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

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
               For the quarterly period ended SEPTEMBER 30, 2001
                                              ------------------

Commission    Registrant's Name, State of Incorporation,      IRS Employer
File Number          Address and Telephone Number             Identification No.
-----------          ----------------------------             ------------------

333-90553              MIDAMERICAN FUNDING, LLC                 47-0819200
                  (AN IOWA LIMITED LIABILITY COMPANY)
                       666 GRAND AVE. PO BOX 657
                        DES MOINES, IOWA 50303
                             515-242-4300

Securities registered pursuant to Section 12(b) of the Act:  None



Securities registered pursuant to Section 12(g) of the Act:  None



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

All of the member's  equity of MidAmerican  Funding,  LLC is held by MidAmerican
Energy Holdings Company as of October 31, 2001.




<PAGE>



                            MIDAMERICAN FUNDING, LLC

                                    FORM 10-Q

                                TABLE OF CONTENTS



                          PART I.  FINANCIAL INFORMATION                PAGE NO.

ITEM 1.  Financial Statements

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

ITEM 2.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations...................  13

                           PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings ................................................  26

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

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

                                      -2-
<PAGE>




INDEPENDENT ACCOUNTANTS' REPORT


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 September 30, 2001, and the
related  consolidated  statements of income for the  three-month  and nine-month
periods  ended  September  30,  2001  and  2000,  and the  related  consolidated
statements of cash flows for the nine-month periods ended September 30, 2001 and
2000.  These  financial  statements  are  the  responsibility  of the  Company's
management.

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

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

We have  previously  audited,  in accordance with auditing  standards  generally
accepted in the United  States of America,  the  consolidated  balance sheet and
statement of capitalization (not presented herein) of MidAmerican  Funding,  LLC
and  subsidiaries  as  of  December  31,  2000,  and  the  related  consolidated
statements of income,  comprehensive income,  retained earnings,  and cash flows
for the year then ended (not presented herein);  and in our report dated January
18, 2001, we expressed an unqualified  opinion on those  consolidated  financial
statements.  In our  opinion,  the  information  set  forth in the  accompanying
consolidated  balance  sheet as of December  31, 2000 is fairly  stated,  in all
material respects,  in relation to the consolidated  balance sheet from which it
has been derived.


DELOITTE & TOUCHE LLP

Des Moines, Iowa
October 26, 2001

                                      -3-

<PAGE>


                            MIDAMERICAN FUNDING, LLC
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                      THREE MONTHS                 NINE MONTHS
                                                   ENDED SEPTEMBER 30,          ENDED SEPTEMBER 30,
                                               --------------------------    --------------------------
                                                  2001           2000           2001           2000
                                               -----------    -----------    -----------    -----------

<S>                                            <C>            <C>            <C>            <C>
OPERATING REVENUES
Regulated electric .........................   $   386,674    $   359,430    $   986,864    $   919,866
Regulated gas ..............................        56,354         71,573        510,509        349,628
Nonregulated ...............................       109,609        122,547        545,202        276,743
                                               -----------    -----------    -----------    -----------
                                                   552,637        553,550      2,042,575      1,546,237
                                               -----------    -----------    -----------    -----------
OPERATING EXPENSES
Regulated:
  Cost of fuel, energy and capacity ........        88,322         67,342        214,528        181,153
  Cost of gas sold .........................        24,729         39,029        369,914        211,581
  Other operating expenses .................       113,361         98,747        314,014        292,642
  Maintenance ..............................        34,735         29,761         93,681         84,438
  Depreciation and amortization ............        50,260         48,062        151,715        141,545
  Property and other taxes .................        17,614         18,380         53,431         56,789
                                               -----------    -----------    -----------    -----------
                                                   329,021        301,321      1,197,283        968,148
                                               -----------    -----------    -----------    -----------
Nonregulated:
  Cost of sales ............................       104,643        117,794        522,911        257,306
  Other ....................................        15,584         17,663         45,893         50,686
                                               -----------    -----------    -----------    -----------
                                                   120,227        135,457        568,804        307,992
                                               -----------    -----------    -----------    -----------
  Total operating expenses .................       449,248        436,778      1,766,087      1,276,140
                                               -----------    -----------    -----------    -----------

OPERATING INCOME ...........................       103,389        116,772        276,488        270,097
                                               -----------    -----------    -----------    -----------

NON-OPERATING INCOME
Interest income ............................         5,334          7,519         17,547         15,145
Dividend income ............................           512            870          1,935          3,058
Marketable securities gains and losses, net           (258)           (30)        (1,534)        (1,359)
Other, net .................................          (164)          (821)        (3,299)         5,183
                                               -----------    -----------    -----------    -----------
                                                     5,424          7,538         14,649         22,027
                                               -----------    -----------    -----------    -----------
FIXED CHARGES
Interest on long-term debt .................        27,268         28,108         82,683         81,341
Other interest expense .....................         1,442          1,563          5,210          8,969
Preferred dividends of subsidiaries ........         2,972          3,234          9,530          9,763
Allowance for borrowed funds ...............          (351)          (467)        (1,104)        (1,220)
                                               -----------    -----------    -----------    -----------
                                                    31,331         32,438         96,319         98,853
                                               -----------    -----------    -----------    -----------

INCOME BEFORE INCOME TAXES .................        77,482         91,872        194,818        193,271
INCOME TAXES ...............................        36,079         39,586         92,349         88,145
                                               -----------    -----------    -----------    -----------
NET INCOME .................................   $    41,403    $    52,286    $   102,469    $   105,126
                                               ===========    ===========    ===========    ===========

</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -4-
<PAGE>


                            MIDAMERICAN FUNDING, LLC
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                                     AS OF
                                                                        ------------------------------
                                                                        SEPTEMBER 30,     DECEMBER 31,
                                                                            2001             2000
                                                                        -------------     ------------
                                                                         (UNAUDITED)

<S>                                                                       <C>              <C>
ASSETS
UTILITY PLANT
Electric ..............................................................   $4,548,164       $4,471,839
Gas ...................................................................      852,585          831,203
                                                                          ----------       ----------
                                                                           5,400,749        5,303,042
Less accumulated depreciation and amortization ........................    2,816,103        2,680,420
                                                                          ----------       ----------
                                                                           2,584,646        2,622,622
Construction work in progress .........................................       68,826           38,584
                                                                          ----------       ----------
                                                                           2,653,472        2,661,206
                                                                          ----------       ----------
POWER PURCHASE CONTRACT ...............................................       76,516           82,231
                                                                          ----------       ----------
CURRENT ASSETS
Cash and cash equivalents .............................................      132,430           10,018
Marketable securities, trading ........................................       25,067             --
Receivables ...........................................................      168,994          527,078
Inventories ...........................................................       54,017           69,130
Prepaid taxes .........................................................       23,956           22,889
Other .................................................................       14,187           14,218
                                                                          ----------       ----------
                                                                             418,651          643,333
                                                                          ----------       ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ............................      518,497          502,167
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED, NET ................    1,287,748        1,313,558
OTHER ASSETS ..........................................................      287,620          290,226
                                                                          ----------       ----------
TOTAL ASSETS ..........................................................   $5,242,504       $5,492,721
                                                                          ==========       ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Member's equity .......................................................   $1,977,774       $1,874,787
MidAmerican Energy preferred securities, not subject to
  mandatory redemption ................................................       31,759           31,759
Preferred securities, subject to mandatory redemption:
  MidAmerican Energy preferred securities .............................       36,680           50,000
  MidAmerican Energy-obligated preferred securities of subsidiary trust
    holding solely MidAmerican Energy junior subordinated debentures ..      100,000          100,000
Long-term debt (excluding current portion) ............................    1,381,713        1,345,703
                                                                          ----------       ----------
                                                                           3,527,926        3,402,249
                                                                          ----------       ----------
CURRENT LIABILITIES
Notes payable .........................................................        2,500           81,600
Current portion of long-term debt .....................................      286,813          324,933
Current portion of power purchase contract ............................       16,554           16,554
Accounts payable ......................................................      154,263          405,887
Taxes accrued .........................................................      109,571          131,378
Interest accrued ......................................................       20,567           27,955
Other .................................................................       35,451           37,853
                                                                          ----------       ----------
                                                                             625,719        1,026,160
                                                                          ----------       ----------
OTHER LIABILITIES
Power purchase contract ...............................................       35,728           35,728
Deferred income taxes .................................................      583,233          591,667
Investment tax credit .................................................       62,521           66,209
Other .................................................................      407,377          370,708
                                                                          ----------       ----------
                                                                           1,088,859        1,064,312
                                                                          ----------       ----------
TOTAL CAPITALIZATION AND LIABILITIES ..................................   $5,242,504       $5,492,721
                                                                          ==========       ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -5-
<PAGE>


                            MIDAMERICAN FUNDING, LLC
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                   NINE MONTHS
                                                               ENDED SEPTEMBER 30,
                                                              -----------------------
                                                                2001         2000
                                                              ---------    ---------

