Settlement C

                                  STATE OF IOWA

                              IOWA UTILITIES BOARD

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IN RE:                         )        DOCKET NO. APP-96-1 AND
                               )                   RPU-96-8
MIDAMERICAN ENERGY COMPANY     )                   (CONSOLIDATED)
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                              SETTLEMENT AGREEMENT

                            ARTICLE I - INTRODUCTION

     On June 4, 1996,  MidAmerican Energy Company  (MidAmerican)  filed with the
Iowa  Utilities  Board  (Board) an  "Application  for  Adoption of  Market-Based
Pricing  Proposal."  In its  filing,  MidAmerican  requested  Board  approval of
certain waivers, procedures,  elimination of the energy adjustment clause (EAC),
and a series of six price  reductions  primarily  for the  residential  customer
class  totaling  approximately  $20 million  annually.  The Board  docketed  the
filing, identified as Docket No. APP-96-1, and set a procedural schedule.

     On August 1, 1996,  the Consumer  Advocate  Division of the  Department  of
Justice (OCA) filed a petition  pursuant to Iowa Code  (Section)476.3  (1995) to
reduce MidAmerican's electric rates by approximately $100 million.

     During its November 1996 billing  cycle,  MidAmerican  reduced its rates by
$8,698,806   annually  in  the  following   rate  classes  and  amounts:   South
Industrial/Large General Service - $214,246; East Residential - $2,352,988;  and
South Residential -

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$6,131,572.  In addition,  MidAmerican  provided its North Residential  customer
class  with a one time $10 bill  credit  ($1,359,300)  during  the same  billing
month.

     By  order  entered  September  6,  1996,  the  Board  consolidated  the two
proceedings.  Interventions were granted to Deere & Company, Aluminum Company of
America, Izaak Walton League of America, Iowa Energy Consumers,  Iowa Industrial
Intervenors,  Interstate Power Company,  IES Utilities,  Inc.,  Utilicorp United
Inc.,  Iowa   Association  of  Municipal   Utilities,   Iowa  Community   Action
Association,  Iowa Citizen  Action  Network,  Cargill,  Inc.,  and United States
Gypsum  Company.  Numerous  parties  have  filed  statements  or  testimony  and
sponsored evidence in the Consolidated Dockets.

                              ARTICLE II - PURPOSE

     This Settlement Agreement has been prepared and executed by the signatories
hereto for the purpose of resolving all issues among the signatories  except for
the issue of  whether  MidAmerican  should  be  authorized  to  create  and show
separately on utility  bills a Public  Programs  Charge for (1) electric  energy
efficiency  expenditures and deferrals pursuant to Section 476.6(19) of the Iowa
Code; (2) alternate energy  production  purchases  required by Section 476.43 of
the Code; (3) alternate energy revolving loan fund payments  required by Section
476.46 of the Code; and (4) new taxes or mandated expenditures.

     This Settlement  Agreement is applicable  only to Docket Nos.  APP-96-1 and
RPU-96-8.  This Settlement Agreement  supersedes the Stipulation  Regarding 1995
Income Tax

                                       -2-

<PAGE>

Expense filed by MidAmerican  and the OCA with the Board in these Dockets.  This
Settlement  Agreement  does not supersede the  agreement  between  MidAmerican's
predecessor,  Midwest Power  Systems,  and OCA dated October 20, 1994, a copy of
which is attached hereto as Appendix I.

     In  consideration  of the mutual  agreements  hereinafter  set  forth,  the
signatories stipulate as follows:

RATES

1.   The initial  reduction  (approximately  $8.5  million  annually for certain
     residential  customers  and  approximately  $200,000  annually  for certain
     industrial  customers),  already  implemented  in the November 1996 billing
     cycle,  will be  applied  retroactively  to August 1, 1996.  Interest  at a
     15.37% annual rate will apply to the refund amounts from August 1996 to the
     month the refund occurs.  No interest will be paid on the approximate $1.35
     million credit previously  provided to North system residential  customers.
     There will be no reallocation  of the initial  reduction among customers or
     classes.

2.   An additional base rate reduction of $25 million shall be made as follows:

           CLASS                            AMOUNT       EFFECTIVE DATE
           -----                            ------       --------------

     Residential                         $10 million    Consumption on and after
                                                        approval of settlement

     Residential                         $ 5 million    Consumption on and after
                                                        June 1, 1998
     Commercial/Small General Service    $ 4 million                   *
     Industrial/Large General Service    $ 6 million                   *


     -------------
     *These amounts shall be utilized for customer savings/price  reductions
     in  pilot  projects  such  as  unbundled  pricing/retail  access  or in
     negotiated  individual  contract prices for customers within the class.
     To the  extent  that by June 1,  1998 the Board  has  approved  a pilot
     project or projects,  if any, for the class that, in  combination  with
     individually  negotiated  rate  reductions,  will not  utilize the full
     amount of the rate

                                       -3-

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         reduction amount,  the remaining rate reduction amount shall be applied
         as an annual base rate  reduction for the class to be effective June 1,
         1998.

