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

                                    FORM 10-Q

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

Commission      Registrant's Name, State of Incorporation,      IRS Employer
File Number           Address and Telephone Number           Identification No.
-----------     ------------------------------------------    -----------------
1-11505               MIDAMERICAN ENERGY COMPANY                 42-1425214
                        (AN IOWA CORPORATION)
                      666 GRAND AVE. PO BOX 657
                       DES MOINES, IOWA 50303
                            515-242-4300

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

                                                        Name of each Exchange
  Title of Each Class                                    On which Registered
  -------------------                                   -----------------------
7.98% MidAmerican Energy Company - Obligated
  Preferred Securities of Subsidiary Trust              New York Stock Exchange

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

                   Preferred Stock, $3.30 Series, no par value
                   Preferred Stock, $3.75 Series, no par value
                   Preferred Stock, $3.90 Series, no par value
                   Preferred Stock, $4.20 Series, no par value
                   Preferred Stock, $4.35 Series, no par value
                   Preferred Stock, $4.40 Series, no par value
                   Preferred Stock, $4.80 Series, no par value
                   Preferred Stock, $5.25 Series, no par value
                   Preferred Stock, $7.80 Series, no par value
-------------------------------------------------------------------------------
                               Title of each Class

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

As of July 31, 1999, all  70,980,203  outstanding  shares of MidAmerican  Energy
Company's voting stock were held by its parent company, MHC Inc.



<PAGE>

                           MIDAMERICAN ENERGY COMPANY

                                    FORM 10-Q

                                TABLE OF CONTENTS



                     PART I. FINANCIAL INFORMATION                     PAGE NO.

ITEM 1.      Financial Statements

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

ITEM 2.      Management's Discussion and Analysis of
               Financial Condition and Results of Operations.............. 12

ITEM 3.      Quantitative and Qualitative Disclosures About Market Risk... 27

                           PART II. OTHER INFORMATION

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

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

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

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


                                       -2-
<PAGE>


INDEPENDENT ACCOUNTANTS' REPORT


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

We have reviewed the  accompanying  consolidated  balance  sheet of  MidAmerican
Energy  Company and  subsidiaries  (the  Company) as of June 30,  1999,  and the
related consolidated statements of income and cash flows for the three-month and
six-month periods then ended. These financial  statements are the responsibility
of the Company's management.

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

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



DELOITTE & TOUCHE LLP

Des Moines, Iowa
July 23, 1999
                                      -3-
<PAGE>
<TABLE>
<CAPTION>

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

                                               THREE MONTHS               SIX MONTHS
                                               ENDED JUNE 30             ENDED JUNE 30
                                          ----------------------    ----------------------
                                             1999         1998         1999         1998
                                          ---------    ---------    ---------    ---------
<S>                                       <C>          <C>          <C>          <C>
OPERATING REVENUES
Regulated electric ....................   $ 279,350    $ 287,094    $ 541,478    $ 543,448
Regulated gas .........................      71,282       67,288      242,060      240,488
Nonregulated ..........................      27,709       21,124       63,051       38,836
                                          ---------    ---------    ---------    ---------
                                            378,341      375,506      846,589      822,772
                                          ---------    ---------    ---------    ---------
OPERATING EXPENSES
Regulated:
  Cost of fuel, energy and capacity ...      50,681       57,643      101,667      103,400
  Cost of gas sold ....................      38,596       32,648      135,454      137,969
  Other operating expenses ............     104,387      114,031      221,026      222,498
  Maintenance .........................      31,934       31,347       58,471       54,380
  Depreciation and amortization .......      47,687       44,191       97,378       88,382
  Property and other taxes ............      20,662       21,403       40,813       44,733
                                          ---------    ---------    ---------    ---------
                                            293,947      301,263      654,809      651,362
                                          ---------    ---------    ---------    ---------
Nonregulated:
  Cost of sales .......................      24,305       17,781       58,404       33,742
  Depreciation and amortization .......         148            -          148            -
  Other ...............................       4,037        2,112        7,974        3,220
                                          ---------    ---------    ---------    ---------
                                             28,490       19,893       66,526       36,962
                                          ---------    ---------    ---------    ---------
Total operating expenses ..............     322,437      321,156      721,335      688,324
                                          ---------    ---------    ---------    ---------

OPERATING INCOME ......................      55,904       54,350      125,254      134,448
                                          ---------    ---------    ---------    ---------

NON-OPERATING INCOME
Interest and dividend income ..........         588        1,447        1,687        3,394
Other, net ............................      (3,338)      (2,113)      (5,379)      (4,990)
                                          ---------    ---------    ---------    ---------
                                             (2,750)        (666)      (3,692)      (1,596)
                                          ---------    ---------    ---------    ---------

FIXED CHARGES
Interest on long-term debt ............      16,618       17,592       33,107       35,145
Other interest expense ................       2,674        3,529        8,086        6,697
Preferred dividends of subsidiary trust       1,995        1,995        3,990        3,990
Allowance for borrowed funds ..........        (300)        (921)        (606)      (1,675)
                                          ---------    ---------    ---------    ---------
                                             20,987       22,195       44,577       44,157
                                          ---------    ---------    ---------    ---------

INCOME BEFORE INCOME TAXES ............      32,167       31,489       76,985       88,695
INCOME TAXES ..........................      11,815       13,109       30,449       37,136
                                          ---------    ---------    ---------    ---------
NET INCOME ............................      20,352       18,380       46,536       51,559
PREFERRED DIVIDENDS ...................       1,238        1,238        2,477        2,475
                                          ---------    ---------    ---------    ---------

EARNINGS ON COMMON STOCK ..............   $  19,114    $  17,142    $  44,059    $  49,084
                                          =========    =========    =========    =========
</TABLE>

The accompanying notes are an integral part of these statements.

                                      -4-
<PAGE>
<TABLE>
<CAPTION>
                           MIDAMERICAN ENERGY COMPANY
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
                                                                           AS OF
                                                           -------------------------------------
                                                                    JUNE 30          DECEMBER 31
                                                           -----------------------   -----------
                                                              1999         1998         1998
                                                           ----------   ----------   -----------
                                                                 (UNAUDITED)
<S>                                                        <C>          <C>          <C>
ASSETS
UTILITY PLANT
Electric ...............................................   $4,301,654   $4,109,989   $4,258,061
Gas ....................................................      793,745      766,127      786,169
                                                           ----------   ----------   ----------
                                                            5,095,399    4,876,116    5,044,230
Less accumulated depreciation and amortization .........    2,498,306    2,352,465    2,428,954
                                                           ----------   ----------   ----------
                                                            2,597,093    2,523,651    2,615,276
Construction work in progress ..........................       27,641       82,671       26,369
                                                           ----------   ----------   ----------
                                                            2,624,734    2,606,322    2,641,645
                                                           ----------   ----------   ----------

POWER PURCHASE CONTRACT ................................      139,383      164,739      144,875
                                                           ----------   ----------   ----------

