**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, 2007





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 500****Des
                Moines, Iowa 50309-2580****333-15387**
            
            **MIDAMERICAN
                ENERGY COMPANY**
            
            **42-1425214****(An
                Iowa Corporation)****666
                Grand Avenue, Suite 500****Des
                Moines, Iowa 50309-2580**(515)
                242-4300(Registrant’s
                telephone number, including area code)(Former
                name, former address and former fiscal year, if changed since last
                report)





Indicate
      by check mark whether the registrants (1) have filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrants were
      required to file such reports), and (2) have been subject to such filing
      requirements for the past 90 days.





MidAmerican
                Funding, LLC
            Yes£NoT
            MidAmerican
                Energy Company
            YesTNo£





Indicate
      by check mark whether the registrants are large accelerated filers, accelerated
      filers, or non-accelerated filers. See definition of “accelerated filer and
      large accelerated filer” in Rule 12b-2 of the Exchange Act.





(Check
                one):
            Large
                accelerated filer£
            Accelerated
                filer£
            Non-accelerated
                filerT





Indicate
      by check mark whether either registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes £  No T





As
      of
      April 30, 2007, all of the member’s equity of MidAmerican Funding, LLC was
      held by its parent company, MidAmerican Energy Holdings Company.





As
      of
      April 30, 2007, all 70,980,203 outstanding shares of MidAmerican Energy
      Company’s voting stock were held by its parent company, MHC Inc., a direct,
      wholly owned subsidiary of MidAmerican Funding, LLC.














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
      I - FINANCIAL
      INFORMATION**





Item
                1.
            Financial
                Statements
            3Item
                2.
            Management’s
                Discussion and Analysis of Financial
                Condition and Results of Operations
            23Item
                3.
            Quantitative
                and Qualitative Disclosures About
                Market Risk
            33Item
                4.
            Controls
                and Procedures
            33**PART
                II - OTHER
                INFORMATION**Item
                1.
            Legal
                Proceedings
            34Item
                1A.
            Risk
                Factors
            34Item
                2.
            Unregistered
                Sales of Equity Securities and Use
                of Proceeds
            34Item
                3.
            Defaults
                Upon Senior Securities
            34Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            34Item
                5.
            Other
                Information
            35Item
                6.
            Exhibits
            35Signatures
            
            36Exhibit
                Index
            
            37




2





**PART
      I - FINANCIAL INFORMATION**




**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 Comprehensive
                Income
            7Consolidated
                Statements of Cash Flows
            8Notes
                to Consolidated Financial
                Statements
            9MidAmerican
                Funding, LLC and SubsidiariesReport
                of Independent Registered Public Accounting
                Firm
            15Consolidated
                Balance Sheets
            16Consolidated
                Statements of
                Operations
            17Consolidated
                Statements of Comprehensive
                Income
            18Consolidated
                Statements of Cash
                Flows
            19Notes
                to Consolidated Financial
                Statements
            20






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, 2007, and the
      related consolidated statements of operations, comprehensive income, and cash
      flows for the three-month periods ended March 31, 2007 and 2006. 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, 2006, and the related
      consolidated statements of operations, comprehensive income, retained earnings,
      and cash flows for the year then ended (not presented herein); and in our report
      dated February 27, 2007, we expressed an unqualified opinion on those
      consolidated financial statements, which included an explanatory paragraph
      related to the adoption of SFAS No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement
      Plans* .
      In our
      opinion, the information set forth in the accompanying consolidated balance
      sheet as of December 31, 2006, is fairly stated, in all material respects,
      in relation to the consolidated balance sheet from which it has been
      derived.








/s/
      Deloitte & Touche LLP





Des
      Moines, Iowa


May 4,
      2007





4


**MIDAMERICAN
      ENERGY COMPANY AND SUBSIDIARY**


**CONSOLIDATED
      BALANCE SHEETS (Unaudited)**


(In
      thousands)





**As
                of****March 31,**
            
            **December 31,****2007**
            
            **2006****ASSETS****Utility
                Plant, Net**Electric
            
            $
            6,415,190
            
            $
            6,366,054Gas
            
            
            1,041,810
            
            
            1,031,3417,457,000
            
            
            7,397,395Accumulated
                depreciation and amortization
            
            
            (3,309,279
            )
            
            (3,261,001
            )4,147,721
            
            
            4,136,394Construction
                work in progress
            
            
            1,101,760
            
            
            866,6775,249,481
            
            
            5,003,071**Current
                Assets**Cash
                and cash equivalents
            
            
            5,035
            
            
            8,765Short-term
                investments
            
            
            -
            
            
            15,000Receivables,
                net
            
            
            473,993
            
            
            393,504Inventories
            
            
            37,241
            
            
            113,343Other
            
            
            125,799
            
            
            163,192642,068
            
            
            693,804**Investments
                and Nonregulated Property, Net**
            
            
            416,644
            
            
            409,533**Regulatory
                Assets**
            
            
            238,567
            
            
            273,242**Other
                Assets**
            
            
            121,681
            
            
            129,943**Total
                Assets**
            
            $
            6,668,441
            
            $
            6,509,593**CAPITALIZATION
                AND LIABILITIES****Capitalization**Common
                shareholder’s equity
            
            $
            2,059,771
            
            $
            1,950,779MidAmerican
                Energy preferred securities
            
            
            30,329
            
            
            30,329Long-term
                debt, excluding current portion
            
            
            1,819,461
            
            
            1,819,3893,909,561
            
            
            3,800,497**Current
                Liabilities**Notes
                payable
            
            
            100,000
            
            
            -Current
                portion of long-term debt
            
            
            465
            
            
            1,620Accounts
                payable
            
            
            501,063
            
            
            497,672Taxes
                accrued
            
            
            107,896
            
            
            99,150Interest
                accrued
            
            
            28,749
            
            
            32,407Other
            
            
            84,246
            
            
            171,391822,419
            
            
            802,240**Other
                Liabilities**Deferred
                income taxes
            
            
            477,459
            
            
            471,369Investment
                tax credits
            
            
            39,758
            
            
            40,569Asset
                retirement obligations
            
            
            175,707
            
            
            173,204Regulatory
                liabilities
            
            
            1,007,072
            
            
            989,044Other
            
            
            236,465
            
            
            232,6701,936,461
            
            
            1,906,856**Total
                Capitalization and Liabilities**
            
            $
            6,668,441
            
            $
            6,509,593





The
      accompanying notes are an integral part of these financial
      statements.




5




**MIDAMERICAN
      ENERGY COMPANY AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS(Unaudited)**


(In
      thousands)





**Three
                Months****Ended March 31,****2007**
            
            **2006****Operating
                Revenues**Regulated
                electric
            
            $
            480,254
            
            $
            415,189Regulated
                gas
            
            
            498,964
            
            
            455,852Nonregulated
            
            
            256,738
            
            
            170,1411,235,956
            
            
            1,041,182**Operating
                Expenses**Regulated:Cost
                of fuel, energy and capacity
            
            
            196,231
            
            
            141,203Cost
                of gas sold
            
            
            413,041
            
            
            379,929Other
                operating expenses
            
            
            98,302
            
            
            90,724Maintenance
            
            
            42,590
            
            
            30,866Depreciation
                and amortization
            
            
            69,488
            
            
            74,647Property
                and other taxes
            
            
            25,295
            
            
            24,670844,947
            
            
            742,039Nonregulated:Cost
                of sales
            
            
            242,222
            
            
            160,746Other
            
            
            4,165
            
            
            3,509246,387
            
            
            164,255Total
                operating expenses
            
            
            1,091,334
            
            
            906,294**Operating
                Income**
            
            
            144,622
            
            
            134,888**Non-Operating
                Income**Interest
                and dividend income
            
            
            1,038
            
            
            2,423Allowance
                for equity funds
            
            
            10,781
            
            
            7,203Other
                income
            
            
            1,605
            
            
            2,022Other
                expense
            
            
            (432
            )
            
            (381
            )12,992
            
            
            11,267**Fixed
                Charges**Interest
                on long-term debt
            
            
            25,738
            
            
            23,887Other
                interest expense
            
            
            3,489
            
            
            2,709Allowance
                for borrowed funds
            
            
            (5,784
            )
            
            (3,181
            )23,443
            
            
            23,415**Income
                Before Income Taxes**
            
            
            134,171
            
            
            122,740**Income
                Taxes**
            
            
            42,061
            
            
            35,772**Net
                Income**
            
            
            92,110
            
            
            86,968**Preferred
                Dividends**
            
            
            312
            
            
            312**Earnings
                on Common Stock**
            
            $
            91,798
            
            $
            86,656





The
      accompanying notes are an integral part of these financial
      statements.




6




**MIDAMERICAN
      ENERGY COMPANY AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE INCOME(Unaudited)**


(In
      thousands)





**Three
                Months****Ended March 31,****2007**
            
            **2006****Earnings
                on Common Stock**
            
            $
            91,798
            
            $
            86,656**Other
                Comprehensive Income (Loss)**Unrealized
                gains (losses) on cash flow hedges:Unrealized
                gains during period-Before
                income taxes
            
            
            28,699
            
            
            -Income
                tax expense
            
            
            (11,392
            )
            
            -17,307
            
            
            -Less
                realized losses reflected in net income
              during
                period-Before
                income taxes
            
            
            (957
            )
            
            -Income
                tax benefit
            
            
            381
            
            
            -(576
            )
            
            -Net
                unrealized gains
            
            
            17,883
            
            
            -Minimum
                pension liability adjustment:Before
                income taxes
            
            
            -
            
            
            18Income
                tax expense
            
            
            -
            
            
            (7
            )-
            
            
            11Other
                comprehensive income
            
            
            17,883
            
            
            11**Comprehensive
                Income**
            
            $
            109,681
            
            $
            86,667








The
      accompanying notes are an integral part of these financial
      statements.




