UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 [X]
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
 
 For the
quarterly period ended March 31, 2009
 
 or
 
 [  ]
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
 
 For the
transition period from _________to _________
 
 Commission
              
              Exact
      name of registrant as specified in its charter;
              
              IRS
      EmployerFile
      Number
              
              State
      or other jurisdiction of incorporation or
    organization
              
              Identification No.333-90553
              
              MIDAMERICAN
      FUNDING, LLC
              
              47-0819200(An
      Iowa Limited Liability Company)666
      Grand Avenue, Suite 500Des
      Moines, Iowa 50309-2580333-15387
              
              MIDAMERICAN
      ENERGY COMPANY
              
              42-1425214(An
      Iowa Corporation)666
      Grand Avenue, Suite 500Des
      Moines, Iowa 50309-2580(515)
      242-4300(Registrant’s
      telephone number, including area code)N/A(Former
      name, former address and former fiscal year, if changed since last
      report)
 
 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 registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
 
 MidAmerican Funding, LLC
              Yes
      £ No
      T
              
              MidAmerican Energy Company
              Yes
      T  No
      £
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
 
 MidAmerican Funding, LLC
              Yes
      £ No
      £
              
              MidAmerican Energy Company
              Yes
      £  No
      £
 
 Indicate
by check mark whether the registrants are large accelerated filers, accelerated
filers, non-accelerated filers or smaller reporting companies. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
      accelerated filer £
              Accelerated
      filer £
              Non-accelerated
      filer T
              Smaller
      reporting company £
 
 Indicate
by check mark whether either registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 Yes  £                      No  T
  
  
 All of
the member’s equity of MidAmerican Funding, LLC was held by its parent company,
MidAmerican Energy Holdings Company as of April 30, 2009.
 
 All
common stock of MidAmerican Energy Company is held by its parent company, MHC
Inc., which is a direct, wholly owned subsidiary of MidAmerican Funding, LLC. As
of April 30, 2009, 70,980,203 shares of MidAmerican Energy Company common
stock, without par value, were outstanding.
 
 MidAmerican
Funding, LLC (“MidAmerican Funding”) and MidAmerican Energy Company
(“MidAmerican Energy”) separately file this combined Form 10-Q. Information
relating to each individual registrant is filed by such registrant on its own
behalf. Except for its subsidiary, MidAmerican Energy makes no representation as
to information relating to any other subsidiary of MidAmerican
Funding.
 
 TABLE OF
CONTENTS
 
 
 PART
      IItem 1.
              Financial Statements
              3Item 2.
              Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
              24Item 3.
              Quantitative and Qualitative Disclosures About
      Market Risk
              32Item 4.
              Controls and Procedures
              32PART
      IIItem 1.
              Legal Proceedings
              33Item 1A.
              Risk Factors
              33Item 2.
              Unregistered Sales of Equity Securities and Use
      of Proceeds
              33Item 3.
              Defaults Upon Senior Securities
              33Item 4.
              Submission of Matters to a Vote of Security
      Holders
              33Item 5.
              Other Information
              33Item 6.
              Exhibits
              33Signatures
              
              34Exhibit Index
              
              35
 
  2
  
 PART
I
 
 
 Item 1.
                Financial
Statements
 
 
 MidAmerican Energy Company
and Subsidiary
 
 Report of Independent Registered Public Accounting
      Firm
                4Consolidated Balance Sheets
                5Consolidated Statements of
    Operations
                6Consolidated Statements of Cash
    Flows
                7Notes to Consolidated Financial
      Statements
                8MidAmerican Funding, LLC and
      SubsidiariesReport of Independent Registered Public Accounting
      Firm
                17Consolidated Balance Sheets
                18Consolidated Statements of
    Operations
                19Consolidated Statements of Cash
    Flows
                20Notes to Consolidated Financial
      Statements
                21
 
  3
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
 
 
 
 To the
Board of Directors and Shareholder
 MidAmerican
Energy Company
 Des
Moines, Iowa
 
 We have
reviewed the accompanying consolidated balance sheet of MidAmerican Energy
Company and subsidiary (the “Company”) as of March 31, 2009, and the
related consolidated statements of operations and cash flows for the three-month
periods ended March 31, 2009 and 2008. These interim financial statements
are the responsibility of the Company’s management.
 
 We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), 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 reviews, we are not aware of any material modifications that should be made
to such consolidated interim financial statements for them to be in conformity
with accounting principles generally accepted in the United States of
America.
 
 We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet and
consolidated statement of capitalization (not presented herein) of MidAmerican
Energy Company and subsidiary as of December 31, 2008, and the related
consolidated statements of operations, comprehensive income, cash flows, and
retained earnings for the year then ended prior to retrospective adjustment for
the adoption of FASB Statement No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (not presented
herein); and in our report dated February 27, 2009, we expressed an
unqualified opinion on those consolidated financial statements. We also audited
the adjustments described in Note 2 that were applied to retrospectively adjust
the December 31, 2008 consolidated balance sheet of MidAmerican Energy Company
and subsidiary (not presented herein). In our opinion, such adjustments are
appropriate and have been properly applied to the previously issued consolidated
balance sheet in deriving the accompanying retrospectively adjusted consolidated
balance sheet as of December 31, 2008.
 
 
 /s/
Deloitte & Touche LLP
 
 Des
Moines, Iowa
 May 8,
2009
 
  4
  MIDAMERICAN
ENERGY COMPANY AND SUBSIDIARY
 CONSOLIDATED BALANCE SHEETS (Unaudited)
 (In
millions)
 
 As
      ofMarch 31,
                      2009
                  
                  
                  December 31,
                      2008ASSETSUtility
      Plant, NetElectric
                  
                  $
                  9,024
                  
                  
                  $
                  8,952Gas
                  
                  
                  1,166
                  
                  
                  
                  1,15510,190
                  
                  
                  
                  10,107Accumulated
      depreciation and amortization
                  
                  
                  (3,500
                  )
                  
                  
                  (3,426
                  )6,690
                  
                  
                  
                  6,681Construction
      work in progress
                  
                  
                  236
                  
                  
                  
                  2336,926
                  
                  
                  
                  6,914Current
      AssetsCash
      and cash equivalents
                  
                  
                  7
                  
                  
                  
                  9Restricted
      cash and short-term investments
                  
                  
                  12
                  
                  
                  
                  15Receivables,
      net
                  
                  
                  399
                  
                  
                  
                  464Inventories
                  
                  
                  130
                  
                  
                  
                  158Other
                  
                  
                  156
                  
                  
                  
                  114704
                  
                  
                  
                  760Other
      AssetsInvestments
      and nonregulated property, net
                  
                  
                  387
                  
                  
                  
                  400Regulatory
      assets
                  
                  
                  322
                  
                  
                  
                  368Other
                  
                  
                  76
                  
                  
                  
                  78785
                  
                  
                  
                  846Total
      Assets
                  
                  $
                  8,415
                  
                  
                  $
                  8,520CAPITALIZATION
      AND LIABILITIESCapitalizationMidAmerican
      Energy common shareholder’s equity
                  
                  $
                  2,636
                  
                  
                  $
                  2,569Preferred
      securities
                  
                  
                  30
                  
                  
                  
                  30Noncontrolling
      interests
                  
                  
                  1
                  
                  
                  
                  1Long-term
      debt, excluding current portion
                  
                  
                  2,865
                  
                  
                  
                  2,8655,532
                  
                  
                  
                  5,465Current
      LiabilitiesShort-term
      debt
                  
                  
                  323
                  
                  
                  
                  457Accounts
      payable
                  
                  
                  292
                  
                  
                  
                  353Taxes
      accrued
                  
                  
                  82
                  
                  
                  
                  103Interest
      accrued
                  
                  
                  28
                  
                  
                  
                  44Other
                  
                  
                  93
                  
                  
                  
                  100818
                  
                  
                  
                  1,057Other
      LiabilitiesDeferred
      income taxes
                  
                  
                  763
                  
                  
                  
                  713Investment
      tax credits
                  
                  
                  35
                  
                  
                  
                  36Asset
      retirement obligations
                  
                  
                  206
                  
                  
                  
                  200Regulatory
      liabilities
                  
                  
                  676
                  
                  
                  
                  659Other
                  
                  
                  385
                  
                  
                  
                  3902,065
                  
                  
                  
                  1,998Total
      Capitalization and Liabilities
                  
                  $
                  8,415
                  
                  
                  $
                  8,520
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  5
  MIDAMERICAN
ENERGY COMPANY AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 (In
millions)
 
 Three
      Months
                      Ended
      March 31,2009
                  
                  
                  2008Operating
      RevenuesRegulated
      electric
                  
                  $
                  444
                  
                  
                  $
                  483Regulated
      gas
                  
                  
                  388
                  
                  
                  
                  571Nonregulated
                  
                  
                  304
                  
                  
                  
                  3181,136
                  
                  
                  
                  1,372Operating
      ExpensesRegulated:Cost
      of fuel, energy and capacity
                  
                  
                  136
                  
                  
                  
                  176Cost
      of gas sold
                  
                  
                  301
                  
                  
                  
                  480Other
      operating expenses
                  
                  
                  106
                  
                  
                  
                  104Maintenance
                  
                  
                  40
                  
                  
                  
                  37Depreciation
      and amortization
                  
                  
                  82
                  
                  
                  
                  72Property
      and other taxes
                  
                  
                  29
                  
                  
                  
                  25694
                  
                  
                  
                  894Nonregulated:Cost
      of sales
                  
                  
                  279
                  
                  
                  
                  299Other
                  
                  
                  6
                  
                  
                  
                  4285
                  
                  
                  
                  303Total
      operating expenses
                  
                  
                  979
                  
                  
                  
                  1,197Operating
      Income
                  
                  
                  157
                  
                  
                  
                  175Non-Operating
      IncomeInterest
      and dividend income
                  
                  
                  -
                  
                  
                  
                  1Allowance
      for equity funds
                  
                  
                  -
                  
                  
                  
                  4Other,
      net
                  
                  
                  -
                  
                  
                  
                  (1
                  )-
                  
                  
                  
                  4Fixed
      ChargesInterest
      on long-term debt
                  
                  
                  39
                  
                  
                  
                  35Other
      interest expense
                  
                  
                  2
                  
                  
                  
                  1Allowance
      for borrowed funds
                  
                  
                  (1
                  )
                  
                  
                  (3
                  )40
                  
                  
                  
                  33Income
      Before Income Tax Expense
                  
                  
                  117
                  
                  
                  
                  146Income
      Tax Expense
                  
                  
                  18
                  
                  
                  
                  39Net
      Income
                  
                  
                  99
                  
                  
                  
                  107Preferred
      Dividends
                  
                  
                  -
                  
                  
                  
                  -Earnings
      on Common Stock
                  
                  $
                  99
                  
                  
                  $
                  107
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  6
  MIDAMERICAN
ENERGY COMPANY AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 (In
millions)
 
 Three
      Months
                      Ended
      March 31,2009
                  
                  
                  2008Cash
      Flows From Operating ActivitiesNet
      income
                  
                  $
                  99
                  
                  
                  $
                  107Adjustments
      to reconcile net income to net cash flows from
                    operating
      activities:Depreciation
      and amortization
                  
                  
                  82
                  
                  
                  
                  72Provision
      for deferred income taxes, net
                  
                  
                  71
                  
                  
                  
                  48Amortization
      of other assets and liabilities
                  
                  
                  8
                  
                  
                  
                  7Other,
      net
                  
                  
                  15
                  
                  
                  
                  (8
                  )Impact
      of changes in working capital:Receivables,
      net
                  
                  
                  63
                  
                  
                  
                  (140
                  )Inventories
                  
                  
                  27
                  
                  
                  
                  82Derivative
      collateral, net
                  
                  
                  (31
                  )
                  
                  
                  (2
                  )Accounts
      payable
                  
                  
                  (28
                  )
                  
                  
                  41Taxes
      accrued
                  
                  
                  (41
                  )
                  
                  
                  (17
                  )Other
      current assets and liabilities
                  
                  
                  (15
                  )
                  
                  
                  -Net
      cash flows from operating activities
                  
                  
                  250
                  
                  
                  
