MidAmerican Energy Company - Page 4




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            the years in issue, petitioner was an accrual method taxpayer                              
            reporting, except for 1990, on a calendar year basis.                                      
                  Petitioner’s operations are subject to the rules and                                 
            regulations of Federal and State agencies, including the Federal                           
            Energy Regulatory Commission (FERC), the Iowa Utilities Board                              
            (IUB), the Minnesota Public Utility Commission, the South Dakota                           
            Public Utility Commission, and certain municipal governments in                            
            Nebraska (regulatory agencies).  Under established procedures,                             
            these regulatory agencies prescribe the rates at which petitioner                          
            may sell gas and electricity (approved tariff rates), the                                  
            accounting methods and practices that petitioner may adopt for                             
            regulatory and financial accounting purposes, the billing                                  
            practices, the payment practices, and other terms and conditions                           
            for the sale of gas and electricity to its customers.  The                                 
            approved tariff rates for gas are generally made up of gas costs                           
            and the nongas margin.  The nongas margin represents the recovery                          
            of all costs other than gas costs, including physical plant                                
            costs, meter-reading expenses, and labor and other nongas related                          
            expenses, as well as overhead and a reasonable rate of return.                             
            The approved tariff rates for electricity include several                                  
            components in addition to costs incurred to supply energy.                                 
            Purchased Gas Adjustment                                                                   
                  Petitioner implements approved tariff rates for gas using                            
            the purchased gas adjustment (PGA) mechanism.  Once rate                                   






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Last modified: May 25, 2011