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, 2000
                                              ------------------

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:

                  5.85% Senior Secured Exchange Notes due 2001
                  6.339% Senior Secured Exchange Notes due 2009
                  6.927% Senior Secured Exchange Bonds due 2029

-------------------------------------------------------------------------------

                               Title of each Class

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

All of the member's  equity of MidAmerican  Funding,  LLC is held by MidAmerican
Energy Holdings Company as of October 31, 2000.



<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.......................  8

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

                          PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings ............................................... 29

ITEM 6.  Exhibits and Reports on Form 8-K................................. 30

Signatures................................................................ 31

Exhibit Index............................................................. 32

                                      -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, 2000, and the
related  consolidated  statements of income for the  three-month  and nine-month
periods ended September 30, 2000 for the Company; for the period January 1, 1999
to  March  11,  1999 for MHC  Inc.  (prior  to its  acquisition  by  MidAmerican
Funding);  for the period March 12, 1999 to September  30, 1999 for the Company;
and for the three-month period ended September 30, 1999 for the Company; and the
related  consolidated  statements of cash flows for the nine-month  period ended
September 30, 2000 for the Company;  for the period January 1, 1999 to March 11,
1999 for MHC Inc.;  and for the period March 12, 1999 to September  30, 1999 for
the Company.  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 of
MidAmerican  Funding,  LLC and  subsidiaries  as of December 31,  1999,  and the
related consolidated  statements of income,  comprehensive income and cash flows
for the period January 1, 1999 to March 11, 1999 for MHC Inc. and March 12, 1999
to December 31, 1999 for the Company (not presented  herein);  and in our report
dated  January  25,  2000,  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, 1999 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 27, 2000

                                      -3-

<PAGE>



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

                                                                                                                  MHC
                                                             MIDAMERICAN FUNDING (UNAUDITED)                  (PREDECESSOR)
                                                  ----------------------------------------------------------  -------------
                                                          THREE                 NINE MONTHS   MARCH 12, 1999  JAN. 1, 1999
                                                          MONTHS                   ENDED         THROUGH        THROUGH
                                                     ENDED SEPTEMBER 30,       SEPTEMBER 30,   SEPTEMBER 30,    MARCH 11,
                                                     2000           1999           2000           1999            1999
                                                  ----------     ----------    -------------  -------------   ------------
<S>                                               <C>            <C>            <C>            <C>            <C>
OPERATING REVENUES
Regulated electric ..........................     $  359,430     $  352,861     $  919,866     $  685,376     $  208,963
Regulated gas ...............................         71,573         62,471        349,628        164,967        139,564
Nonregulated ................................        122,547         48,554        276,743         93,231         34,539
                                                  ----------     ----------     ----------     ----------     ----------
                                                     553,550        463,886      1,546,237        943,574        383,066
                                                  ----------     ----------     ----------     ----------     ----------
OPERATING EXPENSES
Regulated:
  Cost of fuel, energy and capacity .........         67,342         65,115        181,153        125,396         40,232
  Cost of gas sold ..........................         39,029         29,475        211,581         85,019         79,910
  Other operating expenses ..................         98,747        105,523        292,642        232,420         93,940
  Maintenance ...............................         29,761         26,969         84,438         67,138         18,302
  Depreciation and amortization .............         48,062         49,574        141,545        107,535         39,417
  Property and other taxes ..................         18,380         17,730         56,789         42,785         15,758
                                                  ----------     ----------     ----------     ----------     ----------
                                                     301,321        294,386        968,148        660,293        287,559
                                                  ----------     ----------     ----------     ----------     ----------
Nonregulated:
  Cost of sales .............................        117,794         42,365        257,306         79,348         30,188
  Other .....................................         17,663         16,373         50,686         37,070          6,421
                                                  ----------     ----------     ----------     ----------     ----------
                                                     135,457         58,738        307,992        116,418         36,609
                                                  ----------     ----------     ----------     ----------     ----------
  Total operating expenses ..................        436,778        353,124      1,276,140        776,711        324,168
                                                  ----------     ----------     ----------     ----------     ----------

OPERATING INCOME ............................        116,772        110,762        270,097        166,863         58,898
                                                  ----------     ----------     ----------     ----------     ----------
NON-OPERATING INCOME
Interest income .............................          7,519          5,377         15,145         14,638          1,411
Dividend income .............................            870          1,276          3,058          3,159          1,331
Realized gains and losses on securities, net             (30)          (905)        (1,359)        78,066         15,214
Other, net ..................................           (821)        (1,367)         5,183           (445)       (18,133)
                                                  ----------     ----------     ----------     ----------     ----------
                                                       7,538          4,381         22,027         95,418           (177)
                                                  ----------     ----------     ----------     ----------     ----------
FIXED CHARGES
Interest on long-term debt ..................         28,108         29,392         81,341         65,174         14,814
Other interest expense ......................          1,563          1,124          8,969          5,486          3,145
Preferred dividends of subsidiaries .........          3,234          3,234          9,763          6,327          2,831
Allowance for borrowed funds ................           (467)          (311)        (1,220)          (682)          (235)
                                                  ----------     ----------     ----------     ----------     ----------
                                                      32,438         33,439         98,853         76,305         20,555
                                                  ----------     ----------     ----------     ----------     ----------
INCOME FROM CONTINUING OPERATIONS
  BEFORE INCOME TAXES .......................         91,872         81,704        193,271        185,976         38,166
INCOME TAXES ................................         39,586         34,968         88,145         77,348         21,377
                                                  ----------     ----------     ----------     ----------     ----------
INCOME FROM CONTINUING OPERATIONS ...........         52,286         46,736        105,126        108,628         16,789
INCOME FROM DISCONTINUED OPERATIONS
  (NET OF INCOME TAXES) .....................             --          5,005             --         11,258            421
                                                  ----------     ----------     ----------     ----------     ----------
NET INCOME ..................................     $   52,286     $   51,741     $  105,126     $  119,886     $   17,210
                                                  ==========     ==========     ==========     ==========     ==========