                  190Cash
      Flows From Investing ActivitiesUtility
      construction expenditures
                  
                  
                  (121
                  )
                  
                  
                  (204
                  )Purchases
      of available-for-sale securities
                  
                  
                  (110
                  )
                  
                  
                  (29
                  )Proceeds
      from sales of available-for-sale securities
                  
                  
                  99
                  
                  
                  
                  26Net
      change in restricted cash and investments
                  
                  
                  4
                  
                  
                  
                  -Other,
      net
                  
                  
                  10
                  
                  
                  
                  2Net
      cash flows from investing activities
                  
                  
                  (118
                  )
                  
                  
                  (205
                  )Cash
      Flows From Financing ActivitiesProceeds
      from long-term debt
                  
                  
                  -
                  
                  
                  
                  349Net
      change in short-term debt
                  
                  
                  (134
                  )
                  
                  
                  (86
                  )Other,
      net
                  
                  
                  -
                  
                  
                  
                  2Net
      cash flows from financing activities
                  
                  
                  (134
                  )
                  
                  
                  265Net
      Change in Cash and Cash Equivalents
                  
                  
                  (2
                  )
                  
                  
                  250Cash
      and Cash Equivalents at Beginning of Period
                  
                  
                  9
                  
                  
                  
                  11Cash
      and Cash Equivalents at End of Period
                  
                  $
                  7
                  
                  
                  $
                  261
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  7
  MIDAMERICAN
ENERGY COMPANY AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 
 (1)
                  General
 
 MidAmerican
Energy Company (“MidAmerican Energy”) is a public utility with electric and
natural gas operations and is the principal subsidiary of MHC Inc. (“MHC”). MHC
is a holding company that conducts no business other than the ownership of its
subsidiaries, which include the following nonregulated
subsidiaries:  InterCoast Capital Company, Midwest Capital Group,
Inc., MEC Construction Services Co. and MidAmerican Services Company. MHC Inc.
is the direct wholly owned subsidiary of MidAmerican Funding, LLC (“MidAmerican
Funding”), which is an Iowa limited liability company with MidAmerican Energy
Holdings Company (“MEHC”) as its sole member. MEHC is a consolidated subsidiary
of Berkshire Hathaway Inc.
 
 The
unaudited Consolidated Financial Statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
(“GAAP”) for interim financial information and the United States Securities and
Exchange Commission’s rules and regulations for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the disclosures required
by GAAP for annual financial statements. Management believes the unaudited
Consolidated Financial Statements contain all adjustments (consisting only of
normal recurring adjustments) considered necessary for the fair presentation of
the Consolidated Financial Statements as of March 31, 2009, and for the
three months ended March 31, 2009 and 2008. Certain amounts in the prior
period Consolidated Financial Statements have been reclassified to conform to
the current period presentation. Such reclassifications did not impact
previously reported operating income, net income or retained earnings. The
results of operations for the three months ended March 31, 2009, are not
necessarily indicative of the results to be expected for the full
year.
 
 The
preparation of the unaudited Consolidated Financial Statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results may differ from the estimates used in preparing the unaudited
Consolidated Financial Statements. Note 2 of Notes to Consolidated
Financial Statements included in MidAmerican Energy’s Annual Report on Form 10-K
for the year ended December 31, 2008, describes the most significant
accounting estimates and policies used in the preparation of the Consolidated
Financial Statements. There have been no significant changes in MidAmerican
Energy’s assumptions regarding significant accounting policies during the first
three months of 2009.
 
 (2)
                  New
      Accounting
Pronouncements
 
 In
April 2009, the Financial Accounting Standards Board (the “FASB”)
issued Staff Position (“FSP”) No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1”).
FSP FAS 107-1 requires publicly traded companies to include the annual fair
value disclosures required for all financial instruments within the scope of
Statement of Financial Accounting Standards (“SFAS”) No. 107, “Disclosures about
Fair Value of Financial Instruments,” in interim financial statements. FSP
FAS 107-1 is effective for financial statements issued after June 15,
2009, with early application permitted. MidAmerican Energy will include the
disclosures required by FSP FAS 107-1 within Notes to Consolidated
Financial Statements in its June 30, 2009 interim financial
statements.
 
 In
April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP
FAS 115-2”). FSP FAS 115-2 amends current other-than-temporary
impairment guidance for debt securities to require a new other-than-temporary
impairment model that would shift the focus from an entity’s intent to hold the
debt security until recovery to its intent to sell the debt security. The
existing other-than-temporary impairment models for equity securities will
continue to apply. In addition, FSP FAS 115-2 addresses whether an
other-than-temporary impairment should be recognized in earnings, other
comprehensive income or some combination thereof. FSP FAS 115-2 also
expands the already required annual disclosures about other-than-temporary
impairment for debt and equity securities and requires companies to include
these expanded disclosures in interim financial statements. FSP FAS 115-2
is effective for financial statements issued after June 15, 2009, with
early application permitted. MidAmerican Energy is currently evaluating the
impact of adopting FSP FAS 115-2 on its consolidated financial results and
disclosures included within Notes to Consolidated Financial
Statements.
  8
  In
April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP
FAS 157-4”). FSP FAS 157-4 clarifies the application of SFAS
No. 157, “Fair Value Measurements,” (“SFAS No. 157”) in determining
when a market is not active and if a transaction is not orderly. In addition,
FSP FAS 157-4 amends SFAS No. 157 to require disclosures in interim
and annual periods of the inputs and valuation techniques used to measure fair
value and a discussion of changes in valuation techniques and related inputs, if
any, during the period. FSP FAS 157-4 also amends SFAS No. 157 to
define “major categories” to be consistent with those described in SFAS
No. 115, “Accounting for Certain Investments in Debt and Equity
Securities.” FSP FAS 157-4 is effective for financial statements issued
after June 15, 2009, with early application permitted. MidAmerican Energy
is currently evaluating the impact of adopting FSP FAS 157-4 on its
consolidated financial results and disclosures included within Notes to
Consolidated Financial Statements.
  In
December 2008, the FASB issued FSP No. 132(R)-1, “Employers’ Disclosures
about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”). FSP FAS
132(R)-1 is intended toimprove financial reporting about plan
assets of defined benefit pension and other postretirement plans by requiring
enhanced disclosures to enable investors to better understand how investment
allocation decisions are made and the major categories of plan assets. FSP FAS
132(R)-1 also requires disclosure of the inputs and valuation techniques used to
measure fair value and the effect of fair value measurements using significant
unobservable inputs on changes in plan assets. In addition, FSP FAS 132(R)-1
establishes disclosure requirements for significant concentrations of risk
within plan assets. FSP FAS 132(R)-1 is effective for financial statements
issued after December 15, 2009, with early application permitted.
MidAmerican Energy is currently evaluating the impact of adopting FSP
FAS 132(R)-1 on its disclosures included within Notes to Consolidated
Financial Statements.
 
 In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities - an amendment of FASB Statement
No. 133” (“SFAS No. 161”). SFAS No. 161 is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand how and
why an entity uses derivative instruments and their effects on an entity’s
financial results. MidAmerican Energy adopted the disclosures required by SFAS
No. 161 on January 1, 2009, and included the required disclosures within
Notes to Consolidated Financial Statements.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS
No. 160”). SFAS No. 160 establishes accounting and reporting standards
for the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. MidAmerican Energy adopted SFAS No. 160 on January 1,
2009. The implementation of SFAS No. 160 did not have a material impact on
MidAmerican Energy’s consolidated financial statements.
 
 (3)
                    Fair
      Value
Measurements
 
 MidAmerican
Energy has various financial instruments that are measured at fair value in the
Consolidated Financial Statements, including marketable debt and equity
securities and commodity derivatives. MidAmerican Energy’s financial assets and
liabilities are measured using inputs from the three levels of the fair value
hierarchy. A financial asset or liability classification within the hierarchy is
determined based on the lowest level input that is significant to the fair value
measurement. The three levels are as follows:
  ·
                  Level
      1 – Inputs are unadjusted quoted prices in active markets for identical
      assets or liabilities that MidAmerican Energy has the ability to access at
      the measurement date.  ·
                  Level
      2 – Inputs include quoted prices for similar assets and liabilities in
      active markets, quoted prices for identical or similar assets or
      liabilities in markets that are not active, inputs other than quoted
      prices that are observable for the asset or liability and inputs that are
      derived principally from or corroborated by observable market data by
      correlation or other means (market corroborated
  inputs).
  ·
                  Level
      3 – Unobservable inputs reflect MidAmerican Energy’s judgments about the
      assumptions market participants would use in pricing the asset or
      liability since limited market data exists. MidAmerican Energy develops
      these inputs based on the best information available, including
      MidAmerican Energy’s own
data.
   9
  The
following table presents MidAmerican Energy’s assets and liabilities recognized
in the Consolidated Balance Sheet and measured at fair value on a recurring
basis as of March 31, 2009 (in millions):
 
 Input
      Levels for Fair Value MeasurementsDescription
                      
                      Level
      1
                      
                      
                      Level
      2
                      
                      
                      Level
      3
                      
                      
                      Other(1)
                      
                      
                      TotalAssets(2):Investments
      in available-for-sale securities
                      
                      $
                      166
                      
                      
                      $
                      49
                      
                      
                      $
                      16
                      
                      
                      $
                      -
                      
                      
                      $
                      231Commodity
      derivatives
                      
                      
                      2
                      
                      
                      
                      63
                      
                      
                      
                      56
                      
                      
                      
                      (52
                      )
                      
                      
                      69$
                      168
                      
                      
                      $
                      112
                      
                      
                      $
                      72
                      
                      
                      $
                      (52
                      )
                      
                      $
                      300Liabilities:Commodity
      derivatives
                      
                      $
                      (16
                      )
                      
                      $
                      (156
                      )
                      
                      $
                      (5
                      )
                      
                      $
                      93
                      
                      
                      $
                      (84
                      )
 
 (1)
                  Primarily
      represents cash collateral requirements of $41 million and netting
      under master netting arrangements.(2)
                  Does
      not include investments in either pension or other postretirement plan
      assets.
 
 The
following table presents MidAmerican Energy’s assets and liabilities recognized
in the Consolidated Balance Sheet and measured at fair value on a recurring
basis as of December 31, 2008 (in millions):
 
 Input Levels for Fair Value MeasurementsDescription
                    
                    Level
      1
                    
                    
                    Level
      2
                    
                    
                    Level
      3
                    
                    
                    Other(1)
                    
                    
                    TotalAssets(2):Investments
      in available-for-sale securities
                    
                    $
                    148
                    
                    
                    $
                    75
                    
                    
                    $
                    16
                    
                    
                    $
                    -
                    
                    
                    $
                    239Commodity
      derivatives
                    
                    
                    2
                    
                    
                    
                    55
                    
                    
                    
                    48
                    
                    
                    
                    (48
                    )
                    
                    
                    57$
                    150
                    
                    
                    $
                    130
                    
                    
                    $
                    64
                    
                    
                    $
                    (48
                    )
                    
                    $
                    296Liabilities:Commodity
      derivatives
                    
                    $
                    (55
                    )
                    
                    $
                    (120
                    )
                    
                    $
                    (8
                    )
                    
                    $
                    95
                    
                    
                    $
                    (88
                    )
 
 (1)
                  Primarily
      represents cash collateral requirements of $47 million and netting
      under master netting arrangements.(2)
                  Does
      not include investments in either pension or other postretirement plan
      assets.
 
 MidAmerican
Energy’s investments in debt and equity securities are classified as
available-for-sale and are stated at fair value. When available, the quoted
market price or net asset value of an identical security in the principal market
is used to record the fair value. In the absence of a quoted market price in a
readily observable market, the fair value is determined using pricing models
based on observable market inputs and quoted market prices of securities with
similar characteristics. The fair value of MidAmerican Energy’s investments in
auction rate securities, where there is no current liquid market, is determined
using pricing models based on available observable market data and MidAmerican
Energy’s judgment about the assumptions, including liquidity and nonperformance
risks, which market participants would use when pricing the asset. All of
MidAmerican Energy’s available-for-sale securities in Levels 1 and 2 above are
held in nuclear decommissioning trusts for the Quad Cities Station.
 