7




**MIDAMERICAN
      ENERGY COMPANY AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS
      (Unaudited)**


(In
      thousands)





**Three Months****Ended March 31,****2007**
            
            **2006****Net
                Cash Flows From Operating Activities**Net
                income
            
            $
            92,110
            
            $
            86,968Adjustments
                to reconcile net income to net cash provided:Depreciation
                and amortization
            
            
            69,725
            
            
            74,979Deferred
                income taxes and investment tax credit, net
            
            
            4,560
            
            
            (1,709
            )Amortization
                of other assets and liabilities
            
            
            6,414
            
            
            6,834Impact
                of changes in working capital-Receivables,
                net
            
            
            (79,124
            )
            
            58,083Inventories
            
            
            76,102
            
            
            47,904Accounts
                payable
            
            
            42,392
            
            
            (89,359
            )Taxes
                accrued
            
            
            11,659
            
            
            31,743Other
                current assets and liabilities
            
            
            (11,472
            )
            
            22,921Other,
                net
            
            
            2,622
            
            
            6,555Net
                cash provided by operating activities
            
            
            214,988
            
            
            244,919**Net
                Cash Flows From Investing Activities**Utility
                construction expenditures
            
            
            (331,680
            )
            
            (130,484
            )Quad
                Cities Station decommissioning trust fund
            
            
            (399
            )
            
            (2,075
            )Purchases
                of available-for-sale securities
            
            
            (28,859
            )
            
            (303,163
            )Proceeds
                from sales of available-for-sale securities
            
            
            39,387
            
            
            300,164Other,
                net
            
            
            3,252
            
            
            6,494Net
                cash used in investing activities
            
            
            (318,299
            )
            
            (129,064
            )**Net
                Cash Flows From Financing Activities**Dividends
                paid
            
            
            (312
            )
            
            (312
            )Retirement
                of long-term debt, including reacquisition cost
            
            
            (1,155
            )
            
            (145
            )Net
                increase in notes payable
            
            
            100,000
            
            
            -Other
            
            
            1,048
            
            
            1,122Net
                cash provided by financing activities
            
            
            99,581
            
            
            665**Net
                Increase (Decrease) in Cash and Cash Equivalents**
            
            
            (3,730
            )
            
            116,520**Cash
                and Cash Equivalents at Beginning of Period**
            
            
            8,765
            
            
            70,914**Cash
                and Cash Equivalents at End of Period**
            
            $
            5,035
            
            $
            187,434





The
      accompanying notes are an integral part of these financial
      statements.




8





**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
      has the following nonregulated subsidiaries: InterCoast Capital Company,
      MidAmerican Services Company, Midwest Capital Group, Inc. and MEC Construction
      Services Co. MHC is the direct wholly owned subsidiary of MidAmerican Funding,
      LLC, (“MidAmerican Funding”), which is an Iowa limited liability company with
      MidAmerican Energy Holdings Company (“MidAmerican Energy Holdings”) as its sole
      member. MidAmerican Energy Holdings is a consolidated subsidiary of Berkshire
      Hathaway Inc.





The
      accompanying unaudited Consolidated Financial Statements have been prepared
      by
      MidAmerican Energy in accordance with accounting principles generally accepted
      in the United States of America (“GAAP”) and the rules and regulations of the
      Securities and Exchange Commission for interim financial statements.
      Accordingly, they do not include all of the information and disclosures required
      for annual financial statements. In the opinion of MidAmerican Energy, all
      adjustments, consisting of normal recurring adjustments, have been made to
      present fairly its financial position, results of operations and changes in
      cash
      flows for the periods presented. In order to be consistent with the current
      year
      presentation, certain reclassifications have been made to the unaudited
      Consolidated Statement of Operations for the three months ended March 31,
      2006. Although MidAmerican Energy believes that the disclosures contained herein
      are adequate to make the information presented not misleading, it is suggested
      that these financial statements be read in conjunction with the Consolidated
      Financial Statements and the notes thereto included in MidAmerican Energy’s
      latest Annual Report on Form 10-K.





The
      accompanying unaudited Consolidated Financial Statements include the accounts
      of
      MidAmerican Energy and the subsidiary in which it holds a controlling financial
      interest. All significant intercompany accounts and transactions have been
      eliminated, other than those between rate-regulated operations.





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. Management’s Discussion and Analysis and 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, 2006, describe
      the most significant accounting estimates and policies used in the preparation
      of the unaudited Consolidated Financial Statements. There have been no
      significant changes in MidAmerican Energy’s assumptions regarding critical
      accounting estimates and significant accounting policies during the first three
      months of 2007, except as described in Note 2.





**(2)**
            **New
                Accounting Pronouncements**





In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 159, “The Fair
      Value Option for Financial Assets and Financial ** Liabilities
      - Including an amendment of FASB Statement No. 115” (“SFAS No. 159”).
      SFAS No. 159 permits entities to elect to measure many financial
      instruments and certain other items at fair value. Upon adoption of SFAS
      No. 159, an entity may elect the fair value option for eligible items that
      exist at the adoption date. Subsequent to the initial adoption, the election
      of
      the fair value option may only be made at initial recognition of the asset
      or
      liability or upon a re-measurement event that gives rise to new-basis
      accounting. The decision about whether to elect the fair value option is applied
      on an instrument-by-instrument basis, is irrevocable and is applied only to
      an
      entire instrument and not only to specified risks, cash flows or portions of
      that instrument. SFAS No. 159 does not affect any existing accounting
      literature that requires certain assets and liabilities to be carried at fair
      value nor does it eliminate disclosure requirements included in other accounting
      standards. SFAS No. 159 is effective for fiscal years beginning after
      November 15, 2007. MidAmerican Energy and MidAmerican Funding are currently
      evaluating the impact of adopting SFAS No. 159 on their respective
      financial position and results of operations.




9




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(“SFAS 157”). SFAS No. 157 defines fair value, establishes a framework
      for measuring fair value and expands disclosures about fair value measurements.
      SFAS No. 157 does not impose fair value measurements on items not already
      accounted for at fair value; rather it applies, with certain exceptions, to
      other accounting pronouncements that either require or permit fair value
      measurements. SFAS No. 157 is effective for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years.
      MidAmerican Energy and MidAmerican Funding are currently evaluating the impact
      of adopting SFAS No. 157 on their respective consolidated financial
      position and results of operations.





In
      July
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes - an interpretation of FASB Statement No. 109” ** (“FIN
      48”) *.* MidAmerican Energy adopted the provisions of FIN 48 effective January 1, 2007.
      Under FIN 48, tax benefits are recognized only for tax positions that are
      more likely than not to be sustained upon examination by tax authorities. The
      amount recognized is measured as the largest amount of benefit that is greater
      than 50% likely to be realized upon ultimate settlement. Unrecognized tax
      benefits are tax benefits claimed in MidAmerican Energy’s tax returns that do
      not meet these recognition and measurement standards.





As
      of
      January 1, 2007, MidAmerican Energy had $24.8 million of unrecognized tax
      benefits. Of this amount, MidAmerican Energy recognized a net increase in the
      liability for unrecognized tax benefits of $11.3 million as a cumulative
      effect of adopting FIN 48, which was offset by reductions in beginning retained
      earnings of $0.7 million and deferred income tax liabilities of
      $9.0 million and an increase in regulatory assets of $1.6 million in
      the Consolidated Balance Sheet. The remaining $13.5 million had been previously
      accrued under SFAS No. 5, “Accounting for Contingencies,” or SFAS No. 109,
“Accounting for Income Taxes.” The entire $24.8 million of unrecognized tax
      benefits is included in other liabilities - other in the Consolidated Balance
      Sheet.





Included
      in the $24.8 million are $14.2 million of net unrecognized tax benefits
      that, if recognized, would have an impact on the effective tax rate. The
      remaining unrecognized tax benefits relate to tax positions for which ultimate
      deductibility is highly certain but for which there is uncertainty as to the
      timing of such deductibility. Recognition of these tax benefits, other than
      applicable interest and penalties, would not affect MidAmerican Energy’s
      effective tax rate. MidAmerican Energy recognizes interest and penalties accrued
      related to unrecognized tax benefits in income tax expense. As of
      January 1, 2007, MidAmerican Energy had $4.4 million accrued for the
      payment of interest, which is included in unrecognized tax
      benefits.





MidAmerican
      Energy’s ultimate parent company files income tax returns in the U.S. federal
      jurisdiction and various state jurisdictions. The U.S. Internal Revenue Service
      has closed its examination of the parent company’s income tax returns through
      2003, including components related to MidAmerican Energy. In addition, open
      tax
      years related to a number of state jurisdictions remain subject to examination.
      During the three-month period ended March 31, 2007, there were no material
      changes to the liability for uncertain tax positions.





**(3)**
            **Risk
                Management**





MidAmerican
      Energy is exposed to loss of net income, cash flows and asset values due to
      market risk, including: 1) changes in the market price of gas, electricity
      and
      fuel used in its regulated and nonregulated businesses, 2) variations in the
      severity of weather conditions from normal, and 3) changes in interest rates.
      To
      manage these exposures, MidAmerican Energy enters into various financial
      derivative instruments, including futures, swaps, options and forward physical
      contracts. Through the functioning of a risk oversight committee, senior
      management provides the overall direction, structure, conduct and control of
      MidAmerican Energy’s risk management activities, including authorization and
      communication of risk management policies and procedures, the use of financial
      derivative instruments, strategic hedging program guidelines, appropriate market
      and credit risk limits, and appropriate systems for recording, monitoring and
      reporting the results of transactional and risk management activities.




10


The
      following table summarizes the various derivative mark-to-market positions
      included in the unaudited Consolidated Balance Sheet as of March 31, 2007 (in
      thousands):





AccumulatedRegulatory
            
            OtherDerivative
                Net Assets (Liabilities)
            
            Net
                Asset
            
            ComprehensiveAssets
            
            Liabilities
            
            Total
            
            (Liability)
            
            (Income)
                Loss(1)Regulated
                electric
            
            $
            11,471
            
            $
            (7,885
            )
            $
            3,586
            
            $
            (3,586
            )
            $
            -Regulated
                gas
            
            
            2,369
            
            
            (120
            )
            
            2,249
            
            
            (2,249
            )
            
            -Nonregulated
            
            
            20,289
            
            
            (10,165
            )
            
            10,124
            
            
            -
            
            
            (9,470
            )Total
            
            $
            34,129
            
            $
            (18,170
            )
            $
            15,959
            
            $
            (5,835
            )
            $
            (9,470
            )Current
            
            $
            27,784
            
            $
            (15,235
            )
            $
            12,549Non-current
            
            
            6,345
            
            
            (2,935
            )
            
            3,410Total
            
            $
            34,129
            
            $
            (18,170
            )
            $
            15,959





(1)
            Before
                income taxes.





