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  MARCH 31, 2002
                                                ----------------

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

1-11505                 MIDAMERICAN ENERGY COMPANY               42-1425214
                          (AN IOWA CORPORATION)
                        666 GRAND AVE. PO BOX 657
                         DES MOINES, IOWA 50303
                             515-242-4300

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
                                         -----   ----

As of April 30, 2002, all of the member's equity of MidAmerican Funding, LLC was
held by MidAmerican Energy Holdings Company.

As of April 30, 2002, all 70,980,203  outstanding  shares of MidAmerican  Energy
Company's  voting  stock were held by its parent  company,  MHC Inc.,  a direct,
wholly owned subsidiary of MidAmerican Funding, LLC.



<PAGE>

                            MIDAMERICAN FUNDING, LLC
                                       AND
                           MIDAMERICAN ENERGY COMPANY
                                    FORM 10-Q


This combined  Form 10-Q is separately  filed by  MidAmerican  Funding,  LLC and
MidAmerican  Energy  Company.  Information  herein  relating to each  individual
registrant is filed by such  registrant on its own behalf.  Accordingly,  except
for  its  subsidiaries,   MidAmerican  Energy  makes  no  representation  as  to
information relating to any other subsidiary of MidAmerican Funding.


                                TABLE OF CONTENTS

                          PART I. FINANCIAL INFORMATION                PAGE NO.

ITEM 1.  Financial Statements

         Independent Accountants' Reports............................      3

                           MidAmerican Energy Company

         Consolidated Statements of Income..........................       5
         Consolidated Balance Sheets................................       6
         Consolidated Statements of Cash Flows......................       7
         Notes to Consolidated Financial Statements.................       8

                            MidAmerican Funding, LLC

         Consolidated Statements of Income..........................      14
         Consolidated Balance Sheets................................      15
         Consolidated Statements of Cash Flows......................      16
         Notes to Consolidated Financial Statements.................      17

ITEM 2.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations............      21

                           PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings .........................................      35

ITEM 6.  Exhibits and Reports on Form 8-K...........................      37

Signatures..........................................................      38

Exhibit Index.......................................................      39

                                      -2-
<PAGE>

INDEPENDENT ACCOUNTANTS' REPORT


Board of Directors and Shareholder
MidAmerican Energy Company
Des Moines, Iowa

We have reviewed the  accompanying  consolidated  balance  sheet of  MidAmerican
Energy  Company and  subsidiaries  (the  Company) as of March 31, 2002,  and the
related  consolidated  statements  of income and cash flows for the  three-month
periods  ended  March 31,  2002 and 2001.  These  financial  statements  are the
responsibility of the Company's management.

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

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

We have  previously  audited,  in accordance with auditing  standards  generally
accepted in the United  States of America,  the  consolidated  balance sheet and
statement of capitalization (not presented herein) of MidAmerican Energy Company
and  subsidiaries  as  of  December  31,  2001,  and  the  related  consolidated
statements of income,  comprehensive income,  retained earnings,  and cash flows
for the year then ended (not presented herein);  and in our report dated January
17, 2002, 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, 2001 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
April 26, 2002

                                      -3-
<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 March 31,  2002,  and the
related  consolidated  statements  of income and cash flows for the  three-month
periods  ended  March 31,  2002 and 2001.  These  financial  statements  are the
responsibility of the Company's management.

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

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

We have  previously  audited,  in accordance with auditing  standards  generally
accepted in the United  States of America,  the  consolidated  balance sheet and
statement of capitalization (not presented herein) of MidAmerican  Funding,  LLC
and  subsidiaries  as  of  December  31,  2001,  and  the  related  consolidated
statements of income,  comprehensive income,  retained earnings,  and cash flows
for the year then ended (not presented herein);  and in our report dated January
17, 2002, 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, 2001 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
April 26, 2002

                                      -4-

<PAGE>
                           MIDAMERICAN ENERGY COMPANY
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                                 (IN THOUSANDS)

                                               THREE MONTHS
                                              ENDED MARCH 31,
                                          ----------------------
                                            2002         2001
                                          ---------    ---------
OPERATING REVENUES
Regulated electric ....................   $ 306,778    $ 318,490
Regulated gas .........................     220,057      473,543
Nonregulated ..........................      85,591      190,853
                                          ---------    ---------
                                            612,426      982,886
                                          ---------    ---------
OPERATING EXPENSES
Regulated:
  Cost of fuel, energy and capacity ...      72,449       65,800
  Cost of gas sold ....................     148,514      399,135
  Other operating expenses ............      98,599       96,452
  Maintenance .........................      28,945       27,790
  Depreciation and amortization .......      69,324       74,910
  Property and other taxes ............      17,294       17,274
                                          ---------    ---------
                                            435,125      681,361
                                          ---------    ---------
Nonregulated:
  Cost of sales .......................      79,105      182,768
  Other ...............................       5,629        4,181
                                          ---------    ---------
                                             84,734      186,949
                                          ---------    ---------
Total operating expenses ..............     519,859      868,310
                                          ---------    ---------

OPERATING INCOME ......................      92,567      114,576
                                          ---------    ---------

NON-OPERATING INCOME
Interest and dividend income ..........       2,446        4,525
Other, net ............................         205       (3,945)
                                          ---------    ---------
                                              2,651          580
                                          ---------    ---------

FIXED CHARGES
Interest on long-term debt ............      16,586       16,028
Other interest expense ................         825        1,177
Preferred dividends of subsidiary trust       1,574        2,057
Allowance for borrowed funds ..........        (596)        (492)
                                          ---------    ---------
                                             18,389       18,770
                                          ---------    ---------

INCOME BEFORE INCOME TAXES ............      76,829       96,386
INCOME TAXES ..........................      33,445       40,597
                                          ---------    ---------
NET INCOME ............................      43,384       55,789
PREFERRED DIVIDENDS ...................         848        1,239
                                          ---------    ---------

EARNINGS ON COMMON STOCK ..............   $  42,536    $  54,550
                                          =========    =========

        The accompanying notes are an integral part of these statements.

                                      -5-
<PAGE>



                           MIDAMERICAN ENERGY COMPANY
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
                                                                 AS OF
                                                        ------------------------
                                                         MARCH 31,  DECEMBER 31,
                                                           2002          2001
                                                        ----------- ------------
                                                        (UNAUDITED)
ASSETS
UTILITY PLANT
Electric .............................................   $4,617,272   $4,598,372
Gas ..................................................      872,190      867,277
                                                         ----------   ----------
                                                          5,489,462    5,465,649
Less accumulated depreciation and amortization .......    2,891,771    2,847,979
                                                         ----------   ----------
                                                          2,597,691    2,617,670
Construction work in progress ........................      108,681       80,276
                                                         ----------   ----------
                                                          2,706,372    2,697,946
                                                         ----------   ----------

POWER PURCHASE CONTRACT ..............................       46,271       48,185
                                                         ----------   ----------
CURRENT ASSETS
Cash and cash equivalents ............................      285,238       20,020
Receivables ..........................................      166,578      119,740
Inventories ..........................................       58,021       83,339
Prepaid taxes ........................................       23,956       23,956
Other ................................................       10,805       10,962
                                                         ----------   ----------
                                                            544,598      258,017
                                                         ----------   ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ...........      279,438      272,230
REGULATORY ASSETS ....................................      217,245      221,120
OTHER ASSETS .........................................       59,952       80,394
                                                         ----------   ----------
TOTAL ASSETS .........................................   $3,853,876   $3,577,892
                                                         ==========   ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholder's equity ..........................   $1,231,055   $1,219,057
MidAmerican preferred securities, not subject to
  mandatory redemption ...............................       31,759       31,759
Preferred securities, subject to mandatory redemption:
  MidAmerican preferred securities ...................       26,680       26,680
  MidAmerican-obligated preferred securities of
     subsidiary trust holding solely MidAmerican
     junior subordinated debentures ..................            -      100,000
Long-term debt (excluding current portion) ...........      951,841      656,740
                                                         ----------   ----------
                                                          2,241,335    2,034,236
                                                         ----------   ----------
CURRENT LIABILITIES
Notes payable ........................................            -       89,350
Current portion of long-term debt ....................      263,570      163,854
Current portion of power purchase contract ...........       17,398       17,398
Accounts payable .....................................      199,505      171,535
Taxes accrued ........................................       77,372       54,175
Interest accrued .....................................       14,841       11,709
Other ................................................       33,918       43,184
                                                         ----------   ----------
                                                            606,604      551,205
                                                         ----------   ----------
OTHER LIABILITIES
Power purchase contract ..............................        8,469        8,469
Deferred income taxes ................................      510,143      513,978
Investment tax credit ................................       60,191       61,292
Quad Cities Station decommissioning ..................      160,184      158,349
Regulatory liabilities ...............................       79,346       62,378
Other ................................................      187,604      187,985
                                                         ----------   ----------
                                                          1,005,937      992,451
                                                         ----------   ----------
TOTAL CAPITALIZATION AND LIABILITIES .................   $3,853,876   $3,577,892
                                                         ==========   ==========

        The accompanying notes are an integral part of these statements.

                                      -6-
<PAGE>



                           MIDAMERICAN ENERGY COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>


                                                                 THREE MONTHS
                                                                ENDED MARCH 31,
                                                             ----------------------
                                                               2002         2001
                                                             ---------    ---------
<S>                                                          <C>          <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...............................................   $  43,384    $  55,789
Adjustments to reconcile net income to net cash provided:
  Depreciation and amortization ..........................      69,604       75,023
  Deferred income taxes and investment tax credit, net ...      (4,554)      (4,852)
  Amortization of other assets ...........................       9,318       12,941
  Customer rate credits ..................................           -      (21,610)
  Cash outflows of accounts receivable securitization ....      (8,000)           -
  Impact of changes in working capital ...................      31,669       47,742
  Other ..................................................      18,519       (3,983)
                                                             ---------    ---------
    Net cash provided ....................................     159,940      161,050
                                                             ---------    ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ........................     (62,480)     (26,805)
Quad Cities Station decommissioning trust fund ...........      (2,075)      (2,075)
Nonregulated capital expenditures ........................        (191)      (1,133)
Other investing activities, net ..........................        (933)      (2,690)
                                                             ---------    ---------
  Net cash used ..........................................     (65,679)     (32,703)
                                                             ---------    ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid ...........................................     (30,848)     (91,239)
Issuance of long-term debt, net of issuance costs ........     391,438            -
Retirement of long-term debt, including reacquisition cost        (283)         (40)
Reacquisition of preferred securities ....................    (100,000)           -
Net decrease in notes payable ............................     (89,350)     (36,000)
                                                             ---------    ---------
  Net cash provided (used) ...............................     170,957     (127,279)
                                                             ---------    ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS ................     265,218        1,068
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .........      20,020        9,677
                                                             ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............   $ 285,238    $  10,745
                                                             =========    =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ................   $  11,964    $  14,097
                                                             =========    =========
Income taxes paid (received), net ........................   $  (2,232)   $  13,054
                                                             =========    =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -7-
<PAGE>
                           MIDAMERICAN ENERGY COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A.   GENERAL:

     The consolidated financial statements included herein have been prepared by
MidAmerican Energy Company, 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  Energy,  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 Energy 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
Energy's latest Annual Report on Form 10-K.

