UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2022

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to _______

Exact name of registrant as specified in its charter

State or other jurisdiction of incorporation or organization

Commission

Address of principal executive offices

IRS Employer

File Number

Registrant's telephone number, including area code

Identification No.

001-14881

BERKSHIRE HATHAWAY ENERGY COMPANY

94-2213782

(An Iowa Corporation)

666 Grand Avenue

Des Moines, Iowa 50309-2580

515-242-4300

001-05152

PACIFICORP

93-0246090

(An Oregon Corporation)

825 N.E. Multnomah Street, Suite 1900

Portland, Oregon 97232

888-221-7070

333-90553

MIDAMERICAN FUNDING, LLC

47-0819200

(An Iowa Limited Liability Company)

666 Grand Avenue

Des Moines, Iowa 50309-2580

515-242-4300

333-15387

MIDAMERICAN ENERGY COMPANY

42-1425214

(An Iowa Corporation)

666 Grand Avenue

Des Moines, Iowa 50309-2580

515-242-4300

000-52378

NEVADA POWER COMPANY

88-0420104

(A Nevada Corporation)

6226 West Sahara Avenue

Las Vegas, Nevada 89146

702-402-5000

000-00508

SIERRA PACIFIC POWER COMPANY

88-0044418

(A Nevada Corporation)

6100 Neil Road

Reno, Nevada 89511

775-834-4011

001-37591

EASTERN ENERGY GAS HOLDINGS, LLC

46-3639580

(A Virginia Limited Liability Company)

6603 West Broad Street

Richmond, Virginia 23230

804-613-5100

N/A

(Former name or former address, if changed from last report)

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Registrant			Securities registered pursuant to Section 12(b) of the Act:
BERKSHIRE HATHAWAY ENERGY COMPANY			None
PACIFICORP			None
MIDAMERICAN FUNDING, LLC			None
MIDAMERICAN ENERGY COMPANY			None
NEVADA POWER COMPANY			None
SIERRA PACIFIC POWER COMPANY			None
EASTERN ENERGY GAS HOLDINGS, LLC			None

Registrant			Name of exchange on which registered:
BERKSHIRE HATHAWAY ENERGY COMPANY			None
PACIFICORP			None
MIDAMERICAN FUNDING, LLC			None
MIDAMERICAN ENERGY COMPANY			None
NEVADA POWER COMPANY			None
SIERRA PACIFIC POWER COMPANY			None
EASTERN ENERGY GAS HOLDINGS, LLC			None

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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Registrant			Yes			No
BERKSHIRE HATHAWAY ENERGY COMPANY			☒
PACIFICORP			☒
MIDAMERICAN FUNDING, LLC						☒
MIDAMERICAN ENERGY COMPANY			☒
NEVADA POWER COMPANY			☒
SIERRA PACIFIC POWER COMPANY			☒
EASTERN ENERGY GAS HOLDINGS, LLC			☒

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files). Yes  x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Registrant

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

BERKSHIRE HATHAWAY ENERGY COMPANY

☐

☐

☒

☐

☐

PACIFICORP

☐

☐

☒

☐

☐

MIDAMERICAN FUNDING, LLC

☐

☐

☒

☐

☐

MIDAMERICAN ENERGY COMPANY

☐

☐

☒

☐

☐

NEVADA POWER COMPANY

☐

☐

☒

☐

☐

SIERRA PACIFIC POWER COMPANY

☐

☐

☒

☐

☐

EASTERN ENERGY GAS HOLDINGS, LLC

☐

☐

☒

☐

☐

If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

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Indicate by check mark whether the registrants are a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐  No  x

All shares of outstanding common stock of Berkshire Hathaway Energy Company are privately held by a limited group of investors. As of August 4, 2022, 75,627,913 shares of common stock, no par value, were outstanding.

All shares of outstanding common stock of PacifiCorp are indirectly owned by Berkshire Hathaway Energy Company. As of August 4, 2022, 357,060,915 shares of common stock, no par value, were outstanding.

All of the member's equity of MidAmerican Funding, LLC is held by its parent company, Berkshire Hathaway Energy Company, as of August 4, 2022.

All shares of outstanding common stock of MidAmerican Energy Company are owned by its parent company, MHC Inc., which is a direct, wholly owned subsidiary of MidAmerican Funding, LLC. As of August 4, 2022, 70,980,203 shares of common stock, no par value, were outstanding.

All shares of outstanding common stock of Nevada Power Company are owned by its parent company, NV Energy, Inc., which is an indirect, wholly owned subsidiary of Berkshire Hathaway Energy Company. As of August 4, 2022, 1,000 shares of common stock, $1.00 stated value, were outstanding.

All shares of outstanding common stock of Sierra Pacific Power Company are owned by its parent company, NV Energy, Inc. As of August 4, 2022, 1,000 shares of common stock, $3.75 par value, were outstanding.

All of the member's equity of Eastern Energy Gas Holdings, LLC is held indirectly by its parent company, Berkshire Hathaway Energy Company, as of August 4, 2022.

This combined Form 10-Q is separately filed by Berkshire Hathaway Energy Company, PacifiCorp, MidAmerican Funding, LLC, MidAmerican Energy Company, Nevada Power Company, Sierra Pacific Power Company and Eastern Energy Gas Holdings, LLC. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes no representation as to information relating to the other companies.

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TABLE OF CONTENTS

 

PART I

 

Item 1.			Financial Statements			1
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			2
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			173
Item 4.			Controls and Procedures			173

 

PART II

 

Item 1.			Legal Proceedings			174
Item 1A.			Risk Factors			176
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			176
Item 3.			Defaults Upon Senior Securities			176
Item 4.			Mine Safety Disclosures			176
Item 5.			Other Information			176
Item 6.			Exhibits			176
Signatures						180

i

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Definition of Abbreviations and Industry Terms

When used in Forward-Looking Statements, Part I - Items 2 through 3, and Part II - Items 1 through 6, the following terms have the definitions indicated.

Berkshire Hathaway Energy Company and Related Entities
BHE						Berkshire Hathaway Energy Company
Berkshire Hathaway						Berkshire Hathaway Inc.
Berkshire Hathaway Energy or the Company						Berkshire Hathaway Energy Company and its subsidiaries
PacifiCorp						PacifiCorp and its subsidiaries
MidAmerican Funding						MidAmerican Funding, LLC and its subsidiaries
MidAmerican Energy						MidAmerican Energy Company
NV Energy						NV Energy, Inc. and its subsidiaries
Nevada Power						Nevada Power Company and its subsidiaries
Sierra Pacific						Sierra Pacific Power Company and its subsidiaries
Nevada Utilities						Nevada Power Company and its subsidiaries and Sierra Pacific Power Company and its subsidiaries
Eastern Energy Gas						Eastern Energy Gas Holdings, LLC and its subsidiaries
Registrants						Berkshire Hathaway Energy Company, PacifiCorp and its subsidiaries, MidAmerican Funding, LLC and its subsidiaries, MidAmerican Energy Company, Nevada Power Company and its subsidiaries, Sierra Pacific Power Company and its subsidiaries and Eastern Energy Gas Holdings, LLC and its subsidiaries
Northern Powergrid						Northern Powergrid Holdings Company and its subsidiaries
BHE Pipeline Group						BHE GT&S, LLC, Northern Natural Gas Company and Kern River Gas Transmission Company
BHE GT&S						BHE GT&S, LLC and its subsidiaries
Northern Natural Gas						Northern Natural Gas Company
Kern River						Kern River Gas Transmission Company
BHE Transmission						BHE Canada Holdings Corporation and BHE U.S. Transmission, LLC
BHE Canada						BHE Canada Holdings Corporation and its subsidiaries
AltaLink						AltaLink, L.P.
BHE U.S. Transmission						BHE U.S. Transmission, LLC and its subsidiaries
BHE Renewables						BHE Renewables, LLC and its subsidiaries
HomeServices						HomeServices of America, Inc. and its subsidiaries
Utilities						PacifiCorp and its subsidiaries, MidAmerican Energy Company, Nevada Power Company and its subsidiaries and Sierra Pacific Power Company and its subsidiaries
EGTS						Eastern Gas Transmission and Storage, Inc.

ii

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Certain Industry Terms
2017 Tax Reform						The Tax Cuts and Jobs Act enacted on December 22, 2017, effective January 1, 2018
AFUDC						Allowance for Funds Used During Construction
AUC						Alberta Utilities Commission
BART						Best Available Retrofit Technology
CSAPR						Cross-State Air Pollution Rule
D.C. Circuit						United States Court of Appeals for the District of Columbia Circuit
Dth						Decatherm
EPA						United States Environmental Protection Agency
FERC						Federal Energy Regulatory Commission
FIP						Federal Implementation Plan
GAAP						Accounting principles generally accepted in the United States of America
GEMA						Gas and Electricity Markets Authority
GTA						General Tariff Application
GWh						Gigawatt Hour
IRP						Integrated Resource Plan
IUB						Iowa Utilities Board
kV						Kilovolt
MW						Megawatt
MWh						Megawatt Hour
NAAQS						National Ambient Air Quality Standards
NOx						Nitrogen Oxides
Ofgem						Office of Gas and Electric Markets
OPUC						Oregon Public Utility Commission
PTC						Production Tax Credit
PUCN						Public Utilities Commission of Nevada
RFP						Request for Proposals
RPS						Renewable Portfolio Standards
SCR						Selective Catalytic Reduction
SEC						United States Securities and Exchange Commission
SIP						State Implementation Plan
SO2						Sulfur Dioxide
UPSC						Utah Public Service Commission
WUTC						Washington Utilities and Transportation Commission

iii

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Forward-Looking Statements

This report contains statements that do not directly or exclusively relate to historical facts. These statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can typically be identified by the use of forward-looking words, such as "will," "may," "could," "project," "believe," "anticipate," "expect," "estimate," "continue," "intend," "potential," "plan," "forecast" and similar terms. These statements are based upon the relevant Registrant's current intentions, assumptions, expectations and beliefs and are subject to risks, uncertainties and other important factors. Many of these factors are outside the control of each Registrant and could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include, among others:

•general economic, political and business conditions, as well as changes in, and compliance with, laws and regulations, including income tax reform, initiatives regarding deregulation and restructuring of the utility industry, and reliability and safety standards, affecting the respective Registrant's operations or related industries;

•changes in, and compliance with, environmental laws, regulations, decisions and policies that could, among other items, increase operating and capital costs, reduce facility output, accelerate facility retirements or delay facility construction or acquisition;

•the outcome of regulatory rate reviews and other proceedings conducted by regulatory agencies or other governmental and legal bodies and the respective Registrant's ability to recover costs through rates in a timely manner;

•changes in economic, industry, competition or weather conditions, as well as demographic trends, new technologies and various conservation, energy efficiency and private generation measures and programs, that could affect customer growth and usage, electricity and natural gas supply or the respective Registrant's ability to obtain long-term contracts with customers and suppliers;

•performance, availability and ongoing operation of the respective Registrant's facilities, including facilities not operated by the Registrants, due to the impacts of market conditions, outages and associated repairs, transmission constraints, weather, including wind, solar and hydroelectric conditions, and operating conditions;

•the effects of catastrophic and other unforeseen events, which may be caused by factors beyond the control of each respective Registrant or by a breakdown or failure of the Registrants' operating assets, including severe storms, floods, fires, extreme temperature events, wind events, earthquakes, explosions, landslides, an electromagnetic pulse, mining incidents, litigation, wars (including, for example, Russia's invasion of Ukraine in February 2022), terrorism, pandemics, embargoes, and cyber security attacks, data security breaches, disruptions, or other malicious acts;

•the risks and uncertainties associated with wildfires that have occurred, are occurring or may occur in the respective Registrant's service territory, including the wildfires that began in September 2020 in Oregon and California, and any other wildfires for which the cause has yet to be determined; the damage caused by such wildfires; the extent of the respective Registrant's liability in connection with such wildfires (including the risk that the respective Registrant may be found liable for damages regardless of fault); investigations into such wildfires; the outcome of any legal proceedings initiated against the respective Registrant; the risk that the respective Registrant is not able to recover costs from insurance or through rates; and the effect on the respective Registrant's reputation of such wildfires, investigations and proceedings;

•the respective Registrant's ability to reduce wildfire threats and improve safety, including the ability to comply with the targets and metrics set forth in its wildfire mitigation plans; to retain or contract for the workforce necessary to execute its wildfire mitigation plans; the effectiveness of its system hardening; ability to achieve vegetation management targets; and the cost of these programs and the timing and outcome of any proceeding to recover such costs through rates;

•the ability to economically obtain insurance coverage, or any insurance coverage at all, sufficient to cover losses arising from catastrophic events, such as wildfires where the Registrants may be found liable for real and personal property damages regardless of fault;

•a high degree of variance between actual and forecasted load or generation that could impact a Registrant's hedging strategy and the cost of balancing its generation resources with its retail load obligations;

•changes in prices, availability and demand for wholesale electricity, coal, natural gas, other fuel sources and fuel transportation that could have a significant impact on generating capacity and energy costs;

•the financial condition, creditworthiness and operational stability of the respective Registrant's significant customers and suppliers;

iv

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•changes in business strategy or development plans;

•availability, terms and deployment of capital, including reductions in demand for investment-grade commercial paper, debt securities and other sources of debt financing and volatility in interest rates;

•changes in the respective Registrant's credit ratings;

•risks relating to nuclear generation, including unique operational, closure and decommissioning risks;

•hydroelectric conditions and the cost, feasibility and eventual outcome of hydroelectric relicensing proceedings;

•the impact of certain contracts used to mitigate or manage volume, price and interest rate risk, including increased collateral requirements, and changes in commodity prices, interest rates and other conditions that affect the fair value of certain contracts;

•the impact of inflation on costs and the ability of the respective Registrants to recover such costs in regulated rates;

•fluctuations in foreign currency exchange rates, primarily the British pound and the Canadian dollar;

•increases in employee healthcare costs;

•the impact of investment performance, certain participant elections such as lump sum distributions and changes in interest rates, legislation, healthcare cost trends, mortality, morbidity on pension and other postretirement benefits expense and funding requirements;

•changes in the residential real estate brokerage, mortgage and franchising industries and regulations that could affect brokerage, mortgage and franchising transactions;

•the ability to successfully integrate future acquired operations into a Registrant's business;

•the impact of supply chain disruptions and workforce availability on the respective Registrant's ongoing operations and its ability to timely complete construction projects;

•unanticipated construction delays, changes in costs, receipt of required permits and authorizations, ability to fund capital projects and other factors that could affect future facilities and infrastructure additions;

•the availability and price of natural gas in applicable geographic regions and demand for natural gas supply;

•the impact of new accounting guidance or changes in current accounting estimates and assumptions on the financial results of the respective Registrants; and

•other business or investment considerations that may be disclosed from time to time in the Registrants' filings with the SEC or in other publicly disseminated written documents.

Further details of the potential risks and uncertainties affecting the Registrants are described in the Registrants' filings with the SEC, including Part II, Item 1A and other discussions contained in this Form 10-Q. Each Registrant undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing factors should not be construed as exclusive.

v

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Item 1.Financial Statements

Berkshire Hathaway Energy Company and its subsidiaries
Report of Independent Registered Public Accounting Firm						4
Consolidated Balance Sheets						5
Consolidated Statements of Operations						7
Consolidated Statements of Comprehensive Income						8
Consolidated Statements of Changes in Equity						9
Consolidated Statements of Cash Flows						10
Notes to Consolidated Financial Statements						11
PacifiCorp and its subsidiaries
Report of Independent Registered Public Accounting Firm						51
Consolidated Balance Sheets						52
Consolidated Statements of Operations						54
Consolidated Statements of Changes in Shareholders' Equity						55
Consolidated Statements of Cash Flows						56
Notes to Consolidated Financial Statements						57
MidAmerican Energy Company
Report of Independent Registered Public Accounting Firm						76
Balance Sheets						77
Statements of Operations						79
Statements of Changes in Shareholder's Equity						80
Statements of Cash Flows						81
Notes to Financial Statements						82
MidAmerican Funding, LLC and its subsidiaries
Report of Independent Registered Public Accounting Firm						90
Consolidated Balance Sheets						91
Consolidated Statements of Operations						93
Consolidated Statements of Changes in Member's Equity						94
Consolidated Statements of Cash Flows						95
Notes to Consolidated Financial Statements						96
Nevada Power Company and its subsidiaries
Report of Independent Registered Public Accounting Firm						111
Consolidated Balance Sheets						112
Consolidated Statements of Operations						113
Consolidated Statements of Changes in Shareholder's Equity						114
Consolidated Statements of Cash Flows						115
Notes to Consolidated Financial Statements						116
Sierra Pacific Power Company and its subsidiaries
Report of Independent Registered Public Accounting Firm						132
Consolidated Balance Sheets						133
Consolidated Statements of Operations						134
Consolidated Statements of Changes in Shareholder's Equity						135
Consolidated Statements of Cash Flows						136
Notes to Consolidated Financial Statements						137
Eastern Energy Gas Holdings, LLC and its subsidiaries
Report of Independent Registered Public Accounting Firm						155
Consolidated Balance Sheets						156
Consolidated Statements of Operations						158
Consolidated Statements of Comprehensive Income						159
Consolidated Statements of Changes in Equity						160
Consolidated Statements of Cash Flows						161
Notes to Consolidated Financial Statements						162

1

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

Berkshire Hathaway Energy Company and its subsidiaries						28
PacifiCorp and its subsidiaries						66
MidAmerican Funding, LLC and its subsidiaries and MidAmerican Energy Company						100
Nevada Power Company and its subsidiaries						124
Sierra Pacific Power Company and its subsidiaries						146
Eastern Energy Gas Holdings, LLC and its subsidiaries						169

2

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Berkshire Hathaway Energy Company and its subsidiaries

Consolidated Financial Section

3

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PART I

Item 1.Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Berkshire Hathaway Energy Company

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheet of Berkshire Hathaway Energy Company and subsidiaries (the "Company") as of June 30, 2022, the related consolidated statements of operations, comprehensive income, and changes in equity for the three-month and six-month periods ended June 30, 2022 and 2021, and of cash flows for the six-month periods ended June 30, 2022 and 2021, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, and the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, 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.

/s/ Deloitte & Touche LLP

Des Moines, Iowa

August 5, 2022

4

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BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions)

			As of
			June 30,						December 31,
			2022						2021
ASSETS
Current assets:
Cash and cash equivalents			$	2,081					$	1,096
Restricted cash and cash equivalents			201						127
Trade receivables, net			2,734						2,468
Income tax receivable			25						344
Inventories			1,163						1,122
Mortgage loans held for sale			1,084						1,263
Regulatory assets			778						544
Other current assets			1,294						1,284
Total current assets			9,360						8,248
Property, plant and equipment, net			90,795						89,816
Goodwill			11,559						11,650
Regulatory assets			3,481						3,419
Investments and restricted cash, cash equivalents and investments			16,728						15,788
Other assets			3,372						3,144
Total assets			$	135,295					$	132,065

The accompanying notes are an integral part of these consolidated financial statements.

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BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)

(Amounts in millions)

			As of
			June 30,						December 31,
			2022						2021
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable			$	2,290					$	2,136
Accrued interest			557						537
Accrued property, income and other taxes			789						606
Accrued employee expenses			457						372
Short-term debt			1,948						2,009
Current portion of long-term debt			2,069						1,265
Other current liabilities			1,802						1,837
Total current liabilities			9,912						8,762
BHE senior debt			13,594						13,003
BHE junior subordinated debentures			100						100
Subsidiary debt			35,354						35,394
Regulatory liabilities			7,028						6,960
Deferred income taxes			13,394						12,938
Other long-term liabilities			4,722						4,319
Total liabilities			84,104						81,476
Commitments and contingencies (Note 8)
Equity:
BHE shareholders' equity:
Preferred stock - 100 shares authorized, $0.01 par value, 1 and 2 shares issued and outstanding			850						1,650
Common stock - 115 shares authorized, no par value, 76 shares issued and outstanding			—						—
Additional paid-in capital			6,298						6,374
Long-term income tax receivable			(744)						(744)
Retained earnings			42,688						40,754
Accumulated other comprehensive loss, net			(1,788)						(1,340)
Total BHE shareholders' equity			47,304						46,694
Noncontrolling interests			3,887						3,895
Total equity			51,191						50,589
Total liabilities and equity			$	135,295					$	132,065

The accompanying notes are an integral part of these consolidated financial statements.

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BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue:
Energy			$	4,940					$	4,301					$	9,763					$	9,150
Real estate			1,672						1,763						2,879						2,995
Total operating revenue			6,612						6,064						12,642						12,145
Operating expenses:
Energy:
Cost of sales			1,525						1,110						2,985						2,679
Operations and maintenance			1,081						1,037						2,024						1,971
Depreciation and amortization			1,045						936						2,052						1,851
Property and other taxes			199						189						404						399
Real estate			1,555						1,584						2,734						2,704
Total operating expenses			5,405						4,856						10,199						9,604
Operating income			1,207						1,208						2,443						2,541
Other income (expense):
Interest expense			(550)						(532)						(1,082)						(1,062)
Capitalized interest			18						14						35						28
Allowance for equity funds			42						30						80						56
Interest and dividend income			30						26						53						47
Gains on marketable securities, net			2,528						1,966						1,271						848
Other, net			(26)						48						(21)						56
Total other income (expense)			2,042						1,552						336						(27)
Income before income tax expense (benefit) and equity loss			3,249						2,760						2,779						2,514
Income tax expense (benefit)			149						327						(358)						(208)
Equity loss			(83)						(50)						(140)						(229)
Net income			3,017						2,383						2,997						2,493
Net income attributable to noncontrolling interests			120						102						229						208
Net income attributable to BHE shareholders			2,897						2,281						2,768						2,285
Preferred dividends			13						37						29						75
Earnings on common shares			$	2,884					$	2,244					$	2,739					$	2,210

The accompanying notes are an integral part of these consolidated financial statements.

 

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BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Amounts in millions)

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Net income			$	3,017					$	2,383					$	2,997					$	2,493
Other comprehensive (loss) income, net of tax:
Unrecognized amounts on retirement benefits, net of tax of $9, $1, $12 and $5			25						15						40						22
Foreign currency translation adjustment			(481)						68						(591)						159
Unrealized gains on cash flow hedges, net of tax of $8, $(1), $36 and $4			26						1						103						15
Total other comprehensive (loss) income, net of tax			(430)						84						(448)						196
Comprehensive income			2,587						2,467						2,549						2,689
Comprehensive income attributable to noncontrolling interests			120						106						229						212
Comprehensive income attributable to BHE shareholders			$	2,467					$	2,361					$	2,320					$	2,477

The accompanying notes are an integral part of these consolidated financial statements.

8

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BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

(Amounts in millions)

			BHE Shareholders' Equity
																					Long-term												Accumulated
															Additional						Income												Other
			Preferred						Common						Paid-in						Tax						Retained						Comprehensive						Noncontrolling						Total
			Stock						Stock						Capital						Receivable						Earnings						Loss, Net						Interests						Equity
Balance, March 31, 2021			$	3,750					$	—					$	6,377					$	(658)					$	35,060					$	(1,440)					$	3,962					$	47,051
Net income			—						—						—						—						2,281						—						102						2,383
Other comprehensive income			—						—						—						—						—						80						4						84
Preferred stock dividend			—						—						—						—						(37)						—						—						(37)
Distributions			—						—						—						—						—						—						(121)						(121)
Contributions			—						—						—						—						—						—						9						9
Other equity transactions			—						—						—						—						(1)						—						(3)						(4)
Balance, June 30, 2021			$	3,750					$	—					$	6,377					$	(658)					$	37,303					$	(1,360)					$	3,953					$	49,365
Balance, December 31, 2020			$	3,750					$	—					$	6,377					$	(658)					$	35,093					$	(1,552)					$	3,967					$	46,977
Net income			—						—						—						—						2,285						—						208						2,493
Other comprehensive income			—						—						—						—						—						192						4						196
Preferred stock dividend			—						—						—						—						(75)						—						—						(75)
Distributions			—						—						—						—						—						—						(234)						(234)
Contributions			—						—						—						—						—						—						9						9
Other equity transactions			—						—						—						—						—						—						(1)						(1)
Balance, June 30, 2021			$	3,750					$	—					$	6,377					$	(658)					$	37,303					$	(1,360)					$	3,953					$	49,365
Balance, March 31, 2022			$	1,650					$	—					$	6,374					$	(744)					$	40,608					$	(1,358)					$	3,894					$	50,424
Net income			—						—						—						—						2,897						—						120						3,017
Other comprehensive loss			—						—						—						—						—						(430)						—						(430)
Preferred stock redemptions			(800)						—						—						—						—						—						—						(800)
Preferred stock dividend			—						—						—						—						(13)						—						—						(13)
Common stock purchases			—						—						(77)						—						(793)						—						—						(870)
Distributions			—						—						—						—						—						—						(129)						(129)
Contributions			—						—						—						—						—						—						2						2
Other equity transactions			—						—						1						—						(11)						—						—						(10)
Balance, June 30, 2022			$	850					$	—					$	6,298					$	(744)					$	42,688					$	(1,788)					$	3,887					$	51,191
Balance, December 31, 2021			$	1,650					$	—					$	6,374					$	(744)					$	40,754					$	(1,340)					$	3,895					$	50,589
Net income			—						—						—						—						2,768						—						229						2,997
Other comprehensive loss			—						—						—						—						—						(448)						—						(448)
Preferred stock redemptions			(800)						—						—						—						—						—						—						(800)
Preferred stock dividend			—						—						—						—						(29)						—						—						(29)
Common stock purchases			—						—						(77)						—						(793)						—						—						(870)
Distributions			—						—						—						—						—						—						(245)						(245)
Contributions			—						—						—						—						—						—						2						2
Other equity transactions			—						—						1						—						(12)						—						6						(5)
Balance, June 30, 2022			$	850					$	—					$	6,298					$	(744)					$	42,688					$	(1,788)					$	3,887					$	51,191

The accompanying notes are an integral part of these consolidated financial statements.

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BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)

			Six-Month Periods
			Ended June 30,
			2022						2021
Cash flows from operating activities:
Net income			$	2,997					$	2,493
Adjustments to reconcile net income to net cash flows from operating activities:
Gains on marketable securities, net			(1,271)						(848)
Depreciation and amortization			2,081						1,874
Allowance for equity funds			(80)						(56)
Equity loss, net of distributions			202						313
Changes in regulatory assets and liabilities			(226)						(199)
Deferred income taxes and investment tax credits, net			385						613
Other, net			37						(26)
Changes in other operating assets and liabilities, net of effects from acquisitions:
Trade receivables and other assets			(317)						(254)
Derivative collateral, net			189						92
Pension and other postretirement benefit plans			(21)						(33)
Accrued property, income and other taxes, net			489						76
Accounts payable and other liabilities			682						187
Net cash flows from operating activities			5,147						4,232
Cash flows from investing activities:
Capital expenditures			(3,382)						(2,848)
Purchases of marketable securities			(281)						(185)
Proceeds from sales of marketable securities			257						163
Equity method investments			(28)						(52)
Other, net			(18)						(53)
Net cash flows from investing activities			(3,452)						(2,975)
Cash flows from financing activities:
Preferred stock redemptions			(800)						—
Common stock purchases			(870)						—
Proceeds from BHE senior debt			987						—
Repayments of BHE senior debt			—						(450)
Preferred dividends			(33)						(75)
Proceeds from subsidiary debt			1,201						539
Repayments of subsidiary debt			(542)						(1,210)
Net (repayments of) proceeds from short-term debt			(54)						245
Distributions to noncontrolling interests			(246)						(234)
Other, net			(248)						(19)
Net cash flows from financing activities			(605)						(1,204)
Effect of exchange rate changes			(33)						2
Net change in cash and cash equivalents and restricted cash and cash equivalents			1,057						55
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period			1,244						1,445
Cash and cash equivalents and restricted cash and cash equivalents at end of period			$	2,301					$	1,500

The accompanying notes are an integral part of these consolidated financial statements.

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BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)    General

Berkshire Hathaway Energy Company ("BHE") is a holding company that owns a highly diversified portfolio of locally managed and operated businesses principally engaged in the energy industry (collectively with its subsidiaries, the "Company") and is a consolidated subsidiary of Berkshire Hathaway Inc. ("Berkshire Hathaway").

The Company's operations are organized as eight business segments: PacifiCorp and its subsidiaries ("PacifiCorp"), MidAmerican Funding, LLC and its subsidiaries ("MidAmerican Funding") (which primarily consists of MidAmerican Energy Company ("MidAmerican Energy")), NV Energy, Inc. and its subsidiaries ("NV Energy") (which primarily consists of Nevada Power Company and its subsidiaries ("Nevada Power") and Sierra Pacific Power Company and its subsidiaries ("Sierra Pacific")), Northern Powergrid Holdings Company and its subsidiaries ("Northern Powergrid") (which primarily consists of Northern Powergrid (Northeast) plc and Northern Powergrid (Yorkshire) plc), BHE Pipeline Group, LLC and its subsidiaries (which primarily consists of BHE GT&S, LLC and its subsidiaries ("BHE GT&S"), Northern Natural Gas Company ("Northern Natural Gas") and Kern River Gas Transmission Company ("Kern River")), BHE Transmission (which consists of BHE Canada Holdings Corporation and its subsidiaries ("BHE Canada") (which primarily consists of AltaLink, L.P. ("AltaLink")) and BHE U.S. Transmission, LLC and its subsidiaries), BHE Renewables, LLC and its subsidiaries ("BHE Renewables") and HomeServices of America, Inc. and its subsidiaries ("HomeServices"). The Company, through these locally managed and operated businesses, owns four utility companies in the U.S. serving customers in 11 states, two electricity distribution companies in Great Britain, five interstate natural gas pipeline companies and interests in a liquefied natural gas ("LNG") export, import and storage facility in the U.S., an electric transmission business in Canada, interests in electric transmission businesses in the U.S., a renewable energy business primarily investing in wind, solar, geothermal and hydroelectric projects, the largest residential real estate brokerage firm in the U.S. and one of the largest residential real estate brokerage franchise networks in the U.S.

The unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the United States Securities and Exchange Commission's rules and regulations for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements. Management believes the unaudited Consolidated Financial Statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary for the fair presentation of the unaudited Consolidated Financial Statements as of June 30, 2022 and for the three- and six-month periods ended June 30, 2022 and 2021. The results of operations for the three- and six-month periods ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year.

The preparation of the unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenue and expenses during the period. Actual results may differ from the estimates used in preparing the unaudited Consolidated Financial Statements. Note 2 of Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 describes the most significant accounting policies used in the preparation of the unaudited Consolidated Financial Statements. There have been no significant changes in the Company's assumptions regarding significant accounting estimates and policies during the six-month period ended June 30, 2022, other than the updates associated with the Company's estimates of loss contingencies related to the Oregon and California 2020 wildfires (the "2020 Wildfires") as discussed in Note 8.

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(2)    Property, Plant and Equipment, Net

Property, plant and equipment, net consists of the following (in millions):

									As of
			Depreciable						June 30,						December 31,
			Life						2022						2021
Regulated assets:
Utility generation, transmission and distribution systems			5-80 years						$	90,810					$	90,223
Interstate natural gas pipeline assets			3-80 years						17,547						17,423
									108,357						107,646
Accumulated depreciation and amortization									(33,618)						(32,680)
Regulated assets, net									74,739						74,966
Nonregulated assets:
Independent power plants			2-50 years						8,073						7,665
Cove Point LNG facility			40 years						3,373						3,364
Other assets			2-30 years						3,042						2,666
									14,488						13,695
Accumulated depreciation and amortization									(3,206)						(3,041)
Nonregulated assets, net									11,282						10,654
Net operating assets									86,021						85,620
Construction work-in-progress									4,774						4,196
Property, plant and equipment, net									$	90,795					$	89,816

Construction work-in-progress includes $4.4 billion as of June 30, 2022 and $3.8 billion as of December 31, 2021, related to the construction of regulated assets.

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(3)    Investments and Restricted Cash, Cash Equivalents and Investments

Investments and restricted cash, cash equivalents and investments consists of the following (in millions):

			As of
			June 30,						December 31,
			2022						2021
Investments:
BYD Company Limited common stock			$	9,003					$	7,693
Rabbi trusts			429						492
Other			328						305
Total investments			9,760						8,490
Equity method investments:
BHE Renewables tax equity investments			4,680						4,931
Iroquois Gas Transmission System, L.P.			742						735
Electric Transmission Texas, LLC			606						595
Other			302						293
Total equity method investments			6,330						6,554
Restricted cash, cash equivalents and investments:
Quad Cities Station nuclear decommissioning trust funds			658						768
Other restricted cash and cash equivalents			220						148
Total restricted cash, cash equivalents and investments			878						916
Total investments and restricted cash, cash equivalents and investments			$	16,968					$	15,960
Reflected as:
Current assets			$	240					$	172
Noncurrent assets			16,728						15,788
Total investments and restricted cash, cash equivalents and investments			$	16,968					$	15,960

Investments

Gains on marketable securities, net recognized during the period consists of the following (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Unrealized gains recognized on marketable securities still held at the reporting date			$	2,527					$	1,966					$	1,270					$	847
Net gains recognized on marketable securities sold during the period			1						—						1						1
Gains on marketable securities, net			$	2,528					$	1,966					$	1,271					$	848

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Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash equivalents consist of funds invested in money market mutual funds, U.S. Treasury Bills and other investments with a maturity of three months or less when purchased. Cash and cash equivalents exclude amounts where availability is restricted by legal requirements, loan agreements or other contractual provisions. Restricted cash and cash equivalents consist substantially of funds restricted for debt service obligations for certain of the Company's nonregulated renewable energy projects. A reconciliation of cash and cash equivalents and restricted cash and cash equivalents as presented in the Consolidated Statements of Cash Flows is outlined below and disaggregated by the line items in which they appear on the Consolidated Balance Sheets (in millions):

			As of
			June 30,						December 31,
			2022						2021
Cash and cash equivalents			$	2,081					$	1,096
Restricted cash and cash equivalents			201						127
Investments and restricted cash, cash equivalents and investments			19						21
Total cash and cash equivalents and restricted cash and cash equivalents			$	2,301					$	1,244

(4)    Recent Financing Transactions

Long-Term Debt

In June 2022, Sierra Pacific purchased $60 million of its variable-rate tax-exempt Gas & Water Facilities Refunding Revenue Bonds, Series 2016B, due 2036, as required by the bond indenture. Sierra Pacific is holding this bond and can re-offer it at a future date.

In May 2022, Sierra Pacific issued $250 million of 4.71% General and Refunding Mortgage bonds, Series W, due 2052. The net proceeds were used to repay the outstanding $200 million unsecured loan with NV Energy, Inc., repay amounts outstanding under its existing revolving credit facility and for general corporate purposes.

In April 2022, BHE issued $1 billion of its 4.6% Senior Notes due 2053 and used the net proceeds for general corporate purposes, which included repaying a portion of BHE's outstanding commercial paper obligations and redeeming a portion of its 4.00% Perpetual Preferred Stock issued to certain subsidiaries of Berkshire Hathaway.

In April 2022, Sierra Pacific purchased the following series of bonds that were held by the public: $30 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016C, due 2036; $25 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016D, due 2036; $25 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016E, due 2036; $75 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016F, due 2036; $20 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016G, due 2036; and $30 million of its variable-rate tax-exempt Pollution Control Refunding Revenue Bonds, Series 2016B, due 2029. Sierra Pacific purchased these bonds as required by the bond indentures. Sierra Pacific is holding these bonds and can re-offer them at a future date.

In April 2022, Northern Powergrid (Northeast) plc issued £350 million of its 3.25% bonds due 2052 and used the net proceeds for general corporate purposes.

In January 2022, Nevada Power entered into a $300 million secured delayed draw term loan facility maturing in January 2024. Amounts borrowed under the facility bear interest at variable rates based on the Secured Overnight Financing Rate ("SOFR") or a base rate, at Nevada Power's option, plus a pricing margin. In January 2022, Nevada Power borrowed $200 million under the facility at an initial interest rate of 0.55%. In May 2022, Nevada Power drew the remaining $100 million available under the facility at an initial interest rate of 1.24%. Nevada Power used the proceeds to repay amounts outstanding under its existing secured credit facility and for general corporate purposes.

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Credit Facilities

In June 2022, BHE amended and restated its existing $3.5 billion unsecured credit facility expiring in June 2024. The amendment extended the expiration date to June 2025 and amended pricing from the London Interbank Offered Rate ("LIBOR") to SOFR.

