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

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended SEPTEMBER 30, 1999
                                               ------------------


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 October 31, 1999, 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.....  12


                   PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings ...................................  27

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

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

Exhibit Index.................................................  30

                                      -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 September 30, 1999, and the
related consolidated statements of income and cash flows for the three-month and
nine-month periods then ended. 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  generally  accepted  auditing  standards,  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 generally accepted accounting principles.



DELOITTE & TOUCHE LLP


Des Moines, Iowa
October 25, 1999

                                      -3-

<PAGE>
<TABLE>
<CAPTION>


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

                                                THREE MONTHS                 NINE MONTHS
                                               ENDED SEPT. 30               ENDED SEPT. 30
                                          ------------------------    --------------------------
                                            1999          1998           1999            1998
                                          ---------    -----------    -----------    -----------
<S>                                       <C>          <C>            <C>            <C>
OPERATING REVENUES
Regulated electric ....................   $ 352,861    $   363,992    $   894,339    $   907,440
Regulated gas .........................      62,472         63,156        304,532        303,644
Nonregulated ..........................      43,062         20,844        106,113         59,680
                                          ---------    -----------    -----------    -----------
                                            458,395        447,992      1,304,984      1,270,764
                                          ---------    -----------    -----------    -----------
OPERATING EXPENSES
Regulated:
   Cost of fuel, energy and capacity ..      66,072         72,460        167,739        175,860
   Cost of gas sold ...................      29,474         33,127        164,928        171,096
   Other operating expenses ...........     107,828        120,574        328,854        343,072
   Maintenance ........................      26,969         28,129         85,440         82,509
   Depreciation and amortization ......      49,574         44,178        146,952        132,560
   Property and other taxes ...........      17,731         21,480         58,544         66,213
                                          ---------    -----------    -----------    -----------
                                            297,648        319,948        952,457        971,310
                                          ---------    -----------    -----------    -----------
Nonregulated:
   Cost of sales ......................      40,181         18,671         98,585         52,413
   Depreciation and amortization ......          75              -            223              -
   Other ..............................       3,648          2,651         11,622          5,871
                                          ---------    -----------    -----------    -----------
                                             43,904         21,322        110,430         58,284
                                          ---------    -----------    -----------    -----------
Total operating expenses ..............     341,552        341,270      1,062,887      1,029,594
                                          ---------    -----------    -----------    -----------

OPERATING INCOME ......................     116,843        106,722        242,097        241,170
                                          ---------    -----------    -----------    -----------

NON-OPERATING INCOME
Interest and dividend income ..........         767          1,695          2,454          5,089
Other, net ............................        (689)        (1,458)        (6,068)        (6,448)
                                          ---------    -----------    -----------    -----------
                                                 78            237         (3,614)        (1,359)
                                          ---------    -----------    -----------    -----------

FIXED CHARGES
Interest on long-term debt ............      16,696         18,280         49,803         53,425
Other interest expense ................       1,124          3,166          9,210          9,863
Preferred dividends of subsidiary trust       1,995          1,995          5,985          5,985
Allowance for borrowed funds ..........        (311)        (1,074)          (917)        (2,749)
                                          ---------    -----------    -----------    -----------
                                             19,504         22,367         64,081         66,524
                                          ---------    -----------    -----------    -----------

INCOME BEFORE INCOME TAXES ............      97,417         84,592        174,402        173,287
INCOME TAXES ..........................      38,422         35,048         68,871         72,184
                                          ---------    -----------    -----------    -----------
NET INCOME ............................      58,995         49,544        105,531        101,103
PREFERRED DIVIDENDS ...................       1,239          1,239          3,716          3,714
                                          ---------    -----------    -----------    -----------

EARNINGS ON COMMON STOCK ..............   $  57,756    $    48,305    $   101,815    $    97,389
                                          =========    ===========    ===========    ===========
</TABLE>

The accompanying notes are an integral part of these statements.


                                       -4-
<PAGE>
<TABLE>
<CAPTION>
                           MIDAMERICAN ENERGY COMPANY
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                                                              AS OF
                                                         -------------------------------------
                                                              SEPTEMBER 30         DECEMBER 31
                                                         -----------------------   -----------
                                                            1999         1998         1998
                                                         ----------   ----------   ----------
                                                               (UNAUDITED)
<S>                                                      <C>          <C>          <C>
ASSETS
UTILITY PLANT
Electric .............................................   $4,324,766   $4,139,099   $4,258,061
Gas ..................................................      797,182      774,482      786,169
                                                         ----------   ----------   ----------
                                                          5,121,948    4,913,581    5,044,230
Less accumulated depreciation and amortization .......    2,536,944    2,393,211    2,428,954
                                                         ----------   ----------   ----------
                                                          2,585,004    2,520,370    2,615,276
Construction work in progress ........................       31,330       87,442       26,369
                                                         ----------   ----------   ----------
                                                          2,616,334    2,607,812    2,641,645
                                                         ----------   ----------   ----------

POWER PURCHASE CONTRACT ..............................      136,628      161,999      144,875
                                                         ----------   ----------   ----------

CURRENT ASSETS
Cash and cash equivalents ............................        1,223       12,502        5,370
Receivables ..........................................      126,897      128,700      168,764
Inventories ..........................................      106,764       88,726       92,745
Other ................................................       30,327       29,834       32,126
                                                         ----------   ----------   ----------
                                                            265,211      259,762      299,005
                                                         ----------   ----------   ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ...........      216,212      164,360      183,279
                                                         ----------   ----------   ----------
REGULATORY ASSETS ....................................      273,526      308,455      305,489
                                                         ----------   ----------   ----------
OTHER ASSETS .........................................       24,230        8,765       11,237
                                                         ----------   ----------   ----------

TOTAL ASSETS .........................................   $3,532,141   $3,511,153   $3,585,530
                                                         ==========   ==========   ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholder's equity ..........................   $1,037,294   $  992,465   $  972,278
MidAmerican preferred securities, not subject to
  mandatory redemption ...............................       31,759       31,759       31,759
Preferred securities, subject to mandatory redemption:
  MidAmerican preferred securities ...................       50,000       50,000       50,000
  MidAmerican-obligated preferred securities of
     subsidiary trust holding solely MidAmerican
     junior subordinated debentures ..................      100,000      100,000      100,000
Long-term debt (excluding current portion) ...........      759,893      930,497      870,069
                                                         ----------   ----------   ----------
                                                          1,978,946    2,104,721    2,024,106
                                                         ----------   ----------   ----------
CURRENT LIABILITIES
Notes payable ........................................       89,115       73,600      206,221
Current portion of long-term debt ....................      170,638       49,628       60,897
Current portion of power purchase contract ...........       15,034       14,361       15,034
Accounts payable .....................................      146,989      129,119      159,420
Taxes accrued ........................................       76,779      110,002      106,132
Interest accrued .....................................       14,091       15,247       13,473
Other ................................................       41,729       30,069       35,405
                                                         ----------   ----------   ----------
                                                            554,375      422,026      596,582
                                                         ----------   ----------   ----------
OTHER LIABILITIES
Power purchase contract ..............................       68,093       83,143       68,093
Deferred income taxes ................................      582,173      588,284      584,675
Investment tax credit ................................       73,173       78,847       77,421
Other ................................................      275,381      234,132      234,653
                                                         ----------   ----------   ----------
                                                            998,820      984,406      964,842
                                                         ----------   ----------   ----------
TOTAL CAPITALIZATION AND LIABILITIES .................   $3,532,141   $3,511,153   $3,585,530
                                                         ==========   ==========   ==========
</TABLE>
The accompanying notes are an integral part of these statements.