     MidAmerican  Energy is a public  utility  with  electric  and  natural  gas
operations and is the principal  subsidiary of MHC Inc. MHC is a direct,  wholly
owned subsidiary of MidAmerican  Funding,  LLC, whose sole member is MidAmerican
Energy Holdings 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 that were,
at one time, sites of gas manufacturing  plants in which it may be a potentially
responsible  party.  The purpose of these  evaluations  is to determine  whether
waste materials are present,  whether the materials  constitute an environmental
or health  risk,  and  whether  MidAmerican  Energy has any  responsibility  for
remedial  action.  Investigations  of the  sites  are  at  various  stages,  and
MidAmerican Energy has conducted ten removal actions to date. MidAmerican Energy
is continuing to evaluate several of the sites to determine the appropriate site
remedies, if any, necessary to obtain site closure from the agencies.

     MidAmerican Energy estimates the range of possible costs for investigation,
remediation  and monitoring for the sites  discussed  above to be $21 million to
$68 million.  MidAmerican Energy's estimate of the probable cost for these sites
as of March 31, 2002 was $21 million.  The  estimate  consists of $2 million for
investigation  costs, $6 million for remediation  costs,  $11 million for ground
water   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 5 years.

     The  estimate  of  probable   remediation   costs  is   established   on  a
site-specific  basis.   Initially,   a  determination  is  made  as  to  whether
MidAmerican  Energy has  potential  remedial  liability for the site and whether
information exists to indicate that contaminated wastes remain at the site. When
a potential  remedial  liability  exists,  the best  estimate of projected  site
closure costs are accrued.  The estimates are evaluated and revised quarterly as
appropriate based on additional information obtained during

                                      -8-
<PAGE>

investigation and remedial  activities.  The estimated recorded  liabilities for
these properties include  incremental direct costs of the remediation effort and
oversight by the appropriate  regulatory authority,  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  liability  could
change   materially  based  on  facts  and   circumstances   derived  from  site
investigations,  changes in required  remedial  action and changes in technology
relating to remedial  alternatives.  Insurance recoveries have been received for
some of the sites under investigation.  Those recoveries are intended to be used
principally  for  accelerated  remediation,  as specified by the Iowa  Utilities
Board,  and are  recorded as a  regulatory  liability.  Additionally,  as viable
potentially responsible parties are identified,  those parties are evaluated for
potential contributions, and cost recovery is pursued when appropriate.

     The  Illinois  Commerce  Commission  has approved the use of a tariff rider
that  permits  recovery of the actual  costs of  litigation,  investigation  and
remediation relating to decommissioned manufactured gas plant sites. MidAmerican
Energy's  present  rates  in  Iowa  provide  for  a  fixed  annual  recovery  of
manufactured gas plant costs.

     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) AIR QUALITY -

     In July 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).  The  standards  were  subjected  to  legal
proceedings,  and in February  2001,  the United States Supreme Court upheld the
constitutionality of the standards, though remanding the issue of implementation
of the ozone standard to the Environmental  Protection Agency. The Environmental
Protection Agency is moving forward with analyzing  existing  monitored data and
determining attainment status.

     The impact of the new standards on MidAmerican Energy is currently unknown.
MidAmerican  Energy's  generating stations may be subject to emission reductions
if  the  stations  are  located  in   nonattainment   areas  or   contribute  to
nonattainment areas in other states. As part of an overall state plan to achieve
attainment  of the  standards,  MidAmerican  Energy could be required to install
control  equipment  on its  generating  stations or decrease the number of hours
during which these stations operate.

     The ozone and fine particulate matter standards could, in whole or in part,
be superceded by one of a number of multi-pollutant emission reduction proposals
currently  under  consideration  at the federal level. On February 14, 2002, the
Bush Administration announced its "Clear Skies Initiative" calling for reduction
in  emissions  of  sulfur  dioxide,   nitrogen  oxides  and  mercury  through  a
cap-and-trade  system, with reductions beginning in 2008 and additional emission
reductions being phased in through 2018.

     While  legislative  action is necessary  for the Clear Skies  Initiative or
other  initiatives to become  effective,  MidAmerican  Energy has  implemented a
planning process that forecasts the site-specific  controls and actions required
to meet  emissions  reductions  of this nature.  On April 1, 2002, in accordance
with Iowa law passed in 2001,  MidAmerican  Energy filed with the Iowa Utilities
Board its first  multi-year  plan and budget (the Plan) for  managing  regulated
emissions from its generating  facilities in a cost-effective  manner.  The Iowa
Utilities  Board is required to rule on the prudence of the Plan.

                                      -9-
<PAGE>

C.   RATE MATTERS:

     On December  21,  2001,  the Iowa  Utilities  Board  approved a  settlement
agreement  that  freezes  Iowa  electric  retail rates in effect on December 31,
2000, through December 31, 2005, and, with modifications, reinstates the revenue
sharing provisions of the 1997 pricing plan settlement agreement,  which expired
on December 31, 2000.  Under the 2001 settlement  agreement,  an amount equal to
50% of revenues  associated  with  returns on equity  between  12% and 14%,  and
83.33% of revenues  associated  with  returns on equity  above 14%, in each year
will be recorded as a regulatory liability to be used to offset a portion of the
cost of future generating plant  investments.  An amount equal to the regulatory
liability will be recorded as  depreciation  expense.  As of March 31, 2002, the
related regulatory liability reflected on the Consolidated Balance Sheet totaled
$65.0 million.

     On September 21, 2001,  MidAmerican  Energy filed a petition with the South
Dakota Public Utilities  Commission (SDPUC) to increase its South Dakota natural
gas rates.  On February 20,  2002,  the SDPUC  approved a  settlement  agreement
allowing increased rates of $3.1 million annually.

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

     On March 15, 2002, MidAmerican Energy made a filing with the Iowa Utilities
Board  requesting  an increase in rates of  approximately  $26.6 million for its
Iowa retail natural gas  customers.  As part of the filing,  MidAmerican  Energy
requested an interim rate increase of approximately $20.4 million annually.  The
Iowa  Utilities  Board may adjust  the  requested  interim  amount and delay its
implementation  for up to ninety  days.  MidAmerican  Energy  expects  the final
rates,  which may differ from the requested  amount,  to be implemented in early
2003.

D.   ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF REGULATION:

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

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

                                      -10-
<PAGE>

E.   DERIVATIVE FINANCIAL INSTRUMENTS:

     MidAmerican  Energy is exposed  to market  risk,  including  changes in the
market  price of certain  commodities  and interest  rates.  To manage the price
volatility  relating to these exposures,  MidAmerican Energy enters into various
financial  derivative  instruments.   Senior  management  provides  the  overall
direction,   structure,   conduct  and  control  of  MidAmerican  Energy's  risk
management  activities,  including the use of financial derivative  instruments,
authorization  and  communication  of risk  management  policies and procedures,
strategic hedging program guidelines, appropriate market and credit risk limits,
and appropriate  systems for recording,  monitoring and reporting the results of
transactional and risk management activities.

     SFAS Nos.  133/138 require 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.  If the  conditions  specified  in SFAS Nos.
133/138  are met,  those  instruments  may be  designated  as  hedges.  Only the
ineffectiveness of hedge instruments impacts earnings.

     MidAmerican  Energy  uses  hedge  accounting  for  derivative   instruments
pertaining to its natural gas purchasing,  wholesale electricity  activities and
financing activities.

     Commodity Price Risk -

     Under the current  regulatory  framework,  MidAmerican Energy is allowed to
recover in revenues the cost of gas sold from all of its regulated gas customers
through a purchased gas adjustment  clause.  Because the majority of MidAmerican
Energy's firm natural gas supply contracts contain pricing provisions based on a
daily or monthly  market index,  MidAmerican  Energy's  regulated gas customers,
although ensured of the availability of gas supplies, retain the risk associated
with market price volatility.

     MidAmerican  Energy enters into natural gas futures and swap  agreements to
mitigate a portion of the market risk  retained by its  regulated  gas customers
through the purchased gas adjustment  clause.  These instruments are recorded as
hedge transactions,  with net amounts exchanged or accrued under swap agreements
and realized  gains or losses on futures  contracts  included in the cost of gas
sold and recovered in revenues from regulated gas customers.

     MidAmerican Energy also derives revenues from nonregulated sales of natural
gas. Pricing provisions are individually negotiated with these customers and may
include  fixed  prices  or  prices  based on a daily or  monthly  market  index.
MidAmerican Energy enters into natural gas futures and swap agreements to offset
the financial  impact of variations in natural gas commodity prices for physical
delivery to nonregulated  customers.  These financial derivative  activities are
also recorded as hedge accounting transactions.

     MidAmerican Energy uses natural gas and electric derivative instruments for
trading purposes as defined by Emerging Issues Task Force (EITF) Issue No. 98-10
under  strict  value-at-risk  guidelines  outlined  by  senior  management.  Any
unrealized  gains  or  losses  on such  trading  transactions  are  reported  in
earnings.  Trading  revenues  and costs are reported  gross on the  Consolidated
Statements of Income.