The
      following table summarizes the various derivative mark-to-market positions
      included in the consolidated balance sheet as of December 31, 2006 (in
      thousands):





AccumulatedRegulatory
            
            OtherDerivative
                Net Assets (Liabilities)
            
            Net
                Asset
            
            ComprehensiveAssets
            
            Liabilities
            
            Total
            
            (Liability)
            
            (Income)
                Loss(1)Regulated
                electric
            
            $
            35,744
            
            $
            (14,307
            )
            $
            21,437
            
            $
            (21,437
            )
            $
            -Regulated
                gas
            
            
            1,760
            
            
            (44,728
            )
            
            (42,968
            )
            
            35,793
            
            
            -Nonregulated
            
            
            35,934
            
            
            (56,648
            )
            
            (20,714
            )
            
            -
            
            
            20,187Total
            
            $
            73,438
            
            $
            (115,683
            )
            $
            (42,245
            )
            $
            14,356
            
            $
            20,187Current
            
            $
            67,581
            
            $
            (109,406
            )
            $
            (41,825
            )Non-current
            
            
            5,857
            
            
            (6,277
            )
            
            (420
            )Total
            
            $
            73,438
            
            $
            (115,683
            )
            $
            (42,245
            )





(1)
            Before
                income taxes.





**(4)**
            **Rate
                Matters**





Under
      a
      series of settlement agreements between MidAmerican Energy, the Iowa Office
      of
      Consumer Advocate (“OCA”) and other intervenors approved by the IUB, MidAmerican
      Energy has agreed not to seek a general increase in electric base rates to
      become effective prior to January 1, 2013, unless its Iowa jurisdictional
      electric return on equity for any year falls below 10%. Prior to filing for
      a
      general increase in electric rates, MidAmerican Energy is required to conduct
      30
      days of good faith negotiations with the signatories to the settlement
      agreements to attempt to avoid a general increase in such rates. As a party
      to
      the settlement agreements, the OCA has agreed not to request or support any
      decrease in MidAmerican Energy’s Iowa electric base rates to become effective
      prior to January 1, 2013. The settlement agreements specifically allow the
      IUB to approve or order electric rate design or cost of service rate changes
      that could result in changes to rates for specific customers as long as such
      changes do not result in an overall increase in revenues for MidAmerican Energy.
      The settlement agreements also each provide that portions of revenues associated
      with Iowa retail electric returns on equity within specified ranges will be
      recorded as a regulatory liability.




11




Under
      a
      settlement agreement approved by the IUB on December 21, 2001, which was
      effective through December 31, 2005, an amount equal to 50% of revenues
      associated with returns on equity between 12% and 14%, and 83.33% of revenues
      associated with returns on equity above 14%, in each year was recorded as a
      regulatory liability. A settlement agreement, which was filed in conjunction
      with MidAmerican Energy’s application for ratemaking principles on its 2004/2005
      wind-powered generation project and approved by the IUB on October 17,
      2003, provides that during the period January 1, 2006 through
      December 31, 2010, an amount equal to 40% of revenues associated with
      returns on equity between 11.75% and 13%, 50% of revenues associated with
      returns on equity between 13% and 14%, and 83.3% of revenues associated with
      returns on equity above 14%, in each year will be recorded as a regulatory
      liability. The settlement agreement also includes commitments by MidAmerican
      Energy and the OCA not to seek or support a general increase or decrease,
      respectively, in electric base rates to become effective prior to
      January 1, 2011.





On
      January 31, 2005, the IUB approved a settlement agreement filed in
      conjunction with MidAmerican Energy’s 2005 expansion of its wind-powered
      generation project. On April 18, 2006, the IUB approved a settlement
      agreement filed in conjunction with MidAmerican Energy’s application for up to
      545 MW, based on nameplate ratings, of additional wind-powered generation
      capacity in Iowa. The settlement agreements extend the current revenue sharing
      mechanism through 2012 and MidAmerican Energy’s and the OCA’s commitments
      regarding general increases or decreases in electric base rates through
      December 31, 2012.





On April 19,
      2007, MidAmerican Energy filed with the IUB a settlement agreement between
      MidAmerican Energy and the OCA in conjunction with MidAmerican Energy’s
      ratemaking principles application for up to 540 MW, based on nameplate
      ratings, of additional wind-powered generation capacity in Iowa. With the
      exception of 123 MW currently under development, all new wind-powered capacity,
      up to the 540 MW, that is currently not in service but is placed in service
      on
      or before December 31, 2013 (“Wind IV Iowa Projects”), will be subject to
      this settlement agreement. Under the settlement agreement, MidAmerican Energy
      and the OCA agree not to seek or support a general increase or decrease,
      respectively, in electric base rates to become effective prior to
      January 1, 2014, unless MidAmerican Energy’s projected return on equity for
      2013, computed as prescribed in the agreement, would be below 10%. Additionally,
      the revenue sharing arrangement for the years 2006 through 2010 will also apply
      to 2013, with any revenue sharing liability incurred for 2013 to be applied
      against the cost of Wind IV Iowa Projects, unless a rate case is filed
      pursuant to the 10% threshold, as discussed above. Under that circumstance,
      the
      revenue sharing arrangement is changed for 2013 such that 83.3% of Iowa
      operating income in excess of electric returns on equity allowed by the IUB
      will
      be used to offset the cost of Wind IV Iowa Projects.





Subject
      to regulatory approval of the settlement agreement, effective January 1,
      2007, through December 31, 2013 (or December 31, 2012, in the event
      there is a rate increase in 2013), MidAmerican Energy will reduce its funding
      into the Quad Cities Station’s decommissioning trusts from the 2006 level of
      $8.3 million annually to a new level of $1.6 million annually. The
      remaining difference of $6.7 million will be used to reduce electric base
      rates in 2008 and 2009 for MidAmerican Energy’s residential customers in eastern
      and southern Iowa, service territories previously served by two of MidAmerican
      Energy’s predecessor companies. To the extent the $6.7 million exceeds the
      annual amount needed to implement these rate reductions, as approved by the
      IUB,
      the excess will be used during the period 2007 through 2013 (or 2007 through
      2012 in the event there is a rate increase in 2013), to reduce MidAmerican
      Energy’s investment in Council Bluffs Energy Center Unit No. 4 (“CBEC
      Unit 4”).





The
      regulatory liabilities created by the settlement agreements are recorded as
      a
      regulatory charge in depreciation and amortization expense when the liability
      is
      accrued. Additionally, interest expense is accrued on the portion of the
      regulatory liability balance recorded in prior years. Regulatory liabilities
      created for the years through 2010 will be reduced as they are credited against
      utility plant when the associated generating plant additions are placed in
      service. As a result of such credits applied to generating plant balances,
      future depreciation will be reduced. The regulatory liability accrued for 2011
      and 2012, if any, will be credited to customer bills in 2012 and 2013,
      respectively. All of the January 1, 2007, balance is expected to be
      credited to utility plant in 2007 when CBEC Unit 4 is placed in service.
      The change in the balance of the regulatory liability is summarized as follows
      (in thousands):


12





Balance
                January 1, 2007
            
            $
            259,263Revenue
                sharing
            
            
            10,000Interest
                costs
            
            
            3,057Amounts
                applied to utility plant in service
            
            
            (304
            )Balance
                March 31, 2007
            
            $
            272,016





**(5)**
            **Commitments
                and Contingencies**





*Environmental
      Matters*





MidAmerican
      Energy is subject to federal, state and local laws and regulations regarding
      air
      and water quality, hazardous and solid waste disposal and other environmental
      matters that have the potential to impact its current and future operations.
      MidAmerican Energy believes it is in material compliance with current
      environmental requirements.





*Legal
      Matters*





MidAmerican
      Energy is party in a variety of legal actions 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 litigation
      will
      have a material effect on its consolidated financial results.





**(6)**
            **Employee
                Benefit Plans**





MidAmerican
      Energy sponsors a noncontributory defined benefit pension plan covering
      substantially all employees of MidAmerican Energy Holdings Company 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 MidAmerican Energy Holdings Company
      and
      its domestic energy subsidiaries other than PacifiCorp. The components of net
      periodic benefit cost for these plans for the three months ended March 31
      was as follows (in thousands):





Pension
            
            Other
                Postretirement2007
            
            2006
            
            2007
            
            2006Service
                cost
            
            $
            6,232
            
            $
            6,409
            
            $
            1,709
            
            $
            1,741Interest
                cost
            
            
            10,024
            
            
            9,489
            
            
            3,657
            
            
            3,471Expected
                return on plan assets
            
            
            (10,633
            )
            
            (9,727
            )
            
            (3,337
            )
            
            (2,482
            )Net
                amortization
            
            
            828
            
            
            910
            
            
            629
            
            
            953Net
                periodic benefit cost
            
            $
            6,451
            
            $
            7,081
            
            $
            2,658
            
            $
            3,683





MidAmerican
      Energy expects to contribute $6.9 million and $13.9 million in 2007 to
      its pension and other postretirement plans, respectively. As of
      March 31, 2007, $1.0 million and $3.5 million of
      contributions had been made to the pension and other postretirement plans,
      respectively.





**(7)**
            **Segment
                Information**




MidAmerican
      Energy has identified two reportable operating segments: regulated electric
      and
      regulated gas. 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 to other utilities. 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 gas sales are established separately by
      regulatory agencies; therefore, management also reviews each segment separately
      to make decisions regarding allocation of resources and in evaluating
      performance. Common operating costs, interest income, interest expense and
      income tax expense are allocated to each segment based on MidAmerican Energy
      allocators most related to the nature of the cost. “Nonregulated and other” in
      the tables below consists principally of nonregulated gas and electric
      activities. The
      following tables provide information on a reportable operating segment basis
      (in
      thousands):




13




Three
                MonthsEnded
                March 31,2007
            
            
            2006Segment
                Profit InformationOperating
                revenues:Regulated
                electric
            
            $
            480,254
            
            $
            415,189Regulated
                gas
            
            
            498,964
            
            
            455,852Nonregulated
                and other
            
            
            256,738
            
            
            170,141Total
            
            $
            1,235,956
            
            $
            1,041,182Operating
                income:Regulated
                electric
            
            $
            94,873
            
            $
            99,168Regulated
                gas
            
            
            40,819
            
            
            31,609Nonregulated
                and other
            
            
            8,930
            
            
            4,111Total
            
            $
            144,622
            
            $
            134,888Earnings
                on common stock:Regulated
                electric
            
            $
            63,704
            
            $
            63,300Regulated
                gas
            
            
            23,123
            
            
            19,967Nonregulated
                and other
            
            
            4,971
            
            
            3,389Total
            
            $
            91,798
            
            $
            86,656





As
                ofMarch 31,
            
            December 31,2007
            
            
            2006Segment
                Asset InformationTotal
                assets:Regulated
                electric
            
            $
            5,640,113
            
            $
            5,484,726Regulated
                gas
            
            
            836,903
            
            
            923,373Nonregulated
                and other
            
            
            191,425
            
            
            101,494Total
            
            $
            6,668,441
            
            $
            6,509,593





14





**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, 2007, and the related
      consolidated statements of operations, comprehensive income, and cash flows
      for
      the three-month periods ended March 31, 2007 and 2006. 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, 2006, and the related
      consolidated statements of operations, comprehensive income, retained earnings,
      and cash flows for the year then ended (not presented herein); and in our report
      dated February 27, 2007, we expressed an unqualified opinion on those
      consolidated financial statements, which included an explanatory paragraph
      related to the adoption of SFAS No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement
      Plans* .
      In our
      opinion, the information set forth in the accompanying consolidated balance
      sheet as of December 31, 2006, is fairly stated, in all material respects,
      in relation to the consolidated balance sheet from which it has been
      derived.








