MIDAMERICAN ENERGY CO
IUB SETTLEMENT AGREEMENT - OCTOBER 17, 2003
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>mecexh10.txt
<DESCRIPTION>IUB SETTLEMENT AGREEMENT - OCTOBER 17, 2003
<TEXT>
                                                                      EXHIBIT 10
                                  STATE OF IOWA

                              IOWA UTILITIES BOARD

 ------------------------------------------------------------------------------

 IN RE:                    )                 RATEMAKING PRINCIPLES FOR
                           )                  WIND ENERGY INVESTMENT
 MIDAMERICAN ENERGY COMPANY)
 ------------------------------------------------------------------------------


                            STIPULATION AND AGREEMENT
                            -------------------------


                            Article I - Introduction
                            ------------------------


     The  Honorable  Thomas  J.  Vilsack,  Governor  of the  state of Iowa,  has
established a goal of 1000 megawatts (MW) of renewable energy such as wind power
in the state by 2010.  The Honorable Rod  Blagojevich,  Governor of the state of
Illinois,  and members of the South Dakota Public Utilities Commission have also
urged the development of more renewable energy in the Midwest.  Renewable energy
such as wind  power  will not  create  air  pollution,  will  help  prevent  the
depletion of non-renewable resources used for electric generation, does not rely
on  out-of-  state  resources  and will  have an  important  positive  impact on
economic  development  in Iowa.  At the time of this  Stipulation  and Agreement
(Stipulation),  MidAmerican  Energy  Company  (MEC) owns or has under  long-term
contract approximately 125 MW of renewable energy.

     Subject to the terms and  conditions  of this  Stipulation  and  subject to
final  approval of this  Stipulation  in its entirety  and without  condition or
modification  by the Iowa  Utilities  Board  (Board),  MEC agrees to construct a
minimum of an additional 310 MW (nameplate  rating) of wind power  facilities in
Iowa (Project) as its commitment toward the renewable energy goal

                                   Page 1 of 8
<PAGE>


established  by  Governor  Vilsack  and  the  expressions  of  support  for  the
development of renewable  energy made by  representatives  of Illinois and South
Dakota.  The Project is expected to require an investment of approximately  $323
million  (plus  associated  transmission  costs) and will be dedicated to public
service and subject to regulation by the Board.  The first of the Project's wind
power  facilities  is expected to begin  service in late 2004,  with the Project
completed by 2007.

                              Article II -- Purpose
                              --------------------

     This Stipulation and attached Appendices have been prepared and executed by
the signatories for the purpose of stipulating to their mutually-agreed position
in the ratemaking  principles case regarding the Project, to be commenced by MEC
pursuant to Section 476.53 of the Iowa Code. MEC commits to commencing such case
as soon as feasible after the enactment of legislation  consistent  with that in
Appendix 1. All signatories to this  Stipulation  agree to support or not oppose
such legislation.

     In  consideration  of the  mutual  agreements  set forth,  the  signatories
stipulate  that the  Board  should  issue an order  that  allows  the  terms and
provisions of this Stipulation to be fully implemented.

Terms:
------

     1.   MEC commits to  construct,  own and operate a minimum of an additional
          310 MW of wind power  facilities  in Iowa,  representing  a  projected
          investment of approximately  $323 million plus the costs of associated
          transmission.

     2.   As soon as feasible after the enactment of legislation consistent with
          that in  Appendix  1, MEC shall  file  with the Board a request  for a
          certificate  to  construct  the  Project.   The  signatories  to  this
          Stipulation  agree to support the request,  as well as any request for
          expedited  approval  or other  relief to enable  the first of the wind
          power  facilities  to be placed in service by late-2004  and to enable
          completion of the Project by 2007.

     3.   As soon as feasible after the enactment of legislation consistent with
          that in Appendix  1, MEC shall file with the Board a request  pursuant
          to Code Section 476.53 for

                                   Page 2 of 8

<PAGE>


          ratemaking  principles  for  the  Project.  The  signatories  to  this
          Stipulation agree to support the request and the following  ratemaking
          principles:

          a.   The  Iowa  jurisdictional  portion  of MEC's  prudently  incurred
               capital  costs,  operation  and  maintenance  expenses  and other
               actual costs of the Project shall be included in MEC's  regulated
               electric  rates.  MEC shall be  permitted to include in rates the
               actual  costs  of  the  Project,  up to the  Iowa  jurisdictional
               portion  of the  $323  million  projection  and  $12  million  in
               associated  transmission  costs,  without  the need to  establish
               prudence or  reasonableness.  MEC shall be required to  establish
               the prudence and  reasonableness  of any Project  investment  and
               transmission costs in excess of the foregoing  calculated amounts
               before  the Iowa  jurisdictional  portion  of such  excess can be
               included in rates.

          b.   The  depreciation  life of the  Project for  ratemaking  purposes
               shall be 20 years.

          c.   The  allowed  return on  common  equity  investment  (ROE) on the
               portion of the Project  included in Iowa electric rate base shall
               be 12.2%.

          d.   The Iowa jurisdictional  portion of any revenues from the sale of
               renewable  energy credits and carbon dioxide  credits  associated
               with the Project shall be recorded  above-the-line  by MEC in the
               accounts  specified  in  Appendix 2 and  included  in the revenue
               sharing calculations of items "g" and "h".

          e.   The Iowa  jurisdictional  portion of any federal  production  tax
               credits   associated   with  the   Project   shall  be   recorded
               above-the-line by MEC in the accounts specified in Appendix 2 and
               included in the  revenue  sharing  calculations  of items "g" and
               "h".