     MidAmerican  Energy  is  exposed  to  variations  in the  price of fuel for
generation  and the price of  purchased  power in its Iowa  jurisdiction,  which
accounts for approximately 89% of electric operating  revenues.  Fuel price risk
is mitigated  through forward  contracts.  Under typical  operating  conditions,
MidAmerican  Energy has  sufficient  generation  to supply  its retail  electric
needs.  A loss of such  generation at a time of high market prices could subject
MidAmerican  Energy to losses  on its  energy

                                      -11-
<PAGE>

sales.   MidAmerican   Energy  uses  electricity   forward  contracts  to  hedge
anticipated sales of wholesale electric power.

     MidAmerican  Energy  and  its  customers  are  exposed  to  the  effect  of
variations  in  weather  conditions  on sales and  purchases,  respectively,  of
electricity  and natural  gas. For the  2001-2002  heating  season,  MidAmerican
Energy  entered  into  several  degree  day  swaps to  offset a  portion  of the
financial impact of those variations on MidAmerican Energy and its customers.

     Unrealized gains and losses on cash flow hedges of future  transactions are
recorded in other comprehensive income. Only hedges that are highly effective in
offsetting  the risk of  variability  in future cash flows are  accounted for in
this  manner.  Future  transactions  include  purchases  of gas  for  resale  to
regulated  and  nonregulated  customers,  purchases  of  gas  for  storage,  and
purchases and sales of wholesale  electric  energy.  When the associated  hedged
future transaction occurs or when a forecasted transaction is no longer probable
of  occurring,   the  unrealized  gains  and  losses  are  reversed  from  other
comprehensive  income and recognized in net income.  Realized gains on cash flow
hedges are  recorded  in Cost of Gas Sold,  Regulated  Cost of Fuel,  Energy and
Capacity or Nonregulated  Operating  Revenues,  depending upon the nature of the
physical transaction being hedged.

     Unrealized  gains and losses on fair value hedges of firm  commitments  are
recognized in income as either  Nonregulated  Operating  Revenues or Cost of Gas
Sold  depending  upon the nature of the item being  hedged.  Purchase  and sales
commitments  hedged by fair value  hedges are  recorded at fair value,  with the
changes in values also  recognized in income and  substantially  offsetting  the
impact of the hedges on earnings.

F.   SEGMENT INFORMATION:

     MidAmerican Energy has identified four reportable  operating segments based
principally on management structure.  The generation segment derives most of its
revenue  from the  sale of  regulated  wholesale  electricity  and  nonregulated
wholesale  and retail  natural  gas.  The energy  delivery  segment  derives its
revenue  principally from the sale and delivery of regulated retail  electricity
and natural gas, while the transmission segment obtains most of its revenue from
the sale of transmission  capacity. The marketing and sales segment receives its
revenue  principally  from  nonregulated  sales of natural gas and  electricity.
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.

                                      -12-

<PAGE>

     The following table provides  MidAmerican  Energy's  operating revenues and
income before income taxes on an operating segment basis (in thousands):

                                     Three Months
                                   Ended March 31,
                              ----------------------
                                2002         2001
                              ---------    ---------
Revenues:
  External revenues -
    Generation ............   $ 147,880    $ 310,217
    Energy delivery .......     425,942      602,987
    Transmission ..........       4,925        5,775
    Sales & marketing .....      33,679       63,907
                              ---------    ---------
      Total ...............     612,426      982,886
                              ---------    ---------

  Intersegment revenues -
    Generation ............     131,042      125,398
    Energy delivery .......        --           --
    Transmission ..........      13,800       13,689
    Sales & marketing .....        --            132
                              ---------    ---------
      Total ...............     144,842      139,219

  Intersegment eliminations    (144,842)    (139,219)
                              ---------    ---------
    Consolidated ..........   $ 612,426    $ 982,886
                              =========    =========

Income before income taxes:
  Generation ..............   $  14,866    $  29,634
  Energy delivery .........      52,146       56,168
  Transmission ............       9,916       10,222
  Sales & marketing .......        (947)        (877)
                              ---------    ---------
    Total .................      75,981       95,147
  Preferred dividends .....         848        1,239
                              ---------    ---------
    Consolidated ..........   $  76,829    $  96,386
                              =========    =========

G.   STATEMENT OF COMPREHENSIVE INCOME:

     For the three  months ended March 31, 2002 and 2001,  MidAmerican  Energy's
total  comprehensive  income was $42.0 million and $53.9 million,  respectively.
The differences from Earnings on Common Stock for the periods  presented are due
to the  effective  portion  of net gains  and  losses  on  MidAmerican  Energy's
derivative  instruments  classified  as  cash  flow  hedges.  Accumulated  other
comprehensive loss, net, which also includes  recognition of the minimum pension
liability  adjustment,  was $4.3  million and $3.8 million as of March 31, 2002,
and December 31, 2001, respectively.

                                      -13-

<PAGE>

                            MIDAMERICAN FUNDING, LLC
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                                 (IN THOUSANDS)

                                                   THREE MONTHS
                                                  ENDED MARCH 31,
                                              ----------------------
                                                 2002         2001
                                              ---------    ---------

OPERATING REVENUES
Regulated electric ........................   $ 306,778    $ 318,490
Regulated gas .............................     220,057      473,543
Nonregulated ..............................      86,342      201,183
                                              ---------    ---------
                                                613,177      993,216
                                              ---------    ---------
OPERATING EXPENSES
Regulated:
  Cost of fuel, energy and capacity .......      72,449       65,800
  Cost of gas sold ........................     148,514      399,135
  Other operating expenses ................      98,599       96,452
  Maintenance .............................      28,945       27,790
  Depreciation and amortization ...........      69,324       74,910
  Property and other taxes ................      17,294       17,274
                                              ---------    ---------
                                                435,125      681,361
                                              ---------    ---------
Nonregulated:
  Cost of sales ...........................      79,236      192,350
  Other ...................................       7,437       15,080
                                              ---------    ---------
                                                 86,673      207,430
                                              ---------    ---------
  Total operating expenses ................     521,798      888,791
                                              ---------    ---------

OPERATING INCOME ..........................      91,379      104,425
                                              ---------    ---------

NON-OPERATING INCOME
Interest income ...........................       3,978        6,037
Dividend income ...........................         266          738
Marketable securities gains and losses, net      (3,218)      (2,238)
Other, net ................................       6,669       (3,782)
                                              ---------    ---------
                                                  7,695          755
                                              ---------    ---------
FIXED CHARGES
Interest on long-term debt ................      28,553       27,311
Other interest expense ....................         828        1,183
Preferred dividends of subsidiaries .......       2,422        3,295
Allowance for borrowed funds ..............        (596)        (492)
                                              ---------    ---------
                                                 31,207       31,297
                                              ---------    ---------

INCOME BEFORE INCOME TAXES ................      67,867       73,883
INCOME TAXES ..............................      29,439       34,571
                                              ---------    ---------
NET INCOME ................................   $  38,428    $  39,312
                                              =========    =========

        The accompanying notes are an integral part of these statements.

                                      -14-
<PAGE>
                            MIDAMERICAN FUNDING, LLC
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                  AS OF
                                                                         -------------------------
                                                                          MARCH 31,   DECEMBER 31,
                                                                            2002          2001
                                                                         -----------   ----------
                                                                         (UNAUDITED)

<S>                                                                       <C>          <C>
ASSETS
UTILITY PLANT
Electric ..............................................................   $4,617,272   $4,598,372
Gas ...................................................................      872,190      867,277
                                                                          ----------   ----------
                                                                           5,489,462    5,465,649
Less accumulated depreciation and amortization ........................    2,891,771    2,847,979
                                                                          ----------   ----------
                                                                           2,597,691    2,617,670
Construction work in progress .........................................      108,681       80,276
                                                                          ----------   ----------
                                                                           2,706,372    2,697,946
                                                                          ----------   ----------
POWER PURCHASE CONTRACT ...............................................       46,271       48,185
                                                                          ----------   ----------
CURRENT ASSETS
Cash and cash equivalents .............................................      288,587       20,270
Marketable securities, trading ........................................       14,711       20,743
Receivables ...........................................................      215,819      167,969
Inventories ...........................................................       58,021       83,339
Prepaid taxes .........................................................       23,956       23,956
Other .................................................................       12,257       12,640
                                                                          ----------   ----------
                                                                             613,351      328,917
                                                                          ----------   ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ............................      499,003      519,680
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED, NET ................    1,279,143    1,279,143
REGULATORY ASSETS .....................................................      217,245      221,120
OTHER ASSETS ..........................................................       60,073       80,481
                                                                          ----------   ----------
TOTAL ASSETS ..........................................................   $5,421,458   $5,175,472
                                                                          ==========   ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Member's equity .......................................................   $1,979,976   $1,974,605
MidAmerican Energy preferred securities, not subject to
  mandatory redemption ................................................       31,759       31,759
Preferred securities, subject to mandatory redemption:
  MidAmerican Energy preferred securities .............................       26,680       26,680
  MidAmerican Energy-obligated preferred securities of subsidiary trust
    holding solely MidAmerican Energy junior subordinated debentures ..            -      100,000
Long-term debt (excluding current portion) ............................    1,652,571    1,357,782
                                                                          ----------   ----------
                                                                           3,690,986    3,490,826
                                                                          ----------   ----------
CURRENT LIABILITIES
Notes payable .........................................................            -       91,780
Current portion of long-term debt .....................................      286,904      187,187
Current portion of power purchase contract ............................       17,398       17,398
Accounts payable ......................................................      212,707      185,528
Taxes accrued .........................................................       79,403       61,269
Interest accrued ......................................................       19,665       27,813
Other .................................................................       34,572       44,132
                                                                          ----------   ----------
                                                                             650,649      615,107
                                                                          ----------   ----------
OTHER LIABILITIES
Power purchase contract ...............................................        8,469        8,469
Deferred income taxes .................................................      558,137      564,334
Investment tax credit .................................................       60,191       61,292
Quad Cities Station decommissioning ...................................      160,184      158,349
Regulatory liabilities ................................................       79,346       62,378
Other .................................................................      213,496      214,717
                                                                          ----------   ----------
                                                                           1,079,823    1,069,539
                                                                          ----------   ----------
TOTAL CAPITALIZATION AND LIABILITIES ..................................   $5,421,458   $5,175,472
                                                                          ==========   ==========
</TABLE>
        The accompanying notes are an integral part of these statements.