/s/
      Deloitte & Touche LLP





Des
      Moines, Iowa


May 4,
      2007





15


**MIDAMERICAN
      FUNDING, LLC AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS(Unaudited)**


(In
      thousands)





**As
                of****March 31,**
            
            **December 31,****2007**
            
            **2006****ASSETS****Utility
                Plant, Net**Electric
            
            $
            6,415,190
            
            $
            6,366,054Gas
            
            
            1,041,810
            
            
            1,031,3417,457,000
            
            
            7,397,395Accumulated
                depreciation and amortization
            
            
            (3,309,279
            )
            
            (3,261,001
            )4,147,721
            
            
            4,136,394Construction
                work in progress
            
            
            1,101,760
            
            
            866,6775,249,481
            
            
            5,003,071**Current
                Assets**Cash
                and cash equivalents
            
            
            5,648
            
            
            9,124Short-term
                investments
            
            
            -
            
            
            15,000Receivables,
                net
            
            
            475,859
            
            
            390,836Inventories
            
            
            37,241
            
            
            113,343Other
            
            
            126,325
            
            
            163,450645,073
            
            
            691,753**Investments
                and Nonregulated Property, Net**
            
            
            433,282
            
            
            426,983**Goodwill**
            
            
            1,269,498
            
            
            1,269,667**Regulatory
                Assets**
            
            
            238,567
            
            
            273,242**Other
                Assets**
            
            
            121,526
            
            
            129,775**Total
                Assets**
            
            $
            7,957,427
            
            $
            7,794,491**CAPITALIZATION
                AND LIABILITIES****Capitalization**Member’s
                equity
            
            $
            2,614,499
            
            $
            2,513,402MidAmerican
                Energy preferred securities
            
            
            30,329
            
            
            30,329Long-term
                debt, excluding current portion
            
            
            2,519,461
            
            
            2,519,3895,164,289
            
            
            5,063,120**Current
                Liabilities**Notes
                payable
            
            
            100,000
            
            
            -Note
                payable to affiliate
            
            
            25,293
            
            
            3,285Current
                portion of long-term debt
            
            
            465
            
            
            1,620Accounts
                payable
            
            
            501,272
            
            
            493,409Taxes
                accrued
            
            
            103,004
            
            
            97,972Interest
                accrued
            
            
            32,809
            
            
            48,130Other
            
            
            84,530
            
            
            171,583847,373
            
            
            815,999**Other
                Liabilities**Deferred
                income taxes
            
            
            469,972
            
            
            467,735Investment
                tax credits
            
            
            39,758
            
            
            40,569Asset
                retirement obligations
            
            
            175,707
            
            
            173,204Regulatory
                liabilities
            
            
            1,007,072
            
            
            989,044Other
            
            
            253,256
            
            
            244,8201,945,765
            
            
            1,915,372**Total
                Capitalization and Liabilities**
            
            $
            7,957,427
            
            $
            7,794,491





The
      accompanying notes are an integral part of these financial
      statements





16


**MIDAMERICAN
      FUNDING, LLC AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS
      (Unaudited)**


(In
      thousands)





**Three
                Months****Ended March 31,****2007**
            
            
            **2006****Operating
                Revenues**Regulated
                electric
            
            $
            480,254
            
            $
            415,189Regulated
                gas
            
            
            498,964
            
            
            455,852Nonregulated
            
            
            258,082
            
            
            170,6761,237,300
            
            
            1,041,717**Operating
                Expenses**Regulated:Cost
                of fuel, energy and capacity
            
            
            196,231
            
            
            141,203Cost
                of gas sold
            
            
            413,041
            
            
            379,929Other
                operating expenses
            
            
            98,302
            
            
            90,724Maintenance
            
            
            42,590
            
            
            30,866Depreciation
                and amortization
            
            
            69,488
            
            
            74,647Property
                and other taxes
            
            
            25,295
            
            
            24,670844,947
            
            
            742,039Nonregulated:Cost
                of sales
            
            
            242,415
            
            
            160,924Other
            
            
            5,309
            
            
            4,281247,724
            
            
            165,205Total
                operating expenses
            
            
            1,092,671
            
            
            907,244**Operating
                Income**
            
            
            144,629
            
            
            134,473**Non-Operating
                Income**Interest
                and dividend income
            
            
            1,087
            
            
            2,464Allowance
                for equity funds
            
            
            10,781
            
            
            7,203Other
                income
            
            
            1,969
            
            
            15,173Other
                expense
            
            
            (462
            )
            
            (415
            )13,375
            
            
            24,425**Fixed
                Charges**Interest
                on long-term debt
            
            
            37,513
            
            
            35,661Other
                interest expense
            
            
            3,661
            
            
            3,394Preferred
                dividends of subsidiaries
            
            
            312
            
            
            312Allowance
                for borrowed funds
            
            
            (5,784
            )
            
            (3,181
            )35,702
            
            
            36,186**Income
                Before Income Taxes**
            
            
            122,302
            
            
            122,712**Income
                Taxes**
            
            
            37,355
            
            
            36,084**Net
                Income**
            
            $
            84,947
            
            $
            86,628








The
      accompanying notes are an integral part of these financial
      statements.




17




**MIDAMERICAN
      FUNDING, LLC AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE INCOME
      (Unaudited)**


(In
      thousands)





**Three
                Months****Ended March 31,****2007**
            
            **2006****Net
                Income**
            
            $
            84,947
            
            $
            86,628**Other
                Comprehensive Income (Loss)**Unrealized
                gains (losses) on available-for-sale securities:Unrealized
                holding gains (losses) during period-Before
                income taxes
            
            
            (26
            )
            
            1Income
                tax benefit
            
            
            9
            
            
            -Net
                unrealized gains (losses)
            
            
            (17
            )
            
            1Unrealized
                gains (losses) on cash flow hedges:Unrealized
                gains during period-Before
                income taxes
            
            
            28,699
            
            
            -Income
                tax expense
            
            
            (11,392
            )
            
            -17,307
            
            
            -Less
                realized gains (losses) reflected in net income during
                period-Before
                income taxes
            
            
            (957
            )
            
            -Income
                tax benefit
            
            
            381
            
            
            -(576
            )Net
                unrealized gains
            
            
            17,883
            
            
            -Funded
                status of benefit plans:Before
                income taxes
            
            
            11
            
            
            -Income
                tax expense
            
            
            (5
            )
            
            -6
            
            
            -Minimum
                pension liability adjustment:Before
                income taxes
            
            
            -
            
            
            18Income
                tax expense
            
            
            -
            
            
            (7
            )-
            
            
            11Other
                comprehensive income
            
            
            17,872
            
            
            12**Comprehensive
                Income**
            
            $
            102,819
            
            $
            86,640








The
      accompanying notes are an integral part of these financial
      statements.




18


**MIDAMERICAN
      FUNDING, LLC AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS(Unaudited)**


(In
      thousands)





**Three
                Months****Ended
                March 31,****2007**
            
            **2006****Net
                Cash Flows From Operating Activities**Net
                income
            
            $
            84,947
            
            $
            86,628Adjustments
                to reconcile net income to net cash provided:Depreciation
                and amortization
            
            
            69,771
            
            
            75,028Deferred
                income taxes and investment tax credit, net
            
            
            4,265
            
            
            7,062Amortization
                of other assets and liabilities
            
            
            6,082
            
            
            2,273Gain
                on sale of securities, assets and other investments
            
            
            -
            
            
            (7,288
            )Impact
                of changes in working capital-Receivables,
                net
            
            
            (83,658
            )
            
            66,520Inventories
            
            
            76,102
            
            
            47,904Accounts
                payable
            
            
            46,864
            
            
            (89,470
            )Taxes
                accrued
            
            
            8,291
            
            
            19,930Other
                current assets and liabilities
            
            
            (23,310
            )
            
            10,973Other,
                net
            
            
            3,591
            
            
            7,514Net
                cash provided by operating activities
            
            
            192,945
            
            
            227,074**Net
                Cash Flows From Investing Activities**Utility
                construction expenditures
            
            
            (331,680
            )
            
            (130,484
            )Quad
                Cities Station decommissioning trust fund
            
            
            (399
            )
            
            (2,075
            )Proceeds
                from sales of assets and other investments
            
            
            -
            
            
            8,564Purchases
                of available-for-sale securities
            
            
            (28,859
            )
            
            (303,163
            )Proceeds
                from sales of available-for-sale securities
            
            
            39,387
            
            
            300,164Other,
                net
            
            
            3,228
            
            
            6,506Net
                cash used in investing activities
            
            
            (318,323
            )
            
            (120,488
            )**Net
                Cash Flows From Financing Activities**Retirement
                of long-term debt, including reacquisition cost
            
            
            (1,155
            )
            
            (145
            )Note
                payable to affiliate
            
            
            22,009
            
            
            8,905Net
                increase in notes payable
            
            
            100,000
            
            
            -Other
            
            
            1,048
            
            
            1,122Net
                cash provided by financing activities
            
            
            121,902
            
            
            9,882**Net
                Increase (Decrease) in Cash and Cash Equivalents**
            
            
            (3,476
            )
            
            116,468**Cash
                and Cash Equivalents at Beginning of Period**
            
            
            9,124
            
            
            71,207**Cash
                and Cash Equivalents at End of Period**
            
            $
            5,648
            
            $
            187,675








The
      accompanying notes are an integral part of these financial
      statements.