                                      -5-
<PAGE>
<TABLE>
<CAPTION>

                           MIDAMERICAN ENERGY COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

                                                                  THREE MONTHS              NINE MONTHS
                                                                 ENDED SEPT. 30            ENDED SEPT. 30
                                                             ----------------------    ----------------------
                                                                1999        1998         1999         1998
                                                             ---------    ---------    ---------    ---------
<S>                                                          <C>          <C>          <C>          <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...............................................   $  58,995    $  49,544    $ 105,531    $ 101,103
Adjustments to reconcile net income to net cash provided:
    Depreciation and amortization ........................      55,004       50,926      162,585      147,341
    Net decrease in deferred income taxes and
      investment tax credit, net .........................      (2,675)      (2,951)      (6,750)      (8,836)
    Amortization of other assets .........................       9,328       11,162       29,335       30,195
    Net cash inflow of accounts receivable sale ..........       9,668            -        5,643            -
    Impact of changes in working capital .................     (51,415)     (24,268)     (18,536)      48,750
    Other ................................................      15,588       23,188        1,928       24,747
                                                             ---------    ---------    ---------    ---------
       Net cash provided .................................      94,493      107,601      279,736      343,300
                                                             ---------    ---------    ---------    ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ........................     (38,132)     (45,633)    (115,997)    (114,225)
Quad Cities Nuclear Power Station
  decommissioning trust fund .............................      (2,620)      (2,875)      (8,278)      (8,533)
Proceeds from sale of assets and other investments .......           -            -            -       19,854
Other investing activities, net ..........................         (87)         272       (1,317)     (18,844)
                                                             ---------    ---------    ---------    ---------
  Net cash used ..........................................     (40,839)     (48,236)    (125,592)    (121,748)
                                                             ---------    ---------    ---------    ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid ...........................................      (1,239)     (34,738)     (40,422)     (94,414)
Issuance of long-term debt, net of issuance cost .........           -            -            -      158,440
Retirement of long-term debt, including reacquisition cost        (134)    (157,879)        (763)    (233,490)
Reacquisition of preferred shares ........................           -           (1)           -           (4)
Net increase (decrease) in notes payable .................     (60,785)      32,100     (117,106)     (48,900)
                                                             ---------    ---------    ---------    ---------
  Net cash used ..........................................     (62,158)    (160,518)    (158,291)    (218,368)
                                                             ---------    ---------    ---------    ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .....      (8,504)    (101,153)      (4,147)       3,184
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .........       9,727      113,655        5,370        9,318
                                                             ---------    ---------    ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............   $   1,223    $  12,502    $   1,223    $  12,502
                                                             =========    =========    =========    =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ................   $  16,401    $  28,046    $  53,614    $  67,572
                                                             =========    =========    =========    =========
Income taxes paid ........................................   $ 103,171    $  19,194    $ 128,014    $  52,630
                                                             =========    =========    =========    =========
</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  (MidAmerican),  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,  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
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's latest Annual Report on Form 10-K.

     MidAmerican  is a public  utility with electric and natural gas  operations
and is the principal  subsidiary of MHC Inc. (MHC).  MHC is an indirect,  wholly
owned subsidiary of MidAmerican Energy Holdings Company (Holdings).

B.   ENVIRONMENTAL MATTERS:

         (1)  MANUFACTURED GAS PLANT FACILITIES -

     The  United  States  Environmental  Protection  Agency  (EPA) and the state
environmental  agencies have determined that  contaminated  wastes  remaining at
certain decommissioned manufactured gas plant (MGP) 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 is evaluating 27 properties  which were, at one time,  sites of
gas  manufacturing  plants in which it may be a  potentially  responsible  party
(PRP). The purpose of these  evaluations is to determine whether waste materials
are present,  whether such materials constitute an environmental or health risk,
and whether MidAmerican has any responsibility for remedial action.  MidAmerican
is currently conducting field investigations at eighteen sites and has conducted
interim removal  actions at six of the eighteen sites. In addition,  MidAmerican
has  completed  investigations  and  removals  at  four  sites.  MidAmerican  is
continuing to evaluate  several of the sites to determine the future  liability,
if any, for conducting site investigations or other site activity.

     MidAmerican  estimates  the  range of  possible  costs  for  investigation,
remediation  and monitoring for the sites  discussed  above to be $21 million to
$69 million.  MidAmerican's  estimate of the probable total cost for these sites
as of September 30, 1999, was $29 million.  This estimate has been recorded as a
liability and a regulatory asset for future recovery.

     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  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 remediation 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

                                      -7-
<PAGE>

monitoring at sites and costs of  compensation to employees for time expected to
be spent directly on the remediation effort. The estimated recorded  liabilities
for these properties are based upon preliminary  data. Thus,  actual costs could
vary  significantly  from the estimates.  The estimate  could change  materially
based on facts and circumstances  derived from site  investigations,  changes in
required  remedial  action  and  changes  in  technology  relating  to  remedial
alternatives. In addition, insurance recoveries for some or all of the costs may
be possible,  but the liabilities recorded have not been reduced by any estimate
of such recoveries.

     The  Illinois  Commerce  Commission  (ICC) has approved the use of a tariff
rider which permits  recovery of the actual costs of  litigation,  investigation
and  remediation  relating to former MGP sites.  MidAmerican's  present rates in
Iowa provide for a fixed annual  recovery of MGP costs.  MidAmerican  intends to
pursue  recovery  of the  remediation  costs from  other PRPs 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's financial position or results of operations.

         (2)  CLEAN AIR ACT -

     Following recommendations provided by the Ozone Transport Assessment Group,
the EPA,  in  November  1997,  issued  a Notice  of  Proposed  Rulemaking  which
identified  22 states  and the  District  of  Columbia  as making a  significant
contribution  to  nonattainment  of the ozone standard in downwind states in the
eastern half of the United States.  The  nonattainment of the downwind states is
based on the ozone standard  established  prior to the 1997 revisions  discussed
below.  In September  1998,  the EPA issued its final rules in this  proceeding.
Iowa is not subject to the emissions reduction  requirements in the final rules,
and, as such,  MidAmerican's  facilities are not currently subject to additional
emissions reductions as a result of this initiative.

     On July 18, 1997,  the EPA adopted  revisions  to the National  Ambient Air
Quality  Standards  (NAAQS) for ozone and a new  standard  for fine  particulate
matter.  Based on data to be obtained  from  monitors  located  throughout  each
state,  the EPA 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 May  1999,  the U.S.  District  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.  The EPA has
appealed  the  court's  ruling to the full panel of the U.S.  District  Court of
Appeals for the  District of Columbia  Circuit.  On October 29,  1999,  the U.S.
District Court of Appeals for the District of Columbia  Circuit granted in part,
and denied in part,  the petitions for panel  rehearing in the case. As a result
of the court's  decision and the current status of the standards,  the impact of
any new standards on MidAmerican is currently unknown.

C.   RATE MATTERS:

         (1)  ELECTRIC -

     In Iowa on June 1, 1998,  prices for electric  residential  customers  were
reduced by an amount which will have a $5.0 million  annual  impact on revenues.
The decrease was the last of three for Iowa residential customers as a result of
a 1997 settlement agreement.

                                      -8-
<PAGE>

     Through several steps from mid-1997 to the end of 1998, electric prices for
Iowa industrial customers were reduced by an amount which will have a $6 million
annual impact on revenues,  and electric  prices for Iowa  commercial  customers
were  reduced  by an  amount  which  will  have a $4  million  annual  impact on
revenues.  The reductions  were achieved  through a retail access pilot project,
negotiated  individual  electric  contracts  and a $1.5  million  tariffed  rate
reduction for certain non-contract commercial customers.

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

     If  MidAmerican's  annual  Iowa  electric  jurisdictional  return on common
equity  (ROE)  exceeds  12%,  then  earnings  above the 12% level will be shared
equally between customers and MidAmerican; if the ROE exceeds 14%, two-thirds of
MidAmerican's  share of those  earnings  above  the 12%  level  will be used for
accelerated  recovery  of  certain  regulatory  assets.  The 1997  pricing  plan
settlement agreement precludes MidAmerican from filing for increased rates prior
to 2001 unless the ROE falls below 9%. Other  parties  signing the agreement are
prohibited  from  filing for  reduced  rates  prior to 2001 unless the ROE after
reflecting  credits to  customers,  exceeds  14%.  On April 14,  1999,  the Iowa
Utilities Board (IUB) approved, subject to additional refund, MidAmerican's 1998
ROE calculation.  During the second quarter of 1999,  MidAmerican  refunded $2.2
million to its Iowa  non-contract  customers  related to the ROE calculation for
1998.

     Under an  Illinois  restructuring  law enacted in 1997,  a similar  sharing
mechanism is in place for MidAmerican's  Illinois electric operations.  Two-year
average  ROEs greater than a two-year  average  benchmark  will trigger an equal
sharing of earnings on the excess.  The  benchmark is a  calculation  of average
30-year Treasury Bond rates plus 5.5% for 1998 and 1999.  Legislation  passed in
July 1999  increases  the  benchmark  for 2000  through  2004 to 8.5%  above the
30-year  Treasury  bond rate.  The  initial  calculation,  which is still  being
defined and is due March 31, 2000, will be based on 1998 and 1999 results.

         (2)  GAS -

     In October 1998,  MidAmerican  made a filing with the IUB requesting a rate
increase  for its Iowa  retail  gas  customers.  An  interim  rate  increase  of
approximately $6.7 million annually was approved by the IUB on January 22, 1999,
effective  immediately.  On April 23, 1999, the IUB issued an order  approving a
settlement agreement between  MidAmerican,  the Iowa Office of Consumer Advocate
(OCA) and other parties which provides for an annual  increase of $13.9 million.
The new rates were implemented May 27, 1999.

     In November 1998,  MidAmerican filed with the South Dakota Public Utilities
Commission  (SDPUC)  requesting a rate  increase for its South Dakota retail gas
customers.  The  SDPUC,  on April 23,  1999,  issued an order  approving  a rate
increase of $2.4 million annually, effective May 1, 1999.