                                      -15-
<PAGE>
                            MIDAMERICAN FUNDING, LLC
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                 THREE MONTHS
                                                                ENDED MARCH 31,
                                                             ----------------------
                                                               2002         2001
                                                             ---------    ---------

<S>                                                          <C>          <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...............................................   $  38,428    $  39,312
Adjustments to reconcile net income to net cash provided:
  Depreciation and amortization ..........................      69,947       83,912
  Deferred income taxes and investment tax credit, net ...      (5,617)      (6,793)
  Amortization of other assets and liabilities ...........       8,591       12,422
  Customer rate credits ..................................           -      (21,610)
  Other-than-temporary decline in value of investments ...       2,913            -
  (Income) loss on equity investments ....................      (5,483)         164
  Gain on sale of securities, assets and other investments           -       (1,386)
  Cash outflows of accounts receivable securitization ....      (8,000)           -
  Impact of changes in working capital ...................      19,488       35,172
  Other ..................................................      19,353       (1,211)
                                                             ---------    ---------
    Net cash provided ....................................     139,620      139,982
                                                             ---------    ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ........................     (62,480)     (26,805)
Quad Cities Station decommissioning trust fund ...........      (2,075)      (2,075)
Nonregulated capital expenditures ........................        (252)      (1,103)
Purchase of assets and long-term investments .............           -         (146)
Proceeds from sales of available-for-sale securities .....       1,938            -
Proceeds from sale of assets and other investments .......           4           22
Notes receivable from affiliate ..........................      22,240      (68,429)
Other investing activities, net ..........................         (53)      (1,506)
                                                             ---------    ---------
  Net cash used ..........................................     (40,678)    (100,042)
                                                             ---------    ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid ....................................     (30,000)           -
Issuance of long-term debt, net of issuance costs ........     391,438      198,150
Retirement of long-term debt, including reacquisition cost        (283)    (200,040)
Reacquisition of preferred securities ....................    (100,000)           -
Net decrease in notes payable ............................     (91,780)     (36,000)
                                                             ---------    ---------
  Net cash provided (used) ...............................     169,375      (37,890)
                                                             ---------    ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS ................     268,317        2,050
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .........      20,270       10,018
                                                             ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............   $ 288,587    $  12,068
                                                             =========    =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ................   $  35,520    $  36,918
                                                             =========    =========
Income taxes paid (received), net ........................   $    (138)   $  12,232
                                                             =========    =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -16-
<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., MidAmerican Services Company and MEC Construction Services Co.

B.   ENVIRONMENTAL MATTERS:

     Refer to Note B of  MidAmerican  Energy's Notes to  Consolidated  Financial
Statements  for  information  regarding   MidAmerican  Funding's   environmental
matters.

C.   RATE MATTERS:

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

D.   ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF REGULATION:

     Refer to Note D of  MidAmerican  Energy's Notes to  Consolidated  Financial
Statements for information  regarding  MidAmerican  Funding's accounting for the
effects of certain types of regulation.

                                      -17-

<PAGE>

E.   DERIVATIVE FINANCIAL INSTRUMENTS:

     Refer to Note E of  MidAmerican  Energy's Notes to  Consolidated  Financial
Statements, for information regarding MidAmerican Funding's derivative financial
instruments.  The  first  paragraph  of  MidAmerican  Energy's  Note  E is  also
applicable to MidAmerican Funding as a whole.

     In  addition,  MidAmerican  Capital is  exposed  to market  value risk from
changes  in  interest  rates on its  preferred  stock  investments.  MidAmerican
Capital reviews the interest rate  sensitivity of these securities and purchases
put options in order to reduce related interest rate risk. MidAmerican Capital's
intent is to manage  the risk  arising  from  changes  in the  general  level of
interest  rates with a change in market  value of the  hedging  instruments.  As
permitted  by SFAS No.  133,  MidAmerican  Capital  accounts  for these  hedging
instruments as trading securities.

F.   SEGMENT INFORMATION:

     MidAmerican Funding has identified four reportable operating segments based
principally on management structure.  The generation segment derives most of its
revenue  from the  sale of  regulated  wholesale  electricity  and  nonregulated
wholesale  and retail  natural  gas.  The energy  delivery  segment  derives its
revenue  principally from the sale and delivery of regulated retail  electricity
and natural gas, while the transmission segment obtains most of its revenue from
the sale of transmission  capacity. The marketing and sales segment receives its
revenue  principally  from  nonregulated  sales of natural gas and  electricity.
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.

                                      -18-
<PAGE>

     The following table provides  MidAmerican  Funding's operating revenues and
income before income taxes on an operating segment basis (in thousands):

                                     Three Months
                                   Ended March 31,
                              ----------------------
                                 2002         2001
                              ---------    ---------

Revenues:
  External revenues -
    Generation ............   $ 147,880    $ 310,217
    Energy delivery .......     425,942      602,987
    Transmission ..........       4,925        5,775
    Sales & marketing .....      33,679       63,907
    Other (a) .............         751       10,330
                              ---------    ---------
      Total ...............     613,177      993,216
                              ---------    ---------

  Intersegment revenues -
    Generation ............     131,042      125,398
    Energy delivery .......        --           --
    Transmission ..........      13,800       13,689
    Sales & marketing .....        --            132
    Other (a) .............        --             31
                              ---------    ---------
      Total ...............     144,842      139,250

  Intersegment eliminations    (144,842)    (139,250)
                              ---------    ---------
    Consolidated ..........   $ 613,177    $ 993,216
                              =========    =========

Income before income taxes:
  Generation ..............   $  14,866    $  29,634
  Energy delivery .........      52,146       56,168
  Transmission ............       9,916       10,222
  Sales & marketing .......        (947)        (877)
  Other (a) ...............      (8,114)     (21,264)
                              ---------    ---------
    Total .................   $  67,867    $  73,883
                              =========    =========


     (a)  Other includes the combined  amounts for all segments that do not meet
          the  requirements  for  being  a  reportable   segment.   It  includes
          MidAmerican  Capital,  Midwest  Capital,   MidAmerican  Services,  MEC
          Construction and amounts of the parent companies.

G.   OTHER COMPREHENSIVE INCOME:

     For the three months ended March 31, 2002 and 2001,  MidAmerican  Funding's
total  comprehensive  income was $35.4 million and $39.8 million,  respectively.
The differences  from Net Income are due to unrealized  holding gains and losses
of marketable  securities  during the periods and the  effective  portion of net
gains and  losses of  derivative  instruments  classified  as cash flow  hedges.
Accumulated other  comprehensive  loss, net, which also includes  recognition of
the minimum pension liability  adjustment,  was $3.7 million and $0.6 million as
of March 31, 2002, and December 31, 2001, respectively.

                                      -19-

<PAGE>

H.   EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED, NET:

     On January 1, 2002, MidAmerican Funding adopted SFAS No. 142, "Goodwill and
Other  Intangible  Assets," which dictates the accounting for acquired  goodwill
and other intangible assets. SFAS No. 142 requires that amortization of goodwill
and  indefinite-lived  intangible  assets  be  discontinued  and  that  entities
disclose net income for prior periods adjusted to exclude such  amortization and
related  income tax effects,  as well as a  reconciliation  from the  originally
reported net income to the adjusted net income.  MidAmerican  Funding's  related
amortization consists solely of goodwill  amortization,  which has no income tax
effect.  Following is a reconciliation of net income as originally  reported for
the quarter ended March 31, 2001, to adjusted net income (in thousands):

     Net income as originally reported   $39,312
     Goodwill amortization ...........     8,602
                                         -------
     Net income as adjusted ..........   $47,914
                                         =======

     MidAmerican  Funding will complete the initial goodwill  impairment test by
June 30, 2002, as required by SFAS No. 142.

                                      -20-

<PAGE>

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

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

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

     Management's   Discussion  and  Analysis  (MD&A)  addresses  the  financial
statements of MidAmerican  Funding and  MidAmerican  Energy as presented in this
joint  filing.  Information  related  to  MidAmerican  Energy,  whether  or  not
segregated,  also relates to MidAmerican  Funding.  Information related to other
subsidiaries  of  MidAmerican  Funding  pertains  only to the  discussion of the
financial  condition  and results of operations of  MidAmerican  Funding.  Where
necessary,  discussions  have been segregated and labeled to allow the reader to
identify information applicable only to MidAmerican Funding.

FORWARD-LOOKING STATEMENTS

     From  time  to  time,  MidAmerican  Funding,  or one  of  its  subsidiaries
individually,  may make  forward-looking  statements  within the  meaning of the
federal   securities  laws  that  involve   judgments,   assumptions  and  other
uncertainties   beyond  the  control  of  MidAmerican  Funding  or  any  of  its
subsidiaries  individually.  These forward-looking statements may include, among
others,  statements  concerning  revenue and cost trends,  cost  recovery,  cost
reduction strategies and anticipated  outcomes,  pricing strategies,  changes in
the  utility  industry,  planned  capital  expenditures,   financing  needs  and
availability,  statements of MidAmerican Funding's expectations, beliefs, future
plans  and  strategies,  anticipated  events  or  trends  and  similar  comments
concerning  matters that are not historical facts. These type of forward-looking
statements are based on current  expectations  and involve a number of known and
unknown  risks and  uncertainties  that  could  cause  the  actual  results  and
performance of MidAmerican Funding to differ materially from any expected future
results or performance, expressed or implied, by the forward-looking statements.
In  connection  with  the  safe  harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995,  MidAmerican  Funding has  identified  important
factors  that  could  cause  actual  results  to differ  materially  from  those
expectations, including weather effects on sales and revenues, fuel prices, fuel
transportation  and  other  operating  uncertainties,  acquisition  uncertainty,
uncertainties  relating to economic and political  conditions and  uncertainties
regarding  the impact of  regulations,  changes in  government  policy,  utility
industry deregulation and competition.  Neither MidAmerican Funding, nor any one
of  its  subsidiaries   individually,   assumes  any  responsibility  to  update
forward-looking information contained herein.