In June 2022, PacifiCorp amended and restated its existing $1.2 billion unsecured credit facility expiring in June 2024. The amendment extended the expiration date to June 2025 and amended pricing from LIBOR to SOFR.

In June 2022, MidAmerican Energy amended and restated its existing $1.5 billion unsecured credit facility expiring in June 2024. The amendment extended the expiration date to June 2025 and amended pricing from LIBOR to SOFR.

In June 2022, Nevada Power and Sierra Pacific each amended and restated its existing $400 million and $250 million secured credit facilities expiring in June 2024. The amendments extended the expiration date to June 2025 and amended pricing from LIBOR to SOFR.

(5)    Income Taxes

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax benefit is as follows:

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Federal statutory income tax rate			21		%				21		%				21		%				21		%
Income tax credits			(13)						(13)						(28)						(27)
State income tax, net of federal income tax impacts			(1)						4						—						2
Income tax effect of foreign income			—						3						(1)						3
Effects of ratemaking			(1)						(2)						(2)						(4)
Equity income			(1)						—						(1)						(2)
Noncontrolling interest			(1)						(1)						(2)						(2)
Other, net			1						—						—						1
Effective income tax rate			5		%				12		%				(13)		%				(8)		%

Income tax credits relate primarily to PTCs from wind-powered generating facilities owned by MidAmerican Energy, PacifiCorp and BHE Renewables. Federal renewable electricity PTCs are earned as energy from qualifying wind-powered generating facilities is produced and sold and are based on a per-kilowatt hour rate pursuant to the applicable federal income tax law. Wind-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service. PTCs for the six-month periods ended June 30, 2022 and 2021 totaled $734 million and $678 million, respectively.

Income tax effect on foreign income includes, among other items, a deferred income tax charge of $109 million recognized in June 2021 upon the enactment of an increase in the United Kingdom's corporate income tax rate from 19% to 25% effective April 1, 2023.

The Company's provision for income taxes has been computed on a stand-alone basis. Berkshire Hathaway includes the Company in its consolidated U.S. federal and Iowa state income tax returns and the majority of the Company's U.S. federal income tax is remitted to or received from Berkshire Hathaway. The Company received net cash payments for federal income taxes from Berkshire Hathaway for the six-month periods ended June 30, 2022 and 2021 totaling $1,249 million and $943 million, respectively.

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(6)    Employee Benefit Plans

Domestic Operations

Net periodic benefit cost (credit) for the domestic pension and other postretirement benefit plans included the following components (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Pension:
Service cost			$	6					$	8					$	13					$	15
Interest cost			19						18						38						38
Expected return on plan assets			(27)						(36)						(54)						(69)
Settlement			—						—						2						—
Net amortization			5						7						9						13
Net periodic benefit cost (credit)			$	3					$	(3)					$	8					$	(3)
Other postretirement:
Service cost			$	4					$	4					$	6					$	6
Interest cost			5						5						10						10
Expected return on plan assets			(7)						(6)						(14)						(11)
Net amortization			(1)						(1)						(1)						(2)
Net periodic benefit cost			$	1					$	2					$	1					$	3

Amounts other than the service cost for pension and other postretirement benefit plans are recorded in Other, net in the Consolidated Statements of Operations. Employer contributions to the domestic pension and other postretirement benefit plans are expected to be $13 million and $5 million, respectively, during 2022. As of June 30, 2022, $7 million and $5 million of contributions had been made to the domestic pension and other postretirement benefit plans, respectively.

Foreign Operations

Net periodic benefit credit for the United Kingdom pension plan included the following components (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Service cost			$	3					$	4					$	7					$	8
Interest cost			9						7						19						15
Expected return on plan assets			(23)						(28)						(48)						(56)
Net amortization			6						14						12						28
Net periodic benefit credit			$	(5)					$	(3)					$	(10)					$	(5)

Amounts other than the service cost for the United Kingdom pension plan are recorded in Other, net in the Consolidated Statements of Operations. Employer contributions to the United Kingdom pension plan are expected to be £12 million during 2022. As of June 30, 2022, £6 million, or $8 million, of contributions had been made to the United Kingdom pension plan.

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(7)    Fair Value Measurements

The carrying value of the Company's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. The Company has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•Level 3 — Unobservable inputs reflect the Company's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, including its own data.

The following table presents the Company's financial assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):

						Input Levels for Fair Value Measurements
						Level 1						Level 2						Level 3						Other(1)						Total
As of June 30, 2022:
Assets:
Commodity derivatives						$	11					$	660					$	77					$	(164)					$	584
Interest rate derivatives						16						45						24						—						85
Mortgage loans held for sale						—						1,084						—						—						1,084
Money market mutual funds						1,492						—						—						—						1,492
Debt securities:
U.S. government obligations						220						—						—						—						220
International government obligations						—						1						—						—						1
Corporate obligations						—						75						—						—						75
Municipal obligations						—						3						—						—						3
Agency, asset and mortgage-backed obligations						—						1						—						—						1
Equity securities:
U.S. companies						348						—						—						—						348
International companies						9,011						—						—						—						9,011
Investment funds						258						—						—						—						258
						$	11,356					$	1,869					$	101					$	(164)					$	13,162
Liabilities:
Commodity derivatives						$	(14)					$	(211)					$	(255)					$	77					$	(403)
Foreign currency exchange rate derivatives						—						(19)						—						—						(19)
Interest rate derivatives						—						(6)						(3)						—						(9)
						$	(14)					$	(236)					$	(258)					$	77					$	(431)

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						Input Levels for Fair Value Measurements
						Level 1						Level 2						Level 3						Other(1)						Total
As of December 31, 2021:
Assets:
Commodity derivatives						$	5					$	271					$	73					$	(47)					$	302
Foreign currency exchange rate derivatives						—						3						—						—						3
Interest rate derivatives						1						3						20						—						24
Mortgage loans held for sale						—						1,263						—						—						1,263
Money market mutual funds						554						—						—						—						554
Debt securities:
U.S. government obligations						232						—						—						—						232
International government obligations						—						2						—						—						2
Corporate obligations						—						90						—						—						90
Municipal obligations						—						3						—						—						3
Agency, asset and mortgage-backed obligations						—						2						—						—						2
Equity securities:
U.S. companies						428						—						—						—						428
International companies						7,703						—						—						—						7,703
Investment funds						237						—						—						—						237
						$	9,160					$	1,637					$	93					$	(47)					$	10,843
Liabilities:
Commodity derivatives						$	(2)					$	(113)					$	(224)					$	73					$	(266)
Foreign currency exchange rate derivatives						—						(3)						—						—						(3)
Interest rate derivatives						—						(7)						(1)						—						(8)
						$	(2)					$	(123)					$	(225)					$	73					$	(277)

(1)Represents netting under master netting arrangements and a net cash collateral payable of $87 million and receivable of $26 million as of June 30, 2022 and December 31, 2021, respectively.

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which the Company transacts. When quoted prices for identical contracts are not available, the Company uses forward price curves. Forward price curves represent the Company's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. The Company bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent brokers, exchanges, direct communication with market participants and actual transactions executed by the Company. Market price quotations are generally readily obtainable for the applicable term of the Company's outstanding derivative contracts; therefore, the Company's forward price curves reflect observable market quotes. Market price quotations for certain electricity and natural gas trading hubs are not as readily obtainable due to the length of the contract. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, the Company uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of the underlying forward commodity prices, interest rates, currency rates, related volatility, counterparty creditworthiness and duration of contracts.

The Company's mortgage loans held for sale are valued based on independent quoted market prices, where available, or the prices of other mortgage whole loans with similar characteristics. As necessary, these prices are adjusted for typical securitization activities, including servicing value, portfolio composition, market conditions and liquidity.

18

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The Company's investments in money market mutual funds and debt and equity securities are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics.

The following table reconciles the beginning and ending balances of the Company's financial assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions). Transfers out of Level 3 occur primarily due to increased price observability.

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
									Interest												Interest
			Commodity						Rate						Commodity						Rate
			Derivatives						Derivatives						Derivatives						Derivatives
2022:
Beginning balance			$	(239)					$	13					$	(151)					$	19
Changes included in earnings(1)			(26)						8						(82)						2
Changes in fair value recognized in OCI			5						—						10						—
Changes in fair value recognized in net regulatory assets			1						—						(59)						—
Purchases			1						—						1						—
Settlements			11						—						34						—
Transfers out of Level 3 into Level 2			69						—						69						—
Ending balance			$	(178)					$	21					$	(178)					$	21

2021:
Beginning balance			$	124					$	41					$	116					$	62
Changes included in earnings(1)			(10)						—						(16)						(21)
Changes in fair value recognized in OCI			(6)						—						(7)						—
Changes in fair value recognized in net regulatory assets			(7)						—						9						—
Purchases			1						—						1						—
Settlements			3						—						2						—
Ending balance			$	105					$	41					$	105					$	41

(1)Changes included in earnings for interest rate derivatives are reported net of amounts related to the satisfaction of the associated loan commitment.

The Company's long-term debt is carried at cost, including fair value adjustments and unamortized premiums, discounts and debt issuance costs as applicable, on the Consolidated Balance Sheets. The fair value of the Company's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of the Company's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of the Company's long-term debt (in millions):

			As of June 30, 2022												As of December 31, 2021
			Carrying						Fair						Carrying						Fair
			Value						Value						Value						Value
Long-term debt			$	51,117					$	48,636					$	49,762					$	57,189

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(8)    Commitments and Contingencies

Construction Commitments

During the six-month period ended June 30, 2022, PacifiCorp entered into a procurement and construction services agreement for $849 million through 2024 for the construction of a key Energy Gateway Transmission segment extending between the Aeolus substation near Medicine Bow, Wyoming and the Clover substation near Mona, Utah.

Fuel Contracts

During the six-month period ended June 30, 2022, PacifiCorp entered into certain coal supply and transportation agreements totaling approximately $200 million through 2024.

Legal Matters

The Company is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. The Company does not believe that such normal and routine litigation will have a material impact on its consolidated financial results. The Company is also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines, penalties and other costs in substantial amounts and are described below.

    

2020 Wildfires

In September 2020, a severe weather event resulting in high winds, low humidity and warm temperatures contributed to several major wildfires, real and personal property and natural resource damage, personal injuries and loss of life and widespread power outages in Oregon and Northern California. The wildfires spread across certain parts of PacifiCorp's service territory and surrounding areas across multiple counties in Oregon and California, including Siskiyou County, California; Jackson County, Oregon; Douglas County, Oregon; Marion County, Oregon; Lincoln County, Oregon; and Klamath County, Oregon burning over 500,000 acres in aggregate. Third party reports for these wildfires indicate over 2,000 structures destroyed, including residences; several structures damaged; multiple individuals injured; and several fatalities. Fire suppression costs estimated by various agencies total approximately $150 million. Investigations into the cause and origin of each wildfire are complex and ongoing and being conducted by various entities, including the United States Forest Service, the California Public Utilities Commission, the Oregon Department of Forestry, the Oregon Department of Justice, PacifiCorp and various experts engaged by PacifiCorp.

Multiple lawsuits have been filed in Oregon and California, including a putative class action complaint in Oregon, on behalf of citizens and businesses who suffered damages from fires allegedly caused by PacifiCorp. Additionally, several insurance carriers have filed subrogation complaints in Oregon and California with allegations similar to those made in the aforementioned lawsuits. The final determinations of liability, however, will only be made following comprehensive investigations and litigation processes.

In California, under inverse condemnation, courts have held that investor-owned utilities can be liable for real and personal property damages without the utility being found negligent and regardless of fault. California law also permits inverse condemnation plaintiffs to recover reasonable attorney fees and costs. In both Oregon and California, PacifiCorp has equipment in areas accessed through special use permits, easements or similar agreements that may contain provisions requiring it to pay for damages caused by its equipment regardless of fault. Even if inverse condemnation or other provisions do not apply, PacifiCorp could nevertheless be found liable for all damages proximately caused by negligence, including real and personal property and natural resource damage; fire suppression costs; personal injury and loss of life damages; and interest.

20

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During the three-month period ended June 30, 2022, PacifiCorp accrued $64 million of losses net of expected insurance recoveries associated with the 2020 Wildfires resulting in an overall loss accrual net of expected insurance recoveries of $200 million as of June 30, 2022 compared to $136 million as of December 31, 2021. These accruals include PacifiCorp's estimate of losses for fire suppression costs, real and personal property damages, natural resource damages and noneconomic damages such as personal injury damages and loss of life damages that are considered probable of being incurred and that it is reasonably able to estimate at this time. For certain aspects of the 2020 Wildfires for which loss is considered probable, information necessary to reasonably estimate the potential losses, such as those related to natural resource damages, is not currently available. It is reasonably possible that PacifiCorp will incur additional losses beyond the amounts accrued; however, PacifiCorp is currently unable to estimate the range of possible additional losses that could be incurred due to the number of properties and parties involved and the variation in those types of properties and lack of available details. To the extent losses beyond the amounts accrued are incurred, additional insurance coverage is expected to be available to cover at least a portion of the losses. PacifiCorp's receivable for expected insurance recoveries was $277 million as of June 30, 2022.

Environmental Laws and Regulations

The Company is subject to federal, state, local and foreign laws and regulations regarding climate change, renewable portfolio standards, air and water quality, emissions performance standards, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact the Company's current and future operations. The Company believes it is in material compliance with all applicable laws and regulations.

Hydroelectric Relicensing

PacifiCorp is a party to the 2016 amended Klamath Hydroelectric Settlement Agreement ("KHSA"), which is intended to resolve disputes surrounding PacifiCorp's efforts to relicense the Klamath Hydroelectric Project. The KHSA establishes a process for PacifiCorp, the states of Oregon and California ("States") and other stakeholders to assess whether dam removal can occur consistent with the settlement's terms. For PacifiCorp, the key elements of the settlement include: (1) a contribution from PacifiCorp's Oregon and California customers capped at $200 million plus $250 million in California bond funds; (2) complete indemnification from harms associated with dam removal; (3) transfer of the FERC license to a third-party dam removal entity, the Klamath River Renewal Corporation ("KRRC"), who would conduct dam removal; and (4) ability for PacifiCorp to operate the facilities for the benefit of customers until dam removal commences.

In September 2016, the KRRC and PacifiCorp filed a joint application with the FERC to transfer the license for the four mainstem Klamath dams from PacifiCorp to the KRRC. The FERC approved partial transfer of the Klamath license in a July 2020 order, subject to the condition that PacifiCorp remains co-licensee. Under the amended KHSA, PacifiCorp did not agree to remain co-licensee during the surrender and removal process given concerns about liability protections for PacifiCorp and its customers. In November 2020, PacifiCorp entered a memorandum of agreement (the "MOA") with the KRRC, the Karuk Tribe, the Yurok Tribe and the States to continue implementation of the KHSA. The agreement required the States, PacifiCorp and KRRC to file a new license transfer application to remove PacifiCorp from the license for the Klamath Hydroelectric Project and add the States and KRRC as co-licensees for the purposes of surrender. In addition, the MOA provides for additional contingency funding of $45 million, equally split between PacifiCorp and the States, and for PacifiCorp and the States to equally share in any additional cost overruns in the unlikely event that dam removal costs exceed the $450 million in funding to ensure dam removal is complete. The MOA also requires PacifiCorp to cover the costs associated with certain pre-existing environmental conditions. In June 2021, the FERC approved transfer of the four mainstem Klamath dams from PacifiCorp to the KRRC and the States as co-licensees. In July 2021, the Oregon, Wyoming, Idaho and California state public utility commissions conditionally approved the required property transfer applications. In August 2021, PacifiCorp notified the Public Service Commission of Utah of the property transfer, however no formal approval is required in Utah. The transfer will be effective within 30 days following the issuance of a license surrender from the FERC for the project, which remains pending. In February 2022, the FERC staff issued a draft environmental impact statement for the project, concluding that dam removal is the preferred alternative. A final environmental impact statement is expected later in 2022.

Guarantees

The Company has entered into guarantees as part of the normal course of business and the sale of certain assets. These guarantees are not expected to have a material impact on the Company's consolidated financial results.

21

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(9)    Revenue from Contracts with Customers

Energy Products and Services

The following table summarizes the Company's energy products and services revenue from contracts with customers ("Customer Revenue") by regulated and nonregulated, with further disaggregation of regulated by line of business, including a reconciliation to the Company's reportable segment information included in Note 12 (in millions):

						For the Three-Month Period Ended June 30, 2022
						PacifiCorp						MidAmerican Funding						NV Energy						Northern Powergrid						BHE Pipeline Group						BHE Transmission						BHE Renewables						BHE and Other(1)						Total
Customer Revenue:
Regulated:
Retail electric						$	1,167					$	594					$	831					$	—					$	—					$	—					$	—					$	(1)					$	2,591
Retail gas						—						136						28						—						—						—						—						—						164
Wholesale						55						119						15						—						—						—						—						(2)						187
Transmission and    distribution						45						13						18						274						—						172						—						—						522
Interstate pipeline						—						—						—						—						524						—						—						(27)						497
Other						28						—						—						—						—						—						—						—						28
Total Regulated						1,295						862						892						274						524						172						—						(30)						3,989
Nonregulated						—						—						1						42						285						15						262						151						756
Total Customer Revenue						1,295						862						893						316						809						187						262						121						4,745
Other revenue						19						35						6						29						47						(4)						32						31						195
Total						$	1,314					$	897					$	899					$	345					$	856					$	183					$	294					$	152					$	4,940

						For the Six-Month Period Ended June 30, 2022
						PacifiCorp						MidAmerican Funding						NV Energy						Northern Powergrid						BHE Pipeline Group						BHE Transmission						BHE Renewables						BHE and Other(1)						Total
Customer Revenue:
Regulated:
Retail electric						$	2,352					$	1,066					$	1,430					$	—					$	—					$	—					$	—					$	(1)					$	4,847
Retail gas						—						473						79						—						—						—						—						—						552
Wholesale						110						280						35						—						—						—						—						(2)						423
Transmission and    distribution						77						28						35						543						—						348						—						—						1,031
Interstate pipeline						—						—						—						—						1,269						—						—						(68)						1,201
Other						48						—						1						—						1						—						—						—						50
Total Regulated						2,587						1,847						1,580						543						1,270						348						—						(71)						8,104
Nonregulated						—						2						1						57						563						22						431						284						1,360
Total Customer Revenue						2,587						1,849						1,581						600						1,833						370						431						213						9,464
Other revenue						24						53						11						60						58						(4)						30						67						299
Total						$	2,611					$	1,902					$	1,592					$	660					$	1,891					$	366					$	461					$	280					$	9,763

22

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						For the Three-Month Period Ended June 30, 2021
						PacifiCorp						MidAmerican Funding						NV Energy						Northern Powergrid						BHE Pipeline Group						BHE Transmission						BHE Renewables						BHE and Other(1)						Total
Customer Revenue:
Regulated:
Retail electric						$	1,188					$	516					$	708					$	—					$	—					$	—					$	—					$	(1)					$	2,411
Retail gas						—						89						20						—						—						—						—						—						109
Wholesale						30						69						10						—						—						—						—						(1)						108
Transmission and    distribution						37						15						22						243						—						178						—						—						495
Interstate pipeline						—						—						—						—						458						—						—						(25)						433
Other						31						—						1						—						(1)						—						—						—						31
Total Regulated						1,286						689						761						243						457						178						—						(27)						3,587
Nonregulated						—						1						1						8						232						7						239						124						612
Total Customer Revenue						1,286						690						762						251						689						185						239						97						4,199
Other revenue						12						3						5						29						17						(3)						28						11						102
Total						$	1,298					$	693					$	767					$	280					$	706					$	182					$	267					$	108					$	4,301

						For the Six-Month Period Ended June 30, 2021
						PacifiCorp						MidAmerican Funding						NV Energy						Northern Powergrid						BHE Pipeline Group						BHE Transmission						BHE Renewables						BHE and Other(1)						Total
Customer Revenue:
Regulated:
Retail electric						$	2,333					$	968					$	1,219					$	—					$	—					$	—					$	—					$	(1)					$	4,519
Retail gas						—						549						58						—						—						—						—						—						607
Wholesale						66						194						25						—						17						—						—						(1)						301
Transmission and    distribution						62						30						43						506						—						350						—						—						991
Interstate pipeline						—						—						—						—						1,273						—						—						(66)						1,207
Other						54						—						1						—						1						—						—						—						56
Total Regulated						2,515						1,741						1,346						506						1,291						350						—						(68)						7,681
Nonregulated						—						11						1						18						469						15						405						311						1,230
Total Customer Revenue						2,515						1,752						1,347						524						1,760						365						405						243						8,911
Other revenue						25						8						11						56						39						(3)						52						51						239
Total						$	2,540					$	1,760					$	1,358					$	580					$	1,799					$	362					$	457					$	294					$	9,150

(1)The BHE and Other reportable segment represents amounts related principally to other entities, including MidAmerican Energy Services, LLC, corporate functions and intersegment eliminations.

Real Estate Services

The following table summarizes the Company's real estate services Customer Revenue by line of business (in millions):

			HomeServices
			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Customer Revenue:
Brokerage			$	1,544					$	1,569					$	2,636					$	2,591
Franchise			17						24						37						42
Total Customer Revenue			1,561						1,593						2,673						2,633
Mortgage and other revenue			111						170						206						362
Total			$	1,672					$	1,763					$	2,879					$	2,995

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Remaining Performance Obligations

The following table summarizes the Company's revenue it expects to recognize in future periods related to significant unsatisfied remaining performance obligations for fixed contracts with expected durations in excess of one year as of June 30, 2022, by reportable segment (in millions):

			Performance obligations expected to be satisfied:
			Less than 12 months						More than 12 months						Total
BHE Pipeline Group			$	3,324					$	21,878					$	25,202
BHE Transmission			695						348						1,043
Total			$	4,019					$	22,226					$	26,245

(10)    BHE Shareholders' Equity

In May 2022, BHE redeemed at par 800,006 shares of its 4.00% Perpetual Preferred Stock from certain subsidiaries of Berkshire Hathaway Inc. for $800 million, plus an additional amount equal to the accrued dividends on the pro rata shares redeemed.

In June 2022, BHE purchased 740,961 shares of its common stock held by Mr. Gregory E. Abel, BHE's Chair, for $870 million. The purchase was pursuant to the terms of BHE's Shareholders Agreement.

(11)    Components of Accumulated Other Comprehensive Loss, Net

The following table shows the change in accumulated other comprehensive loss by each component of other comprehensive income (loss), net of applicable income tax (in millions):

						Unrecognized						Foreign						Unrealized												AOCI
						Amounts on						Currency						(Losses) Gains												Attributable
						Retirement						Translation						on Cash						Noncontrolling						To BHE
						Benefits						Adjustment						Flow Hedges						Interests						Shareholders, Net
Balance, December 31, 2020						$	(492)					$	(1,062)					$	(8)					$	10					$	(1,552)
Other comprehensive income (loss)						22						159						15						(4)						192
Balance, June 30, 2021						$	(470)					$	(903)					$	7					$	6					$	(1,360)
Balance, December 31, 2021						$	(318)					$	(1,086)					$	59					$	5					$	(1,340)
Other comprehensive income (loss)						40						(591)						103						—						(448)
Balance, June 30, 2022						$	(278)					$	(1,677)					$	162					$	5					$	(1,788)

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(12)    Segment Information

The Company's reportable segments with foreign operations include Northern Powergrid, whose business is principally in the United Kingdom, and BHE Transmission, whose business includes operations in Canada. Intersegment eliminations and adjustments, including the allocation of goodwill, have been made. Information related to the Company's reportable segments is shown below (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue:
PacifiCorp			$	1,314					$	1,298					$	2,611					$	2,540
MidAmerican Funding			897						693						1,902						1,760
NV Energy			899						767						1,592						1,358
Northern Powergrid			345						280						660						580
BHE Pipeline Group			856						706						1,891						1,799
BHE Transmission			183						182						366						362
BHE Renewables			294						267						461						457
HomeServices			1,672						1,763						2,879						2,995
BHE and Other(1)			152						108						280						294
Total operating revenue			$	6,612					$	6,064					$	12,642					$	12,145

Depreciation and amortization:
PacifiCorp			$	279					$	275					$	559					$	539
MidAmerican Funding			277						209						527						416
NV Energy			139						137						279						273
Northern Powergrid			100						73						180						144
BHE Pipeline Group			125						121						256						239
BHE Transmission			60						60						118						118
BHE Renewables			66						61						131						121
HomeServices			14						12						29						23
BHE and Other(1)			(1)						(1)						2						1
Total depreciation and amortization			$	1,059					$	947					$	2,081					$	1,874

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			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating income:
PacifiCorp			$	158					$	283					$	374					$	517
MidAmerican Funding			90						103						190						151
NV Energy			140						145						202						215
Northern Powergrid			110						126						269						277
BHE Pipeline Group			352						245						890						863
BHE Transmission			84						85						167						166
BHE Renewables			134						97						132						130
HomeServices			117						179						145						291
BHE and Other(1)			22						(55)						74						(69)
Total operating income			1,207						1,208						2,443						2,541
Interest expense			(550)						(532)						(1,082)						(1,062)
Capitalized interest			18						14						35						28
Allowance for equity funds			42						30						80						56
Interest and dividend income			30						26						53						47
Gains on marketable securities, net			2,528						1,966						1,271						848
Other, net			(26)						48						(21)						56
Total income before income tax expense (benefit) and equity loss			$	3,249					$	2,760					$	2,779					$	2,514

Interest expense:
PacifiCorp			$	107					$	105					$	213					$	212
MidAmerican Funding			83						78						165						156
NV Energy			52						51						103						103
Northern Powergrid			34						32						66						65
BHE Pipeline Group			36						40						73						78
BHE Transmission			38						40						76						78
BHE Renewables			45						40						86						80
HomeServices			2						1						3						2
BHE and Other(1)			153						145						297						288
Total interest expense			$	550					$	532					$	1,082					$	1,062

Earnings on common shares:
PacifiCorp			$	83					$	226					$	213					$	395
MidAmerican Funding			204						211						445						355
NV Energy			93						100						122						134
Northern Powergrid			71						(25)						182						79
BHE Pipeline Group			199						100						521						483
BHE Transmission			62						60						124						119
BHE Renewables			249						181						353						197
HomeServices			84						135						105						219
BHE and Other(1)			1,839						1,256						674						229
Total earnings on common shares			$	2,884					$	2,244					$	2,739					$	2,210

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			As of
			June 30,						December 31,
			2022						2021
Assets:
PacifiCorp			$	28,596					$	27,615
MidAmerican Funding			25,733						25,352
NV Energy			15,905						15,239
Northern Powergrid			9,343						9,326
BHE Pipeline Group			20,691						20,434
BHE Transmission			9,441						9,476
BHE Renewables			11,853						11,829
HomeServices			4,115						4,574
BHE and Other(1)			9,618						8,220
Total assets			$	135,295					$	132,065

(1)The differences between the reportable segment amounts and the consolidated amounts, described as BHE and Other, relate principally to other entities, including MidAmerican Energy Services, LLC, corporate functions and intersegment eliminations.

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue by country:
U.S.			$	6,087					$	5,604					$	11,621					$	11,201
United Kingdom			345						280						660						580
Canada			180						180						361						357
Other			—						—						—						7
Total operating revenue by country			$	6,612					$	6,064					$	12,642					$	12,145

Income before income tax expense (benefit) and equity loss by country:
U.S.			$	3,117					$	2,611					$	2,463					$	2,188
United Kingdom			87						104						226						236
Canada			46						46						92						85
Other			(1)						(1)						(2)						5
Total income before income tax expense (benefit) and equity loss by country			$	3,249					$	2,760					$	2,779					$	2,514

The following table shows the change in the carrying amount of goodwill by reportable segment for the six-month period ended June 30, 2022 (in millions):

																											BHE Pipeline Group
			PacifiCorp						MidAmerican Funding						NV Energy						Northern Powergrid												BHE Transmission						BHE Renewables						HomeServices
																																																									Total
December 31, 2021			$	1,129					$	2,102					$	2,369					$	992					$	1,814					$	1,563					$	95					$	1,586											$	11,650
Acquisitions			—						—						—						—						—						—						—						8												8
Foreign currency translation			—						—						—						(70)						—						(29)						—						—												(99)
June 30, 2022			$	1,129					$	2,102					$	2,369					$	922					$	1,814					$	1,534					$	95					$	1,594											$	11,559

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

The following is management's discussion and analysis of certain significant factors that have affected the consolidated financial condition and results of operations of the Company during the periods included herein. Explanations include management's best estimate of the impact of weather, customer growth, usage trends and other factors. This discussion should be read in conjunction with the Company's historical unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q. The Company's actual results in the future could differ significantly from the historical results.

BHE is a holding company that owns a highly diversified portfolio of locally managed businesses principally engaged in the energy industry and is a consolidated subsidiary of Berkshire Hathaway. As of August 4, 2022, Berkshire Hathaway and family members and related or affiliated entities of the late Mr. Walter Scott, Jr., a former member of BHE's Board of Directors, beneficially owned 92% and 8%, respectively, of BHE's common stock.

Berkshire Hathaway Energy's operations are organized as eight business segments: PacifiCorp, MidAmerican Funding (which primarily consists of MidAmerican Energy), NV Energy (which primarily consists of Nevada Power and Sierra Pacific), Northern Powergrid (which primarily consists of Northern Powergrid (Northeast) plc and Northern Powergrid (Yorkshire) plc), BHE Pipeline Group (which primarily consists of BHE GT&S, Northern Natural Gas and Kern River), BHE Transmission (which consists of BHE Canada (which primarily consists of AltaLink) and BHE U.S. Transmission), BHE Renewables and HomeServices. BHE, through these locally managed and operated businesses, owns four utility companies in the U.S. serving customers in 11 states, two electricity distribution companies in Great Britain, five interstate natural gas pipeline companies, one of which owns a liquefied natural gas ("LNG") export, import and storage facility, in the U.S., an electric transmission business in Canada, interests in electric transmission businesses in the U.S., a renewable energy business primarily investing in wind, solar, geothermal and hydroelectric projects, the largest residential real estate brokerage firm in the U.S. and one of the largest residential real estate brokerage franchise networks in the U.S. The reportable segment financial information includes all necessary adjustments and eliminations needed to conform to the Company's significant accounting policies. The differences between the reportable segment amounts and the consolidated amounts, described as BHE and Other, relate principally to other entities, including MidAmerican Energy Services, LLC, corporate functions and intersegment eliminations.

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Results of Operations for the Second Quarter and First Six Months of 2022 and 2021

Overview

Operating revenue and earnings on common shares for the Company's reportable segments are summarized as follows (in millions):

			Second Quarter																								First Six Months
			2022						2021						Change												2022						2021						Change
Operating revenue:
PacifiCorp			$	1,314					$	1,298					$	16					1		%				$	2,611					$	2,540					$	71					3		%
MidAmerican Funding			897						693						204						29						1,902						1,760						142						8
NV Energy			899						767						132						17						1,592						1,358						234						17
Northern Powergrid			345						280						65						23						660						580						80						14
BHE Pipeline Group			856						706						150						21						1,891						1,799						92						5
BHE Transmission			183						182						1						1						366						362						4						1
BHE Renewables			294						267						27						10						461						457						4						1
HomeServices			1,672						1,763						(91)						(5)						2,879						2,995						(116)						(4)
BHE and Other			152						108						44						41						280						294						(14)						(5)
Total operating revenue			$	6,612					$	6,064					$	548					9		%				$	12,642					$	12,145					$	497					4		%
Earnings on common shares:
PacifiCorp			$	83					$	226					$	(143)					(63)		%				$	213					$	395					$	(182)					(46)		%
MidAmerican Funding			204						211						(7)						(3)						445						355						90						25
NV Energy			93						100						(7)						(7)						122						134						(12)						(9)
Northern Powergrid			71						(25)						96						*						182						79						103						*
BHE Pipeline Group			199						100						99						99						521						483						38						8
BHE Transmission			62						60						2						3						124						119						5						4
BHE Renewables(1)			249						181						68						38						353						197						156						79
HomeServices			84						135						(51)						(38)						105						219						(114)						(52)
BHE and Other			1,839						1,256						583						46						674						229						445						*
Total earnings on common shares			$	2,884					$	2,244					$	640					29		%				$	2,739					$	2,210					$	529					24		%

(1)Includes the tax attributes of disregarded entities that are not required to pay income taxes and the earnings of which are taxable directly to BHE.

*    Not meaningful

Earnings on common shares increased $640 million for the second quarter of 2022 compared to 2021. The second quarter of 2022 included a pre-tax unrealized gain of $2,557 million ($2,020 million after-tax) compared to a pre-tax unrealized gain in the second quarter of 2021 of $1,954 million ($1,420 million after-tax) on the Company's investment in BYD Company Limited. Excluding the impact of this item, adjusted earnings on common shares for the second quarter of 2022 was $864 million, an increase of $40 million, or 5%, compared to adjusted earnings on common shares in the second quarter of 2021 of $824 million.

Earnings on common shares increased $529 million for the first six months of 2022 compared to 2021. The first six months of 2022 included a pre-tax unrealized gain of $1,310 million ($1,035 million after-tax) compared to a pre-tax unrealized gain in the first six months of 2021 of $830 million ($602 million after-tax) on the Company's investment in BYD Company Limited. Excluding the impact of this item, adjusted earnings on common shares for the first six months of 2022 was $1,704 million, an increase of $96 million, or 6%, compared to adjusted earnings on commons shares in the first six months of 2021 of $1,608 million.

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The increases in earnings on common shares for the second quarter and for the first six months of 2022 compared to 2021 were primarily due to the following:

•The Utilities' earnings decreased $157 million for the second quarter and $104 million for the first six months of 2022 compared to 2021, reflecting higher operations and maintenance expense, higher depreciation and amortization expense and unfavorable investment earnings, partially offset by higher electric utility margin and a favorable income tax benefit from higher PTCs recognized. Electric retail customer volumes increased 1.3% for the first six months of 2022 compared to 2021, primarily due to higher customer usage and an increase in the average number of customers;

•Northern Powergrid's earnings increased $96 million for the second quarter and $103 million for the first six months of 2022 compared to 2021, primarily due to a deferred income tax charge of $109 million related to a June 2021 enacted increase in the United Kingdom corporate income tax rate from 19% to 25% effective April 1, 2023;

•BHE Pipeline Group's earnings increased $99 million for the second quarter and $38 million for the first six months of 2022 compared to 2021, largely due to higher earnings at BHE GT&S from favorable state unitary income tax adjustments, the impacts of the EGTS general rate case and lower operations and maintenance expense. In addition, earnings for the first six months decreased from the effects of higher margins on natural gas sales and higher transportation revenue in the first quarter of 2021 at Northern Natural Gas from the February 2021 polar vortex weather event;

•BHE Renewables' earnings increased $68 million for the second quarter and $156 million for the first six months of 2022 compared to 2021, primarily due to higher operating revenue from owned renewable energy projects and higher earnings from tax equity investments, with the first six months being positively impacted by the unfavorable impacts in the first quarter of 2021 from the February 2021 polar vortex weather event;

•HomeServices' earnings decreased $51 million for the second quarter and $114 million for the first six months of 2022 compared to 2021, reflecting lower earnings from mortgage services mainly from a decrease in funded volumes and lower earnings from brokerage and settlement services largely attributable to a decrease in closed units at existing companies; and

•BHE and Other's earnings increased $583 million for the second quarter and $445 million for the first six months of 2022 compared to 2021, mainly due to $600 million and $433 million, respectively, of favorable changes in the after-tax unrealized position of the Company's investment in BYD Company Limited and lower dividends on BHE's 4.00% Perpetual Preferred Stock issued to certain subsidiaries of Berkshire Hathaway, partially offset by lower federal income tax credits recognized on a consolidated basis.

Reportable Segment Results

PacifiCorp

Operating revenue increased $16 million for the second quarter of 2022 compared to 2021, primarily due to higher wholesale and other revenue of $30 million, partially offset by lower retail revenue of $14 million. Wholesale and other revenue increased primarily due to higher average wholesale prices and higher wheeling revenue. Retail revenue decreased primarily due to lower retail volumes of $42 million, partially offset by price impacts of $28 million from higher average retail rates primarily due to tariff changes. Retail customer volumes decreased 3.3%, primarily due to the unfavorable impact of weather and lower customer usage, partially offset by an increase in the average number of customers.