          f.   Until MEC's next Iowa electric  rate case decision  after January
               1,  2011,  the Iowa  jurisdictional  portion of  wholesale  sales
               revenue  associated  with all generating  units included in MEC's
               Iowa jurisdictional  electric rate base (including the wind power
               facilities of the Project) shall be recorded  above-  the-line in
               the accounts  specified in Appendix 2 and included in the revenue
               sharing calculations of items "g" and "h".

          g.   Element 3 of the Settlement Outline  incorporated by reference in
               the Settlement in Docket Nos.  RPU-0l-3 and RPU-0l-5 provides for
               the customer  portion of shared  revenues  during the period 2001
               through  2005 to be used to  reduce  AFUDC  on  generating  plant
               investment  committed  to by December  31,  2005.  The wind power
               Project  which  is the  subject  of  this  Stipulation  shall  be
               considered  a  "generating  plant  investment   committed  to  by
               December  31, 2005" for the purpose of that  Settlement,  and the
               customer portion of shared  revenues,  after offsetting the AFUDC
               on the Greater Des Moines Energy  Center  (GDMEC) and the Council
               Bluffs 4 (CB 4) generating  plant  investments,  shall be applied
               sequentially to the Iowa  jurisdictional  portion of rate base as
               follows:  first,  to  reduce  to zero the  AFUDC on the  Project;
               second,  to be accrued in an interest bearing account and used to
               accelerate  depreciation on the CB 4 investment  until it reaches
               zero; third, to accelerate  depreciation on the investment in the
               Project until it reaches zero; fourth, to accelerate depreciation
               on the  investment  in GDMEC until it reaches  zero. In the event
               there is money left in the accounts after the above,  it shall be
               returned  to  ratepayers  in a  manner  approved  by  the  Board.
               Interest on the

                                   Page 3 of 8
<PAGE>

               amount  accrued  in the  interest  bearing  account  and  used to
               accelerate depreciation on the CB 4 investment will be determined
               based  on the  monthly  average  U.S.  Treasury  3-year  constant
               maturities   rate  as  reported  by  the  Federal  Reserve  Board
               Statistical Release H. 15 and shall accrue on the average monthly
               balance in the account.

          h.   If  MEC's   calculated  ROE  on  Iowa   jurisdictional   electric
               operations  in  calendar  year  2006,  2007,  2008,  2009 or 2010
               exceeds  11.75%,  then 40% of the annual  revenues  for that year
               between  11.75% and 13% ROE, 50% of the revenues  between 13% and
               14% ROE,  and 83.3% of the  revenues in excess of 14% ROE that is
               the  customer   portion  of  shared  revenues  shall  be  applied
               sequentially  as set  out in  Term 3 "g",  above.  MEC  shall  be
               entitled to retain the revenues that are not the customer portion
               of shared  revenues.  The methodology to be used to calculate the
               jurisdictional ROE is set forth in Appendix 3.

          i.   MEC  commits not to seek any  general  increase in Iowa  electric
               base rates to become effective before January 1, 2011, unless its
               Iowa jurisdictional ROE on electric operations falls below 10% in
               any  12-month  period  after  January  1,  2006.  If  MEC's  Iowa
               jurisdictional ROE on electric operations, as calculated pursuant
               to Appendix 3, falls below 10% in a 12-month period after January
               1, 2006,  all  signatories to this  Stipulation  shall conduct 30
               days of good  faith  negotiations  to modify the  Stipulation  to
               provide  MEC  with a  reasonable  opportunity  to  earn  an  Iowa
               jurisdictional ROE between 10% and 11.75% on electric operations.
               If no agreement  is reached at the end of the 30 days,  MEC shall
               have the ability to file for a general  increase in electric base
               rates.  The  signatories  to this  Stipulation  may oppose  MEC's
               request for such general  increase in electric rates,  but not on
               the grounds that such request violates this Stipulation.

          j.   MEC has assumed  that through  December  31,  2010,  the costs of
               compliance with environmental requirements to reduce emissions at
               existing  coal-fired  generating  plants will be $214,090,000 for
               capital  improvements and $45,478,000 for incremental  operations
               and maintenance (O&M) expenses.  If, at any time prior to January
               1, 2011, the Board issues an order or orders in proceedings under
               Code Section 476.6 (25) that authorize MEC to cumulatively  spend
               more than $325  million  in  capital  and O&M  expenses  for such
               environmental  improvements  before  January  1,  2011,  then all
               signatories  to this  Stipulation  shall conduct up to 30 days of
               good  faith  negotiations  to  determine  whether  to modify  the
               Stipulation  to provide MEC a reasonable  opportunity  to recover
               the  environmental  costs  in  excess  of  $325  million.  If  no
               agreement  is reached  at the end of 30 days,  MEC shall have the
               ability to file a request with the Board seeking  recovery of the
               environmental costs in excess of $325 million. The signatories to
               this Stipulation may oppose MEC's request, but not on the grounds
               that such request violates this Stipulation.

          k.   The  signatories  commit  not  to  commence  or  support  a  rate
               reduction  proceeding  regarding  MEC's  electric  rates prior to
               January 1, 2011.


                                   Page 4 of 8
<PAGE>

          1.   MEC may  continue  to  recover  the  costs of  energy  efficiency
               expenditures  pursuant  to Section  476.6(19),  alternate  energy
               production  purchases  pursuant to Section  476.43 and  alternate
               energy  revolving  loan fund payments  pursuant to Section 476.46
               through the rate mechanisms  approved and in place at the time of
               this Stipulation.


          m.   Nothing  in  this  Stipulation  shall  prohibit  the  Board  from
               approving  changes in  electric  rates  designed  to  minimize or
               eliminate  rate  disparities  based on customer  location or rate
               disparities  not  justified  by the  costs of  providing  utility
               service or other important public policy considerations; provided
               that any such changes in rates shall be designed in the aggregate
               to be revenue neutral to MEC.