         The signatories  agree that there will be no pilot project required for
         the residential class before December 31, 2000.

         MidAmerican  may, at its option,  propose  pilot  projects or negotiate
         individual  contracts  with  customers  that  collectively  exceed  the
         amounts in the table above.  MidAmerican  shall not attempt at any time
         to recover  from other  retail  customers  any  reduction  in  electric
         revenues caused by any pilot project  approved between the date of this
         Settlement Agreement and June 1, 1998. With respect to any reduction in
         electric  revenues  resulting from any pilot project  approved  between
         June 1,  1998 and  December  31,  2000,  MidAmerican  may only  seek to
         recover such revenue  reductions from other  customers  within the same
         class  eligible  for the pilot  project.  With  respect to any  revenue
         reduction resulting from additional  negotiated  individual  contracts,
         MidAmerican  may  only  seek  to  recover  the  revenue   reduction  in
         accordance  with  paragraph  1 of the section  titled  "Waiver" of this
         Article II.

         MidAmerican  may allocate the rate  reductions  within a given class in
         such a manner as will reduce price  disparity  for  comparable  service
         within the given  class.  The tariffs  for the $10 million  residential
         rate reduction to be effective  upon Board approval of this  Settlement
         Agreement  are attached  hereto as Appendix II. The tariffs in Appendix
         II do not  include any of the costs that would be  recovered  through a
         Public Programs Charge and do not include the EAC factors  discussed in
         paragraph 3 below.  The  tariffs do include the initial  charge for the
         Cooper Nuclear Station cost tracking mechanism discussed in paragraph 4
         below. Proposed tariffs for the June 1, 1998 residential rate reduction
         and any  June 1,  1998  commercial  or  industrial  rate  reduction  as
         discussed above shall be provided to the parties by February 1, 1998.

3.       MidAmerican  will  eliminate the EAC on or prior to July 1, 1997.  Base
         rates for energy shall be increased at the time of the EAC  elimination
         by a roll-in  factor.  The factor  applicable  to former  Iowa-Illinois
         customers  shall be  0.8650  cents  per  kilowatt-hour  and the  factor
         applicable to former  Midwest Power Systems  customers  shall be 0.9151
         cents per kilowatt hour.

         On  February  1,  1999,  MidAmerican  will  file  with  the  Board  the
         calculation  of calendar year 1998 costs per kWh (1998 roll-in  factor)
         that would have been  eligible for EAC recovery if the EAC had remained
         in effect. If the calculated 1998 roll-in factor, calculated consistent
         with the method the 0.8650 cents per kilowatt hour was

                                       -4-

<PAGE>

         calculated in MidAmerican's filing in Docket No. APP-96-1, is less than
         0.7353  cents per kWh  (i.e.,  less than 85% of 0.8650  cents per kWh),
         base rates shall be reduced by the difference  between the 1998 roll-in
         factor and 0.7353 cents per kWh. If the calculated  1998 roll-in factor
         exceeds 0.9948 cents per kWh (i.e., 115% of 0.8650 cents per kWh), base
         rates shall be  increased  by the  difference  between the 1998 roll-in
         factor and 0.9948  cents per kWh.  Any  adjustment  shall be  effective
         prospectively  from March 1, 1999. The  methodology for normalizing the
         1998 nuclear refueling outage costs is attached hereto as Appendix III.

         The EAC or any  portion  thereof  may  only be  reinstated  with  Board
         approval.  With the  exception  of revenues  associated  with  required
         energy efficiency  expenditures,  alternate energy production  payments
         and alternate  energy loan fund  assessments,  all revenues  associated
         with  costs that would  have been  recovered  through  the EAC shall be
         included in the  calculation of revenues for the purpose of the sharing
         mechanism of paragraph 5.