</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,
                                                                            2000           1999
                                                                        -------------   ------------
                                                                        (UNAUDITED)
<S>                                                                        <C>           <C>
ASSETS
UTILITY PLANT
Electric ..............................................................    $4,423,032    $4,209,281
Gas ...................................................................       824,942       809,112
                                                                           ----------    ----------
                                                                            5,247,974     5,018,393
Less accumulated depreciation and amortization ........................     2,662,908     2,546,516
                                                                           ----------    ----------
                                                                            2,585,066     2,471,877
Construction work in progress .........................................        29,280        33,739
                                                                           ----------    ----------
                                                                            2,614,346     2,505,616
                                                                           ----------    ----------
POWER PURCHASE CONTRACT ...............................................        95,970            --
                                                                           ----------    ----------
CURRENT ASSETS
Cash and cash equivalents .............................................        49,751         6,235
Receivables ...........................................................       234,224       215,361
Inventories ...........................................................        82,153        82,823
Prepaid taxes .........................................................        22,889        22,889
Other .................................................................        11,889        12,301
                                                                           ----------    ----------
                                                                              400,906       339,609
                                                                           ----------    ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ............................       561,204       519,201
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED, NET ................     1,321,362     1,482,992
OTHER ASSETS ..........................................................       303,292       347,935
                                                                           ----------    ----------
TOTAL ASSETS ..........................................................    $5,297,080    $5,195,353
                                                                           ==========    ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Member's equity .......................................................    $1,909,373    $1,800,416
MidAmerican Energy preferred securities, not subject to
  mandatory redemption ................................................        31,759        31,759
Preferred securities, subject to mandatory redemption:
  MidAmerican Energy preferred securities .............................        50,000        50,000
  MidAmerican Energy-obligated preferred securities of subsidiary trust
    holding solely MidAmerican Energy junior subordinated debentures ..       100,000       101,598
Long-term debt (excluding current portion) ............................     1,469,337     1,508,394
                                                                           ----------    ----------
                                                                            3,560,469     3,492,167
                                                                           ----------    ----------
CURRENT LIABILITIES
Notes payable .........................................................        23,075       204,000
Current portion of long-term debt .....................................       224,810       134,082
Current portion of power purchase contract ............................        15,767        15,767
Accounts payable ......................................................       208,831       165,915
Taxes accrued .........................................................        94,493       110,592
Interest accrued ......................................................        21,929        29,555
Other .................................................................        34,863        42,392
                                                                           ----------    ----------
                                                                              623,768       702,303
                                                                           ----------    ----------
OTHER LIABILITIES
Power purchase contract ...............................................        52,282        52,282
Deferred income taxes .................................................       607,287       520,088
Investment tax credit .................................................        67,111        71,757
Other .................................................................       386,163       356,756
                                                                           ----------    ----------
                                                                            1,112,843     1,000,883
                                                                           ----------    ----------
TOTAL CAPITALIZATION AND LIABILITIES ..................................    $5,297,080    $5,195,353
                                                                           ==========    ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -5-
<PAGE>
                            MIDAMERICAN FUNDING, LLC
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                    MHC
                                                             MIDAMERICAN FUNDING (UNAUDITED)   (PREDECESSOR)
                                                             -------------------------------   -------------
                                                              NINE MONTHS     MARCH 12, 1999    JAN. 1, 1999
                                                                 ENDED           THROUGH          THROUGH
                                                             SEPTEMBER 30,     SEPTEMBER 30,     MARCH 11,
                                                                 2000              1999            1999
                                                             -------------    --------------   -------------
<S>                                                             <C>             <C>               <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...............................................      $ 105,126       $   119,886       $  17,210
Adjustments to reconcile net income to net cash provided:
  Income from discontinued operations ....................             --           (11,258)           (421)
  Depreciation and amortization ..........................        169,626           128,661          39,865
  Deferred income taxes and investment tax credit, net ...         (2,885)          (88,570)         (2,327)
  Amortization of other assets and liabilities ...........         17,356            23,883          12,035
  Gain on sale of securities, assets and other investments         (4,731)          (77,340)        (15,478)
  Cash inflows (outflows) of accounts
    receivable securitization ............................         12,877            (4,357)         10,000
  Impact of changes in working capital, net
    of effects from discontinued operations ..............        (18,996)            3,297          38,190
  Other ..................................................          6,287            20,834           4,878
                                                                ---------       -----------       ---------
    Net cash provided by continuing operations ...........        284,660           115,036         103,952
    Net cash provided by (used in)
      discontinued operations ............................             --            28,967            (429)
                                                                ---------       -----------       ---------
    Net cash provided by operating activities ............        284,660           144,003         103,523
                                                                ---------       -----------       ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ........................       (119,447)          (99,073)        (16,924)
Quad Cities Nuclear Power Station
  decommissioning trust fund .............................         (6,227)           (6,089)         (2,189)
Nonregulated capital expenditures ........................           (802)          (15,946)         (6,058)
Purchase of assets and long-term investments .............         (7,104)           (2,608)           (140)
Purchase of available-for-sale securities ................        (37,832)          (62,014)        (30,575)
Proceeds from sale of securities
  Available for sale .....................................         61,634           451,214          91,110
  Held to maturity .......................................             --                --           2,984
Proceeds from sale of assets and other investments .......         23,777             1,833           1,097
Notes receivable from affiliate ..........................        (27,017)         (172,842)             --
Purchase of MHC, net of cash received ....................             --        (2,429,532)             --
Investment in discontinued operations ....................             --            (7,751)             --
Other investing activities, net ..........................          2,566            (3,180)         (8,128)
                                                                ---------       -----------       ---------
  Net cash provided by (used in) continuing operations ...       (110,452)       (2,345,988)         31,177
  Net cash used in discontinued operations ...............             --           (35,080)         (1,056)
                                                                ---------       -----------       ---------
  Net cash provided by (used in) investing activities ....       (110,452)       (2,381,068)         30,121
                                                                ---------       -----------       ---------
</TABLE>


        The accompanying notes are an integral part of these statements.

                                      -6-
<PAGE>

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

                                                                                                       MHC
                                                              MIDAMERICAN FUNDING (UNAUDITED)     (PREDECESSOR)
                                                             ---------------------------------    -------------
                                                              NINE MONTHS       MARCH 12, 1999    JAN. 1, 1999
                                                                 ENDED             THROUGH           THROUGH
                                                             SEPTEMBER 30,      SEPTEMBER 30,       MARCH 11,
                                                                 2000               1999              1999
                                                             ------------       -------------     -------------

<S>                                                             <C>             <C>               <C>
NET CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid ....................................      $      --       $        --       $ (30,359)
Issuance of long-term debt, net of issuance costs
  and rate swap ..........................................        161,156           706,525              --
Retirement of long-term debt, including
  reacquisition cost .....................................       (110,923)             (735)           (127)
Reacquisition of common shares ...........................             --                --         (50,629)
Equity contribution from parent ..........................             --         1,727,651              --
Repayment of MidAmerican Capital Company
   unsecured revolving credit facility ...................             --                --         (34,600)
Net change in notes payable ..............................       (180,925)         (200,838)        (15,274)
                                                                ---------       -----------       ---------
  Net cash provided by (used in) continuing operations ...       (130,692)        2,232,603        (130,989)
  Net cash provided by discontinued operations ...........             --            12,661           1,719
                                                                ---------       -----------       ---------
  Net cash provided by (used in) financing activities ....       (130,692)        2,245,264        (129,270)
                                                                ---------       -----------       ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS
  OF DISCONTINUED OPERATIONS .............................             --            (6,548)           (234)
                                                                ---------       -----------       ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS ................         43,516             1,651           4,140
CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD ..............................................          6,235                --           6,107
                                                                ---------       -----------       ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............      $  49,751       $     1,651       $  10,247
                                                                =========       ===========       =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ................      $  93,884       $    60,767       $  15,458
                                                                =========       ===========       =========
Income taxes paid ........................................      $  99,833       $   156,478       $   8,401
                                                                =========       ===========       =========

</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -7-
<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.

     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. and MidAmerican Services Company.

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 which 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, 2000 was $26 million.  The estimate  consists of $3 million
for  investigation  costs,  $8 million for  remediation  costs,  $13 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.

                                      -8-
<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. In addition,
insurance  recoveries  for some or all of the  costs  may be  possible,  but the
liabilities recorded have not been reduced by any estimate of such recoveries.

     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. Oral arguments are expected in the fall of 2000.