<S>                                                           <C>          <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................   $ 102,469    $ 105,126
Adjustments to reconcile net income to net cash provided:
   Depreciation and amortization ..........................     178,860      169,626
   Deferred income taxes and investment tax credit, net ...     (13,533)      (2,885)
   Amortization of other assets and liabilities ...........      34,477       17,356
   Gain on sale of securities, assets and other investments      (1,376)      (4,731)
   Net change in accrued customer rate credits ............      16,869       (1,675)
   Cash inflows of accounts receivable securitization .....        --         12,877
   Impact of changes in working capital ...................     115,410      (18,996)
   Other ..................................................       7,261        7,962
                                                              ---------    ---------
     Net cash provided ....................................     440,437      284,660
                                                              ---------    ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures .........................    (150,867)    (119,447)
Quad Cities Generating Station decommissioning
   trust fund .............................................      (6,224)      (6,227)
Nonregulated capital expenditures .........................      (2,149)        (802)
Purchase of assets and long-term investments ..............      (2,251)      (7,104)
Purchase of available-for-sale securities .................        --        (37,832)
Proceeds from sale of available-for-sale securities .......        --         61,634
Proceeds from sale of assets and other investments ........         277       23,777
Notes receivable from affiliate ...........................     (65,534)     (27,017)
Other investing activities, net ...........................       4,553        2,566
                                                              ---------    ---------
   Net cash used ..........................................    (222,195)    (110,452)
                                                              ---------    ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt, net of issuance costs .........     198,150      161,156
Retirement of long-term debt, including reacquisition cost     (201,560)    (110,923)
Reacquisition of preferred securities .....................     (13,320)        --
Net decrease in notes payable .............................     (79,100)    (180,925)
                                                              ---------    ---------
   Net cash used ..........................................     (95,830)    (130,692)
                                                              ---------    ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS .................     122,412       43,516
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..........      10,018        6,235
                                                              ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................   $ 132,430    $  49,751
                                                              =========    =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized .................   $  90,388    $  93,884
                                                              =========    =========
Income taxes paid .........................................   $ 153,513    $  99,833
                                                              =========    =========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                      -6-
<PAGE>
                            MIDAMERICAN FUNDING, LLC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A.  GENERAL:

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

     MidAmerican  Funding is an Iowa limited  liability company with MidAmerican
Energy Holdings Company as its sole member. MidAmerican Funding's direct, wholly
owned  subsidiary is MHC Inc. MHC,  MidAmerican  Funding and MidAmerican  Energy
Holdings  are exempt  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 MidAmerican Capital Company,  Midwest Capital Group,
Inc., MidAmerican Services Company and MEC Construction Services Co.

B.  ENVIRONMENTAL MATTERS:

     (1) MANUFACTURED GAS PLANT FACILITIES -

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

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

     MidAmerican Energy estimates the range of possible costs for investigation,
remediation  and monitoring for the sites  discussed  above to be $22 million to
$68 million.  MidAmerican Energy's estimate of the probable cost for these sites
as of September  30, 2001 was $24 million.  The estimate  consists of $3 million
for  investigation  costs,  $8 million for  remediation  costs,  $11 million for
groundwater  treatment  and  monitoring  costs and $2 million  for  closure  and
administrative  costs.  This  estimate  has been  recorded as a liability  and a
regulatory  asset for future  recovery.  MidAmerican  Energy projects that these
amounts will be paid or incurred over the next 10 years.

                                      -7-
<PAGE>

     The  estimate  of  probable   remediation   costs  is   established   on  a
site-specific basis. The costs are accumulated in a three-step process. First, a
determination  is made as to  whether  MidAmerican  Energy has  potential  legal
liability  for  the  site  and  whether  information  exists  to  indicate  that
contaminated  wastes  remain  at the site.  If so,  the  costs of  performing  a
preliminary  investigation and the costs of removing known contaminated soil are
accrued.  As the  investigation  is performed and if it is  determined  remedial
action  is  required,  the  best  estimate  of  remedial  costs is  accrued.  If
necessary, the estimate is revised when a consent order is issued. The estimated
recorded  liabilities for these properties  include  incremental direct costs of
the  remediation  effort,  costs  for  future  monitoring  at sites and costs of
compensation  to  employees  for  time  expected  to be  spent  directly  on the
remediation effort. The estimated recorded  liabilities for these properties are
based upon preliminary  data. Thus, actual costs could vary  significantly  from
the  estimates.  The  estimate  could  change  materially  based  on  facts  and
circumstances  derived from site  investigations,  changes in required  remedial
action and changes in technology  relating to remedial  alternatives.  Insurance
recoveries have been received for some of the sites under  investigation.  Those
recoveries are intended to be used principally for accelerated  remediation,  as
specified  by the  Iowa  Utilities  Board,  and  are  recorded  as a  regulatory
liability.

     The  Illinois  Commerce  Commission  has approved the use of a tariff rider
which  permits  recovery of the actual costs of  litigation,  investigation  and
remediation  relating  to  former  manufactured  gas  plant  sites.  MidAmerican
Energy's  present  rates  in  Iowa  provide  for  a  fixed  annual  recovery  of
manufactured gas plant costs.  MidAmerican  Energy intends to pursue recovery of
the  remediation  costs  from  other  potentially  responsible  parties  and its
insurance carriers.

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

     (2) CLEAN AIR ACT -

     On July 18, 1997, the Environmental  Protection Agency adopted revisions to
the National Ambient Air Quality Standards for ozone and a new standard for fine
particulate  matter.  Based  on  data  to  be  obtained  from  monitors  located
throughout each state, the Environmental  Protection Agency will determine which
states have areas that do not meet the air quality  standards (i.e.,  areas that
are  classified  as  nonattainment).  If  a  state  has  area(s)  classified  as
nonattainment  area(s),  the state is required to submit a State  Implementation
Plan specifying how it will reach  attainment of the standards  through emission
reductions or other means.  In August 1998,  the Iowa  Environmental  Protection
Commission  adopted by reference the National Ambient Air Quality  Standards for
ozone and fine particulate matter.

     In May 1999,  the  United  States  Court of  Appeals  for the  District  of
Columbia  Circuit  remanded  the  standards  adopted  in July  1997  back to the
Environmental  Protection Agency indicating the Environmental  Protection Agency
had not expressed  sufficient  justification  for the basis of establishing  the
standards and ruling that the  Environmental  Protection Agency has exceeded its
constitutionally-delegated authority in setting the standards. The Environmental
Protection Agency's appeal of the court's ruling to the full panel of the United
States District Court of Appeals for the District of Columbia was denied. In May
2000, the United States  Supreme Court granted  certiorari to review the appeals
court decision.

     On February 27, 2001,  the Supreme Court,  in Whitman v. American  Trucking
Associations,  upheld the standards,  ruling that the  Environmental  Protection
Agency did not exceed its constitutional delegation of authority in establishing
the standards in 1997. The court ruled that the Clean Air Act's  requirement for
the Environmental  Protection  Agency to establish  National Ambient Air Quality

                                      -8-
<PAGE>

Standards at a level "requisite" to protect public health,  or "sufficient,  but
not more than necessary",  is within the constitutional scope of discretion that
Congress can delegate to a federal  agency.  The court also explicitly held that
cost cannot be taken into account when setting the standards. The court remanded
the issue of  implementation of the ozone standard.  However,  the Environmental
Protection Agency is moving forward with analyzing  existing  monitored data and
determining attainment status.

     The impact of the new standards on MidAmerican Energy is currently unknown.
MidAmerican  Energy's fossil fuel generating stations may be subject to emission
reductions  if the stations are located in  nonattainment  areas.  As part of an
overall state plan to achieve  attainment of the standards,  MidAmerican  Energy
could be required to install  control  equipment  on its fossil fuel  generating
stations or decrease the number of hours during  which these  stations  operate.
The degree to which  MidAmerican  Energy  may be  required  to  install  control
equipment or decrease  operating  hours under a  nonattainment  scenario will be
determined  by  the  state's   assessment  of  MidAmerican   Energy's   relative
contribution,  along with other emission sources,  to the nonattainment  status.
The  installation  of  control  equipment  would  result in  increased  costs to
MidAmerican  Energy. A decrease in the number of hours during which the affected
stations operate would increase  operating costs and decrease wholesale electric
revenues of MidAmerican Energy.

C.  RATE MATTERS:

     In 1997,  pursuant to a rate  proceeding  before the Iowa Utilities  Board,
MidAmerican  Energy,  the Office of Consumer  Advocate and other parties entered
into a pricing plan settlement agreement establishing  MidAmerican Energy's Iowa
retail electric rates. That settlement agreement expired on December 31, 2000.