Earnings decreased $143 million for the second quarter of 2022 compared to 2021, primarily due to higher operations and maintenance expense of $120 million, an unfavorable income tax benefit and unfavorable changes in the cash surrender value of corporate-owned life insurance policies, partially offset by higher utility margin of $6 million. Operations and maintenance expense increased mainly due to an increase in the loss accruals associated with the September 2020 wildfires, net of estimated insurance recoveries, and higher general and plant maintenance costs. Utility margin increased primarily due to lower purchased power costs and the higher wholesale and other revenue, partially offset by higher thermal generation costs, the lower retail revenue and lower deferred net power costs in accordance with established adjustment mechanisms. The unfavorable income tax benefit was largely due to lower PTCs recognized of $22 million and the effects of ratemaking of $18 million.

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Operating revenue increased $71 million for the first six months of 2022 compared to 2021, primarily due to higher wholesale and other revenue of $45 million and higher retail revenue of $26 million. Wholesale and other revenue increased primarily due to higher average wholesale prices and higher wheeling revenue. Retail revenue increased primarily due to price impacts of $43 million from higher average retail rates largely due to tariff changes, partially offset by lower retail volumes of $17 million. Retail customer volumes decreased 0.7%, primarily due to the unfavorable impact of weather and lower customer usage, partially offset by an increase in the average number of customers.

Earnings decreased $182 million for the first six months of 2022 compared to 2021, primarily due to higher operations and maintenance expense of $138 million, an unfavorable income tax benefit, higher depreciation and amortization expense of $20 million, mainly from additional assets placed in-service, and unfavorable changes in the cash surrender value of corporate-owned life insurance policies, partially offset by higher utility margin of $20 million. Operations and maintenance expense increased mainly due to an increase in loss accruals related to the September 2020 wildfires, net of estimated insurance recoveries, and higher general and plant maintenance costs. Utility margin increased primarily due to the higher retail, wholesale and other revenues, partially offset by higher thermal generation costs. The unfavorable income tax benefit was largely due to lower PTCs recognized of $27 million and the effects of ratemaking of $27 million.

MidAmerican Funding

Operating revenue increased $204 million for the second quarter of 2022 compared to 2021, primarily due to higher electric operating revenue of $139 million and higher natural gas operating revenue of $65 million. Electric operating revenue increased due to higher retail revenue of $77 million and higher wholesale and other revenue of $62 million. Electric retail revenue increased primarily due to higher recoveries through adjustment clauses of $59 million (fully offset in expense, primarily cost of sales) and higher customer volumes of $11 million. Electric wholesale and other revenue increased mainly due to higher average wholesale per-unit prices of $59 million. Electric retail customer volumes increased 3.3% due to higher customer usage and the favorable impact of weather. Natural gas operating revenue increased due to higher purchased gas adjustment recoveries of $63 million (fully offset in cost of sales), primarily from a higher average per-unit cost of natural gas sold.

Earnings decreased $7 million for the second quarter of 2022 compared to 2021, primarily due to higher depreciation and amortization expense of $68 million, unfavorable changes in the cash surrender value of corporate-owned life insurance policies, higher operations and maintenance expense of $16 million and higher interest expense of $5 million, partially offset by higher electric utility margin of $68 million, a favorable income tax benefit and higher allowances for equity and borrowed funds used during construction of $9 million. Depreciation and amortization expense increased primarily from the impacts of certain regulatory mechanisms and additional assets placed in-service. Electric utility margin increased primarily due to the higher retail and wholesale revenues, partially offset by higher purchased power costs. The favorable income tax benefit was largely due to higher PTCs recognized of $39 million from higher wind-powered generation, partially offset by the effects of ratemaking.

Operating revenue increased $142 million for the first six months of 2022 compared to 2021, primarily due to higher electric operating revenue of $202 million, partially offset by lower natural gas operating revenue of $51 million. Electric operating revenue increased due to higher wholesale and other revenue of $105 million and higher retail revenue of $97 million. Electric wholesale and other revenue increased mainly due to higher average wholesale per-unit prices of $78 million and higher wholesale volumes of $28 million. Electric retail revenue increased primarily due to higher recoveries through adjustment clauses of $63 million (fully offset in expense, primarily cost of sales) and higher customer volumes of $28 million. Electric retail customer volumes increased 4.4% due to higher customer usage and the favorable impact of weather. Natural gas operating revenue decreased due to lower purchased gas adjustment recoveries of $71 million (fully offset in cost of sales), primarily from a lower average per-unit cost of natural gas sold driven largely by the February 2021 polar vortex weather event, partially offset by the impacts of certain regulatory recovery mechanisms of $5 million, the impacts of tax reform of $5 million and the favorable impact of weather of $5 million.

Earnings increased $90 million for the first six months of 2022 compared to 2021, primarily due to higher electric utility margin of $157 million, a favorable income tax benefit, higher natural gas utility margin of $20 million and higher allowances for equity and borrowed funds used during construction of $20 million, partially offset by higher depreciation and amortization expense of $111 million, unfavorable changes in the cash surrender value of corporate-owned life insurance policies, higher operations and maintenance expense of $15 million, higher interest expense of $9 million and lower nonregulated utility margin of $8 million. Electric utility margin increased primarily due to the higher wholesale and retail revenues, partially offset by higher purchased power costs. The favorable income tax benefit was mainly due to higher PTCs recognized of $91 million from higher wind-powered generation, partially offset by the effects of ratemaking. Depreciation and amortization expense increased primarily from the impacts of certain regulatory mechanisms and additional assets placed in-service.

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NV Energy

Operating revenue increased $132 million for the second quarter of 2022 compared to 2021, primarily due to higher electric operating revenue of $123 million and higher natural gas operating revenue of $8 million. Electric operating revenue increased primarily due to higher fully-bundled energy rates (fully offset in cost of sales) of $121 million and higher regulatory-related revenue deferrals of $11 million, partially offset by unfavorable price impacts from changes in sales mix of $12 million. Electric retail customer volumes increased 0.4%, primarily due to an increase in the average number of customers, partially offset by the unfavorable impact of weather. Natural gas operating revenue increased primarily due to a higher average per-unit cost of natural gas sold (fully offset in cost of sales).

Earnings decreased $7 million for the second quarter of 2022 compared to 2021, mainly due to unfavorable changes in the cash surrender value of corporate-owned life insurance policies, higher depreciation and amortization expense of $3 million, primarily from additional plant placed in-service, and higher operations and maintenance expense of $2 million, primarily from an unfavorable change in earnings sharing at the Nevada Utilities, partially offset by higher interest and dividend income of $9 million, primarily from carrying charges on regulatory balances.

Operating revenue increased $234 million for the first six months of 2022 compared to 2021, primarily due to higher electric operating revenue of $213 million and higher natural gas operating revenue of $21 million. Electric operating revenue increased primarily due to higher fully-bundled energy rates (fully offset in cost of sales) of $209 million, higher regulatory-related revenue deferrals of $8 million and higher transmission and wholesale revenue of $5 million, partially offset by unfavorable price impacts from changes in sales mix of $7 million. Electric retail customer volumes increased 2.0%, primarily due to an increase in the average number of customers and higher customer usage, partially offset by the unfavorable impact of weather. Natural gas operating revenue increased primarily due to a higher average per-unit cost of natural gas sold (fully offset in cost of sales).

Earnings decreased $12 million for the first six months of 2022 compared to 2021, mainly due to unfavorable changes in the cash surrender value of corporate-owned life insurance policies, higher operations and maintenance expense of $8 million, primarily from an unfavorable change in earnings sharing at the Nevada Utilities and increased plant operations and maintenance expenses, and higher depreciation and amortization expense of $6 million, primarily from additional plant placed in-service, partially offset by higher interest and dividend income of $14 million, primarily from carrying charges on regulatory balances.

Northern Powergrid

Operating revenue increased $65 million for the second quarter of 2022 compared to 2021, primarily due to higher distribution revenue of $60 million and revenue from a gas project that commenced commercial operation in March 2022 totaling $40 million, partially offset by $40 million from the stronger U.S. dollar. Distribution revenue increased due to the recovery of Supplier of Last Resort payments totaling $45 million (fully offset in cost of sales) and higher tariff rates of $25 million, partially offset by a 4.0% decline in units distributed of $9 million.

Earnings increased $96 million for the second quarter of 2022 compared to 2021, primarily due to a deferred income tax charge of $109 million related to a June 2021 enacted increase in the United Kingdom corporate income tax rate from 19% to 25% effective April 1, 2023 and the higher distribution tariff rates, partially offset by higher distribution-related operating and depreciation expenses of $27 million, including higher storm-related costs, $9 million from the stronger U.S. dollar and the decline in units distributed.

Operating revenue increased $80 million for the first six months of 2022 compared to 2021, primarily due to higher distribution revenue of $70 million and revenue from a gas project that commenced commercial operation in March 2022 totaling $50 million, partially offset by $45 million from the stronger U.S. dollar. Distribution revenue increased due to the recovery of Supplier of Last Resort payments totaling $45 million (fully offset in cost of sales) and higher tariff rates of $39 million, partially offset by a 3.3% decline in units distributed of $12 million.

Earnings increased $103 million for the first six months of 2022 compared to 2021, primarily due to a deferred income tax charge of $109 million related to a June 2021 enacted increase in the United Kingdom corporate income tax rate from 19% to 25% effective April 1, 2023 and the higher distribution tariff rates, partially offset by higher distribution-related operating and depreciation expenses of $27 million, including higher storm-related costs, the decline in units distributed and $8 million from the stronger U.S. dollar.

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BHE Pipeline Group

Operating revenue increased $150 million for the second quarter of 2022 compared to 2021, primarily due to higher non-regulated revenue of $58 million (largely offset in cost of sales) at BHE GT&S from favorable pricing, an increase in regulated gas transportation and storage services rates due to an agreement in principle for EGTS' general rate case of $25 million, higher LNG variable revenue of $25 million at Cove Point, higher transportation revenue of $17 million at Northern Natural Gas due to higher volumes and rates and higher gas sales of $9 million (largely offset in cost of sales) related to system balancing activities at Northern Natural Gas.

Earnings increased $99 million for the second quarter of 2022 compared to 2021, primarily due to higher earnings of $90 million at BHE GT&S largely due to favorable state unitary income tax adjustments, the impacts of the EGTS general rate case, lower operations and maintenance expense, favorable valuations of system gas and higher margin from non-regulated activities.

Operating revenue increased $92 million for the first six months of 2022 compared to 2021, primarily due to higher non-regulated revenue of $69 million (largely offset in cost of sales) at BHE GT&S from favorable pricing, higher LNG variable revenue of $38 million at Cove Point and an increase in regulated gas transportation and storage services rates due to an agreement in principle for EGTS' general rate case of $25 million, partially offset by lower gas sales of $32 million related to system balancing activities at Northern Natural Gas, lower gas sales of $17 million at EGTS used for operational and system balancing purposes and lower transportation revenue of $3 million at Northern Natural Gas. The variances in gas sales and transportation revenue at Northern Natural Gas included favorable impacts recognized in the first quarter of 2021 of $77 million and $49 million, respectively, from the February 2021 polar vortex weather event. Excluding this item, gas sales increased $45 million (largely offset in cost of sales) and transportation revenue increased $46 million due to higher volumes and rates.

Earnings increased $38 million for the first six months of 2022 compared to 2021, primarily due to higher earnings of $99 million at BHE GT&S, partially offset by lower earnings of $60 million at Northern Natural Gas. Earnings at BHE GT&S increased mainly due to favorable state unitary income tax adjustments, the impacts of the EGTS general rate case, lower operations and maintenance expense, favorable property tax assessments, increased earnings at Cove Point and higher margin from non-regulated activities. Earnings at Northern Natural Gas decreased as the higher gross margin on gas sales and higher transportation revenue in the first quarter of 2021 from the February 2021 polar vortex weather event were partially offset by the favorable transportation revenue due to higher volumes and rates.

BHE Transmission

Operating revenue increased $1 million for the second quarter and $4 million for the first six months of 2022 compared to 2021, primarily due to higher non-regulated revenue and higher revenue at AltaLink from recovery of higher costs, partially offset by $7 million from the weaker U.S. dollar.

Earnings increased $2 million for the second quarter and $5 million for the first six months of 2022 compared to 2021, primarily due to the higher non-regulated revenue and improved equity earnings at Electric Transmission Texas, LLC, partially offset by $2 million from the weaker U.S. dollar.

BHE Renewables

Operating revenue increased $27 million for the second quarter of 2022 compared to 2021, primarily due to higher wind, geothermal and solar revenues of $51 million from higher generation and pricing, partially offset by unfavorable changes in the valuation of certain derivative contracts totaling $14 million and lower natural gas revenues of $13 million from lower generation.

Earnings increased $68 million for the second quarter of 2022 compared to 2021, primarily due to higher wind earnings of $58 million and higher geothermal earnings of $11 million, largely due to the higher operating revenue and lower maintenance costs. Wind earnings increased primarily due to higher earnings from owned projects of $31 million, largely from the higher operating revenue and favorable production tax credits offset by the unfavorable derivative contract valuations, and higher earnings from tax equity investments of $27 million, mainly from higher production tax credits offset by unfavorable performance.

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Operating revenue increased $4 million for the first six months of 2022 compared to 2021, primarily due to higher wind, geothermal and solar revenues of $77 million from higher generation and pricing, partially offset by unfavorable changes in the valuation of certain derivative contracts totaling $57 million, lower natural gas revenues of $10 million from lower generation and lower hydro revenues of $6 million due to the transfer of the Casecnan generating facility to the Philippine National Irrigation Administration in December 2021.

Earnings increased $156 million for the first six months of 2022 compared to 2021, primarily due to higher wind earnings of $150 million, higher solar earnings of $10 million, mainly due to the higher operating revenue, and higher geothermal earnings of $9 million, largely due to the higher operating revenue and lower maintenance costs, partially offset by lower hydro earnings of $10 million due to the Casecnan generating facility transfer. Wind earnings increased primarily due to higher earnings from tax equity investments of $123 million, mainly as a result of the unfavorable impacts in the first quarter of 2021 from the February 2021 polar vortex weather event and higher production tax credits offset by unfavorable performance, and higher earnings from owned projects of $27 million, largely from the higher operating revenue and favorable production tax credits offset by the unfavorable derivative contract valuations.

HomeServices

Operating revenue decreased $91 million for the second quarter of 2022 compared to 2021, primarily due to lower mortgage revenue of $63 million from a 29% decrease in funded volume due to a decline in refinance activity and lower brokerage and settlement services revenue of $26 million from a decrease in closed transaction volumes.

Earnings decreased $51 million for the second quarter of 2022 compared to 2021, primarily due to lower earnings from brokerage and settlement services of $33 million, largely attributable to the decrease in closed units at existing companies, and lower earnings from mortgage services of $22 million from the decrease in funded volume.

Operating revenue decreased $116 million for the first six months of 2022 compared to 2021, primarily due to lower mortgage revenue of $160 million from a 34% decrease in funded volume due to a decline in refinance activity, partially offset by higher brokerage revenue of $67 million from a 3% increase in closed transaction volume. The increase in brokerage volume was due to acquisitions and a 10% increase in average sales price at existing companies offset by 15% fewer closed units at existing companies.

Earnings decreased $114 million for the first six months of 2022 compared to 2021, primarily due to lower earnings from mortgage services of $71 million and lower earnings from brokerage and settlement services of $49 million due to the decrease in closed units at existing companies. Earnings from mortgage services were lower primarily due to the decrease in funded volumes, partially offset by favorable operating expense variances.

BHE and Other

Operating revenue increased $44 million for the second quarter of 2022 compared to 2021, primarily due to higher electricity and natural gas sales revenue at MidAmerican Energy Services, LLC, from favorable pricing and higher electricity volumes offset by lower natural gas volumes.

Earnings increased $583 million for the second quarter of 2022 compared to 2021, primarily due to the $600 million favorable comparative change in the after-tax unrealized position of the Company's investment in BYD Company Limited, lower corporate costs and $25 million of lower dividends on BHE's 4.00% Perpetual Preferred Stock issued to certain subsidiaries of Berkshire Hathaway, partially offset by $41 million of lower federal income tax credits recognized on a consolidated basis, unfavorable changes in the cash surrender value of corporate-owned life insurance policies and higher BHE corporate interest expense from an April 2022 debt issuance.

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Operating revenue decreased $14 million for the first six months of 2022 compared to 2021, primarily due to lower electricity sales revenue at MidAmerican Energy Services, LLC, from unfavorable pricing offset by higher volumes, partially offset by higher natural gas sales revenue at MidAmerican Energy Services, LLC, from favorable pricing offset by lower volumes.

Earnings increased $445 million for the first six months of 2022 compared to 2021, primarily due to the $433 million favorable comparative change in the after-tax unrealized position of the Company's investment in BYD Company Limited, lower corporate costs, $46 million of lower dividends on BHE's 4.00% Perpetual Preferred Stock issued to certain subsidiaries of Berkshire Hathaway and higher earnings of $45 million at MidAmerican Energy Services, LLC, mainly due to favorable changes in unrealized positions on derivative contracts, partially offset by $95 million of lower federal income tax credits recognized on a consolidated basis, unfavorable changes in the cash surrender value of corporate-owned life insurance policies and higher BHE corporate interest expense from an April 2022 debt issuance.

Liquidity and Capital Resources

Each of BHE's direct and indirect subsidiaries is organized as a legal entity separate and apart from BHE and its other subsidiaries. It should not be assumed that the assets of any subsidiary will be available to satisfy BHE's obligations or the obligations of its other subsidiaries. However, unrestricted cash or other assets that are available for distribution may, subject to applicable law, regulatory commitments and the terms of financing and ring-fencing arrangements for such parties, be advanced, loaned, paid as dividends or otherwise distributed or contributed to BHE or affiliates thereof. The Company's long-term debt may include provisions that allow BHE or its subsidiaries to redeem such debt in whole or in part at any time. These provisions generally include make-whole premiums. Refer to Note 18 of Notes to Consolidated Financial Statements in Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion regarding the limitation of distributions from BHE's subsidiaries.

As of June 30, 2022, the Company's total net liquidity was as follows (in millions):

																																													BHE Pipeline
															MidAmerican						NV						Northern						BHE												Group and
			BHE						PacifiCorp						Funding						Energy						Powergrid						Canada						HomeServices						Other						Total
Cash and cash equivalents			$	61					$	390					$	497					$	83					$	327					$	60					$	294					$	369					$	2,081
Credit facilities(1)			3,500						1,200						1,509						650						259						835						3,400						—						11,353
Less:
Short-term debt			(385)						—						—						—						(15)						(378)						(1,170)						—						(1,948)
Tax-exempt bond support and letters of credit			—						(218)						(370)						—						—						(1)						—						—						(589)
Net credit facilities			3,115						982						1,139						650						244						456						2,230						—						8,816
Total net liquidity			$	3,176					$	1,372					$	1,636					$	733					$	571					$	516					$	2,524					$	369					$	10,897
Credit facilities:
Maturity dates			2025						2025						2023, 2025						2025						2024, 2026						2023, 2026						2022, 2023, 2026

(1)Includes $15 million drawn on a capital expenditure credit facility at Northern Powergrid Holdings.

Operating Activities

Net cash flows from operating activities for the six-month periods ended June 30, 2022 and 2021 were $5.1 billion and $4.2 billion, respectively. The increase was primarily due to changes in working capital and favorable income tax cash flows.

The timing of the Company's income tax cash flows from period to period can be significantly affected by the estimated federal income tax payment methods selected and assumptions made for each payment date.

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Investing Activities

Net cash flows from investing activities for the six-month periods ended June 30, 2022 and 2021 were $(3.5) billion and $(3.0) billion, respectively. The change was primarily due to higher capital expenditures of $534 million. Refer to "Future Uses of Cash" for a discussion of capital expenditures.

Financing Activities

Net cash flows from financing activities for the six-month period ended June 30, 2022 was $(605) million. Sources of cash totaled $2,188 million and consisted of proceeds from subsidiary debt issuances totaling $1.2 billion and proceeds from BHE senior debt issuances totaling $987 million. Uses of cash totaled $2,793 million and consisted mainly of purchases of common stock totaling $870 million, preferred stock redemptions of $800 million, repayments of subsidiary debt totaling $542 million, distributions to noncontrolling interests of $246 million and net repayments of short-term debt totaling $54 million.

For discussions of recent financing and BHE shareholders' equity transactions, refer to Notes 4 and 10 of Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

Net cash flows from financing activities for the six-month period ended June 30, 2021 was $(1.2) billion. Sources of cash totaled $784 million and consisted of proceeds from subsidiary debt issuances totaling $539 million and net proceeds from short-term debt of $245 million. Uses of cash totaled $2.0 billion and consisted mainly of repayments of subsidiary debt totaling $1.2 billion, repayments of BHE senior debt totaling $450 million and distributions to noncontrolling interests of $234 million.

Future Uses of Cash

The Company has available a variety of sources of liquidity and capital resources, both internal and external, including net cash flows from operating activities, public and private debt offerings, the issuance of commercial paper, the use of unsecured revolving credit facilities, the issuance of equity and other sources. These sources are expected to provide funds required for current operations, capital expenditures, acquisitions, investments, debt retirements and other capital requirements. The availability and terms under which BHE and each subsidiary has access to external financing depends on a variety of factors, including regulatory approvals, its credit ratings, investors' judgment of risk and conditions in the overall capital markets, including the condition of the utility industry and project finance markets, among other items.

Capital Expenditures

The Company has significant future capital requirements. Capital expenditure needs are reviewed regularly by management and may change significantly as a result of these reviews, which may consider, among other factors, impacts to customers' rates; changes in environmental and other rules and regulations; outcomes of regulatory proceedings; changes in income tax laws; general business conditions; load projections; system reliability standards; the cost and efficiency of construction labor, equipment and materials; commodity prices; and the cost and availability of capital.

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The Company's historical and forecast capital expenditures, each of which exclude amounts for non-cash equity AFUDC and other non-cash items, are as follows (in millions):

			Six-Month Periods												Annual
			Ended June 30,												Forecast
			2021						2022						2022
Capital expenditures by business:
PacifiCorp			$	819					$	894					$	2,279
MidAmerican Funding			720						862						1,913
NV Energy			365						541						1,228
Northern Powergrid			369						450						776
BHE Pipeline Group			308						457						1,252
BHE Transmission			156						95						210
BHE Renewables			80						60						185
HomeServices			18						20						55
BHE and Other(1)			13						3						16
Total			$	2,848					$	3,382					$	7,914

Capital expenditures by type:
Wind generation			$	483					$	300					$	886
Electric distribution			817						815						1,763
Electric transmission			339						620						1,773
Natural gas transmission and storage			308						336						976
Solar generation			67						100						230
Other			834						1,211						2,286
Total			$	2,848					$	3,382					$	7,914

(1)BHE and Other represents amounts related principally to other entities, including MidAmerican Energy Services, LLC, corporate functions and intersegment eliminations.

The Company's historical and forecast capital expenditures consisted mainly of the following:

•Wind generation includes both growth and operating expenditures. Growth expenditures include spending for the following:

◦Construction of wind-powered generating facilities at MidAmerican Energy totaling $5 million and $172 million for the six-month periods ended June 30, 2022 and 2021, respectively. Planned spending for the construction of additional wind-powered generating facilities totals $106 million for the remainder of 2022.

◦Repowering of wind-powered generating facilities at MidAmerican Energy totaling $214 million and $82 million for the six-month periods ended June 30, 2022 and 2021, respectively. Planned spending for the repowering of wind-powered generating facilities totals $314 million for the remainder of 2022. MidAmerican Energy expects its repowered facilities to meet Internal Revenue Service guidelines for the re-establishment of PTCs for 10 years from the date the facilities are placed in-service. The rate at which PTCs are re-established for a facility depends upon the date construction begins. Of the 593 MWs of current repowering projects not in-service as of June 30, 2022, 292 MWs are currently expected to qualify for 80% of the PTCs available for 10 years following each facility's return to service and 301 MWs are expected to qualify for 60% of such credits.

◦Construction of wind-powered generating facilities at PacifiCorp totaling $4 million and $79 million for the six-month periods ended June 30, 2022 and 2021, respectively. Construction includes 516 MWs of new wind-powered generating facilities that were placed in-service in 2021. Planned spending for the construction of additional wind-powered generating facilities totals $24 million for the remainder of 2022. The energy production from the new wind-powered generating facilities placed in-service by the end of 2024 is expected to qualify for 60% of the federal PTCs available for 10 years once the equipment is placed in-service.

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◦Planned acquisition and repowering of two wind-powered generating facilities by PacifiCorp totaling $7 million and $2 million (excluding the 2021 sale of wind turbines) for the six-month periods ended June 30, 2022 and 2021, respectively. In 2021, PacifiCorp sold wind turbines previously acquired from a third party to BHE Wind, LLC, an indirect wholly owned subsidiary of BHE, for $6 million. The repowered facilities are expected to be placed in-service in 2023 and 2024. Planned spending for acquiring and repowering generating facilities totals $14 million for the remainder of 2022.

◦Repowering of wind-powered generating facilities at BHE Renewables totaling $45 million for the six-month period ended June 30, 2022. Planned spending for repowering generating facilities totals $43 million for the remainder of 2022.

•Electric distribution includes both growth and operating expenditures. Growth expenditures include spending for new customer connections and enhancements to existing customer connections. Operating expenditures include spending for ongoing distribution systems infrastructure needed at the Utilities and Northern Powergrid, wildfire mitigation, storm damage restoration and repairs and investments in routine expenditures for distribution needed to serve existing and expected demand.

•Electric transmission includes both growth and operating expenditures. Growth expenditures include spending for the following:

◦PacifiCorp's transmission investment primarily reflects planned costs for the 416-mile, 500-kV high-voltage transmission line between the Aeolus substation near Medicine Bow, Wyoming and the Clover substation near Mona, Utah; the 59-mile, 230-kV high-voltage transmission line between the Windstar substation near Glenrock, Wyoming and the Aeolus substation; and the 290-mile, 500-kV high-voltage transmission line from the Longhorn substation near Boardman, Oregon to the Hemingway substation near Boise, Idaho. Expenditures for these segments totaled $296 million and $35 million for the six-month periods ended June 30, 2022 and 2021, respectively. Planned spending for these Energy Gateway Transmission segments to be placed in-service in 2024-2026 totals $614 million for the remainder of 2022.

◦Nevada Utilities' Greenlink Nevada transmission expansion program. In this project, the company has received approval from the PUCN to build a 350-mile, 525-kV transmission line, known as Greenlink West, connecting the Ft. Churchill substation to the Northwest substation to the Harry Allen substation; a 235-mile, 525-kV transmission line, known as Greenlink North, connecting the new Ft. Churchill substation to the Robinson Summit substation; a 46-mile, 345-kV transmission line from the new Ft. Churchill substation to the Mira Loma substations; and a 38-mile, 345-kV transmission line from the new Ft. Churchill substation to the Robinson Summit substations. Expenditures for the expansion program and other growth projects totaled $60 million and $41 million for the six-month periods ended June 30, 2022 and 2021, respectively. Planned spending for the expansion program estimated to be placed in-service in 2026-2028 and other growth projects totals $109 million for the remainder of 2022.

◦Operating expenditures include spending for system reinforcement, upgrades and replacements of facilities to maintain system reliability and investments in routine expenditures for transmission needed to serve existing and expected demand.

•Natural gas transmission and storage includes both growth and operating expenditures. Growth expenditures include, among other items, spending for the Northern Natural Gas Twin Cities Area Expansion and Spraberry Compression projects. Operating expenditures include, among other items, spending for asset modernization, pipeline integrity projects and natural gas transmission, storage and liquefied natural gas terminalling infrastructure needs to serve existing and expected demand.

•Solar generation includes growth expenditures, including spending for the following:

◦Construction of solar-powered generating facilities at MidAmerican Energy totaling 141 MWs of small- and utility-scale solar generation, with total spend of $77 million and $63 million for the six-month periods ended June 30, 2022 and 2021, respectively and planned spending of $63 million for the remainder of 2022.

◦Construction of a solar-powered generating facility at Nevada Power totaling $23 million and $5 million for the six-month periods ended June 30, 2022 and 2021, respectively and planned spending of $67 million for the remainder of 2022. Construction includes expenditures for a 150-MW solar photovoltaic facility with an additional 100 MWs of co-located battery storage that will be developed in Clark County, Nevada. Commercial operation is expected by the end of 2023.

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•Other capital expenditures includes both growth and operating expenditures, including spending for routine expenditures for generation and other infrastructure needed to serve existing and expected demand, natural gas distribution, technology, and environmental spending relating to emissions control equipment and the management of coal combustion residuals.

Material Cash Requirements

As of June 30, 2022, there have been no material changes in cash requirements from the information provided in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021, other than those disclosed in Notes 4 and 8 of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

Quad Cities Generating Station Operating Status

Constellation Energy Corp. ("Constellation Energy," previously Exelon Generation Company, LLC, which was a subsidiary of Exelon Corporation prior to February 1, 2022), the operator of Quad Cities Generating Station Units 1 and 2 ("Quad Cities Station") of which MidAmerican Energy has a 25% ownership interest, announced on June 2, 2016, its intention to shut down Quad Cities Station on June 1, 2018. In December 2016, Illinois passed legislation creating a zero emission standard, which went into effect June 1, 2017. The zero emission standard requires the Illinois Power Agency to purchase ZECs and recover the costs from certain ratepayers in Illinois, subject to certain limitations. The proceeds from the ZECs will provide Constellation Energy additional revenue through 2027 as an incentive for continued operation of Quad Cities Station. MidAmerican Energy will not receive additional revenue from the subsidy.

The PJM Interconnection, L.L.C. ("PJM") capacity market includes a Minimum Offer Price Rule ("MOPR"). If a generation resource is subjected to a MOPR, its offer price in the market is adjusted to effectively remove the revenues it receives through a state government-provided financial support program, resulting in a higher offer that may not clear the capacity market. Prior to December 19, 2019, the PJM MOPR applied only to certain new gas-fired resources. An expanded PJM MOPR to include existing resources would require exclusion of ZEC compensation when bidding into future capacity auctions, resulting in an increased risk of Quad Cities Station not receiving capacity revenues in future auctions.

On December 19, 2019, the FERC issued an order requiring the PJM to broadly apply the MOPR to all new and existing resources, including nuclear. This greatly expanded the breadth and scope of the PJM's MOPR, which became effective as of the PJM's capacity auction for the 2022-2023 planning year in May 2021. While the FERC included some limited exemptions, no exemptions were available to state-supported nuclear resources, such as Quad Cities Station. The FERC provided no new mechanism for accommodating state-supported resources other than the existing Fixed Resource Requirement ("FRR") mechanism under which an entire utility zone would be removed from PJM's capacity auction along with sufficient resources to support the load in such zone. In response to the FERC's order, the PJM submitted a compliance filing on March 18, 2020, wherein the PJM proposed tariff language reflecting the FERC's directives and a schedule for resuming capacity auctions. On April 16, 2020, the FERC issued an order largely denying requests for rehearing of the FERC's December 2019 order but granting a few clarifications that required an additional PJM compliance filing, which the PJM submitted on June 1, 2020. A number of parties, including Constellation Energy, have filed petitions for review of the FERC's orders in this proceeding, which remain pending before the D.C. Circuit.

As a result, the MOPR applied to Quad Cities Station in the capacity auction for the 2022-2023 planning year, which prevented Quad Cities Station from clearing in that capacity auction.

At the direction of the PJM Board of Managers, the PJM and its stakeholders developed further MOPR reforms to ensure that the capacity market rules respect and accommodate state resource preferences such as the ZEC programs. The PJM filed related tariff revisions at the FERC on July 30, 2021, and, on September 29, 2021, the PJM's proposed MOPR reforms became effective by operation of law. Under the new tariff provisions, the MOPR will no longer apply to Quad Cities Station. Requests for rehearing of the FERC's notice establishing the effective date for the PJM's proposed market reforms were filed in October 2021 and denied by operation of law on November 4, 2021. Several parties have filed petitions for review of the FERC's orders in this proceeding, which remain pending before the Court of Appeals for the Third Circuit. Constellation Energy is strenuously opposing these appeals.

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Assuming the continued effectiveness of the Illinois zero emission standard, Constellation Energy no longer considers Quad Cities Station to be at heightened risk for early retirement. However, to the extent the Illinois zero emission standard does not operate as expected over its full term, Quad Cities Station would be at heightened risk for early retirement. The FERC's December 19, 2019 order on the PJM MOPR may undermine the continued effectiveness of the Illinois zero emission standard unless the PJM adopts further changes to the MOPR or Illinois implements an FRR mechanism, under which Quad Cities Station would be removed from the PJM's capacity auction.

Regulatory Matters

BHE's regulated subsidiaries and certain affiliates are subject to comprehensive regulation. The discussion below contains material developments to those matters disclosed in Item 1 of each Registrant's Annual Report on Form 10-K for the year ended December 31, 2021 and new regulatory matters occurring in 2022.

PacifiCorp

Oregon

In March 2022, PacifiCorp filed a general rate case requesting an overall rate change of $82 million, or 6.6%, to become effective January 1, 2023, that includes cost increases associated with the implementation of PacifiCorp's wildfire mitigation and vegetation management plans. Parties to the case filed testimony in June 2022. PacifiCorp filed reply testimony in July 2022 supporting an overall rate increase of $94 million but proposing that the request be capped at PacifiCorp's original request. A hearing in the rate case will be held in September 2022 with an order expected in December 2022.

In May 2022, PacifiCorp filed its 2021 power cost adjustment mechanism ("PCAM"), which is the first time since the mechanism has been in place that a rate change has been warranted. After consideration of the mechanism's deadband, sharing band and earnings test, PacifiCorp is requesting recovery of $52 million, or a 4.2% increase, to become effective January 1, 2023. This request is incremental to the rate change sought in the general rate case.

In July 2022, PacifiCorp filed an application requesting approval of an automatic adjustment clause with a balancing account to recover costs associated with implementing PacifiCorp's wildfire protection plan in Oregon. Oregon Senate Bill 762 provides for utilities to timely recover these costs through an automatic adjustment clause. The filing requests a rate increase of $20 million, or 1.6%, to recover incremental costs in 2022. While PacifiCorp requested an effective date of August 24, 2022, the OPUC has suspended the filing for further review.

Washington

In June 2021, PacifiCorp filed a power cost only rate case to update baseline net power costs for 2022. PacifiCorp requested a $13 million, or 3.7%, rate increase with an effective date of January 1, 2022. In November 2021, PacifiCorp reached a proposed settlement with most of the parties, which includes an agreement to adjust the PTC rate in base rates and apply a production factor and to include a net power cost update as part of the compliance filing. A hearing was held in January 2022 and the WUTC issued an order approving the settlement in March 2022. A compliance filing reflecting a $43 million, or 12.2%, increase was filed in April 2022 with rates effective May 1, 2022.

In June 2022, PacifiCorp filed its 2021 PCAM and the new tracking mechanism for PTCs approved in the 2021 general rate case. For the 2021 PCAM, PacifiCorp is requesting recovery of $26 million, or a 6.5% increase. PacifiCorp proposed that the 2021 PCAM be amortized over two years, rather than the one-year period required under the current terms of the PCAM. For the new 2021 PTC tracker, PacifiCorp is seeking recovery of $3 million, or an 0.8% increase. Should the WUTC approve the proposal to extend the amortization period of the 2021 PCAM from one to two years, the combined annual increase would be $16 million, or 4.0%, effective January 1, 2023.

California

In May 2022, PacifiCorp filed a general rate case requesting an overall rate change of $28 million, or 25.7%, to become effective January 1, 2023. In June 2022, a proposed procedural schedule was developed that would result in a decision in August 2023.

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MidAmerican Energy

South Dakota

In May 2022, MidAmerican Energy filed a request with the South Dakota Public Utilities Commission ("SDPUC") for an increase in its South Dakota retail natural gas rates, which would increase revenue by $7 million annually. If approved, the requested rates would increase retail customers' bills by an average of 6.4%.

Wind PRIME

In January 2022, MidAmerican Energy filed an application with the IUB for advance ratemaking principles for Wind PRIME. If approved, MidAmerican Energy expects to proceed with Wind PRIME, which consists of up to 2,042 MWs of new wind generation and up to 50 MWs of solar generation. If all of Wind PRIME generation is constructed, MidAmerican Energy will own over 9,300 MWs of wind generation and nearly 200 MWs of solar generation. Wind PRIME is projected to allow MidAmerican Energy to generate renewable energy greater than or equal to all of its Iowa retail customers' annual energy needs. MidAmerican Energy secured sufficient safe harbor equipment necessary to remain eligible for 60% PTCs under current tax law. Procedural hearings with the IUB are scheduled to begin in October 2022.

