statements................... 7

ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 12

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk... 27

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings ........................................... 27

ITEM 6. Exhibits and Reports on Form 8-K............................. 28

Signatures................................................................ 29

Exhibit Index............................................................. 30

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<PAGE>

INDEPENDENT ACCOUNTANTS' REPORT

Board of Directors and Shareholder
MidAmerican Energy Company
Des Moines, Iowa

We have reviewed the accompanying consolidated balance sheet of MidAmerican
Energy Company and subsidiaries (the Company) as of June 30, 1999, and the
related consolidated statements of income and cash flows for the three-month and
six-month periods then ended. These financial statements are the responsibility
of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Des Moines, Iowa
July 23, 1999
-3-
<PAGE>
<TABLE>
<CAPTION>

MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)

THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Regulated electric .................... $ 279,350 $ 287,094 $ 541,478 $ 543,448
Regulated gas ......................... 71,282 67,288 242,060 240,488
Nonregulated .......................... 27,709 21,124 63,051 38,836
--------- --------- --------- ---------
378,341 375,506 846,589 822,772
--------- --------- --------- ---------
OPERATING EXPENSES
Regulated:
Cost of fuel, energy and capacity ... 50,681 57,643 101,667 103,400
Cost of gas sold .................... 38,596 32,648 135,454 137,969
Other operating expenses ............ 104,387 114,031 221,026 222,498
Maintenance ......................... 31,934 31,347 58,471 54,380
Depreciation and amortization ....... 47,687 44,191 97,378 88,382
Property and other taxes ............ 20,662 21,403 40,813 44,733
--------- --------- --------- ---------
293,947 301,263 654,809 651,362
--------- --------- --------- ---------
Nonregulated:
Cost of sales ....................... 24,305 17,781 58,404 33,742
Depreciation and amortization ....... 148 - 148 -
Other ............................... 4,037 2,112 7,974 3,220
--------- --------- --------- ---------
28,490 19,893 66,526 36,962
--------- --------- --------- ---------
Total operating expenses .............. 322,437 321,156 721,335 688,324
--------- --------- --------- ---------

OPERATING INCOME ...................... 55,904 54,350 125,254 134,448
--------- --------- --------- ---------

NON-OPERATING INCOME
Interest and dividend income .......... 588 1,447 1,687 3,394
Other, net ............................ (3,338) (2,113) (5,379) (4,990)
--------- --------- --------- ---------
(2,750) (666) (3,692) (1,596)
--------- --------- --------- ---------

FIXED CHARGES
Interest on long-term debt ............ 16,618 17,592 33,107 35,145
Other interest expense ................ 2,674 3,529 8,086 6,697
Preferred dividends of subsidiary trust 1,995 1,995 3,990 3,990
Allowance for borrowed funds .......... (300) (921) (606) (1,675)
--------- --------- --------- ---------
20,987 22,195 44,577 44,157
--------- --------- --------- ---------

INCOME BEFORE INCOME TAXES ............ 32,167 31,489 76,985 88,695
INCOME TAXES .......................... 11,815 13,109 30,449 37,136
--------- --------- --------- ---------
NET INCOME ............................ 20,352 18,380 46,536 51,559
PREFERRED DIVIDENDS ................... 1,238 1,238 2,477 2,475
--------- --------- --------- ---------

EARNINGS ON COMMON STOCK .............. $ 19,114 $ 17,142 $ 44,059 $ 49,084
========= ========= ========= =========
</TABLE>

The accompanying notes are an integral part of these statements.

-4-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
AS OF
-------------------------------------
JUNE 30 DECEMBER 31
----------------------- -----------
1999 1998 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
UTILITY PLANT
Electric ............................................... $4,301,654 $4,109,989 $4,258,061
Gas .................................................... 793,745 766,127 786,169
---------- ---------- ----------
5,095,399 4,876,116 5,044,230
Less accumulated depreciation and amortization ......... 2,498,306 2,352,465 2,428,954
---------- ---------- ----------
2,597,093 2,523,651 2,615,276
Construction work in progress .......................... 27,641 82,671 26,369
---------- ---------- ----------
2,624,734 2,606,322 2,641,645
---------- ---------- ----------

POWER PURCHASE CONTRACT ................................ 139,383 164,739 144,875
---------- ---------- ----------

CURRENT ASSETS
Cash and cash equivalents .............................. 9,727 113,655 5,370
Receivables ............................................ 119,170 109,376 168,764
Inventories ............................................ 71,735 62,641 92,745
Other .................................................. 31,678 1,799 32,126
---------- ---------- ----------
232,310 287,471 299,005
---------- ---------- ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ............. 210,930 126,195 183,279
---------- ---------- ----------
REGULATORY ASSETS ...................................... 279,489 311,979 305,489
---------- ---------- ----------
OTHER ASSETS ........................................... 26,838 11,282 11,237
---------- ---------- ----------

TOTAL ASSETS ........................................... $3,513,684 $3,507,988 $3,585,530
========== ========== ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholder's equity ............................ $ 979,537 $ 977,627 $ 972,278
MidAmerican preferred securities, not subject to
mandatory redemption ................................. 31,759 31,760 31,759
Preferred securities, subject to mandatory redemption:
MidAmerican preferred securities ..................... 50,000 50,000 50,000
MidAmerican-obligated preferred securities of
subsidiary trust holding solely MidAmerican
junior subordinated debentures .................... 100,000 100,000 100,000
Long-term debt (excluding current portion) ............. 759,784 929,327 870,069
---------- ---------- ----------
1,921,080 2,088,714 2,024,106
---------- ---------- ----------
CURRENT LIABILITIES
Notes payable .......................................... 149,900 41,500 206,221
Current portion of long-term debt ...................... 170,773 199,351 60,897
Current portion of power purchase contract ............. 15,034 14,361 15,034
Accounts payable ....................................... 96,917 85,542 159,420
Taxes accrued .......................................... 129,181 103,801 106,132
Interest accrued ....................................... 13,444 18,977 13,473
Other .................................................. 37,442 26,942 35,405
---------- ---------- ----------
612,691 490,474 596,582
---------- ---------- ----------
OTHER LIABILITIES
Power purchase contract ................................ 68,093 83,143 68,093
Deferred income taxes .................................. 582,918 589,808 584,675
Investment tax credit .................................. 74,589 80,274 77,421
Other .................................................. 254,313 175,575 234,653
---------- ---------- ----------
979,913 928,800 964,842
---------- ---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES ................... $3,513,684 $3,507,988 $3,585,530
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements

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<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................ $ 20,352 $ 18,380 $ 46,536 $ 51,559
Adjustments to reconcile net income to net cash provided:
Depreciation and amortization ......................... 51,406 48,642 102,828 96,415
Net decrease in deferred income taxes and
investment tax credit, net ......................... (1,211) (2,960) (4,075) (5,885)
Amortization of other assets .......................... 9,843 9,868 20,007 19,033
Impact of changes in working capital .................. 18,187 (20,212) 37,632 73,018
Other ................................................. 8,338 2,487 (13,660) 1,559
--------- --------- --------- ---------
Net cash provided .................................. 106,915 56,205 189,268 235,699
--------- --------- --------- ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ......................... (52,023) (43,906) (77,865) (68,592)
Quad Cities Nuclear Power Station
decommissioning trust fund ............................ (2,844) (2,844) (5,658) (5,658)
Proceeds from sale of assets and other investments ........ - 19,854 - 19,854
Other investing activities, net ........................... (8) 183 (1,230) (19,116)
--------- --------- --------- ---------
Net cash used ......................................... (54,875) (26,713) (84,753) (73,512)
--------- --------- --------- ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid ............................................ (1,238) (29,838) (39,183) (59,676)
Issuance of long-term debt, net of issuance cost .......... - 158,440 - 158,440
Retirement of long-term debt, including reacquisition cost (494) (486) (629) (75,611)
Reacquisition of preferred shares ......................... - (1) - (3)
Cash outflow of accounts receivable securitization ........ (14,025) - (4,025) -
Net decrease in notes payable ............................. (41,695) (73,602) (56,321) (81,000)
--------- --------- --------- ---------
Net cash provided (used) .............................. (57,452) 54,513 (100,158) (57,850)
--------- --------- --------- ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...... (5,412) 84,005 4,357 104,337
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......... 15,139 29,650 5,370 9,318
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................ $ 9,727 $ 113,655 $ 9,727 $ 113,655
========= ========= ========= =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ................. $ 15,752 $ 12,223 $ 37,213 $ 39,526
========= ========= ========= =========
Income taxes paid ......................................... $ 24,843 $ 33,352 $ 24,843 $ 33,436
========= ========= ========= =========

</TABLE>
The accompanying notes are an integral part of these statements.

-6-
<PAGE>
MIDAMERICAN ENERGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. GENERAL:

The consolidated financial statements included herein have been prepared by
MidAmerican Energy Company (MidAmerican), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of MidAmerican, all
adjustments (consisting of normal recurring adjustments) have been made to
present fairly the financial position, the results of operations and the changes
in cash flows for the periods presented. Prior year amounts have been
reclassified to a basis consistent with the current year presentation. All
significant intercompany transactions have been eliminated. Although MidAmerican
believes that the disclosures are adequate to make the information presented not
misleading, it is suggested that these financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in MidAmerican's latest Annual Report on Form 10-K.

MidAmerican is a public utility with electric and natural gas operations
and is the principal subsidiary of MHC Inc. (MHC). MHC is an indirect, wholly
owned subsidiary of MidAmerican Energy Holdings Company. The current corporate
structure is the result of a merger transaction completed on March 12, 1999,
involving MHC (formerly MidAmerican Energy Holdings Company) and CalEnergy
Company, Inc. (CalEnergy). CalEnergy, through a reincorporation transaction, was
renamed MidAmerican Energy Holdings Company (Holdings). Holdings is an exempt
public utility holding company headquartered in Des Moines, Iowa.

B. ENVIRONMENTAL MATTERS:

(1) MANUFACTURED GAS PLANT FACILITIES -

The United States Environmental Protection Agency (EPA) and the state
environmental agencies have determined that contaminated wastes remaining at
certain decommissioned manufactured gas plant (MGP) facilities may pose a threat
to the public health or the environment if such contaminants are in sufficient
quantities and at such concentrations as to warrant remedial action.