4.       The cost tracking mechanism for capital additions for Cooper Nuclear
         Station for 1997 and beyond, outlined in OCA witness Fuhrman's rebuttal
         testimony at pages 44 through 46, will be implemented. However,
         MidAmerican will be allowed to earn both a return of and a return on
         capital additions at Cooper Nuclear Station that occur from January 1,
         1996 through the effective date of implementation of the tracking
         mechanism. MidAmerican will not include in the costs recovered through
         the tracking mechanism the following three types of costs: (1) AFUDC on
         1996 and January through May 1997 construction expenditures; (2)
         construction work-in-progress (CWIP) as of May 1997; and (3) AFUDC on
         CWIP. MidAmerican shall be allowed to include the foregoing costs in
         the calculation of the jurisdictional returns on common equity, as
         referenced in paragraph 5 below.

         The amounts  recovered  through the cost  tracking  mechanism  shall be
         allocated among classes using the "average and excess" methodology,  as
         applied to other  non-fuel  expenses  at Cooper  Nuclear  Station.  The
         tariffs for the cost tracking mechanism are attached hereto as Appendix
         IV.  OCA  reserves  the  right to object  to any  unreasonable  charges
         proposed or assessed under the tracker.

5.       In the event  MidAmerican earns more than a 12% return on common equity
         on jurisdictional electric operations in calendar year 1997, 1998, 1999
         or 2000,  50% of any  revenues  in excess of the 12%  earned  return on
         common  equity  shall be credited to  non-contract  customers  prior to
         April 1 of the  following  year.  The credit  amount shall be allocated
         among the residential, commercial/small general service and

                                       -5-

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         industrial/large general service classes to provide an equal percentage
         bill credit per class.

         MidAmerican shall use two-thirds of the revenues it retains above a 14%
         return on common equity on jurisdictional  electric operations in 1997,
         1998,  1999 or 2000 to  accelerate  the recovery of  regulatory  assets
         involving, first, D.O.E. Fees and, second, Debt Refinancing Costs.

         Except as  provided  in  paragraph 3 and except to recover the costs of
         energy  efficiency  expenditures  and  deferrals  pursuant  to  Section
         476.6(19) of the Code,  alternate energy production  purchases required
         by Section  476.43 of the Code,  alternate  energy  revolving loan fund
         payments  required  by  Section  476.46  of the Code  and new  taxes or
         mandated  expenditures,  MidAmerican commits not to seek an increase in
         its electric prices before December 31, 2000, unless its jurisdictional
         return on common equity on electric  operations in any 12-month  period
         falls below 9%. MidAmerican can continue to file for and recover energy
         efficiency costs as approved by the Board.

         The signatories commit not to request  commencement of a rate reduction
         proceeding  against  MidAmerican  prior to  December  31,  2000  unless
         MidAmerican's  jurisdictional  return  on  common  equity  on  electric
         operations  exceeds  14% after  reflecting  the  credits  to  customers
         provided for in this paragraph 5.

         After  December 31, 2000,  any signatory may file with the Board for an
         increase or decrease in MidAmerican's rates.

         The methodology to be used to calculate the  jurisdictional  returns on
         common equity on electric  operations is attached hereto as Appendix V.
         Results for 1997 and 1998 shall first be adjusted to assume a full year
         of the rate reductions provided for in paragraph 2 above.

         The above  sharing  arrangement  shall be a pilot  project  only and is
         limited solely to this proceeding.

WAIVERS

1.       The signatories to the Settlement Agreement support a waiver for
         MidAmerican of subsections 20.14(2), 20.14(3), 20.14(4)"d" and
         20.14(5) of the Board's flexible pricing rules. MidAmerican shall be
         able to negotiate non-standard prices, terms and

                                       -6-

<PAGE>

         conditions of service with any customer  based upon the cost of serving
         that  customer,  subject  to the  restrictions  of  this  paragraph.  A
         negotiated  price,  term or condition  need not be filed with the Board
         before it becomes  effective,  but MidAmerican  must continue to comply
         with the reporting requirements of subsections 20.14(4)"a", "b" and "c"
         of the Board's rules.  MidAmerican  shall not agree to a price,  except
         for competitive reasons,  below its expected short run marginal cost of
         serving the customer unless the Board approves.  MidAmerican  shall not
         be  required  to offer the same  price,  term or  condition  to another
         customer  simply  because  the  customer  makes the same end product or
         offers  the  same  service.  Upon the  written  joint  notification  of
         MidAmerican  and  the  customer  filed  with  the  Board  prior  to the
         effective date of the contract, the negotiated contractual  provisions:
         (1) can be for a term exceeding five years; and/or (2) shall be treated
         as confidential information.  MidAmerican shall not attempt at any time
         to recover from the other retail  customers  any  reduction in electric
         revenues caused by non-standard prices, terms and conditions of service
         negotiated  with a customer in a contract  executed  between January 1,
         1997 and June 1, 1998.  With respect to a contract  with a customer for
         non-standard prices, terms and conditions executed between June 1, 1998
         and  December  31,  2000,  MidAmerican  may only  seek to  recover  any
         associated  revenue reduction from other customers within the same rate
         class as the customer negotiating the contract.