                                      -21-

<PAGE>

                              RESULTS OF OPERATIONS
                              ---------------------

REGULATED GROSS MARGIN

     Regulated Electric Gross Margin -

                                           Three Months
                                          Ended March 31,
                                         ----------------
                                         2002        2001
                                         ----        ----
                                           (In millions)
     Operating revenues ..............   $307        $318
     Cost of fuel, energy and capacity     72          66
                                         ----        ----
          Electric gross margin ......   $235        $252
                                         ====        ====

     Electric  gross margin for the first quarter of 2002  decreased $17 million
compared to the first quarter of 2001.  Temperature  conditions during the three
months  ended March 31,  2002,  were  milder than in the first  quarter of 2001,
resulting in an $8 million decrease in electric margin.  Other usage factors not
dependent on weather increased  electric margin by $13.1 million compared to the
first quarter of 2001. In total, retail sales of electricity  increased 4.5% for
the three months ended March 31, 2002.

     MidAmerican  Energy's  margins on wholesale  sales  decreased  $7.0 million
compared to the first quarter of 2001 due to price  declines.  The price decline
was somewhat  offset by sales volumes for wholesale  sales which  increased 3.1%
for the three months ended March 31, 2002,  relative to the comparable period in
2001. Wholesale sales are the sales of energy to other utilities, municipalities
and marketers outside of MidAmerican Energy's delivery system.

     Electric  revenues  from the recovery of energy  efficiency  program  costs
decreased  $5.6  million  compared to the  quarter  ended  March 31,  2001.  The
decrease in the first quarter of 2002 was due to completion in the third quarter
of 2001 of the  final  recovery  phase for  deferred  energy  efficiency  costs.
Deferred energy  efficiency costs were costs previously  incurred by MidAmerican
Energy,  which, in accordance  with rate treatment,  were not charged to expense
until  recovery from customers  began.  Recovery of deferred  energy  efficiency
costs occurred over a four-year  period from the date collection  began for each
phase.  Changes in these revenues are substantially  matched with  corresponding
changes in other operating expenses.

     MidAmerican Energy sells and purchases  electric  capacity.  The net margin
from those sales and  purchases  decreased  $3.9  million  compared to the first
quarter of 2001. Also, gains from the sale of emission allowances decreased $3.2
million due to sales in the three  months  ended March 31,  2001.  Additionally,
fuel costs related to Iowa retail sales increased $1.6 million, further reducing
electric margin compared to the first three months of 2001.

     Regulated Gas Gross Margin -

                                 Three Months
                                Ended March 31,
                               ----------------
                               2002        2001
                               ----        ----
                                 (In millions)
     Operating revenues ....   $220        $474
     Cost of gas sold ......    149         399
                               ----        ----
          Gas gross margin..   $ 71        $ 75
                               ====        ====

                                      -22-
<PAGE>

     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. A decrease in
the  per-unit  cost of gas for the  three-month  period  ended  March 31,  2002,
compared to the same period in 2001,  decreased revenues and cost of gas sold by
approximately $194 million.

     Temperature  conditions  during the three months ended March 31, 2002, were
milder  than  those in the first  quarter  of 2001,  resulting  in a $9  million
decrease  in gas gross  margin.  Other rate and usage  factors  increased  gross
margin by $8.1 million compared to the first quarter of 2001. Total retail sales
of natural gas decreased 14.2% for the three months ended March 31, 2002.

     A decrease in revenues from the recovery of energy efficiency costs reduced
gas margin by $1.6  million  compared to the three  months ended March 31, 2001.
Refer to the "Regulated Electric Gross Margin" section above for a discussion of
energy efficiency revenues.

REGULATED OPERATING EXPENSES

     Regulated other operating  expenses for the first quarter of 2002 increased
$2.1 million  compared to the first quarter of 2001 due principally to increases
of $4.6  million in pension and other  postretirement  costs,  $3.0  million for
health care and other  benefit  costs and $2.0 million in property and liability
insurance due to greater premium refunds in the 2001 period.  The increases were
substantially  offset  by a $6.0  million  decrease  in  amortization  of energy
efficiency  program  costs and a $1.3  million  decrease  in the  provision  for
uncollectible  accounts  receivable.  Refer  to the  "Regulated  Electric  Gross
Margin" section for discussion regarding energy efficiency costs.

     Maintenance  expenses  increased  $1.2  million for the three  months ended
March 31,  2002,  compared to the 2001 period due to an increase in  fossil-fuel
generation maintenance expenses.

     Depreciation  and amortization  expense  decreased $5.6 million compared to
the first quarter of 2001 due to a decrease in  amortization  expense related to
the establishment of a regulatory liability for a revenue sharing arrangement in
Iowa.

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     Nonregulated Gross Margin -

                                 Three Months Ended March 31,
                          MidAmerican Energy    MidAmerican Funding
                          ------------------    -------------------
                          2002         2001         2002       2001
                          ----         ----         ----       ----
                                         (In millions)
     Operating revenues   $ 86         $191         $ 86       $201
     Cost of sales ....     79          183           79        192
                          ----         ----         ----       ----
          Gross margin    $  7         $  8         $  7       $  9
                          ====         ====         ====       ====

           MidAmerican Energy:

     Nonregulated   revenues  and  cost  of  sales  consist   substantially   of
nonregulated  natural gas marketing  operations.  The  nonregulated  natural gas
marketing operations include wholesale and retail activities.  Approximately 61%
of the  nonregulated  natural gas  revenues for the three months ended March 31,
2002, are related to wholesale sales.

                                      -23-
<PAGE>

     Gross margin for the  nonregulated  natural gas  operations  decreased $1.9
million to $1.3  million  for the first  quarter of 2002.  The  decline in gross
margin was due to a decrease in the margin per unit.  Revenues from nonregulated
natural gas marketing  operations decreased $100.8 million compared to the first
quarter of 2001 to $79.5  million for the first  quarter of 2002.  A decrease in
the average  price per unit sold,  reflective  of a 63%  decrease in the average
cost of gas,  resulted in a $133.1 million  decrease in revenues.  Sales volumes
increased  5 million  MMBtus  (18%)  resulting  in a $32.3  million  increase in
revenues.  A portion of the  increase is due to contracts  formerly  serviced by
another  subsidiary of  MidAmerican  Funding as discussed  below.  Cost of sales
decreased  $98.9  million to $78.2  million for the three months ended March 31,
2002, due to the decrease in the per-unit cost of gas sold,  offset partially by
the increase in sales volumes.

     Nonregulated  revenues  for the first  quarter of 2001 include $3.6 million
from  MidAmerican  Energy's  market access service  project.  The pilot project,
which   concluded  in  May  2001,   allowed  larger  Iowa  customers  that  were
participating   in  the  project  to  choose  their  electric  power   supplier.
MidAmerican  Energy's revenues from project  participants  related to non-supply
services,  such as  distribution  and  transmission,  are reflected in regulated
electric  revenues.  Cost of sales  totaled $3.3  million  related to the market
access service project in the first quarter of 2001.

     Non-residential  customers in Illinois are allowed to select their electric
power supplier. For the three months ended March 31, 2002, compared to the three
months ended March 31, 2001,  related  revenues  decreased  $1.7 million to $2.0
million  and  related  cost of sales  decreased  $1.8  million to $0.1  million,
resulting in a $0.1 million increase in gross margin.

     Additionally,  revenues for the first  quarter of 2002 include $1.2 million
for emergency storm restoration work performed  outside of MidAmerican  Energy's
service  territory.  Related  costs are  reflected  in  "Nonregulated  Operating
Expenses: Other".

          MidAmerican Funding:

     During the first quarter of 2001, a subsidiary of  MidAmerican  Capital had
nonregulated  natural gas revenues and costs of sales  totaling $9.0 million and
$9.3  million,  respectively.  All  contracts  of that  subsidiary  have  either
terminated or are being serviced by MidAmerican Energy as of March 31, 2002.

     Nonregulated Operating Expenses: Other -

           MidAmerican Energy:

     Nonregulated  other operating expenses increased $1.4 million for the three
months ended March 31, 2002,  due  principally to costs related to the emergency
storm restoration work discussed above.

           MidAmerican Funding:

     MidAmerican Funding's  nonregulated other operating expenses,  inclusive of
MidAmerican Energy amounts, decreased $7.6 million for the first quarter of 2002
compared  to the first  quarter of 2001.  MidAmerican  Funding's  goodwill is no
longer  being  amortized  as a result of the  adoption of Statement of Financial
Accounting  Standards  (SFAS)  No.  142 on  January  1,  2002.  Amortization  of
MidAmerican  Funding's  goodwill  totaled $8.6 million for the first  quarter of
2001.

                                      -24-
<PAGE>

NON-OPERATING INCOME AND INTEREST EXPENSE

     Interest and Dividend Income -

          MidAmerican Energy:

     The  decrease  in interest  income was due  principally  to a $2.6  million
decrease in interest income on a note receivable related to MidAmerican Energy's
accounts  receivable  sold.  The  decrease  related to the note  receivable  was
partially  offset by  MidAmerican  Energy's  favorable  cash position due to the
issuance of $400 million of medium-term notes in February 2002.

          MidAmerican Funding:

     Dividend income decreased due to partial liquidation of the preferred stock
investment portfolio in the past twelve months.

     Marketable Securities Gains and Losses, Net -

          MidAmerican Funding:

     Net losses on marketable  securities increased $1.0 million compared to the
first  quarter of 2001 to a net loss of $3.2  million  for the first  quarter of
2002. In the first quarter of 2002,  MidAmerican Capital recorded a $2.9 million
loss  related  to  other-than-temporary  declines  in two of  its  common  stock
investments.  The first  quarter of 2001  includes a $2.4  million  pre-tax loss
related to the  re-characterization  of  marketable  securities  to "trading" as
allowed by Statement of Financial Accounting Standards No. 133.

     Other, Net -

           MidAmerican Energy:

     MidAmerican  Energy's Other,  Net, which includes a number of non-operating
income and deduction items,  increased  Non-Operating Income by $0.2 million for
the three months ended March 31, 2002, and reduced  Non-Operating Income by $3.9
million for the three months ended March 31, 2001.

     Other,  Net  includes  a discount  on sold  accounts  receivable,  net of a
subservicer fee charged to MidAmerican Energy Funding  Corporation for servicing
the  accounts.  The  discount is designed to cover the  expenses of  MidAmerican
Energy  Funding  Corporation,  including  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 $1.3
million and $5.5 million in the first quarter of 2002 and 2001, respectively.

