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

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     of the Securities Exchange Act of 1934

                 For the quarterly period ended MARCH 31, 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 April 30, 1999, all 70,980,203  outstanding  shares of MidAmerican  Energy
Company's voting stock was 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...... 26

                           PART II. OTHER INFORMATION

ITEM 1.    Legal Proceedings   ............................................ 26

ITEM 6.    Exhibits and Reports on Form 8-K................................ 27

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

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

                                      -2-
<PAGE>



INDEPENDENT ACCOUNTANTS' REPORT


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

We have reviewed the  accompanying  consolidated  balance  sheet of  MidAmerican
Energy  Company and  subsidiaries  (the  Company) as of March 31, 1999,  and the
related  consolidated  statements  of income and cash flows for the three  month
period 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
April 28, 1999

                                      -3-

<PAGE>

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

                                               THREE MONTHS
                                              ENDED MARCH 31
                                          ----------------------
                                            1999         1998
                                          ---------    ---------
OPERATING REVENUES
Regulated electric ....................   $ 262,128    $ 256,354
Regulated gas .........................     170,778      173,200
Nonregulated ..........................      35,342       17,712
                                          ---------    ---------
                                            468,248      447,266
                                          ---------    ---------
OPERATING EXPENSES
Regulated:
  Cost of fuel, energy and capacity....      50,986       45,757
  Cost of gas sold ....................      96,858      105,321
  Other operating expenses ............     116,639      108,467
  Maintenance .........................      26,537       23,033
  Depreciation and amortization .......      49,691       44,191
  Property and other taxes ............      20,151       23,330
                                          ---------    ---------
                                            360,862      350,099
                                          ---------    ---------
Nonregulated:
  Cost of sales .......................      34,099       15,961
  Other ...............................       3,937        1,108
                                          ---------    ---------
                                             38,036       17,069
                                          ---------    ---------
Total operating expenses ..............     398,898      367,168
                                          ---------    ---------

OPERATING INCOME ......................      69,350       80,098
                                          ---------    ---------

NON-OPERATING INCOME
Interest and dividend income ..........       1,099        1,947
Other, net ............................      (2,041)      (2,877)
                                          ---------    ---------
                                               (942)        (930)
                                          ---------    ---------

FIXED CHARGES
Interest on long-term debt ............      16,489       17,553
Other interest expense ................       5,412        3,168
Preferred dividends of subsidiary trust       1,995        1,995
Allowance for borrowed funds ..........        (306)        (754)
                                          ---------    ---------
                                             23,590       21,962
                                          ---------    ---------

INCOME BEFORE INCOME TAXES ............      44,818       57,206
INCOME TAXES ..........................      18,634       24,027
                                          ---------    ---------
NET INCOME ............................      26,184       33,179
PREFERRED DIVIDENDS ...................       1,239        1,237
                                          ---------    ---------

EARNINGS ON COMMON STOCK ..............   $  24,945    $  31,942
                                          =========    =========


The accompanying notes are an integral part of these statements.

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

                                                                             AS OF
                                                           -------------------------------------
                                                                   MARCH 31          DECEMBER 31
                                                           -----------------------   -----------
                                                              1999         1998         1998
                                                           ----------   ----------   ----------
                                                                 (UNAUDITED)
  <S>                                                      <C>          <C>          <C>
  ASSETS
  UTILITY PLANT
  Electric .............................................   $4,272,431   $4,098,474   $4,258,061
  Gas ..................................................      786,781      759,847      786,169
                                                           ----------   ----------   ----------
                                                            5,059,212    4,858,321    5,044,230
  Less accumulated depreciation and amortization .......    2,467,571    2,314,918    2,428,954
                                                           ----------   ----------   ----------
                                                            2,591,641    2,543,403    2,615,276
  Construction work in progress ........................       28,221       62,034       26,369
                                                           ----------   ----------   ----------
                                                            2,619,862    2,605,437    2,641,645
                                                           ----------   ----------   ----------