  10
  The fair
value of commodity derivatives is determined using unadjusted quoted prices for
identical instruments on the applicable exchange in which MidAmerican Energy
transacts. When quoted prices for identical instruments are not available,
MidAmerican Energy uses forward price curves derived from market price
quotations, when available, or internally developed and commercial models, with
internal and external fundamental data inputs. Market price quotations are
obtained from independent energy brokers, exchanges, direct communication with
market participants and actual transactions executed by MidAmerican Energy.
Market price quotations for certain major electricity and natural gas trading
hubs are generally readily obtainable for the applicable term of MidAmerican
Energy’s outstanding commodity derivative instruments, and therefore,
MidAmerican Energy’s forward price curves for those locations and periods
reflect observable market quotes. Market price quotations for other electricity
and natural gas trading hubs are not as readily obtainable or the instrument is
not actively traded. Given that limited market data exists for these
instruments, MidAmerican Energy uses forward price curves derived from internal
models based on perceived pricing relationships to major trading hubs that are
based on significant unobservable inputs. Refer to Note 4 for further
discussion regarding MidAmerican Energy’s risk management and hedging
activities.
 
 The
following table reconciles the beginning and ending balances of MidAmerican
Energy’s assets and liabilities measured at fair value on a recurring basis
using significant Level 3 inputs for the three months ended March 31 (in
millions):
 
 2009
                        
                        
                        2008Investments
      in
                        
                        
                        
                        
                        
                        Investments
      inAvailable-For-
                        
                        
                        Commodity
                        
                        
                        Available-For-
                        
                        
                        CommoditySale
      Securities
                        
                        
                        Derivatives
                        
                        
                        Sale
      Securities
                        
                        
                        DerivativesBeginning
      balance
                        
                        $
                        16
                        
                        
                        $
                        40
                        
                        
                        $
                        40
                        
                        
                        $
                        -Changes
      included in earnings(1)
                        
                        
                        -
                        
                        
                        
                        18
                        
                        
                        
                        -
                        
                        
                        
                        (12
                        )Unrealized
      gains (losses) included in other comprehensive income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (4
                        )
                        
                        
                        1Unrealized
      gains included in regulatory
                          assets
      and liabilities
                        
                        
                        -
                        
                        
                        
                        15
                        
                        
                        
                        -
                        
                        
                        
                        (4
                        )Settlements
                        
                        
                        -
                        
                        
                        
                        (22
                        )
                        
                        
                        -
                        
                        
                        
                        2Ending
      balance
                        
                        $
                        16
                        
                        
                        $
                        51
                        
                        
                        $
                        36
                        
                        
                        $
                        (13
                        )
 
 (1)
                Changes
      included in earnings are reported as nonregulated revenues in the
      Consolidated Statements of Operations. Net unrealized gains (losses)
      included in earnings for the three months ended March 31, 2009 and
      2008, related to commodity derivatives held at March 31, 2009 and
      2008, totaled $14 million and $(12) million,
      respectively.
 
 (4)
                Risk
      Management and Hedging
Activities
 
 MidAmerican
Energy is exposed to the impact of market fluctuations in commodity prices and
interest rates. Exposures to commodity prices include variations in the price of
wholesale electricity that is purchased and sold, fuel costs to generate
electricity and natural gas supply for customers. Electricity and natural gas
prices are subject to wide price swings as demand responds to, among many other
items, changing weather, limited storage, transmission and transportation
constraints, and lack of alternative supplies from other areas. Interest rate
risk exists on variable-rate debt, commercial paper and future debt issuances.
MidAmerican Energy does not engage in a material amount of proprietary trading
activities.
 
 MidAmerican
Energy employs established policies and procedures to manage its risks
associated with these market fluctuations through the use of various commodity
and financial derivative instruments, including those that settle both
physically and financially. The risk management process is designed to identify,
assess, monitor, report, manage and mitigate each of the various types of risk
involved in its business. To mitigate a portion of its commodity risk,
MidAmerican Energy uses commodity derivative instruments, including forward
contracts, futures, options, fixed price and basis swaps and other agreements,
to effectively secure future supply or sell future production at fixed prices.
To manage its
interest rate risk on existing or future debt, MidAmerican Energy may from time
to time enter into interest rate derivatives.
  There
have been no significant changes in MidAmerican Energy’s significant accounting
policies related to derivatives. Refer to Notes 2 and 5 of Notes to
Consolidated Financial Statements for additional information on derivative
instruments.
  11
  The
following table summarizes the fair value of MidAmerican Energy’s derivative
contracts, on a gross basis, and reconciles those amounts to the amounts
presented on a net basis on the Consolidated Balance Sheet as of March 31,
2009 (in millions):
 
 Balance
      Sheet LocationsCurrent
                  
                  
                  Other
                  
                  
                  Current
                  
                  
                  OtherAssets
                  
                  
                  Assets
                  
                  
                  Liabilities
                  
                  
                  Liabilities-
      Other
                  
                  
                  -
      Other
                  
                  
                  -
      Other
                  
                  
                  -
      Other
                  
                  
                  TotalNot
      Designated as Hedging Contracts(1)(2):Commodity
      assets
                  
                  $
                  99
                  
                  
                  $
                  17
                  
                  
                  $
                  5
                  
                  
                  $
                  -
                  
                  
                  $
                  121Commodity
      liabilities
                  
                  
                  (17
                  )
                  
                  
                  -
                  
                  
                  
                  (18
                  )
                  
                  
                  (8
                  )
                  
                  
                  (43
                  )Total
                  
                  
                  82
                  
                  
                  
                  17
                  
                  
                  
                  (13
                  )
                  
                  
                  (8
                  )
                  
                  
                  78Designated
      as Cash Flow Hedging Contracts(1):Commodity
      assets
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Commodity
      liabilities
                  
                  
                  (1
                  )
                  
                  
                  -
                  
                  
                  
                  (75
                  )
                  
                  
                  (58
                  )
                  
                  
                  (134
                  )Total
                  
                  
                  (1
                  )
                  
                  
                  -
                  
                  
                  
                  (75
                  )
                  
                  
                  (58
                  )
                  
                  
                  (134
                  )Total
      derivatives(3)
                  
                  
                  81
                  
                  
                  
                  17
                  
                  
                  
                  (88
                  )
                  
                  
                  (66
                  )
                  
                  
                  (56
                  )Cash
      collateral receivable (payable)
                  
                  
                  (29
                  )
                  
                  
                  -
                  
                  
                  
                  50
                  
                  
                  
                  20
                  
                  
                  
                  41Total
      derivatives - net basis
                  
                  $
                  52
                  
                  
                  $
                  17
                  
                  
                  $
                  (38
                  )
                  
                  $
                  (46
                  )
                  
                  $
                  (15
                  )
 
 (1)
                  Derivative
      instruments within these categories are subject to master netting
      arrangements and are presented on a net basis in the Consolidated Balance
      Sheet.(2)
                  The
      majority of MidAmerican Energy’s net commodity derivatives not designated
      as hedging contracts are recoverable from customers in regulated rates and
      as of March 31, 2009, a net regulatory liability of $70 million was
      recorded related to the net derivative assets of $78
    million.(3)
                  The
      net notional amounts of outstanding commodity derivative contract volumes
      with fixed price terms that compose the mark-to-market values included
      above are 3.9 million megawatt hours of electricity purchases, 9.2 million
      decatherms of natural gas purchases and 6.5 million gallons of fuel
      purchases.
 
 Not
Designated As Hedging Contracts
 
 For
MidAmerican Energy’s regulated electric and regulated gas commodity derivatives,
the settled cost is generally recovered from customers in regulated rates.
Accordingly, the net unrealized gains and losses associated with interim price
movements on contracts that are accounted for as derivatives and probable of
recovery in rates are recorded as net regulatory assets or regulatory
liabilities. For those contracts that are not included in regulated rates,
unrealized gains and losses are recognized on the Consolidated Statements of
Operations as operating revenue for sales contracts and as costs of sales for
purchase contracts and financial swap energy contracts.
 
  12
  The
following table summarizes the pre-tax gains and losses on commodity derivative
contracts recognized in net regulatory assets and regulatory liabilities, as
well as amounts reclassified to earnings during the three months ended
March 31, 2009 (in millions):
 
 Net
                    Regulatory
                    Assets
                    (Liabilities)Beginning
      balance
                
                $
                4Gains
      on derivatives recognized in net regulatory assets and
      liabilities
                
                
                (28
                )Gains
      on derivatives reclassified to operating revenues
                
                
                13Gains
      on derivatives reclassified to cost of fuel, energy and
      capacity
                
                
                4Losses
      on derivatives reclassified to cost of gas sold
                
                
                (63
                )Ending
      balance
                
                $
                (70
                )
 
 The
following table summarizes the pre-tax gains and losses included within the
Consolidated Statement of Operations associated with MidAmerican Energy’s
derivative contracts, which, other than a weather derivative that is recognized
in regulated cost of gas sold, are not recoverable from customers in regulated
rates for the three months ended March 31, 2009 (in millions):
 
 Gains
      (Losses)Nonregulated
      operating revenues
                
                $
                18Regulated
      cost of gas sold
                
                
                1Nonregulated
      cost of sales
                
                
                (15
                )Total
                
                $
                4
 
 Designated
as Cash Flow Hedging Contracts
 
 MidAmerican
Energy uses derivative contracts accounted for as cash flow hedges to hedge
electricity and natural gas commodity prices for physical delivery to
nonregulated customers.
 
 The
following table summarizes the pre-tax gains and losses on derivative contracts
designated and qualifying as cash flow hedges recognized in other comprehensive
income (“OCI”), as well as amounts reclassified to earnings during the three
months ended March 31, 2009 (in millions):
 
 Accumulated
                    Other
                    Comprehensive
                    LossBeginning
      balance
                
                $
                80Losses
      on derivatives recognized in OCI
                
                
                76Losses
      on derivatives reclassified to nonregulated cost of sales
                
                
                (22
                )Ending
      balance
                
                $
                134
 
 Realized
gains and losses on all hedges and hedge ineffectiveness are recognized in
income as nonregulated operating revenues or nonregulated cost of sales
depending upon the nature of the item being hedged. For the three months ended
March 31, 2009 and 2008, hedge ineffectiveness was
insignificant.
  13
  
 Credit
Risk
 
 MidAmerican
Energy extends unsecured credit to other utilities, energy marketers, financial
institutions and other market participants in conjunction with wholesale energy
supply and marketing activities. Credit risk relates to the risk of loss that
might occur as a result of nonperformance by counterparties of their contractual
obligations to make or take delivery of electricity, natural gas or other
commodities and to make financial settlements of these obligations. Credit risk
may be concentrated to the extent that one or more groups of counterparties have
similar economic, industry or other characteristics that would cause their
ability to meet contractual obligations to be similarly affected by changes in
market or other conditions. In addition, credit risk includes not only the risk
that a counterparty may default due to circumstances relating directly to it,
but also the risk that a counterparty may default due to circumstances involving
other market participants that have a direct or indirect relationship with such
counterparty.
 
 MidAmerican
Energy analyzes the financial condition of each significant wholesale
counterparty before entering into any transactions, establishes limits on the
amount of unsecured credit to be extended to each counterparty and evaluates the
appropriateness of unsecured credit limits on an ongoing basis. To mitigate
exposure to the financial risks of wholesale counterparties, MidAmerican Energy
enters into netting and collateral arrangements that may include margining and
cross-product netting agreements and obtaining third-party guarantees, letters
of credit and cash deposits. Counterparties may be assessed interest fees for
delayed payments. If required, MidAmerican Energy exercises rights under these
arrangements, including calling on the counterparty’s credit support
arrangement. Based on MidAmerican Energy’s policies and risk exposures related
to credit, it does not anticipate a material adverse effect on its consolidated
financial position and results of operations as a result of counterparty
nonperformance.
 