CURRENT ASSETS
Cash and cash equivalents ..............................        9,727      113,655        5,370
Receivables ............................................      119,170      109,376      168,764
Inventories ............................................       71,735       62,641       92,745
Other ..................................................       31,678        1,799       32,126
                                                           ----------   ----------   ----------
                                                              232,310      287,471      299,005
                                                           ----------   ----------   ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET .............      210,930      126,195      183,279
                                                           ----------   ----------   ----------
REGULATORY ASSETS ......................................      279,489      311,979      305,489
                                                           ----------   ----------   ----------
OTHER ASSETS ...........................................       26,838       11,282       11,237
                                                           ----------   ----------   ----------

TOTAL ASSETS ...........................................   $3,513,684   $3,507,988   $3,585,530
                                                           ==========   ==========   ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholder's equity ............................   $  979,537   $  977,627   $  972,278
MidAmerican preferred securities, not subject to
  mandatory redemption .................................       31,759       31,760       31,759
Preferred securities, subject to mandatory redemption:
  MidAmerican preferred securities .....................       50,000       50,000       50,000
  MidAmerican-obligated preferred securities of
     subsidiary trust holding solely MidAmerican
     junior subordinated debentures ....................      100,000      100,000      100,000
Long-term debt (excluding current portion) .............      759,784      929,327      870,069
                                                           ----------   ----------   ----------
                                                            1,921,080    2,088,714    2,024,106
                                                           ----------   ----------   ----------
CURRENT LIABILITIES
Notes payable ..........................................      149,900       41,500      206,221
Current portion of long-term debt ......................      170,773      199,351       60,897
Current portion of power purchase contract .............       15,034       14,361       15,034
Accounts payable .......................................       96,917       85,542      159,420
Taxes accrued ..........................................      129,181      103,801      106,132
Interest accrued .......................................       13,444       18,977       13,473
Other ..................................................       37,442       26,942       35,405
                                                           ----------   ----------   ----------
                                                              612,691      490,474      596,582
                                                           ----------   ----------   ----------
OTHER LIABILITIES
Power purchase contract ................................       68,093       83,143       68,093
Deferred income taxes ..................................      582,918      589,808      584,675
Investment tax credit ..................................       74,589       80,274       77,421
Other ..................................................      254,313      175,575      234,653
                                                           ----------   ----------   ----------
                                                              979,913      928,800      964,842
                                                           ----------   ----------   ----------
TOTAL CAPITALIZATION AND LIABILITIES ...................   $3,513,684   $3,507,988   $3,585,530
                                                           ==========   ==========   ==========
</TABLE>
The accompanying notes are an integral part of these statements

                                      -5-
<PAGE>
<TABLE>
<CAPTION>
                           MIDAMERICAN ENERGY COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)


                                                                  THREE MONTHS               SIX MONTHS
                                                                  ENDED JUNE 30             ENDED JUNE 30
                                                              ----------------------    ----------------------
                                                                1999         1998         1999         1998
                                                              ---------    ---------    ---------    ---------
<S>                                                           <C>          <C>          <C>          <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................   $  20,352    $  18,380    $  46,536    $  51,559
Adjustments to reconcile net income to net cash provided:
    Depreciation and amortization .........................      51,406       48,642      102,828       96,415
    Net decrease in deferred income taxes and
       investment tax credit, net .........................      (1,211)      (2,960)      (4,075)      (5,885)
    Amortization of other assets ..........................       9,843        9,868       20,007       19,033
    Impact of changes in working capital ..................      18,187      (20,212)      37,632       73,018
    Other .................................................       8,338        2,487      (13,660)       1,559
                                                              ---------    ---------    ---------    ---------
       Net cash provided ..................................     106,915       56,205      189,268      235,699
                                                              ---------    ---------    ---------    ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures .........................     (52,023)     (43,906)     (77,865)     (68,592)
Quad Cities Nuclear Power Station
    decommissioning trust fund ............................      (2,844)      (2,844)      (5,658)      (5,658)
Proceeds from sale of assets and other investments ........           -       19,854            -       19,854
Other investing activities, net ...........................          (8)         183       (1,230)     (19,116)
                                                              ---------    ---------    ---------    ---------
    Net cash used .........................................     (54,875)     (26,713)     (84,753)     (73,512)
                                                              ---------    ---------    ---------    ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid ............................................      (1,238)     (29,838)     (39,183)     (59,676)
Issuance of long-term debt, net of issuance cost ..........           -      158,440            -      158,440
Retirement of long-term debt, including reacquisition cost         (494)        (486)        (629)     (75,611)
Reacquisition of preferred shares .........................           -           (1)           -           (3)
Cash outflow of accounts receivable securitization ........     (14,025)           -       (4,025)           -
Net decrease in notes payable .............................     (41,695)     (73,602)     (56,321)     (81,000)
                                                              ---------    ---------    ---------    ---------
    Net cash provided (used) ..............................     (57,452)      54,513     (100,158)     (57,850)
                                                              ---------    ---------    ---------    ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......      (5,412)      84,005        4,357      104,337
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..........      15,139       29,650        5,370        9,318
                                                              ---------    ---------    ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................   $   9,727    $ 113,655    $   9,727    $ 113,655
                                                              =========    =========    =========    =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized .................   $  15,752    $  12,223    $  37,213    $  39,526
                                                              =========    =========    =========    =========
Income taxes paid .........................................   $  24,843    $  33,352    $  24,843    $  33,436
                                                              =========    =========    =========    =========

</TABLE>
The accompanying notes are an integral part of these statements.

                                      -6-
<PAGE>
                           MIDAMERICAN ENERGY COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.  GENERAL:

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

     MidAmerican  is a public  utility with electric and natural gas  operations
and is the principal  subsidiary of MHC Inc. (MHC).  MHC is an indirect,  wholly
owned subsidiary of MidAmerican  Energy Holdings Company.  The current corporate
structure  is the result of a merger  transaction  completed  on March 12, 1999,
involving  MHC  (formerly  MidAmerican  Energy  Holdings  Company) and CalEnergy
Company, Inc. (CalEnergy). CalEnergy, through a reincorporation transaction, was
renamed  MidAmerican Energy Holdings Company  (Holdings).  Holdings is an exempt
public utility holding company headquartered in Des Moines, Iowa.

B.  ENVIRONMENTAL MATTERS:

     (1)  MANUFACTURED GAS PLANT FACILITIES -

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

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

     MidAmerican's   estimate  of  probable  remediation  costs  for  the  sites
discussed  above as of June 30, 1999,  was $24 million.  This  estimate has been
recorded as a liability and a regulatory asset for future recovery. The Illinois
Commerce  Commission  (ICC) has approved the use of a tariff rider which permits
recovery  of the  actual  costs of  litigation,  investigation  and  remediation
relating to former MGP sites.  MidAmerican's present rates in Iowa provide for a
fixed annual  recovery of MGP costs.  MidAmerican  intends to pursue recovery of
the remediation costs from other PRPs and its insurance carriers.