  POWER PURCHASE CONTRACT ..............................      142,132      167,215      144,875
                                                           ----------   ----------   ----------
  CURRENT ASSETS
  Cash and cash equivalents ............................       15,140       29,650        5,370
  Receivables ..........................................      139,274      140,476      168,764
  Inventories ..........................................       65,021       39,039       92,745
  Other ................................................       34,095        4,322       32,126
                                                           ----------   ----------   ----------
                                                              253,530      213,487      299,005
                                                           ----------   ----------   ----------

  INVESTMENTS AND NONREGULATED PROPERTY, NET ...........      202,754      141,479      183,279
                                                           ----------   ----------   ----------
  REGULATORY ASSETS ....................................      292,274      324,894      305,489
                                                           ----------   ----------   ----------
  OTHER ASSETS .........................................       31,343        9,019       11,237
                                                           ----------   ----------   ----------

  TOTAL ASSETS .........................................   $3,541,895   $3,461,531   $3,585,530
                                                           ==========   ==========   ==========

  CAPITALIZATION AND LIABILITIES
  CAPITALIZATION
  Common shareholder's equity ..........................   $  960,423   $  989,085   $  972,278
  MidAmerican preferred securities, not subject to
     mandatory redemption ..............................       31,759       31,761       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) ...........      760,178      919,815      870,069
                                                           ----------   ----------   ----------
                                                            1,902,360    2,090,661    2,024,106
                                                           ----------   ----------   ----------
  CURRENT LIABILITIES
  Notes payable ........................................      191,595      115,102      206,221
  Current portion of long-term debt ....................      170,763       49,837       60,897
  Current portion of power purchase contract ...........       15,034       14,361       15,034
  Accounts payable .....................................      138,211      129,198      159,420
  Taxes accrued ........................................       97,004      101,818      106,132
  Interest accrued .....................................       13,957       14,181       13,473
  Other ................................................       39,459       20,298       35,405
                                                           ----------   ----------   ----------
                                                              666,023      444,795      596,582
                                                           ----------   ----------   ----------
  OTHER LIABILITIES
  Power purchase contract ..............................       68,093       83,143       68,093
  Deferred income taxes ................................      583,405      591,341      584,675
  Investment tax credit ................................       76,005       81,700       77,421
  Other ................................................      246,009      169,891      234,653
                                                           ----------   ----------   ----------
                                                              973,512      926,075      964,842
                                                           ----------   ----------   ----------

  TOTAL CAPITALIZATION AND LIABILITIES .................   $3,541,895   $3,461,531   $3,585,530
                                                           ==========   ==========   ==========
</TABLE>

The accompanying notes are an integral part of these statements.

                                      -5-

<PAGE>


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

<TABLE>
<CAPTION>

                                                                   THREE MONTHS
                                                                  ENDED MARCH 31
                                                               ---------------------
                                                                 1999         1998
                                                               --------    ---------
<S>                                                            <C>         <C>    
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................   $ 26,184    $  33,179
Adjustments to reconcile net income to net cash provided:
    Depreciation and amortization ..........................     51,422       47,774
    Net decrease in deferred income taxes and
        investment tax credit, net .........................     (2,863)      (2,925)
    Amortization of other assets ...........................     10,164        9,165
    Impact of changes in working capital ...................     19,446       93,230
    Other ..................................................    (22,001)        (928)
                                                               --------    ---------
        Net cash provided ..................................     82,352      179,495
                                                               --------    ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ..........................    (25,841)     (24,686)
Quad Cities Nuclear Power Station decommissioning trust fund     (2,813)      (2,813)
Nonregulated capital expenditures ..........................       (584)     (19,966)
Other investing activities, net ............................       (639)         667
                                                               --------    ---------
    Net cash used ..........................................    (29,877)     (46,798)
                                                               --------    ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid .............................................    (37,945)     (29,838)
Retirement of long-term debt, including reacquisition cost .       (134)     (75,126)
Reacquisition of preferred shares ..........................          -           (3)
Cash inflow of accounts receivable securitization ..........     10,000            -
Net decrease in notes payable ..............................    (14,626)      (7,398)
                                                               --------    ---------
    Net cash used ..........................................    (42,705)    (112,365)
                                                               --------    ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS ..................      9,770       20,332
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...........      5,370        9,318
                                                               --------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................   $ 15,140    $  29,650
                                                               ========    =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ..................   $ 21,461    $  27,303
                                                               ========    =========
Income taxes paid ..........................................   $      -    $      84
                                                               ========    =========
</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 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 a  wholly  owned
indirect  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 five 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 March 31, 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.  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 August 1998, the Iowa
Environmental Protection Commission adopted by reference the NAAQS for ozone and
fine particulate matter.