     As a result of the court's  initial  decision and the current status of the
standards,  the impact of any new standards on  MidAmerican  Energy is currently
unknown. If the Environmental Protection Agency successfully appeals the court's
decision,  however,  and the new standards  are  implemented,  then  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,

                                      -9-
<PAGE>

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 would 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 decrease the revenues of MidAmerican Energy.

C.   RATE MATTERS:

     Under a 1997  pricing  plan  settlement  agreement  resulting  from an Iowa
Utilities  Board  rate  proceeding,  electric  prices  for Iowa  industrial  and
commercial  customers  were  reduced  through  a retail  access  pilot  project,
negotiated  individual electric contracts and a tariffed rate reduction for some
non-contract commercial customers.

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

     Under the 1997 pricing plan settlement  agreement,  if MidAmerican Energy's
annual Iowa electric  jurisdictional  return on common equity  exceeds 12%, then
earnings  above  the 12% level  will be shared  equally  between  customers  and
MidAmerican  Energy;  if the return exceeds 14%, then  two-thirds of MidAmerican
Energy's  share  of  those  earnings  above  the 14%  level  will  be  used  for
accelerated  recovery of regulatory  assets. The year 2000 is the last year this
Iowa electric  retail revenue  sharing plan remains in effect.  The 1997 pricing
plan  settlement  agreement  also precludes  MidAmerican  Energy from filing for
increased  rates prior to 2001 unless the return falls below 9%.  Other  parties
signing the agreement are prohibited from filing for reduced rates prior to 2001
unless the return after reflecting credits to customers, exceeds 14%.

     Under an  Illinois  restructuring  law enacted in 1997,  a similar  sharing
mechanism is in place for MidAmerican Energy's Illinois electric  operations.  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. The benchmark
is a calculation of average  30-year  Treasury Bond rates plus 5.5% for 1998 and
1999 and 8.5% for 2000  through  2004.  The initial  calculation,  which was due
March 31, 2000, was based on 1998 and 1999 results.  The two-year  average above
which  sharing must occur for 1999 was 11.21%.  Using the same 30-year  Treasury
bond average,  the computed  level of return would be 12.71% for 2000 and 14.21%
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.

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

                                      -10-


<PAGE>

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 may no longer apply. SFAS No.
71 sets forth  accounting  principles for operations that are regulated and meet
certain criteria.  For operations that meet the criteria,  SFAS 71 allows, among
other  things,  the  deferral of costs that would  otherwise  be  expensed  when
incurred.  With the exception of the generation  operations serving the Illinois
jurisdiction, 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 resulting  legislation.  As of September 30, 2000,
MidAmerican  Energy had $245 million of  regulatory  assets on its  Consolidated
Balance Sheet.

E.   SEGMENT INFORMATION:

     MidAmerican  Funding has two reportable  operating  segments:  electric and
gas.  The  electric  segment  derives  most of its revenue  from retail sales of
regulated electricity to residential,  commercial,  and industrial customers and
sales to other  utilities.  The gas segment  derives  most of its  revenue  from
retail sales of regulated 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 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.

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

<TABLE>
<CAPTION>
                                                                                                     MHC
                                               MIDAMERICAN FUNDING (UNAUDITED)                  (PREDECESSOR)
                                 ------------------------------------------------------------   ------------
                                          THREE                 NINE MONTHS    MARCH 12, 1999   JAN. 1, 1999
                                          MONTHS                   ENDED          THROUGH         THROUGH
                                     ENDED SEPTEMBER 30        SEPTEMBER 30,   SEPTEMBER 30,    MARCH 11,
                                    2000           1999            2000            1999            1999
                                 ----------     -----------    -------------   --------------   ------------

<S>                              <C>            <C>              <C>              <C>            <C>
Revenues:
  Electric .................     $ 359,430      $   352,861      $   919,866      $ 685,376      $ 208,963
  Gas ......................        71,573           62,471          349,628        164,967        139,564
  Nonregulated and other (a)       122,547           48,554          276,743         93,231         34,539
                                 ---------      -----------      -----------      ---------      ---------
                                 $ 553,550      $   463,886      $ 1,546,237      $ 943,574      $ 383,066
                                 =========      ===========      ===========      =========      =========
Net Income:
  Electric .................     $  69,765      $    65,655      $   123,699      $  91,736      $  11,878
  Gas ......................        (4,586)          (7,342)          10,802        (12,022)        13,010
  Nonregulated and other (a)       (12,893)          (6,572)         (29,375)        40,172         (7,678)
                                 ---------      -----------      -----------      ---------      ---------
                                 $  52,286      $    51,741      $   105,126      $ 119,886      $  17,210
                                 =========      ===========      ===========      =========      =========
</TABLE>

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


                                      -11-
<PAGE>

F.   OTHER COMPREHENSIVE INCOME:

     For the nine months ended September 30, 2000, and for the periods March 12,
1999 through  September 30, 1999,  and January 1, 1999,  through March 11, 1999,
MidAmerican  Funding's total  comprehensive  income was $109.7  million,  $119.6
million and $58.8 million,  respectively.  For the three months ended  September
30, 2000 and 1999,  MidAmerican  Funding's total comprehensive  income was $58.3
million and $51.1 million, respectively. The differences from Net Income are due
to  unrealized  holding  gains and losses of  marketable  securities  during the
periods.  Accumulated other comprehensive income was $4.6 million and zero as of
September 30, 2000, and December 31, 1999, 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 that was
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., formerly known as MidAmerican Energy Holdings Company,  which
owns all of the common stock of MidAmerican Energy Company,  MidAmerican Capital
Company, Midwest Capital Group, Inc. and MidAmerican Services Company.

     On March 12,  1999,  MidAmerican  Funding  acquired  MHC. As a part of this
transaction,  the former CalEnergy  Company,  Inc, a Delaware  corporation,  was
reincorporated as an Iowa corporation and changed its name to MidAmerican Energy
Holdings Company.  As a result, MHC and all direct and indirect  subsidiaries of
MHC each became a subsidiary of MidAmerican Funding.

     Prior to October 1999,  MidAmerican  Energy Holdings' real estate brokerage
and related services were conducted through MHC's subsidiary, MidAmerican Realty
Services.  In  October  1999,  MidAmerican  Realty was  dividended  from MHC and
MidAmerican Funding to MidAmerican Energy Holdings.

DESCRIPTION OF FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS

     Management's   Discussion  and  Analysis  (MD&A)  addresses  the  financial
statements  of  MidAmerican  Funding  and  MHC.  The  financial   statements  of
MidAmerican  Funding  include the results of MHC  beginning  March 12, 1999.  As
discussed  above,  MHC's  investment in  MidAmerican  Realty was  distributed to
MidAmerican Energy Holdings in October 1999. Accordingly,  the operating results
of MidAmerican Realty, which was acquired in 1998, are reflected as discontinued
operations in the 1999 periods.

     Final  valuations  associated with the purchase of MHC were  established in
the  first  quarter  of  2000.  Due to the  failure  of  electric  restructuring
legislation to pass in the Iowa  legislature's  2000 session,  adjustments  were
made to utility assets and  liabilities in the first quarter of 2000,  primarily
impacting Electric Plant, Power Purchase Contract,  and Excess of Cost Over Fair
Value of Assets Acquired, Net on the Consolidated Balance Sheet included herein.