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

                                      -7-
<PAGE>
potential  legal  liability  for the  site and  whether  information  exists  to
indicate  that  contaminated  wastes  remain  at the site.  If so,  the costs of
performing  a  preliminary   investigation  and  the  costs  of  removing  known
contaminated  soil are accrued.  As the  investigation is performed and if it is
determined  remedial action is required,  the best estimate of remediation costs
is  accrued.  If  necessary,  the  estimate is revised  when a consent  order is
issued.  The  estimated  recorded   liabilities  for  these  properties  include
incremental direct costs of the remediation effort,  costs for future monitoring
at sites and costs of  compensation  to employees  for time expected to be spent
directly on the remediation effort. The estimated recorded liabilities for these
properties  are based upon  preliminary  data.  Thus,  actual  costs  could vary
significantly from the estimates.  The estimate could change materially based on
facts and circumstances  derived from site  investigations,  changes in required
remedial action and changes in technology relating to remedial alternatives.  In
addition, insurance recoveries for some or all of the costs may be possible, but
the  liabilities  recorded  have  not  been  reduced  by any  estimate  of  such
recoveries.

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

     (2)  CLEAN AIR ACT -

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

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

     In May  1999,  the U.S.  District  Court of  Appeals  for the  District  of
Columbia  Circuit  remanded the  standards  adopted in July 1997 back to the EPA
indicating the EPA had not expressed  sufficient  justification for the basis of
establishing   the   standards   and  ruling  that  the  EPA  has  exceeded  its
constitutionally-delegated  authority  in  setting  the  standards.  The EPA has
appealed  the  court's  ruling to the full panel of the U.S.  District  Court of
Appeals for the District of Columbia Circuit.  Argument in the appeal proceeding
is scheduled for the fall of 1999.  As a result of the court's  decision and the
current status of the standards,  the impact of any new standards on MidAmerican
is currently unknown.

C.  RATE MATTERS:

     (1)  ELECTRIC -

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

     Through several steps from mid-1997 to the end of 1998, electric prices for
Iowa industrial customers were reduced by an amount which will have a $6 million
annual impact on revenues and electric

                                      -8-
<PAGE>
prices for Iowa commercial customers were reduced by an amount which will have a
$4 million  annual impact on revenues.  The reductions  were achieved  through a
retail access pilot project, negotiated individual electric contracts and a $1.5
million tariffed rate reduction for certain non-contract commercial customers.

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

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

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

     (2)  GAS -

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

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

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

     MidAmerican's  utility operations are subject to the regulation of the IUB,
the ICC,  the  SDPUC,  and the  Federal  Energy  Regulatory  Commission  (FERC).
MidAmerican's  accounting policies and the accompanying  Consolidated  Financial
Statements conform to generally  accepted  accounting  principles  applicable to
rate-regulated enterprises and reflect the effects of the ratemaking process.

                                      -9-
<PAGE>

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

E.  MIDAMERICAN-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES:

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

F.  SEGMENT INFORMATION:

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

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

                                     Three Months                Six Months
                                     Ended June 30             Ended June 30
                                 ----------------------    ---------------------
                                   1999         1998         1999         1998
                                 ---------    ---------    ---------    --------
Electric:
  Revenues ..................    $ 279,350    $ 287,094    $ 541,478    $543,448
  Operating income ..........       62,562       60,368      106,924     114,014
Gas:
  Revenues ..................       71,282       67,288      242,060     240,488
  Operating income ..........       (5,877)      (7,813)      21,805      17,559
Nonregulated and other (a):
  Revenues ..................       27,709       21,124       63,051      38,836
  Operating income (loss) ...         (781)       1,795       (3,475)      2,875

                                      -10-
<PAGE>

                                                   June 30          December 31
                                          -----------------------   -----------
                                             1999         1998         1998
                                          ----------   ----------   ----------
Total Assets:
  Electric ............................   $2,897,678   $2,882,669   $2,897,657
  Gas .................................      600,854      606,910      672,072
  Nonregulated and other (a) ..........       15,152       18,409       15,801

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

G.  OTHER COMPREHENSIVE INCOME:

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

                                      -11-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

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

     MidAmerican Energy Company  (MidAmerican) is a public utility with electric
and natural gas  operations and is the principal  subsidiary of MHC Inc.  (MHC).
MHC is  headquartered  in Des Moines,  Iowa, and is a wholly owned subsidiary of
MidAmerican  Funding,  LLC,  which is an indirect,  wholly owned  subsidiary  of
MidAmerican Energy Holdings Company.

     The current  corporate  structure  is the result of the merger  transaction
completed on March 12, 1999, involving MHC (formerly MidAmerican Energy Holdings
Company)  and  CalEnergy  Company,  Inc.  (CalEnergy).   CalEnergy,   through  a
reincorporation  transaction,  was renamed  MidAmerican  Energy Holdings Company
(Holdings).  Holdings is an exempt public utility holding company  headquartered
in Des Moines.

FORWARD-LOOKING STATEMENTS

     From time to time,  MidAmerican may make forward-looking  statements within
the meaning of the federal securities laws that involve  judgments,  assumptions
and other uncertainties beyond its control. These forward-looking statements may
include,  among  others,  statements  concerning  revenue and cost trends,  cost
recovery,   cost  reduction   strategies  and  anticipated   outcomes,   pricing
strategies,  changes in the  utility  industry,  planned  capital  expenditures,
financing  needs and  availability,  statements of  MidAmerican's  expectations,
beliefs,  future plans and strategies,  anticipated events or trends and similar
comments  concerning matters that are not historical facts.  Investors and other
users of the  forward-looking  statements are cautioned that such statements are
not  a  guarantee  of  future   performance   of   MidAmerican   and  that  such
forward-looking  statements  are subject to risks and  uncertainties  that could
cause actual results to differ  materially  from those  expressed in, or implied
by, such statements.  Some, but not all, of the risks and uncertainties  include
weather  effects  on sales  and  revenues,  fuel  prices,  fuel  transportation,
competitive  factors,  general  economic  conditions  in  MidAmerican's  service
territory, interest rates, inflation and federal and state regulatory actions.

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

EARNINGS DISCUSSION

     MidAmerican's  earnings on common stock for the second quarter of 1999 were
$19.1 million compared to $17.1 million for the second quarter of 1998. Earnings
on common  stock for the six  months  ended June 30,  1999 and 1998,  were $44.1
million  and  $49.1  million,  respectively.  Below  is a list  of  some  of the
significant  factors  contributing  to  the  change  in  earnings.  The  amounts
represent the variance between the respective periods.  Therefore, a factor that
had a  negative  impact on  earnings  in both  periods,  but which had less of a
negative  impact in the 1999 period than in the 1998 period,  would be displayed
as a positive factor for comparison purposes.

     For purposes of the following  table,  expenses  related to amortization of
deferred energy  efficiency  costs,  ongoing energy efficiency costs and certain
Cooper Nuclear Station  (Cooper) costs are netted against the related  recovery.
As a result,  the "O&M expenses" line below does not reflect the impact of these
expenses,  and the net effect of the  revenues  and  expenses is included in the
amounts on the "Other factors" line under gross margin.

                                      -12-
<PAGE>

     The discussions that follow address the listed items and other variations.