MidAmerican is evaluating 27 properties which were, at one time, sites of
gas manufacturing plants in which it may be a potentially responsible party
(PRP). The purpose of these evaluations is to determine whether waste materials
are present, whether such materials constitute an environmental or health risk,
and whether MidAmerican has any responsibility for remedial action. MidAmerican
is currently conducting field investigations at eighteen sites and has conducted
interim removal actions at six of the eighteen sites. In addition, MidAmerican
has completed investigations and removals at four sites. MidAmerican is
continuing to evaluate several of the sites to determine the future liability,
if any, for conducting site investigations or other site activity.

MidAmerican's estimate of probable remediation costs for the sites
discussed above as of June 30, 1999, was $24 million. This estimate has been
recorded as a liability and a regulatory asset for future recovery. The Illinois
Commerce Commission (ICC) has approved the use of a tariff rider which permits
recovery of the actual costs of litigation, investigation and remediation
relating to former MGP sites. MidAmerican's present rates in Iowa provide for a
fixed annual recovery of MGP costs. MidAmerican intends to pursue recovery of
the remediation costs from other PRPs and its insurance carriers.

The estimate of probable remediation costs is established on a site
specific basis. The costs are accumulated in a three-step process. First, a
determination is made as to whether MidAmerican has

-7-
<PAGE>
potential legal liability for the site and whether information exists to
indicate that contaminated wastes remain at the site. If so, the costs of
performing a preliminary investigation and the costs of removing known
contaminated soil are accrued. As the investigation is performed and if it is
determined remedial action is required, the best estimate of remediation costs
is accrued. If necessary, the estimate is revised when a consent order is
issued. The estimated recorded liabilities for these properties include
incremental direct costs of the remediation effort, costs for future monitoring
at sites and costs of compensation to employees for time expected to be spent
directly on the remediation effort. The estimated recorded liabilities for these
properties are based upon preliminary data. Thus, actual costs could vary
significantly from the estimates. The estimate could change materially based on
facts and circumstances derived from site investigations, changes in required
remedial action and changes in technology relating to remedial alternatives. In
addition, insurance recoveries for some or all of the costs may be possible, but
the liabilities recorded have not been reduced by any estimate of such
recoveries.

Although the timing of potential incurred costs and recovery of such costs
in rates may affect the results of operations in individual periods, management
believes that the outcome of these issues will not have a material adverse
effect on MidAmerican's financial position or results of operations.

(2) CLEAN AIR ACT -

Following recommendations provided by the Ozone Transport Assessment Group,
the EPA, in November 1997, issued a Notice of Proposed Rulemaking which
identified 22 states and the District of Columbia as making a significant
contribution to nonattainment of the ozone standard in downwind states in the
eastern half of the United States. The nonattainment of the downwind states is
based on the ozone standard established prior to the 1997 revisions discussed
below. In September 1998, the EPA issued its final rules in this proceeding.
Iowa is not subject to the emissions reduction requirements in the final rules,
and, as such, MidAmerican's facilities are not currently subject to additional
emissions reductions as a result of this initiative.

On July 18, 1997, the EPA adopted revisions to the National Ambient Air
Quality Standards (NAAQS) for ozone and a new standard for fine particulate
matter. Based on data to be obtained from monitors located throughout each
state, the EPA will determine which states have areas that do not meet the air
quality standards (i.e., areas that are classified as nonattainment). If a state
has area(s) classified as nonattainment area(s), the state is required to submit
a State Implementation Plan specifying how it will reach attainment of the
standards through emission reductions or other means.

In May 1999, the U.S. District Court of Appeals for the District of
Columbia Circuit remanded the standards adopted in July 1997 back to the EPA
indicating the EPA had not expressed sufficient justification for the basis of
establishing the standards and ruling that the EPA has exceeded its
constitutionally-delegated authority in setting the standards. The EPA has
appealed the court's ruling to the full panel of the U.S. District Court of
Appeals for the District of Columbia Circuit. Argument in the appeal proceeding
is scheduled for the fall of 1999. As a result of the court's decision and the
current status of the standards, the impact of any new standards on MidAmerican
is currently unknown.

C. RATE MATTERS:

(1) ELECTRIC -

In Iowa on June 1, 1998, prices for electric residential customers were
reduced by an amount which will have a $5.0 million annual impact on revenues.
The decrease was the last of three for Iowa residential customers as a result of
a 1997 settlement agreement.

Through several steps from mid-1997 to the end of 1998, electric prices for
Iowa industrial customers were reduced by an amount which will have a $6 million
annual impact on revenues and electric

-8-
<PAGE>
prices for Iowa commercial customers were reduced by an amount which will have a
$4 million annual impact on revenues. The reductions were achieved through a
retail access pilot project, negotiated individual electric contracts and a $1.5
million tariffed rate reduction for certain non-contract commercial customers.

The negotiated electric contracts have differing terms and conditions as
well as prices. The contracts range in length from five to ten years, and some
have price renegotiation and early termination provisions exercisable by either
party. The vast majority of the contracts are for terms of seven years or less,
although, some large customers have agreed to ten-year contracts. Prices are set
as fixed prices; however, many contracts allow for potential price adjustments
with respect to environmental costs, government imposed public purpose programs,
tax changes, and transition costs. While the contract prices are fixed (except
for the potential adjustment elements), the costs MidAmerican incurs to fulfill
these contracts will vary. On an aggregate basis the annual revenues under
contract are approximately $180 million.

If MidAmerican's annual Iowa electric jurisdictional return on common
equity (ROE) exceeds 12%, then earnings above the 12% level will be shared
equally between customers and MidAmerican; if the ROE exceeds 14%, two-thirds of
MidAmerican's share of those earnings will be used for accelerated recovery of
certain regulatory assets. The 1997 pricing plan settlement agreement precludes
MidAmerican from filing for increased rates prior to 2001 unless the ROE falls
below 9%. Other parties signing the agreement are prohibited from filing for
reduced rates prior to 2001 unless the ROE after reflecting credits to
customers, exceeds 14%. On April 14, 1999, the Iowa Utilities Board (IUB)
approved, subject to additional refund, MidAmerican's 1998 ROE calculation.
During the second quarter of 1999, MidAmerican refunded $2.2 million to its Iowa
non-contract customers related to the ROE calculation for 1998.

Under an Illinois restructuring law enacted in 1997, a similar sharing
mechanism is in place for MidAmerican's Illinois electric operations. Two-year
average ROEs greater than a two-year average benchmark will trigger an equal
sharing of earnings on the excess. The benchmark is a calculation of average
30-year Treasury Bond rates plus 5.5% for 1998 and 1999. Legislation passed in
July 1999 increases the benchmark for 2000 through 2004 to 8.5% above the
30-year Treasury bond rate. The initial calculation, which is still being
defined and is due March 31, 2000, will be based on 1998 and 1999 results.

(2) GAS -

In October 1998, MidAmerican made a filing with the IUB requesting a rate
increase for its Iowa retail gas customers. An interim rate increase of
approximately $6.7 million annually was approved by the IUB on January 22, 1999,
effective immediately. On April 23, 1999, the IUB issued an order approving a
settlement agreement between MidAmerican, the Iowa Office of Consumer Advocate
(OCA) and other parties which provides for an annual increase of $13.9 million.
The new rates were implemented May 27, 1999.

In November 1998, MidAmerican filed with the South Dakota Public Utilities
Commission (SDPUC) requesting a rate increase for its South Dakota retail gas
customers. The SDPUC, on April 23, 1999, issued an order approving a rate
increase of $2.4 million annually, effective May 1, 1999.

D. ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF REGULATION:

MidAmerican's utility operations are subject to the regulation of the IUB,
the ICC, the SDPUC, and the Federal Energy Regulatory Commission (FERC).
MidAmerican's accounting policies and the accompanying Consolidated Financial
Statements conform to generally accepted accounting principles applicable to
rate-regulated enterprises and reflect the effects of the ratemaking process.

-9-
<PAGE>

Statement of Financial Accounting Standards (SFAS) No. 71 sets forth
accounting principles for operations that are regulated and meet certain
criteria. For operations that meet the criteria, SFAS 71 allows, among other
things, the deferral of costs that would otherwise be expensed when incurred. A
possible consequence of the changes in the utility industry is the discontinued
applicability of SFAS 71. The majority of MidAmerican's electric and gas utility
operations currently meet the criteria of SFAS 71, but its applicability is
periodically reexamined. On December 16, 1997, MidAmerican's generation
operations serving Illinois were no longer subject to the provisions of SFAS 71
due to passage of industry restructuring legislation in Illinois. Thus in 1997,
MidAmerican was required to write off the regulatory assets and liabilities from
its balance sheet related to its Illinois generation operations. The net amount
of such write-offs was not material. If other portions of its utility operations
no longer meet the criteria of SFAS 71, MidAmerican could be required to write
off the related regulatory assets and liabilities from its balance sheet and
thus, a material adjustment to earnings in that period could result.

E. MIDAMERICAN-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES:

The MidAmerican Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holding Solely MidAmerican Junior Subordinated Debentures
included in the Consolidated Balance Sheets were issued by MidAmerican Energy
Financing I (the Trust), a wholly owned statutory business trust of MidAmerican.
The sole assets of the Trust are $103.1 million of MidAmerican 7.98% Series A
Debentures due 2045.

F. SEGMENT INFORMATION:

MidAmerican has two reportable operating segments: electric and gas. The
electric segment derives most of its revenue from retail sales of regulated
electricity to residential, commercial, and industrial customers and sales to
other utilities; whereas the gas segment derives most of its revenue from retail
sales of regulated natural gas to residential, commercial, and industrial
customers. The gas segment also earns significant revenues by transporting gas
owned by others through its distribution systems. Pricing for electric and gas
sales are established separately by regulatory agencies; therefore, management
also reviews each segment separately to make decisions regarding allocation of
resources and in evaluating performance. Common operating costs are allocated to
each segment.

