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 JUNE 30, 2001
                                                 -------------

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

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

Securities registered pursuant to Section 12(b) of the Act:

                                                        Name of each Exchange
     Title of Each Class                                 On which Registered
     -------------------                                 -------------------

7.98% MidAmerican Energy Company - Obligated
   Preferred Securities of Subsidiary Trust            New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

                   Preferred Stock, $3.30 Series, no par value
                   Preferred Stock, $3.75 Series, no par value
                   Preferred Stock, $3.90 Series, no par value
                   Preferred Stock, $4.20 Series, no par value
                   Preferred Stock, $4.35 Series, no par value
                   Preferred Stock, $4.40 Series, no par value
                   Preferred Stock, $4.80 Series, no par value
                   Preferred Stock, $5.25 Series, no par value
                   Preferred Stock, $7.80 Series, no par value
_______________________________________________________________________________

                              Title of each Class

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

As of July 31, 2001, all  70,980,203  outstanding  shares of MidAmerican  Energy
Company's voting stock were held by its parent company, MHC Inc.


<PAGE>


                           MIDAMERICAN ENERGY COMPANY

                                    FORM 10-Q

                                TABLE OF CONTENTS



                          PART I. FINANCIAL INFORMATION                 PAGE NO.


ITEM 1.    Financial Statements

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

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

                           PART II. OTHER INFORMATION

ITEM 1.    Legal Proceedings.............................................. 24

ITEM 6.    Exhibits and Reports on Form 8-K............................... 26

Signatures................................................................ 27

Exhibit Index............................................................. 28

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

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

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

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




DELOITTE & TOUCHE LLP

Des Moines, Iowa
July 20, 2001

                                      -3-
<PAGE>
                           MIDAMERICAN ENERGY COMPANY
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                 THREE MONTHS                   SIX MONTHS
                                                ENDED JUNE 30,                ENDED JUNE 30,
                                          --------------------------    --------------------------
                                             2001           2000           2001           2000
                                          -----------    -----------    -----------    -----------
<S>                                       <C>            <C>            <C>            <C>
OPERATING REVENUES
Regulated electric ....................   $   305,800    $   281,973    $   600,190    $   560,436
Regulated gas .........................        87,297         98,153        454,155        278,055
Nonregulated ..........................       204,593         88,936        431,882        145,423
                                          -----------    -----------    -----------    -----------
                                              597,690        469,062      1,486,227        983,914
                                          -----------    -----------    -----------    -----------
OPERATING EXPENSES
Regulated:
  Cost of fuel, energy and capacity ...        60,406         57,172        126,206        115,489
  Cost of gas sold ....................        52,735         61,054        345,185        172,552
  Other operating expenses ............       105,433        102,863        201,885        204,754
  Maintenance .........................        31,156         29,938         58,946         54,677
  Depreciation and amortization .......        50,645         49,140        101,455         97,534
  Property and other taxes ............        18,543         19,110         35,817         38,409
                                          -----------    -----------    -----------    -----------
                                              318,918        319,277        869,494        683,415
                                          -----------    -----------    -----------    -----------
Nonregulated:
  Cost of sales .......................       197,808         83,447        417,012        134,585
  Other ...............................         4,350          5,271          8,531          8,870
                                          -----------    -----------    -----------    -----------
                                              202,158         88,718        425,543        143,455
                                          -----------    -----------    -----------    -----------
Total operating expenses ..............       521,076        407,995      1,295,037        826,870
                                          -----------    -----------    -----------    -----------

OPERATING INCOME ......................        76,614         61,067        191,190        157,044
                                          -----------    -----------    -----------    -----------

NON-OPERATING INCOME
Interest and dividend income ..........         3,763          1,212          8,288          2,585
Other, net ............................        (4,022)        (1,941)        (7,967)        (4,060)
                                          -----------    -----------    -----------    -----------
                                                 (259)          (729)           321         (1,475)
                                          -----------    -----------    -----------    -----------

FIXED CHARGES
Interest on long-term debt ............        15,640         13,804         31,668         28,387
Other interest expense ................         2,570          4,101          3,747          7,001
Preferred dividends of subsidiary trust         1,995          2,057          4,052          4,052
Allowance for borrowed funds ..........          (261)          (374)          (753)          (753)
                                          -----------    -----------    -----------    -----------
                                               19,944         19,588         38,714         38,687
                                          -----------    -----------    -----------    -----------

INCOME BEFORE INCOME TAXES ............        56,411         40,750        152,797        116,882
INCOME TAXES ..........................        23,775         16,875         64,372         48,208
                                          -----------    -----------    -----------    -----------
NET INCOME ............................        32,636         23,875         88,425         68,674
PREFERRED DIVIDENDS ...................         1,268          1,238          2,507          2,477
                                          -----------    -----------    -----------    -----------

EARNINGS ON COMMON STOCK ..............   $    31,368    $    22,637    $    85,918    $    66,197
                                          ===========    ===========    ===========    ===========
</TABLE>
        The accompanying notes are an integral part of these statements.