19




**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 as its sole member. MidAmerican Energy
      Holdings Company 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, MidAmerican Funding and MidAmerican Energy Holdings Company
      are
      public utility holding companies headquartered in Des Moines, Iowa. MHC’s
      principal subsidiary is MidAmerican Energy Company, a public utility with
      electric and natural gas operations. Other direct, wholly owned subsidiaries
      of
      MHC include InterCoast Capital Company, Midwest Capital Group, Inc., MidAmerican
      Services Company and MEC Construction Services Co.





The
      accompanying unaudited Consolidated Financial Statements have been prepared
      by
      MidAmerican Funding in accordance with accounting principles generally accepted
      in the United States of America (“GAAP”) and the rules and regulations of the
      Securities and Exchange Commission for interim financial statements.
      Accordingly, they do not include all of the information and disclosures required
      for annual financial statements. In the opinion of MidAmerican Funding, all
      adjustments, consisting of normal recurring adjustments, have been made to
      present fairly its financial position, results of operations and changes in
      cash
      flows for the periods presented. In order to be consistent with the current
      year
      presentation, certain reclassifications have been made to the unaudited
      Consolidated Statement of Operations for the three months ended March 31,
      2006. Although MidAmerican Funding believes that the disclosures contained
      herein are adequate to make the information presented not misleading, it is
      suggested that these financial statements be read in conjunction with the
      Consolidated Financial Statements and the notes thereto included in MidAmerican
      Funding’s latest Annual Report on Form 10-K.





The
      accompanying unaudited Consolidated Financial Statements include the accounts
      of
      MidAmerican Funding and its subsidiaries in which it holds a controlling
      financial interest. All significant intercompany accounts and transactions
      have
      been eliminated, other than those between rate-regulated
      operations.





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. Management’s Discussion and Analysis and 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, 2006,
      describe the most significant accounting estimates and policies used in the
      preparation of the unaudited Consolidated Financial Statements. There have
      been
      no significant changes in MidAmerican Funding’s assumptions regarding critical
      accounting estimates and significant accounting policies during the first three
      months of 2007, except as described in Note 2.





**(2)**
            **New
                Accounting Pronouncements**





In
      July
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement No. 109” ** (“FIN
      48”) *.* MidAmerican Funding adopted the provisions of FIN 48 effective January 1, 2007.
      Under FIN 48, tax benefits are recognized only for tax positions that are
      more likely than not to be sustained upon examination by tax authorities. The
      amount recognized is measured as the largest amount of benefit that is greater
      than 50% likely to be realized upon ultimate settlement. Unrecognized tax
      benefits are tax benefits claimed in MidAmerican Funding’s tax returns that do
      not meet these recognition and measurement standards.




20




As
      of
      January 1, 2007, MidAmerican Funding had $33.1 million of unrecognized tax
      benefits. Of this amount, MidAmerican Funding recognized a net increase in
      the
      liability for unrecognized tax benefits of $15.7 million as a cumulative
      effect of adopting FIN 48, which was offset by reductions in beginning retained
      earnings of $1.7 million, deferred income tax liabilities of
      $12.6 million and goodwill of $0.2 million and an increase in
      regulatory assets of $1.6 million in the Consolidated Balance Sheet. The
      remaining $17.4 million had been previously accrued under SFAS No. 5,
“Accounting for Contingencies,” or SFAS No. 109, “Accounting for Income
      Taxes.” The entire $33.1 million of unrecognized tax benefits is included
      in other liabilities - other in the Consolidated Balance Sheet.





Included
      in the 33.1 million are $19.0 million of net unrecognized tax benefits that,
      if
      recognized, would have an impact on the effective tax rate. The remaining
      unrecognized tax benefits relate to tax positions for which ultimate
      deductibility is highly certain but for which there is uncertainty as to the
      timing of such deductibility. Recognition of these tax benefits, other than
      applicable interest and penalties, would not affect MidAmerican Funding’s
      effective tax rate. MidAmerican Funding recognizes interest and penalties
      accrued related to unrecognized tax benefits in income tax expense. As of
      January 1, 2007, MidAmerican Funding had $4.6 million accrued for the
      payment of interest, which is included in unrecognized tax
      benefits.





MidAmerican
      Funding’s ultimate parent company files income tax returns in the U.S. federal
      jurisdiction and various state jurisdictions. The U.S. Internal Revenue Service
      has closed its examination of the parent company’s income tax returns through
      2003, including components related to MidAmerican Funding. In addition, open
      tax
      years related to a number of state jurisdictions remain subject to examination.
      During the three-month period ended March 31, 2007, there were no material
      changes to the liability for uncertain tax positions.





Refer
      to
      Note 2 of MidAmerican Energy’s Notes to Consolidated Financial Statements
      for additional disclosure of new accounting pronouncements.





**(3)**
            **Risk
                Management**





Refer
      to
      Note 3 of MidAmerican Energy’s Notes to Consolidated Financial Statements
      for information regarding MidAmerican Funding’s risk management.





**(4)**
            **Rate
                Matters**





Refer
      to
      Note 4 of MidAmerican Energy’s Notes to Consolidated Financial Statements
      for information regarding MidAmerican Funding’s rate matters.





**(5)**
            **Commitments
                and Contingencies**





Refer
      to
      Note 5 of MidAmerican Energy’s Notes to Consolidated Financial Statements
      for information regarding MidAmerican Funding’s commitments and
      contingencies.





**(6)**
            **Employee
                Benefit Plans**





Refer
      to
      Note 6 of MidAmerican Energy’s Notes to Consolidated Financial Statements
      for information regarding MidAmerican Funding’s employee benefit
      plans.





**(7)**
            **Segment
                Information**





MidAmerican
      Funding has identified two reportable operating segments: regulated electric
      and
      regulated gas. 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 to other utilities. 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 gas sales are established separately by
      regulatory agencies; therefore, management also reviews each segment separately
      to make decisions regarding allocation of resources and in evaluating
      performance. Common operating costs, interest income, interest expense and
      income tax expense are allocated to each segment based on MidAmerican Funding
      allocators most related to the nature of the cost. “Nonregulated and other” in
      the tables below consists principally of nonregulated gas and electric
      activities and parent company interest expense. The following tables provide
      information on a reportable operating segment basis (in thousands):




21






Three
                MonthsEnded March 31,2007
            
            2006Segment
                Profit InformationOperating
                revenues:Regulated
                electric
            
            $
            480,254
            
            $
            415,189Regulated
                gas
            
            
            498,964
            
            
            455,852Nonregulated
                and other
            
            
            258,082
            
            
            170,676Total
            
            $
            1,237,300
            
            $
            1,041,717Operating
                income:Regulated
                electric
            
            $
            94,873
            
            $
            99,168Regulated
                gas
            
            
            40,819
            
            
            31,609Nonregulated
                and other
            
            
            8,937
            
            
            3,696Total
            
            $
            144,629
            
            $
            134,473Net
                income:Regulated
                electric
            
            $
            63,704
            
            $
            63,300Regulated
                gas
            
            
            23,123
            
            
            19,967Nonregulated
                and other
            
            
            (1,880
            )
            
            3,361Total
            
            $
            84,947
            
            $
            86,628





As
                ofMarch 31,
            
            
            December
                31,2007
            
            
            2006Segment
                Asset InformationTotal
                assets(a):Regulated
                electric
            
            $
            6,831,113
            
            $
            6,675,884Regulated
                gas
            
            
            915,401
            
            
            1,001,882Nonregulated
                and other
            
            
            210,913
            
            
            116,725Total
            
            $
            7,957,427
            
            $
            7,794,491





(a)
            Total
              assets by operating segment reflect the assignment of goodwill to
              applicable reporting units in accordance with
              GAAP.




Goodwill
      is allocated to each reportable operating segment included in total assets
      above. For the three months ended March 31, 2007, MidAmerican Funding
      adjusted goodwill for a change in deferred income taxes in conjunction with
      the
      adoption of FIN 48 as discussed in Note 2. The following table shows the change
      in the carrying amount of goodwill by reportable operating segment for the
      three
      months ended March 31, 2007 (in thousands):





Electric
            
            Gas
            
            TotalBalance
                at January 1, 2007
            
            $
            1,191,160
            
            $
            78,507
            
            $
            1,269,667Income
                tax adjustment
            
            
            (160
            )
            
            (9
            )
            
            (169
            )Balance
                at March 31, 2007
            
            $
            1,191,000
            
            $
            78,498
            
            $
            1,269,498





22




**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 and business conditions in the United States as a whole
                and in
                the midwestern United States and MidAmerican Energy’s service territory in
                particular;





·
            the
                financial condition and creditworthiness of their significant customers
                and suppliers;





·
            governmental,
                statutory, legislative, regulatory or administrative initiatives,
                proceedings or decisions, including those relating to the Energy
                Policy
                Act of 2005;





·
            weather
                effects on costs, sales and
                revenues;





·
            changes
                in expected customer growth or usage of electricity or
                gas;





·
            economic
                or industry trends that could impact electricity or gas
                usage;





·
            increased
                competition in the power generation, electric or gas
                industries;





·
            fuel,
                fuel transportation and power costs and
                availability;





·
            changes
                in business strategy, development plans or customer or vendor
                relationships;





·
            availability,
                term and deployment of capital;





·
            availability
                of qualified personnel;





·
            unscheduled
                generation outages or repairs;




23




·
            risks
                relating to nuclear generation;





·
            financial
                or regulatory accounting principles or policies imposed by the Public
                Company Accounting Oversight Board, the Financial Accounting Standards
                Board, the Securities and Exchange Commission (“SEC”), the Federal Energy
                Regulatory Commission and similar entities with regulatory
                oversight;





·
            changes
                in, and compliance with, environmental laws, regulations, decisions
                and
                policies that could increase operating and capital improvement costs
                or
                affect plant output and/or delay plant
                construction;





·
            other
                risks or unforeseen events, including 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 SEC filings or in
                other publicly disseminated written
                documents.





Further
      details of potential risks and uncertainties affecting MidAmerican Energy or
      MidAmerican Funding are described in their filings with the SEC, including
      Item 1A and other discussions contained in their Annual Report on Form 10-K
      for the year-ended December 31, 2006. 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.