     The  impact  of  the  new  standards  on  MidAmerican  will  depend  on the
attainment  status  of  the  areas  surrounding   MidAmerican's  operations  and
MidAmerican's  relative contribution to the nonattainment status. The attainment
status of areas in the  state of Iowa will not be known for two to three  years.
However,   if   MidAmerican's   operations   are  determined  to  contribute  to
nonattainment,  the  installation  of  additional  control  equipment,  such  as
scrubbers and/or selective catalytic reduction,  on MidAmerican's units could be
required.  The cost to install such equipment could be significant.  MidAmerican
will continue to follow the attainment  status of the areas in which it operates
and evaluate the  potential  impact of the status of these areas on  MidAmerican
under the new regulations.

C.  RATE MATTERS:

     (1)  ELECTRIC -

     In Iowa,  prices for  electric  residential  customers  were  reduced  $5.0
million  annually on June 1, 1998.  The  decrease was the last of three for Iowa
residential customers as a result of a 1997 settlement agreement.

                                      -8-
<PAGE>

     Electric  prices for Iowa  industrial  customers were reduced by $6 million
annually and electric  prices for Iowa  commercial  customers were reduced by $4
million  annually  through  several steps from mid-1997 to the end of 1998.  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 10-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 ROE calculation and its
proposed $2.2 million refund to non-contract customers.  MidAmerican has accrued
for this refund.

     Under an  Illinois  restructuring  law enacted in 1997,  a similar  sharing
mechanism is in place for MidAmerican's  Illinois electric operations.  Two-year
average ROE's 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 and 6.5% for 2000
through 2004. The initial calculation, 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.
MidAmerican anticipates the new rates will be implemented by June 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 21,  1999,  approved 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
                                               Ended March 31
                                          ------------------------
                                            1999            1998
                                          --------        --------
Electric:
  Revenues............................    $262,128        $256,354
  Operating income....................      44,362          53,646
Gas:
  Revenues............................     170,778         173,200
  Operating income....................      27,682          25,372
Nonregulated and other (a):
  Revenues............................      35,342          17,712
  Operating income (loss).............      (2,694)          1,080

                                      -10-

<PAGE>


                                              March 31          December 31
                                  --------------------------
                                     1999            1998          1998
                                  ----------      ----------    -----------
Total Assets:
  Electric...................     $2,908,822      $2,830,942    $2,897,657
  Gas  ......................        614,435         589,539       672,072
    Nonregulated and other (a).       18,638          41,050        15,801

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

G.  OTHER COMPREHENSIVE INCOME:

     For the  three  months  ended  March  31,  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 has the following  nonregulated
subsidiaries:  MidAmerican Capital Company,  MidAmerican Realty Services Company
and Midwest Capital Group,  Inc. MHC is a wholly owned subsidiary of MidAmerican
Funding,  LLC, which is a 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 first  quarter of 1999 were
$24.9 million  compared to $31.9 million for the first quarter of 1998. 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.

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

                                      -12-
<PAGE>



                                                 Approximate Earnings Variances
                                                  Three Months Ended March 31,
                                                           1999 vs 1998
                                                           (In millions)
Variation in gross margin due to -
  Weather effect....................................            $1.8
  Customer growth & other sales growth..............             2.1
  Off-system sales margin & other Iowa energy costs.             5.8
  Electric retail prices............................            (3.8)
  Gas retail prices.................................             0.9
  Other factors.....................................            (2.1)
O&M expenses.........................................           (7.7)
Depreciation & amortization..........................           (3.2)
Property and other taxes.............................            1.9
Utility nonregulated operating activities............           (2.0)


