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, 2002
                                              ------------------

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

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

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

Indicate  by check mark  whether  the  registrants  (1) have  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, 2002, all of the member's equity of MidAmerican  Funding,  LLC
was held by MidAmerican Energy Holdings Company.

As of October 31, 2002, all 70,980,203  outstanding shares of MidAmerican Energy
Company's  voting  stock were held by its parent  company,  MHC Inc.,  a direct,
wholly owned subsidiary of MidAmerican Funding, LLC.



<page>



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


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


                                TABLE OF CONTENTS

                         PART I.  FINANCIAL INFORMATION                PAGE NO.

ITEM 1.  Financial Statements

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

                           MidAmerican Energy Company

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

                            MidAmerican Funding, LLC

         Consolidated Statements of Income.................................. 15
         Consolidated Balance Sheets........................................ 16
         Consolidated Statements of Cash Flows.............................. 17
         Notes to Consolidated Financial Statements......................... 18

ITEM 2.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations.................... 23

ITEM 4.  Controls and Procedures............................................ 42

                           PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings ................................................. 43

ITEM 6.  Exhibits and Reports on Form 8-K................................... 44

Signatures.................................................................. 45

Officer Certifications...................................................... 46

Exhibit Index............................................................... 54

                                      -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, 2002, and the
related consolidated statements of income for the three-month and nine-month
periods ended September 30, 2002 and 2001, and the related consolidated
statements of cash flows for the nine-month periods ended September 30, 2002 and
2001. These financial statements are the responsibility of the Company's
management.

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

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

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet and
statement of capitalization (not presented herein) of MidAmerican Energy Company
and subsidiaries as of December 31, 2001, and the related consolidated
statements of income, comprehensive income, retained earnings, and cash flows
for the year then ended (not presented herein); and in our report dated January
17, 2002, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 2001 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.




DELOITTE & TOUCHE LLP

Des Moines, Iowa
October 25, 2002

                                      -3-
<page>



INDEPENDENT ACCOUNTANTS' REPORT


Board of Managers and Member
MidAmerican Funding, LLC
Des Moines, Iowa

We have reviewed the accompanying consolidated balance sheet of MidAmerican
Funding, LLC and subsidiaries (the Company) as of September 30, 2002, and the
related consolidated statements of income for the three-month and nine-month
periods ended September 30, 2002 and 2001, and the related consolidated
statements of cash flows for the nine-month periods ended September 30, 2002 and
2001. These financial statements are the responsibility of the Company's
management.

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

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

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet and
statement of capitalization (not presented herein) of MidAmerican Funding, LLC
and subsidiaries as of December 31, 2001, and the related consolidated
statements of income, comprehensive income, retained earnings, and cash flows
for the year then ended (not presented herein); and in our report dated January
17, 2002, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 2001 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.


DELOITTE & TOUCHE LLP

Des Moines, Iowa
October 25, 2002

                                      -4-

<page>


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

<table>
<caption>
                                                THREE MONTHS                 NINE MONTHS
                                             ENDED SEPTEMBER 30,         ENDED SEPTEMBER 30,
                                             -------------------         -------------------
                                             2002           2001           2002           2001
                                          -----------    -----------    -----------    -----------

                                       <C>            <C>            <C>            <C>
OPERATING REVENUES
Regulated electric ....................   $   419,542    $   390,274    $ 1,052,130    $ 1,025,264
Regulated gas .........................        96,163        101,292        442,290        736,483
Nonregulated ..........................        21,088         14,231         84,367        119,232
                                          -----------    -----------    -----------    -----------
                                              536,793        505,797      1,578,787      1,880,979
                                          -----------    -----------    -----------    -----------
OPERATING EXPENSES
Regulated:
  Cost of fuel, energy and capacity ..        110,590         88,322        255,907        214,528
  Cost of gas sold ...................         61,907         69,667        297,226        595,888
  Other operating expenses ...........         93,810        113,362        300,001        315,247
  Maintenance ........................         30,002         34,735         90,698         93,681
  Depreciation and amortization ......         66,451         53,860        207,120        190,115
  Property and other taxes ...........         19,640         17,614         56,229         53,431
                                          -----------    -----------    -----------    -----------
                                              382,400        377,560      1,207,181      1,462,890
                                          -----------    -----------    -----------    -----------
Nonregulated:
  Cost of sales ......................         14,380         10,173         63,211        100,304
  Other ..............................          4,439          4,724         14,665         13,255
                                          -----------    -----------    -----------    -----------
                                               18,819         14,897         77,876        113,559
                                          -----------    -----------    -----------    -----------
Total operating expenses ..............       401,219        392,457      1,285,057      1,576,449
                                          -----------    -----------    -----------    -----------

OPERATING INCOME ......................       135,574        113,340        293,730        304,530
                                          -----------    -----------    -----------    -----------

NON-OPERATING INCOME
Interest and dividend income ..........         2,377          3,051          7,654         11,339
Other income ..........................         3,342          2,335          8,063          6,061
Other expense .........................        (2,502)        (4,279)        (7,245)       (15,972)
                                          -----------    -----------    -----------    -----------
                                                3,217          1,107          8,472          1,428
                                          -----------    -----------    -----------    -----------

FIXED CHARGES
Interest on long-term debt ............        18,262         14,803         53,150         46,471
Other interest expense ................           886          1,448          2,594          5,195
Preferred dividends of subsidiary trust             -          1,995          1,574          6,047
Allowance for borrowed funds ..........          (895)          (351)        (2,160)        (1,104)
                                          -----------    -----------    -----------    -----------
                                               18,253         17,895         55,158         56,609
                                          -----------    -----------    -----------    -----------

INCOME BEFORE INCOME TAXES ............       120,538         96,552        247,044        249,349
INCOME TAXES ..........................        50,028         39,988        103,899        104,360
                                          -----------    -----------    -----------    -----------
NET INCOME ............................        70,510         56,564        143,145        144,989
PREFERRED DIVIDENDS ...................           327            976          2,605          3,483
                                          -----------    -----------    -----------    -----------
EARNINGS ON COMMON STOCK ..............   $    70,183    $    55,588    $   140,540    $   141,506
                                          ===========    ===========    ===========    ===========
</table>

        The accompanying notes are an integral part of these statements.

                                      -5-
<page>

<table>
<caption>

                           MIDAMERICAN ENERGY COMPANY
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
                                                                   AS OF
                                                        ---------------------------
                                                        SEPTEMBER 30,  DECEMBER 31,
                                                            2002         2001
                                                        -------------  ------------
                                                         (UNAUDITED)

                                                       <C>          <C>
ASSETS
UTILITY PLANT
Electric ..............................................   $4,688,802   $4,598,372
Gas ...................................................      888,602      867,277
                                                          ----------   ----------
                                                           5,577,404    5,465,649
Less accumulated depreciation and amortization ........    2,985,267    2,847,979
                                                          ----------   ----------
                                                           2,592,137    2,617,670
Construction work in progress .........................      161,505       80,276
                                                          ----------   ----------
                                                           2,753,642    2,697,946
                                                          ----------   ----------

POWER PURCHASE CONTRACT ...............................       19,185       48,185
                                                          ----------   ----------

CURRENT ASSETS
Cash and cash equivalents .............................      121,123       20,020
Receivables ...........................................      185,526      119,740
Inventories ...........................................       91,903       83,339
Prepaid taxes .........................................       23,956       23,956
Other .................................................       10,433       10,962
                                                          ----------   ----------
                                                             432,941      258,017
                                                          ----------   ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ............      273,784      272,230
REGULATORY ASSETS .....................................      204,251      221,120
OTHER ASSETS ..........................................       61,194       80,394
                                                          ----------   ----------
TOTAL ASSETS ..........................................   $3,744,997   $3,577,892
                                                          ==========   ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholder's equity ...........................   $1,279,585   $1,219,057
MidAmerican Energy preferred securities, not subject to
  mandatory redemption ................................       31,759       31,759
Preferred securities, subject to mandatory redemption:
  MidAmerican Energy preferred securities .............            -       26,680
  MidAmerican Energy-obligated preferred securities of
    subsidiary trust holding solely MidAmerican Energy
    junior subordinated debentures ...................             -      100,000
Long-term debt (excluding current portion) ............      948,979      656,740
                                                          ----------   ----------
                                                           2,260,323    2,034,236
                                                          ----------   ----------
CURRENT LIABILITIES
Notes payable .........................................            -       89,350
Current portion of long-term debt .....................      104,445      163,854
Current portion of power purchase contract ............            -       17,398
Accounts payable ......................................      183,382      171,535
Taxes accrued .........................................       70,670       54,175
Interest accrued ......................................       15,727       11,709
Other .................................................       45,411       43,814
                                                          ----------   ----------
                                                             419,635      551,835
                                                          ----------   ----------
OTHER LIABILITIES
Power purchase contract ...............................            -        8,469
Deferred income taxes .................................      517,991      513,978
Investment tax credit .................................       57,982       61,292
Quad Cities Station decommissioning ...................      155,306      158,349
Regulatory liabilities ................................      108,158       62,378
Other .................................................      225,602      187,355
                                                          ----------   ----------
                                                           1,065,039      991,821
                                                          ----------   ----------
TOTAL CAPITALIZATION AND LIABILITIES ..................   $3,744,997   $3,577,892
                                                          ==========   ==========
</table>

        The accompanying notes are an integral part of these statements.

                                      -6-
<page>

                           MIDAMERICAN ENERGY COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<table>
<caption>
                                                                         NINE MONTHS
                                                                     ENDED SEPTEMBER 30,
                                                                     2002         2001
                                                                   ---------    ---------

                                                                <C>          <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income .....................................................   $ 143,145    $ 144,989
Adjustments to reconcile net income to net cash provided:
  Depreciation and amortization ................................     207,966      190,626
  Deferred income taxes and investment tax credit, net .........       2,657      (12,374)
  Amortization of other assets .................................      28,209       37,268
  Customer rate credits ........................................           -      (21,531)
  Power purchase contract restructuring receipt ................      39,100            -
  Cash outflow of accounts receivable securitization ...........      (8,000)           -
  Impact of changes in working capital .........................     (31,864)     114,731
  Other ........................................................      14,953        7,330
                                                                   ---------    ---------
    Net cash provided ..........................................     396,166      461,039
                                                                   ---------    ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ..............................    (228,771)    (150,867)
Less cost of equity funds in utility construction expenditures .       5,420          839
Quad Cities Generating Station decommissioning trust fund ......      (6,224)      (6,224)
Nonregulated capital expenditures ..............................        (586)      (1,984)
Other investing activities, net ................................       3,932        2,690
                                                                   ---------    ---------
  Net cash used ................................................    (226,229)    (155,546)
                                                                   ---------    ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid .................................................     (80,106)     (93,483)
Issuance of long-term debt, net of issuance cost ...............     391,147            -
Retirement of long-term debt, including reacquisition cost .....    (163,845)      (1,560)
Reacquisition of preferred securities ..........................    (126,680)     (13,320)
Net decrease in notes payable ..................................     (89,350)     (81,600)
                                                                   ---------    ---------
  Net cash used ................................................     (68,834)    (189,963)
                                                                   ---------    ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS ......................     101,103      115,530
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...............      20,020        9,677
                                                                   ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .....................   $ 121,123    $ 125,207
                                                                   =========    =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ......................   $  44,681    $  42,692
                                                                   =========    =========
Income taxes paid ..............................................   $  67,406    $ 166,537
                                                                   =========    =========
</table>

        The accompanying notes are an integral part of these statements.

                                      -7-
<page>

                           MIDAMERICAN ENERGY COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A.  GENERAL:

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

     MidAmerican  Energy is a public  utility  with  electric  and  natural  gas
operations and is the principal  subsidiary of MHC Inc. MHC is a direct,  wholly
owned subsidiary of MidAmerican  Funding,  LLC, whose sole member is MidAmerican
Energy Holdings Company.