The following tables provide certain MidAmerican information on an
operating segment basis (in thousands):

Three Months Six Months
Ended June 30 Ended June 30
---------------------- ---------------------
1999 1998 1999 1998
--------- --------- --------- --------
Electric:
Revenues .................. $ 279,350 $ 287,094 $ 541,478 $543,448
Operating income .......... 62,562 60,368 106,924 114,014
Gas:
Revenues .................. 71,282 67,288 242,060 240,488
Operating income .......... (5,877) (7,813) 21,805 17,559
Nonregulated and other (a):
Revenues .................. 27,709 21,124 63,051 38,836
Operating income (loss) ... (781) 1,795 (3,475) 2,875

-10-
<PAGE>

June 30 December 31
----------------------- -----------
1999 1998 1998
---------- ---------- ----------
Total Assets:
Electric ............................ $2,897,678 $2,882,669 $2,897,657
Gas ................................. 600,854 606,910 672,072
Nonregulated and other (a) .......... 15,152 18,409 15,801

(a) "Nonregulated and other" consists of nonregulated gas operations, CBEC
Railway and other nonregulated activities.

G. OTHER COMPREHENSIVE INCOME:

For the six months ended June 30, 1999 and 1998, there were no differences
between MidAmerican's comprehensive income and earnings on common stock.

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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

INTRODUCTION
------------

MidAmerican Energy Company (MidAmerican) is a public utility with electric
and natural gas operations and is the principal subsidiary of MHC Inc. (MHC).
MHC is headquartered in Des Moines, Iowa, and is a wholly owned subsidiary of
MidAmerican Funding, LLC, which is an indirect, wholly owned subsidiary of
MidAmerican Energy Holdings Company.

The current corporate structure is the result of the merger transaction
completed on March 12, 1999, involving MHC (formerly MidAmerican Energy Holdings
Company) and CalEnergy Company, Inc. (CalEnergy). CalEnergy, through a
reincorporation transaction, was renamed MidAmerican Energy Holdings Company
(Holdings). Holdings is an exempt public utility holding company headquartered
in Des Moines.

FORWARD-LOOKING STATEMENTS

From time to time, MidAmerican may make forward-looking statements within
the meaning of the federal securities laws that involve judgments, assumptions
and other uncertainties beyond its control. These forward-looking statements may
include, among others, statements concerning revenue and cost trends, cost
recovery, cost reduction strategies and anticipated outcomes, pricing
strategies, changes in the utility industry, planned capital expenditures,
financing needs and availability, statements of MidAmerican's expectations,
beliefs, future plans and strategies, anticipated events or trends and similar
comments concerning matters that are not historical facts. Investors and other
users of the forward-looking statements are cautioned that such statements are
not a guarantee of future performance of MidAmerican and that such
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed in, or implied
by, such statements. Some, but not all, of the risks and uncertainties include
weather effects on sales and revenues, fuel prices, fuel transportation,
competitive factors, general economic conditions in MidAmerican's service
territory, interest rates, inflation and federal and state regulatory actions.

RESULTS OF OPERATIONS
---------------------

EARNINGS DISCUSSION

MidAmerican's earnings on common stock for the second quarter of 1999 were
$19.1 million compared to $17.1 million for the second quarter of 1998. Earnings
on common stock for the six months ended June 30, 1999 and 1998, were $44.1
million and $49.1 million, respectively. Below is a list of some of the
significant factors contributing to the change in earnings. The amounts
represent the variance between the respective periods. Therefore, a factor that
had a negative impact on earnings in both periods, but which had less of a
negative impact in the 1999 period than in the 1998 period, would be displayed
as a positive factor for comparison purposes.

For purposes of the following table, expenses related to amortization of
deferred energy efficiency costs, ongoing energy efficiency costs and certain
Cooper Nuclear Station (Cooper) costs are netted against the related recovery.
As a result, the "O&M expenses" line below does not reflect the impact of these
expenses, and the net effect of the revenues and expenses is included in the
amounts on the "Other factors" line under gross margin.

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The discussions that follow address the listed items and other variations.

Approximate Earnings Variances
Periods Ended June 30, 1999 vs. 1998
Three Months Six Months
------------ ----------
(In millions)
Variation in gross margin due to -
Weather effect............................... $(0.9) $0.9
Other retail sales factors & customer growth. (2.1) -
Off-system sales margin & energy costs....... 7.3 13.1
Electric retail prices....................... (4.1) (7.9)
Gas retail prices............................ 0.8 1.7
Other factors................................ (2.8) (4.9)
O&M expenses.................................... 5.5 (2.1)
Depreciation & amortization..................... (2.1) (5.3)
Property and other taxes........................ 0.4 2.3
Utility nonregulated operating activities....... (1.2) (3.2)

REGULATED GROSS MARGIN

Regulated Electric Gross Margin:
- --------------------------------

Three Months Six Months
Ended June 30 Ended June 30
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
(In millions)
Operating revenues .................. $279 $287 $541 $543
Cost of fuel, energy and capacity ... 51 58 102 103
---- ---- ---- ----
Electric gross margin ............... $228 $229 $439 $440
==== ==== ==== ====

MidAmerican's electric gross margin for the three-month and six-month
periods ended June 30, 1999, was relatively unchanged from the comparable
periods in 1998. The impact of various factors affecting electric margin are
discussed in the following paragraphs.

A decrease in revenues from energy efficiency cost recovery accounted for
$2.1 million and $3.9 million of the decrease in revenues and margin for the
three- and six-month comparisons, respectively. Approximately $9.3 million and
$18.8 million of MidAmerican's electric revenues for the 1999 three- and
six-month periods, respectively, were from the recovery of energy efficiency
program costs. Collection of deferred energy efficiency costs decreased in 1999
compared to the 1998 periods due to the completion of one of the four recovery
periods. Changes in revenues from energy efficiency cost recovery are
substantially offset by corresponding changes in other operating expenses. Refer
to the discussion under "Energy Efficiency" in the OPERATING ACTIVITIES AND
OTHER MATTERS section of MD&A for further discussion.

Revenues and gross margin for the 1999 periods reflect price reductions
which were not in effect, or were only partially in effect, during the 1998
periods presented. In June 1998, revenues from Iowa residential customers were
reduced $5 million annually. Since July 1997, MidAmerican has reduced revenues
from its Iowa commercial and industrial customers a total of approximately $10
million annually through negotiated contracts and a tariffed rate reduction.
These reductions were only partially in effect in the 1998 periods. Revenues
from Illinois customers were reduced $0.9 million in August 1998 related to
Illinois utility industry restructuring. MidAmerican also recorded a refund
accrual for a revenue sharing arrangement in Iowa. The accrual reduced revenues
and margin by $5.1 million and $9.0 million for the

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quarter and year-to-date periods ended June 30, 1999, respectively. Refer to
"Rate Matters: Electric" in the OPERATING ACTIVITIES AND OTHER MATTERS section
of MD&A for a discussion of revenue sharing. The combined effect of the revenue
reductions and the revenue sharing accrual decreased revenues and electric
margin by $7.1 million for the second quarter of 1999 compared to the second
quarter of 1998 and $13.5 million for six months ended June 30, 1999, compared
to the same period in 1998.

For the second quarter of 1999, temperatures were milder than normal,
resulting in a $5 million reduction of electric margin for the period. Compared
to the second quarter of 1998, which was also milder than normal, the effect of
temperatures decreased electric margin by $2 million. A decrease in sales not
dependent on weather also reduced revenues and electric margin compared to the
second quarter of 1998. Moderate growth in the number of customers increased
electric margin by $1.5 million. In total, retail sales of electricity decreased
1.5%.

Temperatures during the six months ended June 30, 1999, were milder than
normal resulting in a $10 million reduction of electric margin for the period.
Compared to the six-month period ended June 30, 1998, electric margin decreased
$1 million from the effect of temperatures. A decrease in sales not dependent on
weather also reduced revenues and electric margin compared to the first six
months of 1998. Moderate growth in the number of customers increased electric
margin by $3.5 million. In total, retail sales of electricity decreased 0.1%.

MidAmerican also sells energy and capacity in the off-system market.
Margins on off-system sales, which account for most of MidAmerican's sales for
resale, contributed $12.4 million and $22.2 million more to gross margin in the
three- and six-month periods ended June 30, 1999, than in the comparable periods
in 1998. Related sales volumes increased 24.6% and 20.9% compared to the three-
and six-month periods in 1998 due in part to improved availability of Quad
Cities Nuclear Power Station (Quad Cities Station) in 1999.

Deregulation of the Illinois electric utility industry resulted in changes
in the way certain taxes are assessed in Illinois. One of the taxes is now
assessed directly on the energy consumer instead of through the utility.
Accordingly, MidAmerican's electric revenues and electric margin reflect
reductions of $1.2 million and $2.5 million in the quarter and six-month period
ended June 30, 1999, respectively, for this tax collection change.

Regulated Gas Gross Margin:
- ---------------------------
Three Months Six Months
Ended June 30 Ended June 30
----------------- --------------
1999 1998 1999 1998
----- ----- ---- ----
(In millions)
Operating revenues... $ 71 $ 67 $242 $240
Cost of gas sold..... 39 33 135 138
---- ---- ---- ----
Gas gross margin..... $ 32 $ 34 $107 $102
==== ==== ==== ====

MidAmerican's regulated gas revenues include purchase gas adjustment
clauses (PGAs) through which MidAmerican is allowed to recover the cost of gas
sold from most of its gas utility customers. Consequently, fluctuations in the
cost of gas sold do not affect gross margin or net income because revenues
reflect comparable fluctuations in revenues from PGAs. An increase in the
per-unit cost of gas for the second quarter of 1999 compared to the second
quarter of 1998 increased revenues and cost of gas sold by approximately $5.6
million. For the six-month period comparison, revenues and cost of gas decreased
$6.1 million due to a change in the average per-unit cost of gas.

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Recovery of gas energy efficiency program costs decreased $0.5 million and
$0.8 million for the 1999 three- and six-month periods presented compared to the
same periods in 1998. Approximately $3.9 million and $8.0 million of
MidAmerican's gas revenues for the 1999 three- and six-month periods,
respectively, were from the recovery of gas energy efficiency program costs.
Again, changes in revenues from energy efficiency cost recovery are
substantially offset by corresponding changes in other operating expenses. Refer
to the discussion under "Energy Efficiency" in the OPERATING ACTIVITIES AND
OTHER MATTERS section of MD&A for further discussion.