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

     MidAmerican's  utility operations are subject to the regulation of the IUB,
the ICC,  the  SDPUC,  and the  Federal  Energy  Regulatory  Commission  (FERC).
MidAmerican'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>

     Statement  of  Financial  Accounting  Standards  (SFAS)  No. 71 sets  forth
accounting  principles  for  operations  that are  regulated  and  meet  certain
criteria.  For operations  that meet the criteria,  SFAS 71 allows,  among other
things, the deferral of costs that would otherwise be expensed when incurred.  A
possible  consequence of the changes in the utility industry is the discontinued
applicability of SFAS 71. The majority of MidAmerican's electric and gas utility
operations  currently  meet the  criteria of SFAS 71, but its  applicability  is
periodically   reexamined.   On  December  16,  1997,  MidAmerican's  generation
operations  serving Illinois were no longer subject to the provisions of SFAS 71
due to passage of industry restructuring  legislation in Illinois. Thus in 1997,
MidAmerican was required to write off the regulatory assets and liabilities from
its balance sheet related to its Illinois generation operations.  The net amount
of such write-offs was not material. If other portions of its utility operations
no longer meet the criteria of SFAS 71,  MidAmerican  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.

E.   MIDAMERICAN-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES:

     The MidAmerican  Obligated  Mandatorily  Redeemable Preferred Securities of
Subsidiary  Trust Holding  Solely  MidAmerican  Junior  Subordinated  Debentures
included in the  Consolidated  Balance Sheets were issued by MidAmerican  Energy
Financing I (the Trust), a wholly owned statutory business trust of MidAmerican.
The sole assets of the Trust are $103.1  million of  MidAmerican  7.98% Series A
Debentures due 2045.

F.   SEGMENT INFORMATION:

     MidAmerican has two reportable  operating  segments:  electric and gas. The
electric  segment  derives  most of its revenue  from retail  sales of regulated
electricity to residential,  commercial,  and industrial  customers and sales to
other utilities; whereas the gas segment derives most of its revenue from retail
sales of  regulated  natural  gas to  residential,  commercial,  and  industrial
customers.  The gas segment also earns significant  revenues by transporting gas
owned by others through its distribution  systems.  Pricing for electric and gas
sales are established separately by regulatory agencies;  therefore,  management
also reviews each segment separately to make decisions  regarding  allocation of
resources and to evaluate  performance.  Common operating costs are allocated to
each segment.

     The  following  tables  provide  certain  MidAmerican   information  on  an
operating segment basis (in thousands):

                                    Three Months              Nine Months
                                   Ended Sept. 30            Ended Sept. 30
                              ----------------------    ----------------------
                                 1999         1998         1999         1998
                              ---------    ---------    ---------    ---------
Electric:
   Revenues ...............   $ 352,861    $ 363,992    $ 894,339    $907,440
   Operating income .......     126,143      119,624      233,067     233,638
Gas:
   Revenues ...............      62,472       63,156      304,532     303,644
   Operating income (loss)       (8,459)     (11,290)      13,346       6,269
Nonregulated and other (a):
   Revenues ...............      43,062       20,844      106,113      59,680
   Operating income (loss).        (841)      (1,612)      (4,316)      1,263

                                      -10-

<PAGE>


                                         September 30         December 31
                                  ------------------------    -----------
                                     1999          1998          1998
                                  ----------    ----------    ----------
Total Assets:

    Electric ...................  $2,856,975    $2,859,896    $2,897,657
    Gas ........................     649,934       631,951       672,072
    Nonregulated and other (a) .      17,232        19,306        15,801


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

G.   OTHER COMPREHENSIVE INCOME:

     For the nine  months  ended  September  30,  1999 and 1998,  there  were no
differences between  MidAmerican's  comprehensive  income and earnings on common
stock.

                                      -11-

<PAGE>

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

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

     MidAmerican Energy Company  (MidAmerican) is a public utility with electric
and natural gas operations and is the principal subsidiary of MHC Inc. (MHC), an
Iowa Corporation. MHC is headquartered in Des Moines, Iowa.

FORWARD-LOOKING STATEMENTS

     From time to time,  MidAmerican 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's  expectations,
beliefs,  future plans and strategies,  anticipated events or trends and similar
comments  concerning matters that are not historical facts.  Investors and other
users of the  forward-looking  statements are cautioned that such statements are
not  a  guarantee  of  future   performance   of   MidAmerican   and  that  such
forward-looking  statements  are subject to risks and  uncertainties  that could
cause actual results to differ  materially  from those  expressed in, or implied
by, such statements.  Some, but not all, of the risks and uncertainties  include
weather  effects  on sales  and  revenues,  fuel  prices,  fuel  transportation,
competitive  factors,  general  economic  conditions  in  MidAmerican's  service
territory, interest rates, inflation and federal and state regulatory actions.

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

EARNINGS DISCUSSION

     MidAmerican's  earnings on common stock for the third  quarter of 1999 were
$57.8 million compared to $48.3 million for the third quarter of 1998.  Earnings
on common  stock for the nine months  ended  September  30, 1999 and 1998,  were
$101.8  million and $97.4  million,  respectively.  Following is a discussion of
significant factors affecting earnings.

REGULATED GROSS MARGIN

Regulated Electric Gross Margin:
--------------------------------

                                         Three Months            Nine Months
                                        Ended Sept. 30         Ended Sept. 30
                                        ---------------        ---------------
                                        1999       1998        1999       1998
                                        ----       ----        ----       ----
                                                     (In millions)
  Operating revenues ................   $353       $364        $894       $907
  Cost of fuel, energy and capacity .     66         72         168        176
                                        ----       ----        ----       ----
      Electric gross margin .........   $287       $292        $726       $731
                                        ====       ====        ====       ====

     MidAmerican's  electric  gross margin for the  three-month  and  nine-month
periods  ended  September  30, 1999,  decreased  $5 million from the  comparable
periods in 1998. The impact of various  factors  affecting  electric  margin are
discussed in the following paragraphs.

                                      -12-
<PAGE>

     A decrease in revenues from energy  efficiency cost recovery  accounted for
$2.2  million and $6.1  million of the  decrease in revenues  and margin for the
three- and nine-month comparisons, respectively.  Approximately $9.0 million and
$27.8  million  of  MidAmerican's  electric  revenues  for the 1999  three-  and
nine-month  periods,  respectively,  were from the recovery of energy efficiency
program costs.  Collection of deferred energy efficiency costs decreased in 1999
compared to the 1998 periods due to the  completion  of one of the four recovery
periods.   Changes  in  revenues  from  energy   efficiency  cost  recovery  are
substantially offset by corresponding changes in other operating expenses. Refer
to the  discussion  under "Energy  Efficiency"  in the OPERATING  ACTIVITIES AND
OTHER MATTERS section of MD&A for further discussion.

     Revenues  and gross margin for the 1999 periods  reflect  price  reductions
which  were not in effect,  or were only  partially  in effect,  during the 1998
periods presented.  In June 1998, revenues from Iowa residential  customers were
reduced $5 million annually.  Since July 1997,  MidAmerican has reduced revenues
from its Iowa commercial and industrial  customers a total of approximately  $10
million  annually  through  negotiated  contracts and a tariffed rate reduction.
These  reductions were only partially in effect in the 1998  nine-month  period.
Revenues  from  Illinois  customers  were  reduced  $0.9  million in August 1998
related to Illinois utility industry restructuring.  MidAmerican also recorded a
refund accrual for a revenue  sharing  arrangement in Iowa. The accrual  reduced
revenues  and margin by $9.3  million  and $18.3  million  for the  quarter  and
year-to-date  periods  ended  September 30, 1999,  respectively.  Refer to "Rate
Matters: Electric" in the OPERATING ACTIVITIES AND OTHER MATTERS section of MD&A
for a  discussion  of  revenue  sharing.  The  combined  effect  of the  revenue
reductions  and the revenue  sharing  accrual  decreased  revenues  and electric
margin by $10.7  million  for the third  quarter of 1999  compared  to the third
quarter of 1998 and $24.2  million for nine months  ended  September  30,  1999,
compared to the same period in 1998.

     For the third quarter of 1999, temperatures were close to normal, resulting
in a $1 million  increase  in electric  margin for the  period.  Compared to the
third quarter of 1998, which was hotter than normal,  the effect of temperatures
decreased electric margin by $13 million.  An increase in sales not dependent on
weather and moderate growth in the number of customers  significantly offset the
effect of the milder  temperatures  compared  to the third  quarter of 1998.  In
total, retail sales of electricity decreased 0.5%.