B.  ENVIRONMENTAL MATTERS:

     (1) MANUFACTURED GAS PLANT FACILITIES -

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

     MidAmerican  Energy has evaluated or is evaluating 27 properties that were,
at one time, sites of gas manufacturing  plants in which it may be a potentially
responsible  party.  The purpose of these  evaluations  is to determine  whether
waste materials are present,  whether the materials  constitute an environmental
or health  risk,  and  whether  MidAmerican  Energy has any  responsibility  for
remedial  action.  Investigations  of the  sites  are  at  various  stages,  and
MidAmerican Energy has conducted ten removal actions to date. MidAmerican Energy
is continuing to evaluate several of the sites to determine the appropriate site
remedies, if any, necessary to obtain site closure from the agencies.

     MidAmerican Energy estimates the range of possible costs for investigation,
remediation  and monitoring for the sites  discussed  above to be $16 million to
$30 million.  MidAmerican Energy's estimate of the probable cost for these sites
as of September  30, 2002 was $18 million.  The estimate  consists of $1 million
for investigation costs, $6 million for remediation costs, $9 million for ground
water   treatment  and   monitoring   costs  and  $2  million  for  closure  and
administrative  costs.  This  estimate  has been  recorded as a liability  and a
regulatory  asset for future  recovery.  MidAmerican  Energy projects that these
amounts will be paid or incurred over the next 5 years.

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

                                      -8-
<page>

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

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

     (2)  AIR QUALITY -

     In July 1997, the  Environmental  Protection Agency (EPA) adopted revisions
to the National  Ambient Air Quality  Standards for ozone and a new standard for
fine  particulate  matter.  Based on data to be obtained from  monitors  located
throughout  each state,  the EPA will determine  which states have areas that do
not  meet  the air  quality  standards  (i.e.,  areas  that  are  classified  as
nonattainment).  The  standards  were  subjected  to legal  proceedings,  and in
February 2001, the United States Supreme Court upheld the  constitutionality  of
the  standards,  though  remanding  the  issue of  implementation  of the  ozone
standard  to the EPA.  As a result of a decision  rendered  by the U.S.  Circuit
Court of Appeals for the  District  of  Columbia,  the EPA is moving  forward in
implementation  of  the  standard  and  analyzing  existing  monitored  data  to
determine attainment status.

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

     The ozone and fine particulate matter standards could, in whole or in part,
be superceded by one of a number of multi-pollutant emission reduction proposals
currently under  consideration  at the federal level. In July 2002,  legislation
was introduced in Congress to implement the Bush  Administration's  "Clear Skies
Initiative"  calling for  reduction  in emissions  of sulfur  dioxide,  nitrogen
oxides and mercury through a  cap-and-trade  system.  Reductions  would begin in
2008 with additional emission reductions being phased in through 2018.

     While  legislative  action is necessary  for the Clear Skies  Initiative or
other  multi-pollutant  emission  reduction  initiatives  to  become  effective,
MidAmerican  Energy  has  implemented  a planning  process  that  forecasts  the
site-specific controls and actions required to meet emissions reductions of this
nature.  On  April  1,  2002,  in  accordance  with  Iowa  law  passed  in 2001,
MidAmerican Energy filed with the Iowa Utilities Board its first multi-year plan
and budget  (the Plan) for  managing  regulated  emissions  from its  generating
facilities  in a  cost-effective  manner.  MidAmerican  Energy  expects the Iowa
Utilities Board to rule on the prudence of the Plan in 2003.

                                      -9-

<page>


C.  RATE MATTERS:

     Under a settlement  agreement approved by the Iowa Utilities Board (IUB) on
December 21, 2001,  MidAmerican Energy's Iowa retail electric rates in effect on
December  31, 2000,  are  effectively  frozen  through  December  31,  2005.  In
approving that settlement,  the IUB  specifically  allows the filing of electric
rate  design  and/or  cost of service  rate  changes  that are  intended to keep
overall  company  revenues  unchanged  but could result in changes to individual
tariffs.   Additionally,   the  2001  settlement  agreement   reinstates,   with
modifications,   the  revenue  sharing  provisions  of  the  1997  pricing  plan
settlement  agreement,  which  expired  on  December  31,  2000.  Under the 2001
settlement  agreement,  an amount equal to 50% of revenues  associated with Iowa
retail  electric  returns on equity  between 12% and 14%, and 83.33% of revenues
associated with Iowa retail  electric  returns on equity above 14%, in each year
will be recorded as a regulatory liability to be used to offset a portion of the
cost to Iowa customers of future generating plant  investments.  An amount equal
to  the  regulatory  liability  will  be  recorded  as a  regulatory  charge  in
depreciation  and amortization  expense when the liability is accrued.  Interest
expense is accrued on the portion of the regulatory  liability  related to prior
years.  Beginning in 2002,  the  liability  is being  relieved as it is credited
against allowance for funds used during construction,  or capitalized  financing
costs, associated with generating plant additions. As of September 30, 2002, the
related regulatory liability reflected on the Consolidated Balance Sheet totaled
$95.0 million.

     On September 11, 2002,  MidAmerican  Energy received a final order from the
Illinois Commerce  Commission to increase its Illinois natural gas rates by $2.2
million annually.

     On March 15, 2002, MidAmerican Energy made a filing with the IUB requesting
an increase in rates of approximately  $26.6 million for its Iowa retail natural
gas customers.  As part of the filing,  MidAmerican  Energy requested an interim
rate increase of approximately $20.4 million annually. On June 12, 2002, the IUB
issued an order granting an interim rate increase of approximately $13.8 million
annually, effective immediately and subject to refund with interest. On July 15,
2002,  MidAmerican  Energy and the Office of Consumer  Advocate filed a proposed
settlement  agreement with the IUB. The proposed  settlement  agreement provides
for an increase in rates of $17.7 million annually for MidAmerican Energy's Iowa
retail natural gas customers and freezes such rates for two years after the date
the  IUB  approves  tariffs  implementing  the  proposed  settlement  agreement.
MidAmerican Energy anticipates  implementing the new rates in the fourth quarter
of 2002.

D.  DERIVATIVE FINANCIAL INSTRUMENTS:

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

     SFAS Nos.  133/138 require an entity to recognize all of its derivatives as
either assets or liabilities in its statement of financial  position and measure
those  instruments  at fair  value.  If the  conditions  specified  in SFAS Nos.
133/138  are met,  those  instruments  may be  designated  as  hedges.  Only the
ineffectiveness of hedge instruments impacts earnings.

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

                                      -10-
<page>


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

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

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

     MidAmerican Energy uses natural gas and electric derivative instruments for
trading purposes as defined by Emerging Issues Task Force (EITF) Issue No. 98-10
under strict  value-at-risk  limits  outlined by senior  management.  Unrealized
gains or losses on such  trading  transactions  are  reported  in  earnings  and
totaled a gain of $1.3 million as of September  30, 2002.  Approximately  57% of
the trading  unrealized  gain at September 30, 2002, is scheduled to be realized
in the next twelve  months.  In accordance  with EITF Issue No. 02-3,  effective
September 30, 2002, for MidAmerican  Energy,  all trading  revenues are reported
net of the  costs  of such  sales  on the  Consolidated  Statements  of  Income.
Previously,  such  amounts  were  recorded  gross.  All prior  periods have been
reclassified to conform to the net presentation.

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

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

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

                                      -11-
<page>

Sold,  Regulated  Cost of Fuel,  Energy and Capacity or  Nonregulated  Operating
Revenues, depending upon the nature of the physical transaction being hedged.

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

E.  SEGMENT INFORMATION:

     MidAmerican Energy has identified four reportable  operating segments based
principally on management structure.  The generation segment derives most of its
revenue  from the  sale of  regulated  wholesale  electricity  and  nonregulated
wholesale  and retail  natural  gas.  The energy  delivery  segment  derives its
revenue  principally from the sale and delivery of regulated retail  electricity
and natural gas. The  transmission  segment obtains most of its revenue from the
sale of  transmission  capacity.  The marketing  and sales segment  receives its
revenue   principally  from  nonregulated   retail  sales  of  natural  gas  and
electricity.  Common operating costs, interest income,  interest expense, income
tax expense and equity in the net income or loss of investees  are  allocated to
each segment.

                                      -12-

<page>


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

                                          Three Months                 Nine Months
                                      Ended September 30,          Ended September 30,
                                  --------------------------    --------------------------
                                     2002           2001           2002           2001
                                  -----------    -----------    -----------    -----------

                               <C>            <C>            <C>            <C>
Revenues:
  External revenues -
    Generation ................   $   112,750    $   101,047    $   310,696    $   429,129
    Energy delivery ...........       399,572        374,374      1,178,692      1,315,930
    Transmission ..............         5,553          6,064         15,689         17,053
    Marketing & sales .........        18,918         24,312         73,710        118,867
                                  -----------    -----------    -----------    -----------
      Total....................       536,793        505,797      1,578,787      1,880,979
                                  -----------    -----------    -----------    -----------

  Intersegment revenues -
    Generation ................       228,964        204,330        521,291        468,823
    Energy delivery ...........             -              -              -              -
    Transmission ..............        13,803         13,824         41,404         41,262
    Marketing & sales .........         1,276          1,649          2,052          2,353
                                  -----------    -----------    -----------    -----------
      Total ...................       244,043        219,803        564,747        512,438

  Intersegment eliminations ...      (244,043)      (219,803)      (564,747)      (512,438)
                                  -----------    -----------    -----------    -----------
    Consolidated ..............   $   536,793    $   505,797    $ 1,578,787    $ 1,880,979
                                  ===========    ===========    ===========    ===========


Income before income taxes:
  Generation ..................   $   104,454    $    83,353    $   145,627    $   153,667
  Energy delivery .............         3,399          4,551         66,831         68,209
  Transmission ................        10,318         10,699         31,162         29,988
  Marketing & sales ...........         2,040         (3,027)           819         (5,998)
                                  -----------    -----------    -----------    -----------
    Total .....................       120,211         95,576        244,439        245,866

  Preferred dividends .........           327            976          2,605          3,483
                                  -----------    -----------    -----------    -----------
    Consolidated ..............   $   120,538    $    96,552    $   247,044    $   249,349
                                  ===========    ===========    ===========    ===========
</table>

                                                     As of
                                       --------------------------------
                                       September 30,       December 31,
                                           2002                 2001
                                       -------------       ------------
Total Assets:
  Generation.....................       $1,341,702          $1,282,677
  Energy delivery................        2,206,775           2,107,598
  Transmission...................          230,735             226,251
  Marketing & sales..............           51,644              51,164
                                        ----------          ----------
    Total........................        3,830,856           3,667,690
  Reclassifications and
    intersegment eliminations(a)           (85,859)            (89,798)
                                        ----------          ----------
  Consolidated...................       $3,744,997          $3,577,892
                                        ==========          ==========

     (a)  Reclassifications and intersegment  eliminations relate principally to
          the  reclassification  of  income  tax  balances  in  accordance  with
          generally  accepted  accounting  principles  and  the  elimination  of
          intersegment accounts receivables and payables.

                                      -13-
<page>

F.   TOTAL COMPREHENSIVE INCOME:

     For the nine months ended September 30, 2002 and 2001, MidAmerican Energy's
total comprehensive income was $137.8 million and $147.2 million,  respectively.
For the three months ended  September  30, 2002 and 2001,  MidAmerican  Energy's
total  comprehensive  income was $68.5 million and $54.8 million,  respectively.
The differences from Earnings on Common Stock for the periods  presented are due
to the  effective  portion  of net gains  and  losses  on  MidAmerican  Energy's
derivative  instruments  classified  as  cash  flow  hedges.  Accumulated  other
comprehensive loss, net, which also includes  recognition of the minimum pension
liability  adjustment,  was $6.5 million and $3.8  million as of  September  30,
2002, and December 31, 2001, respectively.