     On March 14,  2001,  the Office of the Consumer  Advocate  filed a petition
with  the  Iowa  Utilities  Board  to  reduce  Iowa  retail  electric  rates  by
approximately  $77  million  annually.  On June  11,  2001,  MidAmerican  Energy
responded to that petition by filing a request with the Iowa Utilities  Board to
increase  MidAmerican  Energy's  Iowa  retail  electric  rates  by  $51  million
annually. On July 12, 2001,  MidAmerican Energy, the Office of Consumer Advocate
and other parties  jointly filed a proposed  settlement  with the Iowa Utilities
Board that,  if approved,  will freeze the rates in effect on December 31, 2000,
through December 31, 2005, and, with  modifications,  will reinstate the revenue
sharing  provisions  of the 1997 pricing plan  settlement  agreement.  Under the
proposed  settlement,  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 would be deferred as a regulatory  liability to be used to offset a
portion of the cost of future generating plant  investments.  The Iowa Utilities
Board held a public  hearing on the proposed  settlement  in October  2001,  and
interested  parties  submitted  briefs  thereafter.  The  Iowa  Utility  Board's
decision on approving the proposed settlement is pending.

     Under an Illinois restructuring law enacted in 1997, a sharing mechanism is
in place for MidAmerican  Energy's Illinois regulated retail electric operations
whereby  earnings  above a computed  threshold  will be shared  equally  between
customers and  shareholders.  A two-year average return on common equity greater
than a two-year  average  benchmark will trigger an equal sharing of earnings on
the excess.  MidAmerican  Energy's  computed level of return on common equity is
based on a rolling  two-year  average of the 30-year  Treasury Bond rates plus a
premium of 5.50% for 1998 and 1999 and a premium of 8.5% for 2000 through  2004.
The two-year  average above which sharing must occur for 2000 was 12.83%.  Using
the same 30-year  Treasury Bond average,  the computed  level of return would be
14.33% for 2001 through 2004. The law allows  MidAmerican Energy to mitigate the
sharing  of  earnings  above  the  threshold  return on  common  equity  through
accelerated recovery of regulatory assets.

                                      -9-
<PAGE>

     On September 21, 2001,  MidAmerican  Energy filed a petition with the South
Dakota Public Utilities  Commission (SDPUC) to increase its South Dakota natural
gas rates by $3.7  million  annually.  Under  South  Dakota  law,  the SDPUC may
suspend  the  new  rates  for up to six  months  during  the  pendency  of  rate
proceedings.

     On October 19, 2001  MidAmerican  Energy filed a petition with the Illinois
Commerce  Commission to increase its Illinois  natural gas rates by $3.2 million
annually.  A final decision on the petition is required  within eleven months of
the date of filing.

D.  ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF REGULATION

     MidAmerican  Energy's  utility  operations are subject to the regulation of
the Iowa Utilities Board,  the Illinois  Commerce  Commission,  the South Dakota
Public  Utilities  Commission,  and the Federal  Energy  Regulatory  Commission.
MidAmerican  Energy's  accounting  policies  and the  accompanying  Consolidated
Financial  Statements  conform  to  generally  accepted  accounting   principles
applicable  to  rate-regulated  enterprises  and  reflect  the  effects  of  the
ratemaking process.

     A possible  consequence  of  deregulation  in the utility  industry is that
Statement  of  Financial  Accounting  Standards  No.  71 (SFAS 71) may no longer
apply.  SFAS 71  sets  forth  accounting  principles  for  operations  that  are
regulated and meet the stated  criteria.  For operations that meet the criteria,
SFAS 71 allows, among other things, the deferral of expense or income that would
otherwise be recognized  when incurred.  MidAmerican  Energy's  electric and gas
utility operations currently meet the criteria of SFAS 71, but its applicability
is periodically reexamined. If portions of its utility operations no longer meet
the criteria of SFAS 71,  MidAmerican  Energy could be required to write off the
related  regulatory  assets and  liabilities  from its balance sheet and thus, a
material adjustment to earnings in that period could result if regulatory assets
are not recovered in transition provisions of any deregulation legislation.

E.  DERIVATIVE FINANCIAL INSTRUMENTS:

     In  January  2001,  MidAmerican  Funding  adopted  Statement  of  Financial
Accounting  Standards (SFAS) Nos. 133 and 138,  pertaining to the accounting for
derivative instruments and hedging activities. These pronouncements require that
derivative  instruments  be  recorded  at fair  value on the  balance  sheet and
changes  in fair value  recognized  in income.  To the  extent  that  derivative
instruments are used for hedging  purposes,  and are highly effective as hedges,
hedge accounting is permitted, as discussed below, which mitigates the impact on
earnings of changes in the fair value of the derivatives.

     MidAmerican Energy enters into derivative financial instruments,  including
futures,  swaps,  options  and forward  contracts,  to hedge the effect of price
changes on cash flows from  expected  future  physical  transactions  (cash flow
hedges) and the fair value of physical purchase and sale commitments (fair value
hedges) and to reduce natural gas price  volatility for regulated gas customers.
The objective of MidAmerican  Energy's hedging program is to minimize the impact
of changing prices for natural gas and electricity on its cash flows.  From time
to time,  MidAmerican Energy also enters into derivative  financial  instruments
for  trading  purposes  to profit  from  changing  prices  for  natural  gas and
electricity or to take advantage of price arbitrage opportunities.

     Unrealized gains and losses on cash flow hedges of future  transactions are
recorded in other comprehensive income. Only hedges that are highly effective in
offsetting  the risk of  variability  in future cash flows are  accounted for in
this  manner.  Future  transactions  include  purchases  of gas  for  resale  to
regulated  and  nonregulated  customers,  purchases  of  gas  for  storage,  and
purchases and sales of wholesale  electric  energy.  When the associated  hedged
future transaction occurs or if a hedging relationship is no longer appropriate,
the unrealized gains and losses are reversed from other comprehensive income and

                                      -10-
<PAGE>

recognized  in net income.  Realized  gains on cash flow hedges are  recorded in
Cost of Gas Sold,  Regulated Cost of Fuel,  Energy and Capacity or  Nonregulated
Operating Revenues,  depending upon the nature of the physical transaction being
hedged.

     For the nine  months  ended  September  30,  2001,  net gains of $2,000 and
$43,000,  representing the ineffectiveness of cash flow hedges, are reflected in
Cost of Gas Sold and Regulated Cost of Fuel, Energy and Capacity,  respectively.
During the twelve months beginning  October 1, 2001, it is anticipated that $4.9
million of the $5.7 million after-tax,  net unrealized gains on cash flow hedges
presently  recorded as accumulated other  comprehensive  income will be realized
and  recorded  in  earnings.  MidAmerican  Energy  has  hedged a portion  of its
exposure  to the  variability  of cash  flows for  future  transactions  through
December 2002.

     Unrealized  gains and losses on fair value hedges are  recognized in income
as either Nonregulated Operating Revenues or Cost of Gas Sold depending upon the
nature of the item being hedged.  Purchase and sales commitments  hedged by fair
value  hedges are  recorded  at fair  value,  with the  changes  in values  also
recognized in income and  substantially  offsetting  the impact of the hedges on
earnings.  For the nine months ended  September  30, 2001, a net pre-tax gain of
$3,000,  representing the  ineffectiveness  of fair value hedges, is included in
Nonregulated Operating Revenues.

     Unrealized  gains and losses on MidAmerican  Energy's  derivatives held for
trading  purposes are recognized in income each reporting period as Nonregulated
Operating Revenues.

     MidAmerican  Funding is exposed to fair value risk from changes in interest
rates for fixed rate sinking  fund  preferred  and  perpetual  preferred  stocks
(fixed rate preferred  stocks).  MidAmerican  Funding  reviews the interest rate
sensitivity  of these  securities  and  purchases  put options on U.S.  Treasury
securities.  MidAmerican  Funding's intent is to substantially offset any change
in market value of the fixed rate  preferred  stocks due to a change in interest
rates with a change in market value of the put options.

     On  January  1,  2001,  as  permitted  by  FAS  133,   MidAmerican  Funding
re-characterized  its  portfolio of  preferred  stock  investments  as "trading"
securities.  Accordingly,  any  changes  in  value in the  portfolio,  or in the
derivatives  used to hedge their exposure to changes in interest rates,  are now
reflected  in  Marketable  Securities  Gains and  Losses,  Net.  This  change in
classification resulted in an initial pre-tax loss of $2.4 million. For the nine
months ended  September  30, 2001,  excluding  the initial  pre-tax  loss, a net
pre-tax gain of $0.3 million,  representing the  ineffectiveness  of the related
fair value hedges, is included in Marketable Securities Gains and Losses, Net.

F.  SEGMENT INFORMATION:

     MidAmerican  Funding  has  two  reportable  operating  segments:  regulated
electric and regulated  gas,  referred to as the electric and gas segments.  The
electric  segment  derives  most of its revenue  from retail  sales of regulated
electricity  to  residential,  commercial,  and  industrial  customers  and from
wholesale  sales to  other  utilities,  municipalities  and  marketers.  The gas
segment  derives  most of its  revenue  from  retail  sales  of  natural  gas to
residential,  commercial,  and industrial  customers and also earns  significant
revenues by transporting gas owned by others through its  distribution  systems.
Pricing for most 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,  income tax expense
and equity in the net income or loss of investees are allocated to each segment.