     Temperatures  during the nine months ended  September 30, 1999, were milder
than normal  resulting  in an $8 million  reduction  of electric  margin for the
period.  Compared to the nine-month  period ended  September 30, 1998,  electric
margin  decreased  $14 million from the effect of  temperatures.  An increase in
sales not dependent on weather,  moderate growth in the number of customers, and
mix of sales offset the decrease due to milder  temperatures.  In total,  retail
sales of electricity were basically unchanged.

     MidAmerican  also  sells  energy and  capacity  in the  off-system  market.
Margins on off-system sales,  which account for most of MidAmerican's  sales for
resale,  contributed  $7.0 million and $29.2 million more to gross margin in the
three- and nine-month  periods ended  September 30, 1999, than in the comparable
periods in 1998.  The  increases  were due  primarily to lower costs per unit of
energy  sold,  which in part was due to  improved  availability  of Quad  Cities
Nuclear  Power Station (Quad Cities  Station) in 1999.  Additionally,  favorable
sales  prices  during  the hot  temperatures  in July  1999  contributed  to the
increase.

     Deregulation of the Illinois  electric utility industry resulted in changes
in the way  certain  taxes are  assessed  in  Illinois.  One of the taxes is now
assessed  directly  on the  energy  consumer  instead of  through  the  utility.
Accordingly,   MidAmerican's  electric  revenues  and  electric  margin  reflect
reductions of $0.3 million and $2.8 million in the quarter and nine-month period
ended September 30, 1999, respectively, for this tax collection change.

                                      -13-
<PAGE>

Regulated Gas Gross Margin:
---------------------------

                                        Three Months          Nine Months
                                       Ended Sept. 30       Ended Sept. 30
                                      ----------------      ---------------
                                      1999       1998       1999       1998
                                      ----       ----       ----       ----
                                                  (In millions)
     Operating revenues.........      $ 62       $ 63       $305       $304
     Cost of gas sold...........        29         33        165        171
                                      ----       ----       ----       ----
         Gas gross margin.......      $ 33       $ 30       $140       $133
                                      ====       ====       ====       ====

     MidAmerican's  regulated  gas  revenues  include  purchase  gas  adjustment
clauses (PGAs)  through which  MidAmerican 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 PGAs.  A  decrease  in the
per-unit cost of gas for the third quarter of 1999 compared to the third quarter
of 1998 decreased  revenues and cost of gas sold by approximately  $3.0 million.
For the nine-month  period  comparison,  revenues and cost of gas decreased $9.4
million due to a change in the average per-unit cost of gas.

     Recovery of gas energy efficiency  program costs decreased $1.2 million and
$2.0 million for the 1999 three- and nine-month  periods  presented  compared to
the same  periods  in 1998.  Approximately  $3.2  million  and $11.2  million of
MidAmerican's  gas  revenues  for  the  1999  three-  and  nine-month   periods,
respectively,  were from the recovery of gas energy  efficiency  program  costs.
Again,   changes  in  revenues   from  energy   efficiency   cost  recovery  are
substantially offset by corresponding changes in other operating expenses. Refer
to the  discussion  under "Energy  Efficiency"  in the OPERATING  ACTIVITIES AND
OTHER MATTERS section of MD&A for further discussion.

     On January 22, 1999, the Iowa Utilities Board (IUB) approved a $6.7 million
annual  interim  increase  in gas  rates  for Iowa  retail  customers  effective
immediately. An additional increase was implemented on May 27, 1999, as a result
of the IUB's approval of a final rate increase of $13.9 million annually.  These
increases  contributed  approximately  $2.5  million  and  $5.4  million  to the
comparative  increase in gas margin for the three- and nine-month  periods ended
September 30, 1999, respectively.

     Temperatures  in the first nine  months of 1999 were  warmer  than  normal,
resulting in a $7 million decrease in gas gross margin for the period.  Compared
to the same period in 1998, gas margin increased $3 million due to the effect of
temperatures.  Customer  growth  resulted in a $1.6 million  improvement  in gas
margin in the 1999  period.  In total,  retail sales of natural gas in the first
nine months of 1999 increased 1.9% compared to the 1998 period.

REGULATED OPERATING EXPENSES

     Other operating  expenses  decreased $12.7 million for the third quarter of
1999 compared to the third  quarter of 1998 and decreased  $14.2 million for the
nine  months  ended  September  30,  1999,  compared  to the nine  months  ended
September 30, 1998.

     As mentioned in the gross margin discussions,  the recovery of one phase of
deferred energy  efficiency costs is complete,  and  accordingly,  the costs for
that phase have been fully amortized to expense. As a result,  energy efficiency
costs  decreased  $2.6  million and $6.4  million for the three- and  nine-month
period comparisons, respectively.

                                      -14-
<PAGE>

     Reductions in marketing and sales-related expenses, gas distribution costs,
certain  administrative  and  general  costs and  customer  service  costs  also
contributed to the decrease in other operating  expenses in the third quarter of
1999 compared to the third quarter of 1998.

     For the nine months ended  September  30, 1999,  decreases in marketing and
sales expenses,  customer records costs,  certain  employee  benefits costs, gas
distribution costs and other administrative and general costs all contributed to
the decrease.  The  decreases  were  partially  offset by an increase in nuclear
operating expenses.

     Maintenance  expenses  decreased  $1.2  million  for the 1999  quarter  due
primarily to $3.1 million of storm  repair  costs in the 1998  quarter.  For the
nine-month period,  maintenance  expenses increased $2.9 million compared to the
same  period  in 1998 due to the  timing of  generating  plant  maintenance  and
increased gas distribution and general plant maintenance. The increases in these
areas were partially offset by a $2.7 million decrease in the nine-month  period
for maintenance at the Quad Cities Station.

     Property  and other taxes  decreased  $3.7 million and $7.7 million for the
three months and nine months ended September 30, 1999, respectively, compared to
the same periods in 1998.  MidAmerican's Iowa property tax expense decreased for
the 1999 periods due to reduced  assessed  values.  Deregulation of the Illinois
electric  utility  industry  resulted  in changes in the way  certain  taxes are
assessed in Illinois.  The changes  resulted in decreases in  MidAmerican's  tax
expense for the 1999 three- and nine-month periods compared to the 1998 periods.
One of the taxes is now  assessed  directly  on the energy  consumer  instead of
through the utility.  Accordingly,  MidAmerican's  electric  revenues reflect an
equal reduction in the 1999 periods for this tax collection change.

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     Revenues and Cost of Sales -

     Revenues from wholesale  natural gas marketing  operations  increased $14.9
million and $37.9  million for the three months and nine months ended  September
30, 1999, respectively,  compared to the same periods in 1998. The primary cause
of the  increase  in  revenues  for the 1999  quarter  was an  increase in sales
volumes.  Related sales volumes increased 4 million MMBtus (50%) compared to the
third quarter of 1998 due in part to additional  contracts which were previously
serviced by a nonregulated affiliate of MidAmerican.  Additionally,  the average
price per unit increased, driven by an increase in the average cost of gas. Cost
of sales  related to natural  gas  marketing  reflects  the  increases  in sales
volumes and the average cost of gas.  Total gross margin  (total price less cost
of gas) on nonregulated natural gas sales decreased $0.7 million.

     For the  nine-month  period,  related  sales  volumes  increased 17 million
MMBtus  (68%).  The increase in sales  volumes is due primarily to gas marketing
contracts  previously  serviced by a nonregulated  affiliate of MidAmerican that
started being renewed as  MidAmerican  contracts in May 1998. An increase in the
average  price  per unit,  reflective  of a higher  cost of gas per  unit,  also
contributed  to the increase in revenues.  Cost of sales  related to natural gas
marketing for the nine months ended  September 30, 1999,  reflects the increases
in  sales  and  the  average  cost  of gas  per  unit.  Total  gross  margin  on
nonregulated natural gas sales decreased $1.3 million compared to the first nine
months of 1998.  The  decrease was due to lower than  anticipated  gas prices in
part of the first  quarter  of 1999,  as well as lower  than  anticipated  sales
volumes due in part to mild weather during the same quarter.

     Revenues for the 1999 periods include  revenues from  MidAmerican's  market
access  service  project,  which began in the third  quarter of 1999.  The pilot
project allows  customers with at least 4 MW of load that are  participating  in
the project to choose their electric power supplier. MidAmerican's revenues from
project participants  related to non-supply  services,  such as distribution and
transmission, are reflected in regulated electric revenues.

                                      -15-
<PAGE>

     Other  increases  in  revenues  relate to  growth  in two of  MidAmerican's
nonregulated   programs  and  revenues  of  a  railway  subsidiary  which  began
operations in the fourth quarter of 1998.

     Other Nonregulated Operating Expenses -

     Other  nonregulated  operating  expenses  increased  in  the  1999  periods
compared  to the  same  periods  in 1998 due to  costs  of  initiatives  for new
nonregulated products and services.