                                               Approximate Earnings Variances
                                            Periods Ended June 30, 1999 vs. 1998
                                                Three Months      Six Months
                                                ------------      ----------
                                                        (In millions)
Variation in gross margin due to -
  Weather effect...............................    $(0.9)            $0.9
  Other retail sales factors & customer growth.     (2.1)               -
  Off-system sales margin & energy costs.......      7.3             13.1
  Electric retail prices.......................     (4.1)            (7.9)
  Gas retail prices............................      0.8              1.7
  Other factors................................     (2.8)            (4.9)
O&M expenses....................................     5.5             (2.1)
Depreciation & amortization.....................    (2.1)            (5.3)
Property and other taxes........................     0.4              2.3
Utility nonregulated operating activities.......    (1.2)            (3.2)


REGULATED GROSS MARGIN

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

                                             Three Months         Six Months
                                             Ended June 30       Ended June 30
                                             --------------      --------------
                                             1999      1998      1999      1998
                                             ----      ----      ----      ----
                                                        (In millions)
     Operating revenues ..................   $279      $287      $541      $543
     Cost of fuel, energy and capacity ...     51        58       102       103
                                             ----      ----      ----      ----
     Electric gross margin ...............   $228      $229      $439      $440
                                             ====      ====      ====      ====

     MidAmerican's  electric  gross  margin for the  three-month  and  six-month
periods  ended June 30,  1999,  was  relatively  unchanged  from the  comparable
periods in 1998. The impact of various  factors  affecting  electric  margin are
discussed in the following paragraphs.

     A decrease in revenues from energy  efficiency cost recovery  accounted for
$2.1  million and $3.9  million of the  decrease in revenues  and margin for the
three- and six-month comparisons,  respectively.  Approximately $9.3 million and
$18.8  million  of  MidAmerican's  electric  revenues  for the 1999  three-  and
six-month  periods,  respectively,  were from the recovery of energy  efficiency
program costs.  Collection of deferred energy efficiency costs decreased in 1999
compared to the 1998 periods due to the  completion  of one of the four recovery
periods.   Changes  in  revenues  from  energy   efficiency  cost  recovery  are
substantially offset by corresponding changes in other operating expenses. Refer
to the  discussion  under "Energy  Efficiency"  in the OPERATING  ACTIVITIES AND
OTHER MATTERS section of MD&A for further discussion.

     Revenues  and gross margin for the 1999 periods  reflect  price  reductions
which  were not in effect,  or were only  partially  in effect,  during the 1998
periods presented.  In June 1998, revenues from Iowa residential  customers were
reduced $5 million annually.  Since July 1997,  MidAmerican has reduced revenues
from its Iowa commercial and industrial  customers a total of approximately  $10
million  annually  through  negotiated  contracts and a tariffed rate reduction.
These  reductions  were only  partially in effect in the 1998 periods.  Revenues
from  Illinois  customers  were  reduced  $0.9 million in August 1998 related to
Illinois  utility  industry  restructuring.  MidAmerican  also recorded a refund
accrual for a revenue sharing  arrangement in Iowa. The accrual reduced revenues
and margin by $5.1  million and $9.0  million  for the

                                      -13-
<PAGE>

quarter and  year-to-date  periods ended June 30, 1999,  respectively.  Refer to
"Rate Matters:  Electric" in the OPERATING  ACTIVITIES AND OTHER MATTERS section
of MD&A for a discussion of revenue sharing.  The combined effect of the revenue
reductions  and the revenue  sharing  accrual  decreased  revenues  and electric
margin by $7.1  million  for the second  quarter of 1999  compared to the second
quarter of 1998 and $13.5  million for six months ended June 30, 1999,  compared
to the same period in 1998.

     For the second  quarter of 1999,  temperatures  were  milder  than  normal,
resulting in a $5 million reduction of electric margin for the period.  Compared
to the second quarter of 1998, which was also milder than normal,  the effect of
temperatures  decreased  electric margin by $2 million.  A decrease in sales not
dependent on weather also reduced  revenues and electric  margin compared to the
second  quarter of 1998.  Moderate  growth in the number of customers  increased
electric margin by $1.5 million. In total, retail sales of electricity decreased
1.5%.

     Temperatures  during the six months ended June 30,  1999,  were milder than
normal  resulting in a $10 million  reduction of electric margin for the period.
Compared to the six-month period ended June 30, 1998,  electric margin decreased
$1 million from the effect of temperatures. A decrease in sales not dependent on
weather also reduced  revenues  and  electric  margin  compared to the first six
months of 1998.  Moderate growth in the number of customers  increased  electric
margin by $3.5 million. In total, retail sales of electricity decreased 0.1%.

     MidAmerican  also  sells  energy and  capacity  in the  off-system  market.
Margins on off-system sales,  which account for most of MidAmerican's  sales for
resale,  contributed $12.4 million and $22.2 million more to gross margin in the
three- and six-month periods ended June 30, 1999, than in the comparable periods
in 1998.  Related sales volumes increased 24.6% and 20.9% compared to the three-
and  six-month  periods  in 1998 due in part to  improved  availability  of Quad
Cities Nuclear Power Station (Quad Cities Station) in 1999.

     Deregulation of the Illinois  electric utility industry resulted in changes
in the way  certain  taxes are  assessed  in  Illinois.  One of the taxes is now
assessed  directly  on the  energy  consumer  instead of  through  the  utility.
Accordingly,   MidAmerican's  electric  revenues  and  electric  margin  reflect
reductions of $1.2 million and $2.5 million in the quarter and six-month  period
ended June 30, 1999, respectively, for this tax collection change.

Regulated Gas Gross Margin:
---------------------------
                              Three Months                  Six Months
                              Ended June 30                Ended June 30
                            -----------------             --------------
                             1999        1998             1999     1998
                            -----       -----             ----     ----
                                             (In millions)
     Operating revenues...   $ 71        $ 67             $242     $240
     Cost of gas sold.....     39          33              135      138
                             ----        ----             ----     ----
     Gas gross margin.....   $ 32        $ 34             $107     $102
                             ====        ====             ====     ====

     MidAmerican's  regulated  gas  revenues  include  purchase  gas  adjustment
clauses (PGAs)  through which  MidAmerican is allowed to recover the cost of gas
sold from most of its gas utility customers.  Consequently,  fluctuations in the
cost of gas sold do not  affect  gross  margin or net  income  because  revenues
reflect  comparable  fluctuations  in  revenues  from PGAs.  An  increase in the
per-unit  cost of gas for the  second  quarter  of 1999  compared  to the second
quarter of 1998 increased  revenues and cost of gas sold by  approximately  $5.6
million. For the six-month period comparison, revenues and cost of gas decreased
$6.1 million due to a change in the average per-unit cost of gas.

                                      -14-
<PAGE>

     Recovery of gas energy efficiency  program costs decreased $0.5 million and
$0.8 million for the 1999 three- and six-month periods presented compared to the
same  periods  in  1998.   Approximately   $3.9  million  and  $8.0  million  of
MidAmerican's   gas  revenues  for  the  1999  three-  and  six-month   periods,
respectively,  were from the recovery of gas energy  efficiency  program  costs.
Again,   changes  in  revenues   from  energy   efficiency   cost  recovery  are
substantially offset by corresponding changes in other operating expenses. Refer
to the  discussion  under "Energy  Efficiency"  in the OPERATING  ACTIVITIES AND
OTHER MATTERS section of MD&A for further discussion.