G.   POWER PURCHASE CONTRACT RESTRUCTURING:

     On July 31, 2002,  MidAmerican  Energy and Nebraska  Public Power  District
(NPPD) signed an agreement on the  restructuring of the power purchase  contract
for  Cooper  Nuclear  Station  (Cooper).  Under  the  terms of the  restructured
contract,  MidAmerican  Energy  will pay  NPPD  through  December  31,  2004,  a
scheduled amount per unit for 380 megawatts of the accredited capacity of Cooper
and a minimum of approximately 1.2 million megawatt-hours (MWh) in the last five
months of 2002 and  approximately 2.5 million MWh in each of 2003 and 2004. NPPD
also paid MidAmerican Energy $39.1 million on August 1, 2002.

     In December 2000,  MidAmerican Energy ceased  contributing  decommissioning
funds  to  NPPD  and   maintained   a  separate   fund  for   estimated   Cooper
decommissioning costs. Through July 31, 2002, $18.3 million had been accrued and
retained by MidAmerican  Energy in this separate  fund. In conjunction  with the
power purchase  contract  restructuring,  MidAmerican  Energy is recognizing the
$39.1  million  cash  payment  and the  $18.3  million  previously  accrued  for
decommissioning  into  income  based  on the  estimated  energy  expected  to be
received for the remainder of the contract.

     Finally, both parties agreed to release each other from any and all claims,
past or present,  each might have or assert  against  the other with  respect to
Cooper on or before July 31, 2002,  and to file for dismissal of the  litigation
then pending in U.S. District Court.

     Under the terms of MidAmerican  Energy's power purchase  contract with NPPD
prior to its  restructuring,  MidAmerican Energy paid NPPD one-half of the fixed
and  operating  costs of  Cooper,  excluding  depreciation  but  including  debt
service,  and  MidAmerican  Energy's  share of the nuclear fuel cost,  including
Department of Energy  disposal  fees,  based on energy  delivered.  In addition,
prior to  December  2000,  MidAmerican  Energy  contributed  toward  payment  of
one-half of Cooper's  projected  decommissioning  costs based on an assumed 2004
shutdown of the plant.

                                      -14-

<page>


                            MIDAMERICAN FUNDING, LLC
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<table>
<caption>

                                                         THREE MONTHS                       NINE MONTHS
                                                      ENDED SEPTEMBER 30,               ENDED SEPTEMBER 30,
                                                 -----------------------------       ------------------------------
                                                    2002              2001              2002              2001
                                                 -----------       -----------       -----------       -----------


                                              <C>               <C>               <C>               <C>
OPERATING REVENUES
Regulated electric ........................      $   419,542       $   390,274       $ 1,052,130       $ 1,025,264
Regulated gas .............................           96,163           101,292           442,290           736,483
Nonregulated ..............................           22,991            16,096            88,189           136,046
                                                 -----------       -----------       -----------       -----------
                                                     538,696           507,662         1,582,609         1,897,793
                                                 -----------       -----------       -----------       -----------
OPERATING EXPENSES
Regulated:
  Cost of fuel, energy and capacity .......          110,590            88,322           255,907           214,528
  Cost of gas sold ........................           61,907            69,667           297,226           595,888
  Other operating expenses ................           93,810           113,361           300,001           314,014
  Maintenance .............................           30,002            34,735            90,698            93,681
  Depreciation and amortization ...........           66,451            53,860           207,120           190,115
  Property and other taxes ................           19,640            17,614            56,229            53,431
                                                 -----------       -----------       -----------       -----------
                                                     382,400           377,559         1,207,181         1,461,657
                                                 -----------       -----------       -----------       -----------
Nonregulated:
  Cost of sales ...........................           14,899            11,130            64,056           113,755
  Other ...................................            7,594            15,584            21,373            45,893
                                                 -----------       -----------       -----------       -----------
                                                      22,493            26,714            85,429           159,648
                                                 -----------       -----------       -----------       -----------
  Total operating expenses ................          404,893           404,273         1,292,610         1,621,305
                                                 -----------       -----------       -----------       -----------

OPERATING INCOME ..........................          133,803           103,389           289,999           276,488
                                                 -----------       -----------       -----------       -----------

NON-OPERATING INCOME
Interest and dividend income ..............            9,004             5,846            17,761            19,482
Marketable securities gains and losses, net           (1,697)             (258)           (5,221)           (1,534)
Other income ..............................              330             4,273            13,172            13,159
Other expense .............................           (2,643)           (4,437)           (7,657)          (16,458)
                                                 -----------       -----------       -----------       -----------
                                                       4,994             5,424            18,055            14,649
                                                 -----------       -----------       -----------       -----------
FIXED CHARGES
Interest on long-term debt ................           30,230            27,268            89,052            82,683
Other interest expense ....................              886             1,442             2,598             5,210
Preferred dividends of subsidiaries .......              327             2,972             4,179             9,530
Allowance for borrowed funds ..............             (895)             (351)           (2,160)           (1,104)
                                                 -----------       -----------       -----------       -----------
                                                      30,548            31,331            93,669            96,319
                                                 -----------       -----------       -----------       -----------

INCOME BEFORE INCOME TAXES ................          108,249            77,482           214,385           194,818
INCOME TAXES ..............................           44,702            36,079            89,705            92,349
                                                 -----------       -----------       -----------       -----------
NET INCOME ................................      $    63,547       $    41,403       $   124,680       $   102,469
                                                 ===========       ===========       ===========       ===========
</table>


        The accompanying notes are an integral part of these statements.

                                      -15-
<page>


                            MIDAMERICAN FUNDING, LLC
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<table>
<caption>

                                                                                     As of
                                                                         ---------------------------
                                                                         September 30,  December 31,
                                                                               2002         2001
                                                                         -------------  ------------
                                                                                  (Unaudited)

                                                                         <C>          <C>
ASSETS
UTILITY PLANT
Electric ................................................................   $4,688,802   $4,598,372
Gas .....................................................................      888,602      867,277
                                                                            ----------   ----------
                                                                             5,577,404    5,465,649
Less accumulated depreciation and amortization ..........................    2,985,267    2,847,979
                                                                            ----------   ----------
                                                                             2,592,137    2,617,670
Construction work in progress ...........................................      161,505       80,276
                                                                            ----------   ----------
                                                                             2,753,642    2,697,946
                                                                            ----------   ----------
POWER PURCHASE CONTRACT .................................................       19,185       48,185
                                                                            ----------   ----------
CURRENT ASSETS
Cash and cash equivalents ...............................................      132,504       20,270
Marketable securities, trading ..........................................        6,677       20,743
Receivables .............................................................      250,588      167,969
Inventories .............................................................       91,903       83,339
Prepaid taxes ...........................................................       23,956       23,956
Other ...................................................................       11,795       12,640
                                                                            ----------   ----------
                                                                               517,423      328,917
                                                                            ----------   ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ..............................      462,109      519,680
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED, NET ..................    1,279,143    1,279,143
REGULATORY ASSETS .......................................................      204,251      221,120
OTHER ASSETS ............................................................       61,301       80,481
                                                                            ----------   ----------
TOTAL ASSETS ............................................................   $5,297,054   $5,175,472
                                                                            ==========   ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Member's equity .........................................................   $2,015,875   $1,974,605
MidAmerican Energy preferred securities, not subject to
  mandatory redemption ..................................................       31,759       31,759
Preferred securities, subject to mandatory redemption:
  MidAmerican Energy preferred securities ...............................            -       26,680
  MidAmerican Energy-obligated preferred securities of subsidiary trust
    holding solely MidAmerican Energy junior subordinated debentures.....            -      100,000
Long-term debt (excluding current portion) ..............................    1,649,086    1,357,782
                                                                            ----------   ----------
                                                                             3,696,720    3,490,826
                                                                            ----------   ----------
CURRENT LIABILITIES
Notes payable ...........................................................            -       91,780
Current portion of long-term debt .......................................      127,778      187,187
Current portion of power purchase contract ..............................            -       17,398
Accounts payable ........................................................      194,765      185,528
Taxes accrued ...........................................................       75,883       61,269
Interest accrued ........................................................       20,551       27,813
Other ...................................................................       46,102       44,762
                                                                            ----------   ----------
                                                                               465,079      615,737
                                                                            ----------   ----------
OTHER LIABILITIES
Power purchase contract .................................................            -        8,469
Deferred income taxes ...................................................      564,496      564,334
Investment tax credit ...................................................       57,982       61,292
Quad Cities Station decommissioning .....................................      155,306      158,349
Regulatory liabilities ..................................................      108,158       62,378
Other ...................................................................      249,313      214,087
                                                                            ----------   ----------
                                                                             1,135,255    1,068,909
                                                                            ----------   ----------
TOTAL CAPITALIZATION AND LIABILITIES ....................................   $5,297,054   $5,175,472
                                                                            ==========   ==========
</table>

        The accompanying notes are an integral part of these statements.

                                      -16-
<page>


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

                                                                           Nine Months
                                                                       Ended September 30,
                                                                    -------------------------
                                                                      2002            2001
                                                                    ---------       ---------


                                                                 <C>             <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................      $ 124,680       $ 102,469
Adjustments to reconcile net income to net cash provided:
  Depreciation and amortization ..............................        208,725         217,260
  Deferred income taxes and investment tax credit, net .......            333         (13,533)
  Amortization of other assets and liabilities ...............         26,165          34,477
  Other-than-temporary declines in value of investments ......          4,363               -
  Income from equity method investments ......................         (1,916)         (4,031)
  Gain on sale of securities, assets and other investments ...         (3,458)         (1,376)
  Customer rate credits ......................................              -         (21,531)
  Power purchase contract restructuring receipt ..............         39,100               -
  Cash outflow of accounts receivable securitization .........         (8,000)              -
  Impact of changes in working capital .......................        (50,343)        115,410
  Other ......................................................         19,129          11,292
                                                                    ---------       ---------
    Net cash provided ........................................        358,778         440,437
                                                                    ---------       ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ............................       (228,771)       (150,867)
Less cost of equity funds in utility construction expenditures          5,420             839
Quad Cities Generating Station decommissioning
  trust fund .................................................         (6,224)         (6,224)
Nonregulated capital expenditures ............................           (990)         (2,149)
Purchase of assets and long-term investments .................         (1,500)         (2,251)
Proceeds from sale of available-for-sale securities ..........          4,341               -
Proceeds from sale of assets and other investments ...........         11,520             277
Notes receivable from affiliate ..............................         34,164         (65,534)
Other investing activities, net ..............................          4,154           3,714
                                                                    ---------       ---------
  Net cash used ..............................................       (177,886)       (222,195)
                                                                    ---------       ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid ........................................        (77,500)              -
Issuance of long-term debt, net of issuance costs ............        391,147         198,150
Retirement of long-term debt, including reacquisition cost ...       (163,845)       (201,560)
Reacquisition of preferred securities ........................       (126,680)        (13,320)
Net decrease in notes payable ................................        (91,780)        (79,100)
                                                                    ---------       ---------
  Net cash used ..............................................        (68,658)        (95,830)
                                                                    ---------       ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS ....................        112,234         122,412
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .............         20,270          10,018
                                                                    ---------       ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................      $ 132,504       $ 132,430
                                                                    =========       =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ....................      $  92,784       $  90,388
                                                                    =========       =========
Income taxes paid ............................................      $  57,384       $ 153,513
                                                                    =========       =========
</table>

        The accompanying notes are an integral part of these statements.

                                      -17-
<page>


                            MIDAMERICAN FUNDING, LLC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.  GENERAL:

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

     MidAmerican  Funding is an Iowa limited  liability company with MidAmerican
Energy Holdings Company as its sole member. MidAmerican Funding's direct, wholly
owned  subsidiary is MHC Inc. MHC,  MidAmerican  Funding and MidAmerican  Energy
Holdings  are exempt  public  utility  holding  companies  headquartered  in Des
Moines, Iowa. MHC's principal subsidiary is MidAmerican Energy Company, a public
utility with electric and natural gas  operations.  Other  direct,  wholly owned
subsidiaries of MHC include MidAmerican Capital Company,  Midwest Capital Group,
Inc., MidAmerican Services Company and MEC Construction Services Co.

