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EXHIBIT 10.2
 
STIPULATION AND AGREEMENT

Dated December __, 2004

Article I Introduction

On October 17, 2003, the Iowa Utilities Board (“Board”) issued an “Order
Approving Stipulation and Agreement” in Docket No. RPU-03-l. In that decision
the Board approved ratemaking principles pursuant to Iowa Code Section
476.53 for MidAmerican Energy Company’s (“MidAmerican” or “Company”) proposed
310 megawatt (MW) wind-powered generating project MidAmerican had committed to
the development of wind resources in response to public policy pronouncements.
The Honorable Thomas J. Vilsack, Governor of the state of Iowa, established a
goal of 1000 megawatts (MW) of renewable energy (such as wind power) in the
state by 2010. The Honorable Rod Blagojevich, Governor of the state of Illinois,
and members of the South Dakota Public Utilities Commission have also urged the
development of more renewable energy in the Midwest.

MidAmerican is currently constructing the 310 MW wind generating project.
MidAmerican anticipates that it will complete approximately 160 MW of the wind
generating project prior to the end of 2004, with the balance of the project
slated for completion prior to the fourth quarter of 2005.

MidAmerican has determined that it would be beneficial to the Company and its
customers to pursue an expansion of the 310 MW wind generating project by up to
90 MW (“Expansion Project”) at this time because of the following factors:

 
(a)
The 310 MW wind generating project is progressing well;
       
(b) 
One or both of the sites where construction is currently occurring should
support the Expansion Project;

 

 
(c)
From a transmission/interconnection, landowner and substation perspective the
Expansion Project is likely to require only a relatively small incremental
investment;
       
(d)
The federal production tax credit for wind energy projects is scheduled to
expire on January 1, 2006; and
       
(e)
The anticipated incremental revenues generated by the Expansion Project are in
excess of incremental expansion costs. The Expansion Project size will be
determined by MidAmerican following the completion of wind turbine siting
studies and regional transmission reliability analysis.

The Office of Consumer Advocate (“OCA’) supports the Expansion Project and
concurs with the ratemaking principles specified below.
 
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Article II - Purpose

This Stipulation has been prepared and executed by the signatories for the
purpose of stipulating to their mutually-agreed position in the ratemaking
principles case regarding the Expansion Project, to be commenced by MidAmerican
pursuant to Section 476.53 of the Iowa Code. MidAmerican commits to commencing
such case as soon as feasible after executing this Stipulation.

In consideration of the mutual agreements set forth, the signatories stipulate
that the Board should issue an order that allows the terms and provisions of
this Stipulation to be fully implemented.

Terms:

1.
The signatories to this Stipulation agree to support the Expansion Project with
the following ratemaking principles:

 
a.
Cost Cap. The Iowa jurisdictional portion of MidAmerican’s prudently incurred
capital costs, operation and maintenance expenses and other actual costs of the
Expansion Project shall be included in MidAmerican’s regulated electric rates.
MidAmerican shall be permitted to include in rates the actual costs of the
Expansion Project, up to the Iowa jurisdictional portion of $1.3 million per MW
installed (inclusive of associated costs necessary for the reliable integration
of the Expansion Project into the MidAmerican delivery system), without the need
to establish prudence or reasonableness. MidAmerican anticipates installing up
to 90 MW of additional wind capacity. MidAmerican shall be required to establish
the prudence and reasonableness of any Expansion Project costs in excess of the
foregoing calculated per MW amount before the Iowa jurisdictional portion of
such excess can be included in rates.

 

 
b.
Depreciation. The depreciation life of the Expansion Project for ratemaking
purposes shall be 20 years.
       
c.
Return on Equity. The allowed return on common equity investment (ROE) on the
portion of the Expansion Project included in Iowa electric rate base shall be
12.2%.
 
d.
Renewable Energy and Carbon Tax Credits. The Iowa jurisdictional portion of any
revenues from the sale of renewable energy credits and carbon dioxide credits
associated with the Expansion Project shall be recorded above-the-line by
MidAmerican in the accounts specified in Appendix 2 and included in the revenue
sharing calculations of items “g” and “h” of the Stipulation and Settlement in
Docket RPU-03-1 and the revenue sharing calculation for calendar year 2011 as
provided in Term 2(a) hereof.
        e.
Federal Production Tax Credit. The Iowa jurisdictional portion of any federal
production tax credits associated with the Expansion Project shall be recorded
above-the-line by MidAmerican in the accounts specified in Appendix 2 and
included in the revenue sharing calculations of items “g” and “h” of the
Stipulation and Settlement in Docket RPU-03-l and the revenue sharing
calculation for calendar year 2011 as provided in Term 2(a) hereof.
     

 
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f.
Wholesale Sales Revenue. The Iowa jurisdictional portion of wholesale sales
revenue associated with all generating units included in MEC’s Iowa
jurisdictional electric rate base (including the wind power facilities of the
Expansion Project) shall be recorded above-the-line in the accounts specified in
Appendix 2 and included in the revenue sharing calculations of items “g” and “h”
of the Stipulation and Settlement in Docket RPU-03-1 and the revenue sharing
calculation for calendar year 2011 as provided in Term 2(a) hereof.
     