NON-OPERATING INCOME AND INTEREST EXPENSE

     Interest and Dividend Income -

     Interest  income  decreased  in the  three  months  and nine  months  ended
September  30,  1999,  compared to the same  periods in 1998 due to decreases in
temporary  cash  investments  and a  note  receivable  related  to the  sale  of
MidAmerican's accounts receivable.

     Other, Net -

     Other, Net reflects the discount on sold accounts receivable,  net of a fee
for  servicing  the  accounts.  The net  discount  was recorded as an expense in
Other,  Net in the amount of $1.8 million and $1.4 million for the third quarter
of 1999 and 1998, respectively.  For the nine months ended September 30, the net
discount  was an expense of $6.4  million  and $4.4  million  for 1999 and 1998,
respectively.

     Fixed Charges -

     The  decrease  in  interest  on  long-term  debt is due to  long-term  debt
maturities and refinancing in 1998. Other interest expense decreased in the nine
months ended  September  30, 1999,  compared to the 1998  nine-month  period due
primarily to interest expense in 1998 related to a Federal income tax payment. A
decrease in other  short-term debt interest expense in the third quarter of 1999
was due to reduced short-term borrowing requirements.

                                      -16-
<PAGE>

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

     MidAmerican  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's
net cash provided from  operating  activities  was $280 million and $343 million
the first nine months of 1999 and 1998, respectively.

INVESTING ACTIVITIES AND PLANS

     Utility Construction Expenditures -

     MidAmerican's   primary   need  for   capital   is   utility   construction
expenditures.   For  the  first  nine  months  of  1999,  utility   construction
expenditures  totaled $116  million,  including  allowance for funds used during
construction  (AFUDC) 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 AFUDC, for 1999 are
$179 million and $720 million for 2000 through 2003.  Capital  expenditure needs
are reviewed regularly by MidAmerican's  management and may change significantly
as a result of such  reviews.  MidAmerican  presently  expects  that all utility
construction  expenditures  for  the  next  five  years  will be met  with  cash
generated from utility  operations,  net of dividends.  The actual level of cash
generated from utility  operations is affected by, among other things,  economic
conditions  in the  utility  service  territory,  weather  and federal and state
regulatory actions.

     Nuclear Decommissioning -

     Each  licensee  of a nuclear  facility  is  required  to provide  financial
assurance for the cost of  decommissioning  its licensed  nuclear  facility.  In
general,  decommissioning  of a  nuclear  facility  means to safely  remove  the
facility  from  service  and  restore  the  property  to  a  condition  allowing
unrestricted  use by the operator.  Based on  information  presently  available,
MidAmerican  expects to contribute  approximately  $42 million during the period
1999 through 2003 to an external trust  established  for the investment of funds
for  decommissioning  the Quad Cities Station.  Approximately 65% of the trust's
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.

     In addition,  MidAmerican  makes payments to Nebraska Public Power District
(NPPD) related to decommissioning  Cooper. These payments are reflected in other
operating expenses in the Consolidated Statements of Income. NPPD estimates call
for   MidAmerican  to  pay   approximately   $57  million  to  NPPD  for  Cooper
decommissioning  during the period 1999  through  2003.  NPPD  invests the funds
predominately  in U.S.  Treasury  Bonds and other  U.S.  Government  securities.
Approximately  20%  was  invested  in  domestic  corporate  debt.  MidAmerican's
obligation  for Cooper  decommissioning  may be  affected  by the  actual  plant
shutdown  date and the status of the power  purchase  contract at that time.  In
July 1997, NPPD filed a lawsuit in United States District Court for the District
of Nebraska  naming  MidAmerican  as the defendant and seeking a declaration  of
MidAmerican'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.  Decommissioning  costs
charged to Illinois  customers  are  recovered  through a rate rider on customer
billings.

                                      -17-
<PAGE>

FINANCING ACTIVITIES, PLANS AND AVAILABILITY

     MidAmerican  currently has authority from the FERC to issue short-term debt
in the form of commercial paper and bank notes  aggregating $400 million.  As of
September 30, 1999,  MidAmerican  had a $250 million  revolving  credit facility
agreement and a $5 million bank line of credit.  MidAmerican's  commercial paper
borrowings  are  supported  by the  revolving  credit  facility  and the line of
credit.  MidAmerican  also has a revolving credit facility which is dedicated to
providing  liquidity for its obligations  under  outstanding  pollution  control
revenue bonds that are periodically remarketed.

     In 1997,  MidAmerican 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 (Funding Corp.), a
special  purpose  entity  established  to  purchase  accounts   receivable  from
MidAmerican.  Funding  Corp.  in  turn  sold  receivable  interests  to  outside
investors.  In consideration for the sale,  MidAmerican  received $70 million in
cash and the remaining  balance in the form of a subordinated  note from Funding
Corp. As of September 30, 1999,  the revolving  cash balance was $66 million due
to a decline during the second quarter of 1999 in accounts receivable  available
for sale.  As part of the  agreement,  the  creditors of Funding  Corp.  will be
entitled to be satisfied out of the assets of Funding  Corp.  prior to any value
being  returned  to  MidAmerican  or  its  creditors.  Therefore,  the  accounts
receivable sold are not reflected on MidAmerican's  Consolidated Balance Sheets.
As of September 30, 1999, $98.4 million of accounts receivable, net of reserves,
were sold under the agreement.

     MidAmerican  has  authorization  from the FERC to issue up to an additional
$500 million in various  forms of  long-term  debt.  MidAmerican  will also need
authorization  from the ICC prior to issuing any  securities.  If 90% or more of
the proceeds  from a  securities  issuance  are used for  refinancing  purposes,
MidAmerican need only provide the ICC 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 ICC is required to hold a hearing  before
issuing its authorization.

OPERATING ACTIVITIES AND OTHER MATTERS

     Industry Evolution -

     The utility industry  continues to evolve into an increasingly  competitive
environment.  In  virtually  every  region  of  the  country,   legislative  and
regulatory actions are being taken which result in customers having more choices
in their energy decisions.

     In  the  electric  industry,   the  traditional   vertical  integration  of
generation,  delivery and marketing is being unbundled,  with the generation and
marketing  functions being deregulated.  For local gas distribution  businesses,
the supply, local delivery and marketing functions are similarly being separated
and opened to competitors  for all classes of customers.  While retail  electric
competition is presently not permitted in Iowa,  MidAmerican's  primary  market,
legislation to do so was introduced in the Iowa legislature in the last session.
While this legislation has not passed,  it is expected to be considered again by
the Iowa legislature in 2000. Deregulation of the gas supply function related to
small  volume  customers is also being  considered  by the IUB.  MidAmerican  is
actively participating in the legislative and regulatory processes.

     The generation and retail portions of MidAmerican's  electric business will
be  most  affected  by  competition.  The  introduction  of  competition  in the
wholesale market has resulted in a proliferation of power

                                      -18-
<PAGE>

marketers  and a  substantial  increase  in market  activity.  As retail  choice
evolves,  competition  from other  traditional  utilities,  power  marketers and
customer-owned generation could put pressure on utility margins.

     During the  transition  to full  competition,  increased  volatility in the
marketplace  can be  expected.  With the  elimination  of the energy  adjustment
clause in Iowa,  MidAmerican is exposed to movements in energy prices.  Although
MidAmerican  has  sufficient  low  cost  generation   under  typical   operating
conditions  for its retail  electric  needs,  a loss of adequate  generation  by
MidAmerican at a time of high market prices could subject  MidAmerican to losses
on its energy sales.

     Legislative and Regulatory Evolution -

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

     The law required a 15% electric rate reduction for all Illinois residential
customers in 1998. To satisfy its  obligation,  MidAmerican  received credit for
its 1996 and 1997 Illinois rate reductions,  totaling $15.5 million, and reduced
rates an additional $0.9 million annually, effective August 1, 1998. MidAmerican
is exempted from the requirement to join an independent system operator (ISO) or
to form an in-state ISO.

     In addition,  the law provides for Illinois  earnings above a certain level
of ROE to be shared equally between customers and MidAmerican beginning in April
2000.  MidAmerican's ROE level will be based on a rolling two-year average, with
the first  determination  being  based on an average  of 1998 and 1999.  The ROE
level at which  MidAmerican  will be required to share  earnings is a multi-step
calculation of average 30-year Treasury Bond rates plus 5.50% for 1998 and 1999.
Legislation passed in July 1999 increases the benchmark for 2000 through 2004 to
8.5% above the 30-year  Treasury  bond rate.  The ROE level above which  sharing
must occur for 1998 and 1999 is 11.21%.  Using the same  30-year  Treasury  bond
average,  the computed ROE level would be 13.71% for 2000 through 2004.  The law
allows  MidAmerican  to mitigate the sharing of earnings above the threshold ROE
through accelerated cost recognition that would reduce  MidAmerican's  earnings.
MidAmerican continues to evaluate its strategy regarding the sharing mechanism.