                           Article III -- Joint Motion
                           --------------------------

     The  signatories  shall  jointly file this  Stipulation  in the  ratemaking
principles  proceeding  related to the  Project,  commenced  by MEC  pursuant to
Section 476.53.  The  signatories  shall also file with the Board a joint motion
requesting  that  the  Board  accept  the  Stipulation   without   condition  or
modification.

                        Article IV -- Condition Precedent
                        --------------------------------

     This  Stipulation  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  Stipulation  is made  pursuant  to Iowa Code  Section  17A.10 and 199
I.A.C.   Section  7.2(11).   The  Stipulation  shall  become  binding  upon  the
signatories upon its execution; provided, however, that if this Stipulation does
not become effective in accordance with Article IV above, it shall be null, void
and  privileged.  This  Stipulation  is intended to relate only to the  specific
matters  referenced  herein,  and no signatory waives any claim or right that it
may otherwise have with respect to any matter not expressly provided for herein.
Except as expressly provided in this


                                   Page 5 of 8
<PAGE>


Stipulation, 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  Stipulation  or be  prejudiced  or bound  thereby in any other  current or
future  proceeding  before any agency.  This Stipulation  shall not, directly or
indirectly,  be  referred  to as  precedent  in  any  other  current  or  future
proceeding before the Board.


                              Article VI Execution
                              --------------------

     To facilitate and expedite  execution,  the  Stipulation may be 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 Board.


                    Article VII - Modification and Amendment
                    ----------------------------------------

     This  Stipulation  shall not be amended or modified except by an instrument
in writing signed by all signatories.


                               Article VIII-- Term
                               ------------------

     1.  Unless  terminated  earlier by  operation  of  paragraph 2 or 3 of this
Article,  this  Stipulation  shall terminate  January 1, 2011,  except for MEC's
responsibility  for  revenue  sharing for the year 2010 and except for items "a"
through "e" of "Term 3" of Article II that shall remain in effect as long as the
wind power  facilities  continue to provide  regulated  electric service to Iowa
consumers.

     2. This Stipulation and the obligations of the signatories  shall terminate
if:


                                   Page 6 of 8
<PAGE>


          a.   the  Board  does not  issue  the  required  certificates  for the
               Project or approve the terms of this Stipulation; or

          b.   MEC is unable to secure access to sufficient transmission for the
               Project.

     3.  This  Stipulation  and  the  obligations  of  the  signatories  may  be
terminated by MEC if:

          a.   the Board does not approve the ratemaking  principles  settlement
               regarding CB 4 in Docket No. RPU-02-10; or

          b.   the federal  production tax credit  applicable to the wind energy
               facilities  that  are  the  subject  of this  Stipulation  is not
               available  at a rate of 1.8 cents per kWh or greater for a period
               of at least 10 years  after  the  wind  energy  facilities  begin
               generation of electricity.

     4. In the event of termination pursuant to subparagraphs 2 "a", 2 "b", or 3
"a", MEC shall be permitted to record as above-the-line expenses an amortization
over a 5-year  period  of all  reasonable  costs  of  canceling  the wind  power
Project,  but shall not be entitled  to recover a return on such  costs.  In the
event of  termination  pursuant  to  subparagraph  3 "b",  MEC  shall  record as
below-the  line  expenses the costs of canceling  the wind power Project that is
the subject of this Stipulation.


                           Article IX - Binding Nature
                           ---------------------------

     This Stipulation shall be binding on the signatories. The signatories shall
take no actions directly or indirectly to eliminate or otherwise limit the scope
or effect of this Stipulation throughout its term.

                                   Page 7 of 8

<PAGE>

                         Article X - Further Assurances
                         ------------------------------

     The  signatories  agree to  cooperate in order to  effectuate  the full and
complete intent of the signatories as expressed in this Stipulation.


                          Article XI - Entire Agreement
                          -----------------------------

     This  Stipulation  contains the entire  agreement  between the signatories.
There are no  additional  terms,  whether  consistent or  inconsistent,  oral or
written, that have not been incorporated into this Stipulation.




MIDAMERICAN ENERGY COMPANY                     OFFICE OF CONSUMER ADVOCATE

/s/ Brent E. Gale                              /s/ John R. Perkins
--------------------------                     ---------------------------
(Signature)                                    (Signature)

Name: Brent E. Gale                            Name: John R. Perkins
      -------------                                  ---------------
Date: 3/20/03                                  Date: March 20, 2003
      -------------                                  ---------------

DEERE & COMPANY                                IBEW LOCAL 109

/s/ Kathleen R. Gibson                         /s/ Michael W. Kriegermeier
----------------------                         ---------------------------
(Signature) Senior Counsel                     (Signature)

Name:  Kathleen R. Gibson                      Name:  Michael W. Kriegermeier
       ------------------                             -----------------------
Date:  24 March 2003                           Date:  6-19-03
       ------------------                             -----------------------

IBEW STATE CONFERENC

/s/ Sandy Opstuedt
    --------------
(Signature)
Name:  Sandy Opstuedt
       --------------
Date:  3/26/03
       --------------



                                   Page 8 of 8
<PAGE>
                                                                      APPENDIX 1

        S.F. ___________   H.F.  ____________


   1       Section 1.  Section 476.23, subsection 1, Code 2003, is

   2  amended to read as follows:

   3       1.  An electric utility shall not construct or extend

   4  facilities or furnish or offer to furnish electric service to

   5  the existing point of delivery of any customer already

   6  receiving electric service from another electric utility

   7  without having first filed with the board the express written

   8  agreement of the electric utility presently serving this

   9  customer, except as otherwise provided in this section.  Any

  10  municipal corporation, after being authorized by a vote of the

  11  people, or any electric utility may file a petition with the

  12  board requesting a certificate of authority to furnish

  13  electric service to the existing point of delivery of any

  14  customer already receiving electric service from another

  15  electric utility.  If, after notice by the board to the

  16  electric utility currently serving the customer, objection to

  17  the petition is not filed and investigation is not deemed

  18  necessary, the board shall issue a certificate within thirty

  19  days of the filing of the petition.  When an objection is

  20  filed, if the board, after notice and opportunity for hearing,

  21  determines that service to the customer by the petitioner is

  22  in the public interest, including consideration of any

  23  unnecessary duplication of facilities, it shall grant this

  24  certificate in whole or in part, upon such terms, conditions,

  25  and restrictions as may be justified.  Whether or not an

  26  objection is filed, any certificate issued shall require that

  27  the petitioner pay to the electric utility presently serving

  28  the customer, the reasonable price for facilities serving the

  29  customer.  This price determination by the board shall include

  30  due consideration of the cost of the facilities being

  31  acquired [stricken ,] ; any necessary generating capacity and transmission
                            -
  32  capacity dedicated to the customer, including, but not limited
                                          --------------------------
  33  to, electric power generating facilities and alternate energy
      -------------------------------------------------------------
  34  production facilities not yet in service but for which the
      ----------------------------------------------------------
  35  board has issued an order pursuant to section 476.53, and
      ---------------------------------------------------------

                                      -1-
<PAGE>
                                                                     APPENDIX 1

                               S.F. ___________   H.F.  ____________


   1  electric power generating facility emissions plan budgets
      ---------------------------------------------------------
   2  approved by the board pursuant to section 476.6, subsection
      -----------------------------------------------------------
   3  25; depreciation [stricken,]; loss of revenue [stricken,]; and the cost of
      ---                         -                            -
   4  facilities necessary to reintegrate the system of the utility

   5  after detaching the portion sold.

   6       Sec. 2.  Section 476.43, subsection 1, Code 2003, is

   7  amended to read as follows:

   8       1.  Subject to section 476.44, the board shall require

   9  electric utilities [stricken- to enter into long-term contracts] to do

  10  both of the following under terms and conditions that the
      -------               -----------------------------------
  11  board finds are just and economically reasonable for the
      --------------------------------------------------------
  12  electric utilities' customers, are nondiscriminatory to
      -------------------------------------------------------
  13  alternate energy producers and small hydro producers, and will
      --------------------------------------------------------------
  14  further the policy stated in section 476.41:
      -------------------------------------------
  15     a.  [stricken- Purchase] At least one of the following:
                                  -----------------------------
  16     (1)  Own alternate energy production facilities or small
         --------------------------------------------------------
  17  hydro facilities located in this state.
      ---------------------------------------
  18     (2)  Enter into long-term contracts to purchase or wheel
         --------------------------------------------------------
  19  electricity from alternate energy production facilities or

  20  small hydro facilities located in the utility's service area

  21  [stricken- under the terms and conditions that the board finds are just

  22  and economically reasonable to the electric utilities'

  23  ratepayers, are nondiscriminatory to alternate energy

  24  producers and small hydro producers and will further the

  25  policy stated in section 476.41.]

  26     b.  Provide for the availability of supplemental or backup

  27  power to alternate energy production facilities or small hydro

  28  facilities on a nondiscriminatory basis and at just and

  29  reasonable rates.

  30     Sec. 3.  Section 476.44, subsection 2, Code 2003, is

  31  amended to read as follows:

  32     2.  An electric utility subject to this division, except a

  33  utility [stricken- which] that elects rate regulation pursuant to section
                                ----
  34  476.1A, shall not be required to own or purchase, at any one
                                       ------
  35  time, more than its share of one hundred five megawatts of

                                      -2-
<PAGE>
                                                                     APPENDIX 1

        S.F. ___________   H.F.  ____________


   1  power from alternative energy production facilities or small

   2  hydro facilities at the rates established pursuant to section

   3  476.43.  The board shall allocate the one hundred five

   4  megawatts based upon each utility's percentage of the total

   5  Iowa retail peak demand, for the year beginning January 1,

   6  1990, of all utilities subject to this section.  If a utility

   7  undergoes reorganization as defined in section 476.76, the

   8  board shall combine the allocated purchases of power for each

   9  utility involved in the reorganization.

  10     Notwithstanding the one hundred five megawatt maximum, the

  11  board may increase the amount of power that a utility is

  12  required to own or purchase at the rates established pursuant
                  ------
  13  to section 476.43 if the board finds that a utility, including

  14  a reorganized utility, exceeds its 1990 Iowa retail peak

  15  demand by twenty percent and the additional power the utility

  16  is required to purchase will encourage the development of

  17  alternate energy production facilities and small hydro

  18  facilities.  The increase shall not exceed the utility's

  19  increase in peak demand multiplied by the ratio of the

  20  utility's share of the one hundred five megawatt maximum to

  21  its 1990 Iowa retail peak demand.

  22     Sec. 4.  Section 476.45, Code 2003, is amended to read as

  23  follows:

  24     476.45  EXEMPTION FROM EXCESS CAPACITY.