B.  ENVIRONMENTAL MATTERS:

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

C.  RATE MATTERS:

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

D.  DERIVATIVE FINANCIAL INSTRUMENTS:

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

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

                                      -18-

<page>


E.  SEGMENT INFORMATION:

     MidAmerican Funding has identified four reportable operating segments based
principally on management structure.  The generation segment derives most of its
revenue  from the  sale of  regulated  wholesale  electricity  and  nonregulated
wholesale  and retail  natural  gas.  The energy  delivery  segment  derives its
revenue  principally from the sale and delivery of regulated retail  electricity
and natural gas. The  transmission  segment obtains most of its revenue from the
sale of  transmission  capacity.  The marketing  and sales segment  receives its
revenue   principally  from  nonregulated   retail  sales  of  natural  gas  and
electricity.  Common operating costs, interest income,  interest expense, income
tax expense and equity in the net income or loss of investees  are  allocated to
each segment.

                                      -19-
<page>



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

                                      Three Months                  Nine Months
                                   Ended September 30,           Ended September 30,
                                --------------------------    --------------------------
                                   2002           2001           2002           2001
                                -----------    -----------    -----------    -----------


                             <C>            <C>            <C>            <C>
Revenues:
  External revenues -
    Generation ..............   $   112,750    $   101,047    $   310,696    $   429,129
    Energy delivery .........       399,572        374,374      1,178,692      1,315,930
    Transmission ............         5,553          6,064         15,689         17,053
    Marketing & sales .......        18,918         24,312         73,710        118,867
    Other (a) ...............         1,903          1,865          3,822         16,814
                                -----------    -----------    -----------    -----------
      Total .................       538,696        507,662      1,582,609      1,897,793
                                -----------    -----------    -----------    -----------

  Intersegment revenues -
      Generation ............       228,964        204,330        521,291        468,823
      Energy delivery .......             -              -              -              -
      Transmission ..........        13,803         13,824         41,404         41,262
      Marketing & sales .....         1,276          1,649          2,052          2,353
      Other (a) .............             -             31              -             92
                                -----------    -----------    -----------    -----------
        Total ...............       244,043        219,834        564,747        512,530

  Intersegment eliminations        (244,043)      (219,834)      (564,747)      (512,530)
                                -----------    -----------    -----------    -----------
      Consolidated ..........   $   538,696    $   507,662    $ 1,582,609    $ 1,897,793
                                ===========    ===========    ===========    ===========

Income before income taxes:
  Generation ................   $   104,454    $    83,353    $   145,627    $   153,667
  Energy delivery ...........         3,399          4,551         66,831         68,209
  Transmission ..............        10,318         10,699         31,162         29,988
  Marketing & sales .........         2,040         (3,027)           819         (5,998)
  Other (a) .................       (11,962)       (18,094)       (30,054)       (51,048)
                                -----------    -----------    -----------    -----------
    Total ...................   $   108,249    $    77,482    $   214,385    $   194,818
                                ===========    ===========    ===========    ===========
</table>
<table>
<caption>

                                              As of
                                  ----------------------------
                                  September 30,   December 31,
                                      2002            2001
                                  -------------   ------------

                                <C>            <C>
Total Assets(b):
  Generation ...................   $ 2,269,593    $ 2,210,569
  Energy delivery ..............     2,473,948      2,374,771
  Transmission .................       314,913        310,429
  Marketing & sales ............        51,644         51,164
  Other (a) ....................       529,602        506,331
                                   -----------    -----------
    Total ......................     5,639,700      5,453,264
  Reclassifications and
    intersegment eliminations(c)      (342,646)      (277,792)
                                   -----------    -----------
  Consolidated .................   $ 5,297,054    $ 5,175,472
                                   ===========    ===========
</table>

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

                                      -20-

<page>

    (b)  Total assets by operating segment reflect the assignment of goodwill to
         applicable reporting units in accordance with SFAS No. 142. Refer to
         Note H for further discussion of SFAS No. 142 and the assignment of
         goodwill.

    (c)  Reclassifications and intersegment eliminations relate principally to
         the reclassification of income tax balances in accordance with
         generally accepted accounting principles and the elimination of
         intersegment accounts receivables and payables.

F.   TOTAL COMPREHENSIVE INCOME:

     Total  comprehensive  income for MidAmerican  Funding is shown in the table
below.  The  differences  from Net  Income  to total  comprehensive  income  for
MidAmerican Funding are due to unrealized holding gains and losses of marketable
securities  during the periods and the effective portion of net gains and losses
of  derivative  instruments  classified as cash flow hedges.  Accumulated  other
comprehensive loss, net, which is a component of common equity and also includes
recognition of the minimum pension  liability  adjustment,  was $6.5 million and
$0.6 million as of September 30, 2002, and December 31, 2001, respectively.
<table>
<caption>

                                          Three Months               Nine Months
                                       Ended September 30,        Ended September 30,
                                      ----------------------    ----------------------
                                         2002        2001         2002         2001
                                      ---------    ---------    ---------    ---------


                                   <c>          <c>          <c>          <c>
Net Income ........................   $  63,547    $  41,403    $ 124,680    $ 102,469
Other Comprehensive Income (Loss) -
  Marketable securities ...........         522       (7,373)      (3,172)      (5,134)
  Cash flow hedges ................      (1,672)        (744)      (2,738)       5,652
                                      ---------    ---------    ---------    ---------
Total Comprehensive Income ........   $  62,397    $  33,286    $ 118,770    $ 102,987
                                      =========    =========    =========    =========
</table>

G.  POWER PURCHASE CONTRACT RESTRUCTURING:

     Refer to Note G of  MidAmerican  Energy's Notes to  Consolidated  Financial
Statements  for  information  regarding  MidAmerican  Funding's  power  purchase
contract restructuring.

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

     On January 1, 2002, MidAmerican Funding adopted SFAS No. 142, "Goodwill and
Other  Intangible  Assets," which dictates the accounting for acquired  goodwill
and other intangible assets. SFAS No. 142 requires that amortization of goodwill
and  indefinite-lived  intangible  assets  be  discontinued  and  that  entities
disclose net income for prior periods adjusted to exclude such  amortization and
related  income tax effects,  as well as a  reconciliation  from the  originally
reported net income to the adjusted net income.  MidAmerican  Funding's  related
amortization consisted solely of goodwill amortization,  which had no income tax
effect.  Following is a reconciliation of net income as originally  reported for
the periods ended September 30, 2001, to adjusted net income (in thousands):

                                          Three       Nine
                                          Months     Months
                                         --------   --------
     Net income as originally reported   $ 41,403   $102,469
     Goodwill amortization ...........      8,605     25,811
                                         --------   --------
     Net income as adjusted ..........   $ 50,008   $128,280
                                         ========   ========

                                      -21-
<page>


     MidAmerican  Funding has completed the initial goodwill  impairment test as
required by SFAS No. 142,  and no  impairment  was  indicated.  As of January 1,
2002,  and  September  30,  2002,  goodwill  has been  assigned  to  MidAmerican
Funding's reportable segments as follows (in thousands):

     Generation ........   $  927,892
     Energy delivery ...      267,173
     Transmission ......       84,178
     Marketing & sales..            -
                           ----------
                           $1,279,243
                           ==========

                                      -22-
<page>


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

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

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

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

FORWARD-LOOKING STATEMENTS

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

                                      -23-
<page>


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

REGULATED GROSS MARGIN

     Regulated Electric Gross Margin -

                                          Three Months         Nine Months
                                       Ended September 30,  Ended September 30,
                                       -------------------  -------------------
                                          2002     2001       2002     2001
                                         ------   ------     ------   ------
                                                    (In millions)
     Operating revenues ..............   $  420   $  390     $1,052   $1,025
     Cost of fuel, energy and capacity      111       88        256      215
                                         ------   ------     ------   ------
     Electric gross margin ...........   $  309   $  302     $  796   $  810
                                         ======   ======     ======   ======

     Electric  gross margin for the third  quarter of 2002  increased $7 million
compared to the third quarter of 2001.

     Temperature  conditions  during the three months ended  September 30, 2002,
were  hotter  than in the  third  quarter  of 2001,  resulting  in a $9  million
increase  in electric  margin.  Other usage  factors  not  dependent  on weather
increased  electric  margin by $14.9  million  compared to the third  quarter of
2001.  In total,  retail  electric  sales volumes  increased  6.6% for the three
months ended September 30, 2002.

     MidAmerican  Energy's  gross  margin on  wholesale  sales  decreased  $20.6
million,  excluding the effect of  restructuring  the contract related to Cooper
Nuclear Station,  due primarily to a decline in prices.  The price declines were
somewhat offset by a 41.4% increase in wholesale  sales volumes  compared to the
2001  quarter.  Wholesale  sales are the  sales of  energy  to other  utilities,
municipalities and marketers outside of MidAmerican Energy's delivery system.

     MidAmerican Energy sells and purchases  electric  capacity.  The net margin
from those sales and  purchases  increased  $9.6  million  compared to the third
quarter of 2001.  Additionally,  a change in the mix of fuel  sources and in the
average cost per unit of coal and natural gas  decreased  fuel costs  related to
Iowa  retail   electric  sales  by  $12.1  million,   excluding  the  effect  of
restructuring the contract related to Cooper Nuclear Station, further increasing
electric margin relative to the three months ended September 30, 2001.

     Electric  gross  margin  decreased by $12.0  million  compared to the third
quarter  of 2001 due to a change in the  classification  of costs for energy and
capacity  purchased  from  Cooper  Nuclear  Station  under a  contract  with the
Nebraska Public Power District. Prior to August 1, 2002, only the fuel costs for
energy  purchased  from Cooper  Nuclear  Station were  included in Cost of Fuel,
Energy and  Capacity.  Other costs  under the  contract  were  included in Other
Operating  Expenses.  As a result of a contract  restructuring on July 31, 2002,
all current  costs for energy and  capacity  purchased  under that  contract are
included in Cost of Fuel,  Energy and Capacity,  as with other purchased  power.
Other Operating  Expenses  reflects a decrease  accordingly.  Refer to Note G of
Notes to  Consolidated  Financial  Statements  for a discussion  of the contract
restructuring.

     Electric  revenues  from the recovery of energy  efficiency  program  costs
decreased  $4.8 million  compared to the quarter ended  September 30, 2001.  The
decrease in the third quarter of 2002 was due to completion in the third quarter
of 2001 of the  final  recovery  phase for  deferred  energy  efficiency  costs.
Deferred energy  efficiency costs were costs previously  incurred by MidAmerican
Energy,  which, in accordance  with rate treatment,  were not charged to expense
until  recovery from customers  began.  Recovery of deferred  energy  efficiency
costs occurred over a four-year  period from the date collection  began for each
phase.  The decrease in recovery of deferred  costs was reduced  partially by an
increase in

                                      -24-
<page>

the recovery of current energy efficiency  costs.  Changes in these revenues are
substantially matched with corresponding changes in other operating expenses.

     For the nine months ended  September  30, 2002,  compared to the first nine
months  of 2001,  electric  gross  margin  decreased  $14  million.  MidAmerican
Energy's gross margin on wholesale sales decreased $38.3 million,  excluding the
effect of the Cooper Nuclear  Station  contract  restructuring,  compared to the
first nine months of 2001 due to price  declines.  The impact of price  declines
was partially offset by an 18.0% increase in wholesale sales volumes.

     Electric margin  decreased $12.0 million  compared to the nine months ended
September 30, 2001, due to the change in  classification of costs for energy and
capacity purchased from Cooper Nuclear Station due to the contract restructuring
discussed above.

     Electric  revenues  from the recovery of energy  efficiency  program  costs
decreased $15.7 million compared to the nine months ended September 30, 2001. As
discussed  above,  changes in these  revenues  are  substantially  matched  with
corresponding changes in other operating expenses.