On January 22, 1999, the IUB approved a $6.7 million annual interim
increase in gas rates for Iowa retail customers effective immediately. An
additional increase was implemented on May 27, 1999, as a result of the IUB's
approval of a final rate increase of $13.9 million annually. These increases
contributed approximately $1.4 million and $2.9 million to the comparative
increase in gas margin for the three- and six-month periods ended June 30, 1999,
respectively.

Temperatures in the second quarter of 1999 were milder than normal.
However, due to the relatively low volume of gas sales during the second quarter
in the Midwest, the milder-than-normal temperatures had little impact on
revenues and gas margin. Compared to the second quarter of 1998, gas margin
increased approximately $1 million due to the effect of temperatures. Customer
growth resulted in a $0.4 million improvement in gas margin in the 1999 quarter.
In total, retail sales of natural gas in the second quarter of 1999 increased
1.2% compared to the 1998 quarter.

Temperatures in the first six months of 1999 were warmer than normal,
resulting in a $6 million decrease in gas gross margin for the period. Compared
to the same period in 1998, gas margin increased $3 million due to the effect of
temperatures. Customer growth resulted in a $1.4 million improvement in gas
margin in the 1999 period. In total, retail sales of natural gas in the first
six months of 1999 increased 2.6% compared to the 1998 period.

REGULATED OPERATING EXPENSES

Other operating expenses decreased $9.6 million for the second quarter of
1999 compared to the second quarter of 1998 and decreased $1.5 million for the
six months ended June 30, 1999, compared to the six months ended June 30, 1998.

As mentioned in the gross margin discussions, the recovery of one phase of
deferred energy efficiency costs is complete, and accordingly, the costs for
that phase have been fully amortized to expense. As a result, energy efficiency
costs decreased $2.2 million and $4.0 million for the three- and six-month
period comparisons, respectively.

Expense related to the Cooper Tracker (a cost recovery mechanism begun in
1997) increased $2.5 million and $3.1 million for the three- and six-month
comparisons to 1998, respectively. MidAmerican is recovering on a current basis
the Iowa portion of these costs from its Iowa electric customers.

Reductions in marketing and sales-related expenses, gas distribution costs,
certain administrative and general costs and customer service costs also
contributed to the decrease in other operating expenses in the second quarter of
1999 compared to the second quarter of 1998.

Increased expenses in the six months ended June 30, 1999, for information
technology, consulting and customer service costs were offset by decreases in
marketing and sales expenses, certain employee benefits costs, gas distribution
costs and other administrative and general costs. The increase in information
technology costs was due in part to year 2000 preparation and support for
various new systems.

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Maintenance expenses increased $0.6 million and $4.1 million for the 1999
quarter and year-to-date periods, respectively, compared to the same periods in
1998 due to the timing of generating plant maintenance and increased electric
and gas distribution maintenance. The increases in these areas were partially
offset by a $3.0 million decrease in both 1999 periods for maintenance at the
Quad Cities Station.

Property and other taxes decreased $0.7 million and $3.9 million for the
three months and six months ended June 30, 1999, respectively, compared to the
same periods in 1998. MidAmerican's Iowa property tax decreased for the 1999
periods due to reduced assessed values. Deregulation of the Illinois electric
utility industry resulted in changes in the way certain taxes are assessed in
Illinois. The changes resulted in decreases in MidAmerican's tax expense for the
1999 three- and six-month periods compared to the 1998 periods. One of the taxes
is now assessed directly on the energy consumer instead of through the utility.
Accordingly, MidAmerican's electric revenues reflect an equal reduction in the
1999 periods for this tax collection change.

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

Revenues and Cost of Sales -

Revenues from wholesale natural gas marketing operations increased $5.7
million and $23.0 million for the three months and six months ended June 30,
1999, respectively, compared to the same periods in 1998. The primary cause of
the increase in revenues for the 1999 quarter was an increase in the average
price per unit, driven by an increase in the average cost of gas. Related sales
volumes increased 723,000 MMBtus (7%) compared to the second quarter of 1998 due
in part to additional contracts which were previously serviced by a nonregulated
affiliate of MidAmerican. Cost of sales related to natural gas marketing
reflects the increases in sales volumes and the average cost of gas. Total gross
margin (total price less cost of gas) on nonregulated natural gas sales was
relatively unchanged.

For the six-month period, related sales volumes increased 13 million MMBtus
(77%). The increase in sales volumes is due primarily to gas marketing contracts
previously serviced by a nonregulated affiliate of MidAmerican that started
being renewed as MidAmerican contracts in May 1998. A decrease in the average
price per unit, reflective of a lower cost of gas per unit, partially offset the
effect of increased sales. Cost of sales related to natural gas marketing for
the six months ended June 30, 1999, reflects the increase in sales and the
decrease in the average cost of gas per unit. Total gross margin on nonregulated
natural gas sales decreased $0.6 million compared to the first six months of
1998. The decrease was due to lower than anticipated gas prices in part of the
first quarter of 1999, as well as lower than anticipated sales volumes due in
part to mild weather during the same quarter.

Other increases in revenues relate to growth in two of the Company's
nonregulated programs and revenues of a railway subsidiary which began
operations in the fourth quarter of 1998.

Other Nonregulated Operating Expenses -

Other nonregulated operating expenses increased in the 1999 periods
compared to the same periods in 1998 due to costs of initiatives for new
nonregulated products and services.

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NON-OPERATING INCOME AND INTEREST EXPENSE

Interest and Dividend Income -

Interest income decreased in the three months and six months ended June 30,
1999, compared to the same periods in 1998 due to a decrease in temporary cash
investments and a note receivable related to the sale of MidAmerican's accounts
receivable.

Other, Net -

Other, Net reflects the discount on sold accounts receivable, net of a fee
for servicing the accounts. The net discount was recorded as an expense in
Other, Net in the amount of $1.7 million and $1.4 million for the second quarter
of 1999 and 1998, respectively. For the six months ended June 30, the net
discount was an expense of $4.6 million and $3.1 million for 1999 and 1998,
respectively.

Fixed Charges -

The decrease in interest on long-term debt is due to long-term debt
maturities and refinancing in 1998. Other interest expense increased in the six
months ended June 30, 1999, compared to the 1998 six-month period due primarily
to an increase in commercial paper outstanding. A decrease in other short-term
debt interest expense in the second quarter of 1999 was due to interest expense
in 1998 related to a Federal income tax payment which offset the impact of the
commercial paper increase for the quarterly comparison.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

MidAmerican has available a variety of sources of liquidity and capital
resources, both internal and external. These resources provide funds required
for current operations, construction expenditures, dividends, debt retirement
and other capital requirements.

As reflected on the Consolidated Statements of Cash Flows, MidAmerican's
net cash provided from operating activities was $189 million and $236 million
the first six months of 1999 and 1998, respectively.

INVESTING ACTIVITIES AND PLANS

Utility Construction Expenditures -

MidAmerican's primary need for capital is utility construction
expenditures. For the first six months of 1999, utility construction
expenditures totaled $78 million, including allowance for funds used during
construction (AFUDC) and Quad Cities Station nuclear fuel purchases. All such
expenditures were met with cash generated from utility operations, net of
dividends.

Forecasted utility construction expenditures, including AFUDC, for 1999 are
$179 million and $720 million for 2000 through 2003. Capital expenditure needs
are reviewed regularly by MidAmerican's management and may change significantly
as a result of such reviews. MidAmerican presently expects that all utility
construction expenditures for the next five years will be met with cash
generated from utility operations, net of dividends. The actual level of cash
generated from utility operations is affected by, among other things, economic
conditions in the utility service territory, weather and federal and state
regulatory actions.

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Nuclear Decommissioning -

Each licensee of a nuclear facility is required to provide financial
assurance for the cost of decommissioning its licensed nuclear facility. In
general, decommissioning of a nuclear facility means to safely remove the
facility from service and restore the property to a condition allowing
unrestricted use by the operator. Based on information presently available,
MidAmerican expects to contribute approximately $42 million during the period
1999 through 2003 to an external trust established for the investment of funds
for decommissioning the Quad Cities Station. Approximately 65% of the trust's
funds are now invested in domestic corporate debt and common equity securities.
The remainder is invested in investment grade municipal and U.S. Treasury bonds.

In addition, MidAmerican makes payments to Nebraska Public Power District
(NPPD) related to decommissioning Cooper. These payments are reflected in other
operating expenses in the Consolidated Statements of Income. NPPD estimates call
for MidAmerican to pay approximately $57 million to NPPD for Cooper
decommissioning during the period 1999 through 2003. NPPD invests the funds
predominately in U.S. Treasury Bonds and other U.S. Government securities.
Approximately 20% was invested in domestic corporate debt. MidAmerican's
obligation for Cooper decommissioning may be affected by the actual plant
shutdown date and the status of the power purchase contract at that time. In
July 1997, NPPD filed a lawsuit in United States District Court for the District
of Nebraska naming MidAmerican as the defendant and seeking a declaration of
MidAmerican's rights and obligations in connection with Cooper nuclear
decommissioning funding. Refer to Part II, Item 1. Legal Proceedings, for
further discussion of the litigation.

Cooper and Quad Cities Station decommissioning costs charged to Iowa
customers are included in base rates, and recovery of increases in those amounts
must be sought through the normal ratemaking process. Decommissioning costs
charged to Illinois customers are recovered through a rate rider on customer
billings.

FINANCING ACTIVITIES, PLANS AND AVAILABILITY

MidAmerican currently has authority from the FERC to issue short-term debt
in the form of commercial paper and bank notes aggregating $400 million. As of
June 30, 1999, MidAmerican had a $250 million revolving credit facility
agreement and a $5 million bank line of credit. MidAmerican's commercial paper
borrowings are supported by the revolving credit facility and the line of
credit. MidAmerican also has a revolving credit facility which is dedicated to
providing liquidity for its obligations under outstanding pollution control
revenue bonds that are periodically remarketed.