     On January  22,  1999,  the IUB  approved  a $6.7  million  annual  interim
increase  in gas rates  for Iowa  retail  customers  effective  immediately.  An
additional  increase was  implemented  on May 27, 1999, as a result of the IUB's
approval of a final rate increase of $13.9  million  annually.  These  increases
contributed  approximately  $1.4  million  and $2.9  million to the  comparative
increase in gas margin for the three- and six-month periods ended June 30, 1999,
respectively.

     Temperatures  in the  second  quarter  of 1999  were  milder  than  normal.
However, due to the relatively low volume of gas sales during the second quarter
in the  Midwest,  the  milder-than-normal  temperatures  had  little  impact  on
revenues  and gas  margin.  Compared to the second  quarter of 1998,  gas margin
increased  approximately $1 million due to the effect of temperatures.  Customer
growth resulted in a $0.4 million improvement in gas margin in the 1999 quarter.
In total,  retail sales of natural gas in the second  quarter of 1999  increased
1.2% compared to the 1998 quarter.

     Temperatures  in the first six  months of 1999  were  warmer  than  normal,
resulting in a $6 million decrease in gas gross margin for the period.  Compared
to the same period in 1998, gas margin increased $3 million due to the effect of
temperatures.  Customer  growth  resulted in a $1.4 million  improvement  in gas
margin in the 1999  period.  In total,  retail sales of natural gas in the first
six months of 1999 increased 2.6% compared to the 1998 period.

REGULATED OPERATING EXPENSES

     Other operating  expenses  decreased $9.6 million for the second quarter of
1999 compared to the second  quarter of 1998 and decreased  $1.5 million for the
six months ended June 30, 1999, compared to the six months ended June 30, 1998.

     As mentioned in the gross margin discussions,  the recovery of one phase of
deferred energy  efficiency costs is complete,  and  accordingly,  the costs for
that phase have been fully amortized to expense. As a result,  energy efficiency
costs  decreased  $2.2  million and $4.0  million  for the three- and  six-month
period comparisons, respectively.

     Expense  related to the Cooper Tracker (a cost recovery  mechanism begun in
1997)  increased  $2.5  million and $3.1  million  for the three- and  six-month
comparisons to 1998, respectively.  MidAmerican is recovering on a current basis
the Iowa portion of these costs from its Iowa electric customers.

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

     Increased  expenses in the six months ended June 30, 1999, for  information
technology,  consulting  and customer  service costs were offset by decreases in
marketing and sales expenses,  certain employee benefits costs, gas distribution
costs and other  administrative  and general costs.  The increase in information
technology  costs  was due in part to year  2000  preparation  and  support  for
various new systems.

                                      -15-
<PAGE>

     Maintenance  expenses  increased $0.6 million and $4.1 million for the 1999
quarter and year-to-date periods, respectively,  compared to the same periods in
1998 due to the timing of generating  plant  maintenance and increased  electric
and gas  distribution  maintenance.  The increases in these areas were partially
offset by a $3.0 million  decrease in both 1999 periods for  maintenance  at the
Quad Cities Station.

     Property  and other taxes  decreased  $0.7 million and $3.9 million for the
three months and six months ended June 30, 1999,  respectively,  compared to the
same periods in 1998.  MidAmerican's  Iowa  property tax  decreased for the 1999
periods due to reduced  assessed values.  Deregulation of the Illinois  electric
utility  industry  resulted in changes in the way certain  taxes are assessed in
Illinois. The changes resulted in decreases in MidAmerican's tax expense for the
1999 three- and six-month periods compared to the 1998 periods. One of the taxes
is now assessed  directly on the energy consumer instead of through the utility.
Accordingly,  MidAmerican's  electric revenues reflect an equal reduction in the
1999 periods for this tax collection change.

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     Revenues and Cost of Sales -

     Revenues from  wholesale  natural gas marketing  operations  increased $5.7
million  and $23.0  million for the three  months and six months  ended June 30,
1999,  respectively,  compared to the same periods in 1998. The primary cause of
the  increase  in revenues  for the 1999  quarter was an increase in the average
price per unit,  driven by an increase in the average cost of gas. Related sales
volumes increased 723,000 MMBtus (7%) compared to the second quarter of 1998 due
in part to additional contracts which were previously serviced by a nonregulated
affiliate  of  MidAmerican.  Cost of sales  related  to  natural  gas  marketing
reflects the increases in sales volumes and the average cost of gas. Total gross
margin  (total  price less cost of gas) on  nonregulated  natural  gas sales was
relatively unchanged.

     For the six-month period, related sales volumes increased 13 million MMBtus
(77%). The increase in sales volumes is due primarily to gas marketing contracts
previously  serviced by a  nonregulated  affiliate of  MidAmerican  that started
being  renewed as  MidAmerican  contracts in May 1998. A decrease in the average
price per unit, reflective of a lower cost of gas per unit, partially offset the
effect of increased  sales.  Cost of sales  related to natural gas marketing for
the six months  ended June 30,  1999,  reflects  the  increase  in sales and the
decrease in the average cost of gas per unit. Total gross margin on nonregulated
natural gas sales  decreased  $0.6  million  compared to the first six months of
1998. The decrease was due to lower than  anticipated  gas prices in part of the
first  quarter of 1999, as well as lower than  anticipated  sales volumes due in
part to mild weather during the same quarter.

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

     Other Nonregulated Operating Expenses -

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

                                      -16-
<PAGE>

NON-OPERATING INCOME AND INTEREST EXPENSE

     Interest and Dividend Income -

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

     Other, Net -

     Other, Net reflects the discount on sold accounts receivable,  net of a fee
for  servicing  the  accounts.  The net  discount  was recorded as an expense in
Other, Net in the amount of $1.7 million and $1.4 million for the second quarter
of 1999 and  1998,  respectively.  For the six  months  ended  June 30,  the net
discount  was an expense of $4.6  million  and $3.1  million  for 1999 and 1998,
respectively.

     Fixed Charges -

     The  decrease  in  interest  on  long-term  debt is due to  long-term  debt
maturities and refinancing in 1998. Other interest expense  increased in the six
months ended June 30, 1999,  compared to the 1998 six-month period due primarily
to an increase in commercial paper  outstanding.  A decrease in other short-term
debt interest  expense in the second quarter of 1999 was due to interest expense
in 1998 related to a Federal  income tax payment  which offset the impact of the
commercial paper increase for the quarterly comparison.

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

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

     As reflected on the  Consolidated  Statements of Cash Flows,  MidAmerican's
net cash provided from  operating  activities  was $189 million and $236 million
the first six months of 1999 and 1998, respectively.