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

                                      -13-
<PAGE>

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
                              ---------------------

     The  following is a discussion  of the  historical  results of  MidAmerican
Funding  and  of  its  predecessor,  MHC,  for  the  periods  presented  on  the
Consolidated  Statements  of Income in this Form 10-Q.  Results for  MidAmerican
Funding include the results of MHC beginning March 12, 1999, in conjunction with
the acquisition of MHC by MidAmerican  Funding. The impact of the acquisition is
reflected in MidAmerican Funding's results of operations, predominately interest
costs on debt issued by MidAmerican  Funding to complete the acquisition and the
effects of purchase accounting,  including goodwill  amortization and fair value
adjustments to the carrying value of assets and  liabilities.  Since the periods
discussed, other than the three-month periods ended September 30, 2000 and 1999,
are not  comparable  to a similar  prior-year  period,  the  emphasis  for these
discussions is on fluctuations from "normal" or unusual items that may cause the
reported  results of  operations  to not  necessarily  be  indicative  of future
operating results.

RESULTS OF OPERATIONS OF MIDAMERICAN FUNDING FOR THE THREE MONTHS ENDED
-----------------------------------------------------------------------
SEPTEMBER 30, 2000, COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------

REGULATED GROSS MARGIN

     Regulated Electric Gross Margin -

                                                   Three Months
                                                Ended September 30
                                                ------------------
                                                2000          1999
                                                ----          ----
                                                   (In millions)
     Operating revenues...................      $359          $353
     Cost of fuel, energy and capacity....        67            65
                                                ----          ----
     Electric gross margin................      $292          $288
                                                ====          ====

     Electric  gross margin for the third  quarter of 2000  increased $4 million
compared to the third  quarter of 1999. A refund  accrual for a revenue  sharing
arrangement  in Iowa was $3.6 million less in the third  quarter of 2000 than in
the 1999 quarter, resulting in an increase in electric margin.

     Temperatures  during  the three  months  ended  September  30,  2000,  were
slightly higher than  temperatures in the third quarter of 1999,  resulting in a
$1 million  increase in electric  margin.  Growth in the number of customers and
other usage factors not dependent on weather  increased  electric margin by $2.8
million  compared  to the  third  quarter  of 1999.  In total,  retail  sales of
electricity  increased  3.3% for the three  months  ended  September  30,  2000,
compared to the same period in 1999.

     A higher cost of sales for Iowa  retail  sales  resulted in a $2.0  million
decrease in electric margin compared to the third quarter of 1999. Additionally,
electric  margin  decreased  $1.0  million  due  to a  decrease  in  margins  on
off-system sales compared to the quarter ended September 30, 1999. Related

                                      -14-
<PAGE>

sales volumes increased 6.9%; however, prices of off-system sales were less than
in the  1999  quarter.  Off-system  sales  are the  supply  of  energy  to other
utilities,  municipalities  and marketers which in turn distribute it to end-use
customers.

     Regulated Gas Gross Margin -

                                               Three Months
                                            Ended September 30
                                             2000         1999
                                            -----        -----
                                               (In millions)
     Operating revenues..............       $  72        $  62
     Cost of gas sold................          39           29
                                            -----        -----
       Gas gross margin...........          $  33        $  33
                                            =====        =====

     Regulated gas revenues  include  purchase gas  adjustment  clauses  through
which MidAmerican Energy is allowed to recover the cost of gas sold from most of
its gas utility customers. Consequently, fluctuations in the cost of gas sold do
not  affect  gross  margin or net income  because  revenues  reflect  comparable
fluctuations in revenues from the purchase gas adjustment  clauses.  An increase
in the per-unit cost of gas for the three-month period ended September 30, 2000,
compared to the same period in 1999  increased  revenues and cost of gas sold by
approximately $13 million.

     Gross  margin for gas  transported  decreased  $0.7  million  due to a 6.9%
decrease in volumes  transported  compared to the quarter  ended  September  30,
1999. The decrease was partially  offset by the impact of higher retail rates in
Illinois and other usage factors.

REGULATED OPERATING EXPENSES

     Regulated  other  operating  expenses  decreased $6.8 million for the third
quarter of 2000  compared to the third  quarter of 1999.  Lower  Cooper  Nuclear
Station costs  contributed  $5.0 million to the  decrease.  Reductions in health
care and other benefit  costs,  energy  efficiency  program  costs,  information
technology  expenses and  assessments  from  utility  regulatory  agencies  also
contributed to the decrease.

     Maintenance  expenses  increased  $2.8  million for the three  months ended
September 30, 2000,  compared to the 1999 period due to the timing of coal-fired
and nuclear generating plant maintenance and increased forestry service costs.

     Depreciation and amortization expense decreased compared to the 1999 period
due  to  decreases  in  nuclear  decommissioning  expense  and  amortization  of
regulatory assets for MidAmerican  Energy's Illinois  operations.  Utility plant
depreciation increased due to the increase in utility plant.

     Property and other taxes increased for the three months ended September 30,
2000,  compared  to the 1999  period  due to the  effect of  adjustments  to the
accruals in each of the quarters.

                                      -15-

<PAGE>

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     Nonregulated Gas Gross Margin -

                                         Three Months
                                      Ended September 30
                                       2000        1999
                                      ------      ------
                                        (In millions)
     Operating revenues...........    $112.7      $ 34.7
     Cost of gas sold.............     111.4        34.3
                                      ------      ------
       Gross margin...............    $  1.3      $  0.4
                                      ======      ======

     Revenues from nonregulated natural gas marketing operations increased $78.0
million for the third  quarter of 2000  compared to the same period in 1999.  An
increase in the average price per unit sold, reflective of a 70% increase in the
average cost of gas,  accounted  for $46.3  million of the increase in revenues.
Sales  volumes  increased 12 million  MMBtus (91%)  resulting in a $31.7 million
increase  in  revenues.  The  increase  in related  cost of sales  reflects  the
increases in cost per unit and sales volumes.

     Other Nonregulated Revenue and Cost of Sales -

     Nonregulated  revenues  for the third  quarter of 2000 include $4.8 million
from  MidAmerican  Energy's  market  access  service  project,  compared to $6.6
million in the third quarter of 1999, the initial  quarter for the project.  The
pilot project allows  participating  Iowa customers with at least 4 megawatts of
load 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
decreased  $1.9 million to $4.2  million  related to the market  access  service
project.

     Beginning October 1, 1999, some  non-residential  customers in Illinois are
allowed to select  their  electric  power  supplier.  For the three months ended
September 30, 2000, nonregulated revenues and cost of sales totaled $0.5 million
and $1.6 million, respectively.

     The third  quarter  of 1999  includes  $4.4  million of  revenues  and $2.8
million of cost of sales from the security system operations sold in April 2000.

     Nonregulated Operating Expenses: Other -

     Nonregulated  other operating expenses increased $1.3 million for the three
months  ended  September  30,  2000,  compared  to the same  period in 1999.  An
increase  in costs  related  to  MidAmerican  Energy  nonregulated  distribution
services and costs of MidAmerican  Services Company contributed to the increase.
Amortization  of  MidAmerican  Funding  goodwill  decreased $0.6 million to $8.6
million for the third  quarter of 2000.  Costs  related to the  security  system
operations sold in April 2000 totaled $1.6 million in the third quarter of 1999.