  25     Capacity [stricken- purchased from] of an alternate energy production
                                             --
  26  facility or small hydro facility, that is owned or purchased
                                      ----------------------------
  27  by an electric utility, shall not be included in a calculation
      -----------------------
  28  of an electric utility's excess generating capacity for [stricken- rate-

  29  making] ratemaking purposes.
              ----------
  30     Sec. 5.  Section 476.53, subsection 3, paragraph b, Code

  31  2003, is amended to read as follows:

  32     b.  In determining the applicable ratemaking principles,

  33  the board shall not be limited to traditional ratemaking

  34  principles or traditional cost recovery mechanisms.  In
                                                           --
  35  particular, the board shall have the authority to consider
      ----------------------------------------------------------

                                      -3-

<PAGE>
                                                                    APPENDIX 1

                              S.F. ___________   H.F.  ____________


   1  ratemaking proposals by a rate-regulated public utility that
      ------------------------------------------------------------
   2  facilitate the construction of an electric power generating
      ------------------------------------------------------------
   3  facility or an alternate energy production facility pursuant
      ------------------------------------------------------------
   4  to paragraph "a" and provide for reasonable restrictions on
      -----------------------------------------------------------
   5  the ability of the public utility to seek a general increase
      ------------------------------------------------------------
   6  in electric rates under section 476.6 for at least three years
      --------------------------------------------------------------
   7  after the generation facility begins providing service to Iowa
      --------------------------------------------------------------
   8  consumers.
      ----------

   9     Sec. 6.  EFFECTIVE DATE.  This Act, being deemed of

  10  immediate importance, takes effect upon enactment.

  11                         EXPLANATION

  12     This bill amends various provisions in Code chapter 476,

  13  relating to public utilities.  Specifically. the bill provides

  14  for ownership of alterate energy production facilities by

  15  public utilities, and makes related changes.

  16     The bill in Code section 476.23 states the authority of the

  17  utilities board to consider the cost of a utility's alternate

  18  energy production facilities and other generating facilities,

  19  as well as generating plant emissions plan budgets approved by

  20  the board, when valuing an electric utility's property.

  21     The bill provides in Code section 476.43 that public

  22  utilities may own alternate energy production facilities or

  23  small hydro facilities located in Iowa.  The bill also

  24  restructures the language in subsection 1.  Related changes

  25  are made in Code sections 476.44 and 476.45.

  26     The bill in Code section 476.53 specifies the authority of

  27  the utilities board to consider rate proposals that facilitate

  28  construction of alternate energy production facilities or

  29  other electric generating facilities when the proposal

  30  provides for reasonable restrictions on the utility's ability

  31  to seek rate increases for at least three years after the

  32  generating facility begins providing service.

  33      The bill is effective upon enactment.

  34

  35

                                       -4-
<PAGE>
                                                                      APPENDIX 2

                           MIDAMERICAN ENERGY COMPANY
                            STIPULATION AND AGREEMENT


     DESCRIPTION                                            FERC ACCOUNT
-------------------------------                             ------------

Renewable Energy Credit Revenue                                 456

Carbon Dioxide Credit Revenue                                   411.8

Wholesale Sales Revenue                                         447

Federal Production Tax Credits                                  409.1


                                   Page 1 of 1

<PAGE>

                                                                      APPENDIX 3
                                                                     PAGE 1 OF 2


                           MIDAMERICAN ENERGY COMPANY
             ROE CALCULATION RELATING TO ELECTRIC PRICING SETTLEMENT


INTENT
------

The intent of the  methodology is to keep the calculation as simple as possible,
making it verifiable to MidAmerican's  IE-1 filing,  and avoiding the voluminous
amount of detail  required for a traditional  rate filing,  while  arriving at a
calculation that is reasonable and acceptable to all parties.

The calculation will be in the form of an "imputed" return. As discussed in more
detail  below,  Iowa  electric  jurisdictional   operating  income  (before  any
provision  for revenue  sharing  under the  provisions  of this  settlement)  is
divided by Iowa electric jurisdiction rate base (the average of period beginning
and period  ending  balances)  to arrive at an actual  overall rate of return on
rate base.  Weighted  average embedded costs of capital (based on thirteen month
end balances) of preferred and long-term debt are  subtracted  from this rate of
return, with the difference divided by the utility's common equity percentage.

MidAmerican  proposes  to submit  this  calculation  by  February  15  following
calendar years 2006-2010.

Attachment 1 presents the format of such calculation.  Specific calculations are
described below.

The  parties  reserve  the right to modify or change the  methodology  set forth
herein  in the event  such  party or  parties  deem the  methodology  to lead to
unreasonable or unrepresentative results. In the event of a dispute, the parties
agree to  attempt  to  negotiate  a  settlement  and if a  settlement  cannot be
reached,  submit the matter to the Iowa Utilities Board for a final decision and
order pursuant to the Iowa Administrative Procedure Act.

RATE BASE
---------

All rate base items except cash working capital are two point (beginning and end
of period  balances)  averages (see  Attachment 4 for  definitions  of rate base
items).  The Iowa electric  jurisdictional  rate base amounts are  calculated by
applying the respective total MidAmerican  balance to various allocation factors
(discussed in Attachment 2) for each rate base item. MidAmerican will use a cash
working capital amount calculated using the percentages as shown in Attachment 5
applied to the  corresponding  per books values for the year, to include in rate
base.

<PAGE>



                                                                      APPENDIX 3
                                                                     PAGE 2 OF 2

The two-factor and average and excess allocators  indicated on Attachment 2 will
be calculated as of the beginning of the year being  reported in order that they
may be used by  MidAmerican's  accounting  system to  mechanically  allocate O&M
costs throughout the year. The average and excess allocator will be a three-year
average calculation.