In 1997, MidAmerican entered into a revolving agreement, which expires in
2002, to sell all of its right, title and interest in the majority of its billed
accounts receivable to MidAmerican Energy Funding Corporation (Funding Corp.), a
special purpose entity established to purchase accounts receivable from
MidAmerican. Funding Corp. in turn sold receivable interests to outside
investors. In consideration for the sale, MidAmerican received $70 million in
cash and the remaining balance in the form of a subordinated note from Funding
Corp. As of June 30, 1999, the revolving cash balance was $56 million due to a
decline during the second quarter of 1999 in accounts receivable available for
sale. The agreement is structured as a true sale, as determined by Statement of
Financial Accounting Standards (SFAS) No. 125, under which the creditors of
Funding Corp. will be entitled to be satisfied out of the assets of Funding
Corp. prior to any value being returned to MidAmerican or its creditors.
Therefore, the accounts receivable sold are not reflected on MidAmerican's
Consolidated Balance Sheets. As of June 30, 1999, $87.4 million of accounts
receivable, net of reserves, were sold under the agreement.

MidAmerican has authorization from the FERC to issue up to an additional
$500 million in various forms of long-term debt. MidAmerican will also need
authorization from the ICC prior to issuing

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any securities. If 90% or more of the proceeds from a securities issuance are
used for refinancing purposes, MidAmerican need only provide the ICC with an
"informational statement" prior to the issuance which sets forth the type,
amount and use of the proceeds of the securities to be issued. If less than 90%
of the proceeds are used for refinancing, MidAmerican must file a comprehensive
application seeking authorization prior to issuance. The ICC is required to hold
a hearing before issuing its authorization.

OPERATING ACTIVITIES AND OTHER MATTERS

Industry Evolution -

The utility industry continues to evolve into an increasingly competitive
environment. In virtually every region of the country, legislative and
regulatory actions are being taken which result in customers having more choices
in their energy decisions.

In the electric industry, the traditional vertical integration of
generation, delivery and marketing is being unbundled, with the generation and
marketing functions being deregulated. For local gas distribution businesses,
the supply, local delivery and marketing functions are similarly being separated
and opened to competitors for all classes of customers. While retail electric
competition is presently not permitted in Iowa, MidAmerican's primary market,
legislation to do so was introduced in the Iowa legislature in the last session.
Deregulation of the gas supply function related to small volume customers is
also being considered by the IUB. MidAmerican is actively participating in the
legislative and regulatory processes shaping the new environment in which its
businesses will operate.

The generation and retail portions of MidAmerican's electric business will
be most affected by competition. The introduction of competition in the
wholesale market has resulted in a proliferation of power marketers and a
substantial increase in market activity. As retail choice evolves, competition
from other traditional utilities, power marketers and customer-owned generation
could put pressure on utility margins.

During the transition to full competition, increased volatility in the
marketplace can be expected. With the elimination of the energy adjustment
clause in Iowa, MidAmerican is exposed to movements in energy prices. Although
MidAmerican has sufficient low cost generation under typical operating
conditions for its retail electric needs, a loss of adequate generation by
MidAmerican at a time of high market prices could subject MidAmerican to losses
on its energy sales.

Legislative and Regulatory Evolution -

In December 1997, the Governor of Illinois signed into law a bill to
restructure Illinois' electric utility industry and transition it to a
competitive market. Under the law, larger non-residential customers in Illinois
and 33% of the remaining non-residential Illinois customers will be allowed to
select their provider of electric supply services, beginning October 1, 1999.
All other non-residential customers will have supplier choice starting December
31, 2000. Residential customers all receive the opportunity to select their
electric supplier on May 1, 2002.

The law required a 15% electric rate reduction for all Illinois residential
customers in 1998. To satisfy its obligation, MidAmerican received credit for
its 1996 and 1997 Illinois rate reductions, totaling $15.5 million, and reduced
rates an additional $0.9 million annually, effective August 1, 1998. MidAmerican
is exempted from the requirement to join an independent system operator (ISO) or
to form an in-state ISO.

In addition, the law provides for Illinois earnings above a certain level
of ROE to be shared equally between customers and MidAmerican beginning in April
2000. MidAmerican's ROE level will be based on a rolling two-year average, with
the first determination being based on an average of 1998 and 1999.

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The ROE level at which MidAmerican will be required to share earnings is a
multi-step calculation of average 30-year Treasury Bond rates plus 5.50% for
1998 and 1999. Legislation passed in July 1999 increases the benchmark for 2000
through 2004 to 8.5% above the 30-year Treasury bond rate. If the resulting
average Treasury Bond rate were equal to the December 1998 30-year Treasury Bond
rate, the ROE level above which sharing must occur would be approximately 10.6%
for 1998 and 1999 and 13.6% for 2000 through 2004. The law allows MidAmerican to
mitigate the sharing of earnings above the threshold ROE through accelerated
cost recognition that would reduce MidAmerican's earnings. MidAmerican continues
to evaluate its strategy regarding the sharing mechanism.

The law also addresses charges to customers for transition costs based on a
lost-revenue approach. These transition fees, designed to help utilities recover
stranded costs, will end December 31, 2006, subject to possible extension.
MidAmerican continues its involvement in proceedings which detail the new
competitive environment and to evaluate the impact of the law on its operations
and the opportunities the law presents.

In Iowa, a replacement of the prior utility property tax system, which was
supported by MidAmerican, went into effect on January 1, 1999. The replacement
tax is primarily a consumption-based tax on the user of energy and assures
stability in tax collections as the industry is deregulated in Iowa. With
resolution of the utility property tax issue, MidAmerican is pursuing the
adoption of electric utility industry restructuring legislation. Progress was
made during the 1999 Iowa legislative session, and MidAmerican continues working
toward adoption of new legislation in a future session.

Residential and Commercial Pilot Project -

On August 21, 1998, the IUB issued an Order approving MidAmerican's
proposal to allow at least 15,000 Iowa families and 2,000 small businesses to
have the opportunity to select among competing electricity providers. The
two-year pilot program will allow participating retail customers in the selected
test area to choose among several electricity providers, including MidAmerican,
and to have that energy delivered by MidAmerican. Customer enrollment is
currently allowed and the pilot is expected to begin in 1999 after additional
suppliers are registered. Businesses in the test area will be eligible for the
program if their annual peak demand is less than four megawatts. New suppliers
participating in the program will have to be certified by the IUB and meet
specified requirements.

Accounting Effects of Industry Restructuring -

A possible consequence of competition in the utility industry is that SFAS
71 may no longer apply. SFAS 71 sets forth accounting principles for operations
that are regulated and meet certain criteria. For operations that meet the
criteria, SFAS 71 allows, among other things, the deferral of costs that would
otherwise be expensed when incurred. A majority of MidAmerican's electric and
gas utility operations currently meet the criteria required by SFAS 71, but its
applicability is periodically reexamined. On December 16, 1997, MidAmerican's
generation operations serving Illinois were no longer subject to the provisions
of SFAS 71 due to passage of industry restructuring legislation in Illinois.
Thus, in 1997 MidAmerican was required to write off the regulatory assets and
liabilities from its balance sheet related to its Illinois generation
operations. The net amount of such write-offs was not material. If other
portions of its utility operations no longer meet the criteria of SFAS 71,
MidAmerican could be required to write off the related regulatory assets and
liabilities from its balance sheet, and thus, a material adjustment to earnings
in that period could result. As of June 30, 1999, MidAmerican had $279 million
of regulatory assets on its Consolidated Balance Sheet.

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Energy Efficiency -

MidAmerican's regulatory assets as of June 30, 1999, included $55.6 million
of deferred energy efficiency costs. Based on the current level of recovery,
MidAmerican expects to recover these costs by the end of 2001. MidAmerican is
also allowed to recover its ongoing energy efficiency costs on a current basis.
Recovery of these costs is being collected from customers based on projected
annual costs of $17.4 million, which may be adjusted annually. Amortization of
the deferred energy efficiency costs and current expenditures for energy
efficiency costs will be reflected in other operating expenses over the related
periods of recovery. The total of such costs for the years 1999, 2000 and 2001
is estimated to be $43 million, $40 million and $35 million, respectively.

Rate Matters: Electric -

Through several steps from mid-1997 to the end of 1998, electric prices for
Iowa industrial customers were reduced by an amount which will have a $6 million
annual impact on revenues and electric prices for Iowa commercial customers were
reduced by an amount which will have a $4 million annual impact on revenues. The
reductions were achieved through a retail access pilot project, negotiated
individual electric contracts and a $1.5 million tariffed rate reduction for
certain non-contract commercial customers.

If MidAmerican's annual Iowa electric jurisdictional ROE exceeds 12%, then
earnings above the 12% level will be shared equally between customers and
MidAmerican; if the ROE exceeds 14%, then two-thirds of MidAmerican's share of
those earnings will be used for accelerated recovery of certain regulatory
assets. A 1997 pricing plan settlement agreement precludes MidAmerican from
filing for increased rates prior to 2001 unless the ROE falls below 9%. Other
parties signing the agreement are prohibited from filing for reduced rates prior
to 2001 unless the ROE, after reflecting credits to customers, exceeds 14%. On
April 14, 1999, the IUB approved, subject to additional refund, MidAmerican's
1998 ROE calculation. During the second quarter of 1999, MidAmerican refunded
$2.2 million to its Iowa non-contract customers related to the ROE calculation
for 1998. The agreement also eliminated MidAmerican's energy adjustment clause,
and, as a result, the cost of fuel is not directly passed on to customers.

Rate Matters: Gas -

In October 1998, MidAmerican made a filing with the IUB requesting a rate
increase for its Iowa retail gas customers. An interim rate increase of
approximately $6.7 million annually was approved by the IUB on January 22, 1999,
effective immediately. On April 23, 1999, the IUB issued an order approving a
settlement agreement between MidAmerican, the OCA and other parties which
provides for an annual increase of $13.9 million. The new rates were implemented
May 27, 1999.

In November 1998, MidAmerican filed with the South Dakota Public Utilities
Commission (SDPUC) requesting a rate increase for its South Dakota retail gas
customers. The SDPUC in April 1999 approved a rate increase of $2.4 million
annually, effective May 1, 1999.

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Environmental Matters -

The EPA and state environmental agencies have determined that contaminated
wastes remaining at certain decommissioned MGP facilities may pose a threat to
the public health or the environment if such contaminants are in sufficient
quantities and at such concentrations as to warrant remedial action.