NON-OPERATING INCOME AND INTEREST EXPENSE

     Interest and Dividend Income -

     The  increase in interest  income was due  principally  to $2.5  million of
interest in the third quarter of 2000 from a joint plant operator for funds held
by them.  Additionally,  an  increase in a note  receivable  related to accounts
receivable  sold and a more favorable cash position  contributed to the increase
in

                                      -16-
<PAGE>
interest  income.  Dividend income  decreased due to partial  liquidation of the
preferred stock investment portfolio.

     Other, Net -

     Other,  Net  reflects the 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  bad debt  expense,  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 $2.5
million and $1.8  million in the third  quarter of 2000 and 1999,  respectively.
Other,  Net  also  reflects  income  related  to the  cash  surrender  value  of
corporate-owned  life insurance  policies  which  increased $1.1 million for the
third quarter of 2000 compared to the third quarter of 1999.

     Fixed Charges -

     The  decrease  in  interest  on  long-term  debt  is due to  maturities  of
MidAmerican Energy and MidAmerican  Capital long-term debt in 1999 and 2000. The
decrease  resulting from  maturities of long-term  debt was partially  offset by
interest  on $162  million of 7.375%  medium-term  notes  issued by  MidAmerican
Energy on July 24, 2000.

     Other interest expense increased  compared to the 1999 third quarter due to
the effect of a credit to interest on state income taxes in the third quarter of
1999 as a result  of a  settlement.  In  addition,  the  third  quarter  of 2000
includes interest expense on MHC's lines of credit. The increases were partially
offset by a decrease in interest  resulting from a reduction in short-term  debt
outstanding at MidAmerican Energy.

RESULTS OF OPERATIONS OF MIDAMERICAN FUNDING FOR THE NINE MONTHS ENDED
----------------------------------------------------------------------
SEPTEMBER 30, 2000
------------------

REGULATED GROSS MARGIN

     Regulated Electric Gross Margin -

     MidAmerican  Energy's  electric  gross  margin  for the nine  months  ended
September 30, 2000,  totaled $739 million.  Temperatures  during the period were
more moderate than normal  temperature  conditions,  reducing electric margin by
approximately  $15 million.  MidAmerican  Energy's  electric  revenues  from the
recovery  of energy  efficiency  program  costs  totaled  $26.3  million for the
period.  Revenues from energy efficiency cost recovery are substantially  offset
by  corresponding  costs in other operating  expenses.  MidAmerican  Energy also
recorded  an  accrual  for a  revenue  sharing  arrangement  under its 1997 Iowa
pricing plan  settlement.  The accrual  reduced  revenues and electric margin by
$13.2 million for the nine months ended September 30, 2000.

     Regulated Gas Gross Margin -

     MidAmerican  Energy's  regulated gas gross margin  totaled $138 million for
the nine months ended  September 30, 2000.  Temperatures  during the period were
milder than normal temperature conditions,  resulting in a decrease in gas gross
margin of  approximately  $12  million.  Revenues  from  recovery  of gas energy
efficiency  program  costs  totaled $8.7 million for the period.  Revenues  from
energy efficiency cost recovery are substantially  offset by corresponding costs
in other operating expenses.

                                      -17-
<PAGE>

REGULATED OPERATING EXPENSES

     Other operating  expenses  totaled $292.6 million for the nine months ended
September  30,  2000.  As  mentioned  in the  gross  margin  discussions,  other
operating  expenses include energy efficiency program costs. These costs totaled
$30.0 million for the period.

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     For the year to date period ended September 30, 2000,  nonregulated natural
gas  marketing  activities  accounted for $241.4  million and $237.7  million of
nonregulated revenues and nonregulated cost of sales, respectively.

     Revenues  include $13.4  million from  MidAmerican  Energy's  market access
service project discussed in the three-month  comparison  section above. Cost of
sales for the first nine months of 2000 includes  $12.9  million  related to the
market access service project.

     Beginning October 1, 1999, some  non-residential  customers in Illinois are
allowed  to  select  their  electric  power   supplier.   MidAmerican   Energy's
nonregulated  revenues  include $1.9  million in agency fees and other  revenues
related to these supply services. Related cost of sales totaled $2.7 million.

     MidAmerican Energy's nonregulated revenues also include pre-tax income from
awards for successful  performance under its incentive gas procurement  program.
Under  the  program,  if  MidAmerican  Energy's  cost  of  gas  varies  from  an
established  reference  price range,  then the savings or cost is shared between
customers and MidAmerican Energy. The first nine months of 2000 reflect an award
of $1.9 million.

     Nonregulated  revenues  and cost of sales  include  $4.4  million  and $2.6
million, respectively,  from security system operations which were sold in April
2000. Related other operating expenses totaled $1.6 million.

     Nonregulated  other  operating  expenses  include $26.7 million of goodwill
amortization related to the acquisition of MHC.

NON-OPERATING INCOME AND INTEREST EXPENSE

     Interest Income

     Interest  income  includes a $2.8  million of  interest  from a joint plant
operator for funds held by them.

     Realized Gains and Losses on Securities, Net -

     Net  realized  gains and losses on  securities  for the year to date period
ended  September 30, 2000,  reflects a $2.0 million  pre-tax gain on the sale of
the  remaining  shares of McLeodUSA  common stock held by  MidAmerican  Funding,
which partially offset losses on sales of MidAmerican  Funding's preferred stock
portfolio.

                                      -18-

<PAGE>

     Other, Net -

     Other,  Net for the nine-month  period ended  September 30, 2000,  includes
$6.9 million of net expense related to MidAmerican Energy's accounts receivables
sold. The sale of MidAmerican Funding's security system operations in April 2000
resulted in a $4.3 million  pre-tax  gain.  Additionally,  the sale of an office
building resulted in a $1.0 million pre-tax gain.

RESULTS OF OPERATIONS OF MIDAMERICAN FUNDING FOR THE PERIOD MARCH 12, 1999,
---------------------------------------------------------------------------
THROUGH SEPTEMBER 30, 1999
--------------------------

REGULATED GROSS MARGIN

     Regulated Electric Gross Margin -

     MidAmerican  Energy's  electric  gross margin for the period March 12, 1999
through September 30, 1999,  totaled $560 million.  Approximately $21 million of
MidAmerican  Energy's electric revenues for the period were from the recovery of
energy efficiency  program costs.  Revenues from energy efficiency  program cost
recovery are  substantially  offset by  corresponding  costs in other  operating
expenses.  Temperatures  during the period were  milder than normal  temperature
conditions,  reducing electric margin by approximately $4 million. Additionally,
MidAmerican  Energy recorded an accrual for a revenue sharing  arrangement under
its 1997  pricing plan  settlement.  The accrual  reduced  revenues and electric
margin by $15 million during the period.

     Regulated Gas Gross Margin -

     MidAmerican Energy's regulated gas gross margin totaled $80 million for the
period March 12, 1999 through September 30, 1999.  Revenues from recovery of gas
energy efficiency program costs totaled approximately $8 million for the period.

     On January 22,  1999,  the Iowa  Utilities  Board  approved a $6.7  million
annual  interim  increase  in gas  rates  for Iowa  retail  customers  effective
immediately. An additional increase was implemented on May 27, 1999, as a result
of the Iowa Utilities Board's approval of a final rate increase of $13.9 million
annually.  Rates for MidAmerican  Energy's South Dakota gas customers  increased
$2.4  million  annually  effective  May 1, 1999.  Accordingly,  the period ended
September  30, 1999,  includes  only a  partial-year  effect of these final rate
increases.