INCOME STATEMENT
----------------

The income  statement  reflects  the Iowa  electric  utility  operations  of the
utility.  Revenues from sales to retail customers are  specifically  identified.
Other  revenues  and all other  operating  expenses  of  MidAmerican  are either
assigned  to Iowa using  specific  charges by location  or  allocated  using the
allocation method as summarized on Attachment 2. The accounting system allocates
common  locations  within  detailed sub FERC account  numbers using a variety of
factors including labor dollars, plant, revenue,  average and excess, meters and
a two factor allocator of plant and labor.

Line 11 of the income statement reverses, for purposes of this calculation,  any
accruals the Company has made in anticipation of revenue sharing pursuant to the
terms of the settlement.  Amortization of regulatory assets in the normal course
of business will continue to be included in operating income per books.

Other than the adjustments  described above specifically  relating to provisions
of the settlement, no other pro forma adjustments are expected to be made.

CAPITALIZATION
--------------

Due to the holding company  reorganization  that was effective December 1, 1996,
MidAmerican   now  has  a  capital   structure   independent  of  that  for  the
non-regulated    subsidiaries   (except   CBEC   Railway).   The   non-regulated
subsidiaries,  in turn,  are  capitalized  similar  to other  entities  in their
respective  industries.  The capital  structure  and costs used to calculate the
embedded  cost of capital  for  MidAmerican  shall be based on a thirteen  month
average for the period being reported  consistent with the  methodology  used in
the SPU-98-8 Compliance Filing.

LINE DEFINITIONS
----------------

Attachments  3 and 4 present  a summary  of the FERC  accounts  included  in the
various lines in the calculation.

<PAGE>

                                                                      APPENDIX 3
                                                                    ATTACHMENT 1

IOWA UTILITIES BOARD

UTILITY NAME: MIDAMERICAN ENERGY COMPANY

PERIOD ENDED: DECEMBER 31, 2OXX
                                                        IOWA
I       RATE BASE                                     ELECTRIC

      1 Utility Plant in Service                      $      -
      2 (Less) Accum Prov Depreciation
      3 (Plus) Working Capital Amount
      4 (Less) Customer Advances - Constr
      5 (Less) Accum Deferred Taxes
      6 (Less) Unamort Pre - 1971 ITC
      7 Other
      a (Plus) Cooper Nuclear Investment
      b (Less) Customer Deposits
      c (Less) Reserves
      d (Less) Accumulated Uncollectibles
                                                      --------
      8 Estimated Net Utility Rate Base               $      -
                                                      ========

II      INCOME STATEMENT
      1 Operating Revenues                            $      -

        Operating Expenses
      2 Operations
      3 Maintenance
      4 Depreciation & Amortization
      5 Taxes Other than Income Taxes
      6 Income Taxes - Current
      7 Prov Deferred Income Taxes - Net
      8 Investment Tax Credit - Net
                                                      --------
      9 Total Operating Expenses                      $      -
                                                      --------
     10 Operating Income Before Adjustments           $      -
     11 (Plus) Customer Portion of Shared Revenue            -
     12 Net Operating Income Before Sharing           $      -
                                                      ========

III  COST OF CAPITAL
                                                                     WEIGHTED
                                     AMOUNT     RATIO     COST     AVERAGE COST
      1 Common Equity
      2 Preferred Equity                                               0.00%
      3 Long Term Debt                                                 0.00%
                                     ------                            ----
      4 Cost of Debt and Preferred                                     0.00%
                                                                       ====
      5 Total                        $    -
                                     ------


                                   Page 1 of 2
<PAGE>

                                                                      APPENDIX 3
                                                                    Attachment 1
Iowa Utilities Board

Utility Name:  MidAmerican Energy Company

Period Ended:  December 31, 2Oxx                                       Iowa
                                                                     Electric

IV       CUSTOMER PORTION OF SHARED REVENUE OVER 11.75% ROE
       1 Net Operating Income Before Sharing                         $      -
       2 Net Operating Income @ 11.75% ROE                                  -
                                                                     --------
       3 Difference                                                         -
                                                                     --------
       4 40% Sharing                                                        -
                                                                     --------
       5 Tax Gross Up Factor                                            41.57%

       6 Tax Gross Up Dollars                                               -
                                                                     --------
       7 Customer Portion of Shared Revenue Over 11.75% ROE          $      -
                                                                     ========

V        CUSTOMER PORTION OF SHARED REVENUE OVER 13% ROE
       1 Net Operating Income Before Sharing                         $      -

       2 Net Operating Income @ 13% ROE                                     -
                                                                     --------
       3 Difference                                                         -
                                                                     --------
       4 10% Additional Sharing                                             -
                                                                     --------
       5 Tax Gross Up Factor                                            41.57%

       6 Tax Gross Up Dollars                                               -
                                                                     --------

       7 Customer Portion of Shared Revenue Over 13% ROE             $      -
                                                                     ========

VI       CUSTOMER PORTION OF SHARED REVENUE OVER 14% ROE
       1 Net Operating Income Before Sharing                         $      -
       2 Net Operating Income @ 14% ROE                                     -
                                                                     --------
       3 Difference                                                         -
                                                                     --------
       4 33.3% Additional Sharing                                           -
                                                                     --------
       5 Tax Gross Up Factor                                            41.57%

       6 Tax Gross Up Dollars                                               -
                                                                     --------
       7 Customer Portion of Shared Revenue Over 14% ROE             $      -
                                                                     ========
VII      TOTAL CUSTOMER PORTION OF SHARED REVENUE
       1 Sum of line 7 from IV, V and VI Above                       $      -
                                                                     ========

                                   Page 2 of 2
<PAGE>

                                                                      APPENDIX 3
                                                                    ATTACHMENT 2
                                                                     PAGE 1 OF 3