**Executive
      Summary**





MidAmerican
      Energy’s earnings on common stock improved $5.1 million to
      $91.8 million for the first quarter of 2007 compared to $86.7 million
      for the first quarter of 2006. MidAmerican Funding’s net income decreased
      $1.7 million to $84.9 million for the first quarter of 2007 compared
      to $86.6 million for the first quarter of 2006.





The
      following significant events and changes, as discussed in more detail herein,
      highlight some of the factors that had an effect on MidAmerican Energy’s and
      MidAmerican Funding’s operating results, liquidity and capital resources during
      the periods presented:





·
            MidAmerican
                Energy’s regulated electric gross margin increased $10.1 million
                compared to the first quarter of 2006 due principally to increases
                in
                electric wholesale and retail sales volumes. Additionally, regulated
                gas
                gross margin increased $10.0 million due to an increase in sales
                volumes as a result of colder temperature conditions. Nonregulated
                gross
                margin increased $5.9 million compared to the first quarter of 2006
                due to
                an increase in nonregulated electric sales
                volumes.




·
            In
                February 2007, MidAmerican Energy’s electric distribution and transmission
                systems sustained extensive damage from several winter storms. Capital
                expenditures for restoration of facilities damaged by the storms
                are
                expected to total approximately $25 million. Additionally,
                MidAmerican Energy incurred $10.2 million of maintenance expense in
                the first quarter for storm
                restoration.




·
            MidAmerican
                Energy is currently constructing a 790-megawatt (“MW”) (expected
                accreditation) super-critical-temperature, coal-fired generation
                project
                and expects to invest approximately $866 million in the project
                through 2007, including transmission facilities. Through
                March 31, 2007, $821.0 million had been invested, including
                $121.3 million for MidAmerican Energy’s share of deferred payments
                allowed by contract.




·
            On
                April 19, 2007, MidAmerican Energy filed with the Iowa Utilities
                Board a settlement agreement between MidAmerican Energy and the Iowa
                Office of Consumer Advocate in conjunction with MidAmerican Energy’s
                ratemaking principles application for up to 540 MW (nameplate
                ratings) of additional wind-powered generation in Iowa. In general,
                the
                agreement (1) extends the conditional freeze on MidAmerican Energy’s Iowa
                electric base rates through December 31, 2013, except under specified
                circumstances; (2) continues the current revenue sharing arrangement
                in
                2013, with any revenue sharing liability incurred being applied against
                the cost of future wind-powered generation plant; and (3) provides
                for a
                reduction in decommissioning funding to be used to reduce designated
                Iowa
                residential electric base rates and the cost of specified future
                generating plant.




24




Following
      is a discussion of various factors that affected earnings for the periods
      presented on the Consolidated Statements of Operations. Explanations include
      management’s best estimate of the impact of weather, customer growth and other
      factors. MidAmerican Energy’s and MidAmerican Funding’s future results could
      differ significantly from historical results.





**Results
      of Operations for the Quarter Ended March 31, 2007 and
      2006**





Regulated
      Electric Gross Margin





QuarterEnded March 31,2007
            
            
            2006Gross
                margin (in millions):Operating
                revenues
            
            $
            480.3
            
            $
            415.2Less
                cost of fuel, energy and capacity
            
            
            196.2
            
            
            141.2Electric
                gross margin
            
            $
            284.1
            
            $
            274.0Sales
                (GWh):Retail
            
            
            4,974
            
            
            4,793Wholesale
            
            
            3,494
            
            
            2,503Total
            
            
            8,468
            
            
            7,296





Electric
      gross margin for the first quarter of 2007 increased $10.1 million compared
      to the first quarter of 2006 due to a $4.0 million increase in gross margin
      on wholesale sales as a result of an increase in related sales volumes partially
      offset by a lower margin per megawatt hour sold. Gross margin on retail sales
      increased $3.1 million due principally to an increase in related sales
      volumes resulting from colder temperature conditions, while transmission
      revenues increased $3.0 million due to an increase in the use of
      MidAmerican Energy’s transmission services.





Sales
      of
      energy to other utilities, municipalities and marketers inside and outside
      of
      MidAmerican Energy’s control area are classified as wholesale. An increased
      availability of MidAmerican Energy-owned base load generation, in part due
      to
      the effect of newly added wind-powered generation to supply retail customers,
      and greater regional market opportunities contributed to a 39.6% increase in
      wholesale sales volumes during the first quarter of 2007 compared to the first
      quarter of 2006, resulting in a $20.4 million increase in wholesale gross
      margin. A decrease in the average electric wholesale margins per megawatt hour
      sold due to an increase in the cost of internal generation and purchases of
      external energy reduced electric wholesale gross margin by $16.4 million
      compared to the first quarter of 2006.





Gross
      margin on electric retail sales increased $3.1 million, with electric
      retail sales volumes increasing 3.8% compared to the first quarter of 2006.
      The
      effect of colder temperature conditions during the first quarter of 2007
      compared to the first quarter of 2006 resulted in a $5.1 million increase
      in electric retail gross margin. An increase in the average number of retail
      customers improved electric retail gross margin by $2.2 million. An
      increase in fuel costs related to Iowa retail electric sales reduced electric
      retail gross margin by $7.4 million compared to the first quarter of 2006
      due in part to an increase in the portion of energy requirements met with higher
      cost generation resources. Recoveries of energy efficiency program costs
      increased electric retail gross margin by $2.7 million compared to the
      first quarter of 2006. Changes in revenues from the recovery of energy
      efficiency program costs are substantially matched with corresponding changes
      in
      other operating expenses.




25


Regulated
      Gas Gross Margin





QuarterEnded
                March 31,2007
            
            2006Gross
                margin (in millions):Operating
                revenues
            
            $
            499.0
            
            $
            455.9Less
                cost of gas sold
            
            
            413.0
            
            
            379.9Gas
                gross margin
            
            $
            86.0
            
            $
            76.0Sales
                (000’s Dths):Retail
            
            
            36,611
            
            
            31,396Wholesale
            
            
            12,911
            
            
            13,012Total
            
            
            49,522
            
            
            44,408





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 affect
      gross margin or net income because revenues reflect comparable fluctuations
      through the purchased gas adjustment clauses. Regulated gas revenues and cost
      of
      gas sold increased $46.7 million due to improved sales volumes for the
      first quarter of 2007. Compared to the first quarter of 2006, MidAmerican
      Energy’s average per-unit cost of gas sold decreased 2.5%, resulting in a
      $13.6 million decrease in gas revenues and cost of gas sold for the first
      quarter of 2007.





The
      following table summarizes the variance in gas operating revenues based on
      the
      change in gas cost recoveries and margin components.





Quarter
                EndedMarch 31,2007
                vs. 2006(In
                millions)Change
                in cost of gas sold:Average
                cost per unit
            
            $
            (13.6
            )Sales
                volumes
            
            
            46.7Total
                change in cost of gas sold
            
            
            33.1Change
                in margin:Weather
            
            
            6.8Energy
                efficiency cost recovery
            
            
            2.5Customer
                growth
            
            
            0.8Other
            
            
            (0.1
            )Total
                revenue variance
            
            $
            43.1





The
      increase in gas gross margin due to weather was the result of colder temperature
      conditions in the first quarter of 2007 compared to the same quarter in 2006.
      MidAmerican Energy’s average number of gas retail customers increased 1.2%
      compared to the first quarter of 2006. Changes in revenues from the recovery
      of
      energy efficiency program costs are substantially matched with corresponding
      changes in other operating expenses.





Regulated
      Operating Expenses





Other
      operating expenses increased $7.6 million for the first quarter of 2007
      compared to the first quarter of 2006 due primarily to a $5.2 million
      increase in energy efficiency program costs. Changes in energy efficiency
      program costs are substantially matched by changes in related electric and
      gas
      revenues.




26




Maintenance
      expenses for the first quarter of 2007 increased $11.7 million compared to
      the first quarter of 2006 due primarily to $10.2 million of costs incurred
      for restoration of facilities damaged by winter storms in February 2007.





Depreciation
      and amortization expense for the first quarter of 2007 decreased
      $5.2 million compared to the first quarter of 2006 due to a
      $6.5 million decrease in regulatory expense related to a revenue sharing
      arrangement in Iowa. Refer to the “Utility Regulatory Matters” section for an
      explanation of the revenue sharing arrangement. Partially offsetting this
      decrease was higher utility plant depreciation expense due to additional plant
      in service, including wind-powered generation plant placed in service in the
      fourth quarter of 2006.





Nonregulated
      Gross Margin





QuarterEnded
                March 31,2007
            
            2006(In
                millions)MidAmerican
                Energy -Nonregulated
                operating revenues
            
            $
            256.7
            
            $
            170.1Less
                nonregulated cost of sales
            
            
            242.2
            
            
            160.7Nonregulated
                gross margin
            
            $
            14.5
            
            $
            9.4MidAmerican
                Funding Consolidated -Nonregulated
                operating revenues
            
            $
            258.1
            
            $
            170.7Less
                nonregulated cost of sales
            
            
            242.4
            
            
            160.9Nonregulated
                gross margin
            
            $
            15.7
            
            $
            9.8





Nonregulated
      revenues, cost of sales and gross margin for the first quarter of 2007 increased
      due primarily to an increase in nonregulated electric sales volumes driven
      by
      improved opportunities in the Illinois market. Higher average prices, costs
      and
      margin related to nonregulated electric sales also contributed to the increases.
      These increases were partially offset by the impact of a decrease in
      nonregulated gas sales volumes and per-unit averages.





Non-Operating
      Income





MidAmerican
      Energy -





MidAmerican
      Energy’s non-operating income increased $1.7 million compared to the first
      quarter of 2006 due to a $3.6 million increase in allowance for equity
      funds as a result of the increase in construction work in progress. 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”).
      MidAmerican Energy expects to continue to record higher-than-normal income
      for
      the allowance on equity funds used during construction through 2007 while the
      announced generating facilities are constructed. Interest income decreased
      primarily due to a decrease in temporary cash investments during the first
      quarter of 2007 compared to the first quarter of 2006.





MidAmerican
      Funding -





Other
      income for the first quarter of 2006 includes $7.3 million of pre-tax gain
      on the sale of MidAmerican Funding’s non-controlling interest in a non-utility
      gas-fired cogeneration plant and $5.2 million of pre-tax income resulting
      from changes in a financing arrangement related to a non-strategic investment
      in
      a hydroelectric generating plant.