     Temperatures  during the heating months were milder than normal,  resulting
in a decrease in gas gross margin of approximately $3 million.

REGULATED OPERATING EXPENSES

     Other operating expenses totaled $232 million for the period March 12, 1999
through September 30, 1999. As mentioned in the gross margin discussions,  other
operating  expenses  includes energy  efficiency  program costs. For MidAmerican
Funding's period ended September 30, 1999, such costs totaled  approximately $25
million. MidAmerican Energy incurred approximately $3 million in operating costs
related to its year 2000 readiness  efforts during the period.  Depreciation and
amortization  includes  approximately  $5  million  related to  amortization  of
regulatory assets for MidAmerican Energy's Illinois operations.

                                      -19-
<PAGE>

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     Revenues from nonregulated operations include $68 million from nonregulated
natural  gas  activities.  Nonregulated  cost of sales  reflects  $66 million of
related cost of gas. Approximately $7 million of nonregulated revenues were from
MidAmerican  Energy's  market access service  project,  which began in the third
quarter  of  1999.  Revenues  and  cost of  sales  related  to  security  system
operations sold in April 2000 totaled  approximately $10 million and $7 million,
respectively.

     Nonregulated  other  operating  costs for the period March 12, 1999 through
September  30, 1999,  include  approximately  $20 million from  amortization  of
goodwill  at  MidAmerican  Funding  associated  with  the  acquisition  of  MHC.
Additionally,  nonregulated  other  operating  costs  include  $9  million  from
nonregulated marketing initiatives at MidAmerican Energy.

NON-OPERATING INCOME AND INTEREST EXPENSE

     Interest and Dividend Income -

     Interest  income  reflects  interest on temporary  cash  investments  which
include  proceeds  from the sale of  McLeodUSA  common  stock  described  below.
Additionally, interest income includes $7.0 million of interest on a cash escrow
balance for the purchase of MHC.

     Realized Gains and Losses on Securities, Net -

     In May 1999,  6,741,116  shares of McLeodUSA  common stock held by MHC were
sold in a  secondary  offering by  McLeodUSA.  A pre-tax  gain of $78.2  million
resulting  from this  transaction  is reflected in realized  gains and losses on
securities, net.

     Other, Net -

     Other,  Net  reflects  $1.2  million of pre-tax gain on the sale of railcar
assets.

     Fixed Charges -

     Interest on long-term debt includes $25 million of interest expense on $700
million  in  debt  issued  by  MidAmerican   Funding  in  conjunction  with  the
acquisition of MHC.

RESULTS OF OPERATIONS OF MHC FOR THE PERIOD JANUARY 1, 1999 THROUGH
-------------------------------------------------------------------
MARCH 11, 1999
--------------

REGULATED GROSS MARGIN

     Regulated Electric Gross Margin -

     MidAmerican  Energy's electric gross margin for the period January 1, 1999,
through  March 11, 1999,  totaled $169 million.  Temperatures  during the period
were warmer than normal,  reducing  electric margin by approximately $4 million.
Approximately  $7 million of  MidAmerican  Energy's  electric  revenues  for the
period were from the recovery of energy efficiency program costs.  Revenues from
energy efficiency cost recovery are substantially  offset by corresponding costs
in other operating  expenses.  MidAmerican Energy also recorded an accrual for a
revenue sharing arrangement under its

                                      -20-
<PAGE>

1997 pricing plan  settlement.  The accrual reduced revenues and electric margin
by $3 million during the period.

     Regulated Gas Gross Margin -

     MidAmerican Energy's regulated gas gross margin totaled $60 million for the
period  January 1, 1999,  through March 11, 1999.  Revenues from recovery of gas
energy efficiency program costs totaled approximately $3 million for the period.
Revenues  from energy  efficiency  cost  recovery  are  substantially  offset by
corresponding costs in other operating expenses.

     On January 22,  1999,  the Iowa  Utilities  Board  approved a $6.7  million
annual  interim  increase  in gas  rates  for Iowa  retail  customers  effective
immediately.  Temperatures during the period were warmer than normal,  resulting
in a decrease in gas gross margin of approximately $4 million.

REGULATED OPERATING EXPENSES

     Other operating expenses totaled $94 million for the period January 1, 1999
through  March 11, 1999.  As mentioned  in the gross margin  discussions,  other
operating expenses includes energy efficiency program costs. These costs totaled
$8 million for the period.  MidAmerican  Energy also incurred  approximately  $2
million  in  operating  costs  related  to  its  year  2000  readiness  efforts.
Depreciation  and  amortization  includes  approximately  $3 million  related to
amortization of regulatory assets for MidAmerican Energy's Illinois operations.

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     For the year to date period ended March 11, 1999,  nonregulated natural gas
marketing  activities  accounted for $29 million and $28 million of nonregulated
revenues and nonregulated cost of sales, respectively.

     Nonregulated  other  operating  costs include $3 million from  nonregulated
marketing initiatives at MidAmerican Energy.

NON-OPERATING INCOME AND INTEREST EXPENSE

     Realized Gains and Losses on Securities, Net -

     Realized  gains and losses on  securities  net for the year to date  period
ending March 11, 1999, reflects a $16 million pre-tax gain on the sale of shares
of McLeodUSA common stock held by MHC.

     Other, Net -

     Other,  net  non-operating  income  for the  period  ended  March 11,  1999
includes  approximately  $19 million of costs related to the acquisition of MHC.
In addition,  it includes $2 million of expense related to accounts  receivables
sold.

                                      -21-

<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 by  continuing  operations  was $285 million for the
nine months ended  September  30, 2000 and $144 million for the period March 12,
1999,  through  September  30,  1999.  MHC's  net cash  provided  by  continuing
operations  totaled $104 million for the period  January 1, 1999,  through March
11, 1999.

INVESTING ACTIVITIES AND PLANS

     Utility Construction Expenditures -

     MidAmerican  Energy's  primary  need for  capital is  utility  construction
expenditures.   For  the  first  nine  months  of  2000,  utility   construction
expenditures  totaled $119  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.

     Forecasted utility construction expenditures, including allowance for funds
used during  construction  for 2000 are $211  million and $732  million for 2001
through 2004. Capital expenditure needs are reviewed regularly by management and
may  change  significantly  as a  result  of such  reviews.  MidAmerican  Energy
presently expects that all utility  construction  expenditures for the next five
years will be met with cash generated from utility operations, net of dividends.
The actual level of cash generated from utility operations is affected by, among
other things, economic conditions in the utility service territory,  weather and
federal and state regulatory actions.

     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  $42 million during the
period 2000 through 2004 to external  trusts  established  for the investment of
funds for decommissioning Quad Cities Station.  Approximately 65% of the trusts'
funds are invested in domestic corporate debt and common equity securities.  The
remainder is invested in investment grade municipal and U.S. Treasury bonds.