 Contingent
Features
 
 In
accordance with industry practice, certain derivative contracts contain
provisions that require MidAmerican Energy to maintain specific credit ratings
from one or more of the major credit rating agencies on its senior unsecured
debt. These derivative contracts may either specifically provide bilateral
rights to demand cash or other security if credit exposures on a net basis
exceed specified rating-dependent threshold levels (“credit-risk-related
contingent features”) or provide the right for counterparties to demand
“adequate assurance” in the event of a material adverse change in MidAmerican
Energy’s creditworthiness. These rights can vary by contract and by
counterparty. As of March 31, 2009, MidAmerican Energy’s credit ratings from the
three recognized credit rating agencies were investment grade.
 
 The
aggregate fair value of MidAmerican Energy’s derivative contracts in liability
positions with specific credit-risk-related contingent features totaled
$160 million as of March 31, 2009, for which MidAmerican Energy had
posted collateral of $70 million. If all credit-risk-related contingent
features for derivative contracts in liability positions had been triggered as
of March 31, 2009, MidAmerican Energy would have been required to post
$80 million of additional collateral. MidAmerican Energy’s collateral
requirements could fluctuate considerably due to market price volatility,
changes in credit ratings or other factors.
 
  14
  
 (5)
                  Employee
      Benefit Plans
 
 MidAmerican
Energy sponsors a noncontributory defined benefit pension plan covering
substantially all employees of MEHC and its domestic energy subsidiaries other
than PacifiCorp. MidAmerican Energy also sponsors certain postretirement health
care and life insurance benefits covering substantially all retired employees of
MEHC and its domestic energy subsidiaries other than PacifiCorp. Net periodic
benefit cost for the pension, including supplemental executive retirement plans,
and other postretirement benefit plans included the following components for the
three months ended March 31 (in millions):
 
 Pension
                  
                  
                  Other
      Postretirement2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Service
      cost
                  
                  $
                  4
                  
                  
                  $
                  7
                  
                  
                  $
                  1
                  
                  
                  $
                  2Interest
      cost
                  
                  
                  8
                  
                  
                  
                  10
                  
                  
                  
                  3
                  
                  
                  
                  4Expected
      return on plan assets
                  
                  
                  (8
                  )
                  
                  
                  (11
                  )
                  
                  
                  (2
                  )
                  
                  
                  (4
                  )Net
      amortization
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1
                  
                  
                  
                  -Net
      periodic benefit cost
                  
                  $
                  4
                  
                  
                  $
                  6
                  
                  
                  $
                  3
                  
                  
                  $
                  2
 
 Employer
contributions to the pension and other postretirement plans are expected to be
$8 million and $14 million, respectively, during 2009. As of
March 31, 2009, $2 million and $2 million of contributions had
been made to the pension and other postretirement plans,
respectively.
 
 (6)
                  Commitments
      and Contingencies
 
 MidAmerican
Energy is a party in a variety of legal actions or claims arising out of the
normal course of business. Plaintiffs occasionally seek punitive or exemplary
damages. MidAmerican Energy does not believe that such normal and routine
matters will have a material effect on its financial results.
 
 (7)
                Income
      Taxes
 
 The
effective tax rates were 15% and 27% for the three months ended March 31,
2009 and 2008, respectively. The decrease in the effective tax rate was due to
the benefit of additional production tax credits and the effects of rate
making.
 
 (8)
                Comprehensive
      Income and Components of Accumulated Other Comprehensive Loss,
      Net
 
 The
components of comprehensive income are as follows (in millions):
 
 Three
      MonthsEnded
      March 31,2009
                      
                      
                      2008Net
      income
                      
                      $
                      99
                      
                      
                      $
                      107Other
      comprehensive income (loss):Fair
      value adjustment on cash flow hedges, net of tax of $(22) and
      $8
                      
                      
                      (32
                      )
                      
                      
                      11Unrealized
      losses on available-for-sale securities, net of tax of $- and
      $(2)
                      
                      
                      -
                      
                      
                      
                      (2
                      )Total
      other comprehensive income (loss)
                      
                      
                      (32
                      )
                      
                      
                      9Comprehensive
      income
                      
                      $
                      67
                      
                      
                      $
                      116
 
  15
  Accumulated
other comprehensive loss, net is included in the Consolidated Balance Sheets in
MidAmerican Energy common shareholder’s equity and consists of the following
components (in millions):
 
 As
      ofMarch 31,
                  
                  
                  December 31,2009
                  
                  
                  2008Fair
      value adjustment on cash flow hedges, net of tax of $(53) and
      $(31)
                  
                  $
                  (81
                  )
                  
                  $
                  (49
                  )Unrealized
      losses on available-for-sale securities, net of tax of $(8) and
      $(8)
                  
                  
                  (11
                  )
                  
                  
                  (11
                  )Total
                  
                  $
                  (92
                  )
                  
                  $
                  (60
                  )
 
 (9)
                Segment
      Information
 
 MidAmerican
Energy has identified three reportable operating segments: regulated electric,
regulated gas and nonregulated energy. The regulated electric segment derives
most of its revenue from regulated retail sales of electricity to residential,
commercial, and industrial customers and from wholesale sales. The regulated gas
segment derives most of its revenue from regulated retail sales of natural gas
to residential, commercial, and industrial customers and also obtains
significant revenues by transporting gas owned by others through its
distribution system. Pricing for regulated electric and regulated 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. The nonregulated energy segment derives
most of its revenue from nonregulated retail electric and gas activities. Common
operating costs, interest income, interest expense and income tax expense are
allocated to each segment based on certain factors, which primarily relate to
the nature of the cost.
 
 The
following tables provide information on a reportable operating segment basis (in
millions):
 
 Three
      MonthsEnded
      March 31,2009
                    
                    
                    2008Operating
      revenues:Regulated
      electric
                    
                    $
                    444
                    
                    
                    $
                    483Regulated
      gas
                    
                    
                    388
                    
                    
                    
                    571Nonregulated
      energy
                    
                    
                    304
                    
                    
                    
                    318Total
                    
                    $
                    1,136
                    
                    
                    $
                    1,372Depreciation
      and amortization:Regulated
      electric
                    
                    $
                    74
                    
                    
                    $
                    64Regulated
      gas
                    
                    
                    8
                    
                    
                    
                    8Total
                    
                    $
                    82
                    
                    
                    $
                    72Operating
      income:Regulated
      electric
                    
                    $
                    97
                    
                    
                    $
                    116Regulated
      gas
                    
                    
                    43
                    
                    
                    
                    45Nonregulated
      energy
                    
                    
                    17
                    
                    
                    
                    14Total
                    
                    $
                    157
                    
                    
                    $
                    175
 
 As
      ofMarch 31,
                  
                  
                  December 31,2009
                  
                  
                  2008Total
      assets:Regulated
      electric
                  
                  $
                  7,295
                  
                  
                  $
                  7,297Regulated
      gas
                  
                  
                  875
                  
                  
                  
                  972Nonregulated
      energy
                  
                  
                  245
                  
                  
                  
                  251Total
                  
                  $
                  8,415
                  
                  
                  $
                  8,520
 
  16
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
 
 
 
 To the
Board of Managers and Member
 MidAmerican
Funding, LLC
 Des
Moines, Iowa
 
 We have
reviewed the accompanying consolidated balance sheet of MidAmerican Funding, LLC
and subsidiaries (the “Company”) as of March 31, 2009, and the related
consolidated statements of operations and cash flows for the three-month periods
ended March 31, 2009 and 2008. These interim financial statements are the
responsibility of the Company’s management.
 
 We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), 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 reviews, we are not aware of any material modifications that should be made
to such consolidated interim financial statements for them to be in conformity
with accounting principles generally accepted in the United States of
America.
 
 We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet and
consolidated statement of capitalization (not presented herein) of MidAmerican
Funding, LLC and subsidiaries as of December 31, 2008, and the related
consolidated statements of operations, comprehensive income, cash flows, and
retained earnings for the year then ended prior to retrospective adjustment for
the adoption of FASB Statement No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (not presented
herein); and in our report dated February 27, 2009, we expressed an
unqualified opinion on those consolidated financial statements. We also audited
the adjustments described in Note 2 that were applied to retrospectively adjust
the December 31, 2008 consolidated balance sheet of MidAmerican Funding, LLC and
subsidiaries (not presented herein). In our opinion, such adjustments are
appropriate and have been properly applied to the previously issued consolidated
balance sheet in deriving the accompanying retrospectively adjusted consolidated
balance sheet as of December 31, 2008.
 
 
 /s/
Deloitte & Touche LLP
 
 Des
Moines, Iowa
 May 8,
2009
 
  17
  MIDAMERICAN
FUNDING, LLC AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS(Unaudited)
 (In
millions)
 As
      ofMarch 31,
                      2009
                  
                  
                  December 31,2008ASSETSUtility
      Plant, NetElectric
                  
                  $
                  9,024
                  
                  
                  $
                  8,952Gas
                  
                  
                  1,166
                  
                  
                  
                  1,15510,190
                  
                  
                  
                  10,107Accumulated
      depreciation and amortization
                  
                  
                  (3,500
                  )
                  
                  
                  (3,426
                  )6,690
                  
                  
                  
                  6,681Construction
      work in progress
                  
                  
                  236
                  
                  
                  
                  2336,926
                  
                  
                  
                  6,914Current
      AssetsCash
      and cash equivalents
                  
                  
                  8
                  
                  
                  
                  10Restricted
      cash and short-term investments
                  
                  
                  12
                  
                  
                  
                  15Receivables,
      net
                  
                  
                  399
                  
                  
                  
                  468Inventories
                  
                  
                  130
                  
                  
                  
                  158Other
                  
                  
                  156
                  
                  
                  
                  114705
                  
                  
                  
                  765Other
      AssetsInvestments
      and nonregulated property, net
                  
                  
                  399
                  
                  
                  
                  415Goodwill
                  
                  
                  1,270
                  
                  
                  
                  1,270Regulatory
      assets
                  
                  
                  322
                  
                  
                  
                  368Other
                  
                  
                  76
                  
                  
                  
                  782,067
                  
                  
                  
                  2,131Total
      Assets
                  
                  $
                  9,698
                  
                  
                  $
                  9,810CAPITALIZATION
      AND LIABILITIESCapitalizationMidAmerican
      Funding member’s equity
                  
                  $
                  3,142
                  
                  
                  $
                  3,081Noncontrolling
      interests
                  
                  
                  31
                  
                  
                  
                  31Long-term
      debt, excluding current portion
                  
                  
                  3,390
                  
                  
                  
                  3,3906,563
                  
                  
                  
                  6,502Current
      LiabilitiesShort-term
      debt
                  
                  
                  323
                  
                  
                  
                  457Note
      payable to affiliate
                  
                  
                  251
                  
                  
                  
                  59Current
      portion of long-term debt
                  
                  
                  -
                  
                  
                  
                  175Accounts
      payable
                  
                  
                  292
                  
                  
                  
                  352Taxes
      accrued
                  
                  
                  77
                  
                  
                  
                  104Interest
      accrued
                  
                  
                  31
                  
                  
                  
                  60Other
                  
                  
                  93
                  
                  
                  
                  1001,067
                  
                  
                  
                  1,307Other
      LiabilitiesDeferred
      income taxes
                  
                  
                  749
                  
                  
                  
                  700Investment
      tax credits
                  
                  
                  35
                  
                  
                  
                  36Asset
      retirement obligations
                  
                  
                  206
                  
                  
                  
                  200Regulatory
      liabilities
                  
                  
                  676
                  
                  
                  
                  659Other
                  
                  
                  402
                  
                  
                  
                  4062,068
                  
                  
                  
                  2,001Total
      Capitalization and Liabilities
                  
                  $
                  9,698
                  
                  
                  $
                  9,810
 
 The
accompanying notes are an integral part of these consolidated financial
statements
  18
  MIDAMERICAN
FUNDING, LLC AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 (In
millions)
 
 Three
      Months
                      Ended March 31,2009
                  
                  
                  2008Operating
      RevenuesRegulated
      electric
                  
                  $
                  444
                  
                  
                  $
                  483Regulated
      gas
                  
                  
                  388
                  
                  
                  
                  571Nonregulated
                  
                  
                  304
                  
                  
                  
                  3191,136
                  
                  
                  