REGULATED GROSS MARGIN

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

                                                 Three Months
                                                Ended March 31
                                              ------------------
                                               1999        1998 
                                              ------      ------
                                                 (In millions)
     Operating revenues....................    $262        $256
     Cost of fuel, energy and capacity.....      51          46
                                               ----        ----
       Electric gross margin...............    $211        $210
                                               ====        ====

     MidAmerican's  electric  gross  margin  for the first  quarter  of 1999 was
relatively  unchanged  from the first  quarter  of 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 a
$1.8  million  decrease in revenues  and margin.  Approximately  $9.5 million of
MidAmerican's  1999 quarterly electric revenues were from the recovery of energy
efficiency program costs compared to $11.3 million in the first quarter of 1998.
Collection of deferred  energy  efficiency  costs  decreased in the 1999 quarter
compared  to the  first  quarter  of 1998  due to the  completion  of one of the
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.

     Temperatures during the three months ended March 31, 1999, were warmer than
normal  but  colder  than  the  first  quarter  of  1998.  Compared  to  normal,
temperatures resulted in a $4 million reduction of the 1999 three-month electric
margin,  while temperatures in the first quarter of 1998 reduced electric margin
in that  period  by $5  million.  Thus,  compared  to the 1998  quarter,  colder
temperatures  improved margin for the 1999 quarter by  approximately $1 million.
Moderate  growth in the number of customers  increased  electric  margin by $2.0
million. In total, retail sales of electricity increased 1.4%.

     Electric margin in the first quarter of 1999 reflects  MidAmerican's strong
performance in the off-system  market  relative to the 1998 quarter.  Margins on
off-system  sales,  which  account for most of  MidAmerican's  sales for resale,
contributed  $6.1 million more to gross margin in the first quarter of 1999

                                      -13-
<PAGE>

than in the same period in 1998.  Related sales volumes increased 16.9% compared
to the 1998 period due in part to the  availability of Quad Cities Nuclear Power
Station (Quad Cities Station) in 1999.

     Revenues  and gross  margin  for the three  months  ended  March 31,  1999,
reflect price  reductions  which were not in effect,  or were only  partially in
effect,  in the first quarter of 1998. In June 1998, prices for Iowa residential
customers were reduced $5 million  annually.  Since July 1997,  MidAmerican  has
reduced  prices a total  of  approximately  $10  million  annually  for its Iowa
commercial and industrial  customers through negotiated contracts and a tariffed
rate  reduction.  These  reductions  were only  partially in effect in the first
quarter of 1998.  Prices for  Illinois  customers  were  reduced $0.9 million in
August 1998 related to Illinois utility industry restructuring. MidAmerican also
recorded a $3.9 million  refund  accrual for a revenue  sharing  arrangement  in
Iowa.  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 price  reductions  and the revenue  sharing  accrual  decreased  revenues and
electric  margin by $6.4 million for the first  quarter of 1999  compared to the
first quarter of 1998.

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

                                           Three Months
                                          Ended March 31
                                         ----------------
                                         1999        1998
                                         ----        ----
                                          (In millions)
     Operating revenues...........       $171        $173
     Cost of gas sold.............         97         105
                                         ----        ----
       Gas gross margin...........       $ 74        $ 68
                                         ====        ====

     MidAmerican's  regulated  gas  revenues  include  purchase  gas  adjustment
clauses (PGAs)  through which  MidAmerican is allowed to recover the cost of gas
sold from most of its gas utility customers.  Consequently,  fluctuations in the
cost of gas sold do not  affect  gross  margin or net  income  because  revenues
reflect  comparable  fluctuations  in  revenues  from PGAs.  A  decrease  in the
per-unit cost of gas for the first quarter of 1999 compared to the first quarter
of 1998 reduced revenues and cost of gas sold by approximately $12 million.

     On January  22,  1999,  the IUB  approved  a $6.7  million  annual  interim
increase  in gas rates  for Iowa  retail  customers.  The  increase  contributed
approximately  $1.5  million to the  comparative  increase in gas margin for the
first quarter of 1999.