     MidAmerican Energy's gains from sales of emission allowances decreased $3.2
million due to a gain on a sale in the  nine-month  period ended  September  30,
2001.  Additionally,  fuel costs  related to Iowa retail  sales  decreased  $8.0
million,   excluding  the  effect  of  the  Cooper  Nuclear   Station   contract
restructuring, increasing electric margin for the first nine months of 2002, due
principally  to a change in the mix of fuel  sources  compared to the first nine
months of 2001.

     The impact of temperature  conditions  resulted in a $9 million increase in
electric margin compared to the nine months ended September 30, 2001, due to the
hotter temperatures in the third quarter of 2002.  Electricity usage factors not
dependent on weather increased  electric margin by $33.6 million compared to the
first nine months of 2001.  An increase  in the  average  retail rate  increased
electric  margin  by $5.9  million.  In total,  retail  electric  sales  volumes
increased 6.0% for the nine months ended September 30, 2002.

     Regulated Gas Gross Margin -

                              Three Months          Nine Months
                           Ended September 30,   Ended September 30,
                           -------------------   -------------------
                             2002      2001        2002      2001
                             ----      ----        ----      ----
                                        (In millions)
     Operating revenues....  $ 96      $101        $442      $736
     Cost of gas sold .....    62        70         297       596
                             ----      ----        ----      ----
     Gas gross margin .....  $ 34      $ 31        $145      $140
                             ====      ====        ====      ====

     Regulated gas revenues  include  purchase gas  adjustment  clauses  through
which MidAmerican Energy is allowed to recover the cost of gas sold from most of
its gas utility customers. Consequently, fluctuations in the cost of gas sold do
not  affect  gross  margin or net income  because  revenues  reflect  comparable
fluctuations  through the purchase  gas  adjustment  clauses.  A decrease in the
per-unit cost of gas compared to 2001 decreased revenues and cost of gas sold by
approximately $214 million for the first nine months of 2002.

     Temperature  conditions  during the three months ended  September 30, 2002,
were warmer than those in the third  quarter of 2001,  resulting in a $1 million
decrease in gas gross margin. Other usage factors increased gross margin by $1.3
million  compared to the third  quarter of 2001.  Total retail gas sales volumes
decreased  6.3% for the three months ended  September  30, 2002.

                                      -25-
<page>

     An increase in retail rates improved gas margin by $1.9 million compared to
the third quarter of 2001. On February 20, 2002, the South Dakota Public Utility
Commission approved a settlement  agreement allowing increased natural gas rates
of $3.1 million  annually,  effective  immediately.  On June 12, 2002,  the Iowa
Utilities   Board  issued  an  order   granting  an  interim  rate  increase  of
approximately  $13.8  million  annually,  effective  immediately  and subject to
refund with interest. On September 11, 2002, MidAmerican Energy received a final
order from the Illinois Commerce Commission to increase its Illinois natural gas
rates by $2.2 million  annually.  Refer to the "Rate Matters"  discussion in the
"Liquidity and Capital  Resources"  section of MD&A for comments on the Iowa gas
rate proceeding.

     Revenues from the recovery of energy  efficiency costs increased gas margin
by $0.9 million compared to the three months ended September 30, 2001, due to an
increase in the recovery of current on-going energy efficiency  costs.  Refer to
the "Regulated  Electric Gross Margin"  section above for a discussion of energy
efficiency revenues.

     Compared to the first nine months of 2001,  gas gross  margin  increased $5
million.  Milder temperature  conditions in the first and third quarters of 2002
compared to the same quarters in 2001,  offset  partially by colder  temperature
conditions in the second quarter of 2002,  resulted in a $7 million reduction in
gas gross margin.  Other usage  factors not  dependent on weather  increased gas
margin by $7.8 million. Total natural gas retail sales volumes decreased 14.3%.

     The increase in retail rates  improved gas margin by $6.0 million  compared
to the first nine months of 2001.

         A decrease in revenues from the recovery of energy efficiency costs
reduced gas margin by $1.4 million compared to the nine months ended September
30, 2001.

REGULATED OPERATING EXPENSES

     Regulated other operating  expenses for the third quarter of 2002 decreased
$19.6  million  compared  to the  third  quarter  of 2001.  As  discussed  under
"Regulated Electric Gross Margin" above,  MidAmerican  Energy's contract related
to Cooper  Nuclear  Station  was  restructured  July 31,  2002.  Because of that
restructuring,  Cooper  Nuclear  Station  costs  reflected  in  Other  Operating
Expenses  decreased $15.9 million  compared to the third quarter of 2001.  Other
significant  items  contributing to the decrease were a $3.1 million decrease in
the provision for uncollectible  accounts receivable and a $2.3 million decrease
in energy  efficiency  program  costs.  Refer to the  "Regulated  Electric Gross
Margin" section for discussion  regarding energy efficiency costs. The decreases
were  partially  offset  by  a  $4.4  million  increase  in  pension  and  other
postretirement costs.

     Regulated other operating  expenses for the nine months ended September 30,
2002,  decreased  $15.2  million for  MidAmerican  Energy and $14.0  million for
MidAmerican Funding compared to the 2001 period. The more significant  decreases
included  $12.3 million in energy  efficiency  program  costs,  $11.7 million in
Cooper Nuclear Station costs and $5.9 million in the provision for uncollectible
accounts  receivable.  The  decrease  in Cooper  Nuclear  Station  costs was due
primarily  to the related  contract  restructuring.  Numerous  less  substantive
decreases also  contributed to the total decrease in other  operating  expenses.
Compared  to the nine  months  ended  September  30,  2001,  pension  and  other
postretirement  costs  increased  $14.0  million;  health care and other benefit
costs  increased $3.3 million;  and property and liability  insurance  increased
$2.1 million due to greater premium refunds in the 2001 period.  The increase in
pension and  postretirement  costs is due principally to a change in the assumed
discount rate beginning in the fourth quarter of 2001.

                                      -26-
<page>


     Maintenance  expenses  decreased  $4.7  million for the three  months ended
September  30, 2002,  and $3.0 million for the nine months ended  September  30,
2002,  compared to the  respective  2001  periods due  primarily to decreases in
electric distribution  maintenance expenses.  Fossil-fuel generation maintenance
expenses  decreased $2.4 million for the 2002 quarter and increased $1.6 million
for the nine-month 2002 period.

     Depreciation and amortization  expense  increased $12.6 million compared to
the third  quarter  of 2001 due to a $9.4  million  increase  in the  regulatory
charge related to the  establishment of a regulatory  liability for the electric
revenue sharing  arrangement in Iowa. Utility plant depreciation  increased,  in
part,  due to a change in the  estimated  useful life of general  utility  plant
assets.  Also, as a result of the  restructuring  of the Cooper Nuclear  Station
contract,  MidAmerican Energy wrote off the power purchase contract  liabilities
and related  assets,  resulting in a $2.9 million  gain.  The gain is due to the
prior period,  accelerated  write-off of assets and  liabilities as permitted by
Illinois  deregulation  rules.  Depreciation and amortization  expense increased
$17.0  million  compared  to the first nine months of 2001 due to an increase in
utility plant depreciation and an $8.8 million increase in the regulatory charge
related to the revenue sharing arrangement in Iowa.

NONREGULATED GROSS MARGIN

                                       Three Months           Nine Months
                                    Ended September 30,    Ended September 30,
                                    -------------------   --------------------
                                      2002       2001       2002        2001
                                    -------    -------    --------    --------
                                                     (In millions)
MidAmerican Energy -
  Operating revenues:
    Energy trading gross revenues   $  60.4    $  79.1    $  186.6    $  341.6
    Energy trading cost of sales       59.8       78.0       183.4       335.5
                                    -------    -------    --------    --------
      Net energy trading revenues       0.6        1.1         3.2         6.1
    Other revenues ..............      20.5       13.1        81.2       113.1
                                    -------    -------    --------    --------
      Total operating revenues ..      21.1       14.2        84.4       119.2
  Cost of sales .................      14.4       10.2        63.2       100.3
                                    -------    -------    --------    --------
        Gross margin ............   $   6.7    $   4.0    $   21.2    $   18.9
                                    =======    =======    ========    ========


MidAmerican Funding Consolidated -
  Operating revenues:
    Energy trading gross revenues... $ 60.4    $  79.1    $  186.6    $  341.6
    Energy trading cost of sales....   59.8       78.0       183.4       335.5
                                    -------    -------    --------    --------
      Net energy trading revenues...    0.6        1.1         3.2         6.1
    Other revenues..................   22.4       15.0        85.0       129.9
                                    -------    -------    --------    --------
      Total operating revenues......   23.0       16.1        88.2       136.0
    Cost of sales...................   14.9       11.1        64.1       113.8
                                    -------    -------    --------    --------
         Gross margin...............$   8.1    $   5.0    $   24.1    $   22.2
                                    =======    =======    ========    ========

                                      -27-
<page>


     MidAmerican Energy -

     The Emerging  Issues Task Force (EITF) recently issued EITF Issue No. 02-3,
"Recognition and Reporting of Gains and Losses on Energy Trading Contracts under
Issues No. 98-10 and 00-17." In accordance  with EITF Issue No. 02-3,  all gains
and  losses on energy  trading  contracts  must be  reported  net on the  income
statement,  effective for reporting periods ending after July 15, 2002, with all
prior  periods  presented  being  reclassified  to  a  consistent  presentation.
MidAmerican   Energy's   nonregulated   wholesale  gas  and  electric  marketing
activities  qualify as "energy  trading"  contracts  under the  guidance of EITF
Issue No. 98-10.  The preceding  tables  provide the gross  revenues and cost of
sales for those  activities for discussion  purposes.  For the nine months ended
September 30, 2002,  approximately  95% of  MidAmerican  Energy's gross revenues
from energy trading activities were from natural gas trading operations.

     Gross margin for MidAmerican  Energy's  nonregulated  wholesale natural gas
operations  decreased $1.0 million for the third quarter of 2002. The decline in
gross margin was due to a decrease in sales volumes.  Revenues from nonregulated
wholesale natural gas marketing  operations  decreased $23.1 million compared to
the third quarter of 2001 to $56.0 million for the third quarter of 2002.  Sales
volumes  decreased 9 million MMBtus (34%) resulting in a $26.6 million  decrease
in  revenues.  The  decrease  due to sales  volumes was  partially  offset by an
increase in the average price per unit sold, reflective of an 8% increase in the
average cost of gas. Cost of sales  decreased $22.1 million to $56.0 million for
the three months ended September 30, 2002, due to the decrease in sales volumes.

     Gross margin for MidAmerican  Energy's  nonregulated  wholesale natural gas
operations  decreased $4.8 million for the nine months ended September 30, 2002.
The decline in gross  margin was due to decreases in the price per unit sold and
sales  volumes.  Revenues  from  nonregulated  wholesale  natural gas  marketing
operations decreased $163.5 million to $177.9 million compared to the nine-month
period ended  September 30, 2001. A decrease in the average price per unit sold,
reflective  of a 35%  decrease in the average  cost of gas,  resulted in a $99.3
million  decrease in revenues.  Sales volumes  decreased 15 million MMBtus (19%)
resulting  in a $64.2  million  decrease in  revenues.  Cost of sales  decreased
$158.7 million to $176.8  million for the nine months ended  September 30, 2002,
due to the decreases in the per-unit cost of gas and in sales volumes.

     Other  nonregulated  revenues and cost of sales  consist  substantially  of
nonregulated  retail  natural  gas  marketing   operations.   Gross  margin  for
MidAmerican  Energy's  nonregulated  retail natural gas operations for the third
quarter  of 2002 was  relatively  unchanged  from  the  third  quarter  of 2001.
Revenues from  nonregulated  retail natural gas marketing  operations  decreased
$1.1  million  compared  to the third  quarter of 2001 to $14.1  million for the
third quarter of 2002. A decrease in the average price per unit sold, reflective
of a 9% decrease in the average cost of gas, resulted in a $1.4 million decrease
in revenues.  Sales volumes increased  slightly (2%) resulting in a $0.3 million
increase in revenues.  Cost of sales decreased $1.2 million to $13.6 million for
the three months ended September 30, 2002.