                  1,373Operating
      ExpensesRegulated:Cost
      of fuel, energy and capacity
                  
                  
                  136
                  
                  
                  
                  176Cost
      of gas sold
                  
                  
                  301
                  
                  
                  
                  480Other
      operating expenses
                  
                  
                  106
                  
                  
                  
                  104Maintenance
                  
                  
                  40
                  
                  
                  
                  37Depreciation
      and amortization
                  
                  
                  82
                  
                  
                  
                  72Property
      and other taxes
                  
                  
                  29
                  
                  
                  
                  25694
                  
                  
                  
                  894Nonregulated:Cost
      of sales
                  
                  
                  279
                  
                  
                  
                  299Other
                  
                  
                  7
                  
                  
                  
                  5286
                  
                  
                  
                  304Total
      operating expenses
                  
                  
                  980
                  
                  
                  
                  1,198Operating
      Income
                  
                  
                  156
                  
                  
                  
                  175Non-Operating
      IncomeInterest
      and dividend income
                  
                  
                  1
                  
                  
                  
                  1Allowance
      for equity funds
                  
                  
                  -
                  
                  
                  
                  4Other,
      net
                  
                  
                  1
                  
                  
                  
                  -2
                  
                  
                  
                  5Fixed
      ChargesInterest
      on long-term debt
                  
                  
                  50
                  
                  
                  
                  47Other
      interest expense
                  
                  
                  2
                  
                  
                  
                  2Allowance
      for borrowed funds
                  
                  
                  (1
                  )
                  
                  
                  (3
                  )51
                  
                  
                  
                  46Income
      Before Income Tax Expense
                  
                  
                  107
                  
                  
                  
                  134Income
      Tax Expense
                  
                  
                  14
                  
                  
                  
                  34Net
      Income
                  
                  
                  93
                  
                  
                  
                  100Less
      - net income attributable to noncontrolling interests
                  
                  
                  -
                  
                  
                  
                  -Net
      Income Attributable to MidAmerican Funding
                  
                  $
                  93
                  
                  
                  $
                  100
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  19
  MIDAMERICAN
FUNDING, LLC AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 (In
millions)
 
 Three Months
                      Ended March 31,2009
                  
                  
                  2008Cash
      Flows From Operating ActivitiesNet
      income
                  
                  $
                  93
                  
                  
                  $
                  100Adjustments
      to reconcile net income to net cash flows from
                    operating
      activities:Depreciation
      and amortization
                  
                  
                  82
                  
                  
                  
                  72Provision
      for deferred income taxes, net
                  
                  
                  70
                  
                  
                  
                  47Amortization
      of other assets and liabilities
                  
                  
                  8
                  
                  
                  
                  7Other,
      net
                  
                  
                  16
                  
                  
                  
                  (7
                  )Impact
      of changes in working capital:Receivables,
      net
                  
                  
                  67
                  
                  
                  
                  (135
                  )Inventories
                  
                  
                  27
                  
                  
                  
                  82Derivative
      collateral, net
                  
                  
                  (31
                  )
                  
                  
                  (2
                  )Accounts
      payable
                  
                  
                  (27
                  )
                  
                  
                  42Taxes
      accrued
                  
                  
                  (44
                  )
                  
                  
                  (21
                  )Other
      current assets and liabilities
                  
                  
                  (28
                  )
                  
                  
                  (12
                  )Net
      cash flows from operating activities
                  
                  
                  233
                  
                  
                  
                  173Cash
      Flows From Investing ActivitiesUtility
      construction expenditures
                  
                  
                  (121
                  )
                  
                  
                  (204
                  )Purchases
      of available-for-sale securities
                  
                  
                  (110
                  )
                  
                  
                  (29
                  )Proceeds
      from sales of available-for-sale securities
                  
                  
                  99
                  
                  
                  
                  26Net
      change in restricted cash and investments
                  
                  
                  4
                  
                  
                  
                  -Other,
      net
                  
                  
                  10
                  
                  
                  
                  2Net
      cash flows from investing activities
                  
                  
                  (118
                  )
                  
                  
                  (205
                  )Cash
      Flows From Financing ActivitiesProceeds
      from long-term debt
                  
                  
                  -
                  
                  
                  
                  349Retirement
      of long-term debt
                  
                  
                  (175
                  )
                  
                  
                  -Net
      change in note payable to affiliate
                  
                  
                  192
                  
                  
                  
                  17Net
      change in short-term debt
                  
                  
                  (134
                  )
                  
                  
                  (86
                  )Other,
      net
                  
                  
                  -
                  
                  
                  
                  2Net
      cash flows from financing activities
                  
                  
                  (117
                  )
                  
                  
                  282Net
      Change in Cash and Cash Equivalents
                  
                  
                  (2
                  )
                  
                  
                  250Cash
      and Cash Equivalents at Beginning of Period
                  
                  
                  10
                  
                  
                  
                  12Cash
      and Cash Equivalents at End of Period
                  
                  $
                  8
                  
                  
                  $
                  262
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
  20
  MIDAMERICAN
FUNDING, LLC AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 
 (1)
                General
 
 MidAmerican
Funding, LLC (“MidAmerican Funding”) is an Iowa limited liability company with
MidAmerican Energy Holdings Company (“MEHC”) as its sole member. MEHC is a
consolidated subsidiary of Berkshire Hathaway Inc. MidAmerican Funding’s direct,
wholly owned subsidiary is MHC Inc. (“MHC”), which constitutes substantially all
of MidAmerican Funding’s assets, liabilities and business activities except
those related to MidAmerican Funding’s long-term debt securities. MHC conducts
no business other than the ownership of its subsidiaries. MHC’s principal
subsidiary is MidAmerican Energy Company (“MidAmerican Energy”), a public
utility with electric and natural gas operations. Direct, wholly owned
nonregulated subsidiaries of MHC are InterCoast Capital Company, Midwest Capital
Group, Inc., MEC Construction Services Co. and MidAmerican Services
Company.
 
 The
unaudited Consolidated Financial Statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
(“GAAP”) for interim financial information and the United States Securities and
Exchange Commission’s rules and regulations for Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
disclosures required by GAAP for annual financial statements. Management
believes the unaudited Consolidated Financial Statements contain all adjustments
(consisting only of normal recurring adjustments) considered necessary for the
fair presentation of the Consolidated Financial Statements as of March 31,
2009, and for the three months ended March 31, 2009 and 2008. Certain
amounts in the prior period Consolidated Financial Statements have been
reclassified to conform to the current period presentation. Such
reclassifications did not impact previously reported operating income, net
income or retained earnings. The results of operations for the three months
ended March 31, 2009, are not necessarily indicative of the results to be
expected for the full year.
 
 The
preparation of the unaudited Consolidated Financial Statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results may differ from the estimates used in preparing the unaudited
Consolidated Financial Statements. Note 2 of Notes to Consolidated
Financial Statements included in MidAmerican Funding’s Annual Report on Form
10-K for the year ended December 31, 2008, describes the most significant
accounting estimates and policies used in the preparation of the Consolidated
Financial Statements. There have been no significant changes in MidAmerican
Funding’s assumptions regarding significant accounting policies during the first
three months of 2009.
 
 (2)
                New
      Accounting Pronouncements
 
 Refer to
Note 2 of MidAmerican Energy’s Notes to Consolidated Financial
Statements.
 
 In
December 2007, the Financial Accounting Standards Board (the “FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 160,
“Noncontrolling Interests in Consolidated Financial Statements – an amendment of
ARB No. 51” (“SFAS No. 160”). Under SFAS No. 160, noncontrolling
interests are reported as a separate component of equity in the consolidated
financial statements. The amount of earnings attributable to the parent and to
the noncontrolling interests is clearly identified and presented on the face of
the consolidated statements of operations. Additionally, any changes in a
parent’s ownership interest of its subsidiary, while retaining its control, are
accounted for as equity transactions. MidAmerican Funding adopted SFAS
No. 160 on January 1, 2009. The implementation of SFAS No. 160 did not
have a material impact on MidAmerican Funding’s consolidated financial
statements. On the Consolidated Balance Sheets, MidAmerican Energy preferred
securities, which was previously reported separately in the capitalization
section, is now included in noncontrolling interests.
 
  21
  
 (3)
                Fair
      Value Measurements
 
 Refer to
Note 3 of MidAmerican Energy’s Notes to Consolidated Financial
Statements.
 
 (4)
                Risk
      Management and Hedging
Activities
 
 Refer to
Note 4 of MidAmerican Energy’s Notes to Consolidated Financial
Statements.
 
 (5)
                Employee
      Benefit Plans
 
 Refer to
Note 5 of MidAmerican Energy’s Notes to Consolidated Financial
Statements.
 
 (6)
                Income
      Taxes
 
 The
effective tax rates were 13% and 25% for the three months ended March 31,
2009 and 2008, respectively. The decrease in the effective tax rate was due to
the benefit of additional production tax credits and the effects of rate
making.
 
 (7)
                Commitments
      and Contingencies
 
 MidAmerican
Funding is a party in a variety of legal actions or claims arising out of the
normal course of business. Plaintiffs occasionally seek punitive or exemplary
damages. MidAmerican Funding does not believe that such normal and routine
matters will have a material effect on its financial results.
 
 (8)
                Comprehensive
      Income and Components of Accumulated Other Comprehensive Loss,
      Net
 
 Refer to
Note 8 of MidAmerican Energy’s Notes to Consolidated Financial Statements
for the components of accumulated other comprehensive loss, net.
 
 The
components of comprehensive income attributable to MidAmerican Funding are as
follows (in millions):
 
 Three MonthsEnded March 31,2009
                      
                      
                      2008Net
      income attributable to MidAmerican Funding
                      
                      $
                      93
                      
                      
                      $
                      100Other
      comprehensive income (loss) attributable to MidAmerican
      Funding:Fair
      value adjustment on cash flow hedges, net of tax of $(22) and
      $8
                      
                      
                      (32
                      )
                      
                      
                      11Unrealized
      losses on available-for-sale securities, net of tax of $- and
      $(2)
                      
                      
                      -
                      
                      
                      
                      (2
                      )Total
      other comprehensive income (loss) attributable to MidAmerican
      Funding
                      
                      
                      (32
                      )
                      
                      
                      9Comprehensive
      income attributable to MidAmerican Funding
                      
                      $
                      61
                      
                      
                      $
                      109
 
 (9)
                Segment
      Information
 
 MidAmerican
Funding has identified three reportable operating segments: regulated electric,
regulated gas and nonregulated energy. The regulated electric segment derives
most of its revenue from regulated retail sales of electricity to residential,
commercial, and industrial customers and from wholesale sales. The regulated gas
segment derives most of its revenue from regulated retail sales of natural gas
to residential, commercial, and industrial customers and also obtains
significant revenues by transporting gas owned by others through its
distribution system. Pricing for regulated electric and regulated 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. The nonregulated energy segment derives
most of its revenue from nonregulated retail electric and gas activities. Common
operating costs, interest income, interest expense and income tax expense are
allocated to each segment based on certain factors, which primarily related to
the nature of the cost. “Other” in the tables below consists of the nonregulated
subsidiaries of MidAmerican Funding not engaged in the energy business and
parent company interest expense.
  22
  The
following tables provide information on a reportable operating segment basis (in
millions):
 
 Three
      MonthsEnded
      March 31,2009
                      
                      
                      2008Operating
      revenues:Regulated
      electric
                      
                      $
                      444
                      
                      
                      $
                      483Regulated
      gas
                      
                      
                      388
                      
                      
                      
                      571Nonregulated
      energy
                      
                      
                      304
                      
                      
                      
                      318Other
                      
                      
                      -
                      
                      
                      
                      1Total
                      
                      $
                      1,136
                      
                      
                      $
                      1,373Depreciation
      and amortization:Regulated
      electric
                      
                      $
                      74
                      
                      
                      $
                      64Regulated
      gas
                      
                      
                      8
                      
                      
                      
                      8Total
                      
                      $
                      82
                      
                      
                      $
                      72Operating
      income:Regulated
      electric
                      
                      $
                      97
                      
                      
                      $
                      116Regulated
      gas
                      
                      
                      43
                      
                      
                      
                      45Nonregulated
      energy
                      
                      
                      17
                      
                      
                      
                      14Other
                      
                      
                      (1
                      )
                      
                      
                      -Total
                      
                      $
                      156
                      
                      
                      $
                      175
 
 As
      ofMarch 31,
                  
                  
                  December 31,2009
                  
                  
                  2008Total
      assets(1):Regulated
      electric
                  
                  $
                  8,486
                  
                  
                  $
                  8,488Regulated
      gas
                  
                  
                  953
                  
                  
                  
                  1,051Nonregulated
      energy
                  
                  
                  245
                  
                  
                  
                  251Other
                  
                  
                  14
                  
                  
                  
                  20Total
                  
                  $
                  9,698
                  
                  
                  $
                  9,810
 
 (1)
              Total
      assets by operating segment reflect the assignment of goodwill to
      applicable reporting units.
  23
  
 Item 2.
                Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
 
 MidAmerican
Energy Company (“MidAmerican Energy”) is a public utility with electric and
natural gas operations and is the principal subsidiary within MidAmerican
Funding, LLC (“MidAmerican Funding”).
 