     Other,  Net for 2002  includes  $1.2 million of income for an allowance for
equity  funds  used  during   construction.   As  a  regulated  public  utility,
MidAmerican  Energy is allowed to  capitalize,  and record as income,  a cost of
construction for equity funds used, based on guidelines set forth by the Federal
Energy Regulatory Commission.

     Other,  Net for the first quarter of 2001 also reflects a $1.4 million gain
on the sale of MidAmerican Energy rail cars.

                                      -25-
<PAGE>

          MidAmerican Funding:

     Other, Net for MidAmerican Funding,  including  MidAmerican Energy amounts,
increased  Non-Operating Income by $6.7 million for the three months ended March
31, 2002, and reduced  Non-Operating Income by $3.8 million for the three months
ended March 31, 2001.

     Income from MidAmerican Capital's equity investments increased $5.5 million
compared to the first  quarter of 2001.  During the three months ended March 31,
2002, MidAmerican Capital received a distribution of common stock held by one of
its venture capital fund investments and recognized $5.3 million of income.

     Additionally,  MidAmerican  Funding  recorded $0.4 million of income in the
first  quarter  of 2002 for a  distribution  related  to  MidAmerican  Capital's
investments in energy projects.

     Fixed Charges and Preferred Dividends -

          MidAmerican Energy:

     The  increase  in interest  on  long-term  debt was due to interest on $400
million of MidAmerican  Energy medium-term notes issued in February 2002, net of
the impact of debt  maturities in 2001 and lower variable  interest rates in the
first quarter of 2002.

     Other interest expense decreased  compared to the first quarter of 2001 due
principally to a reduction in short-term debt outstanding at MidAmerican Energy,
net of an  increase  in expense  due to  interest  on its  regulatory  liability
associated with its Iowa electric rate settlement.

     MidAmerican  Energy's preferred dividends of its subsidiary trust decreased
due to the reacquisition of all of the related preferred securities on March 11,
2002.  Additionally,  preferred  dividends for  MidAmerican  Energy's  preferred
securities,  which  are  reflected  after Net  Income  for  MidAmerican  Energy,
decreased due to preferred securities reacquired in May and November 2001.

          MidAmerican Funding:

     MidAmerican  Funding also retired $200 million of long-term debt and issued
$200 million of  long-term  debt in the first  quarter of 2001,  resulting in an
increase in interest on long-term  debt for the first quarter of 2002.  Interest
expense  was  reduced  in the first  quarter  of 2001 due to the  period of time
between the retirement of the former debt series and the issuance of the current
debt  series.  Interest  expense for the first  quarter of 2002  reflects a full
quarter  of  interest  expense  for the new  series of debt,  which has a higher
interest rate than the previous debt.

                                      -26-

<PAGE>


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

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

     As  reflected on the  Consolidated  Statements  of Cash Flows,  MidAmerican
Energy's net cash provided from  operating  activities was $160 million and $161
million  for the  three  months  ended  March 31,  2002 and 2001,  respectively.
MidAmerican  Funding's  net cash  provided from  operating  activities  was $140
million  for each of the  three-month  periods  ended  March 31,  2002 and 2001,
respectively.

INVESTING ACTIVITIES AND PLANS

     Utility Construction Expenditures -

     MidAmerican  Energy's  primary  need for  capital is  utility  construction
expenditures.   For  the  first  three  months  of  2002,  utility  construction
expenditures  totaled $62  million,  including  allowance  for funds used during
construction,  or capitalized  financing  costs, and Quad Cities Station nuclear
fuel purchases.  All such expenditures were met with cash generated from utility
operations, net of dividends.

     Forecasted utility construction expenditures, including allowance for funds
used during  construction  are $382 million for 2002 and $1.614 billion for 2003
through 2006. Capital expenditure needs are reviewed regularly by management and
may change significantly as a result of such reviews.  Through 2007, MidAmerican
Energy plans to develop and  construct two electric  generating  plants in Iowa,
requiring an investment of approximately  $1.8 billion.  Participation by others
in a portion of the second plant is being discussed. The two plants will provide
approximately  1,400  megawatts of generating  capacity.  The first project is a
500-megawatt  natural  gas-fired  combined  cycle unit with an estimated cost of
$416  million.  MidAmerican  Energy  has  received a  certificate  from the Iowa
Utilities  Board  allowing  it  to  construct  the  500-megawatt  gas  unit.  In
accordance with an Iowa law passed in 2001,  MidAmerican  Energy has sought Iowa
Utilities  Board  approval for the ratemaking  principles  that will govern cost
recovery for the gas plant.  A ruling is expected late in the second  quarter or
early in the third quarter.  That ruling will impact whether  MidAmerican Energy
continues with the project.  Assuming favorable regulatory treatment is obtained
for the ratemaking principles proceeding, it is anticipated that the first phase
of the project will be completed in 2003 with the remainder  being  completed in
2005.  MidAmerican  Energy has incurred  preliminary costs on the first project.
MidAmerican  Energy  expects to make filings for a  certificate  and approval of
ratemaking  principles  for the second project during the third quarter of 2002.
MidAmerican Energy presently expects that all utility construction  expenditures
for the next five years will be met with the issuance of long-term debt and cash
generated from utility  operations,  net of dividends.  The actual level of cash
generated from utility  operations is affected by, among other things,  economic
conditions  in the  utility  service  territory,  weather  and federal and state
regulatory actions.

                                      -27-

<PAGE>


     Nuclear Decommissioning -

     Each  licensee  of a nuclear  facility  is  required  to provide  financial
assurance for the cost of  decommissioning  its licensed  nuclear  facility.  In
general,  decommissioning  of a  nuclear  facility  means to safely  remove  the
facility  from  service  and  restore  the  property  to  a  condition  allowing
unrestricted  use by the operator.  Based on  information  presently  available,
MidAmerican  Energy expects to contribute  approximately  $41 million during the
period 2002 through 2006 to external  trusts  established  for the investment of
funds for  decommissioning  Quad Cities Station.  Approximately  60% of the fair
value of the trusts' funds is now invested in domestic corporate debt and common
equity  securities.  The remainder is invested in investment grade municipal and
U.S. Treasury bonds. Funding for Quad Cities Station nuclear  decommissioning is
reflected in Depreciation  and  Amortization in the  Consolidated  Statements of
Income.

     Based on  information  presently  available  and assuming a September  2004
shutdown  of Cooper,  MidAmerican  Energy  expects to accrue  approximately  $54
million for Cooper  decommissioning during the period 2002 through 2004. Amounts
related to Cooper  decommissioning  are reflected in Other Operating Expenses in
the Consolidated Statements of Income.  MidAmerican Energy's obligation, if any,
for Cooper  decommissioning  will be affected by the actual plant shutdown date.
In July 1997,  the  Nebraska  Public  Power  District  filed a lawsuit in United
States District Court for the District of Nebraska 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" of this Form 10-Q for further discussion of
the litigation.

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

FINANCING ACTIVITIES, PLANS AND AVAILABILITY

     Debt Authorizations and Credit Facilities -

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

     On  February  8, 2002,  MidAmerican  Energy  issued  $400  million of 6.75%
medium-term notes due in 2031. The proceeds are being used to refinance existing
debt and preferred  securities and for other  corporate  purposes.  On March 11,
2002,   MidAmerican   Energy   redeemed   all   $100   million   of  its   7.98%
MidAmerican-obligated  preferred  securities of subsidiary  trust at 100% of the
principal amount plus accrued interest.

     On May 1, 2002,  MidAmerican  Energy  reacquired  all $26.68 million of its
$7.80 series of  preferred  securities.  The first  $13.32  million of preferred
securities were redeemed at 100% of the principal amount plus accrued dividends,
and the remaining  $13.36 million was redeemed at 103.9% of the principal amount
plus accrued dividends.

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

                                      -28-
<PAGE>

preferred  securities,  $100 million of which  remains  available  following the
issuance of the $400 million of medium-term notes discussed above.

     MidAmerican  Energy has  authorization  from the Federal Energy  Regulatory
Commission  to  issue up to an  additional  $100  million  in  various  forms of
long-term debt  following the issuance of the $400 million of medium-term  notes
discussed  above.  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 October  2002,  to sell all of its right,  title and  interest in the
majority  of its  billed  accounts  receivable  to  MidAmerican  Energy  Funding
Corporation,   a  special  purpose  entity   established  to  purchase  accounts
receivable from MidAmerican  Energy.  MidAmerican Energy Funding  Corporation in
turn sells receivable  interests to outside investors.  In consideration for the
sale, MidAmerican Energy received cash and a subordinated note, bearing interest
at 8%, from MidAmerican  Energy Funding  Corporation.  As of March 31, 2002, the
revolving  cash  balance was $36 million  and the amount  outstanding  under the
subordinated note was $55.6 million. The agreement is structured as a true sale,
under which the creditors of  MidAmerican  Energy  Funding  Corporation  will be
entitled  to be  satisfied  out of the  assets  of  MidAmerican  Energy  Funding
Corporation  prior to any value  being  returned  to  MidAmerican  Energy or its
creditors.  Therefore,  the  accounts  receivable  sold  are  not  reflected  on
MidAmerican Energy's or MidAmerican Funding's Consolidated Balance Sheets. As of
March 31, 2002, $90.7 million of accounts receivable,  net of reserves, was sold
under the agreement.

     Other Information -

     As of March 31,  2002,  MHC had a $4 million  line of credit to provide for
short-term financing needs, none of which was outstanding.

     MidAmerican  Capital has $23.3  million of long-term  debt  outstanding  at
March 31, 2002, which matures in October 2002.

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

OPERATING ACTIVITIES AND OTHER MATTERS

     Legislative and Regulatory Evolution -

     In  December  1997,  the  Governor  of  Illinois  signed into law a bill to
restructure   Illinois'  electric  utility  industry  and  transition  it  to  a
competitive  market.  In accordance  with the law, as of December 31, 2000,  all
non-residential customers in Illinois had been phased in to allow them to select
their provider of

                                      -29-
<PAGE>


electric supply services.  Residential customers all received the opportunity to
select their electric supplier beginning May 1, 2002.