     Gross  margin for  MidAmerican  Energy's  nonregulated  retail  natural gas
operations  increased $0.2 million  compared to the first nine months of 2001 to
$1.7 million for the first nine months of 2002. The  improvement in gross margin
reflects  an  increase  in margin  per unit and  sales  volumes.  Revenues  from
nonregulated  retail  natural gas  operations  decreased  $31.8 million to $62.4
million for the first nine months of 2002.  A decrease in the average  price per
unit sold,  reflective  of a 40% decrease in the average cost of gas,  accounted
for a $40.4  million  decrease in revenues.  Sales  volumes  increased 1 million
MMBtus (9%)  resulting  in an $8.6 million  increase in revenues.  Cost of sales
decreased $32.0 million to $60.7 million for the nine months ended September 30,
2002, due to the decrease in price per unit sold.

                                      -28-
<page>


     All retail customers in Illinois are allowed to select their electric power
supplier.  For the three months ended September 30, 2002,  compared to the three
months ended September 30, 2001,  related gross margin increased $4.9 million to
$3.6 million. For the nine months ended September 30, 2002, compared to the nine
months ended  September 30, 2001,  gross margin  increased  $7.5 million to $7.7
million.  The improvement in margin was due to an increase in sales volumes as a
result of the addition of customers and an increase in margin per unit sold as a
result of decreases in the related cost of energy.

     Nonregulated revenues for the nine months ended September 30, 2001, include
$6.2 million from MidAmerican  Energy's market access service  project.  Related
costs of sales totaled $5.4 million.  The pilot project,  which concluded in May
2001,  allowed larger Iowa customers that were  participating  in the project to
choose their electric power supplier. MidAmerican Energy's revenues from project
participants   related  to  non-supply   services,   such  as  distribution  and
transmission, are reflected in regulated electric revenues.

     MidAmerican  Energy's  nonregulated  revenues  in  the  nine  months  ended
September  30, 2002,  include  $1.8 million of pre-tax  income from an award for
successful  performance  under an incentive  gas  procurement  program.  Similar
awards of $1.9 million and $2.1  million  were  recorded in the third and second
quarters of 2001, respectively.

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

     MidAmerican Funding:

     During 2001, a subsidiary of MidAmerican  Capital had  nonregulated  retail
natural  gas  marketing  operations.  For  the  third  quarter  of  2001,  those
operations  had  revenues  and costs of sales  totaling  $0.5  million  and $0.5
million,  respectively.  For the nine months ended  September 30, 2001,  related
revenues  and  costs  of  sales  totaled   $11.6  million  and  $11.8   million,
respectively. All contracts of that subsidiary have terminated.

NONREGULATED OPERATING EXPENSES:  OTHER

     MidAmerican Energy -

     Nonregulated  other operating  expenses increased $1.4 million for the nine
months ended September 30, 2002, due largely to $1.0 million of costs related to
the emergency storm restoration work discussed above.

     MidAmerican Funding -

     MidAmerican Funding's  nonregulated other operating expenses,  inclusive of
MidAmerican  Energy amounts,  decreased $8.0 million and $24.5 million for three
months and nine months ended September 30, 2002,  respectively,  compared to the
2001 periods.  MidAmerican  Funding's goodwill is no longer being amortized as a
result of the adoption of Statement of Financial Accounting Standards (SFAS) No.
142 on January 1, 2002.  Amortization of MidAmerican  Funding's goodwill totaled
$8.6 million for the third  quarter of 2001 and $25.8  million first nine months
of 2001.

                                      -29-

<page>


INTEREST AND DIVIDEND INCOME

     MidAmerican Energy -

     The  decreases in interest  income  compared to the 2001 periods  presented
were due  principally  to  decreases  in  interest  income on a note  receivable
related to MidAmerican  Energy's  accounts  receivable  sold.  Related  interest
income  decreased  $0.8  million for the  quarter and $5.6  million for the nine
months ended  September 30, 2002. The decreases  related to the note  receivable
were partially offset by MidAmerican Energy's favorable cash position due to the
issuance of $400 million of medium-term notes in February 2002.

     MidAmerican Funding -

     Interest  income for  MidAmerican  Funding  for the quarter and nine months
ended  September  30, 2002,  includes  $5.0 million  from the  settlement  of an
investment in a communications  company.  Dividend income decreased $1.3 million
to $0.6  million  for nine  months  ended  September  30,  2002,  due to partial
liquidation  of the  preferred  stock  investment  portfolio  in the past twelve
months.

MARKETABLE SECURITIES GAINS AND LOSSES, NET

     MidAmerican Funding -

     Net losses on marketable  securities  increased  $1.4 million for the third
quarter of 2002 and $3.7 million for the nine-month  period ended  September 30,
2002,  compared to the  respective  2001 periods.  In the third quarter of 2002,
MidAmerican  Capital  recorded  a $1.4  million  loss  for  other-than-temporary
declines in its  available-for-sale  common stock  investments.  The  nine-month
period  also  includes  a $2.9  million  loss  related  to  other-than-temporary
declines in two of its  available-for-sale  common stock investments.  The first
quarter  of  2001   includes  a  $2.4  million   pre-tax  loss  related  to  the
re-characterization   of  marketable  securities  to  "trading"  as  allowed  by
Statement of Financial Accounting Standards No. 133.

OTHER INCOME AND EXPENSE

     MidAmerican Energy -

     As a regulated public utility, MidAmerican Energy is allowed to capitalize,
and record as income,  a cost of  construction  for equity funds used,  based on
guidelines set forth by the Federal Energy Regulatory  Commission.  Accordingly,
other income includes income for the capitalized  allowance on equity funds used
during  construction  of $2.2  million and $5.4 million for the three months and
nine months ended  September  30, 2002,  respectively,  and $0.8 million for the
three  months and nine months  ended  September  30,  2001.  MidAmerican  Energy
anticipates  recording  income from the  allowance  on equity  funds used during
construction  over the next several years while the announced  generating plants
are constructed.

     Other income  includes net earnings  related to the cash surrender value of
corporate-owned life insurance policies.  Three months ended September 30, 2002,
includes  a net  loss of $0.7  million,  while  the  comparable  period  in 2001
reflects income of $0.4 million.  For the nine-month periods ended September 30,
the 2002 period  reflects a loss of $0.6  million  and the 2001 period  includes
income of $0.7 million.

                                      -30-
<page>

     Other income for the three months and nine months ended September 30, 2002,
reflects a $0.9 million gain on the sale of utility  property.  Other income for
the  first  nine  months of 2001  reflects  a $1.4  million  gain on the sale of
MidAmerican Energy rail cars.

     Other income  includes income from a subservicer fee charged to MidAmerican
Energy  Funding   Corporation  for  servicing   MidAmerican   Energy's  accounts
receivable  sold to them.  Subservicer  fee income totaled $0.5 million and $0.7
million for the three months ended  September  30, 2002 and 2001,  respectively,
and $1.2 million and $2.5 million for the nine-month periods ended September 30,
2002 and 2001, respectively.

     Other expense includes a discount on sold accounts receivable. The discount
is designed to cover the expenses of  MidAmerican  Energy  Funding  Corporation,
including bad debt expense,  subservicer fees, monthly  administrative costs and
interest.  The discount is recorded in Other Expense because it is not reflected
in utility cost of service for regulatory  purposes.  The discount  totaled $2.2
million and $3.8  million in the third  quarter of 2002 and 2001,  respectively,
and $5.8 million and $14.4 million for the  nine-month  periods ended  September
30, 2002 and 2001, respectively.  The related arrangement terminated October 29,
2002. Refer to "Accounts  Receivable Sold" in the "Financing  Activities,  Plans
and Availability" section later in MD&A for further discussion.

     MidAmerican Funding -

     Other  income of  MidAmerican  Funding  reflects a net loss on  MidAmerican
Capital's  equity  method  investments  of $4.6 million for the third quarter of
2002 compared to income of $0.9 million for the third quarter of 2001. The third
quarter of 2002 includes a $5.1 million loss for the permanent  impairment of an
equity method investment.  Income from MidAmerican  Capital's equity investments
totaled $1.4 million for the  nine-month  period ended  September 30, 2002,  and
$3.9 million for nine months ended  September  30, 2001.  Equity  income for the
2002 nine-month  period includes the recognition of $5.3 million of income for a
distribution  of  common  stock  held by one of  MidAmerican  Capital's  venture
capital fund  investments  in the first quarter.  The 2001 period  reflects $2.3
million of equity income related to a gain on a common stock distribution by one
of MidAmerican Capital's venture capital fund investments.

     Other  income for the third  quarter of 2002 also  includes a $2.6  million
gain  on the  sale of an  investment  in a  communications  company  and  losses
totaling  $1.5  million  from  permanent  impairments  on three  of  MidAmerican
Capital's venture capital fund investments.

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

                                      -31-

<page>


FIXED CHARGES AND PREFERRED DIVIDENDS

     MidAmerican Energy -

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

     Other interest expense decreased for three months ended September 30, 2002,
compared to the third quarter of 2001 due  principally  to interest in the third
quarter of 2001 on an income tax audit payable.  The nine months ended September
30, 2001,  includes  additional  interest recorded in the second quarter of 2001
related  to another  income  tax audit  payable.  Additionally,  other  interest
expense  decreased  due  to  a  reduction  in  short-term  debt  outstanding  at
MidAmerican  Energy.  Other interest  expense  increased in the 2002 periods for
interest on regulatory  liabilities associated with the electric revenue sharing
arrangement  in Iowa and the  restructuring  of  MidAmerican  Energy's  contract
related to Cooper Nuclear Station.

     MidAmerican  Energy's preferred dividends of its subsidiary trust decreased
due to the reacquisition of all of the related preferred securities on March 11,
2002.  Dividends  for  MidAmerican  Energy's  preferred  securities,  which  are
reflected  after Net Income for MidAmerican  Energy,  decreased due to preferred
securities reacquired in May and November 2001 and May 2002. Preferred dividends
for the nine months ended  September  30,  2002,  reflect a $0.6 million loss on
reacquisition of preferred securities.

     MidAmerican Funding -

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

                                      -32-

<page>


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

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

     As  reflected on the  Consolidated  Statements  of Cash Flows,  MidAmerican
Energy's net cash provided from  operating  activities was $396 million and $461
million for the nine months  ended  September  30, 2002 and 2001,  respectively.
MidAmerican  Funding's  net cash  provided from  operating  activities  was $359
million and $440 million for the nine months ended  September 30, 2002 and 2001,
respectively.

INVESTING ACTIVITIES AND PLANS

     Utility Construction Expenditures -

     MidAmerican  Energy's  primary  need for  capital is  utility  construction
expenditures.   For  the  first  nine  months  of  2002,  utility   construction
expenditures  totaled $229  million,  including  allowance for funds used during
construction,  or capitalized  financing  costs, and Quad Cities Station nuclear
fuel purchases.  All such expenditures were met with cash generated from utility
operations, net of dividends.

     Forecasted utility construction expenditures, including allowance for funds
used during  construction  are $382 million for 2002 and $1.614 billion for 2003
through 2006. Capital expenditure needs are reviewed regularly by management and
may change significantly as a result of such reviews.  Through 2007, MidAmerican
Energy plans to develop and  construct two electric  generating  plants in Iowa.
Both plants would provide service to regulated retail electricity  customers and
be included in regulated rate base in Iowa, Illinois and South Dakota. Wholesale
sales may also be made from the plants to the extent the power is not needed for
regulated  retail service.  MidAmerican  Energy expects to invest  approximately
$1.2  billion in the two  plants,  including  the cost of  related  transmission
facilities and allowance for funds used during construction.  The two plants may
provide up to 950  megawatts  of  generating  capacity  for  MidAmerican  Energy
depending  on  management's  on-going  assessment  of energy  needs and  related
factors.