                                      -11-

<PAGE>


     The  following  table  provides   MidAmerican  Funding  information  on  an
operating segment basis (in thousands):

                                   Three Months               Nine Months
                                Ended September 30,       Ended September 30,
                                -------------------     -----------------------
                                  2001       2000          2001         2000
                                --------   --------     ----------   ----------

Revenues
  Electric....................  $386,674   $359,430     $  986,864   $  919,866
  Gas.........................    56,354     71,573        510,509      349,628
  Nonregulated and other (a)..   109,609    122,547        545,202      276,743
                                --------   --------     ----------   ----------
                                $552,637   $553,550     $2,042,575   $1,546,237
                                ========   ========     ==========   ==========
Net Income:
  Electric....................  $ 63,522   $ 69,765     $  133,804   $  123,699
  Gas.........................    (7,516)    (4,586)         4,484       10,802
  Nonregulated and other (a)..   (14,603)   (12,893)       (35,819)     (29,375)
                                --------   --------     ----------   ----------
                                $ 41,403   $ 52,286     $  102,469   $  105,126
                                ========   ========     ==========   ==========

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

G.  OTHER COMPREHENSIVE INCOME:

     For the  nine  months  ended  September  30,  2001  and  2000,  MidAmerican
Funding's  total  comprehensive  income was $103.0  million and $109.7  million,
respectively.   For  the  three  months  ended  September  30,  2001  and  2000,
MidAmerican  Funding's  total  comprehensive  income was $33.3 million and $58.3
million,  respectively.  The  differences  from Net Income are due to unrealized
holding  gains and  losses of  marketable  securities  during the  periods  and,
beginning  January 1,  2001,  the  effective  portion of net gains and losses of
derivative  instruments  classified  as  cash  flow  hedges.  Accumulated  other
comprehensive  income,  which also includes  recognition of the minimum  pension
liability in the fourth quarter of 2000, was $3.2 million and $2.7 million as of
September 30, 2001, and December 31, 2000, respectively.

                                      -12-
<PAGE>


         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS

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

     MidAmerican  Funding,  LLC is an Iowa limited  liability  company formed in
March  1999.  The sole  member of  MidAmerican  Funding  is  MidAmerican  Energy
Holdings Company.  MidAmerican  Funding owns all of the outstanding common stock
of MHC Inc. MHC's principal  subsidiary is MidAmerican  Energy Company, a public
utility  with  electric  and  gas   operations.   Other  direct,   wholly  owned
subsidiaries of MHC include MidAmerican Capital Company,  Midwest Capital Group,
Inc., MidAmerican Services Company and MEC Construction Services Co.

FORWARD-LOOKING STATEMENTS

     From  time  to  time,  MidAmerican  Funding,  or one  of  its  subsidiaries
individually,  may make  forward-looking  statements  within the  meaning of the
federal   securities  laws  that  involve   judgments,   assumptions  and  other
uncertainties   beyond  the  control  of  MidAmerican  Funding  or  any  of  its
subsidiaries  individually.  These forward-looking statements may include, among
others,  statements  concerning  revenue and cost trends,  cost  recovery,  cost
reduction strategies and anticipated  outcomes,  pricing strategies,  changes in
the  utility  industry,  planned  capital  expenditures,   financing  needs  and
availability,  statements of MidAmerican Funding's expectations, beliefs, future
plans  and  strategies,  anticipated  events  or  trends  and  similar  comments
concerning  matters that are not historical facts. These type of forward-looking
statements are based on current  expectations  and involve a number of known and
unknown  risks and  uncertainties  that  could  cause  the  actual  results  and
performance of MidAmerican Funding to differ materially from any expected future
results or performance, expressed or implied, by the forward-looking statements.
In  connection  with  the  safe  harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995,  MidAmerican  Funding has  identified  important
factors  that  could  cause  actual  results  to differ  materially  from  those
expectations, including weather effects on sales and revenues, fuel prices, fuel
transportation  and  other  operating  uncertainties,  acquisition  uncertainty,
uncertainties  relating to economic and political  conditions and  uncertainties
regarding  the impact of  regulations,  changes in  government  policy,  utility
industry   deregulation   and  competition.   MidAmerican   Funding  assumes  no
responsibility to update forward-looking information contained herein.

                              RESULTS OF OPERATIONS
                              ---------------------
REGULATED GROSS MARGIN

     Regulated Electric Gross Margin -

                                        Three Months             Nine Months
                                     Ended September 30,     Ended September 30,
                                     -------------------     -------------------
                                       2001         2000       2001         2000
                                       ----         ----       ----         ----
                                                     (In millions)
Operating revenues .................   $387         $359       $987         $920
  Cost of fuel, energy and capacity.     88           67        215          181
                                       ----         ----       ----         ----
    Electric gross margin ..........   $299         $292       $772         $739
                                       ====         ====       ====         ====

     Electric  gross margin for the third  quarter of 2001  increased $7 million
compared to the third quarter of 2000.

     MidAmerican  Energy's  margins on  wholesale  sales,  net of a reserve  for
revenue sharing,  increased $28.1 million compared to the third quarter of 2000.
Sales volumes for wholesale sales

                                      -13-
<PAGE>

increased  4.4%.  Wholesale  sales are the  sales of energy to other  utilities,
municipalities and marketers outside of MidAmerican Energy's delivery system.

     An  increase  in fuel  costs  per unit for Iowa  retail  customers  reduced
electric gross margin by $20.4 million for the third quarter of 2001 compared to
the third  quarter of 2000.  Usage  factors not  dependent on weather  decreased
electric  margin by $2.0  million  compared  to the  third  quarter  of 2000.  A
fluctuation  in temperature  conditions  accounted for an approximate $1 million
increase in gross margin compared to the third quarter of 2000. In total, retail
sales of  electricity  increased  1.7% for the three months ended  September 30,
2001.

     For the nine months ended  September  30, 2001,  compared to the first nine
months of 2000, electric gross margin increased $33 million.

     MidAmerican  Energy's  margins on  wholesale  sales,  net of a reserve  for
revenue  sharing,  increased $50.2 million  compared to the first nine months of
2000,  and  related  sales  volumes  increased  20.4%.  Revenues  from  electric
transmission  services  increased  $4.0 million for the 2001  nine-month  period
compared  to  the  2000  nine-month  period  due  to  additional  revenues  from
Mid-Continent  Area Power Pool.  Additionally,  electric  revenues  for the nine
months ended September 30, 2001,  reflect a $3.3 million  increase in gains from
the sale of emission allowances.

     Temperatures  during the nine months ended  September  30, 2001,  were more
extreme than temperatures in the nine months ended September 30, 2000, resulting
in a $16 million increase in electric margin.  Other usage factors not dependent
on weather decreased electric margin by $15.3 million compared to the first nine
months of 2000. An increase in fuel costs per unit for Iowa retail customers and
the effect of a  fuel-related  purchase  accounting  adjustment  in 2000 reduced
electric  margin by $24.3 million for the nine months ended  September 30, 2001,
compared to the nine months ended September 30, 2000. In total,  retail sales of
electricity increased 1.8% for the nine months ended September 30, 2001.

     Regulated Gas Gross Margin -

                                      Three Months            Nine Months
                                  Ended September 30,     Ended September 30,
                                  -------------------     -------------------
                                    2001       2000        2001        2000
                                    ----       ----        ----        ----
                                                 (In millions)
     Operating revenues .....        $56        $72        $511        $350
     Cost of gas sold .......         25         39         370         212
                                     ---        ---        ----        ----
       Gas gross margin .....        $31        $33        $141        $138
                                     ===        ===        ====        ====

     Regulated gas revenues  include  purchase 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  from the  purchase  gas  adjustment  clauses.  An  increase in the
per-unit  cost  of gas for the  nine-month  period  ended  September  30,  2001,
compared to the same period in 2000,  increased revenues and cost of gas sold by
approximately $136 million.

     Gas  gross  margin  decreased  $2  million  for the third  quarter  of 2001
compared to the 2000 quarter due to  conservation by customers and a fluctuation
in temperature conditions. Total gas retail sales decreased 6.0%.

                                      -14-
<PAGE>

     Compared to the first nine months of 2000,  gas gross  margin  increased $3
million  due to  the  colder-than-normal  temperature  conditions  in the  first
quarter of 2001  offset  partially  by  conservation  by  customers  due to high
natural gas prices.

REGULATED OPERATING EXPENSES

     Regulated  other operating  expenses  increased $14.6 million for the third
quarter of 2001  compared  to the third  quarter of 2000.  An increase in Cooper
Nuclear  Station costs  resulted in a $4.4 million  increase to other  operating
expenses.  Other increases  include a $3.9 million increase in the allowance for
uncollectible  accounts  as a result  of the high  natural  gas  prices,  a $3.0
million  increase in health care benefits  costs and a $2.6 million  increase in
pension and other post-employment benefits costs.