 Management’s
Discussion and Analysis (“MD&A”) addresses the financial statements of
MidAmerican Funding and its subsidiaries and MidAmerican Energy and its
subsidiary as presented in this joint filing. Information in MD&A related to
MidAmerican Energy, whether or not segregated, also relates to MidAmerican
Funding. Information related to other subsidiaries of MidAmerican Funding
pertains only to the discussion of the financial condition and results of
operations of MidAmerican Funding. Where necessary, discussions have been
segregated under the heading “MidAmerican Funding” to allow the reader to
identify information applicable only to MidAmerican Funding.
 
 MD&A
should be read in conjunction with the financial statements included in this
Form 10-Q and the notes to those statements, together with MD&A in
MidAmerican Energy’s and MidAmerican Funding’s most recently filed Annual Report
on Form 10-K.
 
 Forward-Looking
Statements
 
 This
report contains statements that do not directly or exclusively relate to
historical facts. These statements are ‘‘forward-looking statements’’ within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements can typically be identified by the use of forward-looking words, such
as ‘‘may,’’ ‘‘could,’’ ‘‘project,’’ ‘‘believe,’’ ‘‘anticipate,’’ ‘‘expect,’’
‘‘estimate,’’ ‘‘continue,’’ “intend,” ‘‘potential,’’ ‘‘plan,’’ ‘‘forecast,’’ and
similar terms. These statements are based upon MidAmerican Funding’s and/or
MidAmerican Energy’s current intentions, assumptions, expectations and beliefs
and are subject to risks, uncertainties and other important factors. Many of
these factors are outside the control of MidAmerican Funding or MidAmerican
Energy and could cause actual results to differ materially from those expressed
or implied by such forward-looking statements. These factors include, among
others:
 
 ·
                  general
      economic, political and business conditions in the jurisdictions in which
      MidAmerican Energy’s facilities
operate;
  ·
                changes
      in governmental, legislative, or regulatory requirements affecting
      MidAmerican Energy or the electric or gas utility
    industries;
  ·
                changes
      in, and compliance with, environmental laws, regulations, decisions and
      policies that could increase operating and capital improvement costs,
      reduce plant output or delay plant
construction;
  ·
                the
      outcome of general rate cases and other proceedings conducted by
      regulatory commissions or other governmental and legal
    bodies;
  ·
                changes
      in economic, industry or weather conditions, as well as demographic
      trends, that could affect customer growth and usage or supply of
      electricity and gas;
  ·
                a
      high degree of variance between actual and forecasted load and prices that
      could impact the hedging strategy and costs to balance electricity and
      load supply;
  ·
                changes
      in prices and availability for both purchases and sales of wholesale
      electricity, coal, natural gas, other fuel sources and fuel transportation
      that could have a significant impact on generation capacity and energy
      costs;
  ·
                the
      financial condition and creditworthiness of MidAmerican Energy’s
      significant customers and
suppliers;
  ·
                changes
      in business strategy or development
plans;
  ·
                availability,
      terms and deployment of capital, including severe reductions in demand for
      investment grade commercial paper, debt securities and other sources of
      debt financing and volatility in the London Interbank Offered Rate, the
      base interest rate for MidAmerican Energy’s credit
    facilities;
  ·
                changes
      in MidAmerican Energy’s credit
ratings;
  ·
                performance
      of MidAmerican Energy’s generating facilities, including unscheduled
      outages or repairs;
  ·
                risks
      relating to nuclear
generation;
  24
  ·
                the
      impact of derivative instruments used to mitigate or manage volume, price
      and interest rate risks, including increased collateral requirements, and
      changes in the commodity prices, interest rates and other conditions that
      affect the value of derivative
instruments;
  ·
                the
      impact of increases in healthcare costs and changes in interest rates,
      mortality, morbidity, investment performance and legislation on pension
      and other postretirement benefits expense and funding
      requirements;
  ·
                unanticipated
      construction delays, changes in costs, receipt of required permits and
      authorizations, ability to fund capital projects and other factors that
      could affect future generating facilities and infrastructure
      additions;
  ·
                the
      impact of new accounting pronouncements or changes in current accounting
      estimates and assumptions on financial
results;
  ·
                other
      risks or unforeseen events, including litigation, wars, the effects of
      terrorism, embargoes and other catastrophic events;
  and
  ·
                other
      business or investment considerations that may be disclosed from time to
      time in MidAmerican Funding’s or MidAmerican Energy’s filings with the
      United States (“U.S.”) Securities and Exchange Commission (“SEC”) or in
      other publicly disseminated written
documents.
  Further
details of the potential risks and uncertainties affecting MidAmerican Funding
or MidAmerican Energy are described in their filings with the SEC, including
Item 1A and other discussions contained in this Form 10-Q. MidAmerican
Funding and MidAmerican Energy undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. The foregoing review of factors should not be
construed as exclusive.
 
 Results
of Operations for the Three Months Ended March 31, 2009 and 2008
 
 Overview
 
 MidAmerican
Energy’s earnings on common stock decreased $8 million to $99 million
for the first quarter of 2009 compared to $107 million for the first
quarter of 2008. Operating income decreased $18 million compared to the first
quarter of 2008 due to in large part to the current recessionary economic
conditions in the United States, which has lowered demand for electricity
nation-wide. Accordingly, sales volumes for electric retail industrial customers
and prices for electric wholesale sales decreased compared to the first quarter
of 2008. These decreases were partially offset by greater sales volumes and a
lower average cost of energy due in part to the addition of wind-powered
generation capacity in 2008. As a result of the increase in wind-powered
generation plant, depreciation expense increased compared to the first quarter
of 2008. Additionally, issuances of long-term debt in 2008, principally to fund
MidAmerican Energy’s construction of additional wind-powered generation
capacity, resulted in higher interest expense compared to the first quarter of
2008. A reduction in income taxes due to benefits from higher tax depreciation
from significant capital additions and greater production tax credits in 2009,
partially offset the decreases to earnings on common stock. Net income
attributable to MidAmerican Funding decreased $7 million to
$93 million for the first quarter of 2009 compared to $100 million for
the first quarter of 2008.
 
 Regulated Electric Gross
Margin
 
 First
      QuarterFavorable
      (Unfavorable)2009
                      
                      
                      2008
                      
                      
                      ChangeGross
      margin (in millions):Operating
      revenues
                      
                      $
                      444
                      
                      
                      $
                      483
                      
                      
                      $
                      (39
                      )
                      
                      
                      (8
                      )%Less
      - cost of fuel, energy and capacity
                      
                      
                      136
                      
                      
                      
                      176
                      
                      
                      
                      40
                      
                      
                      
                      23
                      %Electric
      gross margin
                      
                      $
                      308
                      
                      
                      $
                      307
                      
                      
                      $
                      1
                      
                      
                      
                      -
                      %Sales
      (Gigawatt hours (“GWh”)):Retail
                      
                      
                      5,057
                      
                      
                      
                      5,236
                      
                      
                      $
                      (179
                      )
                      
                      
                      (3
                      )%Wholesale
                      
                      
                      3,911
                      
                      
                      
                      3,642
                      
                      
                      
                      269
                      
                      
                      
                      7
                      %Total
                      
                      
                      8,968
                      
                      
                      
                      8,878
                      
                      
                      $
                      90
                      
                      
                      
                      1
                      %
 
  25
  
 Electric
gross margin for the first quarter of 2009 increased $1 million compared to
the first quarter of 2008. Gross margin on electric retail sales increased
$15 million, while gross margin on electric wholesale sales, which include
sales of energy to markets operated by regional transmission organizations,
other utilities, municipalities and marketers inside and outside of MidAmerican
Energy’s balancing authority area, decreased $14 million. The increase in
electric retail gross margin was due to a reduction in the cost of energy
resulting from a lower average cost of purchased electricity, less energy
produced with natural gas and greater production from Quad Cities Generating
Station. Additionally, recovery of electric energy efficiency programs costs
increased $3 million compared to the first quarter of 2008. Changes in the
recovery of energy efficiency program costs are substantially matched by changes
in other operating expenses. These increases were partially offset by lower
retail sales volumes, in particular sales to industrial customers, reflecting
the current economic conditions, and other customers as a result of warmer
temperatures experienced in the service territory in the first quarter of 2009.
The decrease in electric wholesale gross margin was due to a significant
reduction in the average margin on wholesale sales as a result of downward
pressure on prices in the market partially offset by an increase in wholesale
sales volumes resulting from increased generation available from the addition of
owned generation and the impact of lower retail sales volumes.
 
 Regulated Gas Gross
Margin
 
 First
      QuarterFavorable
      (Unfavorable)2009
                    
                    
                    2008
                    
                    
                    ChangeGross
      margin (in millions):Operating
      revenues
                    
                    $
                    388
                    
                    
                    $
                    571
                    
                    
                    $
                    (183
                    )
                    
                    
                    (32
                    )%Less
      - cost of gas sold
                    
                    
                    301
                    
                    
                    
                    480
                    
                    
                    
                    179
                    
                    
                    
                    37
                    %Gas
      gross margin
                    
                    $
                    87
                    
                    
                    $
                    91
                    
                    
                    $
                    (4
                    )
                    
                    
                    (4
                    )%Sales
      (000’s decatherms (“Dths”)):Retail
                    
                    
                    37,976
                    
                    
                    
                    41,500
                    
                    
                    
                    (3,524
                    )
                    
                    
                    (8
                    )%Wholesale
                    
                    
                    14,393
                    
                    
                    
                    10,904
                    
                    
                    
                    3,489
                    
                    
                    
                    32
                    %Total
                    
                    
                    52,369
                    
                    
                    
                    52,404
                    
                    
                    
                    (35
                    )
                    
                    
                    -
                    %
 
 Regulated
gas revenues include purchased gas adjustment clauses through which MidAmerican
Energy is allowed to recover the cost of gas sold from its retail gas utility
customers. Consequently, fluctuations in the cost of gas sold do not directly
affect gross margin or net income because revenues reflect comparable
fluctuations through the purchased gas adjustment clauses. Compared to the first
quarter of 2008, MidAmerican Energy’s average per-unit cost of gas sold
decreased 37%, resulting in a $179 million decrease in gas revenues and
cost of gas sold for the first quarter of 2009. Additionally, regulated gas
revenues decreased due to lower retail sales volumes as a result of warmer
temperatures in the first quarter of 2009.
 
 Regulated Operating
Expenses
 
 Other
operating expenses of $106 million for the first quarter of 2009 increased $2
million compared to the first quarter of 2008 due to a $4 million increase in
energy efficiency program costs, which was substantially matched by an increase
in related revenues.
 
 Maintenance
expense of $40 million for the first quarter of 2009 increased
$3 million compared to the first quarter of 2008 due to an increase in
fossil-fueled generation plant maintenance for the first quarter of
2009.
 