     In addition, MidAmerican Energy makes payments to the Nebraska Public Power
District  related to  decommissioning  Cooper.  These  payments are reflected in
other  operating  expenses  in  the  Consolidated  Statements  of  Income.  NPPD
estimates call for MidAmerican  Energy to pay  approximately $57 million to NPPD
for Cooper  decommissioning  during the period 2000 through  2004.  The Nebraska
Public Power District invests the funds predominantly in U.S. Treasury Bonds and
other U.S.  Government  securities.  Approximately  20% was invested in domestic
corporate debt.  MidAmerican Energy's obligation for Cooper  decommissioning may
be  affected  by the  actual  plant  shutdown  date and the  status of the power
purchase contract at that time. In July 1997, the Nebraska Public Power District
filed a lawsuit in United  States  District  Court for the  District of Nebraska
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.

                                      -22-
<PAGE>

     Cooper  and Quad  Cities  Station  decommissioning  costs  charged  to Iowa
customers  are to a  large  extent  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 that is reviewed annually.

     Investments -

     MidAmerican Capital invests in a variety of marketable  securities which it
holds for  indefinite  periods of time. In the  Consolidated  Statements of Cash
Flows, the line "Purchase of  Available-for-Sale  Securities" and the line under
"Proceeds  from Sale of  Securities"  consist  primarily of the gross amounts of
these  activities,  including  realized  gains  and  losses  on  investments  in
marketable securities.

FINANCING ACTIVITIES, PLANS AND AVAILABILITY

     Issuance of MidAmerican Funding Debt -

     On March 11, 1999,  MidAmerican Funding issued $200 million of 5.85% Senior
Secured Notes due March 2001,  $175 million of 6.339%  Senior  Secured Notes due
2009,  and $325 million of 6.927% Senior  Secured  Bonds due 2029.  Prior to the
offering, MidAmerican Funding entered into three separate rate swap arrangements
of $125 million each,  which at closing  created a $13.6 million cash payment to
MidAmerican  Funding due to an increase in interest rates. The net amount of the
rate  swap  arrangements  and $7.0  million  of debt  offering  costs  are being
amortized using the effective interest method over the life of each of the three
traunches.  The proceeds from the offering were used to complete the acquisition
of MHC. On March 7, 2000, MidAmerican Funding exchanged its senior secured notes
for like senior secured exchange notes.

     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 $400 million.  As of September 30, 2000,  MidAmerican
Energy had in place a $250 million  commercial  paper program which is supported
by $250 million of revolving credit facilities. In addition,  MidAmerican Energy
has a $5 million  bank line of credit.  MidAmerican  Energy also has a revolving
credit  facility which is dedicated to providing  liquidity for its  obligations
under  outstanding   pollution  control  revenue  bonds  that  are  periodically
remarketed.

     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.

     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

                                      -23-
<PAGE>

Funding  Corporation,  a special purpose entity established to purchase accounts
receivable  from  MidAmerican  Energy.  Funding Corp.  in turn sells  receivable
interests  to outside  investors.  In  consideration  for the sale,  MidAmerican
Energy  received $70 million in cash and the remaining  balance in the form of a
subordinated  note,  bearing  interest at 8%, from Funding Corp. As of September
30, 2000, the revolving cash balance was $70 million, and the amount outstanding
under the  subordinated  note was $57  million.  As part of the  agreement,  the
creditors of Funding Corp. will be entitled to be satisfied out of the assets of
Funding Corp.  prior to any value being  returned to  MidAmerican  Energy or its
creditors.  Therefore,  the  accounts  receivable  sold  are  not  reflected  on
MidAmerican  Funding's  Consolidated  Balance Sheets.  As of September 30, 2000,
$128.7  million of accounts  receivable,  net of  reserves,  were sold under the
agreement.

     Other Financing Information -

     MidAmerican   Funding  uses   distributions   that  it  receives  from  its
subsidiaries to make payments on the Notes and Bonds.  These  subsidiaries  must
make  payments  on  their  own  indebtedness  before  making   distributions  to
MidAmerican  Funding.  The distributions are also subject to utility  regulatory
restrictions  agreed to by MidAmerican Energy in March 1999 whereby it committed
to the Iowa Utilities Board to use commercially  reasonable  efforts to maintain
an  investment  grade  rating on its  long-term  debt and to maintain its common
equity level above 42% of total  capitalization  unless circumstances beyond its
control  result in the  common  equity  level  decreasing  to below 39% of total
capitalization.  MidAmerican Energy must seek the approval of the Iowa Utilities
Board of a reasonable  utility capital structure if MidAmerican  Energy's common
equity level decreases below 42% of total capitalization, unless the decrease is
beyond the control of MidAmerican Funding.  MidAmerican Funding is also required
to seek the approval of the Iowa Utilities Board if MidAmerican  Energy's equity
level  decreases  to below 39%,  even if the  decrease  is due to  circumstances
beyond the control of MidAmerican Funding.

     Each of MidAmerican  Funding's direct or indirect subsidiaries is organized
as a legal  entity  separate  and apart from  MidAmerican  Funding and its other
subsidiaries.  It should  not be  assumed  that any asset of any  subsidiary  of
MidAmerican  Funding will be available to satisfy the obligations of MidAmerican
Funding or any of its other  subsidiaries;  provided however,  that unrestricted
cash or other  assets  which are  available  for  distribution  may,  subject to
applicable  law and the terms of  financing  arrangements  of such  parties,  be
advanced,  loaned, paid as dividends or otherwise  distributed or contributed to
MidAmerican   Funding,   one  of  its   subsidiaries   or  affiliates   thereof.
Approximately  80%  of  MidAmerican   Energy's  gross  utility  plant  has  been
encumbered to secure mortgage bonds.

     As of September 30, 2000,  MHC had lines of credit  totaling $24 million to
provide for short-term financing needs, of which $23.1 million was used.

     As of  September  30, 2000,  MidAmerican  Capital had  unsecured  revolving
credit  facilities  in the  amount  of $6  million,  under  which  no  debt  was
outstanding.  MidAmerican  Capital has $70 million of long-term debt outstanding
at September 30, 2000, which matures annually through 2002.

     Midwest Capital currently has a $25 million line of credit with MidAmerican
Energy, of which $5 million was outstanding at September 30, 2000.

OPERATING ACTIVITIES AND OTHER MATTERS

     Industry Evolution -

     Legislation to initiate retail  electric  competition was introduced in the
Iowa legislature in the 2000 session,  but it did not pass.  Deregulation of the
gas supply function  related to small volume

                                      -24-


<PAGE>

customers is also being  considered  by the Iowa  Utilities  Board.  MidAmerican
Energy has actively  participated in the  legislative and regulatory  processes.
MidAmerican  Energy  cannot  predict  the  timing  or  ultimate  outcome  of any
potential electric restructuring legislation or gas restructuring in Iowa.

     The  introduction of competition in the wholesale  market has resulted in a
proliferation of power marketers and a substantial  increase in market activity.
The wholesale  market has also increased in volatility.  As this market matures,
volatility may decline.

     With the elimination of the energy adjustment  clause in Iowa,  MidAmerican
Energy  is  financially   exposed  to  movements  in  energy  prices.   Although
MidAmerican  Energy has sufficient low cost generation  under typical  operating
conditions  for its retail  electric  needs,  a loss of adequate  generation  by
MidAmerican  Energy at a time of high market  prices could  subject  MidAmerican
Energy to losses on its energy sales.