     Regulated  other  operating  expenses  increased $21.4 million for the nine
months ended September 30, 2001,  compared to the nine-month  period in 2000. An
increase in Cooper Nuclear Station costs resulted in a $12.5 million increase to
other operating expenses. Other increases include a $7.2 million increase in the
allowance for uncollectible accounts as a result of the high natural gas prices,
a $6.2 million increase in pension and other post-employment  benefits costs and
a $3.4 million  increase in electric  distribution  expense.  The increases were
partially  offset by  reductions  in Quad  Cities  Station  operating  expenses,
electric  transmission  expense,  energy efficiency  program costs,  information
technology expenses and assessments from utility regulatory agencies.

     Maintenance  expenses  for the  three  months  ended  September  30,  2001,
increased  $5.0  million  compared  to the 2000  period  due  principally  to an
increase in fossil fuel generating plant maintenance  costs. For the nine months
ended September 30, 2001,  compared to the nine months ended September 30, 2000,
maintenance expenses increased $9.2 million.  Electric distribution  maintenance
increased $4.4 million in part due to a more aggressive  tree-trimming  program.
Fossil fuel generating plant maintenance  expense increased $3.8 million,  while
maintenance costs for Quad Cities Station (nuclear) decreased $2.9 million.  Gas
distribution system maintenance increased $1.9 million and maintenance costs for
general plant increased $1.3 million.

     Depreciation and amortization  expense increased $2.2 million for the third
quarter of 2001 and $10.2  million for the first nine months of 2001 compared to
the  respective  periods  in 2000.  The  increases  were due  principally  to an
increase in depreciation rates implemented in 2001. An increase in utility plant
also contributed to the increases.

     Property  and other  taxes  for the  three  months  and nine  months  ended
September  30,  2001,  decreased  $0.8 million and $3.4  million,  respectively,
relative to their  comparable  periods in 2000 due  principally to a decrease in
Iowa property taxes. For the nine-month comparison,  the 2000 period included an
accrual for use taxes, which increased total taxes for that period.

                                      -15-

<PAGE>


NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     Nonregulated Gross Margin -

                                      Three Months            Nine Months
                                  Ended September 30,     Ended September 30,
                                  -------------------     -------------------
                                   2001        2000        2001        2000
                                   ----        ----        ----        ----
                                                 (In millions)
     Operating revenues ...        $110        $123        $545        $277
     Cost of sales ........         105         118         523         257
                                   ----        ----        ----        ----
       Gross margin .......        $  5        $  5        $ 22        $ 20
                                   ====        ====        ====        ====

     Nonregulated   revenues  and  cost  of  sales  consist   substantially   of
nonregulated  natural gas marketing  operations.  The  nonregulated  natural gas
marketing operations include wholesale and retail activities.  Approximately 80%
of the nonregulated natural gas revenues for the nine months ended September 30,
2001, are related to wholesale sales.

     Gross margin for the  nonregulated  natural gas  operations  increased $0.2
million to $1.4 million for the third quarter of 2001. The  improvement in gross
margin reflects an increase in sales volumes  partially  offset by a decrease in
margin per unit. Revenues from nonregulated natural gas operations decreased for
the  third  quarter  of 2001  compared  to the  third  quarter  of 2000 due to a
decrease in the average price per unit sold, reflective of a 34% decrease in the
average cost of gas.  The decrease in price per unit was offset  partially by an
increase in sales volumes of 12 million  MMBtus (48%).  Cost of sales  decreased
for the three  months ended  September  30,  2001,  due to the  variances in the
per-unit cost of gas sold and sales volumes.

     Gross margin for the  nonregulated  natural gas  operations  increased $3.5
million to $7.2 million for the first nine months of 2001  compared to the first
nine months of 2000.  The  improvement  in gross margin  reflects an increase in
margin  per unit and sales  volumes.  Revenues  from  nonregulated  natural  gas
operations  increased  $279.5  million  for the first  nine  months of 2001.  An
increase in the average price per unit sold, reflective of a 24% increase in the
average cost of gas,  accounted for $101.6  million of the increase in revenues.
Sales volumes  increased 47 million  MMBtus (74%)  resulting in a $177.9 million
increase in revenues. Cost of sales increased $276.0 million for the nine months
ended  September 30, 2001, due to the increases in the per-unit cost of gas sold
and sales volumes.

     As of December 31, 2000, all non-residential customers in Illinois had been
phased in to allow them to select their electric power  supplier.  For the three
months ended  September 30, 2001,  compared to the three months ended  September
30, 2000, gross margin related to these sales decreased $0.2 million while gross
margin for the  nine-month  period  ended  September  30, 2001,  increased  $0.8
million.

     Nonregulated  revenues for the third  quarter of 2000 included $4.8 million
from MidAmerican Energy's market access service project. The pilot project which
concluded in May, 2001, allowed larger Iowa customers that were participating in
the  project to choose  their  electric  power  supplier.  MidAmerican  Energy's
revenues  from project  participants  related to  non-supply  services,  such as
distribution and  transmission,  are reflected in regulated  electric  revenues.
Cost of sales related to the market access service  project totaled $4.2 million
for the third quarter of 2000. For the nine-month comparison,  revenues from the
project totaled $6.2 million and $13.4 million for 2001 and 2000,  respectively;
the related cost of sales  totaled  $5.4 million and $12.5  million for 2001 and
2000, respectively.

                                      -16-
<PAGE>

     MidAmerican  Energy's  nonregulated  revenues in the third  quarter of 2001
include $1.9 million from an award for successful performance under an incentive
gas  procurement  program.  Awards totaled $4.1 million and $1.9 million for the
first nine months of 2001 and 2000, respectively.

     The first  quarter of 2000 also  includes $4.4 million of revenues and $2.6
million of cost of sales from the security system operations sold in April 2000.

     Nonregulated Operating Expenses: Other -

     Nonregulated  other  operating  expenses  decreased  $2.1  million  for the
quarter ended  September 30, 2001,  compared to the 2000 quarter ended September
30 due to a decrease in  nonregulated  activities for  MidAmerican  Energy and a
decrease in sales tax expense.  Nonregulated  other operating expenses decreased
$4.8 million for the nine months ended  September  30, 2001 for the same reasons
as the quarter.  Additionally,  the 2000 period  included  $1.7 million in costs
related to the security system  operations  sold in April 2000.  Amortization of
MidAmerican  Funding  goodwill  decreased  $0.9 million to $25.8 million for the
first nine months of 2001.

NON-OPERATING INCOME AND INTEREST EXPENSE

     Interest and Dividend Income -

     Interest  income  decreased $2.2 million for the  three-month  period ended
September 30, 2001, and increased  $2.4 million for the nine-month  period ended
September 30, 2001,  relative to their comparable periods in 2000. A decrease in
interest  from a joint  plant  operator  for funds held by it  reduced  interest
income by  approximately  $2.3 million for each of the 2001  periods  presented.
Interest  income  increased $1.0 million and $5.9 million in the three-month and
nine-month  periods,  respectively,  for  interest  income on a note  receivable
related to MidAmerican  Energy's  accounts  receivable sold. The increase in the
note  receivable is a result of the  increased  balance in  receivables  sold. A
reduction  in  interest  rates also  reduced  interest  income for the  periods.
Dividend  income  decreased due to partial  liquidation  of the preferred  stock
investment portfolio in the past twelve months.

     Marketable Securities Gains and Losses, Net -

     Net losses on marketable securities for the nine months ended September 30,
2001,  increased $0.2 million compared to the nine-month  period ended September
30, 2000. The first quarter of 2001 includes a $2.4 million pre-tax loss related
to the  re-characterization  of marketable securities to "trading" as allowed by
Statement of Financial  Accounting  Standards No. 133. The first quarter of 2000
reflects a $2.0  million  pre-tax  gain on the sale of the  remaining  shares of
McLeodUSA common stock held by MidAmerican Funding. These decreases for the 2001
period  were  offset  substantially  by an  increase  in net gains  realized  on
marketable  securities  sold in 2001  compared  to the 2000  nine-month  period.
Additionally,  as a result of the re-characterization of the securities in 2001,
the statement of income for the 2001 period reflects unrealized gains that would
have been recorded in equity in 2000.

     Other, Net -

     Other,  Net, which includes a number of non-operating  income and deduction
items,  decreased  Non-Operating Income by $0.2 million and $0.8 million for the
three months ended September 30, 2001 and 2000, respectively. Other, Net reduced
Non-Operating  Income by $3.3 million for the nine-month  period ended September
30, 2001, and increased  Non-Operating Income by $5.2 million for the nine-month
period ended September 30, 2000.

                                      -17-
<PAGE>

     Other,  Net  includes  a discount  on sold  accounts  receivable,  net of a
subservicer fee charged to MidAmerican Energy Funding  Corporation for servicing
the  accounts.  The  discount is designed to cover the  expenses of  MidAmerican
Energy Funding Corporation,  including subservicer fees, monthly  administrative
costs and  interest.  The  discount is recorded in Other,  Net because it is not
reflected in utility cost of service for regulatory purposes.  The discount, net
of the subservicer  fee,  reduced Other, Net by $3.1 million and $2.5 million in
the third quarter of 2001 and 2000, respectively,  and by $11.9 million and $6.9
million for the nine months ended September 30, 2001 and 2000, respectively.