                                      -4-
<PAGE>

                           MIDAMERICAN ENERGY COMPANY
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                  AS OF
                                                         -------------------------
                                                          JUNE 30,    DECEMBER 31,
                                                            2001          2000
                                                         ----------   ------------
                                                         (UNAUDITED)
<S>                                                      <C>            <C>
ASSETS
UTILITY PLANT
Electric .............................................   $4,521,507     $4,471,839
Gas ..................................................      842,534        831,203
                                                         ----------     ----------
                                                          5,364,041      5,303,042
Less accumulated depreciation and amortization .......    2,775,637      2,680,420
                                                         ----------     ----------
                                                          2,588,404      2,622,622
Construction work in progress ........................       41,909         38,584
                                                         ----------     ----------
                                                          2,630,313      2,661,206
                                                         ----------     ----------

POWER PURCHASE CONTRACT ..............................       78,428         82,231
                                                         ----------     ----------
CURRENT ASSETS
Cash and cash equivalents ............................       13,805          9,677
Receivables ..........................................      240,155        422,661
Inventories ..........................................       43,809         69,130
Prepaid taxes ........................................       23,956         22,889
Other ................................................        8,873          9,789
                                                         ----------     ----------
                                                            330,598        534,146
                                                         ----------     ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ...........      269,004        256,053
REGULATORY ASSETS ....................................      223,356        240,934
OTHER ASSETS .........................................       67,583         48,996
                                                         ----------     ----------
TOTAL ASSETS .........................................   $3,599,282     $3,823,566
                                                         ==========     ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholder's equity ..........................   $1,164,395     $1,161,968
MidAmerican preferred securities, not subject to
  mandatory redemption ...............................       31,759         31,759
Preferred securities, subject to mandatory redemption:
  MidAmerican preferred securities ...................       36,680         50,000
  MidAmerican-obligated preferred securities of
    subsidiary trust holding solely MidAmerican
    junior subordinated debentures ...................      100,000        100,000
Long-term debt (excluding current portion) ...........      820,338        820,082
                                                         ----------     ----------
                                                          2,153,172      2,163,809
                                                         ----------     ----------
CURRENT LIABILITIES
Notes payable ........................................       40,500         81,600
Current portion of long-term debt ....................      101,313        101,600
Current portion of power purchase contract ...........       16,554         16,554
Accounts payable .....................................      155,051        308,784
Taxes accrued ........................................       81,011        124,493
Interest accrued .....................................       10,670         12,016
Other ................................................       33,010         34,667
                                                         ----------     ----------
                                                            438,109        679,714
                                                         ----------     ----------
OTHER LIABILITIES
Power purchase contract ..............................       35,728         35,728
Deferred income taxes ................................      539,378        540,608
Investment tax credit ................................       63,751         66,209
Other ................................................      369,144        337,498
                                                         ----------     ----------
                                                          1,008,001        980,043
                                                         ----------     ----------
TOTAL CAPITALIZATION AND LIABILITIES .................   $3,599,282     $3,823,566
                                                         ==========     ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -5-
<PAGE>


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


                                                                   SIX MONTHS
                                                                 ENDED JUNE 30,
                                                             ----------------------
                                                               2001         2000
                                                             ---------    ---------
<S>                                                          <C>          <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...............................................   $  88,425    $  68,674
Adjustments to reconcile net income to net cash provided:
  Depreciation and amortization ..........................     101,681       97,681
  Deferred income taxes and investment tax credit, net ...      (8,239)      (5,687)
  Amortization of other assets ...........................      25,893       24,490
  Net change in accrued customer rate credits ............      13,190       (6,988)
  Cash inflow of accounts receivable securitization ......          --       12,877
  Impact of changes in working capital ...................       7,458        3,638
  Other ..................................................       5,977       (5,094)
                                                             ---------    ---------
    Net cash provided ....................................     234,385      189,591
                                                             ---------    ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ........................     (74,247)     (80,780)
Quad Cities Generating Station decommissioning trust fund       (4,150)      (4,152)
Nonregulated capital expenditures ........................      (1,845)         (38)
Other investing activities, net ..........................      (2,801)      (2,764)
                                                             ---------    ---------
  Net cash used ..........................................     (83,043)     (87,734)
                                                             ---------    ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid ...........................................     (92,507)      (2,477)
Retirement of long-term debt, including reacquisition cost        (287)    (110,784)
Reacquisition of preferred securities ....................     (13,320)          --
Net increase (decrease) in notes payable .................     (41,100)      10,711
                                                             ---------    ---------
  Net cash used ..........................................    (147,214)    (102,550)
                                                             ---------    ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .....       4,128         (693)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .........       9,677        5,167
                                                             ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............   $  13,805    $   4,474
                                                             =========    =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ................   $  32,694    $  34,395
                                                             =========    =========
Income taxes paid ........................................   $ 107,217    $  89,477
                                                             =========    =========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                      -6-
<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 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. MidAmerican Energy is currently conducting field investigations
at  eighteen  sites and has  conducted  interim  removal  actions  at six of the
eighteen sites. In addition, MidAmerican Energy has completed investigations and
removals at four sites.  MidAmerican Energy is continuing to evaluate several of
the sites to  determine  the  future  liability,  if any,  for  conducting  site
investigations or other site activity.

     MidAmerican Energy estimates the range of possible costs for investigation,
remediation  and monitoring for the sites  discussed  above to be $22 million to
$68 million.  MidAmerican Energy's estimate of the probable cost for these sites
as of June 30, 2001 was $24  million.  The  estimate  consists of $2 million for
investigation   costs,  $8  million  for  remediation  costs,  $12  million  for
groundwater  treatment  and  monitoring  costs and $2 million  for  closure  and
administrative  costs.  This  estimate  has been  recorded as a liability  and a
regulatory  asset for future  recovery.  MidAmerican  Energy projects that these
amounts will be paid or incurred over the next 10 years.