     Recovery of gas energy  efficiency costs decreased from $4.4 million in the
first  quarter  of 1998 to $4.1  million in the first  quarter  of 1999.  Again,
changes in revenues  from energy  efficiency  cost  recovery  are  substantially
offset by corresponding changes in other operating expenses.

     Temperatures  in the first  quarter  of 1999 were 10% warmer  than  normal,
resulting  in a $6 million  decrease in gas gross  margin for the period,  while
temperatures in the first quarter of 1998 were 15% warmer than normal, resulting
in an $8 million decrease in gas gross margin.  Comparing the two quarters,  gas
margin  increased  approximately  $2 million in the first quarter of 1999 due to
the effects of weather.  Customer growth resulted in a $1.0 million  improvement
in gas margin in the 1999 quarter.  Other sales factors also  contributed to the
increase in gas margin for the first quarter of 1999. In total,  retail sales of
natural gas in the first  quarter of 1999  increased  3.0%  compared to the 1998
quarter.

                                      -14-

<PAGE>

UTILITY OPERATING EXPENSES

     Utility  other  operating  expenses  increased  $8.2  million for the first
quarter of 1999  compared to the first  quarter of 1998.  Increased  expenses in
1999 for information  technology,  consulting services and the amount and timing
of certain  employee  incentive  costs were major  causes of the  increase.  The
increase  in  information  technology  costs  was  due  in  part  to  year  2000
preparation and support for various new systems.

     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 $1.8 million in the first quarter of 1999 compared to the first
quarter of 1998.

     Maintenance expenses increased $3.5 million in the 1999 quarter compared to
the same period in 1998 due to the timing of generating  plant  maintenance  and
increased  electric  distribution  maintenance  due in  part to  increased  tree
trimming expense.

     Depreciation  and  amortization  expense  increased in the first quarter of
1999  compared to the first  quarter of 1998 due to an increase in utility plant
and a  $3.5  million  regulatory  accrual  relating  to  the  Illinois  electric
restructuring legislation.

     Property  and other  taxes  decreased  $3.2  million  compared to the three
months ended March 31, 1998.  MidAmerican's  Iowa property tax decreased for the
first  quarter  of 1999 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 a decrease in  MidAmerican's
tax expense for the first  quarter of 1999  compared to the 1998 period.  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 quarter for this tax collection change.

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     MidAmerican's income statements now reflect its nonregulated  operations in
the  determination  of  Operating  Income.  Previously,  these  activities  were
reflected in Other, Net on the Consolidated Statements of Income. All prior year
amounts  have  been  reclassified  to be  consistent  with  the  current  year's
presentation.

     Revenues and Cost of Sales -

     Revenues from wholesale  natural gas marketing  operations  increased $17.3
million for the first quarter of 1999 compared to the same period in 1998 due to
an increase in related sales volumes of 12 million MMBtus  (192%).  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 1999
period  reflects  the  increase in sales and the decrease in the average cost of
gas per unit.  Total gross margin (total price less cost of gas) on nonregulated
natural gas sales decreased $0.7 million  compared to the first quarter of 1998.
The decrease was due to lower than anticipated gas prices in part of the quarter
and lower than anticipated sales volumes due in part to mild weather.

                                      -15-
<PAGE>

     Other Nonregulated Operating Expenses -

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

NON-OPERATING INCOME AND INTEREST EXPENSE

     Interest and Dividend Income -

     Interest income  decreased in the 1999 quarter compared to the 1998 quarter
due to a decrease in temporary cash investments and the 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 $2.9 million and $1.7 million for the first quarter
of 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  due
primarily to an increase in commercial paper outstanding.

                         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 $82 million and $179 million the
first three 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  three  months  of  1999,  utility  construction
expenditures  totaled $26  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.

                                      -16-

<PAGE>

     Nuclear Decommissioning -

     Each owner of a nuclear  facility is required to set aside funds to provide
for  the  cost  of   decommissioning   its   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 60% 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.  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.