     The law also addresses charges to customers for transition costs based on a
lost-revenue approach. These transition fees, designed to help utilities recover
stranded  costs,  will end  December 31,  2006,  subject to possible  extension.
MidAmerican  continues  its  involvement  in  proceedings  which  detail the new
competitive  environment and to evaluate the impact of the law on its operations
and the opportunities the law presents.

     In Iowa, a replacement of the prior utility property tax system,  which was
supported by  MidAmerican,  went into effect on January 1, 1999. With resolution
of the utility  property  tax issue,  MidAmerican  is pursuing  the  adoption of
electric utility industry  restructuring  legislation.  Progress was made during
the 1999 Iowa  legislative  session,  and MidAmerican  continues  working toward
adoption of new legislation in a future session.

     Residential and Commercial Pilot Project -

     On  August  21,  1998,  the IUB  issued  an Order  approving  MidAmerican's
proposal to allow at least 15,000 Iowa  families and 2,000 small  businesses  to
have the  opportunity  to select  among  competing  electricity  providers.  The
two-year pilot program will allow participating retail customers in the selected
test area to choose among several electricity providers,  including MidAmerican,
and to have  that  energy  delivered  by  MidAmerican.

                                      -19-
<PAGE>

Customer  enrollment is currently allowed and the pilot may begin in 1999 should
additional suppliers register.  Businesses in the test area will be eligible for
the  program  if their  annual  peak  demand is less than  four  megawatts.  New
suppliers  participating in the program will have to be certified by the IUB and
meet specified requirements.

     Accounting Effects of Industry Restructuring -

     A possible  consequence of competition in the utility industry is that SFAS
71 may no longer apply. SFAS 71 sets forth accounting  principles for operations
that are  regulated  and meet certain  criteria.  For  operations  that meet the
criteria,  SFAS 71 allows,  among other things, the deferral of costs that would
otherwise be expensed when incurred.  A majority of  MidAmerican's  electric and
gas utility operations  currently meet the criteria required by SFAS 71, but its
applicability is periodically  reexamined.  On December 16, 1997,  MidAmerican's
generation  operations serving Illinois were no longer subject to the provisions
of SFAS 71 due to passage of industry  restructuring  legislation  in  Illinois.
Thus, in 1997  MidAmerican  was required to write off the regulatory  assets and
liabilities   from  its  balance  sheet  related  to  its  Illinois   generation
operations.  The net  amount  of such  write-offs  was not  material.  If  other
portions  of its  utility  operations  no longer  meet the  criteria of SFAS 71,
MidAmerican  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.  As of September  30, 1999,  MidAmerican  had $274
million of regulatory assets on its Consolidated Balance Sheet.

     Energy Efficiency -

     MidAmerican's  regulatory  assets as of September 30, 1999,  included $47.9
million of deferred  energy  efficiency  costs.  Based on the  current  level of
recovery,  MidAmerican  expects  to  recover  these  costs  by the end of  2001.
MidAmerican is also allowed to recover its ongoing energy  efficiency costs on a
current basis.  Recovery of these costs is being  collected from customers based
on projected  annual  costs of $17.4  million,  which may be adjusted  annually.
Amortization of the deferred energy  efficiency  costs and current  expenditures
for energy  efficiency costs will be reflected in other operating  expenses over
the  related  periods of  recovery.  The total of such costs for the years 1999,
2000 and 2001 is  estimated  to be $43  million,  $40 million  and $35  million,
respectively.

     Rate Matters: Electric -

     Through several steps from mid-1997 to the end of 1998, electric prices for
Iowa industrial customers were reduced by an amount which will have a $6 million
annual impact on revenues,  and electric  prices for Iowa  commercial  customers
were  reduced  by an  amount  which  will  have a $4  million  annual  impact on
revenues.  The reductions  were achieved  through a retail access pilot project,
negotiated  individual  electric  contracts  and a $1.5  million  tariffed  rate
reduction for certain non-contract commercial customers.

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

     If MidAmerican's annual Iowa electric  jurisdictional ROE exceeds 12%, then
earnings  above  the 12% level  will be shared  equally  between  customers  and
MidAmerican;  if the ROE exceeds 14%, then two-thirds of MidAmerican's  share of
those  earnings  above the 12% level will be used for  accelerated  recovery  of
certain  regulatory assets. A 1997 pricing plan settlement  agreement  precludes
MidAmerican  from filing for increased  rates prior to 2001 unless the ROE falls
below 9%. Other parties  signing the agreement  are  prohibited  from filing

                                      -20-
<PAGE>

for  reduced  rates prior to 2001 unless the ROE,  after  reflecting  credits to
customers,  exceeds  14%.  On April  14,  1999,  the IUB  approved,  subject  to
additional refund, MidAmerican's 1998 ROE calculation. During the second quarter
of 1999,  MidAmerican  refunded $2.2 million to its Iowa non-contract  customers
related  to  the  ROE  calculation  for  1998.  The  agreement  also  eliminated
MidAmerican's  energy adjustment  clause,  and, as a result, the cost of fuel is
not directly passed on to customers.

     Rate Matters: Gas -

     In October 1998,  MidAmerican  made a filing with the IUB requesting a rate
increase  for its Iowa  retail  gas  customers.  An  interim  rate  increase  of
approximately $6.7 million annually was approved by the IUB on January 22, 1999,
effective  immediately.  On April 23, 1999, the IUB issued an order  approving a
settlement  agreement  between  MidAmerican,  the OCA and  other  parties  which
provides for an annual increase of $13.9 million. The new rates were implemented
May 27, 1999.

     In November 1998,  MidAmerican filed with the South Dakota Public Utilities
Commission  (SDPUC)  requesting a rate  increase for its South Dakota retail gas
customers.  The SDPUC in April 1999  approved a rate  increase  of $2.4  million
annually, effective May 1, 1999.

     On  September  1, 1999,  MidAmerican  filed with the ICC  requesting a rate
increase  totaling $3.2 million  annually for its Illinois retail gas customers.
An ICC decision is anticipated prior to August 2000.

     Environmental Matters -

     The EPA and state environmental  agencies have determined that contaminated
wastes remaining at certain  decommissioned  MGP 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 is evaluating 27 properties  which were, at one time,  sites of
gas  manufacturing  plants  in  which  it may be a PRP.  The  purpose  of  these
evaluations is to determine  whether waste  materials are present,  whether such
materials  constitute an environmental  or health risk, and whether  MidAmerican
has any responsibility for remedial action.  MidAmerican  estimates the range of
possible  costs for  investigation,  remediation  and  monitoring  for the sites
discussed above to be $21 million to $69 million.  MidAmerican's estimate of the
probable  total cost for these sites as of September 30, 1999,  was $29 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's
environmental activities related to MGP sites and cost recovery.

     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's financial position or results of operations.

     Following recommendations provided by the Ozone Transport Assessment Group,
the EPA,  in  November  1997,  issued  a Notice  of  Proposed  Rulemaking  which
identified  22  states  and the  District  of  Columbia  as  making  significant
contribution  to  nonattainment  of the ozone standard in downwind states in the
eastern half of the United States.  The  nonattainment of the downwind states is
based on the ozone standard  established  prior to the 1997 revisions  discussed
below.  In September  1998,  the EPA issued its final rules in this  proceeding.
Iowa is not subject to the emissions reduction  requirements in the final rules,
and, as such,  MidAmerican's  facilities are not currently subject to additional
emissions reductions as a result of this initiative.

                                      -21-
<PAGE>

     On July 18,  1997,  the EPA adopted  revisions to the NAAQS for ozone and a
new  standard for fine  particulate  matter.  Based on data to be obtained  from
monitors  located  throughout the states,  the EPA will make a determination  of
whether  the states  have any 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 May  1999,  the U.S.  District  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.  The EPA has
appealed  the  court's  ruling to the full panel of the U.S.  District  Court of
Appeals for the  District of Columbia  Circuit.  On October 29,  1999,  the U.S.
District Court of Appeals for the District of Columbia  Circuit granted in part,
and denied in part,  the petitions for panel  rehearing in the case. As a result
of the court's  decision and the current status of the standards,  the impact of
any new standards on MidAmerican is currently unknown.

     In  December  1997,  negotiators  from more than 150  nations met in Kyoto,
Japan to negotiate an international agreement designed to address global climate
change impacts by attempting to reduce so-called greenhouse gas emissions.  Some
scientists contend that these gases build up in the Earth's atmosphere and cause
global  temperatures  to rise. The primary  target of these  emissions is carbon
dioxide (CO2) which is formed by, among other things,  the  combustion of fossil
fuels.  The  agreement  currently  calls for the  United  States  to reduce  its
emissions  of CO2 and  other  greenhouse  gases to 7% below  1990  levels in the
2008-2012  time frame.  The United States became a signatory to the agreement on
November 12, 1998. In order for the agreement to become  binding upon the United
States,  ratification by the U.S.  Senate is necessary.  The cost to the utility
industry in general, and to MidAmerican, of reducing its CO2 emissions levels by
7% below 1990 levels would depend on available technology at the time, but could
be material.