INVESTING ACTIVITIES AND PLANS

     Utility Construction Expenditures -

     MidAmerican's   primary   need  for   capital   is   utility   construction
expenditures.   For  the  first  six  months  of  1999,   utility   construction
expenditures  totaled $78  million,  including  allowance  for funds used during
construction  (AFUDC) and Quad Cities Station nuclear fuel  purchases.  All such
expenditures  were met with  cash  generated  from  utility  operations,  net of
dividends.

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

                                      -17-
<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  expects to contribute  approximately  $42 million during the period
1999 through 2003 to an external trust  established  for the investment of funds
for  decommissioning  the Quad Cities Station.  Approximately 65% of the trust's
funds are now invested in domestic  corporate debt and common equity securities.
The remainder is invested in investment grade municipal and U.S. Treasury bonds.

     In addition,  MidAmerican  makes payments to Nebraska Public Power District
(NPPD) related to decommissioning  Cooper. These payments are reflected in other
operating expenses in the Consolidated Statements of Income. NPPD estimates call
for   MidAmerican  to  pay   approximately   $57  million  to  NPPD  for  Cooper
decommissioning  during the period 1999  through  2003.  NPPD  invests the funds
predominately  in U.S.  Treasury  Bonds and other  U.S.  Government  securities.
Approximately  20%  was  invested  in  domestic  corporate  debt.  MidAmerican's
obligation  for Cooper  decommissioning  may be  affected  by the  actual  plant
shutdown  date and the status of the power  purchase  contract at that time.  In
July 1997, NPPD filed a lawsuit in United States District Court for the District
of Nebraska  naming  MidAmerican  as the defendant and seeking a declaration  of
MidAmerican's   rights  and   obligations  in  connection  with  Cooper  nuclear
decommissioning  funding.  Refer  to Part II,  Item 1.  Legal  Proceedings,  for
further discussion of the litigation.

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

FINANCING ACTIVITIES, PLANS AND AVAILABILITY

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

     In 1997,  MidAmerican entered into a revolving agreement,  which expires in
2002, to sell all of its right, title and interest in the majority of its billed
accounts receivable to MidAmerican Energy Funding Corporation (Funding Corp.), a
special  purpose  entity  established  to  purchase  accounts   receivable  from
MidAmerican.  Funding  Corp.  in  turn  sold  receivable  interests  to  outside
investors.  In consideration for the sale,  MidAmerican  received $70 million in
cash and the remaining  balance in the form of a subordinated  note from Funding
Corp. As of June 30, 1999,  the revolving  cash balance was $56 million due to a
decline during the second quarter of 1999 in accounts  receivable  available for
sale.  The agreement is structured as a true sale, as determined by Statement of
Financial  Accounting  Standards  (SFAS) No. 125,  under which the  creditors of
Funding  Corp.  will be  entitled to be  satisfied  out of the assets of Funding
Corp.  prior to any  value  being  returned  to  MidAmerican  or its  creditors.
Therefore,  the accounts  receivable  sold are not  reflected  on  MidAmerican's
Consolidated  Balance  Sheets.  As of June 30, 1999,  $87.4  million of accounts
receivable, net of reserves, were sold under the agreement.

     MidAmerican  has  authorization  from the FERC to issue up to an additional
$500 million in various  forms of  long-term  debt.  MidAmerican  will also need
authorization from the ICC prior to issuing

                                      -18-
<PAGE>

any  securities.  If 90% or more of the proceeds from a securities  issuance are
used for  refinancing  purposes,  MidAmerican  need only provide the ICC with an
"informational  statement"  prior to the  issuance  which  sets  forth the type,
amount and use of the proceeds of the securities to be issued.  If less than 90%
of the proceeds are used for refinancing,  MidAmerican must file a comprehensive
application seeking authorization prior to issuance. The ICC is required to hold
a hearing before issuing its authorization.

OPERATING ACTIVITIES AND OTHER MATTERS

     Industry Evolution -

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

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

     The generation and retail portions of MidAmerican's  electric business will
be  most  affected  by  competition.  The  introduction  of  competition  in the
wholesale  market has  resulted  in a  proliferation  of power  marketers  and a
substantial increase in market activity.  As retail choice evolves,  competition
from other traditional utilities,  power marketers and customer-owned generation
could put pressure on utility margins.

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

     Legislative and Regulatory Evolution -

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

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

     In addition,  the law provides for Illinois  earnings above a certain level
of ROE to be shared equally between customers and MidAmerican beginning in April
2000.  MidAmerican's ROE level will be based on a rolling two-year average, with
the first  determination  being  based on an average  of 1998 and 1999.

                                      -19-
<PAGE>
The ROE level at which  MidAmerican  will be  required  to share  earnings  is a
multi-step  calculation  of average  30-year  Treasury Bond rates plus 5.50% for
1998 and 1999.  Legislation passed in July 1999 increases the benchmark for 2000
through  2004 to 8.5% above the 30-year  Treasury  bond rate.  If the  resulting
average Treasury Bond rate were equal to the December 1998 30-year Treasury Bond
rate, the ROE level above which sharing must occur would be approximately  10.6%
for 1998 and 1999 and 13.6% for 2000 through 2004. The law allows MidAmerican to
mitigate the sharing of earnings  above the  threshold  ROE through  accelerated
cost recognition that would reduce MidAmerican's earnings. MidAmerican continues
to evaluate its strategy regarding the sharing mechanism.

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

     In Iowa, a replacement of the prior utility property tax system,  which was
supported by  MidAmerican,  went into effect on January 1, 1999. The replacement
tax is  primarily  a  consumption-based  tax on the user of energy  and  assures
stability  in tax  collections  as the  industry is  deregulated  in Iowa.  With
resolution  of the utility  property  tax issue,  MidAmerican  is  pursuing  the
adoption of electric utility industry  restructuring  legislation.  Progress was
made during the 1999 Iowa legislative session, and MidAmerican continues working
toward adoption of new legislation in a future session.

     Residential and Commercial Pilot Project -

     On  August  21,  1998,  the IUB  issued  an Order  approving  MidAmerican's
proposal to allow at least 15,000 Iowa  families and 2,000 small  businesses  to
have the  opportunity  to select  among  competing  electricity  providers.  The
two-year pilot program will allow participating retail customers in the selected
test area to choose among several electricity providers,  including MidAmerican,
and to have  that  energy  delivered  by  MidAmerican.  Customer  enrollment  is
currently  allowed and the pilot is  expected to begin in 1999 after  additional
suppliers are  registered.  Businesses in the test area will be eligible for the
program if their annual peak demand is less than four  megawatts.  New suppliers
participating  in the  program  will  have to be  certified  by the IUB and meet
specified requirements.