     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.  MidAmerican  currently
recovers Quad Cities Station decommissioning costs charged to Illinois customers
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
March  31,  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. In the fourth  quarter of 1998,  the revolving  balance was reduced to $60
million due to a decline in accounts receivable available for sale, but returned
to $70 million in the first  quarter of 1999.  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 March 31, 1999,
$112.3  million of accounts  receivable,  net of  reserves,  were sold under the
agreement.

         MidAmerican has authorization from the FERC to issue up to $500 million
in various forms of long-term  debt.  MidAmerican  will also need  authorization
from the ICC prior to issuing  any  securities.  If 90% or more of the  proceeds
from a securities issuance are used for refinancing  purposes,  MidAmerican need
only  provide the ICC with an  "informational  statement"  prior to the issuance
which sets forth the 

                                      -17-
<PAGE>

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.  Although  MidAmerican  has  sufficient  low cost
generation for its retail electric needs,  recent  wholesale  market  volatility
underscores  the  increased  risk and  opportunity  associated  with the  energy
business as it transitions to competition.

     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.  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
and 6.50% for 2000 through  2004. If the  resulting  average  Treasury Bond rate
were equal to the December 1998 30-year  Treasury Bond rate, the 

                                      -18-
<PAGE>

ROE level above which sharing must occur would be  approximately  10.6%. The law
allows  MidAmerican  to mitigate the sharing of earnings above the threshold ROE
through  accelerating  depreciation or other non-cash  methods 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  could  begin in the  second  quarter of 1999.
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 March 31, 1999,  MidAmerican had $292 million
of regulatory assets on its Consolidated Balance Sheet.

                                      -19-

<PAGE>

     Energy Efficiency -

     MidAmerican's  regulatory  assets  as of March  31,  1999,  included  $64.9
million of deferred  energy  efficiency  costs.  Based on the  current  level of
recovery,  MidAmerican  expects  to  recover  these  costs  by the end of  2001.
MidAmerican is also allowed to recover its ongoing energy  efficiency costs on a
current basis.  Recovery of these costs is being  collected from customers based
on projected  annual  costs of $16.8  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 -

     Electric  prices for Iowa  industrial  customers were reduced by $6 million
annually and electric  prices for Iowa  commercial  customers were reduced by $4
million  annually  through  several steps from mid-1997 to the end of 1998.  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 10-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
ROE calculation and its proposed $2.2 million refund to non-contract  customers.
MidAmerican  has  accrued  for  this  refund.   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.  MidAmerican  anticipates the
new rates will be implemented by June 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.

                                      -20-

<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 March 31, 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  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.  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  August  1998,  the  Iowa
Environmental Protection Commission adopted by reference the NAAQS for ozone and
fine particulate matter.

     The  impact  of  the  new  standards  on  MidAmerican  will  depend  on the
attainment  status  of  the  areas  surrounding   MidAmerican's  operations  and
MidAmerican's  relative contribution to the nonattainment status. The attainment
status of areas in the  state of Iowa will not be known for two to three  years.
However,   if   MidAmerican's   operations   are  determined  to  contribute  to
nonattainment,  the  installation  of  additional  control  equipment,  such  as
scrubbers and/or selective catalytic reduction,  on MidAmerican's units could be
required.  The cost to install such equipment could be significant.  MidAmerican
will continue to follow the attainment  status of the areas in which it operates
and evaluate the  potential  impact of the status of these areas on  MidAmerican
under the new regulations.

     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 percent  below 1990 levels in
the 2008-2012 time frame.  The United States became a signatory to the agreement
on November 12,  1998.  In order for the  agreement  to become  binding upon the
United States,  ratification  by the U.S.  Senate is necessary.  The cost to the
utility industry in general,  and to MidAmerican,  of reducing its CO2 emissions
levels by 7 percent  below 1990 levels would depend on available  technology  at
the time, but could be material.