     Quad Cities Nuclear Power Station -

     Quad Cities Station is operated by, and 75% owned by,  Commonwealth  Edison
Company (ComEd). On May 6, 1999, the Nuclear Regulatory Commission (NRC) advised
ComEd that it had classified Quad Cities Station in the NRC's Routine  Oversight
category (the best of the NRC's three new  categories) for nuclear power plants,
removing the station from the Trending  (adversely)  Letter status  initiated in
January 1998.  During the first nine months of 1999, the station capacity factor
was in excess of 93.5%.

     Generating Capability -

     In July 1999,  retail  customer usage of electricity  caused an hourly peak
demand of 3,833 MW on MidAmerican's energy system. MidAmerican is interconnected
with certain 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 was
able to maintain its capacity reserve requirement during the hot weather in July
1999  and was  not  adversely  affected  by the  resultant  high  prices  in the
off-system market.

     MidAmerican   believes  it  has  adequate  electric  capacity  reserve  and
continues to manage its  generating  resources to ensure an adequate  reserve in
the future. However,  significantly  higher-than-normal  temperatures during the
cooling season could cause MidAmerican's  reserve to fall below the 15% minimum.
If MidAmerican fails to maintain the appropriate reserve,  significant penalties
could be contractually imposed by MAPP.

                                      -22-

<PAGE>

ACTIVITIES REGARDING YEAR 2000 DATE ISSUES

     The following discussion of year 2000 issues describes  MidAmerican's plans
to address technical problems relating to calculations,  manipulations,  storage
and other uses of date-sensitive data which could cause some computer-controlled
systems,  applications and processes  (hereinafter  referred to as "Systems") to
incorrectly  process  critical  financial and operational  information,  or stop
processing altogether. The discussion contains by necessity many forward-looking
statements.  MidAmerican wishes to avail itself of the safe harbor provisions of
the  Private  Securities  Litigation  Reform Act of 1995,  and in order to do so
includes  the  following  meaningful  cautionary  statements  with regard to the
forward  looking  statements of its year 2000 plans.  MidAmerican's  intentions,
expectations,  and predictions  relating to its year 2000 efforts are subject to
risks and  uncertainties  that could cause actual  results to differ  materially
from  those  expressed  in, or  implied  by,  such  statements.  Such  risks and
uncertainties include,  among others, the effects of weather,  federal and state
regulatory actions,  and other matters,  many of which are beyond  MidAmerican's
control. In addition, MidAmerican claims the full protections established by the
Year 2000 Information and Readiness  Disclosure Act for Year 2000 Statements and
Year 2000 Readiness Disclosure.

     Project Description -

     MidAmerican  has  undertaken  an extensive  ongoing  project to address its
information  technology (IT) and non-IT (including embedded  technology) Systems
potentially  affected by the year 2000 date  change.  MidAmerican's  approach is
based on a five-phase  project  methodology - inventory,  assessment,  planning,
resolution and  implementation  - designed to result in the  identification  and
evaluation of potential  problems,  and  remediation of  MidAmerican's  Systems.
MidAmerican generally defines the five phases as follows:

     1. Inventory  Phase - The purpose of the inventory phase is to identify and
document Systems used by MidAmerican that may have a date-sensitive function.

     2.  Assessment  Phase - The purpose of the  assessment  phase is to collect
information  about  inventoried  Systems,  including  the business and technical
context  in which  individual  Systems  operate,  to make an  informed  judgment
concerning an appropriate plan to mitigate year 2000 related risks.

     3.  Planning  Phase - The  purpose  of the  planning  phase  is to  develop
strategic  and tactical  plans for Systems that  require  replacement,  repairs,
upgrades or other  appropriate  actions  (collectively  referred to as "remedial
actions").

     4. Resolution Phase - The purpose of the resolution phase is to execute the
plan developed during the preceding phases. Testing of Systems and/or components
of Systems, as well as any preceding or subsequent remedial action, is commenced
during this phase.

     5.  Implementation  Phase - The purpose of the  implementation  phase is to
examine the Systems to determine  whether  they will  function  adequately  in a
production environment and to perform follow-up administrative tasks as required
to  develop  appropriate  documentation  in  support  of  year  2000  readiness.
MidAmerican  classifies all Systems ranging from low- to high-priority  based on
their importance to carrying out MidAmerican's business mission. System priority
is based on potential  impacts  resulting  from year 2000 problems on public and
employee safety, prolonged and widespread service outages, long-term shareholder
value,  and  ability  to comply  with  regulatory  requirements.  In the case of
low-priority Systems, year 2000 readiness may be delayed beyond January 1, 2000,
or perhaps indefinitely. MidAmerican plans to use the last two months of 1999 to
perform post-implementation testing, address selected lower priority Systems and
conduct preparedness exercises.

                                      -23-
<PAGE>

     Vendors, customers and other third parties may affect MidAmerican's ability
to achieve  year 2000  readiness.  Because  service  reliability  and  financial
stability are dependent on  MidAmerican's  supply chain,  a concerted  effort is
being made to  investigate  important  third  parties to assess their ability to
continue to supply  products or  services  to, or purchase  products or services
from, MidAmerican.

     State of Readiness -

     Due to factors such as the overlapping nature of the project phases and the
varying degree of complexity of the Systems being addressed,  it is difficult to
accurately  determine  the status of  completion  of a  particular  phase of the
project at any given point in time.  MidAmerican  uses three  methods to measure
the status of project completion:

1.   As an entity with public utility  operations,  MidAmerican must comply with
     certain year 2000  regulatory  requirements  imposed by the North  American
     Electric  Reliability  Council  (NERC).  NERC  reporting  data  is  limited
     primarily to Systems that are directly  associated with  transmission  grid
     stability.   The   transmission   grid   consists  of  the   interconnected
     transmission  systems of North  American  utilities.  Reporting  categories
     include  nuclear  generation,  non-nuclear  generation,  Energy  Management
     Systems  and  Supervisory  Control  and Data  Acquisition  (SCADA)  system,
     telecommunications  systems, substation controls and system protection, and
     IT  business  information   systems.   MidAmerican  reported  in  its  July
     compliance  filing  with  NERC  that it is  "100%  Y2K  Ready"  on  systems
     considered mission-critical by NERC definition.

2.   A  "checklist"  approach is used to monitor the  completion  status of each
     System  that  is  unique  to a given  organizational  group.  For  example,
     identical   substation   meters  may  be  located  in  several   individual
     substations,  but the meter is counted as only one System.  All Systems are
     viewed as equivalent,  regardless of priority,  in the checklist  approach.
     Systems are  categorized  as complete or not  complete,  without  regard to
     percentage of completion of the System in total or percentage of completion
     of any  particular  phase of the project.  As of September 30, 1999,  there
     were 5,554 separate Systems in MidAmerican's  inventory. Of these, over 99%
     had been completed.

3.   MidAmerican's  internally  developed  measure  is more  sensitive  than the
     methods  discussed above and is based on business  risk/priority,  weighted
     tasks and weighted phases. Only high- and medium-risk/priority  Systems are
     included  in the  status of  completion  calculation.  The data  related to
     Systems that could impact grid  stability  pertains  only to those  Systems
     that  directly  affect  MidAmerican's  customers.   Also,  progress  toward
     completion is measured. As of September 30, 1999, MidAmerican as a whole is
     generally in the resolution  phase.  Percentage of completion for six areas
     of business operations is a follows:

         A.   IT - Applications:  95-100% complete
         B.   IT - Operations & Infrastructure:  95-100% complete
         C.   Generation:  95-100% complete
         D.   Energy Delivery:  95-100% complete
         E.   Retail:  95-100% complete
         F.   Corporate Services (excluding IT):  95-100% complete

     The investigation of supply chain issues consists of documenting the nature
of business  relationships  in  correspondence,  surveys and meetings with third
parties and making  determinations  regarding  their year 2000 readiness  status
based on the responses received.  MidAmerican has initiated contact with vendors
and  business  partners it considers  to  represent a  significant  financial or
operational  risk if they were to experience  year 2000  problems.  In addition,
interconnected  utilities and wholesale customers, as well as high-volume retail
customers,  have been contacted for the purpose of reviewing the status of their
year 2000 readiness efforts. To date,

                                      -24-
<PAGE>

information  made  available  to  MidAmerican  has not been  uniform in terms of
quality and quantity.  Although none of the  information  has suggested that the
year 2000 readiness  efforts of these vendors,  business  partners and customers
have been inadequate,  MidAmerican  intends to maintain  ongoing  communications
with some third  parties  through the remainder of 1999.  MidAmerican  will also
continue  monitoring   information  about  specific  products  in  MidAmerican's
inventory.