 Depreciation
and amortization expense of $82 million for the first quarter of 2009
increased $10 million compared to the first quarter of 2008 due to a
$15 million increase in utility plant depreciation expense as a result of
additional wind-powered generating facilities placed in service in 2008. The
increase was partially offset by a $4 million decrease in regulatory
expense related to a revenue sharing arrangement in Iowa as a result of lower
Iowa electric equity returns.
 
  26
  Nonregulated Gross
Margin
 
 First
      QuarterFavorable
      (Unfavorable)2009
                    
                    
                    2008
                    
                    
                    ChangeMidAmerican
      Energy (in millions) -Nonregulated
      operating revenues
                    
                    $
                    304
                    
                    
                    $
                    318
                    
                    
                    $
                    (14
                    )
                    
                    
                    (4
                    )%Less
      - nonregulated cost of sales
                    
                    
                    279
                    
                    
                    
                    299
                    
                    
                    
                    20
                    
                    
                    
                    7
                    %Nonregulated
      gross margin
                    
                    $
                    25
                    
                    
                    $
                    19
                    
                    
                    $
                    6
                    
                    
                    
                    32
                    %MidAmerican
      Funding Consolidated (in millions) -Nonregulated
      operating revenues
                    
                    $
                    304
                    
                    
                    $
                    319
                    
                    
                    $
                    (15
                    )
                    
                    
                    (5
                    )
      %Less
      - nonregulated cost of sales
                    
                    
                    279
                    
                    
                    
                    299
                    
                    
                    
                    20
                    
                    
                    
                    7
                    %Nonregulated
      gross margin
                    
                    $
                    25
                    
                    
                    $
                    20
                    
                    
                    $
                    5
                    
                    
                    
                    25
                    %Nonregulated
      electric retail sales (GWh)
                    
                    
                    2,375
                    
                    
                    
                    2,385
                    
                    
                    
                    (10
                    )
                    
                    
                    -
                    %
 
 Nonregulated
revenues and cost of sales for the first quarter of 2009 decreased compared to
the first quarter of 2008 due to lower average prices and costs for nonregulated
gas sales and a 9% decrease in related sales volumes. An increase in
nonregulated electric retail revenues and cost of sales due primarily to higher
average prices and costs partially offset the decreases from nonregulated gas.
Nonregulated gross margin increased $6 million compared to the first
quarter of 2008 due primarily to a higher gross margin from nonregulated gas
sales due to the decrease in average cost and a higher gross margin from
nonregulated electric retail sales as a result of increased prices.
 
 Non-Operating
Income
 
 MidAmerican
Energy’s non-operating income for the first quarter of 2009 decreased
$4 million compared to the first quarter of 2008 due to a decrease in
allowance for equity funds as a result of higher short-term borrowing and a
decrease in construction work in progress during the first quarter of 2009. As a
regulated public utility, MidAmerican Energy is allowed to capitalize, and
record as income, a cost of construction for equity funds used, based on
guidelines set forth by the Federal Energy Regulatory Commission
(“FERC”).
 
 Fixed
Charges
 
 The
$4 million increase in MidAmerican Energy’s interest on long-term debt for
the first quarter of 2009 compared to the first quarter of 2008 was primarily
due to the issuance of $350 million of 5.3% Senior Notes in
March 2008. MidAmerican Energy is allowed to capitalize, and record as a
reduction to fixed charges, a cost of construction for debt funds used, based on
guidelines set forth by the FERC. The $2 million decrease in allowance for
borrowed funds for the first quarter of 2009 was due to a decrease in
construction work in progress compared to the first quarter of
2008.
 
 Income
Taxes
 
 MidAmerican
Energy’s income tax expense decreased $21 million to $18 million for
the first quarter of 2009 with an effective tax rate of 15% compared to 27% for
the first quarter of 2008.
 
 Federal
law provides for federal production tax credits for energy produced by renewable
electricity generation facilities, including wind-powered generation, for ten
years after the in-service date. MidAmerican Energy’s income taxes for the first
quarter of 2009 include $5 million of additional production tax credits
compared to the first quarter of 2008 due to additional wind-powered
generation.
 
 State
utility rate regulation in Iowa requires that the tax effect of certain timing
differences be flowed through immediately to customers. Therefore, amounts that
would otherwise have been recognized in income tax expense have been included as
changes in regulatory assets. This treatment of such timing differences impacts
the effective tax rates from year to year. Accordingly, greater tax depreciation
in the first quarter of 2009, due primarily to the addition of wind-powered
generation facilities in 2008, decreased the effective tax rate compared to the
first quarter of 2008.
   27
 
 MidAmerican
Funding’s income tax expense decreased $20 million to $14 million for
the first quarter of 2009 with an effective tax rate of 13% compared to 25% for
the first quarter of 2008.
 
 Liquidity
and Capital Resources
 
 As of
March 31, 2009, MidAmerican Energy’s total net liquidity available was
$389 million consisting of $7 million of cash and cash equivalents and
$900 million of revolving credit facilities reduced by $323 million of
short-term borrowings and $195 million of the revolving credit facilities
reserved to support MidAmerican Energy’s variable-rate tax-exempt bond
obligations. As of March 31, 2009, MidAmerican Funding’s total net
liquidity available was $394 million, including MHC’s $4 million
revolving credit facility.
 
 Cash Flows From Operating
Activities
 
 MidAmerican
Energy’s net cash flows from operating activities were $250 million and
$190 million for the first quarter of 2009 and 2008, respectively.
MidAmerican Funding’s net cash flows from operating activities were
$233 million and $173 million for the first quarter of 2009 and 2008,
respectively. The increase in operating cash flows for the first quarter of 2009
was primarily due to a reduction in income taxes paid resulting from greater tax
depreciation on increased capital additions and greater production tax credits
in 2009, as well as a reduction in payments for purchased gas due to lower
prices. These increases were partially offset by greater cash collateral posted
for derivative positions.
 
 Cash Flows From Investing
Activities
 
 MidAmerican
Energy’s and MidAmerican Funding’s net cash flows from investing activities were
$(118) million and $(205) million for the first quarter of 2009 and
2008, respectively. Net cash flows from investing activities consist almost
entirely of utility construction expenditures. The decrease in utility
construction expenditures is due to the construction of wind-powered generation
facilities during the first quarter of 2008.
 
 Cash Flows From Financing
Activities
 
 MidAmerican
Energy’s net cash flows from financing activities were $(134) million for
the first quarter of 2009 and $265 million for the first quarter of 2008.
MidAmerican Funding’s net cash flows from financing activities were
$(117) million for the first quarter of 2009 and $282 million for the
first quarter of 2008. During the first quarter of 2009, MidAmerican Energy made
repayments of short-term debt totaling $134 million compared to $86 million in
the first quarter of 2008 due to the improvement in cash flows from operating
activities. In the first quarter of 2008, MidAmerican Energy received proceeds
from the issuance of its long-term debt totaling $349 million. In the first
quarter of 2009, MidAmerican Funding retired $175 million of 6.339% Senior
notes and received $192 million through its note payable with
MEHC.
 
 Debt
Authorizations and Related Matters
 
 MidAmerican
Energy has authority from the FERC to issue commercial paper and bank notes
aggregating $1.2 billion through October 30, 2010. MidAmerican Energy
currently has two unsecured revolving credit facilities that support its
commercial paper program and its variable-rate tax-exempt bond obligations. The
$645 million multi-bank credit facility reduces in July 2012 to $530
million, which expires in July 2013, and the $250 million bilateral credit
facility expires in October 2009. Additionally, MidAmerican Energy has a
$5 million unsecured revolving credit facility for general corporate
purposes.
 
 MidAmerican
Energy currently has an effective registration statement with the SEC to issue
any amount of long-term securities through October 1, 2011. It also has
authorization from the FERC to issue long-term securities totaling up to
$1.118 billion through May 14, 2009, and $870 million through
October 30, 2010. Regarding annual and multiple year capital projects,
MidAmerican Energy has authorizations from the Illinois Commerce Commission
(“ICC”), expiring from May 2, 2009 to October 8, 2012, to issue up to an
aggregate of $1.106 billion of long-term debt securities.
 
  28
  In
conjunction with the March 1999 merger, MidAmerican Energy committed to the Iowa
Utilities Board (“IUB”) to use commercially reasonable efforts to maintain an
investment grade rating on its long-term debt and to maintain its common equity
level above 42% of total capitalization unless circumstances beyond its control
result in the common equity level decreasing to below 39% of total
capitalization. MidAmerican Energy must seek the approval of the IUB of a
reasonable utility capital structure if MidAmerican Energy’s common equity level
decreases below 42% of total capitalization, unless the decrease is beyond the
control of MidAmerican Energy. MidAmerican Energy is also required to seek the
approval of the IUB if MidAmerican Energy’s equity level decreases to below 39%,
even if the decrease is due to circumstances beyond the control of MidAmerican
Energy. If MidAmerican Energy’s common equity level were to drop below the
required thresholds, MidAmerican Energy’s ability to issue debt could be
restricted. As of March 31, 2009, MidAmerican Energy’s common equity ratio was
49% computed on a basis consistent with its commitment.
 
 MidAmerican
Funding or one of its subsidiaries, including MidAmerican Energy, may from time
to time seek to retire its outstanding debt through cash purchases in the open
market, privately negotiated transactions or otherwise. Any debt securities
repurchased by MidAmerican Funding or one of its subsidiaries may be reissued or
resold by MidAmerican Funding or one of its subsidiaries from time to time and
will depend on prevailing market conditions, the issuing company’s liquidity
requirements, contractual restrictions and other factors. The amounts involved
may be material.
 
 Future Uses of
Cash
 
 MidAmerican
Energy and MidAmerican Funding have available a variety of sources of liquidity
and capital resources, both internal and external, including cash flows from
operations, public and private debt offerings, the issuance of commercial paper,
the use of unsecured revolving credit facilities, and other sources. These
sources are expected to provide funds required for current operations, capital
expenditures, debt retirements and other capital requirements. The availability
and terms under which MidAmerican Energy and MidAmerican Funding have access to
external financing depends on a variety of factors, including their credit
ratings, investors’ judgment of risk and conditions in the overall capital
market at the time of marketing, including the condition of the utility industry
in general.
 
 Utility
Construction Expenditures
 
 MidAmerican
Energy’s primary need for capital is utility construction expenditures.
MidAmerican Energy’s utility construction expenditures for 2009, excluding the
non-cash allowance for equity funds used during construction, are estimated to
be approximately $409 million, which includes $45 million for wind-powered
generation projects, $27 million for emissions control equipment to address
current and anticipated air quality regulations, and $337 million for
ongoing operational projects, including connections for new customers and
facilities to accommodate load growth. Capital expenditure needs are reviewed
regularly by management and may change significantly as a result of such
reviews, which may consider, among other factors, changes in rules and
regulations, including environmental and nuclear, changes in income tax laws,
general business conditions, load projections, system reliability standards, the
cost and efficiency of construction labor, equipment, and materials, and the
cost and availability of capital.
 
 MidAmerican
Energy continues to pursue additional cost effective wind-powered generation
capacity. On March 25, 2009, MidAmerican Energy filed with the IUB for its
approval a settlement agreement between MidAmerican Energy and the Iowa Office
of Consumer Advocate (“OCA”) in conjunction with MidAmerican Energy’s ratemaking
principles application for up to 1,001 MW (nameplate ratings) of additional
wind-powered generation capacity in Iowa. MidAmerican Energy has not entered
into any contracts for the development or construction of new wind-powered
generation capacity or the purchase of any related wind turbines.
 