     The first  project  is a  500-megawatt  (based on  expected  accreditation)
natural  gas-fired  combined  cycle unit with an estimated cost of $415 million.
MidAmerican Energy will own 100% of the plant and operate it. MidAmerican Energy
has received a certificate  from the Iowa  Utilities  Board (IUB) allowing it to
construct  the  plant.  Also,  on May 29,  2002,  the IUB  issued an order  that
provides the ratemaking  principles for the gas-fired  plant,  thus limiting the
regulatory  risk  of  constructing  the  plant.  As  a  result  of  that  order,
MidAmerican  Energy is  proceeding  with the  construction  of the plant.  It is
anticipated  that the first  phase of the  project  will be  completed  in 2003,
resulting in an  additional  310  megawatts  of  accredited  capacity,  with the
remainder being completed in 2005.

     The second plant is expected to be a 750-megawatt super-critical-
temperature,  coal-fired plant fueled with low-sulfur coal.  MidAmerican  Energy
has made a filing  with the IUB for a  certificate  to  construct  the plant and
expects to make a filing for approval of  ratemaking  principles  for the second
project during the fourth quarter of 2002.

                                      -33-

<page>


Nuclear Decommissioning -

     Each  licensee  of a nuclear  facility  is  required  to provide  financial
assurance for the cost of  decommissioning  its licensed  nuclear  facility.  In
general,  decommissioning  of a  nuclear  facility  means to safely  remove  the
facility  from  service  and  restore  the  property  to  a  condition  allowing
unrestricted use by the operator.

     Based on information  presently  available,  MidAmerican  Energy expects to
contribute  approximately  $41 million  during the period 2002  through  2006 to
external trusts established for the investment of funds for decommissioning Quad
Cities Station.  Approximately 55% of the fair value of the trusts' funds is now
invested in domestic corporate debt and common equity securities.  The remainder
is invested in investment grade municipal and U.S.  Treasury bonds.  Funding for
Quad Cities Station nuclear  decommissioning  is reflected in  Depreciation  and
Amortization  in the  Consolidated  Statements  of Income.  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.

     As a result of a July 31, 2002 restructuring of the power purchase contract
between  MidAmerican Energy and the Nebraska Public Power District,  MidAmerican
Energy will no longer be accruing for  decommissioning  costs  related to Cooper
Nuclear  Station.  Refer to Note G of  MidAmerican  Energy's  Notes to Financial
Statements for a discussion of the contract restructuring.

FINANCING ACTIVITIES, PLANS AND AVAILABILITY

     Debt Authorizations and Credit Facilities -

     MidAmerican  Energy  has  authority  from  the  Federal  Energy  Regulatory
Commission  to issue  through  April  14,  2003  short-term  debt in the form of
commercial  paper and bank notes  aggregating $500 million.  MidAmerican  Energy
currently has in place a $370.4 million  revolving credit facility that supports
its $250  million  commercial  paper  program and its  variable  rate  pollution
control revenue obligations. The facility expires January 16, 2003. In addition,
MidAmerican Energy has a $5 million line of credit, which expires July 1, 2003.

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

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

     MidAmerican Energy has on file with the Securities and Exchange  Commission
a  registration  statement  for $500  million  in  various  forms of senior  and
subordinated, unsecured long-term debt and preferred securities, $100 million of
which  remains  available   following  the  issuance  of  the  $400  million  of
medium-term notes discussed above.

     MidAmerican  Energy has  authorization  from the Federal Energy  Regulatory
Commission (FERC) to issue,  through November 30, 2002, up to an additional $100
million in various  forms of long-term  debt  following the issuance of the $400

                                      -34-
<page>

million of medium-term  notes discussed above.  MidAmerican  Energy has filed an
application with the FERC for authorization to issue, through November 30, 2004,
up to $700 million in various forms of long-term debt.

     MidAmerican  Energy will also need authorization from the Illinois Commerce
Commission (ICC) prior to issuing any securities. If 90% or more of the proceeds
from a securities issuance are used for refinancing purposes, MidAmerican Energy
need  only  provide  the 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.  MidAmerican Energy currently has authority from the
ICC to issue up to approximately $150 million of medium-term notes and has filed
an informational  statement requesting authority to issue additional medium-term
notes of approximately $190 million.

     Accounts Receivable Sold -

     In 1997,  MidAmerican  Energy  entered  into a revolving  agreement,  which
expired on October 29, 2002, to sell all of its right, title and interest in the
majority  of its  billed  accounts  receivable  to  MidAmerican  Energy  Funding
Corporation,   a  special  purpose  entity   established  to  purchase  accounts
receivable from MidAmerican  Energy.  MidAmerican Energy Funding  Corporation in
turn sold receivable  interests to outside  investors.  In consideration for the
sale, MidAmerican Energy received cash and a subordinated note, bearing interest
at 8%, from MidAmerican  Energy Funding  Corporation.  As of September 30, 2002,
the revolving cash balance was $36 million and the amount  outstanding under the
subordinated  note was $89.2  million.  The agreement  was  structured as a true
sale, under which the creditors of MidAmerican  Energy Funding  Corporation were
entitled  to be  satisfied  out of the  assets  of  MidAmerican  Energy  Funding
Corporation  prior to any value  being  returned  to  MidAmerican  Energy or its
creditors.  Therefore,  the  accounts  receivable  sold  are  not  reflected  on
MidAmerican Energy's or MidAmerican Funding's Consolidated Balance Sheets. As of
September 30, 2002, $126.0 million of accounts receivable,  net of reserves, was
sold under the  agreement.  MidAmerican  Energy  did not extend or replace  this
agreement.

     Other Information -

     MHC has a $4 million line of credit,  expiring July 1, 2003, to provide for
short-term financing needs, none of which was outstanding at September 30, 2002.

     MidAmerican  Capital had $23.3  million of long-term  debt  outstanding  at
September 30, 2002, which matured in October 2002.

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

CREDIT RATINGS RISKS

     Debt and preferred securities of MidAmerican Funding and MidAmerican Energy
are rated by nationally  recognized  credit  rating  agencies.  Assigned  credit
ratings are based on each rating agency's assessment of MidAmerican Funding's or
MidAmerican Energy's ability to, in general, meet the obligations of the debt or
preferred  securities issued by the rated company.  The credit ratings are not a


                                      -35-
<page>
recommendation to buy, sell or hold securities, and there is no assurance that a
particular  credit rating will continue for any given period of time. Other than
the energy trading agreements  discussed below,  neither MidAmerican Funding nor
MidAmerican  Energy has any credit  agreements  that  require  termination  or a
material change in collateral requirements or payment schedule in the event of a
downgrade  in  the  credit  ratings  of  the  respective  company's  securities.
MidAmerican  Funding's long-term debt agreements require that no additional debt
can be issued by  MidAmerican  Funding if doing so would  cause a  downgrade  in
MidAmerican Funding's credit ratings.

     In  conjunction  with  its  wholesale  marketing  and  trading  activities,
MidAmerican  Energy must meet credit  quality  standards  as required by counter
parties.  MidAmerican  Energy has energy trading  agreements that, in accordance
with industry practice,  either  specifically  require it to maintain investment
grade  credit  ratings  or  provide  the right  for  counter  parties  to demand
"adequate  assurances" in the event of a material  adverse change in MidAmerican
Energy's creditworthiness. If one or more of MidAmerican Energy's credit ratings
decline below investment grade,  MidAmerican Energy may be required to post cash
collateral,  letters of credit or other  similar  credit  support to  facilitate
ongoing wholesale  marketing and trading  activities.  As of September 30, 2002,
MidAmerican  Energy's  estimated  potential   collateral   requirements  totaled
approximately  $33  million,  of which $5  million  related  to  energy  trading
agreements  with  specific   requirements   that  MidAmerican   Energy  maintain
investment grade credit ratings.  MidAmerican  Energy's collateral  requirements
could fluctuate considerably due to seasonality, market price volatility, a loss
of key MidAmerican Energy generating facilities or other related factors.

RATE MATTERS

     Under a settlement  agreement approved by the Iowa Utilities Board (IUB) on
December 21, 2001,  MidAmerican Energy's Iowa retail electric rates in effect on
December  31, 2000,  are  effectively  frozen  through  December  31,  2005.  In
approving that settlement,  the IUB  specifically  allows the filing of electric
rate  design  and/or  cost of service  rate  changes  that are  intended to keep
overall  company  revenues  unchanged  but could result in changes to individual
tariffs.   Additionally,   the  2001  settlement  agreement   reinstates,   with
modifications,   the  revenue  sharing  provisions  of  the  1997  pricing  plan
settlement  agreement,  which  expired  on  December  31,  2000.  Under the 2001
settlement  agreement,  an amount equal to 50% of revenues  associated with Iowa
retail  electric  returns on equity  between 12% and 14%, and 83.33% of revenues
associated with Iowa retail  electric  returns on equity above 14%, in each year
will be recorded as a regulatory liability to be used to offset a portion of the
cost to Iowa customers of future generating plant  investments.  An amount equal
to  the  regulatory  liability  will  be  recorded  as a  regulatory  charge  in
depreciation  and amortization  expense when the liability is accrued.  Interest
expense is accrued on the portion of the regulatory  liability  related to prior
years.  Beginning in 2002,  the  liability  is being  relieved as it is credited
against allowance for funds used during construction,  or capitalized  financing
costs, associated with generating plant additions. As of September 30, 2002, the
related regulatory liability reflected on the Consolidated Balance Sheet totaled
$95.0 million.

     On September 11, 2002,  MidAmerican  Energy received a final order from the
Illinois Commerce  Commission to increase its Illinois natural gas rates by $2.2
million annually.

     On March 15, 2002, MidAmerican Energy made a filing with the IUB requesting
an increase in rates of approximately  $26.6 million for its Iowa retail natural
gas customers.  As part of the filing,  MidAmerican  Energy requested an interim
rate increase of approximately $20.4 million annually. On June 12, 2002, the IUB
issued an order granting an interim rate increase of approximately $13.8 million
annually, effective immediately and subject to refund with interest. On July 15,
2002,  MidAmerican  Energy and the Office of Consumer  Advocate filed a proposed
settlement  agreement with the IUB. The proposed  settlement  agreement provides
for an increase in rates of $17.7 million annually for MidAmerican Energy's Iowa
retail natural gas customers and freezes such rates for two years after the

                                      -36-
<page>

date the IUB approves tariffs  implementing the proposed  settlement  agreement.
MidAmerican Energy anticipates  implementing the new rates in the fourth quarter
of 2002.

LEGISLATIVE AND REGULATORY EVOLUTION

     Electric Deregulation -

     Under Illinois law, as of December 31, 2000, all non-residential  customers
in  Illinois  had been  phased in to allow  them to  select  their  provider  of
electric supply services.  Residential customers all received the opportunity to
select their electric supplier beginning May 1, 2002.

     Illinois law also provides for Illinois  electric earnings above a computed
level of return on common  equity to be shared  equally  between  customers  and
MidAmerican  Energy.  MidAmerican  Energy's  computed  level of return on common
equity is based on a rolling two-year average of the Monthly Treasury  Long-Term
Average Rate, as published by the Federal Reserve System, plus a premium of 8.5%
for 2000  through  2004,  and a premium  of 12.5%  for 2005  through  2006.  The
two-year  average  above which  sharing must occur for 2001 was 14.34%.  The law
allows  MidAmerican  Energy  to  mitigate  the  sharing  of  earnings  above the
threshold  return on common equity  through  accelerated  recovery of regulatory
assets.