     Legislative and Regulatory Evolution -

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

     In addition to rate  reductions  implemented  in 1998, the law provides for
Illinois  earnings above a certain level of return on common equity to be shared
equally  between  customers  and  MidAmerican  Energy  beginning  in April 2000.
MidAmerican  Energy's  return on common  equity level will be based on a rolling
two-year average, with the first determination being based on an average of 1998
and 1999.  The level of return at which  MidAmerican  Energy will be required to
share  earnings is a multi-step  calculation  of average  30-year  Treasury Bond
rates plus 5.50% for 1998 and 1999.  Legislation  passed in July 1999  increased
the  benchmark  for 2000  through 2004 to 8.5% above the 30-year  Treasury  bond
rate.  The two-year  average above which sharing must occur for 1999 was 11.21%.
Using the same 30-year Treasury bond average, the computed level of return would
be 12.71% for 2000 and 14.21% 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.

     MidAmerican  Energy  continues its involvement in proceedings  which detail
the new  competitive  environment  and to evaluate  the impact of the law on its
operations  and  the  opportunities  the  law  presents,  including  proceedings
involving the unbundling of customer billing and meter reading.

     In December 1999, the Federal Energy Regulatory Commission 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 are 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.
MidAmerican Energy, which was not a member of an independent system operator, is
presently evaluating options to comply with the order.

     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

                                      -25-
<PAGE>

operations  that are regulated and meet certain  criteria.  For operations  that
meet the criteria,  SFAS 71 allows,  among other  things,  the deferral of costs
that would  otherwise  be expensed  when  incurred.  With the  exception  of the
generation  operations serving the Illinois  jurisdiction,  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
resulting  legislation.  As of September 30, 2000,  MidAmerican  Energy had $245
million of net regulatory assets on its Consolidated Balance Sheet.

     Energy Efficiency -

     MidAmerican  Energy's  regulatory assets as of September 30, 2000, included
$24.3 million of deferred energy efficiency costs. Based on the current level of
recovery,  MidAmerican Energy expects to recover these costs by the end of 2001.
MidAmerican  Energy is also  allowed to recover  its ongoing  energy  efficiency
costs on a  current  basis.  Recovery  of these  costs is being  collected  from
customers  based  on  projected  annual  costs of $16.4  million,  which  may be
adjusted  annually.  Amortization  of the deferred energy  efficiency  costs and
current  expenditures  for energy  efficiency  costs will be  reflected in other
operating expenses over the related periods of recovery. The total of such costs
for the years 2000 and 2001 is  estimated  to be $40  million  and $34  million,
respectively.

     Rate Matters: Electric -

     Under a 1997  pricing  plan  settlement  agreement  resulting  from an Iowa
Utilities Board rate proceeding,  electric prices for MidAmerican  Energy's Iowa
industrial and commercial  customers were reduced  through a retail access pilot
project,  negotiated individual electric contracts and a tariffed rate reduction
for some non-contract commercial customers.

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

     Under the 1997 pricing plan settlement  agreement,  if MidAmerican Energy's
annual Iowa electric  jurisdictional  return on common equity  exceeds 12%, then
earnings  above  the 12% level  will be shared  equally  between  customers  and
MidAmerican  Energy.  If the return exceeds 14%, then  two-thirds of MidAmerican
Energy's  share  of  those  earnings  above  the 14%  level  will  be  used  for
accelerated  recovery of certain  regulatory  assets.  The year 2000 is the last
year this Iowa  electric  retail  revenue  sharing plan  remains in effect.  The
pricing plan settlement agreement also precludes  MidAmerican Energy from filing
for  increased  rates  prior to 2001  unless the return  falls  below 9%.  Other
parties signing the agreement are prohibited from filing for reduced rates prior
to 2001 unless the return,  after reflecting credits to customers,  exceeds 14%.
The agreement also eliminated  MidAmerican  Energy's energy  adjustment  clause,
and, as a result, the cost of fuel is not directly passed on to customers.

                                      -26-

<PAGE>


     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 which 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, 2000, was $26 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.  As a result of the court's initial decision
and the current  status of the  standards,  the impact of any new  standards  on
MidAmerican  Energy is currently  unknown.  If the EPA successfully  appeals the
court's  decision,  however,  and  the  new  standards  are  implemented,   then
MidAmerican Energy could incur increased costs and a decrease in revenues. 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.  Each MAPP  participant  is required to maintain for  emergency
purposes a net  generating  capability  reserve of at least 15% above its system
peak  demand.  MidAmerican  Energy was able to  maintain  its  capacity  reserve
requirement during the 2000 cooling season and was not adversely affected by the
seasonal high prices in the off-system market.

     MidAmerican  Energy believes it has adequate  electric capacity reserve and
continues to manage its  generating  resources to ensure an adequate  reserve in
the future. However,  significantly  higher-than-normal  temperatures during the
cooling season could cause  MidAmerican  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.

                                      -27-

<PAGE>


     Sale of Security System Companies -

     In  April  2000,  MidAmerican  Capital  sold  all of its  interests  in its
security  systems  subsidiaries.  The sale  included  AAA  Security,  one of the
largest  residential and commercial  security systems  companies in the Midwest.
Revenues and net income in the quarter  ended March 31,  2000,  for the security
operations sold were $4.4 million and less than $0.1 million, respectively.

ACCOUNTING ISSUES

     In June 1998, the Financial  Accounting  Standards Board (FASB) issued SFAS
133, "Accounting for Derivative  Instruments and Hedging Activities",  which was
delayed by SFAS 137 and  amended by SFAS 138 and is  effective  for  MidAmerican
Funding  beginning January 1, 2001. SFAS 133 requires an entity to recognize all
of its derivatives as either assets or liabilities in its statement of financial
position and measure those instruments at fair value.  MidAmerican Funding is in
the  process of  evaluating  the impact of this  accounting  standard.  Based on
derivative  positions  in place  at  September  30,  2000,  MidAmerican  Funding
believes  the adoption of the  standard  will not have a material  impact on its
financial position, results of operations or cash flows.

     In December  1999,  the  Securities  and Exchange  Commission  issued Staff
Accounting  Bulletin  101 (SAB 101),  "Revenue  Recognition".  SAB 101  provides
additional  guidance on revenue  recognition  criteria  and  related  disclosure
requirements.  This SAB is effective  beginning  in the fourth  quarter of 2000.
Management  does not  anticipate  that the final adoption of SAB 101 will have a
material impact on MidAmerican Funding's consolidated financial statements.

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. The exposure to changes
in market prices and interest  rates at September  30, 2000,  is not  materially
different than at December 31,1999.

                                      -28-
<PAGE>

                                     PART II

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

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

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

     For information  relating to 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;

     (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;

                                      -29-
<PAGE>

     (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 has appealed the court's  summary  judgment.  Oral  arguments  concerning
MidAmerican  Energy's appeal of the summary judgment were held before the United
States Court of Appeals,  Eighth Circuit,  on October 16, 2000.


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

(A)      EXHIBITS

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

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

(B)      REPORTS ON FORM 8-K

None.

                                      -30-
<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, 2000                /s/  Patrick J. Goodman
    -------------------              ------------------------------
                                            Patrick J. Goodman
                                      Vice President and Treasurer



                                      -31-
<PAGE>


                                  EXHIBIT INDEX

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

27   Financial Data Schedule (for electronic filing only)

                                      -32-