 MidAmerican
Energy is subject to federal, state and local laws and regulations with regard
to air and water quality, hazardous and solid waste disposal and other
environmental matters. The future costs (beyond existing planned capital
expenditures) of complying with applicable environmental laws, regulations and
rules cannot yet be reasonably estimated but could be material to MidAmerican
Energy. In particular, future mandates, including those associated with
addressing the issue of global climate change, may impact the operation of
MidAmerican Energy’s generating facilities and may require MidAmerican Energy to
reduce emissions at its facilities through the installation of additional
emission control equipment or to purchase additional emission allowances or
offsets in the future. MidAmerican Energy is not aware of any proven,
commercially available technology that eliminates or captures and stores carbon
dioxide emissions from coal-fired and gas-fired generation facilities, and
MidAmerican Energy is uncertain when, or if, such technology will be
commercially available.
   29
 MidAmerican
Energy has implemented a planning process that forecasts the site-specific
controls and actions that may be required to meet emissions reductions as
promulgated by the U.S. Environmental Protection Agency (“EPA”). The plan is
designed to effectively manage its expenditures required to comply with
emissions standards. On April 1, 2008, MidAmerican Energy submitted to the
IUB an updated plan, as required every two years by Iowa law, which increased
its estimate of required expenditures. That plan estimated that the cost of
capital expenditures for emission control equipment included in its plan for
compliance with current air quality requirements would total approximately
$260 million for January 1, 2009, through December 31, 2015.
Additionally, MidAmerican Energy expects to incur significant incremental
operating costs in conjunction with the utilization of the emissions control
equipment. Estimates of the environmental capital and operating requirements may
change significantly at any time as a result of, among other factors, changes in
related regulations, prices of products used to meet the requirements and
management’s strategies for achieving compliance with the
regulations.
 
 Refer to
the “Environmental Regulations” section of Item 1 of MidAmerican Energy’s
Annual Report on Form 10-K for the year ended December 31, 2008, and updates
provided in this Form 10-Q for a detailed discussion of environmental
standards affecting MidAmerican Energy.
 
 Contractual
Obligations
 
 Subsequent
to December 31, 2008, there were no material changes outside the normal
course of business in MidAmerican Energy’s and MidAmerican Funding’s contractual
obligations from the information provided in Item 7 of their Annual Report
on Form 10-K for the year ended December 31, 2008. Additionally, refer
to the “Utility Construction Expenditures” discussion included in Liquidity and
Capital Resources.
 
 Environmental
Matters
 
 In
addition to the updates contained herein, refer to Item 1 of MidAmerican
Energy’s and MidAmerican Funding’s Annual Report on Form 10-K for the year ended
December 31, 2008, for additional information regarding certain
environmental matters affecting MidAmerican Energy’s operations.
 
 Climate
Change
 
 On April
17, 2009, the Environmental Protection Agency (“EPA”) issued a proposed finding,
in response to the U.S. Supreme Court’s 2007 decision in the case of Massachusetts v. EPA, that
under Section 202(a) of the Clean Air Act six greenhouse gases—carbon dioxide,
methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur
hexafluoride—threaten the public health and welfare of current and future
generations. The proposed finding will be subject to a 60-day public comment
period before being finalized. The finding does not include any proposed
regulations regarding greenhouse gas emissions; however, such regulatory or
legislative action could have a significant adverse impact on MidAmerican
Energy’s current and future fossil-fueled generating facilities.
 
 Credit
Ratings
 
 As of
March 31, 2009, MidAmerican Energy’s senior unsecured debt credit ratings
were as follows: Fitch Ratings, “A/stable;” Moody’s Investor Service,
“A2/stable;” and Standard & Poor’s, “A-/stable.” Debt and preferred
securities of MidAmerican Energy are rated by nationally recognized credit
rating agencies. Assigned credit ratings are based on each rating agency’s
assessment of MidAmerican Energy’s ability to, in general, meet the obligations
of its issued debt or preferred securities. The credit ratings are not a
recommendation to buy, sell or hold securities, and there is no assurance that a
particular credit rating will continue for any given period of
time.
 
 MidAmerican
Funding and MidAmerican Energy have no credit rating downgrade triggers that
would accelerate the maturity dates of their outstanding debt, and a change in
ratings is not an event of default under the applicable debt instruments.
MidAmerican Energy’s unsecured revolving credit facilities do not require the
maintenance of a minimum credit rating level in order to draw upon its
availability, but under certain instances must maintain sufficient covenant
tests if ratings drop below a certain level. However, commitment fees and
interest rates under the credit facilities are tied to credit ratings and
increase or decrease when the ratings change. A ratings downgrade could also
increase the future cost of commercial paper, short- and long-term debt
issuances or new credit facilities.
  30
  A change
in MidAmerican Energy’s credit ratings could result in the requirement to post
cash collateral, letters of credit or other similar credit support under certain
agreements, including derivative contracts, related to its procurement or sale
of electricity, natural gas, coal, transportation and other supplies. In
accordance with industry practice, certain agreements, including derivative
contracts, contain provisions that require MidAmerican Energy to maintain
specific credit ratings from one or more of the major credit ratings agencies on
their unsecured debt. These agreements, including derivative contracts, may
either specifically provide bilateral rights to demand cash or other security if
credit exposures on a net basis exceed specified rating-dependent threshold
levels (“credit-risk-related contingent features”) or provide the right for
counterparties to demand “adequate assurance” in the event of a material adverse
change in MidAmerican Energy’s creditworthiness. These rights can vary by
contract and by counterparty. As of March 31, 2009, MidAmerican Energy’s
credit ratings from the three recognized credit rating agencies were investment
grade. If all credit-risk-related contingent features or adequate assurance
provisions for these agreements, including derivative contracts, had been
triggered as of March 31, 2009, MidAmerican Energy would have been required
to post $332 million of additional collateral. MidAmerican Energy’s
collateral requirements could fluctuate considerably due to market price
volatility, changes in credit ratings or other factors. Refer to Note 4 of Notes
to Consolidated Financial Statements included in Item 1 of this Form 10-Q for a
discussion of MidAmerican Energy’s collateral requirements specific to its
derivative contracts.
 
 Transmission
System Regulation
 
 The FERC
regulates MidAmerican Energy’s wholesale transmission services. The regulations
require MidAmerican Energy to provide open access transmission service at
cost-based rates. The FERC also regulates unbundled transmission service to
retail customers. These services are offered on a non-discriminatory basis,
meaning that all potential customers are provided an equal opportunity to access
the transmission system. MidAmerican Energy’s transmission services are managed
and operated independently from its wholesale marketing activities in accordance
with the FERC Standards of Conduct. MidAmerican Energy is not part of a regional
transmission operator (“RTO”), but it has hired an independent transmission
service coordinator (“TSC”) to administer through August 2009 various
MidAmerican Energy Open Access Transmission Tariff functions. The FERC approved
MidAmerican Energy’s selection of the TSC and the related
agreement.
 
 MidAmerican
Energy has determined that participation in an RTO market as a transmission
owning member would provide it with enhanced wholesale marketing opportunities
through greater access to wholesale electric buyers. While MidAmerican Energy
would retain ownership of its transmission assets, the RTO would be responsible
for the operation of the transmission system and the administration of
transmission services. MidAmerican Energy is currently in discussions with the
Midwest Independent Transmission System Operator, Inc. (“MISO”) and other
affected persons, including transmission service and wholesale electric
customers and joint owners of generation resources, regarding the process for
and the timing of its joining MISO. Membership in MISO is subject to certain
state and federal regulatory filings and approvals and the execution of a
transmission owners agreement. The effective date of MidAmerican Energy’s
participation in the RTO market is expected to be during the second half of
2009.
 
 New
Accounting Pronouncements
 
 For a
discussion of new accounting pronouncements affecting MidAmerican Energy and
MidAmerican Funding, refer to Note 2 of Notes to Consolidated Financial
Statements included in Item 1 of this Form 10-Q.
 
 Critical
Accounting Policies
 
 Certain
accounting policies require management to make estimates and judgments
concerning transactions that will be settled several years in the future.
Amounts recognized in the Consolidated Financial Statements from such estimates
are necessarily based on numerous assumptions involving varying and potentially
significant degrees of judgment and uncertainty. Accordingly, the amounts
currently reflected in the Consolidated Financial Statements will likely
increase or decrease in the future as additional information becomes available.
Estimates are used for, but not limited to, the accounting for the effects of
certain types of regulation, derivatives, impairment of long-lived assets and
goodwill, pension and other postretirement benefits, income taxes and revenue
recognition - unbilled revenue. For additional discussion of MidAmerican
Energy’s and MidAmerican Funding’s critical accounting policies, see Item 7
of their Annual Report on Form 10-K for the year ended December 31,
2008. MidAmerican Energy’s and MidAmerican Funding’s critical accounting
policies have not changed materially since December 31,
2008.
  31
  
 Item 3.
                Quantitative and Qualitative Disclosures About
      Market Risk
 
 For
quantitative and qualitative disclosures about market risk affecting MidAmerican
Energy and MidAmerican Funding, see Item 7A of their Annual Report on
Form 10-K for the year ended December 31, 2008. MidAmerican Energy’s
and MidAmerican Funding’s exposure to market risk and their management of such
risk has not changed materially since December 31, 2008. Refer to
Note 3 of Notes to Consolidated Financial Statements included in
Item 1 of this Form 10-Q for disclosure of MidAmerican Energy’s derivative
positions as of March 31, 2009 and December 31, 2008.
 
 
 Item 4.
                  Controls and
Procedures
 
 At the
end of the period covered by this Quarterly Report on Form 10-Q, the Company
(MidAmerican Energy or MidAmerican Funding, as applicable) carried out an
evaluation, under the supervision and with the participation of the Company’s
management, including the Chief Executive Officer (principal executive officer)
and the Chief Financial Officer (principal financial officer), of the
effectiveness of the design and operation of the Company’s disclosure controls
and procedures (as defined in Rule 13a-15(e) promulgated under the Securities
and Exchange Act of 1934, as amended). Based upon that evaluation, the Company’s
management, including the Chief Executive Officer (principal executive officer)
and the Chief Financial Officer (principal financial officer), concluded that
the Company’s disclosure controls and procedures were effective to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms, and is
accumulated and communicated to management, including the Chief Executive
Officer (principal executive officer) and the Chief Financial Officer (principal
financial officer), or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. There has been no change
in the Company’s internal control over financial reporting during the quarter
ended March 31, 2009, that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial
reporting.
  32
  
 PART
II
 
 Item 1.
                Legal
Proceedings
 
 None.
 
 Item 1A.
                Risk
Factors
 
 There has
been no material change to MidAmerican Funding’s or MidAmerican Energy’s risk
factors from those disclosed in Item 1A of their Annual Report on
Form 10-K for the year ended December 31, 2008.
 
 Item 2.
                Unregistered Sales of Equity Securities and Use of
      Proceeds
 
 Not
applicable.
 
 Item 3.
                Defaults Upon Senior
  Securities
 
 Not
applicable.
 
 Item 4.
                Submission of Matters to a Vote of Security
      Holders
 
 Not
applicable.
 
 Item 5.
                Other
Information
 
 Not
applicable.
 
 Item 6.
                Exhibits
 
 The
exhibits listed on the accompanying Exhibit Index are filed as a part of this
Quarterly Report.
 
 
  33
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, each registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 
 MIDAMERICAN
      FUNDING, LLCMIDAMERICAN ENERGY
  COMPANYRegistrantsDate:  May 8,
      2009
                  /s/  Thomas B.
      SpecketerThomas
      B. SpecketerVice
      President and Controllerof
      MidAmerican Funding, LLCAnd
      MidAmerican Energy Company(principal
      financial and accounting officer)
 
  34
  
 EXHIBIT INDEX
 
 Exhibit No.
                      DescriptionMidAmerican Energy15
                      Awareness
      Letter of Independent Registered Public Accounting
Firm.31.1
                      Principal
      Executive Officer Certification Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
                      Principal
      Financial Officer Certification Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                      Principal
      Executive Officer Certification Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.2
                      Principal
      Financial Officer Certification Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.MidAmerican Funding31.3
                      Principal
      Executive Officer Certification Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.4
                      Principal
      Financial Officer Certification Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.3
                      Principal
      Executive Officer Certification Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.4
                      Principal
      Financial Officer Certification Pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002.
  MidAmerican Energy and MidAmerican
      Funding10.1
                  First
      Amendment, dated as of April 15, 2009, to the Amended and Restated Credit
      Agreement among MidAmerican Energy Company, the lending institutions party
      hereto, as banks, JPMorgan Chase Bank, N.A., as Administrative Agent,
      Union Bank of California, N.A., as Syndication Agent, and The Royal Bank
      of Scotland plc, ABN Amro Bank N.V. and BNP Paribas, as Co-Documentation
      Agents, dated as of July 6,
2006.
 35