     The  estimate  of  probable  remediation  costs  is  established  on a site
specific  basis.  The costs are  accumulated in a three-step  process.  First, a
determination  is made as to  whether  MidAmerican  Energy

                                      -7-
<PAGE>


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

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

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

     (2)  CLEAN AIR ACT -

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

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

     On February 27, 2001,  the Supreme Court,  in Whitman v. American  Trucking
Associations,  upheld the standards,  ruling that the  Environmental  Protection
Agency did not exceed its constitutional delegation of authority in establishing
the standards in 1997. The court ruled that the Clean Air Act's  requirement for
the Environmental  Protection  Agency to establish  National Ambient Air Quality
Standards at a level "requisite" to protect public health,  or "sufficient,  but
not more than necessary",  is within the constitutional scope of discretion that
Congress can delegate to a federal  agency.  The court also explicitly held that
cost cannot be taken into account when setting the standards. The court remanded

                                      -8-
<PAGE>

the issue of  implementation of the ozone standard.  However,  the Environmental
Protection Agency is moving forward with analyzing  existing  monitored data and
determining attainment status.

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

C.  RATE MATTERS:

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

     On March 14,  2001,  the Office of the Consumer  Advocate  filed a petition
with  the  Iowa  Utilities  Board  to  reduce  Iowa  retail  electric  rates  by
approximately  $77  million  annually.  On June  11,  2001,  MidAmerican  Energy
responded to that petition by filing a request with the Iowa Utilities  Board to
increase  MidAmerican  Energy's  Iowa  retail  electric  rates  by  $51  million
annually. On July 12, 2001,  MidAmerican Energy, the Office of Consumer Advocate
and other parties  jointly filed a settlement  agreement with the Iowa Utilities
Board that,  if approved,  will freeze the rates in effect on December 31, 2000,
through December 31, 2005, and, with  modifications,  will reinstate the revenue
sharing  provisions  of the 1997 pricing plan  settlement  agreement.  Under the
proposed settlement agreement, 50% of revenues associated with returns on equity
between 12% and 14%,  and 83.33% of revenues  associated  with returns on equity
above 14%, in each year would be deferred as a  regulatory  liability to be used
to offset a portion of the cost of future generating plant investments.

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

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.

                                      -9-

<PAGE>

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

E.  DERIVATIVE FINANCIAL INSTRUMENTS:

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

     MidAmerican  Energy uses a variety of derivative  financial  instruments to
hedge the effect of price  changes on cash flows from expected  future  physical
transactions (cash flow hedges) and the fair value of physical purchase and sale
commitments  (fair value hedges) and to minimize price  volatility for regulated
gas  purchases.  The objective of  MidAmerican  Energy's  hedging  program is to
minimize the impact of changing  prices for natural gas and  electricity  on its
cash  flows.  Instruments  used for gas  hedging  transactions  include  futures
contracts, swaps and options. Instruments used for electric hedging transactions
include  forward  contracts and options.  Small volumes of derivative  financial
instruments  are  traded  from  time to  time to  profit  from  price  arbitrage
opportunities.

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

     For the six months  ended June 30, 2001,  net gains of $6,000,  $16,000 and
$353,000, representing the ineffectiveness of cash flow hedges, are reflected in
Nonregulated  Operating  Revenues,  Cost of Gas Sold and Regulated Cost of Fuel,
Energy and Capacity,  respectively.  During the twelve months  beginning July 1,
2001, it is anticipated  that all of the net  unrealized  gains (losses) on cash
flow hedges presently recorded as accumulated other comprehensive income will be
realized and recorded in earnings.

     Unrealized  gains and losses on fair value hedges are  recognized in income
as either Nonregulated  Operating Revenues,  Nonregulated Cost of Sales, 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

                                      -10-
<PAGE>

hedges on  earnings.  For the six months ended June 30, 2001, a net pre-tax loss
of $10,000,  representing the  ineffectiveness of fair value hedges, is included
in Nonregulated Operating Revenues.

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

     As of June 30, 2001,  MidAmerican Energy held the following  instruments as
hedges:

                                     Notional    Unit of        Fair Value
                                      Amount     Measure     Asset (Liability)
                                      ------     -------     -----------------

Natural Gas Futures - Net Short    4,930,000      MMBtu        $9,904,550
Natural Gas Swaps                    418,916      MMBtu        (4,465,108)
Natural Gas Options - Long           950,000      MMBtu        (1,676,334)
Natural Gas Options - Short          950,000      MMBtu             1,011
Electricity Forward
    Contracts - Net Short            305,600        MWh           588,056

     A $1/MMBtu  increase  in the price of natural gas would  increase  the fair
value of the natural  gas  instruments  by $5.3  million.  A $5/MWh  increase in
electricity would decrease the fair value of the electricity  forwards contracts
by $1.5 million.

F.  SEGMENT INFORMATION:

     MidAmerican  Energy  has  two  reportable  operating  segments:   regulated
electric and regulated  gas,  referred to as the electric and gas segments.  The
electric  segment  derives  most of its revenue  from retail  sales of regulated
electricity  to  residential,  commercial,  and  industrial  customers  and from
wholesale  sales to  other  utilities,  municipalities  and  marketers.  The gas
segment  derives  most of its  revenue  from  retail  sales  of  natural  gas to
residential,  commercial,  and industrial  customers and also earns  significant
revenues by transporting gas owned by others through its  distribution  systems.
Pricing for most electric and gas sales are established separately by regulatory
agencies;  therefore,  management  also reviews each segment  separately to make
decisions  regarding  allocation  of resources  and in  evaluating  performance.
Common operating costs,  interest income,  interest expense,  income tax expense
and equity in the net income or loss of investees are allocated to each segment.