         The flexible  pricing  arrangement as set forth in this paragraph shall
         be a pilot project only and is limited solely to this proceeding.

2.       The signatories to this Settlement Agreement support a procedure before
         the Board by which tariffs filed by MidAmerican that are optional for
         customers shall be allowed to become effective immediately upon filing
         with the Board. The signatories agree that unbundled pricing tariffs
         and a retail wheeling/direct access pilot project could be subject to
         suspension at the Board's discretion for no more than six months. The
         Board shall have the full authority to investigate the tariff option
         filings and to fashion appropriate remedies within its statutory
         authority at the conclusion of its investigation. MidAmerican agrees
         that it will not protest a decision by the Board to order appropriate
         refunds in those cases in which the Board determines it to be in the
         public interest; however, such refunds shall be without interest in
         recognition of the optional and consensual nature of the tariffs.
         MidAmerican shall not be required to reduce other rates, charges or
         prices to reflect anticipated revenues from the optional tariffs.

                                       -7-

<PAGE>

BUY-THROUGH OPTION

     MidAmerican  and any interested  signatories to this  Settlement  Agreement
will  collaborate  to develop a buy-through  option for  customers  served under
interruptible  electric  tariffs.  The signatories  agree to cooperate to obtain
Iowa  Utilities  Board  approval and any approvals for such  buy-through  option
required by the Board,  other regulators,  and the MidContinent Area Power Pool.
Any revenue loss shall be recovered,  if at all, from participating customers or
from a portion of the $6 million industrial and $4 million  commercial  flexible
rate and pilot project  amounts.  The OCA's  participation in the development of
the  buy-through  option  tariff  shall not be  construed  to  preclude  it from
submitting  testimony  challenging  those  parts  of the  tariff  with  which it
disagrees when the tariff is filed with the Board or other regulatory agency.

MARKET ACCESS SERVICE PILOT

     MidAmerican will engage in good faith  negotiations with the signatories to
develop a Market  Access  Service  Pilot for  industrial/large  general  service
customers.  The pilot will be optional for industrial customers. All signatories
will  cooperate  to achieve the  objective of filing the Market  Access  Service
Pilot  within  90 days  from the  effective  date of the  final  Board  order in
Consolidated  Docket Nos.  APP-96-1 and RPU-96-8.  Unless otherwise agreed to by
the  signatories,  the Market Access Service Pilot will comport with the outline
in Appendix VI, attached hereto.  The OCA's  participation in the development of
the Market

                                       -8-

<PAGE>

Access  Service  Pilot  shall not be  construed  to prelude  it from  submitting
testimony  challenging those parts of the Pilot with which it disagrees when the
Pilot is filed with the Board or other regulatory agency.

     MidAmerican  agrees that it will not seek to recover  from  residential  or
commercial/small  general service customers any reduction in revenues associated
with the Market Access Service Pilot.

                           ARTICLE III - JOINT MOTION

     Upon execution of this Settlement Agreement, the signatories shall file the
same with the Board,  together  with a joint  motion  requesting  that the Board
accept the Settlement  Agreement for the purpose of these Consolidated  Dockets,
without condition or modification.

                        ARTICLE IV - CONDITION PRECEDENT

     This Settlement  Agreement shall not become  effective unless and until the
Board accepts the same in its entirety without condition or modification.

                      ARTICLE V - PRIVILEGE AND LIMITATION

     This Settlement Agreement is made pursuant to Iowa Code (section)17A.10 and
199I.A.C.  (section)7.2(11).  The Settlement Agreement shall become binding upon
the signatories upon its execution;  provided,  however, that if this Settlement
Agreement  does not become  effective in  accordance  with Article IV above,  it
shall be null, void and privileged. This Settlement


                                       -9-

<PAGE>

Agreement is intended to relate only to the specific matters referred to herein.
No signatory  waives any claim or right which it may otherwise have with respect
to any matter not expressly provided for herein. No signatory shall be deemed to
have approved,  accepted,  agreed or consented to any ratemaking principle,  any
method  of cost of  service  determination,  or any  method  of cost  allocation
underlying the provisions of this Settlement Agreement or be prejudiced or bound
thereby  in any other  current  or  future  proceeding  before  any  agency.  No
signatory  shall directly or indirectly  refer to this  Settlement  Agreement as
precedent in any other current or future proceeding before the Board.