27


Fixed
      Charges





The
      $1.9 million increase in MidAmerican Energy’s interest on long-term debt
      was due to the issuance of $350.0 million of long-term debt in October
      2006, offset partially by maturities of higher interest rate debt in 2006.
      MidAmerican Energy’s other interest expense increased $0.8 million due
      principally to a higher balance of the Iowa revenue sharing liability.
      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 $2.6 million increase in allowance for borrowed
      funds for the first quarter of 2007 was due to the increase in construction
      work
      in progress compared to the first quarter of 2006. MidAmerican Energy expects
      to
      continue to record higher-than-normal allowance for borrowed funds used during
      construction through 2007 while the announced generating facilities are
      constructed.





Income
      Taxes





MidAmerican
      Energy -





Federal
      law currently 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 2007 include $1.2 million of additional production tax
      credits compared to the first quarter of 2006 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 flow-through treatment of such timing
      differences impacts the effective tax rates from year to year.





**Liquidity
      and Capital Resources**





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





As
      reflected on the Consolidated Statements of Cash Flows, MidAmerican Energy’s net
      cash provided by operating activities was $215.0 million and
      $244.9 million for the first three months of 2007 and 2006, respectively.
      MidAmerican Funding’s net cash provided by operating activities was
      $192.9 million and $227.1 million for the first three months of 2007
      and 2006, respectively.





Utility
      Construction Expenditures





MidAmerican
      Energy’s primary need for capital is utility construction expenditures. For the
      first three months of 2007, utility construction expenditures totaled
      $331.7 million, including Quad Cities Station nuclear fuel purchases.
      MidAmerican Energy’s utility construction expenditures for 2007, excluding the
      non-cash allowance for equity funds used during construction, are estimated
      to
      be approximately $1,373 million, which includes $784 million for the
      coal-fired and wind-powered generation projects discussed below, including
      payment of previously deferred construction payments; $147 million for
      emissions control equipment to address current and anticipated air quality
      regulations; and $442 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. MidAmerican Energy expects to fund
      these capital expenditures with short-term borrowings, cash flows from
      operations and the issuance of long-term debt.




28




MidAmerican
      Energy anticipates a continuing increase in demand for electricity from its
      regulated customers. To meet anticipated demand and ensure adequate electric
      generation in its service territory, MidAmerican Energy is currently
      constructing Council Bluffs Energy Center Unit No. 4 (“CBEC Unit 4”), a
      790-MW (expected accreditation) super-critical-temperature, coal-fired
      generating plant. MidAmerican Energy will operate the plant and hold an
      undivided ownership interest as a tenant in common with the other owners of
      the
      plant. MidAmerican Energy’s current ownership interest is 60.67%, equating to
      479 MW of output. Municipal, cooperative and public power utilities own the
      remainder, which is a typical ownership arrangement for large base-load plants
      in Iowa. The facility will provide service to regulated retail electricity
      customers. Wholesale sales may also be made from the facility to the extent
      the
      power is not immediately needed for regulated retail service. MidAmerican Energy
      has obtained regulatory approval to include the Iowa portion of the actual
      cost
      of CBEC Unit 4 in its Iowa rate base as long as the actual cost does not
      exceed the agreed cap that MidAmerican Energy has deemed to be reasonable.
      If
      the cap is exceeded, MidAmerican Energy has the right to demonstrate the
      prudence of the expenditures above the cap, subject to regulatory review.
      MidAmerican Energy expects to invest approximately $866 million in CBEC
      Unit 4, including transmission facilities and approximately
      $62 million of non-cash allowance for equity funds used during
      construction. Through March 31, 2007, MidAmerican Energy has invested
      $821.0 million in the plant, including $121.3 million for MidAmerican
      Energy’s share of deferred payments allowed by the construction contract and
      $56.9 million of non-cash allowance for equity funds used during
      construction. MidAmerican Energy expects CBEC Unit 4 to begin commercial
      operation in June 2007.





On
      April 18, 2006, the Iowa Utilities Board (“IUB”) approved a settlement
      agreement between MidAmerican Energy and the Iowa Office of Consumer Advocate
      (“OCA”) regarding ratemaking principles for up to 545 MW (nameplate
      ratings) of wind-powered generation capacity in Iowa to be installed in 2006
      and
      2007. On April 19, 2007, MidAmerican Energy filed with the IUB a settlement
      agreement between MidAmerican Energy and the OCA in conjunction with MidAmerican
      Energy’s ratemaking principles application for up to 540 MW (nameplate
      ratings) of additional wind-powered generation capacity in Iowa. With the
      exception of 123 MW (nameplate ratings) of wind-powered generation
      MidAmerican Energy currently has under construction that is expected to be
      in
      operation by the end of 2007, all new wind-powered generation capacity, up
      to
      the 540 MW, that is currently not in service but is placed in service on or
      before December 31, 2013, will be subject to this settlement agreement, if
      approved. Generally speaking, accredited capacity ratings for wind-powered
      generation facilities are considerably less than the nameplate ratings due
      to
      the varying nature of wind. MidAmerican Energy continues to pursue additional
      cost effective wind-powered generation. In anticipation of the development
      of
      new wind-powered generation, MidAmerican Energy has contracted for the purchase
      of up to 291 MW of wind turbines through 2008. Refer to Note 4 of Notes to
      Consolidated Financial Statements in Item 1 for a more in-depth discussion
      of the proposed settlement agreement.





Refer
      to
      the “Environmental Matters” section later in MD&A for additional information
      regarding capital expenditures for emission control equipment.





Nuclear
      Decommissioning





Each
      licensee of a nuclear facility is required to provide financial assurance for
      the cost of decommissioning its licensed nuclear facility. In general,
      decommissioning of a nuclear facility means to safely remove the facility from
      service and restore the property to a condition allowing unrestricted use by
      the
      operator. MidAmerican Energy has historically contributed $8.3 million
      annually to trusts established for the investment of funds for decommissioning
      Quad Cities Station. Beginning in 2007, MidAmerican Energy reduced its funding
      of the trusts to $1.6 million annually as a result of a recent evaluation
      of the funded status, estimated decommissioning costs and useful life of the
      plant. Rate treatment of the $6.7 million reduction in funding is pending IUB
      approval. Future funding levels are subject to a variety of factors and are
      periodically reviewed. Refer to Note 4 of Notes to Consolidated Financial
      Statements in Item 1 for a discussion of the regulatory treatment of the change
      in funding under the proposed settlement agreement for wind-powered
      generation.





Contractual
      Obligations and Commercial Commitments





During
      the three months ended March 31, 2007, there have been no material changes,
      other than the commitment to purchase wind turbines discussed above, in
      MidAmerican Energy’s and MidAmerican Funding’s obligations and commitments from
      the information provided in Item 7 of MidAmerican Energy’s and MidAmerican
      Funding’s Annual Report on Form 10-K for the year ended December 31,
      2006.




29




Debt
      Authorizations and Credit Facilities





MidAmerican
      Energy has authority from the FERC to issue through April 14, 2009,
      short-term debt in the form of commercial paper and bank notes aggregating
      $800.0 million. MidAmerican Energy currently has in place a
      $500.0 million revolving credit facility, expiring July 6, 2011, that
      supports its $379.6 million commercial paper program and its variable rate
      pollution control revenue obligations. MidAmerican Energy also recently obtained
      a $600.0 million revolving credit facility, which expires April 11,
      2008, or upon MidAmerican Energy’s issuance of long-term debt prior to that
      date.





MidAmerican
      Energy currently has an effective registration statement with the SEC
      to issue up to $480.0 million of additional long-term securities and
      authorizations from the FERC to issue up to $600.0 million of additional
      long-term securities through November 30, 2008, and from the Illinois
      Commerce Commission (“ICC”) to issue up to $1,281.4 million of additional
      long-term debt securities through July 12, 2011. In anticipation of future
      debt issuances, MidAmerican Energy recently filed a request with the FERC
      for additional debt authorization in the amount of $750.0 million.





In
      conjunction with the March 1999 merger, MidAmerican Energy committed to the
      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, 2007, MidAmerican Energy’s common equity ratio was 53.7% computed
      on a basis consistent with its commitment.





Other
      Financing Information





MidAmerican
      Funding or one of its subsidiaries, including MidAmerican Energy, may from
      time
      to time seek to retire its outstanding debt through cash purchases and/or
      exchanges for other securities, in open market purchases, privately negotiated
      transactions or otherwise. The repurchases or exchanges, if any, will depend
      on
      prevailing market conditions, the issuing company’s liquidity requirements,
      contractual restrictions and other factors. The amounts involved may be
      material.





**Credit
      Ratings Risks**





As
      of
      April 30, 2007, MidAmerican Energy’s senior unsecured debt credit ratings were
      as follows: Fitch Ratings, “A/stable;” Moody’s Investor Service, “A2/stable;”
and Standard and Poor’s, “A-/stable.”





Debt
      and
      preferred securities of MidAmerican Funding and MidAmerican Energy may be rated
      by nationally recognized credit rating agencies. Assigned credit ratings are
      based on each rating agency’s assessment of MidAmerican Funding’s or 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. Other than the energy supply and
      marketing agreements discussed below, neither MidAmerican Funding nor
      MidAmerican Energy has any credit agreements that require termination or a
      material change in collateral requirements or payment schedule in the event
      of a
      downgrade in the credit ratings of the respective company’s
      securities.





In
      conjunction with its risk management activities, MidAmerican Energy must meet
      credit quality standards as required by counterparties. In accordance with
      industry practice, master agreements that govern MidAmerican Energy’s energy
      supply and marketing activities either specifically require it to maintain
      investment grade credit ratings or provide the right for counterparties to
      demand “adequate assurances” in the event of a material adverse change in
      MidAmerican Energy’s creditworthiness. If one or more of MidAmerican Energy’s
      credit ratings decline below investment grade, MidAmerican Energy may be
      required to post cash collateral, letters of credit or other similar credit
      support to facilitate ongoing wholesale energy supply and marketing activities.
      As of March 31, 2007, MidAmerican Energy’s estimated potential collateral
      requirements totaled approximately $167 million. MidAmerican Energy’s
      potential collateral requirements could fluctuate considerably due to
      seasonality, market price volatility, and a loss of key MidAmerican Energy
      generating facilities or other related factors.