     Income from equity investments increased $0.4 million compared to the third
quarter of 2000.  For the nine months  ended  September  30,  2001,  income from
equity investments increased $1.1 million compared to the same period in 2000.

     Other,  Net for the first nine months of 2001  reflects a $1.4 million gain
on the sale of MidAmerican  Energy rail cars, while the nine-month  period ended
September  30,  2000,  includes  a $4.3  million  gain on the  sale of  security
companies and $1.3 million from the sale of commercial property and rail cars.

     Income related to  corporate-owned  life insurance  policies decreased $0.2
million and $1.2 million in the three months and nine months ended September 30,
2001, respectively, compared to the same periods in 2000.

     Other,  Net,  for the 2001  quarter and nine  months  ended  September  30,
reflects  $0.8 million of income for an  allowance  for equity funds used during
construction.  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.

     Fixed Charges -

     The  decrease in interest on long-term  debt for the third  quarter of 2001
compared to the third quarter of 2000 is due to maturities of MidAmerican Energy
and MidAmerican Capital long-term debt and lower interest rates on variable rate
debt.  The  increase  in interest on  long-term  debt for the nine months  ended
September 30, 2001, compared to the nine-month period in 2000 is due to interest
on $162 million of MidAmerican Energy medium-term notes issued in July 2000, net
of the  impact of  maturities  in 2000 of  MidAmerican  Energy  and  MidAmerican
Capital long-term debt and lower interest rates.

     Other  interest  expense  decreased  in the 2001  periods  compared  to the
respective  periods in 2000 due  principally  to a reduction in short-term  debt
outstanding  at  MidAmerican  Energy.  Additionally,  the second quarter of 2000
includes  $0.6  million of  interest  related to a gas  supplier  refund that is
refundable to  customers.  These  decreases  were  partially  offset by interest
related to state and federal income tax assessments in 2001.

                                      -18-
<PAGE>


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

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

     As  reflected on the  Consolidated  Statements  of Cash Flows,  MidAmerican
Funding's net cash provided from operating  activities was $440 million and $285
million for the nine months ended September 30, 2001 and 2000, respectively.

     INVESTING ACTIVITIES AND PLANS

     Utility Construction Expenditures -

     MidAmerican  Energy's  primary  need for  capital is  utility  construction
expenditures.   For  the  first  nine  months  of  2001,  utility   construction
expenditures  totaled $151  million,  including  allowance for funds used during
construction,  or capitalized  financing  costs, and Quad Cities Station nuclear
fuel purchases.  All such expenditures were met with cash generated from utility
operations, net of dividends.

     Forecasted utility construction expenditures, including allowance for funds
used during  construction are $223 million for 2001.  Capital  expenditure needs
are reviewed regularly by management and may change significantly as a result of
such reviews.  On July 10, 2001,  MidAmerican  Energy announced plans to develop
and construct two electric generating plants in Iowa, requiring an investment of
approximately  $1.5 billion.  Participation by others in a portion of the second
plant is being  discussed.  The two  plants  will  provide  approximately  1,400
megawatts  of  generating   capacity.   MidAmerican   Energy  expects  to  begin
construction  in  Spring  2002 on the  first  project,  a  540-megawatt  natural
gas-fired combined cycle unit which has an estimated cost of $368 million. It is
anticipated  that the first phase of the project  will be completed in 2003 with
the remainder being completed in 2005. MidAmerican Energy presently expects that
all utility  construction  expenditures for the next five years will be met with
the issuance of long-term debt and cash generated from utility  operations,  net
of  dividends.  The actual level of cash  generated  from utility  operations is
affected by, among other  things,  economic  conditions  in the utility  service
territory, weather and federal and state regulatory actions.

     Nuclear Decommissioning -

     Each  licensee  of a nuclear  facility  is  required  to provide  financial
assurance for the cost of  decommissioning  its licensed  nuclear  facility.  In
general,  decommissioning  of a  nuclear  facility  means to safely  remove  the
facility  from  service  and  restore  the  property  to  a  condition  allowing
unrestricted  use by the operator.  Based on  information  presently  available,
MidAmerican  Energy expects to contribute  approximately  $41 million during the
period 2001 through 2005 to external  trusts  established  for the investment of
funds for decommissioning Quad Cities Station.  Approximately 55% of the trusts'
funds are now invested in domestic  corporate debt and common equity securities.
The remainder is invested in investment grade municipal and U.S. Treasury bonds.
Funding for Quad Cities  Station is  reflected  in  depreciation  expense in the
Consolidated Statements of Income.

     Based on  information  presently  available  and assuming a September  2004
shutdown  of Cooper,  MidAmerican  Energy  expects to accrue  approximately  $55
million for Cooper  decommissioning during the period 2001 through 2004. Amounts
related to Cooper  decommissioning  are reflected in Other Operating Expenses in
the Consolidated Statements of Income.  MidAmerican Energy's obligation, if any,
for Cooper  decommissioning  will be affected by the actual plant shutdown date.
In July 1997,  the  Nebraska  Public  Power  District  filed a lawsuit in United
States District Court for the District of Nebraska

                                      -19-
<PAGE>

naming  MidAmerican  Energy  as the  defendant  and  seeking  a  declaration  of
MidAmerican  Energy's  rights and  obligations in connection with Cooper nuclear
decommissioning  funding.  Refer to Part  II,  Item 1-  Legal  Proceedings,  for
further discussion of the litigation.

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

     Investments -

     MidAmerican Capital  re-characterized all of its marketable securities held
on  January 1, 2001,  as  "trading"  securities  in January  2001.  Accordingly,
changes  in  those   investments   are  reflected  in  working  capital  in  the
Consolidated  Statements of Cash Flows, instead of in purchases or proceeds from
available-for-sale securities.

FINANCING ACTIVITIES, PLANS AND AVAILABILITY

     Issuance of MidAmerican Funding Debt -

     On March 1, 2001,  MidAmerican Funding retired $200 million of 5.85% Senior
Secured  Notes due 2001.  On March 19,  2001,  MidAmerican  Funding  issued $200
million of 6.75% Senior Secured Notes due March 1, 2011.

     MidAmerican Energy Debt Authorizations and Credit Facilities -

     MidAmerican   Energy  currently  has  authority  from  the  Federal  Energy
Regulatory  Commission to issue  short-term debt in the form of commercial paper
and bank notes  aggregating  $500 million.  MidAmerican  Energy currently has in
place a $370.4 million revolving credit facility which supports its $250 million
commercial  paper  program  and its  variable  rate  pollution  control  revenue
obligations. In addition, MidAmerican Energy has a $5 million line of credit.

     MidAmerican Energy has on file with the Securities and Exchange  Commission
a  registration  statement  for $500  million  in  various  forms of senior  and
subordinated, unsecured long-term debt and preferred securities.

     MidAmerican  Energy has  authorization  from the Federal Energy  Regulatory
Commission  to  issue up to an  additional  $500  million  in  various  forms of
long-term  debt.  MidAmerican  Energy  will  also  need  authorization  from the
Illinois Commerce Commission prior to issuing any securities.  If 90% or more of
the proceeds  from a  securities  issuance  are used for  refinancing  purposes,
MidAmerican  Energy need only provide the Illinois  Commerce  Commission with an
"informational  statement"  prior to the  issuance  which  sets  forth the type,
amount and use of the proceeds of the securities to be issued.  If less than 90%
of the proceeds are used for refinancing,  MidAmerican must file a comprehensive
application  seeking  authorization  prior to issuance.  The  Illinois  Commerce
Commission is required to hold a hearing before issuing its authorization.

                                      -20-
<PAGE>


     Accounts Receivable Sold -

     In 1997,  MidAmerican  Energy  entered  into a revolving  agreement,  which
expires in 2002, to sell all of its right, title and interest in the majority of
its billed  accounts  receivable to MidAmerican  Energy Funding  Corporation,  a
special  purpose  entity  established  to  purchase  accounts   receivable  from
MidAmerican  Energy.  MidAmerican  Energy  Funding  Corporation  in  turn  sells
receivable  interests  to  outside  investors.  In  consideration  for the sale,
MidAmerican  Energy received cash and a subordinated  note,  bearing interest at
8%, from MidAmerican Energy Funding  Corporation.  As of September 30, 2001, the
revolving  cash  balance was $70 million  and the amount  outstanding  under the
subordinated note was $76.3 million. The agreement is structured as a true sale,
under which the creditors of  MidAmerican  Energy  Funding  Corporation  will be
entitled  to be  satisfied  out of the  assets  of  MidAmerican  Energy  Funding
Corporation  prior to any value  being  returned  to  MidAmerican  Energy or its
creditors.  Therefore,  the  accounts  receivable  sold  are  not  reflected  on
MidAmerican  Funding's  Consolidated  Balance Sheets.  As of September 30, 2001,
$146.1  million of  accounts  receivable,  net of  reserves,  was sold under the
agreement.