                                      -11-

<PAGE>


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

                                    Three Months             Six Months
                                   Ended June 30,           Ended June 30
                                --------------------    ----------------------
                                  2001        2000         2001         2000
                                --------    --------    ----------    --------
Revenues:
  Electric...................   $305,800    $281,973    $  600,190    $560,436
  Gas   .....................     87,297      98,153       454,155     278,055
  Nonregulated and other (a).    204,593      88,936       431,882     145,423
                                --------    --------    ----------    --------
                                $597,690    $469,062    $1,486,227    $983,914
                                ========    ========    ==========    ========

Earnings on Common Stock:
  Electric...................   $ 35,847    $ 26,163    $   70,282    $ 53,934
  Gas   .....................     (5,875)        550        12,000      15,388
  Nonregulated and other (a).      1,396      (4,076)        3,636      (3,125)
                                --------    --------    ----------    --------
                                $ 31,368    $ 22,637    $   85,918    $ 66,197
                                ========    ========    ==========    ========

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

G.  OTHER COMPREHENSIVE INCOME:

     For the three  months  and six  months  ended  June 30,  2001,  MidAmerican
Energy's  total  comprehensive  income  was $38.4  million  and  $92.3  million,
respectively.  The  difference  from  Earnings  on  Common  Stock  is due to the
effective  portion of net gains and losses on  MidAmerican  Energy's  derivative
instruments  classified as cash flow hedges. For the three months and six months
ended June 30, 2000, there was no difference between MidAmerican  Energy's total
comprehensive   income  and  Earnings  on  Common   Stock.   Accumulated   other
comprehensive  income  (loss),  which also includes  recognition  of the minimum
pension  liability  in the fourth  quarter of 2000,  was $4.0 million and $(2.4)
million as of June 30, 2001, and December 31, 2000.

                                      -12-

<PAGE>

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

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

     MidAmerican Energy Company is a public utility company headquartered in Des
Moines,  Iowa,  and  incorporated  in the  state  of Iowa.  It is the  principal
subsidiary of MHC Inc. MHC is a wholly owned subsidiary of MidAmerican  Funding,
LLC, whose sole member is MidAmerican Energy Holdings Company.

FORWARD-LOOKING STATEMENTS

     From time to time,  MidAmerican Energy may make forward-looking  statements
within the  meaning  of the  federal  securities  laws that  involve  judgments,
assumptions and other uncertainties  beyond its control.  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
Energy'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  Energy 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  Energy  has
identified   important  factors  that  could  cause  actual  results  to  differ
materially  from  those  expectations,  including  weather  effects on sales and
revenues,  fuel prices, fuel  transportation and other operating  uncertainties,
acquisition  uncertainty,  uncertainties  relating  to  economic  and  political
conditions and  uncertainties  regarding the impact of  regulations,  changes in
government policy,  utility industry  deregulation and competition.  MidAmerican
Energy assumes no responsibility to update forward-looking information contained
herein.

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

REGULATED GROSS MARGIN

     Regulated Electric Gross Margin -

                                          Three Months        Six Months
                                         Ended June 30,      Ended June 30,
                                         --------------      --------------
                                          2001    2000        2001    2000
                                          ----    ----        ----    ----
                                                    (In millions)
     Operating revenues................   $306    $282        $600    $560
     Cost of fuel, energy and capacity.     60      57         126     115
                                          ----    ----        ----    ----
       Electric gross margin...........   $246    $225        $474    $445
                                          ====    ====        ====    ====

     Electric  gross margin for the second quarter of 2001 increased $21 million
compared to the second quarter of 2000.

     MidAmerican  Energy's  margins on  wholesale  sales,  net of a reserve  for
revenue sharing, increased $18.9 million compared to the second quarter of 2000.
Sales volumes for wholesale sales increased 38.8%. Wholesale sales are the sales
of  energy  to  other  utilities,   municipalities   and  marketers  outside  of
MidAmerican Energy's delivery system.

                                      -13-
<PAGE>

     Temperatures  during the three months ended June 30, 2001, were hotter than
temperatures  in the second quarter of 2000,  resulting in increased usage and a
corresponding $6 million  increase in electric  margin.  Other usage factors not
dependent on weather  decreased  electric margin by $6.0 million compared to the
second quarter of 2000. In total, retail sales of electricity increased 1.7% for
the three months ended June 30, 2001.

     For the six months ended June 30, 2001, compared to the first six months of
2000, electric gross margin increased $29 million.

     MidAmerican  Energy's  margins on  wholesale  sales,  net of a reserve  for
revenue  sharing,  increased  $22.2 million  compared to the first six months of
2000, and related sales volumes  increased 27.5%.  Wholesale sales are the sales
of  energy  to  other  utilities,   municipalities   and  marketers  outside  of
MidAmerican  Energy's delivery system.  Additionally,  electric revenues for the
six months  ended June 30, 2001,  reflect a $3.3 million  increase in gains from
the sale of emission allowances.

     Temperatures  during the six months ended June 30, 2001,  were more extreme
than  temperatures  in the six months  ended June 30,  2000,  resulting in a $15
million  increase  in electric  margin.  Other usage  factors not  dependent  on
weather  decreased  electric  margin by $13.2 million  compared to the first six
months of 2000. In total, retail sales of electricity increased 1.8% for the six
months ended June 30, 2001.