MidAmerican is evaluating 27 properties which were, at one time, sites of
gas manufacturing plants in which it may be a PRP. The purpose of these
evaluations is to determine whether waste materials are present, whether such
materials constitute an environmental or health risk, and whether MidAmerican
has any responsibility for remedial action. MidAmerican's estimate of probable
remediation costs for these sites as of June 30, 1999, was $24 million. This
estimate has been recorded as a liability and a regulatory asset for future
recovery through the regulatory process. Refer to Note B (1) of Notes to
Consolidated Financial Statements for further discussion of MidAmerican's
environmental activities related to MGP sites and cost recovery.

Following recommendations provided by the Ozone Transport Assessment Group,
the EPA, in November 1997, issued a Notice of Proposed Rulemaking which
identified 22 states and the District of Columbia as making significant
contribution to nonattainment of the ozone standard in "downwind states" in the
eastern half of the United States. The nonattainment of the "downwind states" is
based on the ozone standard established prior to the 1997 revisions discussed
below. In September 1998, the EPA issued its final rules in this proceeding.
Iowa is not subject to the emissions reduction requirements in the final rules,
and, as such, MidAmerican's facilities are not currently subject to additional
emissions reductions as a result of this initiative.

On July 18, 1997, the EPA adopted revisions to the NAAQS for ozone and a
new standard for fine particulate matter. Based on data to be obtained from
monitors located throughout the states, the EPA will make a determination of
whether the states have any areas that do not meet the air quality standards
(i.e., areas that are classified as nonattainment). If a state has area(s)
classified as nonattainment area(s), the state is required to submit a State
Implementation Plan specifying how it will reach attainment of the standards
through emission reductions or other means.

In December 1997, negotiators from more than 150 nations met in Kyoto,
Japan to negotiate an international agreement designed to address global climate
change impacts by attempting to reduce so-called greenhouse gas emissions. Some
scientists contend that these gases build up in the Earth's atmosphere and cause
global temperatures to rise. The primary target of these emissions is carbon
dioxide (CO2) which is formed by, among other things, the combustion of fossil
fuels. The agreement currently calls for the United States to reduce its
emissions of CO2 and other greenhouse gases to 7% below 1990 levels in the
2008-2012 time frame. The United States became a signatory to the agreement on
November 12, 1998. In order for the agreement to become binding upon the United
States, ratification by the U.S. Senate is necessary. The cost to the utility
industry in general, and to MidAmerican, of reducing its CO2

-22-
<PAGE>

emissions levels by 7% below 1990 levels would depend on available technology at
the time, but could be material.

Quad Cities Nuclear Power Station -

Quad Cities Station is operated by, and 75% owned by, Commonwealth Edison
Company (ComEd). On May 6, 1999, the Nuclear Regulatory Commission (NRC) advised
ComEd that it had classified Quad Cities Station in the NRC's Routine Oversight
category (the best of three NRC new categories) for nuclear power plants,
removing the station from the Trending (adversely) Letter status initiated in
January 1998. During the first six months of 1999, the station capacity factor
was in excess of 91%.

Generating Capability -

In July 1998, retail customer usage of electricity caused an hourly peak
demand of 3,643 MW on MidAmerican's energy system. Preliminary information
indicates that retail customer usage of electricity during the hot weather in
July 1999 has resulted in a new hourly peak demand on MidAmerican's energy
system of 3,844 MW. MidAmerican is interconnected with certain Iowa and
neighboring utilities and is involved in an electric power pooling agreement
known as Mid-Continent Area Power Pool (MAPP). Each MAPP participant is required
to maintain for emergency purposes a net generating capability reserve of at
least 15% above its system peak demand. MidAmerican was able to maintain its
capacity reserve requirement during the hot weather in July 1999 and was not
adversely affected by the resultant high prices in the off-system market.

MidAmerican believes it has adequate electric capacity reserve and
continues to manage its generating resources to ensure an adequate reserve in
the future. However, significantly higher-than-normal temperatures during the
cooling season could cause MidAmerican's reserve to fall below the 15% minimum.
If MidAmerican fails to maintain the appropriate reserve, significant penalties
could be contractually imposed by MAPP.

ACTIVITIES REGARDING YEAR 2000 DATE ISSUES

The following discussion of year 2000 issues describes MidAmerican's plans
to address technical problems relating to calculations, manipulations, storage
and other uses of date-sensitive data which could cause some computer-controlled
systems, applications and processes (hereinafter referred to as "Systems") to
incorrectly process critical financial and operational information, or stop
processing altogether. The discussion contains by necessity many forward-looking
statements. MidAmerican wishes to avail itself of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995, and in order to do so
includes the following meaningful cautionary statements with regard to the
forward looking statements of its year 2000 plans. MidAmerican's intentions,
expectations, and predictions relating to its year 2000 efforts are subject to
risks and uncertainties that could cause actual results to differ materially
from those expressed in, or implied by, such statements. Such risks and
uncertainties include, among others, the effects of weather, federal and state
regulatory actions, and other matters, many of which are beyond MidAmerican's
control. In addition, MidAmerican claims the full protections established by the
Year 2000 Information and Readiness Disclosure Act for Year 2000 Statements and
Year 2000 Readiness Disclosure.

Project Description -

MidAmerican has undertaken an extensive ongoing project to address its
information technology (IT) and non-IT (including embedded technology) Systems
potentially affected by the year 2000 date change. MidAmerican's approach is
based on a five-phase project methodology - inventory, assessment, planning,
resolution and implementation - designed to result in the identification and
evaluation of

-23-
<PAGE>

potential problems, and remediation of MidAmerican's Systems. MidAmerican
generally defines the five phases as follows:

1. Inventory Phase - The purpose of the inventory phase is to identify and
document Systems used by MidAmerican that may have a date-sensitive function.

2. Assessment Phase - The purpose of the assessment phase is to collect
information about inventoried Systems, including the business and technical
context in which individual Systems operate, to make an informed judgment
concerning an appropriate plan to mitigate year 2000 related risks.

3. Planning Phase - The purpose of the planning phase is to develop
strategic and tactical plans for Systems that require replacement, repairs,
upgrades or other appropriate actions (collectively referred to as "remedial
actions").

4. Resolution Phase - The purpose of the resolution phase is to execute the
plan developed during the preceding phases. Testing of Systems and/or components
of Systems, as well as any preceding or subsequent remedial action, is commenced
during this phase.

5. Implementation Phase - The purpose of the implementation phase is to
examine the Systems to determine whether they will function adequately in a
production environment and to perform follow-up administrative tasks as required
to develop appropriate documentation in support of year 2000 readiness.
MidAmerican classifies all Systems ranging from low- to high-priority based on
their importance to carrying out MidAmerican's business mission. System priority
is based on potential impacts resulting from year 2000 problems on public and
employee safety, prolonged and widespread service outages, long-term shareholder
value, and ability to comply with regulatory requirements. In the case of
low-priority Systems, year 2000 readiness may be delayed beyond January 1, 2000,
or perhaps indefinitely. MidAmerican plans to use the last six months of 1999 to
perform post-implementation testing, address selected lower priority Systems and
conduct preparedness exercises.

Vendors, customers and other third parties may affect MidAmerican's ability
to achieve year 2000 readiness. Because service reliability and financial
stability are dependent on MidAmerican's supply chain, a concerted effort is
being made to investigate important third parties to assess their ability to
continue to supply products or services to, or purchase products or services
from, MidAmerican.

State of Readiness -

Due to factors such as the overlapping nature of the project phases and the
varying degree of complexity of the Systems being addressed, it is difficult to
accurately determine the status of completion of a particular phase of the
project at any given point in time. MidAmerican uses three methods to measure
the status of project completion:

1. As an entity with public utility operations, MidAmerican must comply
with certain year 2000 regulatory requirements imposed by the North
American Electric Reliability Council (NERC). NERC reporting data is
limited primarily to Systems that are directly associated with
transmission grid stability. The transmission grid consists of the
interconnected transmission systems of North American utilities.
Reporting categories include nuclear generation, non-nuclear
generation, Energy Management Systems and Supervisory Control and Data
Acquisition (SCADA) system, telecommunications systems, substation
controls and system protection, and IT business information systems.
MidAmerican reported in its July compliance filing with NERC that it
is "100% Y2K Ready" on systems considered mission-critical by NERC
definition.

2. A "checklist" approach is used to monitor the completion status of
each System that is unique to a given organizational group. For
example, identical substation meters may be located in several

-24-
<PAGE>

individual substations, but the meter is counted as only one System.
All Systems are viewed as equivalent, regardless of priority, in the
checklist approach. Systems are categorized as complete or not
complete, without regard to percentage of completion of the System in
total or percentage of completion of any particular phase of the
project. As of July 30, 1999, there were 5,554 separate Systems in
MidAmerican's inventory. Of these, 5,510, or 99%, had been completed.

3. MidAmerican's internally developed measure is more sensitive than the
methods discussed above and is based on business risk/priority,
weighted tasks and weighted phases. Only high- and
medium-risk/priority Systems are included in the status of completion
calculation. The data related to Systems that could impact grid
stability pertains only to those Systems that directly affect
MidAmerican's customers. Also, progress toward completion is measured.
As of July 30, 1999, MidAmerican as a whole is generally in the
resolution phase. Percentage of completion for six areas of business
operations is a follows:

A. IT - Applications: 90-95% complete
B. IT - Operations & Infrastructure: 95-100% complete
C. Generation: 95-100% complete
D. Energy Delivery: 95-100% complete
E. Retail: 90-95% complete
F. Corporate Services (excluding IT): 95-100% complete

The investigation of supply chain issues consists of documenting the nature
of business relationships in correspondence, surveys and meetings with third
parties and making determinations regarding their year 2000 readiness status
based on the responses received. MidAmerican has initiated contact with vendors
and business partners it considers to represent a significant financial or
operational risk if they were to experience year 2000 problems. In addition,
interconnected utilities and wholesale customers, as well as high-volume retail
customers, have been contacted for the purpose of reviewing the status of their
year 2000 readiness efforts. To date, information made available to MidAmerican
has not been uniform in terms of quality and quantity. Although none of the
information has suggested that the year 2000 readiness efforts of these vendors,
business partners and customers have been inadequate, MidAmerican intends to
maintain ongoing communications with some third parties through the last half of
1999. MidAmerican will also continue monitoring information about specific
products in MidAmerican's inventory.