NV Energy (Nevada Power and Sierra Pacific)

Regulatory Rate Review

In June 2022, Sierra Pacific filed a regulatory rate review with the PUCN that requested an annual revenue increase of $88 million, or 9.7%. In addition, a filing was made to revise depreciation rates based on a study, the results of which are reflected in the proposed revenue requirement. An order is expected by the end of 2022 and, if approved, would be effective January 1, 2023.

Senate Bill 448 ("SB 448")

SB 448 was signed into law on June 10, 2021. The legislation is intended to accelerate transmission development, renewable energy and storage, and accelerate transportation electrification within the state of Nevada. In September 2021, the Nevada Utilities filed an amendment to the 2021 Joint IRP for the approval of their Transmission Infrastructure for a Clean Energy Economy Plan that sets forth a plan for the construction of high-voltage transmission infrastructure, Greenlink North among others, that will be placed into service no later than December 31, 2028, and requires the IRP to include at least one scenario that uses sources of supply that will achieve certain reductions in carbon dioxide emissions. In September 2021, the Nevada Utilities filed an application for the approval of their Economic Recovery Transportation Electrification Plan to accelerate transportation electrification in the state of Nevada. The plan establishes requirements for the contents of the transportation electrification investment as well as requirements for review, cost recovery and monitoring. The plan covers an initial period beginning January 1, 2022 and ending on December 31, 2024. In November 2021, the PUCN issued an order granting the application and accepting the Economic Recovery Transportation Electrification Plan with some modifications. The PUCN opened rulemakings to address other regulations that resulted from SB 448. In February 2022, the PUCN adopted regulations regarding the Economic Development Electric Rate Rider Program to revise the discounted electric rates to ease the economic burden on small businesses who take advantage of the discounted rates under the tariff. The remaining two SB 448 rulemakings are ongoing.

ON Line Temporary Rider ("ONTR")

In October 2021, Sierra Pacific filed an application with the PUCN for approval of the ONTR with corresponding updates to its electric rate tariffs to authorize recovery of the One Nevada Transmission Line ("ON Line") regulatory asset being accumulated as a result of the ON Line cost reallocation as well as the related on-going reallocated revenue requirement. Sierra Pacific's application would have, if approved by the PUCN as filed, resulted in a one-time rate increase of $28 million to be collected over a nine-month period starting on April 1, 2022. In March 2022, the PUCN issued an order directing Sierra Pacific to recover $14 million of the ON Line regulatory asset as a one-time rate increase collectable over a nine-month period effective April 1, 2022, with the expected remaining balance at December 31, 2022 to be included in rate base in the 2022 regulatory rate review for inclusion in the rates set in that case.

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Merger Application

In March 2022, the Nevada Utilities filed a joint application with the PUCN for authorization to merge Sierra Pacific with and into Nevada Power, with Nevada Power being the surviving entity. If approved by the PUCN as filed, Nevada Power will have two distinct electric service territories in northern and southern Nevada each with their own rates and one natural gas service territory in the Reno and Sparks area. An order is expected in 2022.

Northern Powergrid Distribution Companies

GEMA, through Ofgem, is undertaking its scheduled review of the electricity distribution price control to put in place a new price control at the end of the current period that ends March 2023. The new price control ("ED2") will run for five years from April 2023 to March 2028. In December 2020 and March 2021, GEMA published its decision on the methodology it will use to set ED2. This confirmed that Ofgem will maintain many aspects of the current price control and that the changes being made will generally follow the template that was set by the price controls implemented in April 2021 for transmission and gas distribution in Great Britain. Specific changes include new service standard incentives and mechanisms to adjust cost allowances in specific circumstances, while others will be discontinued, and partially updating the allowed return on equity within the period for changes in the interest rate on government bonds.

In December 2021, Northern Powergrid published and filed its business plan with Ofgem, setting out its detailed approach for 2023-2028 including the cost allowances this approach would require. In June 2022, Ofgem published its draft determinations, which included an allowed cost of equity of 4.75% plus inflation (calculated using the United Kingdom's consumer price index including owner occupiers' housing costs). When placed on a comparable footing, by adjusting for differences in the assumed equity ratio and the measure of inflation used, this working assumption is approximately two percentage points lower than the current cost of equity for electricity distribution. Ofgem's proposals also set out cost allowances and associated expectations. Final values from Ofgem are expected in late 2022.

BHE Pipeline Group

BHE GT&S

In September 2021, EGTS filed a general rate case for its FERC-jurisdictional services, with proposed rates to be effective November 1, 2021. EGTS' previous general rate case was settled in 1998. EGTS proposed an annual cost-of-service of approximately $1.1 billion, and requested increases in various rates, including general system storage rates by 85% and general system transportation rates by 60%. In October 2021, the FERC issued an order that accepted the November 1, 2021 effective date for certain changes in rates, while suspending the other changes for five months following the proposed effective date, until April 1, 2022, subject to refund and the outcome of hearing procedures. In June 2022, the parties reached an agreement in principle and the litigation procedural schedule was ordered held in abeyance for 90 days to enable the parties to finalize a settlement. The settlement is expected to be filed by September 30, 2022. As of June 30, 2022, EGTS' provision for rate refund for April 2022 through June 2022 totaled $35 million and was included in other current liabilities on the Consolidated Balance Sheet.

Northern Natural Gas

In July 2022, Northern Natural Gas filed a general rate case that proposed an overall annual cost-of-service of $1.3 billion. This is an increase of $323 million above the cost of service filed in its 2019 rate case of $1.0 billion. Depreciation on increased rate base and an increase in depreciation and negative salvage rates account for $115 million of the $323 million increase in the filed cost of service. Northern Natural Gas has requested increases in various rates, including transportation reservation rates ranging from approximately 45% in the Field Area to 120% in the Market Area to be implemented, subject to refund, on August 1, 2022. In July 2022, the FERC issued an order that suspended the rates proposed for five months following the proposed effective date, until January 1, 2023, subject to refund and the outcome of hearing procedures.

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BHE Transmission

AltaLink

2022-2023 General Tariff Application

In April 2021, AltaLink filed its 2022-2023 GTA delivering on the last two years of its commitment to keep rates flat for customers at or below the 2018 level of C$904 million for the five-year period from 2019 to 2023. The two-year application achieves flat tariffs by continuing to transition to the AUC-approved salvage recovery method and continuing the use of the flow-through income tax method, with an overall year-over-year increase of approximately 2% in 2022 and 2023 revenue requirements. The application requested the approval of transmission tariffs of C$824 million and C$847 million for 2022 and 2023, respectively. In September 2021, AltaLink provided responses to information requests from the AUC and filed an amended application to reflect certain adjustments and forecast updates. In November 2021, the AUC approved the 2022 interim refundable transmission tariff at C$57 million per month effective January 2022.

In January 2022, the AUC issued its decision with respect to AltaLink's 2022-2023 GTA. AltaLink's 2022-2023 GTA reflected its continued commitment to provide rate stability to customers by maintaining flat tariffs and providing additional tariff relief measures, including a proposed tariff refund of C$60 million of accumulated depreciation in each of 2022 and 2023. The AUC did not approve AltaLink's proposed refund due to an anticipated improvement in general economic conditions in Alberta. In March 2022, AltaLink filed a review and variance application requesting the AUC to review and vary its decision to deny AltaLink's proposed C$120 million refund of accumulated depreciation surplus, given material changes in circumstances since the decision was issued in January 2022. In May 2022, the AUC issued a decision with respect to AltaLink's application to review and vary its proposed $120 million refund of accumulated depreciation surplus. The AUC found that a material decline in Alberta's economic circumstances is not sufficient evidence to warrant the refund. In May 2022, the AUC approved AltaLink's revised total 2022 and 2023 revenue requirement of C$879 million and C$883 million, respectively, allowing AltaLink to fully deliver on its flat-for-five commitment to customers.

2023 Generic Cost of Capital Proceeding

In January 2022, the AUC initiated the 2023 generic cost of capital proceeding. The proceeding will be conducted in two stages. The first stage will determine the cost of capital parameters for 2023 and the second stage will consider returning to a formula-based approach to establish cost of capital adjustments, commencing in 2024. In March 2022, the AUC issued its decision with respect to the first stage of the 2023 GCOC proceeding by approving the extension of the 2022 return on equity of 8.5% and deemed equity ratio of 37% for 2023, recognizing lingering uncertainty and continued volatility of financial markets due to the COVID-19 pandemic. In June 2022, the AUC initiated the second stage to explore a formula-based approach to determine the return on equity for 2024 and future test periods.

Environmental Laws and Regulations

Each Registrant is subject to federal, state, local and foreign laws and regulations regarding climate change, RPS, air and water quality, emissions performance standards, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact each Registrant's current and future operations. In addition to imposing continuing compliance obligations, these laws and regulations provide regulators with the authority to levy substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. These laws and regulations are administered by various federal, state, local and international agencies. Each Registrant believes it is in material compliance with all applicable laws and regulations, although many are subject to interpretation that may ultimately be resolved by the courts. The discussion below contains material developments to those matters disclosed in Item 1 of each Registrant's Annual Report on Form 10-K for the year ended December 31, 2021, and new environmental matters occurring in 2022.

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Climate Change

Affordable Clean Energy Rule

In June 2014, the EPA released proposed regulations to address greenhouse gas emissions from existing fossil-fueled generating facilities, referred to as the Clean Power Plan, under Section 111(d) of the Clean Air Act. The EPA's proposal calculated state-specific emission rate targets to be achieved based on the "best system of emission reduction." In August 2015, the final Clean Power Plan was released, which established the best system of emission reduction as including: (a) heat rate improvements; (b) increased utilization of existing combined-cycle natural gas-fueled generating facilities; and (c) increased deployment of new and incremental non-carbon generation placed in-service after 2012. The Clean Power Plan was stayed by the United States Supreme Court in February 2016 while litigation proceeded. On June 19, 2019, the EPA repealed the Clean Power Plan and issued the Affordable Clean Energy rule. In the Affordable Clean Energy rule, the EPA determined that the best system of emission reduction for existing coal-fueled generating facilities is limited to actions that can be taken at a point source facility, specifically heat rate improvements, and identified a set of candidate technologies and measures that could improve heat rates. Measures taken to meet the standards of performance must be achieved at the source itself. The Affordable Clean Energy rule was challenged by environmental and health groups in the D.C. Circuit. On January 19, 2021, the D.C. Circuit vacated and remanded the Affordable Clean Energy rule to the EPA, finding that the rule "rested critically on a mistaken reading of the Clean Air Act" that limited the best system of emission reduction to actions taken at a facility. In October 2021, the United States Supreme Court agreed to hear an appeal of that decision. Arguments in the case were held February 28, 2022, and on June 30, 2022, the United States Supreme Court issued its decision regarding the scope of the EPA's authority to regulate greenhouse gas emissions under the Clean Air Act. The United States Supreme Court held that the "generation shifting" approach in the Clean Power Plan exceeded the powers granted to the EPA by Congress, although the court did not address whether the EPA may only adopt measures applied at the individual source as it did in the Affordable Clean Energy rule. A key area where the EPA went astray was using the Clean Power Plan to give states the option to promulgate regulations that would encourage "generation shifting," or moving away from higher-polluting power sources like coal to lower-polluting sources like natural gas or renewables. The United States Supreme Court found that type of regulation, which would impact larger economic forces beyond the fence lines of individual generating facilities, is not permitted under Section 111(d) of the Clean Air Act. The United States Supreme Court reversed the D.C. Circuit's vacatur of the Affordable Clean Energy rule and remanded the case for further proceedings. The ruling has no immediate impact on the Registrants, as there is no Section 111(d) rule currently in effect. The Biden administration plans to propose by March 2023 its own rule to replace the Clean Power Plan and Affordable Clean Energy rule.

Clean Air Act Regulations

The Clean Air Act is a federal law administered by the EPA that provides a framework for protecting and improving the nation's air quality and controlling sources of air emissions. The implementation of new standards is generally outlined in SIPs, which are a collection of regulations, programs and policies to be followed. SIPs vary by state and are subject to public hearings and EPA approval. Some states may adopt additional or more stringent requirements than those implemented by the EPA. The major Clean Air Act programs most directly affecting the Registrants' operations are described below.

National Ambient Air Quality Standards

Under the authority of the Clean Air Act, the EPA sets minimum NAAQS for six principal pollutants, consisting of carbon monoxide, lead, NOx, particulate matter, ozone and SO2, considered harmful to public health and the environment. Areas that achieve the standards, as determined by ambient air quality monitoring, are characterized as being in attainment, while those that fail to meet the standards are designated as being nonattainment areas. Generally, sources of emissions in a nonattainment area that are determined to contribute to the nonattainment are required to reduce emissions. Currently, with the exceptions described in the following paragraphs, air quality monitoring data indicates that all counties where the relevant Registrant's major emission sources are located are in attainment of the current NAAQS.

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On June 4, 2018, the EPA published final ozone designations for much of the U.S. Relevant to the Registrants, these designations include classifying Yuma County, Arizona; Clark County, Nevada; and the Northern Wasatch Front, Southern Wasatch Front and Duchesne and Uintah counties in Utah as nonattainment-marginal with the 2015 ozone standard. These areas were required to meet the 2015 standard three years from the August 3, 2018, effective date. All other areas relevant to the Registrants were designated attainment/unclassifiable with this same action. However, on January 29, 2021, the D.C. Circuit vacated several provisions of the 2018 implementing rules for the 2015 ozone standards for contravening the Clean Air Act. The EPA and environmental groups finalized a consent decree in January 2022 that sets deadlines for the agency to approve or disapprove the "good neighbor" provisions of interstate ozone plans of dozens of states. Relevant to the Registrants, the EPA must, by April 30, 2022, propose to approve or disapprove the interstate ozone SIPs of Alabama, Iowa, Maryland, Michigan, Minnesota, New York, Ohio, Pennsylvania, Texas, West Virginia and Wisconsin. On February 22, 2022, the EPA published a series of proposed decisions to disapprove the SIPs for interstate ozone transport of 19 states. Relevant to the Registrants, these states include Alabama, Maryland, Michigan, Minnesota, New York, Ohio, West Virginia and Wisconsin. The EPA also proposed to approve Iowa's SIP after re-analyzing the state's data. The EPA must finalize the proposed rules by December 15, 2022. In addition, the EPA must, by December 15, 2022, approve or disapprove the interstate plans of Arizona, California, Nevada and Wyoming. On April 15, 2022, the EPA issued its final rule approving Iowa's SIP as meeting the good neighbor provisions for the 2015 ozone standard. On May 24, 2022, the EPA disapproved the Utah and Wyoming interstate ozone SIPs. Until the EPA takes final action consistent with this decree, additional impacts to the relevant Registrants cannot be determined.

Separately, on March 28, 2022, the EPA proposed determinations as to whether certain areas have achieved levels of ground-level ozone pollution that meet the 2008 and 2015 ozone NAAQS. Relevant to the Registrants, the Southern Wasatch Front in Utah and Yuma, Arizona are proposed to have met the 2015 ozone standard; and the Cincinnati area of Ohio and Kentucky and the Northern Wasatch Front in Utah are proposed to have not met the 2015 ozone, will be reclassified as Moderate Non-Attainment, and will have until August 3, 2024 to meet the standard. Until the EPA takes final action on the proposal and the affected states submit any required SIPs, the relevant Registrants cannot determine the impacts of the proposed rule.

Cross-State Air Pollution Rule

The EPA promulgated an initial rule in March 2005 to reduce emissions of NOx and SO2, precursors of ozone and particulate matter, from down-wind sources in the eastern U.S., including Iowa, to reduce emissions by implementing a plan based on a market-based cap-and-trade system, emissions reductions, or both. After numerous appeals, the CSAPR was promulgated to address interstate transport of SO2 and NOx emissions in 27 eastern and Midwestern states.

The first phase of the rule was implemented January 1, 2015. In November 2015, the EPA released a proposed rule that would further reduce NOx emissions in 2017. The final "CSAPR Update Rule" was published in the Federal Register in October 2016 and required additional reductions in NOx emissions beginning in May 2017. On December 6, 2018, the EPA finalized a rule to close out the CSAPR, having determined that the CSAPR Update Rule for the 2008 ozone NAAQS fully addressed Clean Air Act interstate transport obligations of 20 eastern states. The EPA determined that 2023 is an appropriate future analytic year to evaluate remaining good neighbor obligations and that there will be no remaining nonattainment or maintenance receptors with respect to the 2008 ozone NAAQS in the eastern U.S. in that year. Accordingly, the 20 CSAPR Update-affected states would not contribute significantly to nonattainment in, or interfere with maintenance of, any other state with regard to the 2008 ozone NAAQS. Both the CSAPR Update and the CSAPR Close-Out rules were challenged in the D.C. Circuit. The D.C. Circuit ruled September 13, 2019, that because the EPA allowed upwind states to continue to significantly contribute to downwind air quality problems beyond statutory deadlines, the CSAPR Update Rule provided only a partial remedy that did not fully address interstate ozone transport, and remanded the CSAPR Update Rule back to the EPA. The D.C. Circuit issued an opinion October 1, 2019, finding that because the CSAPR Close-Out Rule relied on the same faulty reasoning as the CSAPR Update Rule, the CSAPR Close-Out Rule must be vacated. On October 15, 2020, the EPA proposed to tighten caps on emissions of NOx from generating facilities in 12 states in the CSAPR trading program in response to the D.C. Circuit's decision to vacate the CSAPR Update Rule. The rule is intended to fully resolve 21 upwind states' remaining good neighbor obligations under the 2008 ozone NAAQS. Additional emissions reductions are required at generating facilities in 12 states, including Illinois; the EPA predicts that emissions from the remaining nine states, including Iowa and Texas, will not significantly contribute to downwind states' ability to attain or maintain the ozone standard. The EPA accepted comment on the proposal through December 15, 2020. On March 15, 2021, the EPA finalized the Revised CSAPR Update Rule largely as proposed. Significant new compliance obligations are not anticipated as a result of the rule. In June 2021, a new lawsuit was filed that challenges the Revised CSAPR Update Rule. Litigation is ongoing in the D.C. Circuit Court. Until litigation is exhausted, the relevant Registrants cannot determine whether additional action may be required.

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In March 2022, the EPA released its Good Neighbor Rule, which contains proposed revisions to the CSAPR framework and is intended to address ozone transport for the 2015 ozone NAAQS. The rule focuses on reductions of NOx, precursors to ozone formation and covers 26 states. Relevant to the Registrants, four states are included in the cross-state program for the first time - California, Nevada, Utah and Wyoming. Iowa is not included in the proposal. In a separate but related action in February 2022, the EPA proposed to approve the good neighbor provisions of Iowa's SIP addressing ozone transport and the 2015 ozone standard. The EPA proposes to retain emissions allowance trading for generating facilities. Beginning in 2023, emissions budgets would be set at the level of reductions achievable through immediately available measures such as consistently operating existing emissions controls. Starting in 2026, emissions budgets would be set at levels achievable by the installation of SCR controls at certain generating facilities. The proposal also includes additional industries beyond the power sector for the first time, with a focus on the top NOx emitting stationary source categories. These include natural gas pipeline compressor stations, pulp and paper mills, cement production, iron and steel boilers and furnaces, glass furnaces, chemical manufacturing and petroleum and coal product manufacturing. These sources will not have access to trading and will instead be subject to rate-based limits that are assigned for each source category. The EPA accepted comments on the proposal through June 21, 2022. Until the EPA takes final action consistent with this decree, impacts to the relevant Registrants cannot be determined.

Regional Haze

The EPA's Regional Haze Rule, finalized in 1999, requires states to develop and implement plans to improve visibility in designated federally protected areas ("Class I areas"). Some of PacifiCorp's coal-fueled generating facilities in Utah, Wyoming, Arizona and Colorado and certain of Nevada Power's and Sierra Pacific's fossil-fueled generating facilities are subject to the Clean Air Visibility Rules. In accordance with the federal requirements, states are required to submit SIPs that address emissions from sources subject to BART requirements and demonstrate progress towards achieving natural visibility requirements in Class I areas by 2064.

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The state of Utah issued a regional haze SIP requiring the installation of SO2, NOx and particulate matter controls on Hunter Units 1 and 2 and Huntington Units 1 and 2. In December 2012, the EPA approved the SO2 portion of the Utah regional haze SIP and disapproved the NOx and particulate matter portions. Subsequently, the Utah Division of Air Quality completed an alternative BART analysis for Hunter Units 1 and 2 and Huntington Units 1 and 2. In January 2016, the EPA published two alternative proposals to either approve the Utah SIP as written or reject the Utah SIP relating to NOx controls and require the installation of SCR equipment at Hunter Units 1 and 2 and Huntington Units 1 and 2 within five years. The EPA's final action on the Utah regional haze SIP was effective August 4, 2016. The EPA approved in part and disapproved in part the Utah regional haze SIP and issued a FIP requiring the installation of SCR equipment at Hunter Units 1 and 2 and Huntington Units 1 and 2 within five years of the effective date of the rule. PacifiCorp and other parties filed requests with the EPA to reconsider and stay that decision, as well as filed motions for stay and petitions for review with the Tenth Circuit Court of Appeals ("Tenth Circuit") asking the court to overturn the EPA's actions. In July 2017, the EPA issued a letter indicating it would reconsider its FIP decision. In light of the EPA's grant of reconsideration and the EPA's position in the litigation, the Tenth Circuit held the litigation in abeyance and imposed a stay of the compliance obligations of the FIP for the number of days the stay is in effect while the EPA conducts its reconsideration process. To support the reconsideration, PacifiCorp undertook additional air quality modeling using the Comprehensive Air Quality Model with Extensions dispersion model. On January 14, 2019, the state of Utah submitted a SIP revision to the EPA, which includes the updated modeling information and additional analysis. On June 24, 2019, the Utah Air Quality Board unanimously voted to approve the Utah regional haze SIP revision, which incorporates a BART alternative into Utah's regional haze SIP. The BART alternative makes the shutdown of PacifiCorp's Carbon generating facility enforceable under the SIP and removes the requirement to install SCR equipment on Hunter Units 1 and 2 and Huntington Units 1 and 2. The Utah Division of Air Quality submitted the SIP revision to the EPA for approval at the end of 2019. In January 2020, the EPA published its proposed approval of the Utah Regional Haze SIP Alternative, which makes the shutdown of the Carbon generating facility federally enforceable and adopts as BART the existing NOx controls and emission limits on the Hunter and Huntington generating facilities. The proposed approval withdraws the FIP requirements to install SCR equipment on Hunter Units 1 and 2 and Huntington Units 1 and 2. The EPA released the final rule approving the Utah Regional Haze SIP Alternative on October 28, 2020. With the approval, the EPA also finalized its withdrawal of the FIP requirements for the Hunter and Huntington generating facilities. The Utah Regional Haze SIP Alternative took effect December 28, 2020. As a result of these actions, the Tenth Circuit dismissed the Utah regional haze petitions on January 11, 2021. On January 19, 2021, Heal Utah, National Parks Conservation Association, Sierra Club and Utah Physicians for a Healthy Environment filed a petition for review of the Utah Regional Haze SIP Alternative in the Tenth Circuit. PacifiCorp and the state of Utah moved to intervene in the litigation. After review of the rule by the Biden administration, the EPA determined it would defend the rule, and briefing in the case is ongoing. A date for oral arguments has not been scheduled. The Utah Air Quality Board approved the Utah Division of Air Quality's SIP for the regional haze second planning period on April 6, 2022. The public comment period is anticipated to begin in early May 2022. The proposed plan sets mass-based emissions limits for PacifiCorp's Hunter and Huntington generating facilities to ensure reasonable visibility progress for the second planning period. The division proposes to add existing SO2 emission limits for all five Hunter and Huntington units as enforceable regional haze controls. The division also proposes new enforceable mass-based NOx emission limits for both generating facilities based on actual emissions. The state is on track to submit a final implementation plan to the EPA in August 2022.

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The state of Wyoming issued two regional haze SIPs requiring the installation of SO2, NOx and particulate matter controls on certain PacifiCorp coal-fueled generating facilities in Wyoming. The EPA approved the SO2 SIP in December 2012 and the EPA's approval was upheld on appeal by the Tenth Circuit in October 2014. In addition, the EPA initially proposed in June 2012 to disapprove portions of the NOx and particulate matter SIP and instead issue a FIP. The EPA withdrew its initial proposed actions on the NOx and particulate matter SIP and the proposed FIP, published a re-proposed rule in June 2013, and finalized its determination in January 2014, which aligns more closely with the SIP proposed by the state of Wyoming. The EPA's final action on the Wyoming SIP approved the state's plan to have PacifiCorp install low-NOx burners at Naughton Units 1 and 2, SCR controls at Naughton Unit 3 by December 2014, SCR controls at Jim Bridger Units 1 through 4 between 2015 and 2022, and low-NOx burners at Dave Johnston Unit 4. The EPA disapproved a portion of the Wyoming SIP and issued a FIP for Dave Johnston Unit 3, where it required the installation of SCR controls by 2019 or, in lieu of installing SCR controls, a commitment to shut down Dave Johnston Unit 3 by 2027, its currently approved depreciable life. The EPA also disapproved a portion of the Wyoming SIP and issued a FIP for the Wyodak coal-fueled generating facility, requiring the installation of SCR controls within five years (i.e., by 2019). The EPA action became final on March 3, 2014. PacifiCorp filed an appeal of the EPA's final action on Wyodak in March 2014. The state of Wyoming also filed an appeal of the EPA's final action, as did the Powder River Basin Resource Council, National Parks Conservation Association and Sierra Club. In September 2014, the Tenth Circuit issued a stay of the March 2019 compliance deadline for Wyodak, pending further action by the Tenth Circuit in the appeal. The EPA, U.S. Department of Justice, state of Wyoming and PacifiCorp executed a settlement agreement December 16, 2020, removing the requirement to install SCR in lieu of monthly and annual NOx emissions limits. The settlement agreement was subject to a comment period which ended July 6, 2021. Litigation in the Tenth Circuit remains stayed pending finalization of the settlement agreement. The EPA did not proceed with final approval of the settlement agreement for Wyodak and is currently engaged with Wyoming and PacifiCorp concerning alternative paths for resolution. On February 5, 2019, PacifiCorp submitted a reasonable progress reassessment permit application and reasonable progress determination for Jim Bridger Units 1 and 2, seeking a rescission of the December 2017 permit requiring the installation of SCR, to be replaced with a permit imposing plant-wide emission limits to achieve better modeled visibility, fewer overall environmental impacts and lower costs of compliance. In May 2020, the Wyoming Air Quality Division issued a permit approving PacifiCorp's monthly and annual NOx and SO2 emission limits on the four Jim Bridger units and submitted a regional haze SIP revision to the EPA. The revised SIP would grant approval of PacifiCorp's Jim Bridger reasonable progress reassessment application and incorporates PacifiCorp's proposed emission limits in lieu of the requirement to install SCR systems on Jim Bridger Units 1 and 2. On December 27, 2021, Wyoming's governor issued an emergency suspension order under Section 110(g) of the Clean Air Act, allowing the operation of Jim Bridger Unit 2 through April 30, 2022, while the state, the EPA and PacifiCorp continue settlement discussions. On January 18, 2022, the EPA proposed to reject the SIP revisions. The EPA took comment on the proposal through February 17, 2022. On February 14, 2022, the First Judicial District Court for the State of Wyoming entered a consent decree reached between the state of Wyoming and PacifiCorp under Sections 201 and 209(a) of the Wyoming Environmental Quality Act, resolving claims of threatened violations of the Clean Air Act, the Wyoming Environmental Quality Act and the Wyoming Air Quality Standards and Regulations at the Jim Bridger facility. No penalties were imposed under the consent decree. Consistent with the terms and conditions of the consent decree and as forecasted in PacifiCorp's 2021 IRP, PacifiCorp must convert both units to natural gas and begin meeting emissions limits consistent with that conversion by January 1, 2024. In addition, PacifiCorp must propose an RFP by January 1, 2023, for carbon capture technology at Jim Bridger Units 3 and 4. Wyoming issued its proposed implementation plan for second planning period reasonable progress on February 18, 2022 and accepted comments through March 23, 2022. The EPA and PacifiCorp executed an administrative order on consent June 9, 2022, covering compliance for Jim Bridger Units 1 and 2 under the regional haze rule. The federal order contains the same emission and operating limits as the Wyoming consent decree and adds federal approval of the compliance pathway outlined in the state consent decree, including revision of the SIP to include conversion of Jim Bridger Units 1 and 2 to natural gas. The order includes a one-year deadline to complete the SIP revision. The proposed SIP revision reflecting these agreements is currently being evaluated under parallel processes by the state of Wyoming and the EPA. The Wyoming Department of Environmental Quality submitted the Jim Bridger Units 1 and 2 proposed SIP revision to federal land managers for a 60-day consultation on June 7, 2022. The federal land managers must complete review and provide comments by August 8, 2022. For the second round of regional haze planning, Wyoming determined that no controls will be necessary on any Wyoming resources to make reasonable progress. It is estimated that the state will submit a final state-approved implementation plan to the EPA in August 2022.

In February 2022, NV Energy received 30-day notice letters from the Nevada Division of Environmental Protection regarding the reopening and revision of the Valmy and Tracy Generating Station's Title V air quality operating permits to add federally enforceable retirement dates of December 31, 2028 for Valmy Units 1 and 2 and December 31, 2031 for Tracy Unit 4. The enforceable retirement dates will implement Nevada's SIP for the regional haze second planning period. The revised permits were received in March and April 2022. The Nevada Division of Environmental Protection accepted public comment on its SIP through July 25, 2022, and is on track to submit the final SIP to the EPA in August 2022.

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Critical Accounting Estimates

Certain accounting measurements require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized on the Consolidated Financial Statements based on such estimates involve numerous assumptions subject to varying and potentially significant degrees of judgment and uncertainty and will likely change in the future as additional information becomes available. Estimates are used for, but not limited to, the accounting for the effects of certain types of regulation, impairment of goodwill and long-lived assets, pension and other postretirement benefits, income taxes and revenue recognition - unbilled revenue. For additional discussion of the Company's critical accounting estimates, see Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes in the Company's assumptions regarding critical accounting estimates since December 31, 2021.

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PacifiCorp and its subsidiaries

Consolidated Financial Section

50

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PART I

Item 1.Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

PacifiCorp

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheet of PacifiCorp and subsidiaries ("PacifiCorp") as of June 30, 2022, the related consolidated statements of operations and changes in shareholders' equity for the three-month and six-month periods ended June 30, 2022 and 2021, and of cash flows for the six-month periods ended June 30, 2022 and 2021, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of PacifiCorp as of December 31, 2021, and the related consolidated statements of operations, comprehensive income, changes in shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of PacifiCorp's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to PacifiCorp in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, 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.

/s/ Deloitte & Touche LLP

Portland, Oregon

August 5, 2022

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PACIFICORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions)

						As of
						June 30,						December 31,
						2022						2021
ASSETS
Current assets:
Cash and cash equivalents						$	390					$	179
Trade receivables, net						730						725
Other receivables, net						49						52
Inventories						490						474
Derivative contracts						127						76
Regulatory assets						150						65
Other current assets						83						150
Total current assets						2,019						1,721
Property, plant and equipment, net						23,414						22,914
Regulatory assets						1,257						1,287
Other assets						750						534
Total assets						$	27,440					$	26,456

The accompanying notes are an integral part of these consolidated financial statements.

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PACIFICORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)

(Amounts in millions)

						As of
						June 30,						December 31,
						2022						2021
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable						$	848					$	680
Accrued interest						122						121
Accrued property, income and other taxes						189						78
Accrued employee expenses						117						89
Current portion of long-term debt						455						155
Regulatory liabilities						115						118
Other current liabilities						195						219
Total current liabilities						2,041						1,460
Long-term debt						8,268						8,575
Regulatory liabilities						2,833						2,650
Deferred income taxes						2,908						2,847
Other long-term liabilities						1,364						1,011
Total liabilities						17,414						16,543
Commitments and contingencies (Note 9)
Shareholders' equity:
Preferred stock						2						2
Common stock - 750 shares authorized, no par value, 357 shares issued and outstanding						—						—
Additional paid-in capital						4,479						4,479
Retained earnings						5,561						5,449
Accumulated other comprehensive loss, net						(16)						(17)
Total shareholders' equity						10,026						9,913
Total liabilities and shareholders' equity						$	27,440					$	26,456

The accompanying notes are an integral part of these consolidated financial statements.

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PACIFICORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue			$	1,314					$	1,298					$	2,611					$	2,540
Operating expenses:
Cost of fuel and energy			451						441						916						865
Operations and maintenance			375						255						652						514
Depreciation and amortization			279						275						559						539
Property and other taxes			51						43						110						104
Total operating expenses			1,156						1,014						2,237						2,022
Operating income			158						284						374						518
Other income (expense):
Interest expense			(107)						(105)						(213)						(212)
Allowance for borrowed funds			6						6						12						12
Allowance for equity funds			15						12						28						25
Interest and dividend income			7						5						14						11
Other, net			(5)						4						(9)						10
Total other income (expense)			(84)						(78)						(168)						(154)
Income before income tax benefit			74						206						206						364
Income tax benefit			(8)						(19)						(6)						(30)
Net income			$	82					$	225					$	212					$	394

The accompanying notes are an integral part of these consolidated financial statements.

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PACIFICORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)

(Amounts in millions)

																														Accumulated
																		Additional												Other						Total
						Preferred						Common						Paid-in						Retained						Comprehensive						Shareholders'
						Stock						Stock						Capital						Earnings						Loss, Net						Equity
Balance, March 31, 2021						$	2					$	—					$	4,479					$	4,880					$	(19)					$	9,342
Net income						—						—						—						225						—						225
Balance, June 30, 2021						$	2					$	—					$	4,479					$	5,105					$	(19)					$	9,567
Balance, December 31, 2020						$	2					$	—					$	4,479					$	4,711					$	(19)					$	9,173
Net income						—						—						—						394						—						394
Balance, June 30, 2021						$	2					$	—					$	4,479					$	5,105					$	(19)					$	9,567
Balance, March 31, 2022						$	2					$	—					$	4,479					$	5,579					$	(16)					$	10,044
Net income						—						—						—						82						—						82
Common stock dividends declared						—						—						—						(100)						—						(100)
Balance, June 30, 2022						$	2					$	—					$	4,479					$	5,561					$	(16)					$	10,026
Balance, December 31, 2021						$	2					$	—					$	4,479					$	5,449					$	(17)					$	9,913
Net income						—						—						—						212						—						212
Other comprehensive income						—						—						—						—						1						1
Common stock dividends declared						—						—						—						(100)						—						(100)
Balance, June 30, 2022						$	2					$	—					$	4,479					$	5,561					$	(16)					$	10,026

The accompanying notes are an integral part of these consolidated financial statements.

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PACIFICORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)

			Six-Month Periods
			Ended June 30,
			2022						2021
Cash flows from operating activities:
Net income			$	212					$	394
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization			559						539
Allowance for equity funds			(28)						(25)
Changes in regulatory assets and liabilities			(76)						(98)
Deferred income taxes and amortization of investment tax credits			29						22
Other, net			12						(1)
Changes in other operating assets and liabilities:
Trade receivables, other receivables and other assets			(142)						(10)
Inventories			(16)						8
Derivative collateral, net			69						35
Accrued property, income and other taxes, net			152						79
Accounts payable and other liabilities			442						103
Net cash flows from operating activities			1,213						1,046
Cash flows from investing activities:
Capital expenditures			(894)						(819)
Other, net			6						—
Net cash flows from investing activities			(888)						(819)
Cash flows from financing activities:
Repayments of long-term debt			(9)						(400)
Net proceeds from short-term debt			—						208
Dividends paid			(100)						—
Other, net			(2)						(4)
Net cash flows from financing activities			(111)						(196)
Net change in cash and cash equivalents and restricted cash and cash equivalents			214						31
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period			186						19
Cash and cash equivalents and restricted cash and cash equivalents at end of period			$	400					$	50

 

The accompanying notes are an integral part of these consolidated financial statements.