     Regulated Gas Gross Margin -

                                Three Months       Six Months
                               Ended June 30,    Ended June 30,
                             ----------------    --------------
                              2001      2000      2001    2000
                             -----      ----      ----    ----
                                        (In millions)
     Operating revenues.     $  87      $ 98      $454    $278
     Cost of gas sold...        53        61       345     173
                             -----      ----      ----    ----
       Gas gross margin.     $  34      $ 37      $109    $105
                             =====      ====      ====    ====

     Regulated gas revenues  include  purchase gas  adjustment  clauses  through
which  MidAmerican  Energy is allowed  to recover  the cost of gas sold from its
retail gas utility customers. Consequently, fluctuations in the cost of gas sold
do not affect gross margin or net income  because  revenues  reflect  comparable
fluctuations  from the  purchase  gas  adjustment  clauses.  An  increase in the
per-unit cost of gas for the six-month  period ended June 30, 2001,  compared to
the  same  period  in  2000,   increased  revenues  and  cost  of  gas  sold  by
approximately $150 million.

     Gas gross  margin  decreased  $3  million  for the  second  quarter of 2001
compared  to the  2000  quarter  due  primarily  to  conservation  by  customers
following the colder-than-normal temperature conditions in the first quarter and
high gas prices. Temperatures during the second quarter of 2001 were warmer than
temperatures  in the second  quarter  of 2000,  which  also  contributed  to the
decrease in gas margin. Total gas retail sales decreased 7.0%.

     Compared to the first six months of 2000,  gas gross  margin  increased $4
million due primarily to temperature conditions in the first quarter of 2001.

                                      -14-

<PAGE>


REGULATED OPERATING EXPENSES

     Regulated  other operating  expenses  increased $2.6 million for the second
quarter  of 2001  compared  to the  second  quarter  of 2000.  Increases  in the
allowance for uncollectible  accounts as a result of the high natural gas prices
and in pension  and other  post-employment  benefits  costs  accounted  for $3.6
million of the increase. This was partially offset by a decrease of $0.8 million
in Cooper Nuclear Station costs.

     Regulated  other  operating  expenses  decreased  $2.9  million for the six
months ended June 30, 2001 compared to the six-month  period in 2000.  Decreases
in Quad Cities Station and Cooper costs  resulted in a $3.8 million  decrease in
other  operating  expenses.  Reductions in health care and other benefit  costs,
energy efficiency program costs, information technology expenses and assessments
from utility regulatory agencies also contributed to the decrease. The decreases
were partially offset by increases in the allowance for  uncollectible  accounts
as  a  result  of  the  high  natural  gas  prices  and  in  pension  and  other
post-employment benefits costs totaling $7.0 million.

     Maintenance  expenses  for the three and six months  ended  June 30,  2001,
compared  to  the  2000  periods   increased  $1.2  million  and  $4.3  million,
respectively,  due  principally  to  increased  electric  and  gas  distribution
expenses.  Maintenance expense related to Quad Cities Station decreased for both
2001 periods compared to the respective 2000 periods.

     Depreciation and amortization expense increased $1.5 million for the second
quarter of 2001 and $3.9  million  for the first six months of 2001  compared to
the  respective  periods  in 2000.  The  increases  were due  principally  to an
increase in depreciation rates implemented in 2001. An increase in utility plant
also contributed to the increases.  The comparative increase for the quarter was
reduced by additional  depreciation expense in the second quarter of 2000 due to
the  reclassification of transmission plant to distribution plant in conjunction
with  the  Federal  Energy  Regulatory   Commission's   orders  on  open  access
transmission.

     Property and other taxes for the three months and six months ended June 30,
2001, decreased $0.6 million and $2.6 million,  respectively,  relative to their
comparable  periods in 2000 due  principally  to an increase in use taxes in the
second quarter of 2000.

                                      -15-

<PAGE>


NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     Nonregulated Gross Margin -

                               Three Months          Six Months
                              Ended June 30,       Ended June 30,
                              --------------       --------------
                              2001      2000       2001      2000
                              ----      ----       ----      ----
                                         (In millions)
     Operating revenues..     $205       $89       $432      $145
     Cost of sales.......      198        83        417       135
                              ----       ---       ----      ----
       Gross margin......     $  7       $ 6       $ 15      $ 10
                              ====       ===       ====      ====

     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 81%
of the nonregulated natural gas revenues for the six months ended June 30, 2001,
are related to wholesale sales.

     Revenues from nonregulated  natural gas operations increased $114.1 million
to $194.1  million  for the second  quarter of 2001.  An increase in the average
price per unit sold,  reflective  of a 19%  increase in the average cost of gas,
accounted for $32.0 million of the increase in revenues. Sales volumes increased
22 million  MMBtus (103%)  resulting in an $82.1  million  increase in revenues.
Cost of sales  increased  $111.8  million to $191.3 million for the three months
ended June 30, 2001,  due to the  increases in the per-unit cost of gas sold and
sales  volumes.  Gross  margin  for  the  nonregulated  natural  gas  operations
increased  $2.3  million to $2.8  million  for the second  quarter of 2001.  The
improvement  in gross  margin  reflects an increase in margin per unit and sales
volumes.