                              ROE MONITORING REPORT
                               ALLOCATION SUMMARY

MidAmerican  Energy Company used the following methods to allocate the Company's
accounts to Iowa:

ELECTRIC UTILITY OPERATIONS

            ITEM                           PRIMARY METHOD OF ALLOCATION TO IOWA
I.  ELECTRIC PLANT ACCOUNTS

    1. Intangible Plant In Service
       - Production & Transmission             Average & Excess Allocator
       - General Plant                         Direct Assignment & Meters
    2. Production Plant In Service             Average & Excess  Allocator
    3. Transmission Plant In Service           Average & Excess Allocator
    4. Distribution Plant In Service(Note 4)   Direct Assignment, Meters &
                                                 Transformers
    5. General Plant In Service
       - Production & Transmission             Average & Excess Allocator
       - Other (Note 1)                        Direct Assignment & Meters
    6. Completed Construction Not Classified   Same Basis as Classified Plant
    7. Nuclear Fuel                            Average & Excess Allocator
    8. Cooper Capital Additions                Average & Excess Allocator/Direct


II.ELECTRIC ACCUMULATED PROVISION FOR DEPRECIATION & AMORTIZATION

    1. Intangible Plant In Service
       - Production & Transmission             Average & Excess Allocator
       - General Plant                         Direct Assignment & Meters
    2. Production Plant In Service             Average & Excess Allocator
    3. Transmission Plant In Service           Average & Excess Allocator
    4. Distribution Plant In Service(Note 4)   Direct Assignment, Meters &
                                                 Transformers
    5. General Plant In Service
         Production & Transmission             Average & Excess Allocator
         Other (Note 1)                        Direct Assignment & Meters
    6. Nuclear Fuel                            Average & Excess  Allocator
    7. Cooper Capital Additions                Average & Excess Allocator/Direct

III.MATERIALS AND SUPPLIES
    1. Electric Production Fuel                Average & Excess Allocator
    2. Materials and Supplies                  Gross Utility Plant

<PAGE>


                                                                      APPENDIX 3
                                                                    ATTACHMENT 2
                                                                     PAGE 2 OF 3


ELECTRIC UTILITY OPERATIONS (CONTINUED)


         ITEM                              PRIMARY METHOD OF ALLOCATION TO IOWA

IV.  UNAMORTIZED INVESTMENT TAX CREDIT
     1. ElectriC Unamortized ITC
        - Production & Transmission            Average & Excess Allocator
        - Other                                Directly Assigned

V.   CUSTOMER ADVANCES FOR CONSTRUCTION
     1. Electric Customer Advances             Gross Utility Plant

VI.  ACCUMULATED DEFERRED INCOME TAXES
     1. Electric Accumulated Deferred Taxes
        - Production & Transmission            Average & Excess Allocator
        - Other                                Directly Assigned

VII. OPERATING REVENUES AND EXPENSES
     1. Electric Operating Revenues            Directly Assigned Except Sales
                                               for Resale-Off-System Sales and
                                               Other Revenue- Energy Components
                                               are allocated based on KWh sales
                                               to retail customers while
                                               capacity and Other are allocated
                                               per the Average & Excess
                                               Allocator

     2. Electric  Operating  Expenses(Note 3)
          Production & Cooper-Fuel             KWh Sales Allocator
          All Other Production                 Average  & Excess  Allocator
          Transmission                         Average & Excess Allocator
          Distribution                         Direct Charges or Gross Plant
          Customer Accounts                    Direct Charges or Meters
          Customer Service & Inform            Direct Charges or Meters
          Sales                                Direct Charges or Two Factor
          Administrative & General
             Employee Benefits                 Labor (Note 2)
             Property Insurance                Direct Charges or Gross Plant
             Regulatory                        Direct Charges or Revenue
             Other                             Direct Charges or Two Factor
     3. Depreciation and Amortization          Direct Charges and Same as Plant
                                                (I & II)
     4. Taxes Other Than Income

<PAGE>


                                                                      APPENDIX 3
                                                                    ATTACHMENT 2
                                                                     PAGE 3 OF 3


             Payroll                           Labor
             Property                          Direct Charges or Gross Plant
             Other                             Direct Charges or Two Factor
     5. Current Income Taxes                   Calculated
     6. Deferred Income Taxes                  Direct Charges
     7. Investment Tax Credit                  Direct Charges


NOTES:

1.   Other general plant consists primarily of office buildings,  furniture, and
     equipment.  To the extent that such assets can be directly  assigned,  they
     are; however, the majority are allocated via meters.

2.   Employee  benefits follow the labor with which they are associated.  To the
     extent that different  jurisdictions receive different benefits (e.g. South
     Dakota  union  employees),   such  costs  are  directly  charged  to  those
     jurisdictions.

3.   Most O&M accounts have the capability of being direct charged to a specific
     jurisdiction;  however,  many such costs are allocated.  Direct charging is
     preferable when it is clear which  jurisdiction  benefits,  consistent with
     the  Company's  affiliate   transactions  policy.   However,   when  it  is
     impractical  to direct  charge  (e.g.  supervisory  costs in a  border-city
     office or costs for a Company-wide call center), allocations are used.

4.   Distribution  plant is primarily directly  assigned.  However,  capitalized
     meter balances are allocated based on meters actually in service.