     Costs -

     As of September 30, 1999, approximately $10.2 million in operating expenses
have been incurred to carry out year 2000 activities.  It is anticipated that up
to $2.8 million in additional  operating expenses and capital costs will need to
be incurred to complete the project. Although additional unforeseen costs may be
incurred,  at this time  MidAmerican  has not become aware of any material costs
which may arise in order to achieve year 2000 readiness.  Future progress toward
achievement of year 2000 readiness could change this outlook.

     MidAmerican has renovated or replaced several  high-priority Systems (e.g.,
management  information,   materials  management  information,  work  management
information,  customer service,  electric outage  management,  meter control and
inventory,  and  others) to gain  enhanced  functionalities.  For  example,  the
development and  installation of a new customer service system (CSS) and related
applications  was an outcome of the merger which created  MidAmerican in July of
1995.  Although  potential  year  2000  problems  existing  in  the  predecessor
companies' CSS products were  recognized,  the decision to implement the new CSS
was  primarily  in  response  to  integration  difficulties  and  the  need  for
additional  application  functionalities.  The  costs of these  renovations  and
replacements  are not reported herein as their  development and installation was
not driven by year 2000 concerns.

     Contingency Plans -

     A  contingency  plan  identifying  credible  worst-case  scenarios has been
developed.  The  contingency  plan is comprised of both  mitigation and recovery
aspects.  Mitigation  entails  planning to reduce the impact of unresolved  year
2000 problems,  and recovery  entails  planning to restore services in the event
that year 2000 problems occur.  MidAmerican's contingency plan has been reviewed
by senior management.  Although the plan is substantially  complete,  it will be
refined  throughout  the  remainder of the year based on results of  contingency
planning drills and changes in circumstances.

     Although a number of factors come into play in defining  reasonably  likely
worst case scenarios,  the loss of voice and data communications,  volatile load
patterns,  and inability to control generation and/or return generation units to
service are viewed as the most  serious  threats.  The relative  seriousness  of
these threats is based on recognition  that the occurrence of any of these types
of  problems  could  have  an  immediate  and  significant   effect  on  service
reliability and financial performance.

     MidAmerican participated in contingency planning drills coordinated by NERC
on April 9, 1999 and  September  8-9,  1999.  The  drills  focused  on  managing
problems   resulting   from  a  simulated   partial   loss  of  voice  and  data
communications services. During those drills, MidAmerican did not experience any
unexpected results.

     Risks -

     Despite the comprehensive nature of MidAmerican's year 2000 project and the
results the project is designed to produce,  MidAmerican may experience  random,
widespread and simultaneous failures in its generation, distribution and Systems
during  year  2000  transition  periods.  Contingency  plans  for any  known  or
reasonably anticipated risk of interruption to the generation or distribution of
energy are being  developed to plan for  resources  needed to be put in place to
reduce the potential  outage period to a minimum.  Although the impact

                                      -25-
<PAGE>

on future operations and revenues is unknown,  failure of MidAmerican's  Systems
to perform because of year 2000 implications  could result in operating problems
and costs material to MidAmerican.

     Although management believes the project will be completed  sufficiently in
advance of January 1, 2000,  unforeseen  and other factors could cause delays in
the project,  the results of which may have a material  effect on  MidAmerican's
results of operations.  In addition, there is no assurance that MidAmerican will
not be affected by year 2000 problems experienced by third parties.

ACCOUNTING ISSUES

     In June 1998, the Financial  Accounting  Standards Board (FASB) issued SFAS
133, "Accounting for Derivative  Instruments and Hedging Activities",  which was
delayed by SFAS 137 and is effective for fiscal years  beginning  after June 15,
2000.  SFAS 133 requires an entity to recognize all of its derivatives as either
assets or liabilities  in its statement of financial  position and measure those
instruments  at fair  value.  The Company is in the  process of  evaluating  the
impact of this accounting standard.

                                      -26-

<PAGE>

PART II - OTHER INFORMATION

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

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

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

     For information relating to MidAmerican's  Environmental Matters, reference
is made to Part I, Note B of Notes to Consolidated Financial Statements.

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

     On July 23, 1997,  NPPD filed a Complaint,  in the United  States  District
Court for the District of Nebraska,  naming  MidAmerican  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, NPPD
sought a declaratory judgment in the following respects: (1) that MidAmerican is
obligated to pay 50% of all costs and expenses  associated with  decommissioning
Cooper,  and that in the event NPPD continues to operate Cooper after expiration
of the power purchase agreement (September 2004), MidAmerican 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 filed its answer and contingent  counterclaims.  The contingent
counterclaims   filed  by  MidAmerican  are  generally  as  follows:   (1)  that
MidAmerican  has no duty under the power purchase  agreement to reimburse or pay
50% of the decommissioning  costs unless certain conditions occur; (2) that NPPD
has  the  duty  to  repay  all  amounts  that   MidAmerican  has  prefunded  for
decommissioning in the event NPPD operates the plant after the term of the power
purchase  agreement;  (3) that NPPD is equitably  estopped  from  continuing  to
operate the plant after the term of the power purchase agreement;  (4) that NPPD
has granted  MidAmerican 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;  (6)  that  MidAmerican  has no duty to pay for  nuclear  fuel,  O&M
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 NPPD has  breached  its duty to
MidAmerican in making investments of certain funds; (9) that reserves in certain
accounts are excessive and should be refunded to MidAmerican; and (10) that NPPD
must credit  MidAmerican  for  certain  payments by  MidAmerican  for  low-level
radioactive waste disposal.


     On October 6, 1999,  the Court  rendered  summary  judgment for NPPD on the
above-mentioned issue concerning liability for decommissioning (issue one in the
first  paragraph  above)  and the  related  contingent  counterclaims  filed  by
MidAmerican (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  filed with the Federal Court of Appeals
for the 8th Circuit a notice of appeal of the Court's summary  judgment  ruling.
MidAmerican will participate in mediation in an attempt to resolve the remaining
issues.

     MidAmerican and NPPD are currently involved in discovery.

                                      -27-

<PAGE>

North Star Steel Company
------------------------

     On December 8, 1997, North Star Steel Company (NSS), a MidAmerican electric
retail  customer,  filed a Complaint in the United States District Court for the
Southern  District  of  Iowa  naming  MHC and  MidAmerican  as  defendants.  The
Complaint  alleged  that  MidAmerican's  refusal  to allow NSS to obtain  retail
electric  service from an unspecified  alternative  energy company amounted to a
violation of federal  antitrust laws. NSS sought to recover an unspecified level
of damages,  and to require  MidAmerican to provide retail  wheeling  service so
that NSS could obtain  electricity from an unnamed  supplier.  On June 23, 1998,
the  District  Court  issued  an Order  Granting  Summary  Judgment  in favor of
MidAmerican.  On July 20, 1998,  NSS appealed that decision to the United States
Court of Appeals  for the Eighth  Circuit.  On July 7, 1999,  the United  States
Court of Appeals for the Eighth  Circuit  affirmed the  District  Court grant of
summary  judgment  in favor of  MidAmerican.  On October  5,  1999,  NSS filed a
petition for a writ of certiorari  seeking to have the U.S.  Supreme Court agree
to review the adverse decision by the 8th Circuit Court of Appeals. That request
for Supreme Court review is now pending.  In a related matter NSS unsuccessfully
appealed to the Iowa District Court an Iowa Utilities Board  declaratory  ruling
that was favorable to MidAmerican. NSS has appealed that adverse decision to the
Iowa Supreme Court.

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

(A)  EXHIBITS

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

     Exhibit 12 -  Computation of ratios of earnings to fixed charges and
                   computation of ratios of earnings to fixed charges plus
                   preferred dividend requirements.

     Exhibit 15 -  Awareness Letter of Independent Accountants

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

(B)  REPORTS ON FORM 8-K

None.

                                      -28-

<PAGE>


                                   SIGNATURES


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





                                        MIDAMERICAN ENERGY COMPANY
                                        --------------------------
                                               (Registrant)



Date  November 12, 1999                 /s/  Patrick J. Goodman
    -------------------       -------------------------------------------------
                                             Patrick J. Goodman
                              Senior Vice President and Chief Financial Officer


                                      -29-
<PAGE>


                                  EXHIBIT INDEX

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


12   Computation  of ratios of earnings  to fixed  charges  and  computation  of
     ratios of earnings to fixed charges plus preferred dividend requirements.

15   Awareness Letter of Independent Accountants

27   Financial Data Schedules (for electronic filing only).

                                      -30-