     Revenues from nonregulated  natural gas operations increased $284.7 million
to $410.8  million for the first six months of 2001.  An increase in the average
price per unit sold,  reflective  of a 71%  increase in the average cost of gas,
accounted  for  $169.9  million  of the  increase  in  revenues.  Sales  volumes
increased 35 million  MMBtus (91%)  resulting  in a $114.7  million  increase in
revenues.  Cost of sales increased  $280.5 million to $404.8 million for the six
months ended June 30,  2001,  due to the  increases in the per-unit  cost of gas
sold and sales volumes. Gross margin for the nonregulated natural gas operations
increased  $4.2  million to $6.0  million for the first six months of 2001.  The
improvement  in gross  margin  reflects an increase in margin per unit and sales
volumes.

     As of December 31, 2000,  all  non-residential  customers in Illinois  have
been allowed to select their electric power supplier. For the three months ended
June 30,  2001,  compared  to the three  months  ended  June 30,  2000,  related
revenues  increased  $3.2  million,  and related  cost of sales  increased  $3.8
million, resulting in a $0.6 million decrease in gross margin. For the six-month
period ended June 30, 2001, revenues increased $5.4 million to $6.8 million, and
related cost of sales  increased  $4.3 million to $5.4  million,  resulting in a
$1.1 million increase in gross margin.

     Nonregulated  revenues for the second  quarter of 2001 include $2.6 million
from MidAmerican Energy's market access service project compared to $4.5 million
in the second  quarter of 2000.  The pilot project  allows larger Iowa customers
that are  participating  in the project to choose their electric power supplier.
MidAmerican  Energy's revenues from project  participants  related to non-supply
services,  such as  distribution  and  transmission,  are reflected in regulated
electric  revenues.  Cost of sales related to the market access service  project
decreased  $1.5 million to $2.1 million for the second  quarter of 2001. For the
six-month  comparison,  revenues from the project  totaled $6.2 million and $8.6
million for 2001 and 2000, respectively.  The related cost of sales totaled $5.4
million and $8.3 million for 2001 and 2000, respectively.

                                      -16-
<PAGE>


     MidAmerican  Energy's  nonregulated  revenues in the second quarter of 2001
include $2.1 million of pre-tax income from an award for successful  performance
under an incentive gas procurement  program.  Similar awards of $1.0 million and
$0.9  million  were  recorded  in  the  first  and  second   quarters  of  2000,
respectively.

NON-OPERATING INCOME AND INTEREST EXPENSE

     Interest and Dividend Income -

     The increases in interest income for the three-month and six-month  periods
were  due   principally   to  increases  of  $2.3  million  and  $4.9   million,
respectively,  for interest income on a note  receivable  related to MidAmerican
Energy's  accounts  receivable  sold.  The increase in the note  receivable is a
result of the increased balance in receivables sold.

     Other, Net -

     Other,  Net, which includes a number of non-operating  income and deduction
items,  decreased  Non-Operating  Income by $4.0 million and $1.9 million in the
three  months  ended June 30, 2001 and 2000,  respectively.  Other,  Net reduced
Non-Operating  Income by $8.0 million and $4.1 million for the six-month periods
ended June 30, 2001, and 2000, respectively.

     Other,  Net  includes  a discount  on sold  accounts  receivable,  net of a
subservicer fee charged to MidAmerican Energy Funding  Corporation for servicing
the  accounts.  The  discount is designed to cover the  expenses of  MidAmerican
Energy Funding Corporation,  including subservicer fees, monthly  administrative
costs and  interest.  The  discount is recorded in Other,  Net because it is not
reflected in utility cost of service for regulatory purposes.  The discount, net
of the subservicer  fee,  reduced Other, Net by $3.3 million and $2.2 million in
the second quarter of 2001 and 2000, respectively,  and by $8.8 million and $4.4
million for the six months ended June 30, 2001 and 2000, respectively.

     Income related to  corporate-owned  life insurance  policies decreased $0.7
million and $1.1 million in the three months and six months ended June 30, 2001,
respectively,  compared  to  the  same  periods  in  2000.  Income  from  equity
investments decreased $0.6 million compared to the second quarter of 2000.

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

     Fixed Charges -

     The  increase  in  interest  on  long-term  debt  in 2001  compared  to the
respective  periods in 2000 was due to interest on $162  million of  MidAmerican
Energy medium-term notes issued in July 2000, net of the impact of maturities of
long-term debt in 2000.

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

                                      -17-

<PAGE>


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

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

     As  reflected on the  Consolidated  Statements  of Cash Flows,  MidAmerican
Energy's net cash provided from  operating  activities was $234 million and $190
million for the six months ended June 30, 2001 and 2000, respectively.

INVESTING ACTIVITIES AND PLANS

     Utility Construction Expenditures -

     MidAmerican  Energy's  primary  need for  capital is  utility  construction
expenditures.   For  the  first  six  months  of  2001,   utility   construction
expenditures  totaled $74  million,  including  allowance  for funds used during
construction,  or capitalized  financing  costs, and Quad Cities Station nuclear
fuel purchases.  All such expenditures were met with cash generated from utility
operations, net of dividends.