Costs -

As of June 30, 1999 approximately $9.3 million in operating expenses have
been incurred to carry out year 2000 activities. It is anticipated that up to
$5.7 million in additional operating expenses and capital costs will need to be
incurred to complete the project. Although additional unforeseen costs may be
incurred, at this time MidAmerican has not become aware of any material costs
which may arise in order to achieve year 2000 readiness. Future progress toward
achievement of year 2000 readiness could change this outlook.

MidAmerican has renovated or replaced several high-priority Systems (e.g.,
management information, materials management information, work management
information, customer service, electric outage management, meter control and
inventory, and others) to gain enhanced functionalities. For example, the
development and installation of a new customer service system (CSS) and related
applications was an outcome of the merger which created MidAmerican in July of
1995. Although potential year 2000 problems existing in the predecessor
companies' CSS products were recognized, the decision to implement the new CSS
was primarily in response to integration difficulties and the need for
additional application functionalities. The costs of these renovations and
replacements are not reported herein as their development and installation was
not driven by year 2000 concerns.

-25-
<PAGE>

Contingency Plans -

A contingency plan identifying credible worst-case scenarios is being
developed. The contingency plan is comprised of both mitigation and recovery
aspects. Mitigation entails planning to reduce the impact of unresolved year
2000 problems, and recovery entails planning to restore services in the event
that year 2000 problems occur. MidAmerican's contingency plan is under final
review by senior management. Although the plan is substantially complete, it
will be refined throughout the remainder of the year based on results of
contingency planning drills and changes in circumstances.

Although a number of factors come into play in defining reasonably likely
worst case scenarios, the loss of voice and data communications, volatile load
patterns, and inability to control generation and/or return generation units to
service are viewed as the most serious threats. The relative seriousness of
these threats is based on recognition that the occurrence of any of these types
of problems could have an immediate and significant effect on service
reliability and financial performance.

MidAmerican participated in a contingency planning drill coordinated by
NERC on April 9, 1999. The drill focused on managing problems resulting from a
simulated partial loss of voice and data communications services. MidAmerican
also plans to participate in a second NERC-coordinated drill, which has been
scheduled to take place on September 8-9, 1999. It is likely that additional
drills will be conducted at MidAmerican's own discretion, as well.

Risks -

Despite the comprehensive nature of MidAmerican's year 2000 project and the
results the project is designed to produce, MidAmerican may experience random,
widespread and simultaneous failures in its generation, distribution and Systems
during year 2000 transition periods. Contingency plans for any known or
reasonably anticipated risk of interruption to the generation or distribution of
energy are being developed to plan for resources needed to be put in place to
reduce the potential outage period to a minimum. Although the impact on future
operations and revenues is unknown, failure of MidAmerican's Systems to perform
because of year 2000 implications could result in operating problems and costs
material to MidAmerican.

Although management believes the project will be completed sufficiently in
advance of January 1, 2000, unforeseen and other factors could cause delays in
the project, the results of which may have a material effect on MidAmerican's
results of operations. In addition, there is no assurance that MidAmerican will
not be affected by year 2000 problems experienced by third parties.

ACCOUNTING ISSUES

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
133, "Accounting for Derivative Instruments and Hedging Activities", which was
delayed by SFAS 137 and is effective for fiscal years beginning after June 15,
2000. SFAS 133 requires an entity to recognize all of its derivatives as either
assets or liabilities in its statement of financial position and measure those
instruments at fair value. The Company is in the process of evaluating the
impact of this accounting standard.

-26-

<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------

MidAmerican and its subsidiaries have no material legal proceedings except
for the following:

Environmental Matters
- ---------------------

For information relating to MidAmerican's Environmental Matters, reference
is made to Part I, Note B of Notes to Consolidated Financial Statements.

Cooper Litigation
- -----------------

On July 23, 1997, NPPD filed a Complaint, in the United States District
Court for the District of Nebraska, naming MidAmerican as the defendant and
seeking declaratory judgment as to three issues under the parties' long-term
power purchase agreement for Cooper capacity and energy. More specifically, NPPD
seeks a declaratory judgment in the following respects: (1) that MidAmerican is
obligated to pay 50% of all costs and expenses associated with decommissioning
Cooper, and that in the event NPPD continues to operate Cooper after expiration
of the power purchase agreement (September 2004), MidAmerican is not entitled to
reimbursement of any decommissioning funds it has paid to date or will pay in
the future; (2) that the current method of allocating transition costs as a part
of the decommissioning cost is proper under the power purchase agreement; and
(3) that the current method of investing decommissioning funds is proper under
the power purchase agreement.

MidAmerican filed its answer and contingent counterclaims. The contingent
counterclaims filed by MidAmerican are generally as follows: (1) that
MidAmerican has no duty under the power purchase agreement to reimburse or pay
50% of the decommissioning costs unless certain conditions occur; (2) that NPPD
has the duty to repay all amounts that MidAmerican has prefunded for
decommissioning in the event NPPD operates the plant after the term of the power
purchase agreement; (3) that NPPD is equitably estopped from continuing to
operate the plant after the term of the power purchase agreement; (4) that NPPD
has granted MidAmerican an option to continue taking 50% of the power from the
plant; (5) that the term "monthly power costs" as defined in the power purchase
agreement does not include costs and expenses associated with decommissioning
the plant; (6) that MidAmerican has no duty to pay for nuclear fuel, O&M
projects or capital improvements that have useful lives after the term of the
power purchase agreement; (7) that transition costs are not included in any
decommissioning costs and expenses; (8) that NPPD has breached its duty to
MidAmerican in making investments of certain funds; (9) that reserves in certain
accounts are excessive and should be refunded to MidAmerican; and (10) that NPPD
must credit MidAmerican for certain payments by MidAmerican for low-level
radioactive waste disposal.

MidAmerican and NPPD are currently involved in discovery. The trial in this
case is presently scheduled for November 1999. MidAmerican is vigorously
defending and pursuing its interest in this proceeding.

North Star Steel Company
- ------------------------

On December 8, 1997, North Star Steel Company (NSS), a retail MidAmerican
electric customer, filed a Complaint in the United States District Court for the
Southern District of Iowa naming MHC and MidAmerican as defendants. The
Complaint alleged that MidAmerican's refusal to allow NSS to obtain retail
electric service from an unspecified alternative energy company amounted to a
violation of federal antitrust laws. NSS sought to recover an unspecified level
of damages, and to require MidAmerican to provide retail wheeling service so
that NSS could obtain electricity from an unnamed supplier. On June 23, 1998,
the District Court issued an Order Granting Summary Judgment in favor of
MidAmerican.

-27-
<PAGE>

On July 20, 1998, NSS appealed that decision to the United States Court of
Appeals for the Eighth Circuit. On July 7, 1999, the United States Court of
Appeals for the Eighth Circuit affirmed the District Court grant of summary
judgment in favor of MidAmerican. NSS has indicated it plans to appeal this
decision. In a related matter NSS unsuccessfully appealed to the Iowa District
Court an Iowa Utilities Board declaratory ruling that was favorable to
MidAmerican. NSS now has pending before the Iowa Supreme Court an appeal of that
adverse decision.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------

(A) EXHIBITS

Exhibits Filed Herewith
- -----------------------

Exhibit 12 - Computation of ratios of earnings to fixed charges and
computation of ratios of earnings to fixed charges plus
preferred dividend requirements.

Exhibit 15 - Awareness Letter of Independent Accountants

Exhibit 27 - Financial Data Schedules (for electronic filing only).

(B) REPORTS ON FORM 8-K

None.

-28-

<PAGE>

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.

MIDAMERICAN ENERGY COMPANY
-------------------------------------------------
(Registrant)

Date August 13, 1999 /s/ Patrick J. Goodman
------------------- -------------------------------------------------
Patrick J. Goodman
Senior Vice President and Chief Financial Officer

-29-
<PAGE>

EXHIBIT INDEX

Exhibit No.
- -----------

12 Computation of ratios of earnings to fixed charges and computation of
ratios of earnings to fixed charges plus preferred dividend requirements.

15 Awareness Letter of Independent Accountants

27 Financial Data Schedules (for electronic filing only).

-30-

EXHIBIT 12
MIDAMERICAN ENERGY COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>

Twelve Months Ended Twelve Months Ended
June 30, 1999 December 31, 1998
-------------------------------- -------------------------------
Supplemental (a) Supplemental (a)
-------------------- ---------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations ...................... $110,570 $ -- $110,570 $115,593 $ -- $115,593
-------- -------- -------- -------- ------- --------

Add (Deduct):
Total income taxes ..................................... 69,355 -- 69,355 76,042 -- 76,042
Interest on long-term debt ............................. 68,155 2,628 70,783 70,193 2,931 73,124
Other interest charges ................................. 15,517 -- 15,517 14,128 -- 14,128
Preferred stock dividends of subsidiary trust .......... 7,980 -- 7,980 7,980 -- 7,980
Interest on leases ..................................... 195 -- 195 212 -- 212
-------- -------- -------- --------- ------- --------
161,202 2,628 163,830 168,555 2,931 171,486
-------- -------- -------- --------- ------- --------

Earnings available for fixed charges ............... 271,772 2,628 274,400 284,148 2,931 287,079
-------- -------- -------- --------- ------- --------

Fixed Charges:
Interest on long-term debt ............................. 68,155 2,628 70,783 70,193 2,931 73,124
Other interest charges ................................. 15,517 -- 15,517 14,128 -- 14,128
Preferred stock dividends of subsidiary trust .......... 7,980 -- 7,980 7,980 -- 7,980
Interest on leases ..................................... 195 -- 195 212 -- 212
-------- -------- -------- --------- ------- --------
Total fixed charges ................................ 91,847 2,628 94,475 92,513 2,931 95,444
-------- -------- -------- --------- ------- --------

Ratio of earnings to fixed charges ..................... 2.96 -- 2.90 3.07 -- 3.01
======== ======== ======== ========= ======= ========

Preferred stock dividends .............................. $ 4,954 $ -- $ 4,954 $ 4,952 $ -- $ 4,952
Ratio of net income before income taxes to net income .. 1.6272 -- 1.6272 1.6578 -- 1.6578
-------- -------- -------- --------- ------- --------
Preferred stock dividend requirements before income tax 8,061 -- 8,061 8,209 -- 8,209
-------- -------- -------- --------- ------- --------
Fixed charges plus preferred stock dividend requirements 99,908 2,628 102,536 100,722 2,931 103,653
-------- -------- -------- --------- ------- --------

Ratio of earnings to fixed charges plus preferred stock
dividend requirements (pre-income tax basis) ......... 2.72 -- 2.68 2.82 -- 2.77
======== ======== ======== ========= ======== ========
</TABLE>

Note: (a) Amounts in the supplemental columns are to reflect the Company's
portion of the net interest component of payments to Nebraska Public Power
District under a long-term purchase agreement for one-half of the plant capacity
from Cooper Nuclear Station.