 
2.
The signatories to this Stipulation agree to support the Expansion Project with
the following ratemaking provisions:

 

 
a.
Revenue Sharing 2011. Revenue sharing as approved by the Board in its
October 17, 2003, “Order Approving Stipulation and Agreement,” in Docket No.
RPU-03-l for the years 2006-2010 shall continue throughout 2011, except with
respect to the method for crediting customers for any revenue sharing benefits.
The customers’ share of any revenue sharing for 2011 earnings will be returned
to the customers in 2012 through a bill-crediting mechanism approved by the
Board in accordance with the methodology set out in the enclosed Attachment.
     

 

 
b.
Restrictions on General Rate Increases. MidAmerican commits not to seek any
general rate increase in Iowa electric base rates to become effective during
2011, unless its Iowa jurisdictional return on equity on electric operations for
calendar year 2010 falls below 10%. This provision shall not be interpreted to
prevent the implementation, prior to December 31, 2011, of any electric rate or
tariff changes approved by the Board in Docket No. RPU-04-2 and associated
dockets.
       
c.
Restrictions on Show Cause Filings. The OCA commits not to seek any decrease in
Iowa electric base rates to become effective before January 1, 2012.

 
Article III - Joint Motion

The signatories shall jointly file this Stipulation and Agreement in the
ratemaking principles proceeding for the Expansion Project to be commenced by
MidAmerican pursuant to Section 476.53. The signatories shall also file with the
Board a joint motion requesting that the Board accept this Stipulation and
Agreement without condition or modification.

Article IV - Condition Precedent

This Stipulation shall not become effective unless and until the Board accepts
the same in its entirety without condition or modification.

Article V - Privilege and Limitation

This Stipulation and Agreement is made pursuant to Iowa Code §17A.l0 and 199
I.A.C. §7.2(11). The Stipulation and Agreement shall become binding upon the
signatories upon its execution; provided, however, that if this Stipulation and
Agreement does not become effective in accordance with Article IV above, it
shall be null, void and privileged. This Stipulation and Agreement is intended
to relate only to the specific matters referenced herein, and no signatory
waives any claim or right that it may otherwise have with respect to any matter
not expressly provided for herein. Except as expressly provided in this
Stipulation and Agreement, no signatory shall be deemed to have approved,
accepted, agreed or consented to any ratemaking principle, any method of cost of
service determination, or any method of cost allocation underlying the
provisions of this Stipulation and Agreement or be prejudiced or bound thereby
in any other current or future proceeding before any agency. This Stipulation
and Agreement shall not, directly or indirectly, be referred to as precedent in
any other current or future proceeding before the Board.
 
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Article VI - Execution

To facilitate and expedite execution, the Stipulation and Agreement may be
executed by the signatories in multiple conformed copies which, when the
original signature pages are consolidated into a single document, shall
constitute a fully-executed document binding upon all the signatories to be
filed with the Board. The facsimile signatures of the signatories shall be
deemed to constitute original signatures, and facsimile copies hereof shall be
deemed to constitute duplicate originals.

Article VII - Modification and Amendment

This Stipulation and Agreement shall not be amended or modified except by an
instrument in writing signed by all signatories.

Article VIII - Term

1.
Unless terminated earlier by operation of paragraph 2 of this Article, this
Stipulation and Agreement shall terminate January 1, 2012, except for MEC’s
responsibility for revenue sharing for the year 2011 and except for items “a”
through “f” of the “Term” section in Article II that shall remain in effect as
long as the wind power facilities of the Expansion Project continue to provide
regulated electric service to Iowa consumers.

 

   
2.
This Stipulation and Agreement and the obligations of the signatories shall
terminate if:
   

 
a.
the Board does not approve the terms of this Stipulation and Agreement;
           
b.
MidAmerican is unable to secure access to sufficient transmission for the
Expansion Project; or
           
c.
On or before March 1, 2005, MidAmerican determines that it is not likely to
secure acceptable contracts that will result in the Expansion Project obtaining
revenues in excess of costs.
 

3.
In the event of termination pursuant to the preceding subparagraph, MidAmerican
shall be permitted to record as above-the-line expenses an amortization over a
5-year period of all reasonable costs of the Expansion Project, including
cancellation costs, but shall not be entitled to recover a return on such costs.

Article XI - Binding Nature

This Stipulation and Agreement shall be binding on the signatories. The
signatories shall take no actions directly or indirectly to eliminate or
otherwise limit the scope or effect of this Stipulation and Agreement throughout
its term.
 
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Article X - Further Assurances

The signatories agree to cooperate in order to effectuate the full and complete
intent of the signatories as expressed in this Stipulation and Agreement.
 
Article XI - Entire Agreement

This Stipulation and Agreement contains the entire agreement between the
signatories. There are no additional terms, whether consistent or inconsistent,
oral or written, that have not been incorporated into this Stipulation and
Agreement.
 
 

 MIDAMERICAN ENERGY COMPANY       OFFICE OF CONSUMER ADVOCATE                
/s/ Todd M. Raba     /s/ John R. Perkins  Name:  Todd M. Raba     Name:  John R.
Perkins Date:  12/20/04     Date:  12/20/04

 

 
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