     Forecasted utility construction expenditures, including allowance for funds
used during  construction are $223 million for 2001.  Capital  expenditure needs
are reviewed regularly by management and may change significantly as a result of
such reviews.  On July 10, 2001,  MidAmerican  Energy announced plans to develop
and construct two electric generating plants in Iowa, requiring an investment of
approximately  $1.5 billion.  Participation by others in a portion of the second
plant is being  discussed.  The two  plants  will  provide  approximately  1,400
megawatts  of  generating   capacity.   MidAmerican   Energy  expects  to  begin
construction  in  Spring  2002 on the  first  project,  a  540-megawatt  natural
gas-fired combined cycle unit which has an estimated cost of $340 million. It is
anticipated  that the first phase of the project  will be completed in 2003 with
the remainder being completed in 2005. MidAmerican Energy presently expects that
all utility  construction  expenditures for the next five years will be met with
the issuance of long-term debt and cash generated from utility  operations,  net
of  dividends.  The actual level of cash  generated  from utility  operations is
affected by, among other  things,  economic  conditions  in the utility  service
territory, weather and federal and state regulatory actions.

     Nuclear Decommissioning -

     Each  licensee  of a nuclear  facility  is  required  to provide  financial
assurance for the cost of  decommissioning  its licensed  nuclear  facility.  In
general,  decommissioning  of a  nuclear  facility  means to safely  remove  the
facility  from  service  and  restore  the  property  to  a  condition  allowing
unrestricted  use by the operator.  Based on  information  presently  available,
MidAmerican  Energy expects to contribute  approximately  $41 million during the
period 2001 through 2005 to external  trusts  established  for the investment of
funds for decommissioning Quad Cities Station.  Approximately 60% of the trusts'
funds are now invested in domestic  corporate debt and common equity securities.
The remainder is invested in investment grade municipal and U.S. Treasury bonds.
Funding for Quad Cities  Station is  reflected  in  depreciation  expense in the
Consolidated Statements of Income.

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

                                      -18-
<PAGE>


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

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

FINANCING ACTIVITIES, PLANS AND AVAILABILITY

     Debt Authorization 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 that supports its $250 million
commercial  paper  program  and its  variable  rate  pollution  control  revenue
obligations. In addition, MidAmerican Energy has a $5 million line of credit.

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

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

     Accounts Receivable Sold -

     In 1997,  MidAmerican  Energy  entered  into a revolving  agreement,  which
expires in 2002, to sell all of its right, title and interest in the majority of
its billed  accounts  receivable to MidAmerican  Energy 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 June 30,  2001,  the
revolving  cash balance was $70 million,  and the amount  outstanding  under the
subordinated  note was $121.8  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  Consolidated  Balance Sheets. As of June 30, 2001, $191.3
million of accounts receivable, net of reserves, were sold under the agreement.

                                      -19-

<PAGE>


OPERATING ACTIVITIES AND OTHER MATTERS

     Legislative and Regulatory Evolution -

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

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

     In December 1999, the Federal Energy Regulatory Commission issued Order No.
2000 establishing among other things minimum  characteristics  and functions for
regional transmission organizations.  Public utilities that were not a member of
an independent  system operator at the time of the order were required to submit
a plan by which its  transmission  facilities would be transferred to a regional
transmission   organization   on  a  schedule  that  would  allow  the  regional
transmission organization to commence operating by December 15, 2001. On October
16, 2000, MidAmerican Energy filed with the Federal Energy Regulatory Commission
a plan for MidAmerican  Energy to comply with Order No. 2000 by participating in
the  formation of a for-profit  independent  transmission  company.  MidAmerican
Energy continues in its effort to form such a company.

     Accounting Effects of Industry Restructuring -

     A possible  consequence  of  deregulation  in the utility  industry is that
Statement of Financial  Accounting Standards No. 71 may no longer apply. SFAS 71
sets forth accounting  principles for operations that are regulated and meet the
stated criteria.  For operations that meet the criteria,  SFAS 71 allows,  among
other  things,  the  deferral  of expense  or income  that  would  otherwise  be
recognized  when  incurred.  With the  exception  of the  generation  operations
serving the Illinois jurisdiction, MidAmerican Energy's electric and gas utility
operations   currently   meet  the  criteria   required  by  SFAS  71,  but  its
applicability is periodically reexamined.  If portions of its utility operations
no longer meet the criteria of SFAS 71,  MidAmerican Energy could be required to
write off the related  regulatory assets and liabilities from its balance sheet,
and thus,  a material  adjustment  to earnings in that  period  could  result if
regulatory  assets are not recovered in  transition  provisions of any resulting
legislation.  As of June 30,  2001,  MidAmerican  Energy had  $223.4  million of
regulatory assets and $9.4 million of regulatory liabilities on its Consolidated
Balance Sheet.

     Energy Efficiency -

     MidAmerican  Energy's  regulatory assets as of June 30, 2001, included $9.6
million of deferred  energy  efficiency  costs.  Based on the  current  level of
recovery,  MidAmerican Energy expects to recover these costs by the end of 2001.
MidAmerican  Energy is also  allowed to recover  its ongoing  energy  efficiency
costs on a current basis.  These costs are being  collected from customers based
on  projected

                                      -20-
<PAGE>


annual   expenditures  of  $16.4  million,   which  may  be  adjusted  annually.
Amortization of the deferred energy  efficiency  costs and current  expenditures
for energy  efficiency costs will be reflected in other operating  expenses over
the related periods of recovery.