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

         Regional Transmission Organizations -

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

         Standard Electricity Market Design -

         On July 31, 2002, the FERC issued a notice of proposed rulemaking with
respect to Standard Market Design. The FERC has characterized the proposal as
portending "sweeping changes" to the use and expansion of the interstate
transmission and wholesale bulk power systems in the United States. The proposal
includes numerous proposed changes to the current regulation of transmission and
generation facilities designed "to promote economic efficiency" and replace the
"obsolete patchwork we have today," according to the FERC's chairman. The final
rule, if adopted as currently proposed, would

                                      -37-
<page>


require all public utilities  operating  transmission  facilities subject to the
FERC  jurisdiction to file revised open access  transmission  tariffs that would
require changes to the basic services these public utilities  currently provide.
The proposed rule may impact the pricing of MidAmerican Energy's electricity and
transmission  products.  The FERC does not  envision  that a final  rule will be
fully  implemented  until  September  30,  2004.  MidAmerican  Energy  is  still
evaluating   the  proposed  rule  and  recognizes  the  final  rule  could  vary
considerably  from the initial proposal.  Accordingly,  the likely impact of the
proposed rule on MidAmerican Energy's  transmission and generation businesses is
unknown.

ENVIRONMENTAL MATTERS

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

     MidAmerican  Energy has evaluated or is evaluating 27 properties that were,
at one time, sites of gas manufacturing  plants in which it may be a potentially
responsible  party.  The purpose of these  evaluations  is to determine  whether
waste materials are present,  whether the materials  constitute an environmental
or health  risk,  and  whether  MidAmerican  Energy has any  responsibility  for
remedial action.  MidAmerican  Energy's estimate of the probable costs for these
sites as of September 30, 2002, was $18 million. This estimate has been recorded
as a liability and a regulatory asset for future recovery through the regulatory
process.  Refer to Note B(1) of Notes to Consolidated  Financial  Statements for
further discussion of MidAmerican Energy's  environmental  activities related to
manufactured gas plant sites and cost recovery.

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

     In July 1997, the EPA adopted revisions to the National Ambient Air Quality
Standards for ozone and a new standard for fine particulate  matter. In February
2001,  the United  States  Supreme  Court  upheld the  constitutionality  of the
standards, though remanding the issue of implementation of the ozone standard to
the EPA.  The impact of the new  standards  on  MidAmerican  Energy is currently
unknown. These standards could be superceded,  in whole or in part, by a variety
of multi-pollutant  emission reduction initiatives.  Refer to Note B(2) of Notes
to Consolidated Financial Statements for further discussion of this issue.

     In 2001,  the state of Iowa  passed  legislation  that,  in part,  requires
rate-regulated  utilities to develop a  multi-year  plan and budget for managing
regulated emissions from their generating facilities in a cost-effective manner.
MidAmerican  Energy's  proposed plan and associated  budget (the Plan) was filed
with the Iowa Utilities  Board (IUB) on April 1, 2002, in accordance  with state
law.  MidAmerican  Energy expects the IUB to rule on the prudence of the Plan in
2003.  MidAmerican  Energy is required  to file Plan  updates at least every two
years.

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

     The Plan outlines $732.0 million in  environmental  investments to existing
coal-fired  generating  units, some of which are jointly owned, over a nine-year
period from 2002 through 2010.  MidAmerican

                                      -38-
<page>

Energy's share of these investments is $546.6 million, $67.9 million of which is
projected to be incurred during the 2002-2005 rate freeze period.  The Plan also
identifies  expenses  that will be  incurred  at the  generating  facilities  to
operate and maintain the  environmental  equipment  installed as a result of the
Plan.

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

GENERATING CAPABILITY

     In July 2002,  retail  customer  usage of  electricity  caused a new record
hourly  peak  demand of 3,887  megawatts  (MW) on  MidAmerican  Energy's  energy
system,  surpassing  the  previous  record  peak of 3,833  MW set in July  1999.
MidAmerican Energy is interconnected with Iowa and neighboring  utilities and is
involved in an electric  power pooling  agreement  known as  Mid-Continent  Area
Power Pool (MAPP).  Each MAPP  participant is required to maintain for emergency
purposes a net  generating  capability  reserve of at least 15% above its system
peak demand.

     MidAmerican  Energy  believes it has  adequate  electric  capacity  reserve
through  2003 and  continues  to manage its  generating  resources  to ensure an
adequate reserve in the future.  MidAmerican Energy has announced plans to add a
500-megawatt  (based on MAPP rating criteria) natural  gas-fired  combined cycle
unit to be completed in two phases  between 2003 and 2005.  Up to an  additional
450 megawatts of  coal-fired  generation  is expected to be  operational  by the
summer of 2007. However,  significantly  higher-than-normal  temperatures during
the cooling season could cause  MidAmerican  Energy's  reserve to fall below the
15% minimum.  If MidAmerican  Energy fails to maintain the appropriate  reserve,
significant penalties could be contractually imposed by MAPP.

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

                                      -39-

<page>


CRITICAL ACCOUNTING POLICIES

     MidAmerican  Energy's  and  MidAmerican  Funding's  significant  accounting
policies are described in Note (1) of Notes to Consolidated Financial Statements
in their respective  Annual Reports on Form 10-K for the year ended December 31,
2001.

     Accounting for Regulated Entities -

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

     Revenue Recognition -

     Revenues are recorded as services  are rendered to  customers.  MidAmerican
Energy records  unbilled  revenues  representing  the estimated amount customers
will be billed  for  services  rendered  between  the  meter-reading  dates in a
particular  month and the end of that month. The unbilled  revenues  estimate is
reversed in the following month. To the extent the estimated amount differs from
the amount subsequently billed, the timing of revenues will be affected.

     Accounting for Derivatives and Energy Trading Activities -

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

     In accordance with EITF Issue No. 02-3,  effective  September 30, 2002, for
MidAmerican  Energy,  all of MidAmerican  Energy's trading revenues are reported
net of the costs of the related sales on the Consolidated  Statements of Income.
Previously,  the revenues and costs were recorded gross.  All prior periods have
been reclassified to conform to the net presentation.

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

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

                                      -40-

<page>


     Contingent Liabilities -

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

NEW ACCOUNTING PRONOUNCEMENTS

     In  August  2001,  the FASB  issued  SFAS No.  143,  "Accounting  For Asset
Retirement  Obligations." SFAS No. 143 requires recognition on the balance sheet
of legal  obligations  associated with the retirement of long-lived  assets that
result from the acquisition,  construction,  development and/or normal operation
of such assets.  Additionally,  at the time an asset retirement obligation (ARO)
is recognized, an ARO asset of the same amount is recorded and depreciated. SFAS
No. 143 is effective for fiscal years beginning after June 15, 2002. MidAmerican
Funding  is  evaluating  the impact of this  pronouncement  and  estimates  that
additional  assets and liabilities  will be added to its balance sheet, but does
not believe adoption will have a material impact on its results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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

                                      -41-
<page>


PART I - FINANCIAL INFORMATION (CONTINUED)

ITEM 4.  CONTROLS AND PROCEDURES
--------------------------------

     MidAmerican  Funding's and MidAmerican  Energy's respective chief executive
officer and chief financial  officer have established  "disclosure  controls and
procedures"  (as defined in Rule  13a-14(c) and Rule 15d-14(c) of the Securities
and Exchange Act of 1934) to ensure that material  information  of the companies
and their  subsidiaries  is made known to them by others  within the  respective
companies. Under their supervision, an evaluation of the disclosure controls and
procedures  was performed  within 90 days prior to the filing of this  quarterly
report.  Based on that evaluation,  the above-mentioned  officers have concluded
that, as of the date of the evaluation,  the disclosure  controls and procedures
were operating effectively. Additionally, the above-mentioned officers find that
there have been no significant changes in internal controls, or in other factors
that could  significantly  affect internal  controls,  subsequent to the date of
that evaluation.

                                      -42-


<page>


PART II - OTHER INFORMATION

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

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

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

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

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

     As previously disclosed in MidAmerican  Energy's and MidAmerican  Funding's
respective  Annual Report on Form 10-K for the year ended December 31, 2001, and
in their respective Quarterly Report on Form 10-Q for June 30, 2002, MidAmerican
Energy has been involved in litigation  with the Nebraska  Public Power District
regarding issues related to Cooper Nuclear Station.

     The parties have settled the above-mentioned  litigation with the execution
of a Settlement  Agreement and Release which became effective on August 1, 2002.
Under the terms of the Settlement Agreement and Release, MidAmerican Energy will
continue  purchasing  power and energy from the Nebraska  Public Power  District
through December 31, 2004, at prices that are fixed in the Settlement  Agreement
and Release.  In addition,  the Nebraska Public Power District paid  MidAmerican
Energy  a lump  sum  payment  of $39.1  million  on  August  1,  2002.  Further,
MidAmerican  Energy will make no payments for Cooper's  decommissioning  for the
period December 2000 through December 2004;  however,  the Nebraska Public Power
District  will retain the payments for  decommissioning  MidAmerican  Energy had
made prior to December  2000.  Under the terms of the  Settlement  Agreement and
Release, the parties mutually release each other from all claims, pending or not
pending, with respect to Cooper and the power purchase agreement.

                                      -43-

<page>


Item 6.  Exhibits and Reports on Form 8-K
-----------------------------------------

(A)  EXHIBITS

     15     Awareness Letter of Independent Accountants


(B)  REPORTS ON FORM 8-K

     On August 1, 2002,  MidAmerican Funding and MidAmerican Energy each filed a
Current  Report on Form 8-K dated August 1, 2002.  The filing  announced that on
July 31, 2002,  MidAmerican  Energy had entered into an agreement to resolve all
disputes  with the Nebraska  Public Power  District  concerning  Cooper  Nuclear
Station. A copy of the related press release was attached as an exhibit.

     On August 14,  2002,  MidAmerican  Funding and  MidAmerican  Energy filed a
joint Current Report on Form 8-K with  certification  of their  respective chief
executive  officer and chief  financial  officer  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

                                      -44-
<page>


                                   SIGNATURES

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




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




Date  November 12, 2002                       /s/  Patrick J. Goodman
    -------------------                      ---------------------------------
                                                   Patrick J. Goodman
                                                   Vice President and Treasurer







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




Date  November 12, 2002                       /s/  Thomas B. Specketer
    -------------------                      -----------------------------------
                                                   Thomas B. Specketer
                                                   Vice President and Controller
                                      -45-

<page>


                     SECTION 302 CERTIFICATION FOR FORM 10-Q
CERTIFICATIONS
--------------

I, David L. Sokol, certify that:

1. I have reviewed this quarterly  report on Form 10-Q of  MidAmerican  Funding,
LLC;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange  Act Rules  13a-14  and  15d-14)  for the  registrant  and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

                                      -46-
<page>


6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: November 12, 2002


                                 /s/ David L. Sokol
                               -----------------------
                                  David L. Sokol
                               Chief Executive Officer



                                      -47-


<page>


                     SECTION 302 CERTIFICATION FOR FORM 10-Q

CERTIFICATIONS
--------------

I, Patrick J. Goodman, certify that:

1. I have reviewed this quarterly  report on Form 10-Q of  MidAmerican  Funding,
LLC;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange  Act Rules  13a-14  and  15d-14)  for the  registrant  and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

                                      -48-

<page>


6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  November 12, 2002



                              /s/ Patrick J. Goodman
                             -----------------------
                               Patrick J. Goodman
                          Vice President and Treasurer
                            (chief financial officer)


                                      -49-

<page>


                     SECTION 302 CERTIFICATION FOR FORM 10-Q
CERTIFICATIONS
--------------

I, David L. Sokol, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MidAmerican Energy
Company;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

                                      -50-

<page>


6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.



Date:  November 12, 2002



                              /s/ David L. Sokol
                             -----------------------
                                 David L. Sokol
                                    Chairman
                            (chief executive officer)



<page>


                     SECTION 302 CERTIFICATION FOR FORM 10-Q

CERTIFICATIONS
--------------

I, Thomas B. Specketer, certify that:

1. I have  reviewed this  quarterly  report on Form 10-Q of  MidAmerican  Energy
Company;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

                                      -52-
<page>


6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  November 12, 2002



                             /s/ Thomas B. Specketer
                             -----------------------
                               Thomas B. Specketer
                          Vice President and Controller
                            (chief financial officer)

                                      -53-

<page>




                                  EXHIBIT INDEX

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

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

         15     Awareness Letter of Independent Accountants



                                      -54-