     Other Financing Information -

     As of September  30,  2001,  MHC had a $4 million line of credit to provide
for short-term financing needs, all of which was unused.

     As of  September  30, 2001,  MidAmerican  Capital had  unsecured  revolving
credit  facilities  in the  amount  of $6  million,  under  which  no  debt  was
outstanding. MidAmerican Capital has $46.7 million of long-term debt outstanding
at September 30, 2001, which matures annually through 2002.

     MidAmerican  Funding or one of its  subsidiaries may from time to time seek
to retire its  outstanding  debt through cash  purchases  and/or  exchanges  for
equity 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.

OPERATING ACTIVITIES AND OTHER MATTERS

     Legislative and Regulatory Evolution -

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

     The law also  provides  for  Illinois  earnings  above a computed  level of
return on common equity to be shared equally  between  customers and MidAmerican
Energy.  MidAmerican Energy's computed level of return on common equity is based
on a rolling  two-year average of the 30-year Treasury Bond rates plus a premium
of 5.50%  for 1998 and 1999 and a premium  of 8.5% for 2000  through  2004.  The
two-year  average above which sharing must occur for 2000 was 12.83%.  Using the
same 30-year Treasury Bond average, the computed level of return would be 14.33%
for 2001 through 2004. The law allows MidAmerican Energy to mitigate the sharing
of earnings  above the  threshold  return on common equity  through  accelerated
recovery of regulatory assets.

                                      -21-
<PAGE>

     In December 1999, the Federal Energy  Regulatory  Commission  (FERC) issued
Order No. 2000  establishing  among other  things  minimum  characteristics  and
functions for regional  transmission  organizations.  Public utilities that were
not a member of an  independent  system  operator  at the time of the order were
required  to  submit  a plan by  which  its  transmission  facilities  would  be
transferred  to a regional  transmission  organization  on a schedule that would
allow the regional  transmission  organization to commence operating by December
15, 2001. On October 16, 2000, MidAmerican Energy filed with the FERC a plan for
MidAmerican  Energy  to  comply  with  Order No.  2000 by  participating  in the
formation of a for profit  independent  transmission  company.  On September 28,
2001, MidAmerican Energy and five other electric utilities filed with the FERC a
plan to create  TRANSLink  Transmission  Co. LLC and  integrate  their  electric
transmission systems into a single, coordinated system.

     Accounting Effects of Industry Restructuring -

     A possible  consequence  of  deregulation  in the utility  industry is that
Statement of Financial  Accounting Standards No. 71 may no longer apply. SFAS 71
sets forth accounting  principles for operations that are regulated and meet the
stated criteria.  For operations that meet the criteria,  SFAS 71 allows,  among
other  things,  the  deferral  of expense  or income  that  would  otherwise  be
recognized  when  incurred.   MidAmerican  Energy's  electric  and  gas  utility
operations   currently   meet  the  criteria   required  by  SFAS  71,  but  its
applicability is periodically reexamined.  If portions of its utility operations
no longer meet the criteria of SFAS 71,  MidAmerican Energy could be required to
write off the related  regulatory assets and liabilities from its balance sheet,
and thus,  a material  adjustment  to earnings in that  period  could  result if
regulatory assets are not recovered in transition provisions of any deregulation
legislation. As of September 30, 2001, MidAmerican Funding had $218.1 million of
regulatory assets and $9.5 million of regulatory liabilities on its Consolidated
Balance Sheet.

     Rate Matters: Electric -

     In 1997,  pursuant to a rate  proceeding  before the Iowa Utilities  Board,
MidAmerican  Energy,  the Office of Consumer  Advocate and other parties entered
into a pricing plan settlement agreement establishing  MidAmerican Energy's Iowa
retail electric rates. That settlement agreement expired on December 31, 2000.

     On March 14,  2001,  the Office of the Consumer  Advocate  filed a petition
with  the  Iowa  Utilities  Board  to  reduce  Iowa  retail  electric  rates  by
approximately  $77  million  annually.  On June  11,  2001,  MidAmerican  Energy
responded to that petition by filing a request with the Iowa Utilities  Board to
increase  MidAmerican  Energy's  Iowa  retail  electric  rates  by  $51  million
annually. On July 12, 2001,  MidAmerican Energy, the Office of Consumer Advocate
and other parties  jointly filed a proposed  settlement  with the Iowa Utilities
Board that,  if approved,  will freeze the rates in effect on December 31, 2000,
through December 31, 2005, and, with  modifications,  will reinstate the revenue
sharing  provisions  of the 1997 pricing plan  settlement  agreement.  Under the
proposed  settlement,  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 would be deferred as a regulatory  liability to be used to offset a
portion of the cost of new  generating  plant  investments.  The Iowa  Utilities
Board held a public  hearing on the proposed  settlement  in October  2001,  and
interested  parties  submitted  briefs  thereafter.  The Iowa Utilities  Board's
decision on approving the proposed settlement is pending.

     MidAmerican Energy has negotiated  individual  electric contracts with some
of its  commercial and  industrial  customers in Iowa.  The negotiated  electric
contracts  have  differing  terms and  conditions  as well as  prices.  The vast
majority of the contracts  expire during the period 2003 through 2005,  although
some large  customers  have contracts  extending to 2008.  Some of the contracts
have price renegotiation and early termination  provisions exercisable by either
party.  Prices  are set as fixed  prices;  however,  many

                                      -22-
<PAGE>


contracts allow for potential price  adjustments  with respect to  environmental
costs,  government imposed public purpose programs,  tax changes, and transition
costs. While the contract prices are fixed (except for the potential  adjustment
elements),  the costs MidAmerican  Energy incurs to fulfill these contracts will
vary. On an aggregate basis the annual revenues under contract are approximately
$180 million.

     On September 21, 2001,  MidAmerican  Energy filed a petition with the South
Dakota Public Utilities  Commission (SDPUC) to increase its South Dakota natural
gas rates by $3.7  million  annually.  Under  South  Dakota  law,  the SDPUC may
suspend  the  new  rates  for up to six  months  during  the  pendency  of  rate
proceedings.

     On October 19, 2001  MidAmerican  Energy filed a petition with the Illinois
Commerce  Commission to increase its Illinois  natural gas rates by $3.2 million
annually.  A final decision on the petition is required  within eleven months of
the date of filing.

     Environmental Matters -

     The U.S.  Environmental  Protection Agency, or EPA, and state environmental
agencies have determined that  contaminated  wastes remaining at  decommissioned
manufactured  gas plant facilities may pose a threat to the public health or the
environment if these contaminants are in sufficient quantities and at sufficient
concentrations as to warrant remedial action.

     MidAmerican  Energy has evaluated or is evaluating 27 properties that were,
at one time, sites of gas manufacturing  plants in which it may be a potentially
responsible  party.  The purpose of these  evaluations  is to determine  whether
waste materials are present,  whether the materials  constitute an environmental
or health  risk,  and  whether  MidAmerican  Energy has any  responsibility  for
remedial action.  MidAmerican  Energy's estimate of the probable costs for these
sites as of September 30, 2001, was $24 million. This estimate has been recorded
as a liability and a regulatory asset for future recovery through the regulatory
process.  Refer to Note B(1) of Notes to Consolidated  Financial  Statements for
further discussion of MidAmerican Energy's  environmental  activities related to
manufactured gas plant sites and cost recovery.

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

     On July 18, 1997,  the EPA adopted  revisions  to the National  Ambient Air
Quality  Standards for ozone and a new standard for fine particulate  matter. In
May 1999,  the U.S.  Court of  Appeals  for the  District  of  Columbia  Circuit
remanded the standards  adopted in July 1997 back to the EPA  indicating the EPA
had not expressed  sufficient  justification  for the basis of establishing  the
standards  and ruling that the EPA has exceeded  its  constitutionally-delegated
authority in setting the  standards.  On February 27,  2001,  the United  States
Supreme  Court  upheld  the  standards,  ruling  that the EPA did not exceed its
constitutional  delegation of authority in  establishing  the standards in 1997.
The impact of the new  standards on  MidAmerican  Energy is  currently  unknown.
MidAmerican Energy could incur increased costs and a decrease in revenues if its
generating  stations are located in nonattainment  areas.  Refer to Note B(2) of
Notes to Consolidated Financial Statements for further discussion of this issue.

     Generating Capability -

     MidAmerican  Energy is interconnected  with Iowa and neighboring  utilities
and is involved in an electric power pooling  agreement  known as  Mid-Continent
Area Power Pool  (MAPP).  Each MAPP

                                      -23-
<PAGE>

participant  is required to maintain  for  emergency  purposes a net  generating
capability reserve of at least 15% above its system peak demand.