     Rate Matters: Electric -

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

     On March 14,  2001,  the Office of the Consumer  Advocate  filed a petition
with  the  Iowa  Utilities  Board  to  reduce  Iowa  retail  electric  rates  by
approximately  $77  million  annually.  On June  11,  2001,  MidAmerican  Energy
responded to that petition by filing a request with the Iowa Utilities  Board to
increase  MidAmerican  Energy's  Iowa  retail  electric  rates  by  $51  million
annually. On July 12, 2001,  MidAmerican Energy, the Office of Consumer Advocate
and other parties  jointly filed a settlement  agreement with the Iowa Utilities
Board that,  if approved,  will freeze the rates in effect on December 31, 2000,
through December 31, 2005, and, with  modifications,  will reinstate the revenue
sharing  provisions  of the 1997 pricing plan  settlement  agreement.  Under the
proposed settlement agreement, 50% of revenues associated with returns on equity
between 12% and 14%,  and 83.33% of revenues  associated  with returns on equity
above 14%, in each year would be deferred as a  regulatory  liability to be used
to offset a portion of the cost of future generating plant investments.

     MidAmerican Energy has negotiated  individual  electric contracts with some
of its  commercial and  industrial  customers in Iowa.  The negotiated  electric
contracts  have  differing  terms and  conditions  as well as  prices.  The vast
majority of the contracts  expire during the period 2003 through 2005,  although
some large  customers  have contracts  extending to 2008.  Some of the contracts
have price renegotiation and early termination  provisions exercisable by either
party.  Prices  are set as fixed  prices;  however,  many  contracts  allow  for
potential price  adjustments  with respect to  environmental  costs,  government
imposed public purpose programs,  tax changes,  and transition costs.  While the
contract prices are fixed (except for the potential  adjustment  elements),  the
costs  MidAmerican  Energy  incurs to fulfill these  contracts  will vary. On an
aggregate  basis the annual  revenues  under  contract  are  approximately  $180
million.

     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 June 30, 2001, was $24 million. This estimate has been recorded as a
liability  and a regulatory  asset for future  recovery  through the  regulatory
process.  Refer to Note B(1) of Notes to Consolidated  Financial  Statements for
further discussion of MidAmerican Energy's  environmental  activities related to
manufactured gas plant sites and cost recovery.

                                      -21-
<PAGE>

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

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

     Generating Capability -

     MidAmerican  Energy is interconnected  with Iowa and neighboring  utilities
and is involved in an electric power pooling  agreement  known as  Mid-Continent
Area Power Pool.  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  2004 and  continues  to manage its  generating  resources  to ensure an
adequate reserve in the future.  MidAmerican Energy has announced plans to add a
540-megawatt natural gas fired combined cycle unit to be completed in two phases
between 2003 and 2005. An additional  900 megawatts of coal-fired  generation is
expected  to  be   operational   later  this  decade.   However,   significantly
higher-than-normal   temperatures   during  the  cooling   season   could  cause
MidAmerican  Energy's  reserve to fall  below the 15%  minimum.  If  MidAmerican
Energy fails to maintain the appropriate reserve, significant penalties could be
contractually imposed by MAPP.

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

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

                                      -22-

<PAGE>


ACCOUNTING ISSUES

     In  January  2001  MidAmerican  Energy  adopted  SFAS  Nos.  133  and  138,
pertaining to the accounting for derivative  instruments and hedging activities.
These  pronouncements  require that  derivative  instruments be recorded at fair
value on the balance sheet and changes in fair value  recognized in income.  The
Financial   Accounting   Standards  Board's  Derivatives   Implementation  Group
continues  to identify  and provide  guidance on various  implementation  issues
related to SFAS  133/138 that are in varying  stages of review and  clearance by
the  Derivatives  Implementation  Group  and the  FASB.  MidAmerican  Energy  is
monitoring the issues being reviewed by the Derivatives Implementation Group and
the FASB to determine what, if any, impact they may have on MidAmerican Energy's
financial statements.

     In July 2001, the FASB issued SFAS No. 141,  "Business  Combinations",  and
SFAS No. 142, "Goodwill and Other Intangible Assets" which establish  accounting
and  reporting  for  business  combinations.  SFAS No. 141 requires all business
combinations entered into subsequent to June 30, 2001, to be accounted for using
the purchase method of accounting. SFAS No. 142 provides that goodwill and other
intangible assets with indefinite lives will not be amortized but will be tested
for impairment on an annual basis. These standards are effective for MidAmerican
Energy beginning on January 1, 2002.  MidAmerican Energy does not anticipate any
impact on its results of  operations,  cash flows or  financial  condition  as a
result of the adoption of these standards.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     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 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.

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

                                      -23-

<PAGE>


PART II - OTHER INFORMATION

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


     MidAmerican  Energy 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, 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,  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
          Nebraska  Public  Power  District  continues  to operate  Cooper after
          expiration  of  the  power  purchase   agreement   (September   2004),
          MidAmerican   Energy  is  not   entitled  to   reimbursement   of  any
          decommissioning funds it has paid to date or will pay in the future;

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

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

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

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

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

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

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

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

                                      -24-
<PAGE>


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

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

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

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

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

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

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

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

                                      -25-

<PAGE>


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

(A)  EXHIBITS

     Exhibit 15 - Awareness Letter of Independent Accountants

(B)  REPORTS ON FORM 8-K

     None.



                                      -26-

<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 ENERGY COMPANY
                              --------------------------------------------
                                               (Registrant)







Date  August 10, 2001                  /s/  Patrick J. Goodman
    -----------------         -------------------------------------------------
                                            Patrick J. Goodman
                              Senior Vice President and Chief Financial Officer

                                      -27-

<PAGE>



                                  EXHIBIT INDEX

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

     15   Awareness Letter of Independent Accountants




                                      -28-