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PACIFICORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)    General

PacifiCorp, which includes PacifiCorp and its subsidiaries, is a U.S. regulated electric utility company serving retail customers, including residential, commercial, industrial, irrigation and other customers in portions of Utah, Oregon, Wyoming, Washington, Idaho and California. PacifiCorp owns, or has interests in, a number of thermal, hydroelectric, wind-powered and geothermal generating facilities, as well as electric transmission and distribution assets. PacifiCorp also buys and sells electricity on the wholesale market with other utilities, energy marketing companies, financial institutions and other market participants. PacifiCorp is subject to comprehensive state and federal regulation. PacifiCorp's subsidiaries support its electric utility operations by providing coal mining services. PacifiCorp is an indirect subsidiary of Berkshire Hathaway Energy Company ("BHE"), a holding company based in Des Moines, Iowa that owns subsidiaries principally engaged in energy businesses. BHE is a consolidated subsidiary of Berkshire Hathaway Inc. ("Berkshire Hathaway").

The unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the United States Securities and Exchange Commission's rules and regulations for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements. Management believes the unaudited Consolidated Financial Statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary for the fair presentation of the unaudited Consolidated Financial Statements as of June 30, 2022 and for the three- and six-month periods ended June 30, 2022 and 2021. The Consolidated Statements of Comprehensive Income have been omitted as net income materially equals comprehensive income for the three- and six-month periods ended June 30, 2022 and 2021. The results of operations for the three- and six-month periods ended June 30, 2022 and 2021 are not necessarily indicative of the results to be expected for the full year.

The preparation of the unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenue and expenses during the period. Actual results may differ from the estimates used in preparing the unaudited Consolidated Financial Statements. Note 2 of Notes to Consolidated Financial Statements included in PacifiCorp's Annual Report on Form 10-K for the year ended December 31, 2021 describes the most significant accounting policies used in the preparation of the unaudited Consolidated Financial Statements. There have been no significant changes in PacifiCorp's assumptions regarding significant accounting estimates and policies during the six-month period ended June 30, 2022, other than the updates associated with PacifiCorp's estimates of loss contingencies related to the Oregon and California 2020 wildfires (the "2020 Wildfires") as discussed in Note 9.

(2)    Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash equivalents consist of funds invested in money market mutual funds, U.S. Treasury Bills and other investments with a maturity of three months or less when purchased. Cash and cash equivalents exclude amounts where availability is restricted by legal requirements, loan agreements or other contractual provisions. Restricted cash and cash equivalents consist substantially of funds representing vendor retention, nuclear decommissioning and custodial funds. Restricted amounts are included in other current assets and other assets on the Consolidated Balance Sheets. A reconciliation of cash and cash equivalents and restricted cash and cash equivalents as presented in the Consolidated Statements of Cash Flows is outlined below and disaggregated by the line items in which they appear on the Consolidated Balance Sheets (in millions):

			As of
			June 30,						December 31,
			2022						2021
Cash and cash equivalents			$	390					$	179
Restricted cash and cash equivalents included in other current assets			7						4
Restricted cash included in other assets			3						3
Total cash and cash equivalents and restricted cash and cash equivalents			$	400					$	186

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(3)    Property, Plant and Equipment, Net

Property, plant and equipment, net consists of the following (in millions):

									As of
									June 30,						December 31,
			Depreciable Life						2022						2021
Utility Plant:
Generation			15 - 59 years						$	13,770					$	13,679
Transmission			60 - 90 years						7,952						7,894
Distribution			20 - 75 years						8,211						8,044
Intangible plant(1)			5 - 75 years						1,114						1,106
Other			5 - 60 years						1,584						1,539
Utility plant in-service									32,631						32,262
Accumulated depreciation and amortization									(10,874)						(10,507)
Utility plant in-service, net									21,757						21,755
Other non-regulated, net of accumulated depreciation and amortization			14 - 95 years						18						18
Plant, net									21,775						21,773
Construction work-in-progress									1,639						1,141
Property, plant and equipment, net									$	23,414					$	22,914

(1)Computer software costs included in intangible plant are initially assigned a depreciable life of 5 to 10 years.

(4)    Recent Financing Transactions

Credit Facilities

In June 2022, PacifiCorp amended and restated its existing $1.2 billion unsecured credit facility expiring in June 2024. The amendment extended the expiration date to June 2025 and amended pricing from the London Interbank Offered Rate to the Secured Overnight Financing Rate.

Common Shareholders' Equity

In May 2022, PacifiCorp declared a common stock dividend of $100 million, paid in June 2022, to PPW Holdings LLC.

(5)    Income Taxes

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax benefit is as follows:

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Federal statutory income tax rate			21		%				21		%				21		%				21		%
State income tax, net of federal income tax benefit			4						4						3						4
Federal income tax credits			(25)						(19)						(21)						(19)
Effects of ratemaking(1)			(13)						(15)						(11)						(14)
Valuation allowance			—						—						4						—
Other			2						—						1						—
Effective income tax rate			(11)		%				(9)		%				(3)		%				(8)		%

(1)Effects of ratemaking is primarily attributable to activity associated with excess deferred income taxes.

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Income tax credits relate primarily to production tax credits ("PTCs") earned by PacifiCorp's wind-powered generating facilities. Federal renewable electricity PTCs are earned as energy from qualifying wind-powered generating facilities is produced and sold and are based on a per-kilowatt hour rate pursuant to the applicable federal income tax law. Wind-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service. PTCs for the three-month periods ended June 30, 2022 and 2021 totaled $18 million and $40 million, respectively. PTCs for the six-month periods ended June 30, 2022 and 2021 totaled $44 million and $71 million, respectively.

For the six-month period ended June 30, 2022 PacifiCorp recorded a valuation allowance related to state net operating loss carryforwards.

Berkshire Hathaway includes BHE and its subsidiaries in its U.S. federal income tax return. Consistent with established regulatory practice, PacifiCorp's provision for federal and state income tax has been computed on a stand-alone basis, and substantially all of its currently payable or receivable income tax is remitted to or received from BHE. For the six-month periods ended June 30, 2022 and 2021, PacifiCorp received net cash payments for federal and state income tax from BHE totaling $150 million and $93 million, respectively.

(6)    Employee Benefit Plans

Net periodic benefit cost (credit) for the pension and other postretirement benefit plans included the following components (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Pension:
Service cost			$	—					$	—					$	—					$	—
Interest cost			7						7						14						14
Expected return on plan assets			(11)						(14)						(21)						(27)
Net amortization			4						5						8						10
Net periodic benefit cost (credit)			$	—					$	(2)					$	1					$	(3)
Other postretirement:
Service cost			$	1					$	1					$	1					$	1
Interest cost			2						2						4						4
Expected return on plan assets			(3)						(2)						(5)						(4)
Net amortization			—						—						—						—
Net periodic benefit cost (credit)			$	—					$	1					$	—					$	1

Amounts other than the service cost for pension and other postretirement benefit plans are recorded in Other, net in the Consolidated Statements of Operations. Employer contributions to the pension and other postretirement benefit plans are expected to be $4 million and $— million, respectively, during 2022. As of June 30, 2022, $2 million of contributions had been made to the pension plans.

(7)    Risk Management and Hedging Activities

PacifiCorp is exposed to the impact of market fluctuations in commodity prices and interest rates. PacifiCorp is principally exposed to electricity, natural gas, coal and fuel oil commodity price risk as it has an obligation to serve retail customer load in its service territories. PacifiCorp's load and generating facilities represent substantial underlying commodity positions. Exposures to commodity prices consist mainly of variations in the price of fuel required to generate electricity and wholesale electricity that is purchased and sold. Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable items, weather, market liquidity, generating facility availability, customer usage, storage, and transmission and transportation constraints. Interest rate risk exists on variable-rate debt and future debt issuances. PacifiCorp does not engage in a material amount of proprietary trading activities.

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PacifiCorp has established a risk management process that is designed to identify, assess, manage and report on each of the various types of risk involved in its business. To mitigate a portion of its commodity price risk, PacifiCorp uses commodity derivative contracts, which may include forwards, futures, options, swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. PacifiCorp manages its interest rate risk by limiting its exposure to variable interest rates primarily through the issuance of fixed-rate long-term debt and by monitoring market changes in interest rates. Additionally, PacifiCorp may from time to time enter into interest rate derivative contracts, such as interest rate swaps or locks, to mitigate PacifiCorp's exposure to interest rate risk. No interest rate derivatives were in place during the periods presented. PacifiCorp does not hedge all of its commodity price and interest rate risks, thereby exposing the unhedged portion to changes in market prices.

There have been no significant changes in PacifiCorp's accounting policies related to derivatives. Refer to Note 8 for additional information on derivative contracts.

The following table, which reflects master netting arrangements and excludes contracts that have been designated as normal under the normal purchases or normal sales exception afforded by GAAP, summarizes the fair value of PacifiCorp's derivative contracts, on a gross basis, and reconciles those amounts to the amounts presented on a net basis on the Consolidated Balance Sheets (in millions):

			Derivative
			Contracts -												Other						Other
			Current						Other						Current						Long-term
			Assets						Assets						Liabilities						Liabilities						Total
As of June 30, 2022
Not designated as hedging contracts(1):
Commodity assets			$	183					$	80					$	9					$	—					$	272
Commodity liabilities			(1)						—						(44)						(4)						(49)
Total			182						80						(35)						(4)						223
Total derivatives			182						80						(35)						(4)						223
Cash collateral payable			(55)						(9)						—						—						(64)
Total derivatives - net basis			$	127					$	71					$	(35)					$	(4)					$	159
As of December 31, 2021
Not designated as hedging contracts(1):
Commodity assets			$	81					$	21					$	2					$	—					$	104
Commodity liabilities			(5)						(1)						(38)						(7)						(51)
Total			76						20						(36)						(7)						53
Total derivatives			76						20						(36)						(7)						53
Cash collateral receivable			—						—						5						—						5
Total derivatives - net basis			$	76					$	20					$	(31)					$	(7)					$	58

(1)PacifiCorp's commodity derivatives are generally included in rates. As of June 30, 2022 a regulatory liability of $223 million was recorded related to the net derivative asset of $223 million. As of December 31, 2021 a regulatory liability of $53 million was recorded related to the net derivative asset of $53 million.

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The following table reconciles the beginning and ending balances of PacifiCorp's net regulatory assets and summarizes the pre-tax gains and losses on commodity derivative contracts recognized in net regulatory assets, as well as amounts reclassified to earnings (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Beginning balance			$	(195)					$	—					$	(53)					$	17
Changes in fair value recognized in regulatory assets			(49)						(102)						(217)						(119)
Net losses reclassified to operating revenue			(8)						(5)						(11)						(5)
Net gains reclassified to energy costs			29						5						58						5
Ending balance			$	(223)					$	(102)					$	(223)					$	(102)

Derivative Contract Volumes

The following table summarizes the net notional amounts of outstanding commodity derivative contracts with fixed price terms that comprise the mark-to-market values as of (in millions):

			Unit of						June 30,						December 31,
			Measure						2022						2021
Electricity purchases, net			Megawatt hours						2						2
Natural gas purchases			Decatherms						105						106

Credit Risk

PacifiCorp is exposed to counterparty credit risk associated with wholesale energy supply and marketing activities with other utilities, energy marketing companies, financial institutions and other market participants. Credit risk may be concentrated to the extent PacifiCorp's counterparties have similar economic, industry or other characteristics and due to direct or indirect relationships among the counterparties. Before entering into a transaction, PacifiCorp analyzes the financial condition of each significant wholesale counterparty, establishes limits on the amount of unsecured credit to be extended to each counterparty and evaluates the appropriateness of unsecured credit limits on an ongoing basis. To further mitigate wholesale counterparty credit risk, PacifiCorp enters into netting and collateral arrangements that may include margining and cross-product netting agreements and obtains third‑party guarantees, letters of credit and cash deposits. If required, PacifiCorp exercises rights under these arrangements, including calling on the counterparty's credit support arrangement.

Collateral and Contingent Features

In accordance with industry practice, certain wholesale agreements, including derivative contracts, contain credit support provisions that in part base certain collateral requirements on credit ratings for senior unsecured debt as reported by one or more of the recognized credit rating agencies. These agreements may either specifically provide bilateral rights to demand cash or other security if credit exposures on a net basis exceed specified rating-dependent threshold levels ("credit-risk-related contingent features") or provide the right for counterparties to demand "adequate assurance" if there is a material adverse change in PacifiCorp's creditworthiness. These rights can vary by contract and by counterparty. As of June 30, 2022, PacifiCorp's credit ratings for its senior secured debt and its issuer credit ratings for senior unsecured debt from the recognized credit rating agencies were investment grade.

The aggregate fair value of PacifiCorp's derivative contracts in liability positions with specific credit-risk-related contingent features totaled $47 million and $37 million as of June 30, 2022 and December 31, 2021, respectively, for which PacifiCorp had posted collateral of $— million and $5 million, respectively, in the form of cash deposits. If all credit-risk-related contingent features for derivative contracts in liability positions had been triggered as of June 30, 2022 and December 31, 2021, PacifiCorp would have been required to post $33 million and $23 million, respectively, of additional collateral. PacifiCorp's collateral requirements could fluctuate considerably due to market price volatility, changes in credit ratings, changes in legislation or regulation or other factors.

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(8)    Fair Value Measurements

The carrying value of PacifiCorp's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. PacifiCorp has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that PacifiCorp has the ability to access at the measurement date.

•Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•Level 3 — Unobservable inputs reflect PacifiCorp's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. PacifiCorp develops these inputs based on the best information available, including its own data.

The following table presents PacifiCorp's financial assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):

			Input Levels for Fair Value Measurements
			Level 1						Level 2						Level 3						Other(1)						Total
As of June 30, 2022:
Assets:
Commodity derivatives			$	—					$	272					$	—					$	(74)					$	198
Money market mutual funds			374						—						—						—						374
Investment funds			26						—						—						—						26
			$	400					$	272					$	—					$	(74)					$	598
Liabilities - Commodity derivatives			$	—					$	(49)					$	—					$	10					$	(39)
As of December 31, 2021:
Assets:
Commodity derivatives			$	—					$	104					$	—					$	(8)					$	96
Money market mutual funds			181						—						—						—						181
Investment funds			27						—						—						—						27
			$	208					$	104					$	—					$	(8)					$	304
Liabilities - Commodity derivatives			$	—					$	(51)					$	—					$	13					$	(38)

(1)Represents netting under master netting arrangements and a net cash collateral payable of $64 million and a net cash collateral receivable of $5 million as of June 30, 2022 and December 31, 2021, respectively.

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Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which PacifiCorp transacts. When quoted prices for identical contracts are not available, PacifiCorp uses forward price curves. Forward price curves represent PacifiCorp's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. PacifiCorp bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent energy brokers, exchanges, direct communication with market participants and actual transactions executed by PacifiCorp. Market price quotations for certain major electricity and natural gas trading hubs are generally readily obtainable for the first three years; therefore, PacifiCorp's forward price curves for those locations and periods reflect observable market quotes. Market price quotations for other electricity and natural gas trading hubs are not as readily obtainable for the first three years. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, PacifiCorp uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of underlying forward commodity prices, interest rates, currency rates, related volatility, counterparty creditworthiness and duration of contracts. Refer to Note 7 for further discussion regarding PacifiCorp's risk management and hedging activities.

PacifiCorp's investments in money market mutual funds and investment funds are stated at fair value. When available, PacifiCorp uses a readily observable quoted market price or net asset value of an identical security in an active market to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics.

PacifiCorp's long-term debt is carried at cost on the Consolidated Balance Sheets. The fair value of PacifiCorp's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of PacifiCorp's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of PacifiCorp's long-term debt (in millions):

						As of June 30, 2022												As of December 31, 2021
						Carrying						Fair						Carrying						Fair
						Value						Value						Value						Value
Long-term debt						$	8,723					$	8,555					$	8,730					$	10,374

(9)    Commitments and Contingencies

Construction Commitments

During the six-month period ended June 30, 2022, PacifiCorp entered into a procurement and construction services agreement for $849 million through 2024 for the construction of a key Energy Gateway Transmission segment extending between the Aeolus substation near Medicine Bow, Wyoming and the Clover substation near Mona, Utah.

Fuel Contracts

During the six-month period ended June 30, 2022, PacifiCorp entered into certain coal supply and transportation agreements totaling approximately $200 million through 2024.

Legal Matters

PacifiCorp is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. PacifiCorp does not believe that such normal and routine litigation will have a material impact on its consolidated financial results. PacifiCorp is also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines, penalties and other costs in substantial amounts and are described below.

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2020 Wildfires

In September 2020, a severe weather event resulting in high winds, low humidity and warm temperatures contributed to several major wildfires, real and personal property and natural resource damage, personal injuries and loss of life and widespread power outages in Oregon and Northern California. The wildfires spread across certain parts of PacifiCorp's service territory and surrounding areas across multiple counties in Oregon and California, including Siskiyou County, California; Jackson County, Oregon; Douglas County, Oregon; Marion County, Oregon; Lincoln County, Oregon; and Klamath County, Oregon burning over 500,000 acres in aggregate. Third party reports for these wildfires indicate over 2,000 structures destroyed, including residences; several structures damaged; multiple individuals injured; and several fatalities. Fire suppression costs estimated by various agencies total approximately $150 million. Investigations into the cause and origin of each wildfire are complex and ongoing and being conducted by various entities, including the United States Forest Service, the California Public Utilities Commission, the Oregon Department of Forestry, the Oregon Department of Justice, PacifiCorp and various experts engaged by PacifiCorp.

Multiple lawsuits have been filed in Oregon and California, including a putative class action complaint in Oregon, on behalf of citizens and businesses who suffered damages from fires allegedly caused by PacifiCorp. Additionally, several insurance carriers have filed subrogation complaints in Oregon and California with allegations similar to those made in the aforementioned lawsuits. The final determinations of liability, however, will only be made following comprehensive investigations and litigation processes.

In California, under inverse condemnation, courts have held that investor-owned utilities can be liable for real and personal property damages without the utility being found negligent and regardless of fault. California law also permits inverse condemnation plaintiffs to recover reasonable attorney fees and costs. In both Oregon and California, PacifiCorp has equipment in areas accessed through special use permits, easements or similar agreements that may contain provisions requiring it to pay for damages caused by its equipment regardless of fault. Even if inverse condemnation or other provisions do not apply, PacifiCorp could nevertheless be found liable for all damages proximately caused by negligence, including real and personal property and natural resource damage; fire suppression costs; personal injury and loss of life damages; and interest.

During the three-month period ended June 30, 2022, PacifiCorp accrued $64 million of losses net of expected insurance recoveries associated with the 2020 Wildfires resulting in an overall loss accrual net of expected insurance recoveries of $200 million as of June 30, 2022 compared to $136 million as of December 31, 2021. These accruals include PacifiCorp's estimate of losses for fire suppression costs, real and personal property damages, natural resource damages and noneconomic damages such as personal injury damages and loss of life damages that are considered probable of being incurred and that it is reasonably able to estimate at this time. For certain aspects of the 2020 Wildfires for which loss is considered probable, information necessary to reasonably estimate the potential losses, such as those related to natural resource damages, is not currently available. It is reasonably possible that PacifiCorp will incur additional losses beyond the amounts accrued; however, PacifiCorp is currently unable to estimate the range of possible additional losses that could be incurred due to the number of properties and parties involved and the variation in those types of properties and lack of available details. To the extent losses beyond the amounts accrued are incurred, additional insurance coverage is expected to be available to cover at least a portion of the losses. PacifiCorp's receivable for expected insurance recoveries was $277 million as of June 30, 2022.

Environmental Laws and Regulations

PacifiCorp is subject to federal, state and local laws and regulations regarding air and water quality, renewable portfolio standards, emissions performance standards, climate change, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact PacifiCorp's current and future operations. PacifiCorp believes it is in material compliance with all applicable laws and regulations.

Hydroelectric Relicensing

PacifiCorp is a party to the 2016 amended Klamath Hydroelectric Settlement Agreement ("KHSA"), which is intended to resolve disputes surrounding PacifiCorp's efforts to relicense the Klamath Hydroelectric Project. The KHSA establishes a process for PacifiCorp, the states of Oregon and California ("States") and other stakeholders to assess whether dam removal can occur consistent with the settlement's terms. For PacifiCorp, the key elements of the settlement include: (1) a contribution from PacifiCorp's Oregon and California customers capped at $200 million plus $250 million in California bond funds; (2) complete indemnification from harms associated with dam removal; (3) transfer of the Federal Energy Regulatory Commission ("FERC") license to a third-party dam removal entity, the Klamath River Renewal Corporation ("KRRC"), who would conduct dam removal; and (4) ability for PacifiCorp to operate the facilities for the benefit of customers until dam removal commences.

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In September 2016, the KRRC and PacifiCorp filed a joint application with the FERC to transfer the license for the four mainstem Klamath dams from PacifiCorp to the KRRC. The FERC approved partial transfer of the Klamath license in a July 2020 order, subject to the condition that PacifiCorp remains co-licensee. Under the amended KHSA, PacifiCorp did not agree to remain co-licensee during the surrender and removal process given concerns about liability protections for PacifiCorp and its customers. In November 2020, PacifiCorp entered a memorandum of agreement (the "MOA") with the KRRC, the Karuk Tribe, the Yurok Tribe and the States to continue implementation of the KHSA. The agreement required the States, PacifiCorp and KRRC to file a new license transfer application to remove PacifiCorp from the license for the Klamath Hydroelectric Project and add the States and KRRC as co-licensees for the purposes of surrender. In addition, the MOA provides for additional contingency funding of $45 million, equally split between PacifiCorp and the States, and for PacifiCorp and the States to equally share in any additional cost overruns in the unlikely event that dam removal costs exceed the $450 million in funding to ensure dam removal is complete. The MOA also requires PacifiCorp to cover the costs associated with certain pre-existing environmental conditions. In June 2021, the FERC approved transfer of the four mainstem Klamath dams from PacifiCorp to the KRRC and the States as co-licensees. In July 2021, the Oregon, Wyoming, Idaho and California state public utility commissions conditionally approved the required property transfer applications. In August 2021, PacifiCorp notified the Public Service Commission of Utah of the property transfer, however no formal approval is required in Utah. The transfer will be effective within 30 days following the issuance of a license surrender from the FERC for the project, which remains pending. In February 2022, the FERC staff issued a draft environmental impact statement for the project, concluding that dam removal is the preferred alternative. A final environmental impact statement is expected later in 2022.

Guarantees

PacifiCorp has entered into guarantees as part of the normal course of business and the sale or transfer of certain assets. These guarantees are not expected to have a material impact on PacifiCorp's consolidated financial results.

(10)    Revenue from Contracts with Customers

The following table summarizes PacifiCorp's revenue from contracts with customers ("Customer Revenue") by line of business, with further disaggregation of retail by customer class (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Customer Revenue:
Retail:
Residential			$	417					$	429					$	922					$	912
Commercial			393						393						763						752
Industrial			277						282						550						553
Other retail			80						84						117						116
Total retail			1,167						1,188						2,352						2,333
Wholesale			55						30						110						66
Transmission			45						37						77						62
Other Customer Revenue			28						31						48						54
Total Customer Revenue			1,295						1,286						2,587						2,515
Other revenue			19						12						24						25
Total operating revenue			$	1,314					$	1,298					$	2,611					$	2,540

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

The following is management's discussion and analysis of certain significant factors that have affected the consolidated financial condition and results of operations of PacifiCorp during the periods included herein. Explanations include management's best estimate of the impact of weather, customer growth, usage trends and other factors. This discussion should be read in conjunction with PacifiCorp's historical unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10‑Q. PacifiCorp's actual results in the future could differ significantly from the historical results.

Results of Operations for the Second Quarter and First Six Months of 2022 and 2021

Overview

Net income for the second quarter of 2022 was $82 million, a decrease of $143 million, or 64%, compared to 2021. Net income decreased primarily due to higher operations and maintenance expense of $120 million, lower income tax benefit of $11 million, higher property and other taxes of $8 million and higher other expense of $6 million, partially offset by higher utility margin of $6 million. Operations and maintenance expense increased primarily due to an increase in the loss accruals associated with the September 2020 wildfires, net of estimated insurance recoveries, and higher general and plant maintenance costs. Utility margin increased primarily due to lower purchased electricity prices, higher retail rates, higher average wholesale market prices and lower thermal generation volumes, partially offset by higher natural gas-fueled generation prices, lower retail volumes, higher purchased electricity volumes and lower deferred net power costs in accordance with established adjustment mechanisms. Retail customer volumes decreased 3.3%, primarily due to the unfavorable impact of weather and lower customer usage, partially offset by an increase in the average number of customers. Energy generated decreased 7% for the second quarter of 2022 compared to 2021 primarily due to lower coal-fueled and natural gas-fueled generation, partially offset by higher wind-powered and hydroelectric generation. Wholesale electricity sales volumes were essentially flat and purchased electricity volumes increased 12%.

Net income for the first six months of 2022 was $212 million, a decrease of $182 million, or 46%, compared to 2021 primarily due to higher operations and maintenance expense of $138 million, lower income tax benefit of $24 million, higher depreciation and amortization expense of $20 million and higher other expense of $14 million, partially offset by higher utility margin of $20 million. Operations and maintenance expense increased mainly due to an increase in loss accruals related to the September 2020 wildfires, net of estimated insurance recoveries, and higher general and plant maintenance costs. Utility margin increased primarily due to lower purchased electricity prices, higher retail rates, higher average wholesale market prices, lower thermal generation volumes, and higher wheeling revenue, partially offset by higher natural gas-fueled generation prices, higher purchased electricity volumes and lower retail volumes. Retail customer volumes decreased 0.7%, primarily due to the unfavorable impact of weather and lower customer usage, partially offset by an increase in the average number of customers. Energy generated decreased 4% for the first six months of 2022 compared to 2021 primarily due to lower coal-fueled and natural gas-fueled generation, partially offset by higher wind-powered and hydroelectric generation. Wholesale electricity sales volumes decreased 1% and purchased electricity volumes increased 9%.

Non-GAAP Financial Measure

Management utilizes various key financial measures that are prepared in accordance with GAAP, as well as non-GAAP financial measures such as utility margin, to help evaluate results of operations. Utility margin is calculated as operating revenue less cost of fuel and energy, which are captions presented on the Consolidated Statements of Operations.

PacifiCorp's cost of fuel and energy is generally recovered from its customers through regulatory recovery mechanisms and as a result, changes in PacifiCorp's revenue are comparable to changes in such expenses. As such, management believes utility margin more appropriately and concisely explains profitability rather than a discussion of revenue and cost of fuel and energy separately. Management believes the presentation of utility margin provides meaningful and valuable insight into the information management considers important to running the business and a measure of comparability to others in the industry.

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Utility margin is not a measure calculated in accordance with GAAP and should be viewed as a supplement to and not a substitute for operating income which is the most comparable financial measure prepared in accordance with GAAP. The following table provides a reconciliation of utility margin to operating income (in millions):

			Second Quarter																								First Six Months
			2022						2021						Change												2022						2021						Change
Utility margin:
Operating revenue			$	1,314					$	1,298					$	16					1		%				$	2,611					$	2,540					$	71					3		%
Cost of fuel and energy			451						441						10						2						916						865						51						6
Utility margin			863						857						6						1						1,695						1,675						20						1
Operations and maintenance			375						255						120						47						652						514						138						27
Depreciation and amortization			279						275						4						1						559						539						20						4
Property and other taxes			51						43						8						19						110						104						6						6
Operating income			$	158					$	284					$	(126)					(44)		%				$	374					$	518					$	(144)					(28)		%

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Utility Margin

A comparison of key operating results related to utility margin is as follows:

			Second Quarter																								First Six Months
			2022						2021						Change												2022						2021						Change
Utility margin (in millions):
Operating revenue			$	1,314					$	1,298					$	16					1		%				$	2,611					$	2,540					$	71					3		%
Cost of fuel and energy			451						441						10						2						916						865						51						6
Utility margin			$	863					$	857					$	6					1		%				$	1,695					$	1,675					$	20					1		%
Sales (GWhs):
Residential			3,854						4,032						(178)						(4)		%				8,618						8,664						(46)						(1)		%
Commercial			4,633						4,633						—						—						9,183						9,103						80						1
Industrial, irrigation and other			4,849						5,127						(278)						(5)						9,372						9,601						(229)						(2)
Total retail			13,336						13,792						(456)						(3)						27,173						27,368						(195)						(1)
Wholesale			1,245						1,244						1						—						2,798						2,835						(37)						(1)
Total sales			14,581						15,036						(455)						(3)		%				29,971						30,203						(232)						(1)		%
Average number of retail customers  (in thousands)			2,033						1,998						35						2		%				2,029						1,994						35						2		%
Average revenue per MWh:
Retail			$	88.14					$	86.26					$	1.88					2		%				$	86.77					$	85.21					$	1.56					2		%
Wholesale			$	51.53					$	31.08					$	20.45					66		%				$	44.64					$	30.97					$	13.67					44		%
Heating degree days			1,736						1,228						508						41		%				6,481						5,915						566						10		%
Cooling degree days			406						746						(340)						(46)		%				411						746						(335)						(45)		%
Sources of energy (GWhs)(1):
Coal			6,260						7,502						(1,242)						(17)		%				13,171						15,146						(1,975)						(13)		%
Natural gas			2,747						3,223						(476)						(15)						5,862						6,288						(426)						(7)
Wind(2)			1,817						1,383						434						31						4,209						3,121						1,088						35
Hydroelectric and other(2)			1,033						703						330						47						2,017						1,691						326						19
Total energy generated			11,857						12,811						(954)						(7)						25,259						26,246						(987)						(4)
Energy purchased			3,717						3,321						396						12						6,940						6,349						591						9
Total			15,574						16,132						(558)						(3)		%				32,199						32,595						(396)						(1)		%
Average cost of energy per MWh:
Energy generated(3)			$	21.90					$	17.84					$	4.06					23		%				$	20.27					$	17.75					$	2.52					14		%
Energy purchased			$	48.92					$	65.62					$	(16.70)					(25)		%				$	51.97					$	56.80					$	(4.83)					(9)		%

(1)    GWh amounts are net of energy used by the related generating facilities.

(2)    All or some of the renewable energy attributes associated with generation from these sources may be: (a) used in future years to comply with RPS or other regulatory requirements or (b) sold to third parties in the form of Renewable Energy Credits or other environmental commodities.

(3)    The average cost per MWh of energy generated includes only the cost of fuel associated with the generating facilities.

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Quarter Ended June 30, 2022 compared to Quarter Ended June 30, 2021

Utility margin increased $6 million, or 1%, for the second quarter of 2022 compared to 2021 primarily due to:

•$36 million of lower purchased electricity costs from lower average market prices, partially offset by higher purchased volumes;

•$25 million increase in wholesale revenue primarily due to higher average market prices;

•$22 million of lower coal-fueled generation costs primarily due to lower volumes; and

•$7 million of favorable wheeling activities.

The increases above were partially offset by:

•$54 million of higher natural gas-fueled generation costs due to higher average prices, partially offset by lower volumes;

•$14 million decrease in retail revenue due to lower volumes, partially offset by higher average prices. Retail customer volumes decreased 3.3%, primarily due to the unfavorable impacts of weather, mainly in Utah, Idaho and Oregon and a decrease in customer usage, mainly in Utah and Oregon, partially offset by an increase in the average number of customers across the service territory, mainly in Utah and Oregon; and

•$13 million of lower deferred net power costs in accordance with established adjustment mechanisms.

Operations and maintenance increased $120 million, or 47%, for the second quarter of 2022 compared to 2021 primarily due to a $64 million increase in the loss accruals associated with the September 2020 wildfires net of estimated insurance recoveries, $27 million of higher general and plant maintenance costs, higher insurance premiums due to cost increases related to wildfire coverage and higher labor and employee expenses.

Depreciation and amortization increased $4 million, or 1%, for the second quarter of 2022 compared to 2021 primarily due to prior year deferrals in Idaho associated with the increase in depreciation expense resulting from the implementation of the 2018 depreciation study compounded by amortization of those deferrals in the current quarter and higher plant in-service balances in the current quarter, partially offset by lower depreciation associated with Oregon's accelerated depreciation of coal units due to an update to the Oregon allocation factor applied in computing the incremental depreciation.

Property and other taxes increased $8 million, or 19%, for the second quarter of 2022 compared to 2021 primarily due to higher assessed property values in Utah and Wyoming.

Other, net decreased $9 million for the second quarter of 2022 compared to 2021 primarily due to lower cash surrender value of corporate-owned life insurance policies associated with PacifiCorp's supplemental executive retirement plan.

Income tax benefit decreased $11 million, or 58% for the second quarter of 2022 compared to 2021. The effective tax rate was (11)% for the second quarter of 2022 and (9)% for the second quarter of 2021. The effective tax rate decreased primarily due to the relative impact on a percentage basis of PTCs on the lower pre-tax book income in the second quarter of 2022 compared to that of 2021, which results in a higher benefit related to PTCs in the second quarter of 2022.

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First Six Months of 2022 compared to First Six Months Ended 2021

Utility margin increased $20 million, or 1%, for the first six months of 2022 compared to 2021 primarily due to:

•$37 million increase in wholesale revenue due to higher average market prices, partially offset by lower volumes;

•$34 million of lower coal-fueled generation costs due to lower volumes, partially offset by higher average prices;

•$26 million increase in retail revenue due to higher average prices, partially offset by lower volumes. Retail customer volumes decreased 0.7%, primarily due to the unfavorable impacts of weather, mainly in Utah, Oregon and Idaho and a decrease in customer usage primarily in Utah, partially offset by an increase in the average number of customers across the service territory, mainly in Utah and Oregon;

•$24 million of lower purchased electricity costs due to lower average market prices; and

•$15 million of favorable wheeling activities.

The increases above were partially offset by:

•$80 million of higher natural gas-fueled generation costs due to higher average prices, partially offset by lower volumes;

•$24 million of higher purchased electricity costs due to higher volumes;

•$5 million of lower deferred net power costs in accordance with established adjustment mechanisms; and

•$5 million of lower wind-based ancillary revenue.

Operations and maintenance increased $138 million, or 27%, for the first six months of 2022 compared to 2021 primarily due to a $64 million increase in the loss accruals associated with the September 2020 wildfires net of estimated insurance recoveries, $37 million of higher general and plant maintenance costs, higher insurance premiums due to cost increases related to wildfire coverage and higher bad debt expense.

Depreciation and amortization increased $20 million, or 4% for the first six months of 2022 compared to 2021 primarily due to prior year deferrals in Idaho associated with the increase in depreciation expense resulting from the implementation of the 2018 depreciation study compounded by amortization of those deferrals in the current year and higher plant in-service balances in the current year, partially offset by lower depreciation associated with Oregon's accelerated depreciation of coal units due to an update to the Oregon allocation factor applied in computing the incremental depreciation.

Property and other taxes increased $6 million, or 6% for the first six months of 2022 compared to 2021 primarily due to higher assessed property values in Utah and Wyoming.

Other, net decreased $19 million for the first six months of 2022 compared to 2021 primarily due to lower cash surrender value of corporate-owned life insurance policies associated with PacifiCorp's supplemental executive retirement plan.

Income tax benefit decreased $24 million, or 80% for the first six months of 2022 compared to the first six months of 2021. The effective tax rate was (3)% for the first six months of 2022 and (8)% for the first six months of 2021. The effective tax rate increased primarily due to a valuation allowance PacifiCorp recorded in the first quarter of 2022 against state net operating loss carryforwards.

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Liquidity and Capital Resources

As of June 30, 2022, PacifiCorp's total net liquidity was as follows (in millions):

Cash and cash equivalents						$	390
Credit facilities						1,200
Less:
Tax-exempt bond support						(218)
Net credit facilities						982
Total net liquidity						$	1,372
Credit facilities:
Maturity dates						2025

Operating Activities

Net cash flows from operating activities for the six-month periods ended June 30, 2022 and 2021 were $1,213 million and $1,046 million, respectively. The change was primarily due to timing of operating payables, higher transmission deposits, cash received for income taxes and collateral received from counterparties, partially offset by higher fuel and wholesale purchases.

The timing of PacifiCorp's income tax cash flows from period to period can be significantly affected by the estimated federal income tax payment methods and assumptions for each payment date.

Investing Activities

Net cash flows from investing activities for the six-month periods ended June 30, 2022 and 2021 were $(888) million and $(819) million, respectively. The change is primarily due to an increase in capital expenditures of $75 million. Refer to "Future Uses of Cash" for discussion of capital expenditures.

Financing Activities

Net cash flows from financing activities for the six-month period ended June 30, 2022 were $(111) million. Uses of cash consisted primarily of $100 million for common stock dividends paid to PPW Holdings LLC and $9 million for the repayment of long-term debt.

Net cash flows from financing activities for the six-month period ended June 30, 2021 were $(196) million. Sources of cash consisted of $208 million from the borrowing of short-term debt. Uses of cash consisted substantially of $400 million for the repayment of long-term debt.