<PAGE>

                                                                      APPENDIX 3
                                                                    ATTACHMENT 3
                                                                     PAGE 1 OF 1


                           MIDAMERICAN ENERGY COMPANY
                              ROE MONITORING REPORT
                              LINE ITEM DEFINITION

ELECTRIC OPERATIONS
                                                           ACCOUNT RANGE

        DESCRIPTION                                     FROM          THROUGH
Operating Revenues                                      440            456
Gains/losses from Disposition of Allowances             411.8          411.9

Operations
  Steam Power Production                                500            509
  Nuclear Power Production                              517            525
  Hydraulic Power Production                            535            540
  Other Power Production                                546            550
  Other Power Supply                                    555            557
  Transmission                                          560            567
  Distribution                                          580            589
  Customer Accounts                                     901            905
  Customer Service, Informational & Sales               907            916
  Administrative & General                              920            931

Maintenance
  Steam Power Production                                510            514
  Nuclear Power Production                              528            532
  Hydraulic Power Production                            541            545
  Other Power Production                                551            554
  Transmission                                          568            573
  Distribution                                          590            598
  Administrative & General                              935

Depreciation & Amortization                             403            407

Taxes Other Than Income Taxes                           408.1

Income Taxes - Current                                  409.1

Provision for Deferred Income Taxes - Net               410.1          411.1

Investment Tax Credit - Net                             411.4


<PAGE>

                                                                      APPENDIX 3
                                                                    ATTACHMENT 4
                                                                     PAGE 1 OF 1

                           MIDAMERICAN ENERGY COMPANY
                              ROE MONITORING REPORT
                              LINE ITEM DEFINITION


ELECTRIC OPERATIONS
                                                        ACCOUNT RANGE
               DESCRIPTION
RATE BASE

PLANT IN SERVICE
     Plant in Service                                     101 and 106
     Nuclear Fuel                                         120

ACCUMULATED PROVISION - DEPRECIATION
     Provision Depreciation & Amortization                108 and 111
     Amortization-- Nuclear Fuel                          120

WORKING CAPITAL
     Coal and Oil Stocks                                  151
     Materials & Supplies                                 154 and 163
     Prepayments                                          165
     Cash Working Capital (See Attachment 5)                -       -

CUSTOMER ADVANCES - CONSTRUCTION                          252

ACCUMULATED DEFERRED INCOME TAXES                         190, 281 and 282

UNAMORTIZED PRE-1971 3% ITC                               255

COOPER NUCLEAR INVESTMENT
     Amortization Cooper Nuclear Investment               124

CUSTOMER DEPOSITS                                         235

RESERVES                                                  228 and 242

CUSTOMER ADVANCES                                         252

ACCUMULATED UNCOLLECTIBLES                                144


<PAGE>
                                                                      APPENDIX 3
                                                                    ATTACHMENT 5
                                                                     PAGE 1 OF 1

MIDAMERICAN ENERGY COMPANY
CALCULATION OF WORKING CAPITAL COMPONENT
<TABLE>
<CAPTION>

    DESCRIPTION                        SOURCE                                     2OXX MEC    WORKING CAPITAL  WORKING CAPITAL
                                                                                   AMOUNT       PERCENTAGE       REQUIREMENT
<S>  <C>                                 <C>                                      <C>               <C>            <C>

Labor

     Operations and Maintenance          Iowa Per Salaries & Wages Page 354              -

Total Labor                                                                              -          8.22%          $      -
                                                                                  --------                         --------
Fuel Costs
     Coal                                Iowa - 501 Less Labor                           -
     Oil                                 Iowa - 547001 Less Labor                        -
     Natural Gas                         Iowa - 547021 Less Labor                        -
     Nuclear Fuel                        Iowa - 518 Less Labor                           -
                                                                                 ---------

Total Fuel Costs                                                                         -          5.40%                 -
                                                                                 ---------                         --------

Electricity Purchased
     Cooper Fuel                             Iowa - 555404                               -
     Cooper - Other                          Iowa - 555430 - 555460                      -
     Other Purchases                         Iowa - 555099 - 555304, 555411 - 555412     -
                                                                                  --------
Total Electricity Purchased                                                              -          6.26%                 -
                                                                                  --------                        ---------

Other Operations & Maintenance           Iowa 0 & M Less (Labor-Fuel-Purchases)          -
Less:
     Uncollectibles                      Iowa - 904 Electric                             -
     Injuries & Damages                  Iowa - 925 Electric                             -
     Cooper Amortization - Capital       Iowa - 555420- 555422, 555470                   -
     NPPD Replacement Power              None                                            -
                                                                                  --------

Total Operations & Maintenance                                                           -          5.22%                 -
                                                                                  --------                        ---------

Other
     Property Tax - Iowa                 Iowa - 408141 Electric                          -        (89.01%)                -
     Property Tax - Illinois             Iowa - 408143 Electric                          -       (102.18%)                -
     Illinois Investment Capital Tax     Iowa - 408142 Electric                          -          2.52%                 -
     Federal Income Tax                  Iowa - 409 Electric ATL                         -         (2.30%)                -
     State Income Tax                    Iowa - 409 Electric ATL                         -         (2.30%)                -
     Interest on Long Term Debt          Iowa - 427 Electric                             -        (14.17%)                -
     Preferred Stock Dividends           Iowa - 437 Electric                             -         (1.61%)                -
     Federal Payroll Taxes               Iowa - 408111 & 408121 Electric                 -          7.86%                 -
     State Payroll Taxes                 Iowa - 408131 Electric                          -         (4.41%)                -
     Use/Sales Taxes                                                                     -          0.00%                 -
     Regulatory Assessments              Iowa - 928311, 928312 Electric                  -         (0.47%)                -
                                                                                                                   --------

Total Other                                                                                                               -
                                                                                                                   --------

Total Working Capital Requirement                                                                                  $      -
                                                                                                                   ========
</TABLE>

</TEXT>
</DOCUMENT>