-1-
<PAGE>

Twelve Months Ended Twelve Months Ended
December 31, 1997 December 31,1996
-------------------------------- -------------------------------
Supplemental (a) Supplemental (a)
---------------------- ------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations ...................... $125,941 $ -- $125,941 $165,132 $ -- $165,132
-------- -------- -------- -------- -------- --------

Add (Deduct):
Total income taxes ..................................... 76,317 -- 76,317 112,927 -- 112,927
Interest on long-term debt ............................. 78,120 3,760 81,880 79,434 3,615 83,049
Other interest charges ................................. 10,027 -- 10,027 10,842 -- 10,842
Preferred stock dividends of subsidiary trust .......... 7,980 -- 7,980 288 -- 288
Interest on leases ..................................... 268 -- 268 375 -- 375
-------- -------- -------- -------- -------- --------
172,712 3,760 176,472 203,866 3,615 207,481
-------- -------- -------- -------- -------- --------

Earnings available for fixed charges ............... 298,653 3,760 302,413 368,998 3,615 372,613
-------- -------- -------- -------- -------- --------

Fixed Charges:
Interest on long-term debt ............................. 78,120 3,760 81,880 79,434 3,615 83,049
Other interest charges ................................. 10,027 -- 10,027 10,842 -- 10,842
Preferred stock dividends of subsidiary trust .......... 7,980 -- 7,980 288 -- 288
Interest on leases ..................................... 268 -- 268 375 -- 375
-------- -------- -------- -------- -------- --------
Total fixed charges ................................ 96,395 3,760 100,155 90,939 3,615 94,554
-------- -------- -------- -------- -------- --------

Ratio of earnings to fixed charges ..................... 3.10 -- 3.02 4.06 -- 3.94
======== ======== ======== ======== ======== ========

Preferred stock dividends .............................. $ 6,488 $ -- $ 6,488 $ 10,401 $ -- $ 10,401
Ratio of net income before income taxes to net income .. 1.6060 -- 1.6060 1.6839 -- 1.6839
-------- -------- -------- -------- -------- --------
Preferred stock dividend requirements before income tax 10,420 -- 10,420 17,514 -- 17,514
-------- -------- -------- -------- -------- --------
Fixed charges plus preferred stock dividend requirements 106,815 3,760 110,575 108,453 3,615 112,068
-------- -------- -------- -------- -------- --------

Ratio of earnings to fixed charges plus preferred stock
dividend requirements (pre-income tax basis) ......... 2.80 -- 2.73 3.40 -- 3.32
======== ======== ======== ======== ======== ========
</TABLE>

-2-

<PAGE>

Twelve Months Ended Twelve Months Ended
December 31,1995 December 31, 1994
------------------------------ -------------------------------
Supplemental (a) Supplemental (a)
--------------------- ---------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations ...................... $132,489 $ -- $132,489 $121,145 $ -- $121,145
-------- -------- -------- -------- -------- --------

Add (Deduct):
Total income taxes ..................................... 84,098 -- 84,098 66,759 -- 66,759
Interest on long-term debt ............................. 80,133 4,595 84,728 73,922 5,428 79,350
Other interest charges ................................. 9,396 -- 9,396 6,639 -- 6,639
Preferred stock dividends of subsidiary trust .......... -- -- -- -- -- --
Interest on leases ..................................... 1,088 -- 1,088 1,211 -- 1,211
-------- -------- -------- -------- -------- --------
174,715 4,595 179,310 148,531 5,428 153,959
-------- -------- -------- -------- -------- --------

Earnings available for fixed charges ............... 307,204 4,595 311,799 269,676 5,428 275,104
-------- -------- -------- -------- -------- --------

Fixed Charges:
Interest on long-term debt ............................. 80,133 4,595 84,728 73,922 5,428 79,350
Other interest charges ................................. 9,396 -- 9,396 6,639 -- 6,639
Preferred stock dividends of subsidiary trust .......... -- -- -- -- -- --
Interest on leases ..................................... 1,088 -- 1,088 1,211 -- 1,211
-------- -------- -------- -------- -------- --------
Total fixed charges ................................ 90,617 4,595 95,212 81,772 5,428 87,200
-------- -------- -------- -------- -------- --------

Ratio of earnings to fixed charges ..................... 3.39 -- 3.27 3.30 -- 3.15
======== ======== ======== ======== ======== ========

Preferred stock dividends .............................. $ 8,059 $ -- $ 8,059 $ 10,551 $ -- $ 10,551
Ratio of net income before income taxes to net income .. 1.6348 -- 1.6348 1.5511 -- 1.5511
-------- -------- -------- -------- -------- --------
Preferred stock dividend requirements before income tax 13,175 -- 13,175 16,366 -- 16,366
-------- -------- -------- -------- -------- --------
Fixed charges plus preferred stock dividend requirements 103,792 4,595 108,387 98,138 5,428 103,566
-------- -------- -------- -------- -------- --------

Ratio of earnings to fixed charges plus preferred stock
dividend requirements (pre-income tax basis) ......... 2.96 -- 2.88 2.75 -- 2.66
======== ======== ======== ======== ======== ========
</TABLE>

-3-

EXHIBIT 15

MidAmerican Energy Company
Des Moines, Iowa

We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited consolidated interim
financial information of MidAmerican Energy Company and subsidiaries for the
three-month and six-month periods ended June 30, 1999 as indicated in our report
dated July 23, 1999; because we did not perform an audit, we expressed no
opinion on that information.

We are aware that our report referred to above, which is included in your
Quarterly report on Form 10-Q for the quarter ended June 30, 1999, is
incorporated by reference in Registration Statement No. 333-15387 on Form S-3.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered part of a Registration Statement
prepared or certified by an accountant or a report prepared or certified by an
accountant within the meaning of Sections 7 and 11 of that Act.

DELOITTE & TOUCHE LLP

Des Moines, Iowa
August 13, 1999

-31-

<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of MidAmerican Energy Company as of June 30, 1999,
and the related consolidated statements of income and cash flows for the six
months ended June 30, 1999, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000928576
<NAME> MIDAMERICAN ENERGY COMPANY
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,624,734
<OTHER-PROPERTY-AND-INVEST> 210,930
<TOTAL-CURRENT-ASSETS> 232,310
<TOTAL-DEFERRED-CHARGES> 279,489
<OTHER-ASSETS> 166,221
<TOTAL-ASSETS> 3,513,684
<COMMON> 560,562
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 418,975
<TOTAL-COMMON-STOCKHOLDERS-EQ> 979,537
150,000
31,759
<LONG-TERM-DEBT-NET> 759,784
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 149,900
<LONG-TERM-DEBT-CURRENT-PORT> 170,773
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,271,931
<TOT-CAPITALIZATION-AND-LIAB> 3,513,684
<GROSS-OPERATING-REVENUE> 846,589
<INCOME-TAX-EXPENSE> 30,449<F1>
<OTHER-OPERATING-EXPENSES> 654,809
<TOTAL-OPERATING-EXPENSES> 654,809
<OPERATING-INCOME-LOSS> 125,254
<OTHER-INCOME-NET> (3,692)
<INCOME-BEFORE-INTEREST-EXPEN> 121,562
<TOTAL-INTEREST-EXPENSE> 44,577
<NET-INCOME> 46,536
2,477
<EARNINGS-AVAILABLE-FOR-COMM> 44,059
<COMMON-STOCK-DIVIDENDS> 36,706
<TOTAL-INTEREST-ON-BONDS> 33,107
<CASH-FLOW-OPERATIONS> 189,268
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> Income Tax Expense includes operating and nonoperating income
taxes and is excluded from Total Operating Expenses above and on the
Consolidated Statement of Income.
</FN>

</TABLE>

<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of MidAmerican Energy Company as of June 30, 1998,
and the related consolidated statements of income and cash flows for the six
months ended June 30, 1998, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000928576
<NAME> MIDAMERICAN ENERGY COMPANY
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,606,322
<OTHER-PROPERTY-AND-INVEST> 126,195
<TOTAL-CURRENT-ASSETS> 287,471
<TOTAL-DEFERRED-CHARGES> 311,979
<OTHER-ASSETS> 176,021
<TOTAL-ASSETS> 3,507,988
<COMMON> 560,562
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 417,065
<TOTAL-COMMON-STOCKHOLDERS-EQ> 977,627
150,000
31,760
<LONG-TERM-DEBT-NET> 929,327
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 41,500
<LONG-TERM-DEBT-CURRENT-PORT> 199,351
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,178,423
<TOT-CAPITALIZATION-AND-LIAB> 3,507,988
<GROSS-OPERATING-REVENUE> 822,772
<INCOME-TAX-EXPENSE> 37,136<F1>
<OTHER-OPERATING-EXPENSES> 651,362
<TOTAL-OPERATING-EXPENSES> 651,362
<OPERATING-INCOME-LOSS> 134,448
<OTHER-INCOME-NET> (1,596)
<INCOME-BEFORE-INTEREST-EXPEN> 132,852
<TOTAL-INTEREST-EXPENSE> 44,157
<NET-INCOME> 51,559
2,475
<EARNINGS-AVAILABLE-FOR-COMM> 49,084
<COMMON-STOCK-DIVIDENDS> 57,200
<TOTAL-INTEREST-ON-BONDS> 35,145
<CASH-FLOW-OPERATIONS> 235,699
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> Income Tax Expense includes operating and nonoperating income
taxes and is excluded from Total Operating Expenses above and on the
Consolidated Statement of Income.
</FN>

</TABLE>