     The law also  provides  for  Illinois  earnings  above a computed  level of
return on common equity to be shared equally  between  customers and MidAmerican
Energy.  MidAmerican Energy's computed level of return on common equity is based
on a rolling  two-year average of the 30-year Treasury Bond rates plus a premium
of 5.5%  for 1998 and 1999 and a  premium  of 8.5% for 2000  through  2004.  The
two-year  average  above which  sharing must occur for 2001 was 14.34%.  The law
allows  MidAmerican  Energy  to  mitigate  the  sharing  of  earnings  above the
threshold  return on common equity  through  accelerated  recovery of regulatory
assets.

     The energy crisis and related events in California has heightened  concerns
nationally about deregulation of the electric utility industry. Accordingly, the
pace of deregulation in Iowa and elsewhere has slowed considerably.

     In December 1999, the Federal Energy  Regulatory  Commission  (FERC) issued
Order No. 2000 establishing,  among other things,  minimum  characteristics  and
functions for regional  transmission  organizations.  Public utilities that were
not a member of an  independent  system  operator  at the time of the order were
required  to  submit  a plan by  which  its  transmission  facilities  would  be
transferred  to a regional  transmission  organization.  On September  28, 2001,
MidAmerican  Energy and five other electric utilities filed with the FERC a plan
to create  TRANSLink  Transmission  Company LLC and to integrate  their electric
transmission systems into a single, coordinated system operating as a for-profit
independent  transmission  company in conjunction with a FERC-approved  regional
transmission organization. On April 25, 2002, FERC issued an order approving the
transfer  of control of  MidAmerican  Energy and other  utilities'  transmission
assets to TRANSLink in conjunction with TRANSLink's participation in the Midwest
Independent   Transmission   System   Operator,   Inc.   regional   transmission
organization. Additionally, state regulatory approval is required from states in
which  TRANSLink  will be operating,  and those  applications  have not yet been
filed.   Transferring  the  operations  and  control  of  MidAmerican   Energy's
transmission  assets to other  entities  could  increase  costs for  MidAmerican
Energy;  however,  the actual impact of TRANSLink on MidAmerican Energy's future
transmission costs is not yet known.

     Critical Accounting Policies -

         Accounting for Regulated Entities:

     MidAmerican  Energy's  and  MidAmerican  Funding's  significant  accounting
policies are described in Note (1) of Notes to Consolidated Financial Statements
in their respective  Annual Reports on Form 10-K for the year ended December 31,
2001.  MidAmerican  Funding's and MidAmerican  Energy's most critical accounting
policy is the application of SFAS No. 71, "Accounting for the Effects of Certain
Types of Regulation," at MidAmerican Energy.

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

                                      -30-
<PAGE>

     Other accounting  policies that  MidAmerican  Funding believes are critical
include the following:

          Revenue Recognition:

     Revenues are recorded as services  are rendered to  customers.  MidAmerican
Energy records  unbilled  revenues  representing  the estimated amount customers
will be billed  for  services  rendered  between  the  meter-reading  dates in a
particular month and the end of that month.

          Accounting for Derivatives and Energy Trading Activities:

     MidAmerican Energy accounts for its energy trading activities in accordance
with  Emerging  Issues Task Force  (EITF)  Issue No.  98-10 and SFAS No. 133, as
amended  and  interpreted,  which  require  certain  energy  trading  and energy
derivative contracts to be accounted for at fair value.

     EITF 98-10 also allows two methods of recognizing  energy trading contracts
in the income  statement.  The  "gross"  method  provides  that  energy  trading
contracts are recorded at their full value in revenues and  expenses.  The other
method is the "net"  method in which  revenues  and expenses are netted and only
the trading margin is reflected in revenues.  MidAmerican  Energy uses the gross
method for those energy trading contracts for which they have a choice.

     Accounting for derivatives  continues to evolve through  guidance issued by
the Derivatives Implementation Group (DIG) of the Financial Accounting Standards
Board  (FASB).  To the extent that changes by the DIG modify  current  guidance,
including the normal  purchases and normal sales  determination,  the accounting
treatment for derivatives may change.

     See  Note E in Notes  to  Consolidated  Financial  Statements  for  further
discussion related to accounting for derivatives.

          Contingent Liabilities:

     MidAmerican Funding  establishes  reserves for estimated loss contingencies
when it is management's assessment that a loss is probable and the amount of the
loss can be  reasonably  estimated.  Revisions  to  contingent  liabilities  are
reflected in income in the period in which different facts or information become
known or circumstances  change that affect the previous assumptions with respect
to the  likelihood or amount of loss.  Reserves for contingent  liabilities  are
based upon  management's  assumptions and estimates,  advice of legal counsel or
other third parties  regarding the probable  outcomes of the matter.  Should the
outcome differ from the  assumptions  and estimates,  revisions to the estimated
reserves for contingent liabilities would be required.

     New Accounting Pronouncements -

     In  August  2001,  the FASB  issued  SFAS No.  143,  "Accounting  For Asset
Retirement  Obligations." SFAS No. 143 requires recognition on the balance sheet
of legal  obligations  associated with the retirement of long-lived  assets that
result from the acquisition,  construction,  development and/or normal operation
of such assets.  SFAS No. 143 is effective for fiscal years beginning after June
15, 2002.  MidAmerican Funding is evaluating the impact of this pronouncement on
its balance sheet,  but does not believe adoption will have a material impact on
its results of operations.

                                      -31-

<PAGE>


     Rate Matters -

     On December  21,  2001,  the Iowa  Utilities  Board  approved a  settlement
agreement that freezes MidAmerican Energy's Iowa retail electric rates in effect
on December  31, 2000,  through  December 31,  2005,  and,  with  modifications,
reinstates the revenue  sharing  provisions of the 1997 pricing plan  settlement
agreement,  which  expired  on  December  31,  2000.  Under the 2001  settlement
agreement,  an amount equal to 50% of revenues associated with returns on equity
between 12% and 14%,  and 83.33% of revenues  associated  with returns on equity
above 14%, in each year will be recorded as a regulatory liability to be used to
offset a portion of the cost of future generating plant  investments.  An amount
equal to the regulatory  liability will be recorded as depreciation  expense. As
of  March  31,  2002,  the  related  regulatory   liability   reflected  on  the
Consolidated Balance Sheet totaled $65.0 million.

     On September 21, 2001,  MidAmerican  Energy filed a petition with the South
Dakota Public Utilities  Commission (SDPUC) to increase its South Dakota natural
gas rates.  On February 20,  2002,  the SDPUC  approved a  settlement  agreement
allowing increased rates of $3.1 million annually.

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

     On March 15, 2002, MidAmerican Energy made a filing with the Iowa Utilities
Board  requesting  an increase in rates of  approximately  $26.6 million for its
Iowa retail natural gas  customers.  As part of the filing,  MidAmerican  Energy
requested an interim rate increase of approximately $20.4 million annually.  The
Iowa  Utilities  Board may adjust  the  requested  interim  amount and delay its
implementation  for up to ninety  days.  MidAmerican  Energy  expects  the final
rates,  which may differ from the requested  amount,  to be implemented in early
2003.

     Environmental Matters -

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

     MidAmerican  Energy has evaluated or is evaluating 27 properties that were,
at one time, sites of gas manufacturing  plants in which it may be a potentially
responsible  party.  The purpose of these  evaluations  is to determine  whether
waste materials are present,  whether the materials  constitute an environmental
or health  risk,  and  whether  MidAmerican  Energy has any  responsibility  for
remedial action.  MidAmerican  Energy's estimate of the probable costs for these
sites as of March 31, 2002, was $21 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.

     In July 1997, the EPA adopted revisions to the National Ambient Air Quality
Standards for ozone and a new standard for fine particulate  matter. In February
2001,  the United  States  Supreme  Court  upheld the  constitutionality  of the
standards, though remanding the issue of implementation of the ozone standard

                                      -32-
<PAGE>

to the EPA. The impact of the new standards on  MidAmerican  Energy is currently
unknown. These standards could be superceded,  in whole or in part, by a variety
of multi-pollutant emission reduction proposals.  Refer to Note B(2) of Notes to
Consolidated Financial Statements for further discussion of this issue.

     In 2001,  the state of Iowa  passed  legislation  that,  in part,  requires
rate-regulated  utilities to develop a  multi-year  plan and budget for managing
regulated emissions from their generating facilities in a cost-effective manner.
MidAmerican  Energy's  proposed plan and associated  budget (the Plan) was filed
with the Iowa  Utilities  Board on April 1, 2002, in accordance  with state law.
Following a contested case  proceeding,  the Iowa Utilities Board is required to
rule on the  prudence of the Plan.  MidAmerican  Energy is required to file Plan
updates at least every two years.

     The Plan provides  MidAmerican  Energy's projected air emission  reductions
considering current proposals being debated at the federal level and describes a
coordinated  long-range plan to achieve these air emission reductions.  The Plan
provides specific actions to be taken at each coal-fired generating facility and
related costs and timing for each action.

     The Plan outlines $732.0 million in  environmental  investments to existing
coal-fired  generating  units, some of which are jointly owned, over a nine-year
period from 2002 through 2010.  MidAmerican  Energy's share of these investments
is $546.6 million, $67.9 million of which is projected to be incurred during the
2002-2005 rate freeze  period.  The Plan also  identifies  expenses that will be
incurred at the generating  facilities to operate and maintain the environmental
equipment installed as a result of the Plan.

     Following the expiration of the 2001  settlement  agreement on December 31,
2005,  MidAmerican  Energy  proposes  the  use of an  adjustment  mechanism  for
recovery of Plan costs,  similar to the tracker mechanisms for cost recovery for
Cooper Nuclear Station, renewable energy and energy efficiency expenditures that
are presently part of MidAmerican Energy's electric regulated rates.

     Generating Capability -

     MidAmerican  Energy is interconnected  with Iowa and neighboring  utilities
and is involved in an electric power pooling  agreement  known as  Mid-Continent
Area Power Pool  (MAPP).  Each MAPP  participant  is required  to  maintain  for
emergency purposes a net generating capability reserve of at least 15% above its
system peak demand.