     Accounting Effects of Industry Restructuring -

     A possible  consequence of competition in the utility industry is that SFAS
71 may no longer apply. SFAS 71 sets forth accounting  principles for operations
that are  regulated  and meet certain  criteria.  For  operations  that meet the
criteria,  SFAS 71 allows,  among other things, the deferral of costs that would
otherwise be expensed when incurred.  A majority of  MidAmerican's  electric and
gas utility operations  currently meet the criteria required by SFAS 71, but its
applicability is periodically  reexamined.  On December 16, 1997,  MidAmerican's
generation  operations serving Illinois were no longer subject to the provisions
of SFAS 71 due to passage of industry  restructuring  legislation  in  Illinois.
Thus, in 1997  MidAmerican  was required to write off the regulatory  assets and
liabilities   from  its  balance  sheet  related  to  its  Illinois   generation
operations.  The net  amount  of such  write-offs  was not  material.  If  other
portions  of its  utility  operations  no longer  meet the  criteria of SFAS 71,
MidAmerican  could be required to write off the  related  regulatory  assets and
liabilities from its balance sheet, and thus, a material  adjustment to earnings
in that period could result.  As of June 30, 1999,  MidAmerican had $279 million
of regulatory assets on its Consolidated Balance Sheet.

                                      -20-

<PAGE>

     Energy Efficiency -

     MidAmerican's regulatory assets as of June 30, 1999, included $55.6 million
of deferred  energy  efficiency  costs.  Based on the current level of recovery,
MidAmerican  expects to recover these costs by the end of 2001.  MidAmerican  is
also allowed to recover its ongoing energy  efficiency costs on a current basis.
Recovery of these costs is being  collected  from  customers  based on projected
annual costs of $17.4 million,  which may be adjusted annually.  Amortization of
the  deferred  energy  efficiency  costs and  current  expenditures  for  energy
efficiency costs will be reflected in other operating  expenses over the related
periods of recovery.  The total of such costs for the years 1999,  2000 and 2001
is estimated to be $43 million, $40 million and $35 million, respectively.

     Rate Matters: Electric -

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

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

     If MidAmerican's annual Iowa electric  jurisdictional ROE exceeds 12%, then
earnings  above  the 12% level  will be shared  equally  between  customers  and
MidAmerican;  if the ROE exceeds 14%, then two-thirds of MidAmerican's  share of
those  earnings  will be used for  accelerated  recovery  of certain  regulatory
assets.  A 1997 pricing plan settlement  agreement  precludes  MidAmerican  from
filing for  increased  rates prior to 2001 unless the ROE falls below 9%.  Other
parties signing the agreement are prohibited from filing for reduced rates prior
to 2001 unless the ROE, after reflecting  credits to customers,  exceeds 14%. On
April 14, 1999, the IUB approved,  subject to additional  refund,  MidAmerican's
1998 ROE calculation.  During the second quarter of 1999,  MidAmerican  refunded
$2.2 million to its Iowa  non-contract  customers related to the ROE calculation
for 1998. The agreement also eliminated  MidAmerican's energy adjustment clause,
and, as a result, the cost of fuel is not directly passed on to customers.

     Rate Matters: Gas -

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

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

                                      -21-
<PAGE>

     Environmental Matters -

     The EPA and state environmental  agencies have determined that contaminated
wastes remaining at certain  decommissioned  MGP facilities may pose a threat to
the public  health or the  environment  if such  contaminants  are in sufficient
quantities and at such concentrations as to warrant remedial action.

     MidAmerican is evaluating 27 properties  which were, at one time,  sites of
gas  manufacturing  plants  in  which  it may be a PRP.  The  purpose  of  these
evaluations is to determine  whether waste  materials are present,  whether such
materials  constitute an environmental  or health risk, and whether  MidAmerican
has any responsibility for remedial action.  MidAmerican's  estimate of probable
remediation  costs for these sites as of June 30, 1999,  was $24  million.  This
estimate  has been  recorded as a liability  and a  regulatory  asset for future
recovery  through  the  regulatory  process.  Refer  to Note B (1) of  Notes  to
Consolidated  Financial  Statements  for  further  discussion  of  MidAmerican's
environmental activities related to MGP sites and cost recovery.

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

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

     On July 18,  1997,  the EPA adopted  revisions to the NAAQS for ozone and a
new  standard for fine  particulate  matter.  Based on data to be obtained  from
monitors  located  throughout the states,  the EPA will make a determination  of
whether  the states  have any areas that do not meet the air  quality  standards
(i.e.,  areas that are  classified  as  nonattainment).  If a state has  area(s)
classified  as  nonattainment  area(s),  the state is required to submit a State
Implementation  Plan  specifying  how it will reach  attainment of the standards
through emission reductions or other means.

     In May  1999,  the U.S.  District  Court of  Appeals  for the  District  of
Columbia  Circuit  remanded the  standards  adopted in July 1997 back to the EPA
indicating the EPA had not expressed  sufficient  justification for the basis of
establishing   the   standards   and  ruling  that  the  EPA  has  exceeded  its
constitutionally-delegated  authority  in  setting  the  standards.  The EPA has
appealed  the  court's  ruling to the full panel of the U.S.  District  Court of
Appeals for the District of Columbia Circuit.  Argument in the appeal proceeding
is scheduled for the fall of 1999.  As a result of the court's  decision and the
current status of the standards,  the impact of any new standards on MidAmerican
is currently unknown.

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

                                      -22-
<PAGE>

emissions levels by 7% below 1990 levels would depend on available technology at
the time, but could be material.

     Quad Cities Nuclear Power Station -

     Quad Cities Station is operated by, and 75% owned by,  Commonwealth  Edison
Company (ComEd). On May 6, 1999, the Nuclear Regulatory Commission (NRC) advised
ComEd that it had classified Quad Cities Station in the NRC's Routine  Oversight
category  (the best of three  NRC new  categories)  for  nuclear  power  plants,
removing the station from the Trending  (adversely)  Letter status  initiated in
January 1998.  During the first six months of 1999, the station  capacity factor
was in excess of 91%.

     Generating Capability -

     In July 1998,  retail  customer usage of electricity  caused an hourly peak
demand  of 3,643 MW on  MidAmerican's  energy  system.  Preliminary  information
indicates that retail  customer  usage of electricity  during the hot weather in
July 1999 has  resulted  in a new hourly  peak  demand on  MidAmerican's  energy
system  of  3,844  MW.  MidAmerican  is  interconnected  with  certain  Iowa and
neighboring  utilities and is involved in an electric  power  pooling  agreement
known as Mid-Continent Area Power Pool (MAPP). Each MAPP participant is required
to maintain for emergency  purposes a net  generating  capability  reserve of at
least 15% above its system peak  demand.  MidAmerican  was able to maintain  its
capacity  reserve  requirement  during the hot  weather in July 1999 and was not
adversely affected by the resultant high prices in the off-system market.

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

ACTIVITIES REGARDING YEAR 2000 DATE ISSUES

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

     Project Description -

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

                                      -23-
<PAGE>

potential  problems,  and  remediation  of  MidAmerican's  Systems.  MidAmerican
generally defines the five phases as follows:

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

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

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

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

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

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

     State of Readiness -

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

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

     2.   A  "checklist"  approach is used to monitor the  completion  status of
          each  System  that is  unique  to a given  organizational  group.  For
          example, identical substation meters may be located in several

                                      -24-
<PAGE>

          individual  substations,  but the meter is counted as only one System.
          All Systems are viewed as equivalent,  regardless of priority,  in the
          checklist  approach.  Systems  are  categorized  as  complete  or  not
          complete,  without regard to percentage of completion of the System in
          total or  percentage  of  completion  of any  particular  phase of the
          project.  As of July 30, 1999,  there were 5,554  separate  Systems in
          MidAmerican's inventory. Of these, 5,510, or 99%, had been completed.