     MidAmerican  Energy  believes it has  adequate  electric  capacity  reserve
through  2003 and  continues  to manage its  generating  resources  to ensure an
adequate reserve in the future.  MidAmerican Energy has announced plans to add a
540-megawatt natural gas-fired combined cycle unit to be completed in two phases
between 2003 and 2005. An additional  900 megawatts of coal-fired  generation is
expected  to  be   operational   later  this  decade.   However,   significantly
higher-than-normal   temperatures   during  the  cooling   season   could  cause
MidAmerican  Energy's  reserve to fall  below the 15%  minimum.  If  MidAmerican
Energy fails to maintain the appropriate reserve, significant penalties could be
contractually imposed by MAPP.

     As a result of the 1997 pricing settlement  agreement's  elimination of the
energy adjustment clause in Iowa,  MidAmerican Energy is financially  exposed to
movements  in  energy  prices.  Although  MidAmerican  Energy  believes  it  has
sufficient generation under typical operating conditions for its retail electric
needs,  a loss of  adequate  generation  by  MidAmerican  Energy  requiring  the
purchase of  replacement  power at a time of high market  prices  could  subject
MidAmerican Energy to losses on its energy sales.

     MidAmerican   Energy  has  been  able  to  maintain  its  capacity  reserve
requirement and has not been adversely  affected by seasonal price variations in
the wholesale market.

ACCOUNTING ISSUES

     In June 2001, the FASB issued SFAS No. 141,  "Business  Combinations",  and
SFAS No. 142, "Goodwill and Other Intangible Assets" which establish  accounting
and  reporting  for  business  combinations.  SFAS No. 141 requires all business
combinations entered into subsequent to June 30, 2001, to be accounted for using
the purchase method of accounting. SFAS No. 142 provides that goodwill and other
intangible assets with indefinite lives will not be amortized but will be tested
for impairment on an annual basis. These standards are effective for MidAmerican
Funding  beginning on January 1, 2002. The  historical  impact of not amortizing
goodwill  would  have been to  increase  net income  for the nine  months  ended
September 30, 2001 and 2000, by $25.8 million and $26.7  million,  respectively;
however,  MidAmerican  Funding has not quantified the impact  resulting from the
adoption of the other provision of these standards.

     In  August  2001,  the FASB  issued  SFAS No.  143,  "Accounting  for Asset
Retirement  Obligations",  which addresses the accounting for legal  obligations
associated  with  the  retirement  of  tangible,   long-lived  assets,  and  the
associated asset  retirement  costs.  This  pronouncement is effective for years
beginning after June 15, 2002. MidAmerican Funding is evaluating the impact that
adoption of this standard will have on its financial statements.

                                      -24-
<PAGE>


QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     MidAmerican  Funding is exposed to market  risk,  including  changes in the
market  price of certain  commodities  and interest  rates.  To manage the price
volatility relating to these exposures,  MidAmerican Funding enters into various
financial  derivative  instruments.   Senior  management  provides  the  overall
direction,   structure,  conduct  and  control  of  MidAmerican  Funding's  risk
management  activities,  including the use of financial derivative  instruments,
authorization  and  communication  of risk  management  policies and procedures,
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.

     Refer to Note E in Notes to Consolidated  Financial  Statements for further
discussion  of  derivatives  used to hedge  price  risk.  MidAmerican  Funding's
exposure to interest rate risk did not change materially from December 31, 2000.

                                      -25-

<PAGE>


PART II - OTHER INFORMATION

ITEM 1.  EGAL PROCEEDINGS
-------------------------

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

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

     For information on MidAmerican Energy's environmental matters, reference is
made to Note B of Notes to Consolidated Financial Statements.

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

     On July 23, 1997, the Nebraska Public Power District filed a complaint,  in
the  United  States  District  Court  for  the  District  of  Nebraska,   naming
MidAmerican Energy as the defendant and seeking declaratory judgment as to three
issues under the parties' long-term power purchase agreement for Cooper capacity
and energy.  More  specifically,  the Nebraska  Public Power  District  sought a
declaratory judgment in the following respects:

     (1)  that  MidAmerican  Energy  is  obligated  to pay 50% of all  costs and
          expenses associated with decommissioning Cooper, and that in the event
          the Nebraska  Public Power District  continues to operate Cooper after
          expiration  of  the  power  purchase   agreement   (September   2004),
          MidAmerican   Energy  is  not   entitled  to   reimbursement   of  any
          decommissioning funds it has paid to date or will pay in the future;

     (2)  that the current  method of allocating  transition  costs as a part of
          the decommissioning cost is proper under the power purchase agreement;
          and

     (3)  that the current method of investing  decommissioning  funds is proper
          under the power purchase agreement.

     MidAmerican  Energy  filed its answer  and  contingent  counterclaims.  The
contingent counterclaims filed by MidAmerican Energy are generally as follows:

     (1)  that MidAmerican Energy has no duty under the power purchase agreement
          to reimburse or pay 50% of the decommissioning costs unless conditions
          to reimbursement occur;

     (2)  that the  Nebraska  Public  Power  District  has the duty to repay all
          amounts that MidAmerican  Energy has prefunded for  decommissioning in
          the event the Nebraska Public Power District  operates the plant after
          the term of the power purchase agreement;

     (3)  that the Nebraska  Public Power  District is equitably  estopped  from
          continuing  to operate the plant after the term of the power  purchase
          agreement;

     (4)  that the Nebraska Public Power District has granted MidAmerican Energy
          an option to continue taking 50% of the power from the plant;

                                      -26-
<PAGE>


     (5)  that the term "monthly  power costs" as defined in the power  purchase
          agreement  does  not  include  costs  and  expenses   associated  with
          decommissioning the plant;

     (6)  that  MidAmerican  Energy  has  no  duty  to  pay  for  nuclear  fuel,
          operations and maintenance  projects or capital improvements that have
          useful lives after the term of the power purchase agreement;

     (7)  that transition  costs are not included in any  decommissioning  costs
          and expenses;

     (8)  that the  Nebraska  Public  Power  District  has  breached its duty to
          MidAmerican Energy in making investments of decommissioning funds;

     (9)  that  reserves in named  accounts are excessive and should be refunded
          to MidAmerican Energy; and

     (10) that the Nebraska Public Power District must credit MidAmerican Energy
          for payments by  MidAmerican  Energy for low-level  radioactive  waste
          disposal.

     On October 6, 1999,  the court rendered  summary  judgment for the Nebraska
Public Power  District on the  above-mentioned  issue  concerning  liability for
decommissioning  (issue  one in the  first  paragraph  above)  and  the  related
contingent counterclaims filed by MidAmerican Energy (issues one, two, three and
five in the second paragraph above).  The court referred all remaining issues in
the case to mediation, and cancelled the November 1999 trial date.

     MidAmerican  Energy  appealed  the  court's  summary  judgment  ruling.  On
December 12,  2000,  the United  States Court of Appeals for the Eighth  Circuit
reversed the ruling of the district court and granted summary  judgment in favor
of  MidAmerican  Energy on issues  one and five in the second  paragraph  above.
Additionally,   it  remanded  the  case  for  trial  on  all  other  claims  and
counterclaims.

     Since the remand to the  District  Court from the Eighth  Circuit  Court of
Appeals,  the Nebraska Public Power District has been granted  permission,  over
MidAmerican Energy's objections,  to amend its complaint.  The amended complaint
asserts  that  even  though  the  Eighth  Circuit  Court of  Appeals  held  that
MidAmerican  Energy  has no  liability  under the power  purchase  agreement  to
reimburse   or  pay  the  Nebraska   Public  Power   District  a  50%  share  of
decommissioning  costs unless certain  conditions occur,  MidAmerican Energy has
unconditional liability for a 50% share based on agreements other than the power
purchase agreement as originally  written.  The Nebraska Public Power District's
post-remand  contentions -- all strongly disputed by MEC -- are that MidAmerican
Energy has unconditional  liability for a 50% share of decommissioning  based on
any of the  following  alternative  theories:  (i) the parties  without  written
amendment  either  modified  the power  purchase  agreement  or made a  separate
agreement  that  imposes  unconditional  liability  on  MidAmerican  Energy  for
decommissioning  costs; (ii) absent  unconditional  liability for a 50% share of
decommissioning  costs,  MidAmerican  Energy would be unjustly  enriched;  (iii)
MidAmerican   Energy   has   unconditional   liability   for  a  50%   share  of
decommissioning  costs based on promissory estoppel; or (iv) the Nebraska Public
Power  District  is entitled to have the power  purchase  agreement  reformed to
provide that MidAmerican  Energy has unconditional  liability for a 50% share of
decommissioning  costs.  MidAmerican Energy will strongly dispute at trial these
contentions and theories put forth by the Nebraska Public Power District.  Trial
in these matters is scheduled to begin on March 4, 2002.

                                      -27-

<PAGE>


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

(A)  EXHIBITS

     None

(B)  REPORTS ON FORM 8-K

     None.

                                      -28-
<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.





                                                     MIDAMERICAN FUNDING, LLC
                                                   -----------------------------
                                                            (Registrant)




Date  November 9, 2001                                  /s/  Patrick J. Goodman
    ------------------                             -----------------------------
                                                             Patrick J. Goodman
                                                   Vice President and Treasurer


                                      -29-