              ARTICLE VI - PROCEDURE APPLICABLE TO UNRESOLVED ISSUE

     The unresolved issue of whether  MidAmerican should be authorized to create
and show  separately on utility bills a Public Programs Charge shall continue to
be litigated on a schedule established by the Board. In the event the Board does
not approve the Public Programs Charge for  MidAmerican,  the signatories  agree
that   MidAmerican  may  seek  approval  of  an  alternative,   contemporaneous,
cost-tracking recovery mechanism for (1) electric energy efficiency expenditures
and  deferrals  (including  interruptible  rate  credits)  pursuant  to  Section
476.6(19) of the Iowa Code; (2) alternate energy production  purchases  required
by Section 476.43 of the Code; (3) alternate energy revolving loan fund payments
required  by  Section  476.46  of the  Code;  and  (4)  new  taxes  or  mandated
expenditures.

                                      -10-

<PAGE>

                             ARTICLE VII - EXECUTION

     To facilitate and expedite  execution,  the  Settlement  Agreement has been
executed  by the  signatories  in  multiple  conformed  copies  which,  when the
original  signature  pages  are  consolidated  into  a  single  document,  shall
constitute a  fully-executed  document  binding upon all the  signatories  to be
filed with the Iowa Utilities Board.

                                      -11-

<PAGE>

MIDAMERICAN ENERGY COMPANY

By:  /s/ Brent E. Gale

     ---------------------------------------
     Brent E. Gale

     Vice President-Law & Regulatory Affairs
     One RiverCenter Place
     106 East Second Street
     P.O. Box 4350
     Davenport, Iowa  52808
     319/333-8010



                                      -12-

<PAGE>

OFFICE OF CONSUMER ADVOCATE

By:  /s/ James R. Maret

     ------------------------------
     James R. Maret
     Leo J. Steffen, Attorney
     Ben Stead, Attorney
     Ronald Polle, Attorney
     Lucas State Office Building
     Des Moines, Iowa 50319
     515/281-5984




                                      -13-

<PAGE>

Signature page to "Settlement Agreement C" in Docket Nos. APP-96-1 and RPU-96-8,
In Re: MidAmerican Energy Company executed on February 26, 1997.

IOWA ENERGY CONSUMERS

By  /s/ Michael R. May

    ----------------------------------
    Michael R. May
    Suite 935 - Two Ruan Center
    601 Locust Street
    Des Moines, Iowa 50309

                                      -14-

<PAGE>

                              SETTLEMENT AGREEMENT

ALUMINUM COMPANY OF AMERICA

By  /s/ Richard P. Noland
    -----------------------------
    Richard P. Noland
    David I. Adelman
    Sutherland, Asbill & Brennan
    111 Congress Avenue
    Twenty-Third Floor
    Austin, Texas 78701-3350

    William H. Penniman
    Glen S. Howard
    Sutherland, Asbill & Brennan
    1275 Pennsylvania Avenue, N.W.
    Washington, D.C. 20004-2404

    Coralyn Benhart, Esq.
    1501 Alcoa Building
    Pittsburgh, Pennsylvania 15219

    Robert H. Gallagher
    Wells, Gallagher, Roeder & Millage
    1989 Spruce Hills Drive

    Bettendorf, Iowa 52722





                                      -15-

<PAGE>

DEERE & COMPANY

By  /s/ Kathleen R. Gibson
    -------------------------------
    Kathleen R. Gibson
    Deere & Company
    John Deere Road
    Moline, Illinois 61265

                                      -16-

<PAGE>

CARGILL INC.

By  /s/ M. Moelle

    --------------------------------
for Ronald L. Laumbach
    15407 McGinty Road West
    Wayzata, Minnesota 55391-2399

                                      -17-

<PAGE>

                              SETTLEMENT AGREEMENT

U.S. GYPSUM COMPANY

By  /s/ Richard P. Noland

    --------------------------------
    Richard P. Noland
    David I. Adelman
    Sutherland, Asbill & Brennan
    111 Congress Avenue
    Twenty-Third Floor
    Austin, Texas 78701-3350

                                      -18-

<PAGE>

INTERSTATE POWER COMPANY

By  /s/ Christopher B. Clark

    -------------------------------
    Christopher B. Clark
    1000 Main Street
    P.O. Box 769
    Dubuque, Iowa 52004-0769




                                      -19-

<PAGE>

IES UTILITIES, INC.

By  /s/ Jonathan Rogoff
    --------------------------------
    Jonathan Rogoff
    200 First Street, S.E.
    P.O. Box 351
    Cedar Rapids, Iowa 52406



                                      -20-