                                      -21-
<PAGE>

     Quad Cities Nuclear Power Station -

     Quad Cities Station is operated by, and 75% owned by,  Commonwealth  Edison
Company (ComEd).  In January 1998, ComEd was informed by the Nuclear  Regulatory
Commission  (NRC) that the  performance  of Quad  Cities  Station  was  trending
adversely.  During  outages at Units 1 and 2 in the first  five  months of 1998,
ComEd worked  extensively  with the NRC regarding  its concerns.  In a July 1998
meeting,  ComEd was  informed  by the NRC that while the  adverse  trend at Quad
Cities  Station  appears to have been stopped,  the operating  time of the units
since their restarts in May and June 1998 was not sufficient for the NRC to make
a final determination of the trend status of Quad Cities Station. The NRC senior
managers  met again in April 1999 and  briefed the NRC  commissioners  on May 6,
1999. As a result,  Quad Cities  Station is now  classified in the NRC's Routine
Oversight  category  for nuclear  power  plants,  which is the best of the NRC's
three  categories.  Other than a  refueling  outage on one unit and a  scheduled
surveillance  outage  required  by  technical  specifications,  the Quad  Cities
Station units have remained in full  operation  since their  restarts in May and
June 1998.

     Generating Capability -

     In July 1998, customer usage of electricity caused an hourly peak demand of
3,643 MW on  MidAmerican's  energy system.  MidAmerican's  previous  record peak
demand was 3,553 MW set in 1995. 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's  reserve  margin for 1998
was approximately 20%.

     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
would 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.

                                      -22-

<PAGE>

     Project Description -

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

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

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

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

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

     5.  Implementation  Phase - The purpose of the  implementation  phase is to
examine the Systems to determine  whether  they will  function  adequately  in a
production environment and to perform follow-up administrative tasks as required
to develop appropriate documentation in support of year 2000 readiness.

     MidAmerican's  preparedness  goal is to ensure  high-  and  medium-priority
Systems are suitable  for  continued  use into the year 2000 and will  correctly
perform  all  critical   functions   that   require   accurate   processing   of
date-sensitive  data ("year 2000  ready" or "year 2000  readiness")  by June 30,
1999. 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).

                                      -23-
<PAGE>

          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.  Pursuant  to NERC  requirements,  MidAmerican's
          March  compliance  filing  shows  MidAmerican  has  completed  100% of
          inventory  provisions,  97% of assessment conditions (the remaining 3%
          relates to finalizing phase-end sign-off  documentation and completion
          of  assessment  on some  products  that  had not been  implemented  to
          production as of the reporting date),  and 86% of  remediation/testing
          requirements (phases 3-5).

     2.   A  "checklist"  approach is used to monitor the  completion  status of
          each  System  that is  unique  to a given  organizational  group.  For
          example,  identical  substation  meters  may  be  located  in  several
          individual  substations,  but the meter is counted as only one System.
          All Systems are viewed as equivalent,  regardless of priority,  in the
          checklist  approach.  Systems  are  categorized  as  complete  or  not
          complete,  without regard to percentage of completion of the System in
          total or  percentage  of  completion  of any  particular  phase of the
          project.  As of April 15, 1999,  there were 5,547 separate  Systems in
          MidAmerican's inventory. Of these, 4,865, or 88%, had been completed.

     3.   MidAmerican's  internally  developed  measure is more sensitive 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 April 15, 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:  85% complete
            B.     IT - Operations & Infrastructure:  91% complete
            C.     Generation:  90% complete
            D.     Energy Delivery:  93% complete
            E.     Retail:  71% complete
            F.     Corporate Services (excluding IT):  66% 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 March 31, 1999  approximately $7.5 million in operating expenses have
been incurred to carry out year 2000  activities.  It is anticipated  that up to
$7.5 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 

                                      -24-
<PAGE>

achieve year 2000 readiness.  Future  progress  toward  achievement of year 2000
readiness could change this outlook.

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

     Contingency Plans -

     A  contingency  plan  identifying  credible  worst-case  scenarios 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. The first draft of MidAmerican's contingency plan
is completed, and the schedule calls for finalizing the plan by June 30, 1999.

     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"  effective
for fiscal years  beginning  after June 15, 1999. 

                                      -25-
<PAGE>

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. If certain  conditions are met, such  instruments may
be designated  as hedges.  Changes in the value of hedge  instruments  would not
impact  earnings,  except to the extent  that the  instrument  is not  perfectly
effective  as a hedge.  An entity  that  elects  to apply  hedge  accounting  is
required to  establish  at the  inception of the hedge the method it will use in
assessing  the  effectiveness  of  the  derivative.  The  Company  has  not  yet
determined the impact of this accounting standard.