Short-term Debt

Regulatory authorities limit PacifiCorp to $1.5 billion of short-term debt. As of June 30, 2022 and December 31, 2021, PacifiCorp had no short-term debt outstanding.

Debt Authorizations

PacifiCorp currently has regulatory authority from the OPUC and the Idaho Public Utilities Commission to issue an additional $2 billion of long-term debt. PacifiCorp currently has an effective shelf registration statement with the SEC to issue an indeterminate amount of first mortgage bonds through September 2023. PacifiCorp must make a notice filing with the WUTC prior to any future issuance.

Common Shareholders' Equity

In May 2022, PacifiCorp declared a common stock dividend of $100 million, paid in June 2022, to PPW Holdings LLC.

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Future Uses of Cash

PacifiCorp has available a variety of sources of liquidity and capital resources, both internal and external, including net cash flows from operating activities, public and private debt offerings, the issuance of commercial paper, the use of unsecured revolving credit facilities, capital contributions and other sources. These sources are expected to provide funds required for current operations, capital expenditures, debt retirements and other capital requirements. The availability and terms under which PacifiCorp has access to external financing depends on a variety of factors, including PacifiCorp's credit ratings, investors' judgment of risk associated with PacifiCorp and conditions in the overall capital markets, including the condition of the utility industry.

Capital Expenditures

PacifiCorp has significant future capital requirements. Capital expenditure needs are reviewed regularly by management and may change significantly as a result of these reviews, which may consider, among other factors, impacts to customers' rates; changes in environmental and other rules and regulations; outcomes of regulatory proceedings; changes in income tax laws; general business conditions; load projections; system reliability standards; the cost and efficiency of construction labor, equipment and materials; commodity prices; and the cost and availability of capital.

Historical and forecast capital expenditures, each of which exclude amounts for non-cash equity AFUDC and other non-cash items, are as follows (in millions):

			Six-Month Periods												Annual
			Ended June 30,												Forecast
			2021						2022						2022
Wind generation			$	82					$	14					$	66
Electric distribution			326						303						682
Electric transmission			136						405						1,185
Other			275						172						346
Total			$	819					$	894					$	2,279

PacifiCorp's 2021 IRP identified a roadmap for a significant increase in renewable and carbon free generation resources, coal to natural gas conversion of certain coal-fueled units, energy storage and associated transmission. PacifiCorp's 2021 IRP identified over 1,800 MWs of new wind-powered generating resources that are expected to be online by 2025. PacifiCorp anticipates that the additional new wind-powered generation will be a mixture of owned and contracted resources. PacifiCorp has included an estimate for these new generation resources and associated transmission in its forecast capital expenditures for 2022 through 2024. These estimates are likely to change as a result of the RFP process. PacifiCorp's historical and forecast capital expenditures include the following:

•Wind generation includes both growth projects and operating expenditures. Growth projects include:

◦Construction of wind-powered generating facilities at PacifiCorp totaling $4 million and $79 million for the six-month periods ended June 30, 2022 and 2021, respectively. Construction includes 516 MWs of new wind-powered generating facilities that were placed in-service in 2021. Planned spending for the construction of additional wind-powered generating facilities totals $24 million for the remainder of 2022.

◦Planned acquisition and repowering of two wind-powered generating facilities by PacifiCorp totaling $7 million and $2 million (excluding the 2021 sale of wind turbines) for the six-month periods ended June 30, 2022 and 2021, respectively. In 2021, PacifiCorp sold wind turbines previously acquired from a third party to BHE Wind, LLC, an indirect wholly owned subsidiary of BHE, for $6 million. The repowered facilities are expected to be placed in-service in 2023 and 2024. Planned spending for acquiring and repowering generating facilities totals $14 million for the remainder of 2022.

•Electric distribution includes both growth projects and operating expenditures. Operating expenditures includes spend on wildfire mitigation and wildfire and storm damage restoration. Expenditures for these items totaled $59 million and $117 million for the six-month periods ended June 30, 2022 and 2021, respectively. Planned spending for wildfire mitigation and wildfire and storm damage restoration totals $97 million for the remainder of 2022. Remaining investments relate to expenditures for new connections and distribution operations.

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•Electric transmission includes both growth projects and operating expenditures. Transmission investment primarily reflects planned costs for the 416-mile, 500-kV high-voltage transmission line between the Aeolus substation near Medicine Bow, Wyoming and the Clover substation near Mona, Utah; the 59-mile, 230-kV high-voltage transmission line between the Windstar substation near Glenrock, Wyoming and the Aeolus substation; and the 290-mile, 500-kV high-voltage transmission line from the Longhorn substation near Boardman, Oregon to the Hemingway substation near Boise, Idaho. Expenditures for these segments totaled $296 million and $35 million for the six-month periods ended June 30, 2022 and 2021, respectively. Planned spending for these Energy Gateway Transmission segments to be placed in-service in 2024-2026 totals $614 million for the remainder of 2022.

•Other includes both growth projects and operating expenditures. Expenditures for information technology totaled $77 million and $47 million for the six-month periods ended June 30, 2022 and 2021, respectively. Planned information technology spending totals $87 million for the remainder of 2022. Remaining investments relate to operating projects that consist of routine expenditures for generation and other infrastructure needed to serve existing and expected demand.

Energy Supply Planning

As required by certain state regulations, PacifiCorp uses an IRP to develop a long-term resource plan to ensure that PacifiCorp can continue to provide reliable and cost-effective electric service to its customers while maintaining compliance with existing and evolving environmental laws and regulations. PacifiCorp files its IRP biennially with the state commissions in each of the six states where PacifiCorp operates. Five states indicate whether the IRP meets the state commission's IRP standards and guidelines, a process referred to as "acknowledgment" in some states. Acknowledgement by a state commission does not address cost recovery or prudency of resources ultimately selected.

In September 2021, PacifiCorp filed its 2021 IRP with its state commissions and subsequently filed its 2021 IRP Update in March and April 2022. In March 2022, the OPUC acknowledged PacifiCorp's 2021 IRP and its preferred portfolio. In June 2022, the UPSC issued an order declining to acknowledge the 2021 IRP due to its determination that PacifiCorp did not meet the commission's IRP guidelines by excluding new natural gas-fueled resources in its modeling of the 2021 IRP's preferred portfolio, as well as the commission's view that PacifiCorp did not provide ample time for public input and information exchange during the development of the IRP. The UPSC did approve the 2022 All Source RFP ("2022AS RFP") to procure resources identified in the 2021 IRP. Reviews of the 2021 IRP by the Wyoming Public Service Commission, the WUTC and the Idaho Public Utilities Commission are ongoing.

Requests for Proposals

PacifiCorp issues individual RFPs to procure resources identified in the IRP or resources driven by customer demands. The IRP and the RFPs provide for the identification and staged procurement of resources to meet load or state-specific compliance obligations. Depending upon the specific RFP, applicable laws and regulations may require PacifiCorp to file draft RFPs with the UPSC, the OPUC and the WUTC. Approval by the UPSC, the OPUC or the WUTC may be required depending on the nature of the RFPs.

A draft of PacifiCorp's 2022AS RFP was filed for approval with the WUTC in December 2021, and with the UPSC and the OPUC in January 2022. The draft 2022AS RFP was approved by the WUTC in March 2022 and by the UPSC and the OPUC in April 2022. The 2022AS RFP was issued to market in April 2022. PacifiCorp-owned bids are due late November 2022 and market bids are due February 2023.

Material Cash Requirements

As of June 30, 2022, there have been no material changes in cash requirements from the information provided in Item 7 of PacifiCorp's Annual Report on Form 10-K for the year ended December 31, 2021, other than those disclosed in Note 9 of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

Regulatory Matters

PacifiCorp is subject to comprehensive regulation. Refer to "Regulatory Matters" in Berkshire Hathaway Energy's Part I, Item 2 of this Form 10-Q for discussion regarding PacifiCorp's current regulatory matters.

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Environmental Laws and Regulations

PacifiCorp is subject to federal, state and local laws and regulations regarding climate change, wildfire prevention and mitigation, RPS, air and water quality, emissions performance standards, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact PacifiCorp's current and future operations. In addition to imposing continuing compliance obligations, these laws and regulations provide regulators with the authority to levy substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. These laws and regulations are administered by various federal, state and local agencies. PacifiCorp believes it is in material compliance with all applicable laws and regulations, although many are subject to interpretation that may ultimately be resolved by the courts. Environmental laws and regulations continue to evolve, and PacifiCorp is unable to predict the impact of the changing laws and regulations on its operations and financial results.

Refer to "Environmental Laws and Regulations" in Berkshire Hathaway Energy's Part I, Item 2 of this Form 10-Q for additional information regarding environmental laws and regulations.

Critical Accounting Estimates

Certain accounting measurements require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized on the Consolidated Financial Statements based on such estimates involve numerous assumptions subject to varying and potentially significant degrees of judgment and uncertainty and will likely change in the future as additional information becomes available. Estimates are used for, but not limited to, the accounting for the effects of certain types of regulation, pension and other postretirement benefits, income taxes and revenue recognition-unbilled revenue. For additional discussion of PacifiCorp's critical accounting estimates, see Item 7 of PacifiCorp's Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes in PacifiCorp's assumptions regarding critical accounting estimates since December 31, 2021.

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MidAmerican Funding, LLC and its subsidiaries and MidAmerican Energy Company

Consolidated Financial Section

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PART I

Item 1.Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

MidAmerican Energy Company

Results of Review of Interim Financial Information

We have reviewed the accompanying balance sheet of MidAmerican Energy Company ("MidAmerican Energy") as of June 30, 2022, the related statements of operations and changes in shareholder's equity for the three-month and six-month periods ended June 30, 2022 and 2021, and of cash flows for the six-month periods ended June 30, 2022 and 2021, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheet of MidAmerican Energy as of December 31, 2021, and the related statements of operations, changes in shareholder's equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of MidAmerican Energy's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to MidAmerican Energy in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, 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.

/s/ Deloitte & Touche LLP

Des Moines, Iowa

August 5, 2022

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MIDAMERICAN ENERGY COMPANY

BALANCE SHEETS (Unaudited)

(Amounts in millions)

			As of
			June 30,						December 31,
			2022						2021
ASSETS
Current assets:
Cash and cash equivalents			$	495					$	232
Trade receivables, net			525						526
Income tax receivable			19						79
Inventories			226						234
Other current assets			186						123
Total current assets			1,451						1,194
Property, plant and equipment, net			20,504						20,301
Regulatory assets			509						473
Investments and restricted investments			893						1,026
Other assets			278						263
Total assets			$	23,635					$	23,257

The accompanying notes are an integral part of these financial statements.

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MIDAMERICAN ENERGY COMPANY

BALANCE SHEETS (Unaudited) (continued)

(Amounts in millions)

			As of
			June 30,						December 31,
			2022						2021
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable			$	415					$	531
Accrued interest			84						84
Accrued property, income and other taxes			206						158
Current portion of long-term debt			64						—
Other current liabilities			181						145
Total current liabilities			950						918
Long-term debt			7,661						7,721
Regulatory liabilities			1,026						1,080
Deferred income taxes			3,413						3,389
Asset retirement obligations			698						714
Other long-term liabilities			476						475
Total liabilities			14,224						14,297
Commitments and contingencies (Note 8)
Shareholder's equity:
Common stock - 350 shares authorized, no par value, 71 shares issued and outstanding			—						—
Additional paid-in capital			561						561
Retained earnings			8,850						8,399
Total shareholder's equity			9,411						8,960
Total liabilities and shareholder's equity			$	23,635					$	23,257

The accompanying notes are an integral part of these financial statements.

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MIDAMERICAN ENERGY COMPANY

STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue:
Regulated electric			$	725					$	586					$	1,333					$	1,131
Regulated natural gas and other			172						107						569						629
Total operating revenue			897						693						1,902						1,760
Operating expenses:
Cost of fuel and energy			174						103						299						254
Cost of natural gas purchased for resale and other			120						57						418						489
Operations and maintenance			200						184						392						377
Depreciation and amortization			277						209						527						416
Property and other taxes			36						37						76						73
Total operating expenses			807						590						1,712						1,609
Operating income			90						103						190						151
Other income (expense):
Interest expense			(78)						(74)						(156)						(148)
Allowance for borrowed funds			5						2						9						4
Allowance for equity funds			14						8						29						14
Other, net			(12)						15						(15)						26
Total other income (expense)			(71)						(49)						(133)						(104)
Income before income tax benefit			19						54						57						47
Income tax benefit			(188)						(159)						(394)						(313)
Net income			$	207					$	213					$	451					$	360

The accompanying notes are an integral part of these financial statements.

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MIDAMERICAN ENERGY COMPANY

STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (Unaudited)

(Amounts in millions)

			Common Stock						Additional Paid-in Capital						Retained Earnings						Total Shareholder's Equity
Balance, March 31, 2021			$	—					$	561					$	7,651					$	8,212
Net income			—						—						213						213
Other equity transactions			—						—						1						1
Balance, June 30, 2021			$	—					$	561					$	7,865					$	8,426
Balance, December 31, 2020			$	—					$	561					$	7,504					$	8,065
Net income			—						—						360						360
Other equity transactions			—						—						1						1
Balance, June 30, 2021			$	—					$	561					$	7,865					$	8,426
Balance, March 31, 2022			$	—					$	561					$	8,643					$	9,204
Net income			—						—						207						207
Balance, June 30, 2022			$	—					$	561					$	8,850					$	9,411
Balance, December 31, 2021			$	—					$	561					$	8,399					$	8,960
Net income			—						—						451						451
Balance, June 30, 2022			$	—					$	561					$	8,850					$	9,411

The accompanying notes are an integral part of these financial statements.

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MIDAMERICAN ENERGY COMPANY

STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)

			Six-Month Periods
			Ended June 30,
			2022						2021
Cash flows from operating activities:
Net income			$	451					$	360
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization			527						416
Amortization of utility plant to other operating expenses			19						17
Allowance for equity funds			(29)						(14)
Deferred income taxes and investment tax credits, net			58						196
Settlements of asset retirement obligations			(28)						(19)
Other, net			33						11
Changes in other operating assets and liabilities:
Trade receivables and other assets			2						(275)
Inventories			8						41
Accrued property, income and other taxes, net			94						56
Accounts payable and other liabilities			(10)						(68)
Net cash flows from operating activities			1,125						721
Cash flows from investing activities:
Capital expenditures			(862)						(720)
Purchases of marketable securities			(214)						(109)
Proceeds from sales of marketable securities			210						105
Other, net			6						(2)
Net cash flows from investing activities			(860)						(726)
Cash flows from financing activities:
Other, net			(1)						(2)
Net cash flows from financing activities			(1)						(2)
Net change in cash and cash equivalents and restricted cash and cash equivalents			264						(7)
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period			239						45
Cash and cash equivalents and restricted cash and cash equivalents at end of period			$	503					$	38

The accompanying notes are an integral part of these financial statements.

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MIDAMERICAN ENERGY COMPANY

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(1)    General

MidAmerican Energy Company ("MidAmerican Energy") is a public utility with electric and natural gas operations and is the principal subsidiary of MHC Inc. ("MHC"). MHC is a holding company that conducts no business other than the ownership of its subsidiaries. MHC's nonregulated subsidiary is Midwest Capital Group, Inc. MHC is the direct, wholly owned subsidiary of MidAmerican Funding, LLC ("MidAmerican Funding"), which is an Iowa limited liability company with Berkshire Hathaway Energy Company ("BHE") as its sole member. BHE is a holding company based in Des Moines, Iowa, that owns subsidiaries principally engaged in energy businesses. BHE is a consolidated subsidiary of Berkshire Hathaway Inc. ("Berkshire Hathaway").

The unaudited Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the United States Securities and Exchange Commission's rules and regulations for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements. Management believes the unaudited Financial Statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary for the fair presentation of the unaudited Financial Statements as of June 30, 2022, and for the three- and six-month periods ended June 30, 2022 and 2021. The results of operations for the three- and six-month periods ended June 30, 2022, are not necessarily indicative of the results to be expected for the full year.

The preparation of the unaudited Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited Financial Statements and the reported amounts of revenue and expenses during the period. Actual results may differ from the estimates used in preparing the unaudited Financial Statements. Note 2 of Notes to Financial Statements included in MidAmerican Energy's Annual Report on Form 10-K for the year ended December 31, 2021, describes the most significant accounting policies used in the preparation of the unaudited Financial Statements. There have been no significant changes in MidAmerican Energy's assumptions regarding significant accounting estimates and policies during the six-month period ended June 30, 2022.

(2)    Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash equivalents consist of funds invested in money market mutual funds, U.S. Treasury Bills and other investments with a maturity of three months or less when purchased. Cash and cash equivalents exclude amounts where availability is restricted by legal requirements, loan agreements or other contractual provisions. Restricted cash and cash equivalents consist substantially of funds restricted for wildlife preservation. A reconciliation of cash and cash equivalents and restricted cash and cash equivalents as presented in the Statements of Cash Flows is outlined below and disaggregated by the line items in which they appear on the Balance Sheets (in millions):

			As of
			June 30,						December 31,
			2022						2021
Cash and cash equivalents			$	495					$	232
Restricted cash and cash equivalents in other current assets			8						7
Total cash and cash equivalents and restricted cash and cash equivalents			$	503					$	239

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(3)    Property, Plant and Equipment, Net

Property, plant and equipment, net consists of the following (in millions):

									As of
									June 30,						December 31,
			Depreciable Life						2022						2021
Utility plant in-service, net:
Generation			20-70 years						$	17,737					$	17,397
Transmission			52-75 years						2,583						2,474
Electric distribution			20-75 years						4,725						4,661
Natural gas distribution			29-75 years						2,049						2,039
Utility plant in-service									27,094						26,571
Accumulated depreciation and amortization									(7,658)						(7,376)
Utility plant in-service, net									19,436						19,195
Nonregulated property, net:
Nonregulated property, gross			20-50 years						7						7
Accumulated depreciation and amortization									(1)						(1)
Nonregulated property, net									6						6
									19,442						19,201
Construction work-in-progress									1,062						1,100
Property, plant and equipment, net									$	20,504					$	20,301

(4)    Recent Financing Transactions

Credit Facilities

In June 2022, MidAmerican Energy amended and restated its existing $1.5 billion unsecured credit facility expiring in June 2024. The amendment extended the expiration date to June 2025 and amended pricing from the London Interbank Offered Rate to the Secured Overnight Financing Rate.

(5)    Income Taxes

A reconciliation of the federal statutory income tax rate to MidAmerican Energy's effective income tax rate applicable to income before income tax benefit is as follows:

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Federal statutory income tax rate			21		%				21		%				21		%				21		%
Income tax credits			(973)						(271)						(682)						(634)
State income tax, net of federal income tax impacts			(26)						(31)						(23)						(32)
Effects of ratemaking			(11)						(15)						(9)						(21)
Other, net			—						2						2						—
Effective income tax rate			(989)		%				(294)		%				(691)		%				(666)		%

Income tax credits relate primarily to production tax credits ("PTCs") from MidAmerican Energy's wind-powered generating facilities. Federal renewable electricity PTCs are earned as energy from qualifying wind-powered generating facilities is produced and sold and are based on a per-kilowatt hour rate pursuant to the applicable federal income tax law. MidAmerican Energy recognizes its renewable electricity PTCs throughout the year based on when the credits are earned and excludes them from the annual effective tax rate that is the basis for the interim recognition of other income tax expense. Wind-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service. PTCs for the six-month periods ended June 30, 2022 and 2021 totaled $388 million and $297 million, respectively.

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Berkshire Hathaway includes BHE and subsidiaries in its U.S. federal and Iowa state income tax returns. Consistent with established regulatory practice, MidAmerican Energy's provision for income tax has been computed on a stand-alone basis, and substantially all of its currently payable or receivable income tax is remitted to or received from BHE. MidAmerican Energy received net cash payments for income tax from BHE totaling $541 million and $558 million for the six-month periods ended June 30, 2022 and 2021, respectively.

(6)    Employee Benefit Plans

MidAmerican Energy sponsors a noncontributory defined benefit pension plan covering a majority of all employees of BHE and its domestic energy subsidiaries other than PacifiCorp and NV Energy, Inc. MidAmerican Energy also sponsors certain postretirement healthcare and life insurance benefits covering substantially all retired employees of BHE and its domestic energy subsidiaries other than PacifiCorp and NV Energy, Inc.

Net periodic benefit cost for the plans of MidAmerican Energy and the aforementioned affiliates included the following components (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Pension:
Service cost			$	4					$	5					$	9					$	10
Interest cost			5						5						10						11
Expected return on plan assets			(7)						(10)						(14)						(19)
Settlement			—						—						2						—
Net amortization			1						1						1						1
Net periodic benefit cost			$	3					$	1					$	8					$	3
Other postretirement:
Service cost			$	2					$	2					$	4					$	4
Interest cost			2						2						4						4
Expected return on plan assets			(3)						(3)						(7)						(5)
Net amortization			(1)						(1)						(1)						(2)
Net periodic benefit cost			$	—					$	—					$	—					$	1

Amounts other than the service cost for pension and other postretirement benefit plans are recorded in Other, net in the Statements of Operations. Employer contributions to the pension and other postretirement benefit plans are expected to be $7 million and $3 million, respectively, during 2022. As of June 30, 2022, $4 million and $2 million of contributions had been made to the pension and other postretirement benefit plans, respectively.

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(7)    Fair Value Measurements

The carrying value of MidAmerican Energy's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. MidAmerican Energy has various financial assets and liabilities that are measured at fair value on the Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that MidAmerican Energy has the ability to access at the measurement date.

•Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•Level 3 — Unobservable inputs reflect MidAmerican Energy's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. MidAmerican Energy develops these inputs based on the best information available, including its own data.

The following table presents MidAmerican Energy's financial assets and liabilities recognized on the Balance Sheets and measured at fair value on a recurring basis (in millions):

						Input Levels for Fair Value Measurements
						Level 1						Level 2						Level 3						Other(1)						Total
As of June 30, 2022:
Assets:
Commodity derivatives						$	1					$	66					$	28					$	(22)					$	73
Money market mutual funds						498						—						—						—						498
Debt securities:
U.S. government obligations						220						—						—						—						220
International government obligations						—						1						—						—						1
Corporate obligations						—						75						—						—						75
Municipal obligations						—						3						—						—						3
Agency, asset and mortgage-backed obligations						—						1						—						—						1
Equity securities:
U.S. companies						348						—						—						—						348
International companies						8						—						—						—						8
Investment funds						21						—						—						—						21
						$	1,096					$	146					$	28					$	(22)					$	1,248
Liabilities - commodity derivatives						$	(1)					$	(10)					$	(2)					$	7					$	(6)

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						Input Levels for Fair Value Measurements
						Level 1						Level 2						Level 3						Other(1)						Total
As of December 31, 2021:
Assets:
Commodity derivatives						$	—					$	32					$	3					$	(7)					$	28
Money market mutual funds						228						—						—						—						228
Debt securities:
U.S. government obligations						232						—						—						—						232
International government obligations						—						2						—						—						2
Corporate obligations						—						90						—						—						90
Municipal obligations						—						3						—						—						3
Agency, asset and mortgage-backed obligations						—						2						—						—						2
Equity securities:
U.S. companies						428						—						—						—						428
International companies						10						—						—						—						10
Investment funds						18						—						—						—						18
						$	916					$	129					$	3					$	(7)					$	1,041
Liabilities - commodity derivatives						$	—					$	(6)					$	(8)					$	12					$	(2)

(1)Represents netting under master netting arrangements and a net cash collateral payable of $15 million as of June 30, 2022 and a net cash collateral receivable of $5 million as of December 31, 2021.

MidAmerican Energy's investments in money market mutual funds and debt and equity securities are stated at fair value, with debt securities accounted for as available-for-sale securities. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics.

The following table reconciles the beginning and ending balances of MidAmerican Energy's commodity derivative assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Beginning balance			$	4					$	1					$	(5)					$	2
Changes in fair value recognized in regulatory assets			31						—						44						—
Settlements			(9)						(2)						(13)						(3)
Ending balance			$	26					$	(1)					$	26					$	(1)

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MidAmerican Energy's long-term debt is carried at cost on the Balance Sheets. The fair value of MidAmerican Energy's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of MidAmerican Energy's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of MidAmerican Energy's long-term debt (in millions):

			As of June 30, 2022												As of December 31, 2021
			Carrying Value						Fair Value						Carrying Value						Fair Value
Long-term debt			$	7,725					$	7,376					$	7,721					$	9,037

(8)    Commitments and Contingencies

Legal Matters

MidAmerican Energy is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. MidAmerican Energy does not believe that such normal and routine litigation will have a material impact on its financial results.

Environmental Laws and Regulations

MidAmerican Energy is subject to federal, state and local laws and regulations regarding climate change, renewable portfolio standards, air and water quality, emissions performance standards, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact its current and future operations. MidAmerican Energy believes it is in material compliance with all applicable laws and regulations.

Transmission Rates

MidAmerican Energy's wholesale transmission rates are set annually using Federal Energy Regulatory Commission ("FERC")-approved formula rates subject to true-up for actual cost of service. MidAmerican Energy is authorized by the FERC to include a 0.50% adder beyond the approved base return on equity ("ROE") effective January 2015. Prior to September 2016, the rates in effect were based on a 12.38% ROE. In November 2013 and February 2015, a coalition of intervenors filed successive complaints with the FERC requesting that the 12.38% ROE no longer be found just and reasonable and sought to reduce the base ROE to 9.15% and 8.67%, respectively. In September 2016, the FERC issued an order for the first complaint, which reduces the base ROE to 10.32% and required refunds, plus interest, for the period from November 2013 through February 2015. Customer refunds relative to the first complaint occurred in February 2017. In November 2019, the FERC issued an order addressing the second complaint and issues on appeal in the first complaint. The order established a ROE of 9.88% (10.38% including the 0.50% adder) for the 15-month refund period of the first complaint and prospectively from September 2016 forward. In May 2020, the FERC issued an order on rehearing of the November 2019 order. The May 2020 order affirmed the FERC's prior decision to dismiss the second complaint and established an ROE of 10.02% (10.52% including the 0.50% adder) for the 15-month refund period of the first complaint and prospectively from September 2016 to the date of the May 2020 order. These orders continue to be subject to judicial appeal. MidAmerican Energy cannot predict the ultimate outcome of these matters and, as of June 30, 2022, has accrued an $8 million liability for refunds of amounts collected under the higher ROE during the periods covered by both complaints.

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(9)    Revenue from Contracts with Customers

The following table summarizes MidAmerican Energy's revenue from contracts with customers ("Customer Revenue") by line of business, with further disaggregation of retail by customer class, including a reconciliation to MidAmerican Energy's reportable segment information included in Note 10 (in millions):

			For the Three-Month Period Ended June 30, 2022																								For the Six-Month Period Ended June 30, 2022
			Electric						Natural Gas						Other						Total						Electric						Natural Gas						Other						Total
Customer Revenue:
Retail:
Residential			$	185					$	87					$	—					$	272					$	353					$	312					$	—					$	665
Commercial			91						31						—						122						165						119						—						284
Industrial			277						9						—						286						475						18						—						493
Natural gas transportation services			—						9						—						9						—						23						—						23
Other retail(1)			41						—						—						41						73						1						—						74
Total retail			594						136						—						730						1,066						473						—						1,539
Wholesale			84						34						—						118						188						92						—						280
Multi-value transmission projects			13						—						—						13						28						—						—						28
Other Customer Revenue			—						—						1						1						—						—						2						2
Total Customer Revenue			691						170						1						862						1,282						565						2						1,849
Other revenue			34						1						—						35						51						2						—						53
Total operating revenue			$	725					$	171					$	1					$	897					$	1,333					$	567					$	2					$	1,902

			For the Three-Month Period Ended June 30, 2021																								For the Six-Month Period Ended June 30, 2021
			Electric						Natural Gas						Other						Total						Electric						Natural Gas						Other						Total
Customer Revenue:
Retail:
Residential			$	170					$	59					$	—					$	229					$	331					$	367					$	—					$	698
Commercial			80						18						—						98						151						147						—						298
Industrial			230						3						—						233						420						15						—						435
Natural gas transportation services			—						9						—						9						—						19						—						19
Other retail(1)			36						—						—						36						66						1						—						67
Total retail			516						89						—						605						968						549						—						1,517
Wholesale			52						17						—						69						126						68						—						194
Multi-value transmission projects			15						—						—						15						30						—						—						30
Other Customer Revenue			—						—						1						1						—						—						11						11
Total Customer Revenue			583						106						1						690						1,124						617						11						1,752
Other revenue			3						—						—						3						7						1						—						8
Total operating revenue			$	586					$	106					$	1					$	693					$	1,131					$	618					$	11					$	1,760

(1)    Other retail includes provisions for rate refunds, for which any actual refunds will be reflected in the applicable customer classes upon resolution of the related regulatory proceeding.

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(10)    Segment Information

MidAmerican Energy has identified two reportable segments: regulated electric and regulated natural gas. The regulated electric segment derives most of its revenue from regulated retail sales of electricity to residential, commercial, and industrial customers and from wholesale sales. The regulated natural gas segment derives most of its revenue from regulated retail sales of natural gas to residential, commercial, and industrial customers and also obtains revenue by transporting natural gas owned by others through its distribution system. Pricing for regulated electric and regulated natural 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, interest income, interest expense and income tax expense are allocated to each segment based on certain factors, which primarily relate to the nature of the cost.

The following tables provide information on a reportable segment basis (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue:
Regulated electric			$	725					$	586					$	1,333					$	1,131
Regulated natural gas			171						106						567						618
Other			1						1						2						11
Total operating revenue			$	897					$	693					$	1,902					$	1,760
Operating income:
Regulated electric			$	87					$	103					$	138					$	112
Regulated natural gas			3						—						52						39
Total operating income			90						103						190						151
Interest expense			(78)						(74)						(156)						(148)
Allowance for borrowed funds			5						2						9						4
Allowance for equity funds			14						8						29						14
Other, net			(12)						15						(15)						26
Income before income tax benefit			$	19					$	54					$	57					$	47

			As of
			June 30, 2022						December 31, 2021
Assets:
Regulated electric			$	21,967					$	21,385
Regulated natural gas			1,667						1,871
Other			1						1
Total assets			$	23,635					$	23,257

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Managers and Member of

MidAmerican Funding, LLC

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheet of MidAmerican Funding, LLC and subsidiaries ("MidAmerican Funding") as of June 30, 2022, the related consolidated statements of operations and changes in member's equity for the three-month and six-month periods ended June 30, 2022 and 2021, and of cash flows for the six-month periods ended June 30, 2022 and 2021, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) and in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of MidAmerican Funding as of December 31, 2021, and the related consolidated statements of operations, changes in member's equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of MidAmerican Funding's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to MidAmerican Funding in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB and with auditing standards generally accepted in the United States of America applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB and with auditing standards generally accepted in the United States of America, 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.

/s/ Deloitte & Touche LLP

Des Moines, Iowa

August 5, 2022

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MIDAMERICAN FUNDING, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions)

			As of
			June 30,						December 31,
			2022						2021
ASSETS
Current assets:
Cash and cash equivalents			$	497					$	233
Trade receivables, net			525						526
Income tax receivable			20						80
Inventories			226						234
Other current assets			187						123
Total current assets			1,455						1,196
Property, plant and equipment, net			20,505						20,302
Goodwill			1,270						1,270
Regulatory assets			509						473
Investments and restricted investments			895						1,028
Other assets			277						262
Total assets			$	24,911					$	24,531

The accompanying notes are an integral part of these consolidated financial statements.

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MIDAMERICAN FUNDING, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)

(Amounts in millions)

			As of
			June 30,						December 31,
			2022						2021
LIABILITIES AND MEMBER'S EQUITY
Current liabilities:
Accounts payable			$	415					$	531
Accrued interest			89						89
Accrued property, income and other taxes			206						158
Note payable to affiliate			197						189
Current portion of long-term debt			64						—
Other current liabilities			181						146
Total current liabilities			1,152						1,113
Long-term debt			7,901						7,961
Regulatory liabilities			1,026						1,080
Deferred income taxes			3,411						3,387
Asset retirement obligations			698						714
Other long-term liabilities			477						475
Total liabilities			14,665						14,730
Commitments and contingencies (Note 8)
Member's equity:
Paid-in capital			1,679						1,679
Retained earnings			8,567						8,122
Total member's equity			10,246						9,801
Total liabilities and member's equity			$	24,911					$	24,531

The accompanying notes are an integral part of these consolidated financial statements.

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MIDAMERICAN FUNDING, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue:
Regulated electric			$	725					$	586					$	1,333					$	1,131
Regulated natural gas and other			172						107						569						629
Total operating revenue			897						693						1,902						1,760
Operating expenses:
Cost of fuel and energy			174						103						299						254
Cost of natural gas purchased for resale and other			120						57						418						489
Operations and maintenance			200						184						392						377
Depreciation and amortization			277						209						527						416
Property and other taxes			36						37						76						73
Total operating expenses			807						590						1,712						1,609
Operating income			90						103						190						151
Other income (expense):
Interest expense			(83)						(78)						(165)						(156)
Allowance for borrowed funds			5						2						9						4
Allowance for equity funds			14						8						29						14
Other, net			(10)						16						(14)						26
Total other income (expense)			(74)						(52)						(141)						(112)
Income before income tax benefit			16						51						49						39
Income tax benefit			(188)						(160)						(396)						(316)
Net income			$	204					$	211					$	445					$	355

The accompanying notes are an integral part of these consolidated financial statements.

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MIDAMERICAN FUNDING, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY (Unaudited)

(Amounts in millions)

			Paid-in Capital						Retained Earnings						Total Member's Equity
Balance, March 31, 2021			$	1,679					$	7,384					$	9,063
Net income			—						211						211
Other equity transactions			—						(1)						(1)
Balance, June 30, 2021			$	1,679					$	7,594					$	9,273
Balance, December 31, 2020			$	1,679					$	7,240					$	8,919
Net income			—						355						355
Other equity transactions			—						(1)						(1)
Balance, June 30, 2021			$	1,679					$	7,594					$	9,273
Balance, March 31, 2022			$	1,679					$	8,363					$	10,042
Net income			—						204						204
Balance, June 30, 2022			$	1,679					$	8,567					$	10,246
Balance, December 31, 2021			$	1,679					$	8,122					$	9,801
Net income			—						445						445
Balance, June 30, 2022			$	1,679					$	8,567					$	10,246

The accompanying notes are an integral part of these consolidated financial statements.

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MIDAMERICAN FUNDING, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)

			Six-Month Periods
			Ended June 30,
			2022						2021
Cash flows from operating activities:
Net income			$	445					$	355
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization			527						416
Amortization of utility plant to other operating expenses			19						17
Allowance for equity funds			(29)						(14)
Deferred income taxes and investment tax credits, net			58						195
Settlements of asset retirement obligations			(28)						(19)
Other, net			32						11
Changes in other operating assets and liabilities:
Trade receivables and other assets			1						(275)
Inventories			8						41
Accrued property, income and other taxes, net			95						56
Accounts payable and other liabilities			(10)						(68)
Net cash flows from operating activities			1,118						715
Cash flows from investing activities:
Capital expenditures			(862)						(721)
Purchases of marketable securities			(214)						(109)
Proceeds from sales of marketable securities			210						105
Other, net			6						(1)
Net cash flows from investing activities			(860)						(726)
Cash flows from financing activities:
Net change in note payable to affiliate			8						6
Other, net			(1)						(2)
Net cash flows from financing activities			7						4
Net change in cash and cash equivalents and restricted cash and cash equivalents			265						(7)
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period			240						46
Cash and cash equivalents and restricted cash and cash equivalents at end of period			$	505					$	39

The accompanying notes are an integral part of these consolidated financial statements.

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MIDAMERICAN FUNDING, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)    General

MidAmerican Funding, LLC ("MidAmerican Funding") is an Iowa limited liability company with Berkshire Hathaway Energy Company ("BHE") as its sole member. BHE is a holding company based in Des Moines, Iowa, that owns subsidiaries principally engaged in energy businesses. BHE is a consolidated subsidiary of Berkshire Hathaway Inc. ("Berkshire Hathaway"). MidAmerican Funding's direct, wholly owned subsidiary is MHC Inc. ("MHC"), which constitutes substantially all of MidAmerican Funding's assets, liabilities and business activities except those related to MidAmerican Funding's long-term debt securities. MHC conducts no business other than the ownership of its subsidiaries. MHC's principal subsidiary is MidAmerican Energy Company ("MidAmerican Energy"), a public utility with electric and natural gas operations, and its direct, wholly owned nonregulated subsidiary is Midwest Capital Group, Inc.

The unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the United States Securities and Exchange Commission's rules and regulations for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements. Management believes the unaudited Consolidated Financial Statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary for the fair presentation of the unaudited Consolidated Financial Statements as of June 30, 2022, and for the three- and six-month periods ended June 30, 2022 and 2021. The results of operations for the three- and six-month periods ended June 30, 2022, are not necessarily indicative of the results to be expected for the full year.

The preparation of the unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenue and expenses during the period. Actual results may differ from the estimates used in preparing the unaudited Consolidated Financial Statements. Note 2 of Notes to Consolidated Financial Statements included in MidAmerican Funding's Annual Report on Form 10-K for the year ended December 31, 2021, describes the most significant accounting policies used in the preparation of the unaudited Consolidated Financial Statements. There have been no significant changes in MidAmerican Funding's assumptions regarding significant accounting estimates and policies during the six-month period ended June 30, 2022.

(2)    Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash equivalents consist of funds invested in money market mutual funds, U.S. Treasury Bills and other investments with a maturity of three months or less when purchased. Cash and cash equivalents exclude amounts where availability is restricted by legal requirements, loan agreements or other contractual provisions. Restricted cash and cash equivalents consist substantially of funds restricted for wildlife preservation. A reconciliation of cash and cash equivalents and restricted cash and cash equivalents as presented in the Consolidated Statements of Cash Flows is outlined below and disaggregated by the line items in which they appear on the Consolidated Balance Sheets (in millions):

			As of
			June 30,						December 31,
			2022						2021
Cash and cash equivalents			$	497					$	233
Restricted cash and cash equivalents in other current assets			8						7
Total cash and cash equivalents and restricted cash and cash equivalents			$	505					$	240

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(3)    Property, Plant and Equipment, Net

Refer to Note 3 of MidAmerican Energy's Notes to Financial Statements.

(4)    Recent Financing Transactions

Refer to Note 4 of MidAmerican Energy's Notes to Financial Statements.

(5)    Income Taxes

A reconciliation of the federal statutory income tax rate to MidAmerican Funding's effective income tax rate applicable to income before income tax benefit is as follows:

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Federal statutory income tax rate			21		%				21		%				21		%				21		%
Income tax credits			(1,150)						(286)						(793)						(764)
State income tax, net of federal income tax impacts			(38)						(33)						(29)						(41)
Effects of ratemaking			(12)						(16)						(10)						(26)
Other, net			4						—						3						—
Effective income tax rate			(1,175)		%				(314)		%				(808)		%				(810)		%

Income tax credits relate primarily to production tax credits ("PTCs") from MidAmerican Energy's wind-powered generating facilities. Federal renewable electricity PTCs are earned as energy from qualifying wind-powered generating facilities is produced and sold and are based on a per-kilowatt hour rate pursuant to the applicable federal income tax law. MidAmerican Funding recognizes its renewable electricity PTCs throughout the year based on when the credits are earned and excludes them from the annual effective tax rate that is the basis for the interim recognition of other income tax expense. Wind-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service. PTCs for the six-month periods ended June 30, 2022 and 2021 totaled $388 million and $297 million, respectively.

Berkshire Hathaway includes BHE and subsidiaries in its U.S. federal and Iowa state income tax returns. Consistent with established regulatory practice, MidAmerican Funding's and MidAmerican Energy's provisions for income tax have been computed on a stand-alone basis, and substantially all of their currently payable or receivable income tax is remitted to or received from BHE. MidAmerican Funding received net cash payments for income tax from BHE totaling $544 million and $560 million for the six-month periods ended June 30, 2022 and 2021. respectively.

(6)    Employee Benefit Plans

Refer to Note 6 of MidAmerican Energy's Notes to Financial Statements.

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(7)    Fair Value Measurements

Refer to Note 7 of MidAmerican Energy's Notes to Financial Statements. MidAmerican Funding's long-term debt is carried at cost on the Consolidated Financial Statements. The fair value of MidAmerican Funding's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of MidAmerican Funding's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of MidAmerican Funding's long-term debt (in millions):

			As of June 30, 2022												As of December 31, 2021
			Carrying Value						Fair Value						Carrying Value						Fair Value
Long-term debt			$	7,965					$	7,646					$	7,961					$	9,350

(8)    Commitments and Contingencies

MidAmerican Funding is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. MidAmerican Funding does not believe that such normal and routine litigation will have a material impact on its consolidated financial results.

Refer to Note 8 of MidAmerican Energy's Notes to Financial Statements.

(9)    Revenue from Contracts with Customers

Refer to Note 9 of MidAmerican Energy's Notes to Financial Statements.

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(10)    Segment Information

MidAmerican Funding has identified two reportable segments: regulated electric and regulated natural gas. The regulated electric segment derives most of its revenue from regulated retail sales of electricity to residential, commercial, and industrial customers and from wholesale sales. The regulated natural gas segment derives most of its revenue from regulated retail sales of natural gas to residential, commercial, and industrial customers and also obtains revenue by transporting natural gas owned by others through its distribution system. Pricing for regulated electric and regulated natural 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, interest income, interest expense and income tax expense are allocated to each segment based on certain factors, which primarily relate to the nature of the cost. "Other" in the tables below consists of the financial results and assets of nonregulated operations, MHC and MidAmerican Funding.

The following tables provide information on a reportable segment basis (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue:
Regulated electric			$	725					$	586					$	1,333					$	1,131
Regulated natural gas			171						106						567						618
Other			1						1						2						11
Total operating revenue			$	897					$	693					$	1,902					$	1,760
Operating income:
Regulated electric			$	87					$	103					$	138					$	112
Regulated natural gas			3						—						52						39
Total operating income			90						103						190						151
Interest expense			(83)						(78)						(165)						(156)
Allowance for borrowed funds			5						2						9						4
Allowance for equity funds			14						8						29						14
Other, net			(10)						16						(14)						26
Income before income tax benefit			$	16					$	51					$	49					$	39

			As of
			June 30, 2022						December 31, 2021
Assets(1):
Regulated electric			$	23,158					$	22,576
Regulated natural gas			1,746						1,950
Other			7						5
Total assets			$	24,911					$	24,531

(1)			Assets by reportable segment reflect the assignment of goodwill to applicable reporting units.

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

The following is management's discussion and analysis of certain significant factors that have affected the consolidated financial condition and results of operations of MidAmerican Funding and its subsidiaries and MidAmerican Energy during the periods included herein. Information in Management's Discussion and Analysis related to MidAmerican Energy, whether or not segregated, also relates to MidAmerican Funding. Information related to other subsidiaries of MidAmerican Funding pertains only to the discussion of the financial condition and results of operations of MidAmerican Funding. Where necessary, discussions have been segregated under the heading "MidAmerican Funding" to allow the reader to identify information applicable only to MidAmerican Funding. Explanations include management's best estimate of the impact of weather, customer growth, usage trends and other factors. This discussion should be read in conjunction with MidAmerican Funding's historical unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements and MidAmerican Energy's historical unaudited Financial Statements and Notes to Financial Statements in Part I, Item 1 of this Form 10-Q. MidAmerican Funding's and MidAmerican Energy's actual results in the future could differ significantly from the historical results.

Results of Operations for the Second Quarter and First Six Months of 2022 and 2021

Overview

MidAmerican Energy -

MidAmerican Energy's net income for the second quarter of 2022 was $207 million, a decrease of $6 million, or 3%, compared to 2021, primarily due to higher depreciation and amortization expense of $68 million, unfavorable other, net of $27 million, higher operations and maintenance expense of $16 million and higher interest expense of $4 million, offset by higher electric utility margin of $68 million, higher income tax benefit of $29 million, higher allowances for equity and borrowed funds of $9 million and higher natural gas utility margin of $2 million. Electric retail customer volumes increased 3% primarily due to higher customer usage and the favorable impact of weather. Wholesale electricity sales volumes increased 7% due to favorable market conditions. Natural gas retail customer volumes increased 21% due to the favorable impact of weather.

MidAmerican Energy's net income for the first six months of 2022 was $451 million, an increase of $91 million, or 25%, compared to 2021, primarily due to higher electric utility margin of $157 million, higher income tax benefit of $81 million, higher natural gas utility margin of $20 million and higher allowances for equity and borrowed funds of $20 million, offset by higher depreciation and amortization expense of $111 million, unfavorable other, net of $41 million, higher operations and maintenance expense of $15 million, higher interest expense of $8 million, lower nonregulated utility margins of $8 million and higher property and other taxes of $3 million. Electric retail customer volumes increased 4% primarily due to higher customer usage and the favorable impact of weather. Wholesale electricity sales volumes increased 20% due to favorable market conditions. Natural gas retail customer volumes increased 11% due to the favorable impact of weather.

MidAmerican Funding -

MidAmerican Funding's net income for the second quarter of 2022 was $204 million, a decrease of $7 million, or 3%, compared to 2021. MidAmerican Funding's net income for the first six months of 2022 was $445 million, an increase of $90 million, or 25%, compared to 2021. The variances in net income were primarily due to the changes in MidAmerican Energy's earnings discussed above.

Non-GAAP Financial Measure

Management utilizes various key financial measures that are prepared in accordance with GAAP, as well as non-GAAP financial measures such as, electric utility margin and natural gas utility margin, to help evaluate results of operations. Electric utility margin is calculated as regulated electric operating revenue less cost of fuel and energy, which are captions presented on the Statements of Operations. Natural gas utility margin is calculated as regulated natural gas operating revenue less regulated cost of natural gas purchased for resale, which are included in regulated natural gas and other and cost of natural gas purchased for resale and other, respectively, on the Statements of Operations.

MidAmerican Energy's cost of fuel and energy and cost of natural gas purchased for resale are generally recovered from its retail customers through regulatory recovery mechanisms, and as a result, changes in MidAmerican Energy's expense included in regulatory recovery mechanisms result in comparable changes to revenue. As such, management believes electric utility margin and natural gas utility margin more appropriately and concisely explain profitability rather than a discussion of revenue and cost of sales separately. Management believes the presentation of electric utility margin and natural gas utility margin provides meaningful and valuable insight into the information management considers important to running the business and a measure of comparability to others in the industry.

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Electric utility margin and natural gas utility margin are not measures calculated in accordance with GAAP and should be viewed as a supplement to, and not a substitute for, operating income, which is the most comparable financial measure prepared in accordance with GAAP. The following table provides a reconciliation of utility margin to MidAmerican Energy's operating income (in millions):

						Second Quarter																					First Six Months
						2022						2021						Change									2022						2021						Change
Electric utility margin:
Operating revenue						$	725					$	586					$	139		24		%				$	1,333					$	1,131					$	202		18		%
Cost of fuel and energy						174						103						71			69						299						254						45			18
Electric utility margin						551						483						68			14		%				1,034						877						157			18		%
Natural gas utility margin:
Operating revenue						171						106						65			61		%				567						618						(51)			(8)		%
Natural gas purchased for resale						120						57						63			*						418						489						(71)			(15)
Natural gas utility margin						51						49						2			4		%				149						129						20			16		%
Utility margin						602						532						70			13		%				1,183						1,006						177			18		%
Other operating revenue						1						1						—			—		%				2						11						(9)			(82)		%
Operations and maintenance						200						184						16			9						392						377						15			4
Depreciation and amortization						277						209						68			33						527						416						111			27
Property and other taxes						36						37						(1)			(3)						76						73						3			4
Operating income						$	90					$	103					$	(13)		(13)		%				$	190					$	151					$	39		26		%

*    Not meaningful.

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Electric Utility Margin

A comparison of key operating results related to electric utility margin is as follows:

			Second Quarter																								First Six Months
			2022						2021						Change												2022						2021						Change
Utility margin (in millions):
Operating revenue			$	725					$	586					$	139					24		%				$	1,333					$	1,131					$	202					18		%
Cost of fuel and energy			174						103						71						69						299						254						45						18
Utility margin			$	551					$	483					$	68					14		%				$	1,034					$	877					$	157					18		%
Sales (GWhs):
Residential			1,552						1,486						66						4		%				3,405						3,224						181						6		%
Commercial			953						894						59						7						1,966						1,832						134						7
Industrial			4,149						4,056						93						2						8,128						7,875						253						3
Other			406						401						5						1						809						771						38						5
Total retail			7,060						6,837						223						3						14,308						13,702						606						4
Wholesale			4,146						3,872						274						7						9,471						7,923						1,548						20
Total sales			11,206						10,709						497						5		%				23,779						21,625						2,154						10		%
Average number of retail customers (in thousands)			812						803						9						1		%				811						802						9						1		%
Average revenue per MWh:
Retail			$	84.18					$	75.62					$	8.56					11		%				$	74.52					$	70.71					$	3.81					5		%
Wholesale			$	25.23					$	12.06					$	13.17					*						$	22.65					$	14.40					$	8.25					57		%
Heating degree days			677						588						89						15		%				3,992						3,799						193						5		%
Cooling degree days			421						426						(5)						(1)		%				421						426						(5)						(1)		%
Sources of energy (GWhs)(1):
Wind and other(2)			7,364						5,877						1,487						25		%				15,654						11,999						3,655						30		%
Coal			1,481						2,791						(1,310)						(47)						3,840						5,693						(1,853)						(33)
Nuclear			863						1,009						(146)						(14)						1,783						1,904						(121)						(6)
Natural gas			397						336						61						18						631						479						152						32
Total energy generated			10,105						10,013						92						1						21,908						20,075						1,833						9
Energy purchased			1,315						842						473						56						2,277						1,860						417						22
Total			11,420						10,855						565						5		%				24,185						21,935						2,250						10		%
Average cost of energy per MWh:
Energy generated(3)			$	6.34					$	6.43					$	(0.09)					(1)		%				$	5.92					$	6.29					$	(0.37)					(6)		%
Energy purchased			$	83.45					$	45.70					$	37.75					83		%				$	74.41					$	68.55					$	5.86					9		%

*    Not meaningful.

(1)    GWh amounts are net of energy used by the related generating facilities.

(2)    All or some of the renewable energy attributes associated with generation from these generating facilities may be: (a) used in future years to comply with RPS or other regulatory requirements or (b) sold to third parties in the form of renewable energy credits or other environmental commodities.

(3)    The average cost per MWh of energy generated includes only the cost of fuel associated with the generating facilities.

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Natural Gas Utility Margin

A comparison of key operating results related to natural gas utility margin is as follows:

			Second Quarter																								First Six Months
			2022						2021						Change												2022						2021						Change
Utility margin (in millions):
Operating revenue			$	171					$	106					$	65					61		%				$	567					$	618					$	(51)					(8)		%
Natural gas purchased for resale			120						57						63						*						418						489						(71)						(15)
Utility margin			$	51					$	49					$	2					4		%				$	149					$	129					$	20					16		%
Throughput (000's Dths):
Residential			7,500						6,272						1,228						20		%				34,599						31,554						3,045						10		%
Commercial			3,599						3,011						588						20						16,059						14,744						1,315						9
Industrial			1,465						1,069						396						37						3,309						2,506						803						32
Other			16						11						5						45						51						48						3						6
Total retail sales			12,580						10,363						2,217						21						54,018						48,852						5,166						11
Wholesale sales			4,912						5,817						(905)						(16)						17,144						16,590						554						3
Total sales			17,492						16,180						1,312						8						71,162						65,442						5,720						9
Natural gas transportation service			22,491						26,853						(4,362)						(16)						53,804						56,493						(2,689)						(5)
Total throughput			39,983						43,033						(3,050)						(7)		%				124,966						121,935						3,031						2		%
Average number of retail customers (in thousands)			781						776						5						1		%				784						777						7						1		%
Average revenue per retail Dth sold			$	10.08					$	7.81					$	2.27					29		%				$	8.36					$	10.88					$	(2.52)					(23)		%
Heating degree days			734						625						109						17		%				4,219						3,926						293						7		%
Average cost of natural gas per retail Dth sold			$	6.78					$	3.99					$	2.79					70		%				$	6.03					$	8.62					$	(2.59)					(30)		%
Combined retail and wholesale average cost of natural gas per Dth sold			$	6.86					$	3.54					$	3.32					94		%				$	5.87					$	7.47					$	(1.60)					(21)		%

*    Not meaningful.

Quarter Ended June 30, 2022 Compared to Quarter Ended June 30, 2021

MidAmerican Energy -

Electric utility margin increased $68 million, or 14%, for the second quarter of 2022 compared to 2021, primarily due to:

•a $63 million increase in wholesale utility margin due to higher margins per unit of $61 million, reflecting higher market prices and lower energy costs, and higher volumes of 7.1%; and

•a $6 million increase in retail utility margin primarily due to $11 million from higher customer usage; $6 million due to price impacts from changes in sales mix; and $1 million from the favorable impact of weather; partially offset by $12 million, net of energy costs, from lower recoveries through bill riders (offset in operations and maintenance expense and income tax benefit). Retail customer volumes increased 3.3%.

Natural gas utility margin increased $2 million, or 4%, for the second quarter of 2022 compared to 2021 primarily due to:

•a $5 million increase from higher average prices; partially offset by

•a $3 million decrease from higher refunds related to amortization of excess accumulated deferred income taxes arising from 2017 Tax Reform (offset in income tax benefit).

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Operations and maintenance increased $16 million, or 9%, for the second quarter of 2022 compared to 2021 primarily due to higher steam generation maintenance costs of $9 million and higher electric distribution and transmission costs of $10 million, partially offset by lower gas distribution costs of $3 million.

Depreciation and amortization increased $68 million, or 33%, for the second quarter of 2022 compared to 2021 primarily due to $54 million from higher Iowa revenue sharing accruals, $18 million from a regulatory mechanism that provides customers the retail energy benefits of certain wind-powered generation projects and $8 million from wind-powered generating facilities and other plant placed in-service, partially offset by $12 million from a regulatory mechanism deferring certain depreciation expense in 2022.

Interest expense increased $4 million, or 5%, for the second quarter of 2022 compared to 2021 due to higher interest expense from a July 2021 long-term debt issuance and higher interest rates on variable rate long-term debt.

Allowance for borrowed and equity funds increased $9 million, or 90%, for the second quarter of 2022 compared to 2021 primarily due to higher construction work-in-progress balances related to wind- and solar-powered generation.

Other, net decreased $27 million, or 180%, for the second quarter of 2022 compared to 2021 primarily due to unfavorable investment earnings, largely attributable to lower cash surrender values of corporate-owned life insurance policies, and higher non-service costs of employee benefit plans.

Income tax benefit increased $29 million, or 18%, for the second quarter of 2022 compared to 2021 primarily due to higher PTCs and lower pretax income, partially offset by state income tax impacts and the effects of ratemaking. PTCs for the second quarter of 2022 and 2021 totaled $185 million and $146 million, respectively.

MidAmerican Funding -

Income tax benefit increased $28 million, or 18%, for the second quarter of 2022 compared to 2021 principally due to the factors discussed for MidAmerican Energy.

First Six Months of 2022 Compared to First Six Months of 2021

MidAmerican Energy -

Electric utility margin increased $157 million, or 18%, for the first six months of 2022 compared to 2021, due to:

•a $127 million increase in wholesale utility margin due to higher margins per unit of $119 million, reflecting higher market prices and lower energy costs, and higher volumes of 19.5%; and

•a $31 million increase in retail utility margin primarily due to $28 million from higher customer usage; $4 million due to price impacts from changes in sales mix; and $2 million from the favorable impact of weather; partially offset by $3 million, net of energy costs, from lower recoveries through bill riders (offset in operations and maintenance expense and income tax benefit). Retail customer volumes increased 4.4%.

Natural gas utility margin increased $20 million, or 16%, for the first six months of 2022 compared to 2021 primarily due to:

•a $10 million increase from higher average prices primarily due to the timing of recoveries through a capital tracker mechanism;

•a $5 million increase from lower refunds related to amortization of excess accumulated deferred income taxes arising from 2017 Tax Reform (offset in income tax benefit); and

•a $5 million increase from the favorable impact of weather.

Operations and maintenance increased $15 million, or 4%, for the first six months of 2022 compared to 2021 primarily due to higher steam generation maintenance costs of $11 million and higher electric distribution and transmission costs of $10 million, partially offset by lower energy efficiency program expense of $4 million (offset in operating revenue) and lower gas distribution costs of $3 million.

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Depreciation and amortization increased $111 million, or 27%, for the first six months of 2022 compared to 2021 primarily due to $96 million from higher Iowa revenue sharing accruals, $24 million from a regulatory mechanism that provides customers the retail energy benefits of certain wind-powered generation projects and $15 million from wind-powered generating facilities and other plant placed in-service, partially offset by $25 million from a regulatory mechanism deferring certain depreciation expense in 2022.

Interest expense increased $8 million, or 5%, for the first six months of 2022 compared to 2021 due to higher interest expense from a July 2021 long-term debt issuance and higher interest rates on variable rate long-term debt.

Allowance for borrowed and equity funds increased $20 million, or 111%, for the first six months of 2022 compared to 2021 primarily due to higher construction work-in-progress balances related to wind- and solar-powered generation.

Other, net decreased $41 million, or 158%, for the first six months of 2022 compared to 2021 primarily due to unfavorable investment earnings, largely attributable to lower cash surrender values of corporate-owned life insurance policies, and higher non-service costs of employee benefit plans.

Income tax benefit increased $81 million, or 26%, for the first six months of 2022 compared to 2021 primarily due to higher PTCs, partially offset by the effects of ratemaking, state income tax impacts and higher pretax income. PTCs for the first six months of 2022 and 2021 totaled $388 million and $297 million, respectively.

MidAmerican Funding -

Income tax benefit increased $80 million, or 25%, for the first six months of 2022 compared to 2021 principally due to the factors discussed for MidAmerican Energy.

Liquidity and Capital Resources

As of June 30, 2022, the total net liquidity for MidAmerican Energy and MidAmerican Funding was as follows (in millions):

MidAmerican Energy:
Cash and cash equivalents						$	495
Credit facilities, maturing 2023 and 2025						1,505
Less:
Tax-exempt bond support						(370)
Net credit facilities						1,135
MidAmerican Energy total net liquidity						$	1,630
MidAmerican Funding:
MidAmerican Energy total net liquidity						$	1,630
Cash and cash equivalents						2
MHC, Inc. credit facility, maturing 2023						4
MidAmerican Funding total net liquidity						$	1,636

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Operating Activities

MidAmerican Energy's net cash flows from operating activities for the six-month periods ended June 30, 2022 and 2021, were $1,125 million and $721 million, respectively. MidAmerican Funding's net cash flows from operating activities for the six-month periods ended June 30, 2022 and 2021, were $1,118 million and $715 million, respectively. Cash flows from operating activities reflect higher utility margins for MidAmerican Energy's regulated electric and natural gas businesses and lower payments to vendors, partially offset by lower income tax receipts and higher asset retirement obligation settlements. Higher utility margins are largely attributable to the recovery of higher natural gas costs caused by the February 2021 polar vortex weather event.

The timing of MidAmerican Energy's income tax cash flows from period to period can be significantly affected by the estimated federal income tax payment methods and assumptions for each payment date.

Investing Activities

MidAmerican Energy's net cash flows from investing activities for the six-month periods ended June 30, 2022 and 2021, were $(860) million and $(726) million, respectively. MidAmerican Funding's net cash flows from investing activities for the six-month periods ended June 30, 2022 and 2021, were $(860) million and $(726) million, respectively. Net cash flows from investing activities consist almost entirely of capital expenditures. Refer to "Future Uses of Cash" for further discussion of capital expenditures. Purchases and proceeds related to marketable securities substantially consist of activity within the Quad Cities Generating Station nuclear decommissioning trust and other trust investments.

Financing Activities

MidAmerican Energy's net cash flows from financing activities for the six-month periods ended June 30, 2022 and 2021 were $(1) million and $(2) million, respectively. MidAmerican Funding's net cash flows from financing activities for the six-month periods ended June 30, 2022 and 2021, were $7 million and $4 million, respectively. MidAmerican Funding received $8 million and $6 million in 2022 and 2021, respectively, through its note payable with BHE.

Debt Authorizations and Related Matters

Short-term Debt

MidAmerican Energy has authority from the FERC to issue, through April 2, 2024, commercial paper and bank notes aggregating $1.5 billion. MidAmerican Energy has a $1.5 billion unsecured credit facility expiring in June 2025. The credit facility, which supports MidAmerican Energy's commercial paper program and its variable-rate tax-exempt bond obligations and provides for the issuance of letters of credit, has a variable interest rate based on the Secured Overnight Financing Rate, plus a spread that varies based on MidAmerican Energy's credit ratings for senior unsecured long-term debt securities. Additionally, MidAmerican Energy has a $5 million unsecured credit facility for general corporate purposes.

Long-term Debt and Preferred Stock

MidAmerican Energy currently has an effective automatic registration statement with the SEC to issue an indeterminate amount of long-term debt securities and preferred stock through June 13, 2024. MidAmerican Energy has authorization from the FERC to issue, through June 30, 2023, long-term debt securities up to an aggregate of $2.0 billion and preferred stock up to an aggregate of $500 million and from the Illinois Commerce Commission to issue, through May 25, 2025, long-term debt securities up to an aggregate of $2.2 billion and preferred stock up to an aggregate of $500 million. Additionally, MidAmerican Energy has authority from the Illinois Commerce Commission through October 15, 2024, to issue $750 million of long-term debt securities for the purpose of refinancing $250 million of its 3.70% Senior notes due September 2023 and $500 million of its 2.40% Senior notes due October 2024.

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Future Uses of Cash

MidAmerican Energy and MidAmerican Funding have available a variety of sources of liquidity and capital resources, both internal and external, including net cash flows from operating activities, public and private debt offerings, the issuance of commercial paper, the use of unsecured revolving credit facilities and other sources. These sources are expected to provide funds required for current operations, capital expenditures, debt retirements and other capital requirements. The availability and terms under which MidAmerican Energy and MidAmerican Funding have access to external financing depends on a variety of factors, including regulatory approvals, their credit ratings, investors' judgment of risk and conditions in the overall capital markets, including the condition of the utility industry.

Capital Expenditures

MidAmerican Energy has significant future capital requirements. Capital expenditure needs are reviewed regularly by management and may change significantly as a result of these reviews, which may consider, among other factors, impacts to customers' rates; changes in environmental and other rules and regulations; outcomes of regulatory proceedings; changes in income tax laws; general business conditions; load projections; system reliability standards; the cost and efficiency of construction labor, equipment and materials; commodity prices; and the cost and availability of capital.

MidAmerican Energy's historical and forecast capital expenditures, each of which exclude amounts for non-cash equity AFUDC and other non-cash items, are as follows (in millions):

			Six-Month Periods												Annual
			Ended June 30,												Forecast
			2021						2022						2022
Wind generation			$	286					$	244					$	734
Electric distribution			96						125						274
Electric transmission			54						46						158
Solar generation			63						77						140
Other			221						370						607
Total			$	720					$	862					$	1,913

MidAmerican Energy's capital expenditures provided above consist of the following:

•Wind generation includes the construction, repowering and operation of wind-powered generating facilities in Iowa.

◦Construction of wind-powered generating facilities totaling $5 million and $172 million for the six-month periods ended June 30, 2022 and 2021, respectively. Planned spending for the construction of additional wind-powered generating facilities totals $106 million for the remainder of 2022.

◦Repowering of wind-powered generating facilities totaling $214 million and $82 million for the six-month periods ended June 30, 2022 and 2021, respectively. Planned spending for the repowering of wind-powered generating facilities totals $314 million for the remainder of 2022. MidAmerican Energy expects its repowered facilities to meet Internal Revenue Service guidelines for the re-establishment of PTCs for 10 years from the date the facilities are placed in-service. The rate at which PTCs are re-established for a facility depends upon the date construction begins. Of the 593 MWs of current repowering projects not in-service as of June 30, 2022, 292 MWs are currently expected to qualify for 80% of the PTCs available for 10 years following each facility's return to service and 301 MWs are expected to qualify for 60% of such credits.

•Electric distribution includes expenditures for new facilities to meet retail demand growth and for replacement of existing facilities to maintain system reliability.

•Electric transmission includes expenditures to meet retail demand growth, upgrades to accommodate third-party generator requirements and replacement of existing facilities to maintain system reliability.

•Solar generation includes the construction of solar-powered generating facilities totaling 141 MWs of small- and utility-scale solar generation, with total spend of $77 million and $63 million for the six-month periods ended June 30, 2022 and 2021, respectively and planned spending of $63 million for the remainder of 2022.

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•Remaining expenditures primarily relate to routine expenditures for other generation, natural gas distribution, technology, facilities and other operational needs to serve existing and expected demand.

Material Cash Requirements

As of June 30, 2022, there have been no material changes in MidAmerican Energy's and MidAmerican Funding's cash requirements from the information provided in Item 7 of their Annual Report on Form 10-K for the year ended December 31, 2021.

Quad Cities Generating Station Operating Status

Constellation Energy Corp. ("Constellation Energy," previously Exelon Generation Company, LLC, which was a subsidiary of Exelon Corporation prior to February 1, 2022), the operator of Quad Cities Generating Station Units 1 and 2 ("Quad Cities Station") of which MidAmerican Energy has a 25% ownership interest, announced on June 2, 2016, its intention to shut down Quad Cities Station on June 1, 2018. In December 2016, Illinois passed legislation creating a zero emission standard, which went into effect June 1, 2017. The zero emission standard requires the Illinois Power Agency to purchase ZECs and recover the costs from certain ratepayers in Illinois, subject to certain limitations. The proceeds from the ZECs will provide Constellation Energy additional revenue through 2027 as an incentive for continued operation of Quad Cities Station. MidAmerican Energy will not receive additional revenue from the subsidy.

The PJM Interconnection, L.L.C. ("PJM") capacity market includes a Minimum Offer Price Rule ("MOPR"). If a generation resource is subjected to a MOPR, its offer price in the market is adjusted to effectively remove the revenues it receives through a state government-provided financial support program, resulting in a higher offer that may not clear the capacity market. Prior to December 19, 2019, the PJM MOPR applied only to certain new gas-fired resources. An expanded PJM MOPR to include existing resources would require exclusion of ZEC compensation when bidding into future capacity auctions, resulting in an increased risk of Quad Cities Station not receiving capacity revenues in future auctions.

On December 19, 2019, the FERC issued an order requiring the PJM to broadly apply the MOPR to all new and existing resources, including nuclear. This greatly expanded the breadth and scope of the PJM's MOPR, which became effective as of the PJM's capacity auction for the 2022-2023 planning year in May 2021. While the FERC included some limited exemptions, no exemptions were available to state-supported nuclear resources, such as Quad Cities Station. The FERC provided no new mechanism for accommodating state-supported resources other than the existing Fixed Resource Requirement ("FRR") mechanism under which an entire utility zone would be removed from PJM's capacity auction along with sufficient resources to support the load in such zone. In response to the FERC's order, the PJM submitted a compliance filing on March 18, 2020, wherein the PJM proposed tariff language reflecting the FERC's directives and a schedule for resuming capacity auctions. On April 16, 2020, the FERC issued an order largely denying requests for rehearing of the FERC's December 2019 order but granting a few clarifications that required an additional PJM compliance filing, which the PJM submitted on June 1, 2020. A number of parties, including Constellation Energy, have filed petitions for review of the FERC's orders in this proceeding, which remain pending before the D.C. Circuit.

As a result, the MOPR applied to Quad Cities Station in the capacity auction for the 2022-2023 planning year, which prevented Quad Cities Station from clearing in that capacity auction.

At the direction of the PJM Board of Managers, the PJM and its stakeholders developed further MOPR reforms to ensure that the capacity market rules respect and accommodate state resource preferences such as the ZEC programs. The PJM filed related tariff revisions at the FERC on July 30, 2021, and, on September 29, 2021, the PJM's proposed MOPR reforms became effective by operation of law. Under the new tariff provisions, the MOPR will no longer apply to Quad Cities Station. Requests for rehearing of the FERC's notice establishing the effective date for the PJM's proposed market reforms were filed in October 2021 and denied by operation of law on November 4, 2021. Several parties have filed petitions for review of the FERC's orders in this proceeding, which remain pending before the Court of Appeals for the Third Circuit. Constellation Energy is strenuously opposing these appeals.

Assuming the continued effectiveness of the Illinois zero emission standard, Constellation Energy no longer considers Quad Cities Station to be at heightened risk for early retirement. However, to the extent the Illinois zero emission standard does not operate as expected over its full term, Quad Cities Station would be at heightened risk for early retirement. The FERC's December 19, 2019 order on the PJM MOPR may undermine the continued effectiveness of the Illinois zero emission standard unless the PJM adopts further changes to the MOPR or Illinois implements an FRR mechanism, under which Quad Cities Station would be removed from the PJM's capacity auction.

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Regulatory Matters

MidAmerican Energy is subject to comprehensive regulation. Refer to "Regulatory Matters" in Berkshire Hathaway Energy's Part I, Item 2 of this Form 10-Q for discussion regarding MidAmerican Energy's current regulatory matters.

Environmental Laws and Regulations

MidAmerican Energy is subject to federal, state and local laws and regulations regarding climate change, RPS, air and water quality, emissions performance standards, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact MidAmerican Energy's current and future operations. In addition to imposing continuing compliance obligations, these laws and regulations provide regulators with the authority to levy substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. These laws and regulations are administered by various federal, state and local agencies. MidAmerican Energy believes it is in material compliance with all applicable laws and regulations, although many are subject to interpretation that may ultimately be resolved by the courts. Environmental laws and regulations continue to evolve, and MidAmerican Energy is unable to predict the impact of the changing laws and regulations on its operations and consolidated financial results.

Refer to "Environmental Laws and Regulations" in Berkshire Hathaway Energy's Part I, Item 2 of this Form 10-Q for additional information regarding environmental laws and regulations.

Critical Accounting Estimates

Certain accounting measurements require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized on the Financial Statements based on such estimates involve numerous assumptions subject to varying and potentially significant degrees of judgment and uncertainty and will likely change in the future as additional information becomes available. Estimates are used for, but not limited to, the accounting for the effects of certain types of regulation, derivatives, impairment of goodwill and long-lived assets, pension and other postretirement benefits, income taxes and revenue recognition - unbilled revenue. For additional discussion of MidAmerican Energy's and MidAmerican Funding's critical accounting estimates, see Item 7 of their Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes in MidAmerican Energy's and MidAmerican Funding's assumptions regarding critical accounting estimates since December 31, 2021.