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


          A.   IT - Applications: 90-95% complete
          B.   IT - Operations & Infrastructure: 95-100% complete
          C.   Generation: 95-100% complete
          D.   Energy Delivery: 95-100% complete
          E.   Retail: 90-95% complete
          F.   Corporate Services (excluding IT): 95-100% complete

     The investigation of supply chain issues consists of documenting the nature
of business  relationships  in  correspondence,  surveys and meetings with third
parties and making  determinations  regarding  their year 2000 readiness  status
based on the responses received.  MidAmerican has initiated contact with vendors
and  business  partners it considers  to  represent a  significant  financial or
operational  risk if they were to experience  year 2000  problems.  In addition,
interconnected  utilities and wholesale customers, as well as high-volume retail
customers,  have been contacted for the purpose of reviewing the status of their
year 2000 readiness efforts. To date,  information made available to MidAmerican
has not been  uniform in terms of quality  and  quantity.  Although  none of the
information has suggested that the year 2000 readiness efforts of these vendors,
business  partners and customers have been  inadequate,  MidAmerican  intends to
maintain ongoing communications with some third parties through the last half of
1999.  MidAmerican  will also continue  monitoring  information  about  specific
products in MidAmerican's inventory.

     Costs -

     As of June 30, 1999  approximately  $9.3 million in operating expenses have
been incurred to carry out year 2000  activities.  It is anticipated  that up to
$5.7 million in additional  operating expenses and capital costs will need to be
incurred to complete the project.  Although  additional  unforeseen costs may be
incurred,  at this time  MidAmerican  has not become aware of any material costs
which may arise in order to achieve year 2000 readiness.  Future progress toward
achievement of year 2000 readiness could change this outlook.

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

                                      -25-
<PAGE>

     Contingency Plans -

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

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

     MidAmerican  participated  in a contingency  planning drill  coordinated by
NERC on April 9, 1999. The drill focused on managing  problems  resulting from a
simulated partial loss of voice and data  communications  services.  MidAmerican
also plans to participate  in a second  NERC-coordinated  drill,  which has been
scheduled to take place on September  8-9,  1999.  It is likely that  additional
drills will be conducted at MidAmerican's own discretion, as well.

     Risks -

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

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

ACCOUNTING ISSUES

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

                                      -26-

<PAGE>

PART II - OTHER INFORMATION

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

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

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

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

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

     On July 23, 1997,  NPPD filed a Complaint,  in the United  States  District
Court for the District of Nebraska,  naming  MidAmerican  as the  defendant  and
seeking  declaratory  judgment as to three issues  under the parties'  long-term
power purchase agreement for Cooper capacity and energy. More specifically, NPPD
seeks a declaratory judgment in the following respects:  (1) that MidAmerican is
obligated to pay 50% of all costs and expenses  associated with  decommissioning
Cooper,  and that in the event NPPD continues to operate Cooper after expiration
of the power purchase agreement (September 2004), MidAmerican is not entitled to
reimbursement  of any  decommissioning  funds it has paid to date or will pay in
the future; (2) that the current method of allocating transition costs as a part
of the decommissioning  cost is proper under the power purchase  agreement;  and
(3) that the current method of investing  decommissioning  funds is proper under
the power purchase agreement.

     MidAmerican filed its answer and contingent  counterclaims.  The contingent
counterclaims   filed  by  MidAmerican  are  generally  as  follows:   (1)  that
MidAmerican  has no duty under the power purchase  agreement to reimburse or pay
50% of the decommissioning  costs unless certain conditions occur; (2) that NPPD
has  the  duty  to  repay  all  amounts  that   MidAmerican  has  prefunded  for
decommissioning in the event NPPD operates the plant after the term of the power
purchase  agreement;  (3) that NPPD is equitably  estopped  from  continuing  to
operate the plant after the term of the power purchase agreement;  (4) that NPPD
has granted  MidAmerican an option to continue  taking 50% of the power from the
plant;  (5) that the term "monthly power costs" as defined in the power purchase
agreement does not include costs and expenses  associated  with  decommissioning
the  plant;  (6)  that  MidAmerican  has no duty to pay for  nuclear  fuel,  O&M
projects or capital  improvements  that have useful  lives after the term of the
power  purchase  agreement;  (7) that  transition  costs are not included in any
decommissioning  costs  and  expenses;  (8) that NPPD has  breached  its duty to
MidAmerican in making investments of certain funds; (9) that reserves in certain
accounts are excessive and should be refunded to MidAmerican; and (10) that NPPD
must credit  MidAmerican  for  certain  payments by  MidAmerican  for  low-level
radioactive waste disposal.

     MidAmerican and NPPD are currently involved in discovery. The trial in this
case is  presently  scheduled  for  November  1999.  MidAmerican  is  vigorously
defending and pursuing its interest in this proceeding.


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

     On December 8, 1997,  North Star Steel Company (NSS), a retail  MidAmerican
electric customer, filed a Complaint in the United States District Court for the
Southern  District  of  Iowa  naming  MHC and  MidAmerican  as  defendants.  The
Complaint  alleged  that  MidAmerican's  refusal  to allow NSS to obtain  retail
electric  service from an unspecified  alternative  energy company amounted to a
violation of federal  antitrust laws. NSS sought to recover an unspecified level
of damages,  and to require  MidAmerican to provide retail  wheeling  service so
that NSS could obtain  electricity from an unnamed  supplier.  On June 23, 1998,
the  District  Court  issued  an Order  Granting  Summary  Judgment  in favor of
MidAmerican.

                                      -27-
<PAGE>

On July 20,  1998,  NSS  appealed  that  decision to the United  States Court of
Appeals for the Eighth  Circuit.  On July 7, 1999,  the United  States  Court of
Appeals for the Eighth  Circuit  affirmed  the  District  Court grant of summary
judgment  in favor of  MidAmerican.  NSS has  indicated  it plans to appeal this
decision.  In a related matter NSS unsuccessfully  appealed to the Iowa District
Court  an  Iowa  Utilities  Board  declaratory  ruling  that  was  favorable  to
MidAmerican. NSS now has pending before the Iowa Supreme Court an appeal of that
adverse decision.

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

(A)  EXHIBITS

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

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

     Exhibit 15 - Awareness Letter of Independent Accountants

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

(B)  REPORTS ON FORM 8-K

None.

                                      -28-

<PAGE>


                                   SIGNATURES


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





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







Date    August 13, 1999                  /s/  Patrick J. Goodman
    -------------------       -------------------------------------------------
                                              Patrick J. Goodman
                              Senior Vice President and Chief Financial Officer


                                      -29-
<PAGE>


                                  EXHIBIT INDEX

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

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

15   Awareness Letter of Independent Accountants

27   Financial Data Schedules (for electronic filing only).


                                      -30-