     In  November  1998,  the  Emerging  Issues  Task  Force  (EITF) of the FASB
released EITF Issue No.  98-10,  "Accounting  for  Contracts  Involved in Energy
Trading and Risk  Management  Activities,"  effective for fiscal years beginning
after  December  15,  1998.  In this issue,  the EITF  provides  guidance on how
contracts for energy  commodities are to be accounted for on a company's  income
statement.  Current  accounting  practice varies throughout the energy industry.
Historically,  a  "settlement"  basis of accounting  has been used,  meaning the
earnings  impact of energy  contracts was  recognized  when such  contracts were
physically settled. As these type of contracts become more complicated or as the
operation of the group conducting these activities takes on more characteristics
of a  trading  function,  the EITF has  concluded  that such  contracts  must be
recorded at fair value, and the net change in value recorded in income. The EITF
outlines a number of indicators to consider in determining  whether an operation
is engaged in "trading  activities."  Presently,  MidAmerican's  energy contract
operation  does  not meet the  EITF's  definition  of  "trading",  and  hence it
continues to use settlement accounting.  However, if the nature of MidAmerican's
operation changes, there may need to be a transition to fair value accounting.

PART I.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------  ----------------------------------------------------------

     As  of  March  31,  1999,  MidAmerican's  financial  positions  related  to
financial instruments and assets that are sensitive to changes in interest rates
or commodity price changes have not changed  materially since December 31, 1998.
Refer to  MidAmerican's  1998  Annual  Report on Form 10-K under Item 7A for the
applicable information as of December 31, 1998.

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 

                                      -26-
<PAGE>

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  alleges  that  MidAmerican's  refusal  to allow NSS to obtain  retail
electric  service from an unspecified  alternative  energy company  amounts to a
violation of federal  antitrust laws. NSS sought to recover an unspecified level
of damages,  and to require  MidAmerican to provide retail  wheeling  service so
that NSS could obtain  electricity from an unnamed  supplier.  On June 23, 1998,
the  District  Court  issued  an Order  Granting  Summary  Judgment  in favor of
MidAmerican.  On July 20, 1998,  NSS appealed that decision to the United States
Court of Appeals for the Eighth Circuit. That appeal is currently pending.

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

(A)      EXHIBITS

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

         Exhibit 10.1 - MidAmerican Energy Company Combined Midwest 
         Resources/Iowa Resources Restated Deferred Compensation Plan Board of 
         Directors

         Exhibit 10.2 - MidAmerican Energy Company Restated Executive Deferred 
         Compensation Plan.

         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).

                                      -27-
<PAGE>


(B)  REPORTS ON FORM 8-K

     On March 12, 1999,  MidAmerican  filed a current  report on Form 8-K, dated
March 12, 1999. The report included the following information:

     Item 1.  Changes  in  Control  of the  Registrant  -  Discussed  the merger
transaction  between   MidAmerican's  parent  company  and  CalEnergy,   whereby
MidAmerican  became a wholly owned indirect  subsidiary of CalEnergy,  which was
renamed MidAmerican Energy Holdings Company.

     Item 4. Changes in Registrant's  Certifying Accountant - As a result of the
merger,   Deloitte  &  Touche  LLP  now  serves  as  MidAmerican's   independent
accountants.

     Exhibits  included a letter from  PricewaterhouseCoopers  LLP regarding the
change in independent accountants and a news release dated March 12, 1999.

                                      -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  May 17, 1999                      /s/  Patrick J. Goodman
    ----------------          -------------------------------------------------
                                             Patrick J. Goodman
                              Senior Vice President and Chief Financial Officer


                                      -29-
<PAGE>



                                  EXHIBIT INDEX

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

10.1      MidAmerican Energy Company Combined Midwest Resources/Iowa Resources 
          Restated  Deferred Compensation Plan Board of Directors

10.2      MidAmerican Energy Company Restated Executive Deferred Compensation 
          Plan.

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-