30




**Utility
      Regulatory Matters**





Rate
      Matters





Under
      a
      series of electric settlement agreements between MidAmerican Energy, the OCA
      and
      other intervenors approved by the IUB, MidAmerican Energy has agreed not to
      seek
      a general increase in electric base rates to become effective prior to
      January 1, 2013, unless its Iowa jurisdictional electric return on equity
      in any year falls below 10%. As a party to the settlement agreements, the OCA
      has agreed not to seek any decrease in MidAmerican Energy’s Iowa electric base
      rates to become effective prior to January 1, 2013. In addition,
      MidAmerican Energy and the OCA have filed a proposed settlement agreement with
      the IUB that, if approved, would extend their agreement not to seek a change
      in
      electric base rates to January 1, 2014. Refer to Note 4 of MidAmerican
      Energy’s Notes to Consolidated Financial Statements in Item 1 for further
      discussion of these rate matters.





In
      an
      order issued September 27, 2004, the IUB required MidAmerican Energy to
      file various plans to fully equalize and consolidate its class zonal electric
      rates by the end of each of the years 2007 through 2010. On
      October 18, 2004, MidAmerican Energy filed a motion for
      reconsideration opposing full rate equalization and proposing a series of rate
      reductions. On March 21, 2005, the IUB required MidAmerican Energy to file
      additional information about potential rate changes concerning phased
      equalization or consolidation of existing zonal rate differences that could
      have
      the effect of bringing rates together on a basis designed to have no impact
      on
      the overall revenues MidAmerican Energy receives from its Iowa electric
      customers. MidAmerican Energy filed the requested information on April 11,
      2005. In the same proceeding, MidAmerican Energy has a pending plan to reduce
      rates for some residential customers by a total of approximately
      $7.0 million in the 2008-2009 time frame in addition to the reductions to
      be offset by cost decreases related to existing contracts. The $7.0 million
      reduction in revenues may begin to be offset by a rate increase for other
      residential customers starting in 2011. On June 19, 2006, without ruling on
      revenue requirement issues, the IUB issued an order requiring MidAmerican Energy
      to hold informal workshops in 2007 and file a comprehensive class
      cost-of-service study and a revenue neutral rate equalization/rate consolidation
      plan by mid-2009. Refer to Note 4 of Notes to Consolidated Financial
      Statements in Item 1 for discussion of a proposed settlement agreement and
      its
      impact on zonal rate equalization in Iowa.





**Environmental
      Matters**





MidAmerican
      Energy’s generating facilities are subject to applicable provisions of the Clean
      Air Act and related air quality standards promulgated by the United States
      Environmental Protection Agency (“EPA”). The Clean Air Act provides the
      framework for regulation of certain air emissions and permitting and monitoring
      associated with those emissions. MidAmerican Energy believes it is in material
      compliance with current air quality requirements.





The
      EPA
      has in recent years implemented and proposed more stringent national ambient
      air
      quality standards. Additionally, legislation is pending, and could be proposed
      in the future, that may impact MidAmerican Energy if enacted. 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
      EPA. The plan allows MidAmerican Energy to more effectively manage its
      expenditures required to comply with emissions standards. On April 1, 2006,
      MidAmerican Energy submitted to the IUB an updated plan, as required every
      two
      years by Iowa law, which increased its estimate of required expenditures.
      MidAmerican Energy currently estimates that the incremental capital expenditures
      for emission control equipment to comply with air quality requirements will
      total approximately $540 million for January 1, 2007, 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 Item 1. Business of MidAmerican Energy’s most
      recently filed Form 10-K for further discussion of air quality standards
      affecting MidAmerican Energy.




31




As
      a
      result of increased attention to climate change in the United States, numerous
      bills have been introduced in the current session of the United States Congress
      that would reduce greenhouse gas emissions in the United States. Congressional
      leadership has made climate change legislation a priority, and many
      congressional observers expect to see the passage of climate change legislation
      within the next several years. In April 2007, a United States Supreme Court
      decision concluded that the Environmental Protection Agency (“EPA”) has the
      authority under the Clean Air Act to regulate emissions of greenhouse gases
      from
      motor vehicles. In addition, pending cases that address the potential public
      nuisance from greenhouse gas emissions from electricity generators and the
      EPA’s
      failure to regulate greenhouse gas emissions from new and existing coal-fired
      plants are expected to become active. Furthermore, while debate continues at
      the
      national level over the direction of domestic climate policy, several states
      have developed state-specific or regional legislative initiatives to reduce
      greenhouse gas emissions, including California and the Northeastern states,
      and
      individual state actions to regulate greenhouse gas emissions are likely to
      increase. The outcome of any pending judicial proceedings and federal and state
      climate change legislation and regulation cannot be determined at this time;
      however, adoption of stringent limits on greenhouse gas emissions could
      significantly impact MidAmerican Energy’s current and future fossil-fueled
      facilities, and, therefore, its financial results.





**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 in Item 1.





**Critical
      Accounting Policies and Estimates**





Certain
      accounting policies require management to make estimates and judgments
      concerning transactions that will be settled in the future. Amounts recognized
      in the 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
      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, accrued pension
      and
      other postretirement expense, income taxes and revenue recognition - unbilled
      revenue.





For
      a
      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, 2006. MidAmerican Energy’s and MidAmerican Funding’s critical
      accounting policies have not changed materially since December 31, 2006,
      other than the adoption of Financial Accounting Standards Board Interpretation
      No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB
      Statement No. 109.”




32




**Item 3.**
            **Quantitative
              and Qualitative Disclosures About
              Market Risk.**





Refer
      to
      Note 3 of Notes to Consolidated Financial Statements in Item 1 of this Form
      10-Q for disclosure of MidAmerican Energy’s derivative positions as of
      March 31, 2007 and December 31, 2006. For quantitative and qualitative
      disclosures about market risk affecting MidAmerican Energy and MidAmerican
      Funding, see Item 7A included in their Annual Report on Form 10-K for the year
      ended December 31, 2006. MidAmerican Energy’s and MidAmerican Funding’s
      exposure to market risk and their management of such risk has not changed
      materially from December 31, 2006.




**Item 4.**
            **Controls
              and Procedures.**





With
      the
      supervision and participation of MidAmerican Funding’s and MidAmerican Energy’s
      management, including the respective persons acting as chief executive officer
      and chief financial officer, each company performed an evaluation regarding
      the
      effectiveness of the design and operation of its disclosure controls and
      procedures (as defined in Rule 13a-15(e) promulgated under the Securities and
      Exchange Act of 1934, as amended) as of March 31, 2007. Based on that
      evaluation, MidAmerican Funding’s and MidAmerican Energy’s management, including
      the respective persons acting as chief executive officer and chief financial
      officer, concluded that their respective disclosure controls and procedures
      were
      effective. There have been no changes during the quarter covered by this report
      in MidAmerican Funding’s or MidAmerican Energy’s internal control over financial
      reporting that has materially affected, or is reasonably likely to materially
      affect, its internal control over financial reporting.




33




**PART
      II - OTHER INFORMATION**




**Item
                1.**
            **Legal
              Proceedings.**




On
      December 28, 2004, an apparent gas explosion and fire resulted in three
      fatalities, one serious injury and property damage at a commercial building
      in
      Ramsey, Minnesota. According to the Minnesota Office of Pipeline Safety, an
      improper installation of a pipeline connection may have been a cause of the
      explosion and fire. A predecessor company to MidAmerican Energy provided gas
      service in Ramsey, Minnesota, at the time of the original installation in 1980.
      In 1993, a predecessor of CenterPoint Energy, Inc. (“CenterPoint”) acquired all
      of the Minnesota gas properties owned by the MidAmerican Energy predecessor
      company.





All
      of
      the wrongful death, personal injury and property damage claims arising from
      this
      incident have been settled by CenterPoint. MidAmerican Energy’s exposure, if
      any, to these settlements is covered under its liability insurance to which
      a
      $2.0 million retention applies.





Two
      lawsuits naming MidAmerican Energy as a third party defendant have been filed
      by
      CenterPoint Energy Resources Corp. in the U.S. District Court, District of
      Minnesota, related to this incident. The complaints seek reimbursement of all
      sums associated with CenterPoint’s replacement of all service lines in the
      MidAmerican Energy predecessor company’s properties located in Minnesota at a
      cost of approximately $39 million according to publicly available reports.
      MidAmerican Energy filed a motion for summary judgment in both of these actions
      requesting that CenterPoint’s third party claims based upon misrepresentation
      and negligent installation and negligent operation and maintenance of the gas
      pipeline be barred. On March 5, 2007, the U.S. District Court issued an
      order granting MidAmerican Energy’s motion for summary judgment as to
      CenterPoint’s misrepresentation and negligent installation claims and denying
      MidAmerican Energy’s motion for summary judgment as to CenterPoint’s negligent
      operation and maintenance claims. MidAmerican Energy intends to vigorously
      defend its position in these claims and believes their ultimate outcome will
      not
      have a material impact on its financial results. The ready-for-trial date in
      this case is June 1, 2007.





Other
      than the litigation described above, MidAmerican Funding and its subsidiaries
      currently have no material legal proceedings. Information on MidAmerican
      Energy’s environmental matters is included in the “Environmental Matters”
section of MD&A in Item 2 of this Form 10-Q. Information regarding
      MidAmerican Energy’s regulatory matters is included in the “Utility Regulatory
      Matters” section of MD&A in Item 2 of this Form 10-Q.




**Item
                1A.**
            **Risk
                Factors**




There
      has
      been no material change in 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, 2006.




**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.




34






**Item
                5.**
            **Other
                Information.**




Not
      applicable.




**Item
                6.**
            **Exhibits.**




The
      exhibits listed on the Exhibit Index are filed as a part of this Quarterly
      Report.




35





**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 COMPANY(Registrants)Date:
                May 7, 2007
            
            /s/
                Thomas B. SpecketerThomas
                B. SpecketerVice
                President and Controllerof
                MidAmerican Funding, LLCand
                MidAmerican Energy Company(principal
                financial and accounting officer)





36




**EXHIBIT
      INDEX**





**Exhibit
      No.**





MidAmerican
      Energy





15
            Awareness
                Letter of Independent Registered Public Accounting Firm31.1
            Chief
                executive officer certification pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200231.2
            Chief
                financial officer certification pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200232.1
            Chief
                executive officer certification pursuant to Section 906 of the
                Sarbanes-Oxley Act of 200232.2
            Chief
                financial officer certification pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002





MidAmerican
      Funding





31.3
            Chief
                executive officer certification pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200231.4
            Chief
                financial officer certification pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200232.3
            Chief
                executive officer certification pursuant to Section 906 of the
                Sarbanes-Oxley Act of 200232.4
            Chief
                financial officer certification pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002







37