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

     MidAmerican  Energy is  financially  exposed to movements in energy  prices
since it no longer  recovers  fluctuations in its energy costs through an energy
adjustment  clause  in  Iowa.  Although   MidAmerican  Energy  believes  it  has
sufficient generation under typical operating conditions for its retail electric
needs,  a loss of  adequate  generation  by  MidAmerican  Energy  requiring  the
purchase of  replacement  power at a time of high market  prices  could  subject
MidAmerican Energy to losses on its energy sales.

                                      -33-
<PAGE>


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

     Cooper Nuclear Station -

     Under a long-term  power purchase  contract with the Nebraska  Public Power
District,  MidAmerican  Energy  purchases  one-half of the output of Cooper.  On
April 1, 2002,  the Nuclear  Regulatory  Commission  (NRC) placed  Cooper in its
"Multiple  Repetitive  Degraded  Cornerstone"  category  of  the  NRC's  Reactor
Oversight  Process Action Matrix.  As a result,  the NRC will conduct  extensive
diagnostic  inspections  at  Cooper,  which  are  currently  anticipated  to  be
completed  during the month of June 2002.  MidAmerican  Energy  cannot,  at this
time,  predict  the  outcome  of the NRC  inspections  and  their  impact on the
operation of Cooper. The Nebraska Public Power District has informed MidAmerican
Energy that it is currently  developing  an  improvement  plan which it believes
will address the issues that caused Cooper to be placed into this category.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     MidAmerican  Funding,  including  MidAmerican  Energy, is exposed to market
risk from changes in factors such as the market price of certain commodities and
interest  rates.  To manage the price  volatility  relating to these  exposures,
MidAmerican Funding enters into various financial derivative instruments. Senior
management  provides the overall  direction,  structure,  conduct and control of
MidAmerican Funding's risk management activities, including the use of financial
derivative  instruments,  authorization  and  communication  of risk  management
policies and  procedures,  strategic  hedging  program  guidelines,  appropriate
market and credit risk limits, and appropriate systems for recording, monitoring
and  reporting  the results of  transactional  and risk  management  activities.
MidAmerican Funding regularly performs  sensitivity  analysis of its outstanding
positions and adheres to strict  value-at-risk  parameters.  MidAmerican Funding
uses hedge accounting for derivative  instruments  pertaining to its natural gas
purchasing, wholesale electricity activities, financing activities and preferred
stock investing operations.  Refer to Note E in Notes to Consolidated  Financial
Statements  for  further  discussion  of  price  risk  and  the  accounting  for
derivative instruments.

                                      -34-

<PAGE>

PART II - OTHER INFORMATION

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

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

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

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

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

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

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

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

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

     In response, MidAmerican Energy filed its answer and counterclaims.  In its
answer,  MidAmerican Energy denied material allegations in the complaint. In its
counterclaims, MidAmerican Energy sought declaratory judgments opposite to those
that  NPPD  sought;  and in  addition,  MidAmerican  Energy  sought  declaratory
judgments on earlier contingent  versions of MidAmerican  Energy's now operative
counterclaims listed below at (1), (2), (4), (5), (6), (7), (8), (10) and (11).

     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  (1) in the  first  paragraph,  above)  and the  related
contingent  counterclaims  filed by  MidAmerican  Energy  (earlier  versions  of
counterclaims  identified as (1), (2), (5) and (6),  below).  The court referred
all remaining  issues in the case to mediation,  and cancelled the November 1999
trial date.

     MidAmerican  Energy  appealed  the  court's  summary  judgment  ruling.  On
December 12,  2000,  the United  States Court of Appeals for the Eighth  Circuit
reversed the ruling of the district court and granted summary  judgment in favor
of  MidAmerican   Energy  on  the  earlier  versions  of  MidAmerican   Energy's
counterclaims  identified  as (1) and (2) listed  below;  it remanded  for trial
MidAmerican  Energy's  counterclaims  identified as (5) and (6),  below; it also
remanded for trial the Nebraska Public Power District's issues identified as (2)
and  (3) in the  first  paragraph,  above,  and on  MidAmerican  Energy's  other
undisposed-of counterclaims.

                                      -35-
<PAGE>

     After the remand to the  District  Court from the Eighth  Circuit  Court of
Appeals,  the  Nebraska  Public  Power  District  was granted  permission,  over
MidAmerican Energy's objections,  to file a second amended complaint. The second
amended complaint asserted in the first four "causes of action" that MidAmerican
Energy has  unconditional  liability  for a 50% share of  decommissioning  costs
based on alleged  obligations other than those imposed on MidAmerican  Energy by
the power purchase  agreement as originally  written.  The Nebraska Public Power
District's  post-remand  contentions  in those four  "causes of action"  were in
summary: (i) the parties, without formal written agreement,  either modified the
power purchase agreement or made a separate agreement that imposes unconditional
liability on MidAmerican  Energy for  decommissioning  costs;  (ii)  MidAmerican
Energy has  unconditional  liability  for a 50% share of  decommissioning  costs
based on quantum  meruit and unjust  enrichment;  (iii)  MidAmerican  Energy has
unconditional  liability for a 50% share of decommissioning  based on promissory
estoppel;  or (iv) the Nebraska  Public  Power  District is entitled to have the
power  purchase  agreement  reformed  to  provide  that  MidAmerican  Energy has
unconditional  liability for a 50% share of  decommissioning  costs.  Also,  the
second amended complaint asserted three additional "causes of action" and sought
declaratory judgment(s) that (v) Nebraska Public Power District properly invests
revenues  from the sale of Cooper's  power and energy  under the power  purchase
agreement and amounts it has collected for decommissioning costs of Cooper; (vi)
absent an unconditional  obligation of MidAmerican Energy to pay decommissioning
costs, MidAmerican Energy is barred from receiving a refund of prepaid estimated
decommissioning   costs;  and  (vii)  absent  an  unconditional   obligation  of
MidAmerican  Energy  to  pay  estimated  decommissioning  costs,  a  declaration
defining  decommissioning costs is necessary. In response to the Nebraska Public
Power District's second amended  complaint,  MidAmerican  Energy filed its first
amended  answer and third  amended  counterclaims  containing  denials,  several
affirmative defenses, and the eleven counterclaims summarized below:

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

     (3)  that the Nebraska Public Power District violated  MidAmerican Energy's
          directions for application of payments;

     (4)  that transition  costs are not included in any  decommissioning  costs
          and are not any kind of costs that MidAmerican  Energy is obligated to
          pay;

     (5)  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;

     (6)  that the Nebraska  Public Power  District is equitably  estopped  from
          continuing  to operate the plant after the term of the power  purchase
          agreement so long as the Nebraska Public Power District does not repay
          all  amounts   MidAmerican   Energy  has   prefunded   for   estimated
          decommissioning costs together with other amounts in certain funds and
          accounts and for so long as the Nebraska  Public Power  District fails
          to provide  MidAmerican Energy with certain requested  accountings and
          information;

                                      -36-
<PAGE>

     (7)  that certain  funds,  accounts,  and reserves  are  excessive  and are
          required to be paid to  MidAmerican  Energy or credited to MidAmerican
          Energy's pre-2004 monthly power costs;

     (8)  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;

     (9)  that the Nebraska  Public Power  District has  mismanaged the plant in
          numerous  described  transactions  resulting in damage to  MidAmerican
          Energy;

     (10) that the Nebraska  Public Power District has breached its  contractual
          and  other  duties  to  MidAmerican  Energy  by  not  joining  certain
          litigation  and by  failing  to credit or agree to credit  MidAmerican
          Energy with any recovery for low-level radioactive waste; and

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

     In the  course  of  discovery,  the  Nebraska  Public  Power  District  has
contended  that  MidAmerican  Energy has some  responsibility  for some costs of
storage of spent fuel  resulting from the operation of the plant during the term
of the power purchase agreement. MidAmerican Energy disputes this.

     Subsequent  to the Nebraska  Public Power  District's  filing of its second
amended complaint,  MidAmerican Energy filed a mandamus petition with the Eighth
Circuit Court of Appeals  seeking an order of that court  directing the District
Court not to permit the Nebraska Public Power District to pursue,  at trial, the
first four "causes of action" in the second  amended  complaint.  The grounds of
MidAmerican  Energy's  petition  were that such four  "causes  of  action"  were
foreclosed by the December 12, 2000,  Eighth Circuit Court of Appeals  decision.
On April 3,  2002,  the  Eighth  Circuit  Court of  Appeals  granted  the relief
requested by MidAmerican  Energy.  Accordingly,  Nebraska  Public Power District
will not be  permitted to pursue the first four "causes of action" in the second
amended  complaint.  However,  the Nebraska  Public  Power  District has filed a
petition,  with the Eighth Circuit Court of Appeals, for rehearing.  MidAmerican
Energy believes that its counterclaims (1) and (2) have now been resolved by the
Eighth  Circuit Court of Appeals.  A trial is scheduled to begin on September 9,
2002,  to  determine:  the Nebraska  Public Power  District's  three  "causes of
action"  identified  generally  above as (v),  (vi) and  (vii)  and  MidAmerican
Energy's four  counterclaims  referenced above in (3), (4), (5) and (6). Current
plans are for MidAmerican  Energy's five counterclaims  referenced above in (7),
(8),  (9),  (10) and (11) to be tried at a later  time.  However,  the  Court is
currently re-examining such plans.

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

(A)  EXHIBITS

     None

(B)  REPORTS ON FORM 8-K

     On February 8, 2002, MidAmerican Energy filed a Form 8-K, dated February 8,
2002, stating it had issued $400 million of 6.75% medium-term notes due 2031 and
notified  holders of its 7.98% Quarterly  Income  Preferred  Securities that the
securities would be redeemed on March 11, 2002.

                                      -37-
<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
                                                  MIDAMERICAN ENERGY COMPANY
                                                  --------------------------
                                                         (Registrants)







Date  May 10, 2002                                /s/  Patrick J. Goodman
    --------------                                -----------------------------
                                                       Patrick J. Goodman
                                                   Vice President and Treasurer
                                                  of MidAmerican Funding, LLC
                                                  and Senior Vice President and
                                                    Chief Financial Officer of
                                                  MidAmerican Energy Company



                                      -38-

<PAGE>


                                  EXHIBIT INDEX

EXHIBIT NO.
-----------

     MidAmerican Energy
     ------------------

     15     Awareness Letter of Independent Accountants


                                      -39-