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Nevada Power Company and its subsidiaries

Consolidated Financial Section

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PART I

Item 1.Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

Nevada Power Company

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheet of Nevada Power Company and subsidiaries ("Nevada Power") as of June 30, 2022, the related consolidated statements of operations and changes in shareholder's equity for the three-month and six-month periods ended June 30, 2022 and 2021, and of cash flows for the six-month periods ended June 30, 2022 and 2021, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of Nevada Power as of December 31, 2021, and the related consolidated statements of operations, changes in shareholder's equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of Nevada Power's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Nevada Power in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, 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.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada

August 5, 2022

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NEVADA POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions, except share data)

			As of
			June 30,						December 31,
			2022						2021
ASSETS
Current assets:
Cash and cash equivalents			$	42					$	33
Trade receivables, net			369						227
Inventories			68						64
Regulatory assets			401						291
Other current assets			62						86
Total current assets			942						701
Property, plant and equipment, net			7,115						6,891
Regulatory assets			748						728
Other assets			414						432
Total assets			$	9,219					$	8,752
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable			$	433					$	242
Accrued interest			33						32
Short-term debt			—						180
Regulatory liabilities			46						49
Customer deposits			44						44
Derivative contracts			122						55
Other current liabilities			91						91
Total current liabilities			769						693
Long-term debt			2,800						2,499
Finance lease obligations			302						310
Regulatory liabilities			1,075						1,100
Deferred income taxes			816						782
Other long-term liabilities			328						338
Total liabilities			6,090						5,722
Commitments and contingencies (Note 9)
Shareholder's equity:
Common stock - $1.00 stated value; 1,000 shares authorized, issued and outstanding			—						—
Additional paid-in capital			2,333						2,308
Retained earnings			798						724
Accumulated other comprehensive loss, net			(2)						(2)
Total shareholder's equity			3,129						3,030
Total liabilities and shareholder's equity			$	9,219					$	8,752
The accompanying notes are an integral part of the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue			$	639					$	559					$	1,054					$	929
Operating expenses:
Cost of fuel and energy			336						252						548						417
Operations and maintenance			75						77						140						140
Depreciation and amortization			103						100						206						201
Property and other taxes			12						12						25						24
Total operating expenses			526						441						919						782
Operating income			113						118						135						147
Other income (expense):
Interest expense			(39)						(39)						(77)						(77)
Allowance for borrowed funds			2						1						3						2
Allowance for equity funds			2						2						5						3
Interest and dividend income			9						3						18						8
Other, net			(1)						6						—						10
Total other income (expense)			(27)						(27)						(51)						(54)
Income before income tax expense			86						91						84						93
Income tax expense			10						9						10						9
Net income			$	76					$	82					$	74					$	84
The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (Unaudited)

(Amounts in millions, except shares)

																														Accumulated
																		Additional												Other						Total
						Common Stock												Paid-in						Retained						Comprehensive						Shareholder's
						Shares						Amount						Capital						Earnings						Loss, Net						Equity
Balance, March 31, 2021						1,000						$	—					$	2,308					$	636					$	(3)					$	2,941
Net income						—						—						—						82						—						82
Dividends declared						—						—						—						(13)						—						(13)
Balance, June 30, 2021						1,000						$	—					$	2,308					$	705					$	(3)					$	3,010
Balance, December 31, 2020						1,000						$	—					$	2,308					$	634					$	(3)					$	2,939
Net income						—						—						—						84						—						84
Dividends declared						—						—						—						(13)						—						(13)
Balance, June 30, 2021						1,000						$	—					$	2,308					$	705					$	(3)					$	3,010
Balance, March 31, 2022						1,000						$	—					$	2,308					$	722					$	(2)					$	3,028
Net income						—						—						—						76						—						76
Contributions						—						—						25						—						—						25
Balance, June 30, 2022						1,000						$	—					$	2,333					$	798					$	(2)					$	3,129
Balance, December 31, 2021						1,000						$	—					$	2,308					$	724					$	(2)					$	3,030
Net income						—						—						—						74						—						74
Contributions						—						—						25						—						—						25
Balance, June 30, 2022						1,000						$	—					$	2,333					$	798					$	(2)					$	3,129
The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)

			Six-Month Periods
			Ended June 30,
			2022						2021
Cash flows from operating activities:
Net income			$	74					$	84
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization			206						201
Allowance for equity funds			(5)						(3)
Changes in regulatory assets and liabilities			(14)						(17)
Deferred income taxes and amortization of investment tax credits			12						(20)
Deferred energy			(159)						(1)
Amortization of deferred energy			46						7
Other, net			10						—
Changes in other operating assets and liabilities:
Trade receivables and other assets			(154)						(83)
Inventories			(4)						5
Accrued property, income and other taxes			18						21
Accounts payable and other liabilities			194						116
Net cash flows from operating activities			224						310
Cash flows from investing activities:
Capital expenditures			(350)						(237)
Net cash flows from investing activities			(350)						(237)
Cash flows from financing activities:
Proceeds from long-term debt			300						—
Net repayment of short-term debt			(180)						—
Contributions from parent			25						—
Dividends paid			—						(13)
Other, net			(9)						(8)
Net cash flows from financing activities			136						(21)
Net change in cash and cash equivalents and restricted cash and cash equivalents			10						52
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period			45						36
Cash and cash equivalents and restricted cash and cash equivalents at end of period			$	55					$	88
The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)    General

Nevada Power Company, together with its subsidiaries ("Nevada Power"), is a wholly owned subsidiary of NV Energy, Inc. ("NV Energy"), a holding company that also owns Sierra Pacific Power Company and its subsidiaries ("Sierra Pacific") and certain other subsidiaries. Nevada Power is a U.S. regulated electric utility company serving retail customers, including residential, commercial and industrial customers, primarily in the Las Vegas, North Las Vegas, Henderson and adjoining areas. NV Energy is an indirect wholly owned subsidiary of Berkshire Hathaway Energy Company ("BHE"). BHE is a holding company based in Des Moines, Iowa that owns subsidiaries principally engaged in energy businesses. BHE is a consolidated subsidiary of Berkshire Hathaway Inc. ("Berkshire Hathaway").

The unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the United States Securities and Exchange Commission's rules and regulations for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements. Management believes the unaudited Consolidated Financial Statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary for the fair presentation of the unaudited Consolidated Financial Statements as of June 30, 2022 and for the three- and six-month periods ended June 30, 2022 and 2021. The Consolidated Statements of Comprehensive Income have been omitted as net income equals comprehensive income for the three- and six-month periods ended June 30, 2022 and 2021. The results of operations for the three- and six-month periods ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year.

The preparation of the unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenue and expenses during the period. Actual results may differ from the estimates used in preparing the unaudited Consolidated Financial Statements. Note 2 of Notes to Consolidated Financial Statements included in Nevada Power's Annual Report on Form 10-K for the year ended December 31, 2021 describes the most significant accounting policies used in the preparation of the unaudited Consolidated Financial Statements. There have been no significant changes in Nevada Power's assumptions regarding significant accounting estimates and policies during the six-month period ended June 30, 2022.

(2)    Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash equivalents consist of funds invested in money market mutual funds, U.S. Treasury Bills and other investments with a maturity of three months or less when purchased. Cash and cash equivalents exclude amounts where availability is restricted by legal requirements, loan agreements or other contractual provisions. Restricted cash and cash equivalents consist of funds restricted by the Public Utilities Commission of Nevada ("PUCN") for a certain renewable energy contract. A reconciliation of cash and cash equivalents and restricted cash and cash equivalents as presented in the Consolidated Statements of Cash Flows is outlined below and disaggregated by the line items in which they appear on the Consolidated Balance Sheets (in millions):

			As of
			June 30,						December 31,
			2022						2021
Cash and cash equivalents			$	42					$	33
Restricted cash and cash equivalents included in other current assets			13						12
Total cash and cash equivalents and restricted cash and cash equivalents			$	55					$	45

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(3)    Property, Plant and Equipment, Net

Property, plant and equipment, net consists of the following (in millions):

									As of
			Depreciable Life						June 30,						December 31,
									2022						2021
Utility plant:
Generation			30 - 55 years						$	3,879					$	3,793
Transmission			45 - 70 years						1,527						1,503
Distribution			20 - 65 years						4,021						3,920
General and intangible plant			5 - 65 years						834						836
Utility plant									10,261						10,052
Accumulated depreciation and amortization									(3,517)						(3,406)
Utility plant, net									6,744						6,646
Other non-regulated, net of accumulated depreciation and amortization			45 years						1						1
Plant, net									6,745						6,647
Construction work-in-progress									370						244
Property, plant and equipment, net									$	7,115					$	6,891

(4)    Recent Financing Transactions

Long-Term Debt

In January 2022, Nevada Power entered into a $300 million secured delayed draw term loan facility maturing in January 2024. Amounts borrowed under the facility bear interest at variable rates based on the Secured Overnight Financing Rate ("SOFR") or a base rate, at Nevada Power's option, plus a pricing margin. In January 2022, Nevada Power borrowed $200 million under the facility at an initial interest rate of 0.55%. In May 2022, Nevada Power drew the remaining $100 million available under the facility at an initial interest rate of 1.24%. Nevada Power used the proceeds to repay amounts outstanding under its existing secured credit facility and for general corporate purposes.

Credit Facilities

In June 2022, Nevada Power amended and restated its existing $400 million secured credit facility expiring in June 2024. The amendment extended the expiration date to June 2025 and amended pricing from the London Interbank Offered Rate to SOFR.

(5)    Income Taxes

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax benefit is as follows:

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Federal statutory income tax rate			21		%				21		%				21		%				21		%
Effects of ratemaking			(10)						(11)						(10)						(11)
Other			1						—						1						—
Effective income tax rate			12		%				10		%				12		%				10		%

Effects of ratemaking is primarily attributable to the recognition of excess deferred income taxes related to the 2017 Tax Cuts

and Jobs Act pursuant to an order issued by the PUCN effective January 1, 2021.

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Berkshire Hathaway includes BHE and its subsidiaries in its U.S. federal income tax return. Consistent with established regulatory practice, Nevada Power's provision for federal income tax has been computed on a separate return basis, and substantially all of its currently payable or receivable income tax is remitted to or received from BHE. For the six-month period ended June 30, 2022, Nevada Power received net cash payments for federal income tax from BHE totaling $21 million. For the six-month period ended June 30, 2021, Nevada Power made net cash payments for federal income tax to BHE totaling $15 million.

(6)    Employee Benefit Plans

Nevada Power is a participant in benefit plans sponsored by NV Energy. The NV Energy Retirement Plan includes a qualified pension plan ("Qualified Pension Plan") and a supplemental executive retirement plan and a restoration plan (collectively, "Non‑Qualified Pension Plans") that provide pension benefits for eligible employees. The NV Energy Comprehensive Welfare Benefit and Cafeteria Plan provides certain postretirement health care and life insurance benefits for eligible retirees ("Other Postretirement Plans") on behalf of Nevada Power. Amounts attributable to Nevada Power were allocated from NV Energy based upon the current, or in the case of retirees, previous, employment location. Offsetting regulatory assets and liabilities have been recorded related to the amounts not yet recognized as a component of net periodic benefit costs that will be included in regulated rates. Net periodic benefit costs not included in regulated rates are included in accumulated other comprehensive loss, net.

Amounts receivable from (payable to) NV Energy are included on the Consolidated Balance Sheets and consist of the following (in millions):

			As of
			June 30,						December 31,
			2022						2021
Qualified Pension Plan:
Other non-current assets			$	42					$	42
Non-Qualified Pension Plans:
Other current liabilities			(1)						(1)
Other long-term liabilities			(8)						(8)
Other Postretirement Plans:
Other non-current assets			8						8

(7)    Risk Management and Hedging Activities

Nevada Power is exposed to the impact of market fluctuations in commodity prices and interest rates. Nevada Power is principally exposed to electricity, natural gas and coal market fluctuations primarily through Nevada Power's obligation to serve retail customer load in its regulated service territory. Nevada Power's load and generating facilities represent substantial underlying commodity positions. Exposures to commodity prices consist mainly of variations in the price of fuel required to generate electricity and wholesale electricity that is purchased and sold. Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable items, weather, market liquidity, generating facility availability, customer usage, storage, and transmission and transportation constraints. The actual cost of fuel and purchased power is recoverable through the deferred energy mechanism. Interest rate risk exists on variable-rate debt and future debt issuances. Nevada Power does not engage in proprietary trading activities.

Nevada Power has established a risk management process that is designed to identify, assess, manage and report on each of the various types of risk involved in its business. To mitigate a portion of its commodity price risk, Nevada Power uses commodity derivative contracts, which may include forwards, futures, options, swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. Nevada Power manages its interest rate risk by limiting its exposure to variable interest rates primarily through the issuance of fixed-rate long-term debt and by monitoring market changes in interest rates. Additionally, Nevada Power may from time to time enter into interest rate derivative contracts, such as interest rate swaps or locks, to mitigate Nevada Power's exposure to interest rate risk. Nevada Power does not hedge all of its commodity price and interest rate risks, thereby exposing the unhedged portion to changes in market prices.

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There have been no significant changes in Nevada Power's accounting policies related to derivatives. Refer to Note 8 for additional information on derivative contracts.

The following table, which excludes contracts that have been designated as normal under the normal purchases and normal sales exception afforded by GAAP, summarizes the fair value of Nevada Power's derivative contracts, on a gross basis, and reconciles those amounts presented on a net basis on the Consolidated Balance Sheets (in millions):

															Derivative
			Other												Contracts -						Other
			Current						Other						Current						Long-term
			Assets						Assets						Liabilities						Liabilities						Total
As of June 30, 2022
Not designated as hedging contracts(1):
Commodity assets			$	—					$	1					$	—					$	—					$	1
Commodity liabilities			—						—						(122)						(54)						(176)
Total derivative - net basis			$	—					$	1					$	(122)					$	(54)					$	(175)
As of December 31, 2021
Not designated as hedging contracts(1):
Commodity assets			$	4					$	—					$	—					$	—					$	4
Commodity liabilities			—						—						(55)						(62)						(117)
Total derivative - net basis			$	4					$	—					$	(55)					$	(62)					$	(113)

(1)Nevada Power's commodity derivatives not designated as hedging contracts are included in regulated rates. As of June 30, 2022 a regulatory asset of $175 million was recorded related to the net derivative liability of $175 million. As of December 31, 2021 a regulatory asset of $113 million was recorded related to the net derivative liability of $113 million.

Derivative Contract Volumes

The following table summarizes the net notional amounts of outstanding commodity derivative contracts with fixed price terms that comprise the mark-to-market values as of (in millions):

			Unit of						June 30,						December 31,
			Measure						2022						2021
Electricity purchases			Megawatt hours						3						1
Natural gas purchases			Decatherms						113						119

Credit Risk

Nevada Power is exposed to counterparty credit risk associated with wholesale energy supply and marketing activities with other utilities, energy marketing companies, financial institutions and other market participants. Credit risk may be concentrated to the extent Nevada Power's counterparties have similar economic, industry or other characteristics and due to direct and indirect relationships among the counterparties. Before entering into a transaction, Nevada Power analyzes the financial condition of each significant wholesale counterparty, establishes limits on the amount of unsecured credit to be extended to each counterparty and evaluates the appropriateness of unsecured credit limits on an ongoing basis. To further mitigate wholesale counterparty credit risk, Nevada Power enters into netting and collateral arrangements that may include margining and cross-product netting agreements and obtain third-party guarantees, letters of credit and cash deposits. If required, Nevada Power exercises rights under these arrangements, including calling on the counterparty's credit support arrangement.

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Collateral and Contingent Features

In accordance with industry practice, certain wholesale agreements, including derivative contracts, contain credit support provisions that in part base certain collateral requirements on credit ratings for senior unsecured debt as reported by one or more of the recognized credit rating agencies. These agreements may either specifically provide bilateral rights to demand cash or other security if credit exposures on a net basis exceed specified rating-dependent threshold levels "credit-risk-related contingent features") or provide the right for counterparties to demand "adequate assurance" if there is a material adverse change in Nevada Power's creditworthiness. These rights can vary by contract and by counterparty. As of June 30, 2022, Nevada Power's credit ratings for its senior secured debt and its issuer credit ratings for senior unsecured debt from the recognized credit rating agencies were investment grade.

The aggregate fair value of Nevada Power's derivative contracts in liability positions with specific credit-risk-related contingent features totaled $7 million and $6 million as of June 30, 2022 and December 31, 2021, respectively, which represents the amount of collateral to be posted if all credit risk related contingent features for derivative contracts in liability positions had been triggered. Nevada Power's collateral requirements could fluctuate considerably due to market price volatility, changes in credit ratings, changes in legislation or regulation or other factors.

(8)    Fair Value Measurements

The carrying value of Nevada Power's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. Nevada Power has various financial assets and liabilities that are measured at fair value on the Consolidated Balance Sheets using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that Nevada Power has the ability to access at the measurement date.

•Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•Level 3 — Unobservable inputs reflect Nevada Power's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. Nevada Power develops these inputs based on the best information available, including its own data.

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The following table presents Nevada Power's assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):

			Input Levels for Fair Value Measurements
			Level 1						Level 2						Level 3						Total
As of June 30, 2022:
Assets:
Commodity derivatives			$	—					$	—					$	1					$	1
Money market mutual funds			34						—						—						34
Investment funds			3						—						—						3
			$	37					$	—					$	1					$	38
Liabilities - commodity derivatives			$	—					$	—					$	(176)					$	(176)
As of December 31, 2021:
Assets:
Commodity derivatives			$	—					$	—					$	4					$	4
Money market mutual funds			34						—						—						34
Investment funds			3						—						—						3
			$	37					$	—					$	4					$	41
Liabilities - commodity derivatives			$	—					$	—					$	(117)					$	(117)

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which Nevada Power transacts. When quoted prices for identical contracts are not available, Nevada Power uses forward price curves. Forward price curves represent Nevada Power's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. Nevada Power bases its forward price curves upon internally developed models, with internal and external fundamental data inputs. Market price quotations for certain electricity and natural gas trading hubs are not as readily obtainable due to markets that are not active. Given that limited market data exists for these contracts, Nevada Power uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The model incorporates a mid-market pricing convention (the mid‑point price between bid and ask prices) as a practical expedient for valuing its assets and liabilities measured and reported at fair value. The determination of the fair value for derivative contracts not only includes counterparty risk, but also the impact of Nevada Power's nonperformance risk on its liabilities, which as of June 30, 2022 and December 31, 2021, had an immaterial impact to the fair value of its derivative contracts. As such, Nevada Power considers its derivative contracts to be valued using Level 3 inputs.

Nevada Power's investments in money market mutual funds and investment funds are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value.

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The following table reconciles the beginning and ending balances of Nevada Power's commodity derivative assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Beginning balance			$	(168)					$	27					$	(113)					$	15
Changes in fair value recognized in regulatory assets			(21)						(6)						(77)						5
Settlements			14						4						15						5
Ending balance			$	(175)					$	25					$	(175)					$	25

Nevada Power's long-term debt is carried at cost on the Consolidated Balance Sheets. The fair value of Nevada Power's long‑term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of Nevada Power's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of Nevada Power's long‑term debt (in millions):

			As of June 30, 2022												As of December 31, 2021
			Carrying						Fair						Carrying						Fair
			Value						Value						Value						Value
Long-term debt			$	2,800					$	2,807					$	2,499					$	3,067

(9)    Commitments and Contingencies

Legal Matters

Nevada Power is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. Nevada Power does not believe that such normal and routine litigation will have a material impact on its consolidated financial results.

Environmental Laws and Regulations

Nevada Power is subject to federal, state and local laws and regulations regarding climate change, renewable portfolio standards, air and water quality, emissions performance standards, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact Nevada Power's current and future operations. Nevada Power believes it is in material compliance with all applicable laws and regulations.

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(10)    Revenue from Contracts with Customers

The following table summarizes Nevada Power's revenue from contracts with customers ("Customer Revenue") by line of business, with further disaggregation of retail by customer class (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Customer Revenue:
Retail:
Residential			$	353					$	326					$	566					$	521
Commercial			131						110						226						194
Industrial			124						95						203						158
Other			3						3						4						6
Total fully bundled			611						534						999						879
Distribution only service			5						5						10						10
Total retail			616						539						1,009						889
Wholesale, transmission and other			18						15						34						29
Total Customer Revenue			634						554						1,043						918
Other revenue			5						5						11						11
Total revenue			$	639					$	559					$	1,054					$	929

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

The following is management's discussion and analysis of certain significant factors that have affected the consolidated financial condition and results of operations of Nevada Power during the periods included herein. Explanations include management's best estimate of the impact of weather, customer growth, usage trends and other factors. This discussion should be read in conjunction with Nevada Power's historical unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q. Nevada Power's actual results in the future could differ significantly from the historical results.

Results of Operations for the Second Quarter and First Six Months of 2022 and 2021

Overview

Net income for the second quarter of 2022 was $76 million, a decrease of $6 million, or 7%, compared to 2021 primarily due to $7 million of unfavorable other, net, mainly due to lower cash surrender value of corporate-owned life insurance policies, $4 million of lower utility margin and $3 million of higher depreciation and amortization, mainly due to higher plant placed in-service. Utility margin decreased primarily due to unfavorable price impacts from changes in sales mix, the unfavorable impact of weather and lower other retail revenue, partially offset by higher regulatory-related revenue deferrals, an increase in the average number of customers and favorable changes in customer usage patterns. These decreases are offset by $6 million of higher interest and dividend income, mainly from carrying charges on regulatory balances, and $2 million of lower operations and maintenance expenses, mainly due to lower plant operations and maintenance expenses, partially offset by higher earning sharing. Energy generated decreased 17% for the second quarter of 2022 compared to 2021 due to lower natural gas-fueled generation. Wholesale electricity sales volumes increased 136% and purchased electricity volumes increased 17%.

Net income for the first six months of 2022 was $74 million, a decrease of $10 million, or 12%, compared to 2021 primarily due to $10 million of unfavorable other, net, mainly due to lower cash surrender value of corporate-owned life insurance policies, $6 million of lower utility margin and $5 million of higher depreciation and amortization, mainly due to higher plant placed in-service. Utility margin decreased primarily due to unfavorable price impacts from changes in sales mix, the unfavorable impact of weather and lower other retail revenue, partially offset by higher regulatory-related revenue deferrals, an increase in the average number of customers and favorable changes in customer usage patterns. These decreases are offset by $10 million of higher interest and dividend income, mainly from carrying charges on regulatory balances. Energy generated decreased 13% for the first six months of 2022 compared to 2021 primarily due to lower natural gas-fueled generation. Wholesale electricity sales volumes increased 94% and purchased electricity volumes increased 22%.

Non-GAAP Financial Measure

Management utilizes various key financial measures that are prepared in accordance with GAAP, as well as non-GAAP financial measures such as, utility margin, to help evaluate results of operations. Utility margin is calculated as electric operating revenue less cost of fuel and energy, which are captions presented on the Consolidated Statements of Operations.

Nevada Power's cost of fuel and energy are directly recovered from its customers through regulatory recovery mechanisms and as a result, changes in Nevada Power's expenses result in comparable changes to revenue. As such, management believes utility margin more appropriately and concisely explains profitability rather than a discussion of revenue and cost of sales separately. Management believes the presentation of utility margin provides meaningful and valuable insight into the information management considers important to running the business and a measure of comparability to others in the industry.

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Utility margin is not a measure calculated in accordance with GAAP and should be viewed as a supplement to, and not a substitute for, operating income which is the most directly comparable financial measure prepared in accordance with GAAP. The following table provides a reconciliation of utility margin to operating income (in millions):

						Second Quarter																					First Six Months
						2022						2021						Change									2022						2021						Change
Utility margin:
Operating revenue						$	639					$	559					$	80		14		%				$	1,054					$	929					$	125		13		%
Cost of fuel and energy						336						252						84			33						548						417						131			31
Utility margin						303						307						(4)			(1)						506						512						(6)			(1)
Operations and maintenance						75						77						(2)			(3)						140						140						—			—
Depreciation and amortization						103						100						3			3						206						201						5			2
Property and other taxes						12						12						—			—						25						24						1			4
Operating income						$	113					$	118					$	(5)		(4)		%				$	135					$	147					$	(12)		(8)		%

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Utility Margin

A comparison of key operating results related to utility margin is as follows:

						Second Quarter																					First Six Months
						2022						2021						Change									2022						2021						Change
Utility margin (in millions):
Operating revenue						$	639					$	559					$	80		14		%				$	1,054					$	929					$	125		13		%
Cost of fuel and energy						336						252						84			33						548						417						131			31
Utility margin						$	303					$	307					$	(4)		(1)		%				$	506					$	512					$	(6)		(1)		%
Sales (GWhs):
Residential						2,612						2,807						(195)			(7)		%				4,197						4,394						(197)			(4)		%
Commercial						1,272						1,271						1			—						2,270						2,225						45			2
Industrial						1,409						1,310						99			8						2,584						2,367						217			9
Other						46						45						1			2						92						92						—			—
Total fully bundled(1)						5,339						5,433						(94)			(2)						9,143						9,078						65			1
Distribution only service						661						620						41			7						1,230						1,136						94			8
Total retail						6,000						6,053						(53)			(1)						10,373						10,214						159			2
Wholesale						210						89						121			*						335						173						162			94
Total GWhs sold						6,210						6,142						68			1		%				10,708						10,387						321			3		%
Average number of retail customers (in thousands)						1,000						982						18			2		%				997						980						17			2		%
Average revenue per MWh:
Retail - fully bundled(1)						$	114.36					$	98.10					$	16.26		17		%				$	109.26					$	96.86					$	12.40		13		%
Wholesale						$	34.36					$	42.94					$	(8.58)		(20)		%				$	37.55					$	46.09					$	(8.54)		(19)		%
Heating degree days						31						14						17			*						985						1,008						(23)			(2)		%
Cooling degree days						1,322						1,477						(155)			(10)		%				1,371						1,483						(112)			(8)		%
Sources of energy (GWhs)(2)(3):
Natural gas						2,935						3,547						(612)			(17)		%				5,313						6,081						(768)			(13)		%
Renewables						20						20						—			—						34						36						(2)			(6)
Total energy generated						2,955						3,567						(612)			(17)						5,347						6,117						(770)			(13)
Energy purchased						2,472						2,104						368			17						4,233						3,459						774			22
Total						5,427						5,671						(244)			(4)		%				9,580						9,576						4			—		%
Average cost of energy per MWh(4):
Energy generated						$	49.65					$	21.82					$	27.83		*						$	46.19					$	18.96					$	27.23		*
Energy purchased						$	76.63					$	82.70					$	(6.07)		(7)		%				$	71.07					$	87.07					$	(16.00)		(18)		%

*    Not meaningful

(1)    Fully bundled includes sales to customers for combined energy, transmission and distribution services.

(2)    The average cost of energy per MWh and sources of energy excludes 360 GWhs and 249 GWhs of gas generated energy that is purchased at cost by related parties for the second quarter of 2022 and 2021, respectively. The average cost of energy per MWh and sources of energy excludes 784 GWhs and 932 GWhs of gas generated energy that is purchased at cost by related parties for the first six months of 2022 and 2021, respectively.

(3)    GWh amounts are net of energy used by the related generating facilities.

(4)    The average cost of energy per MWh includes only the cost of fuel associated with the generating facilities, purchased power and deferrals.

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Quarter Ended June 30, 2022 Compared to Quarter Ended June 30, 2021

Utility margin decreased $4 million, or 1%, for the second quarter of 2022 compared to 2021 primarily due to:

•$7 million of lower electric retail utility margin due to unfavorable price impacts from changes in sales mix and lower retail customer volumes. Retail customer volumes, including distribution only service customers, decreased 0.9% primarily due to the unfavorable impact of weather, offset by an increase in the average number of customers and favorable changes in customer usage patterns;

•$3 million of lower energy efficiency program rates (offset in operations and maintenance expense); and

•$1 million of lower other retail revenue.

The decrease in utility margin was offset by:

•$7 million of higher regulatory-related revenue deferrals.

Operations and maintenance decreased $2 million, or 3%, for the second quarter of 2022 compared to 2021 primarily due to lower energy efficiency program costs (offset in operating revenue) and lower plant operations and maintenance expenses, partially offset by higher earnings sharing.

Depreciation and amortization increased $3 million, or 3%, for the second quarter of 2022 compared to 2021 primarily due to higher plant placed in-service.

Interest and dividend income increased $6 million for the second quarter of 2022 compared to 2021 primarily due to higher interest income, mainly from carrying charges on regulatory balances.

Other, net is unfavorable $7 million for the second quarter of 2022 compared to 2021 primarily due to lower cash surrender value of corporate-owned life insurance policies.

First Six Months Ended June 30, 2022 Compared to First Six Months Ended June 30, 2021

Utility margin decreased $6 million, or 1%, for the first six months of 2022 compared to 2021 primarily due to:

•$5 million of lower energy efficiency program rates (offset in operations and maintenance expense);

•$4 million of lower electric retail utility margin due to unfavorable price impacts from changes in sales mix, offset by higher retail customer volumes. Retail customer volumes, including distribution only service customers, increased 1.6% primarily due to an increase in the average number of customers and favorable changes in customer usage patterns, offset by the unfavorable impact of weather; and

•$3 million of lower other retail revenue.

The decrease in utility margin was offset by:

•$5 million of higher regulatory-related revenue deferrals; and

•$1 million of higher transmission and wholesale revenue.

Operations and maintenance was consistent for the first six months of 2022 compared to 2021 primarily due to higher earnings sharing and higher plant operations and maintenance expenses, offset by lower energy efficiency program costs (offset in operating revenue).

Depreciation and amortization increased $5 million, or 2%, for the first six months of 2022 compared to 2021 primarily due to higher plant placed in-service.

Interest and dividend income increased $10 million for the first six months of 2022 compared to 2021 primarily due to higher interest income, mainly from carrying charges on regulatory balances.

Other, net is unfavorable $10 million for the first six months of 2022 compared to 2021 primarily due to lower cash surrender value of corporate-owned life insurance policies.

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Liquidity and Capital Resources

As of June 30, 2022, Nevada Power's total net liquidity was as follows (in millions):

Cash and cash equivalents						$	42
Credit facility						400
Total net liquidity						442
Credit facility:
Maturity date						2025

Operating Activities

Net cash flows from operating activities for the six-month periods ended June 30, 2022 and 2021 were $224 million and $310 million, respectively. The change was primarily due to higher payments related to fuel and energy costs and the timing of payments for operating costs, partially offset by higher collections from customers and lower payments for income taxes.

Investing Activities

Net cash flows from investing activities for the six-month periods ended June 30, 2022 and 2021 were $(350) million and $(237) million, respectively. The change was primarily due to increased capital expenditures. Refer to "Future Uses of Cash" for further discussion of capital expenditures.

Financing Activities

Net cash flows from financing activities for the six-month periods ended June 30, 2022 and 2021 were $136 million and $(21) million, respectively. The change was primarily due to higher proceeds from the issuance of long-term debt and contributions from NV Energy, Inc., partially offset by higher repayments of short-term debt.

Long-Term Debt

In January 2022, Nevada Power entered into a $300 million secured delayed draw term loan facility maturing in January 2024. Amounts borrowed under the facility bear interest at variable rates based on the Secured Overnight Financing Rate or a base rate, at Nevada Power's option, plus a pricing margin. In January 2022, Nevada Power borrowed $200 million under the facility at an initial interest rate of 0.55%. In May 2022, Nevada Power drew the remaining $100 million available under the facility at an initial interest rate of 1.24%. Nevada Power used the proceeds to repay amounts outstanding under its existing secured credit facility and for general corporate purposes.

    

Debt Authorizations

Nevada Power currently has financing authority from the PUCN consisting of the ability to: (1) establish debt issuances limited to a debt ceiling of $3.8 billion (excluding borrowings under Nevada Power's $400 million secured credit facility); and (2) maintain a revolving credit facility of up to $1.3 billion. Nevada Power currently has an effective automatic shelf registration statement with the SEC to issue an indeterminate amount of general and refunding mortgage securities through October 2022.

Future Uses of Cash

Nevada Power has available a variety of sources of liquidity and capital resources, both internal and external, including net cash flows from operating activities, public and private debt offerings, the use of its secured revolving credit facility, capital contributions and other sources. These sources are expected to provide funds required for current operations, capital expenditures, debt retirements and other capital requirements. The availability and terms under which Nevada Power has access to external financing depends on a variety of factors, including regulatory approvals, Nevada Power's credit ratings, investors' judgment of risk and conditions in the overall capital markets, including the condition of the utility industry.

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Capital Expenditures

Capital expenditure needs are reviewed regularly by management and may change significantly as a result of these reviews, which may consider, among other factors, changes in environmental and other rules and regulations; impacts to customers' rates; outcomes of regulatory proceedings; changes in income tax laws; general business conditions; load projections; system reliability standards; the cost and efficiency of construction labor, equipment and materials; commodity prices; and the cost and availability of capital. Prudently incurred expenditures for compliance-related items such as pollution control technologies, replacement generation and associated operating costs are generally incorporated into Nevada Power's regulated retail rates.

Historical and forecast capital expenditures, each of which exclude amounts for non-cash equity AFUDC and other non-cash items are as follows (in millions):

			Six-Month Periods												Annual
			Ended June 30,												Forecast
			2021						2022						2022
Electric distribution			$	87					$	108					$	234
Electric transmission			25						39						141
Solar generation			5						23						90
Other			120						180						359
Total			$	237					$	350					$	824

Nevada Power received PUCN approval through its recent IRP filings for an increase in solar generation and electric transmission. Nevada Power has included estimates from its latest IRP filing in its forecast capital expenditures for 2022. These estimates may change as a result of the RFP process. Nevada Power's historical and forecast capital expenditures include the following:

•Electric distribution includes both growth projects and operating expenditures consisting of routine expenditures for distribution needed to serve existing and expected demand.

•Electric transmission includes both growth projects and operating expenditures. Growth projects primarily relate to the Nevada Utilities' Greenlink Nevada transmission expansion program. In this project, the company has received approval from the PUCN to build a 350-mile, 525-kV transmission line, known as Greenlink West, connecting the Ft. Churchill substation to the Northwest substation to the Harry Allen substation; a 235-mile, 525-kV transmission line, known as Greenlink North, connecting the new Ft. Churchill substation to the Robinson Summit substation; a 46-mile, 345-kV transmission line from the new Ft. Churchill substation to the Mira Loma substations; and a 38-mile, 345-kV transmission line from the new Ft. Churchill substation to the Robinson Summit substations. Operating expenditures consist of routine expenditures for transmission and other infrastructure needed to serve existing and expected demand.

•Solar generation investment includes expenditures for a 150-MW solar photovoltaic facility with an additional 100 MWs of co-located battery storage that will be developed in Clark County, Nevada. Commercial operation is expected by the end of 2023.

•Other includes both growth projects and operating expenditures consisting of turbine upgrades at several generating facilities, routine expenditures for generation, other operating projects and other infrastructure needed to serve existing and expected demand.

Material Cash Requirements

As of June 30, 2022, there have been no material changes in cash requirements from the information provided in Item 7 of Nevada Power's Annual Report on Form 10-K for the year ended December 31, 2021, other than those disclosed in Note 4 of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

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Regulatory Matters

Nevada Power is subject to comprehensive regulation. Refer to "Regulatory Matters" in Berkshire Hathaway Energy's Part I, Item 2 of this Form 10-Q for discussion regarding Nevada Power's current regulatory matters.

Environmental Laws and Regulations

Nevada Power is subject to federal, state and local laws and regulations regarding climate change, RPS, air and water quality, emissions performance standards, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact Nevada Power's current and future operations. In addition to imposing continuing compliance obligations, these laws and regulations provide regulators with the authority to levy substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. These laws and regulations are administered by various federal, state and local agencies. Nevada Power believes it is in material compliance with all applicable laws and regulations, although many are subject to interpretation that may ultimately be resolved by the courts. Environmental laws and regulations continue to evolve, and Nevada Power is unable to predict the impact of the changing laws and regulations on its operations and consolidated financial results.

Refer to "Environmental Laws and Regulations" in Berkshire Hathaway Energy's Part I, Item 2 of this Form 10-Q for additional information regarding environmental laws and regulations.

Critical Accounting Estimates

Certain accounting measurements require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized on the Consolidated Financial Statements based on such estimates involve numerous assumptions subject to varying and potentially significant degrees of judgment and uncertainty and will likely change in the future as additional information becomes available. Estimates are used for, but not limited to, the accounting for the effects of certain types of regulation, derivatives, impairment of long-lived assets, income taxes and revenue recognition - unbilled revenue. For additional discussion of Nevada Power's critical accounting estimates, see Item 7 of Nevada Power's Annual Report on Form 10‑K for the year ended December 31, 2021. There have been no significant changes in Nevada Power's assumptions regarding critical accounting estimates since December 31, 2021.

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Sierra Pacific Power Company and its subsidiaries

Consolidated Financial Section

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PART I

Item 1.Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

Sierra Pacific Power Company

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheet of Sierra Pacific Power Company and subsidiaries ("Sierra Pacific") as of June 30, 2022, the related consolidated statements of operations and changes in shareholder's equity for the three-month and six-month periods ended June 30, 2022 and 2021, and of cash flows for the six-month periods ended June 30, 2022 and 2021, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of Sierra Pacific as of December 31, 2021, and the related consolidated statements of operations, changes in shareholder's equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of Sierra Pacific's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Sierra Pacific in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, 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.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada

August 5, 2022

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SIERRA PACIFIC POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions, except share data)

			As of
			June 30,						December 31,
			2022						2021
ASSETS
Current assets:
Cash and cash equivalents			$	17					$	10
Trade receivables, net			127						128
Inventories			75						65
Regulatory assets			207						177
Other current assets			25						35
Total current assets			451						415
Property, plant and equipment, net			3,476						3,340
Regulatory assets			282						263
Other assets			206						205
Total assets			$	4,415					$	4,223
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable			$	177					$	147
Accrued property, income and other taxes			18						16
Short-term debt			—						159
Regulatory liabilities			18						19
Customer deposits			16						15
Derivative contracts			38						16
Other current liabilities			48						42
Total current liabilities			315						414
Long-term debt			1,148						1,164
Regulatory liabilities			435						444
Deferred income taxes			413						402
Other long-term liabilities			258						264
Total liabilities			2,569						2,688
Commitments and contingencies (Note 9)
Shareholder's equity:
Common stock - $3.75 stated value, 20,000,000 shares authorized and 1,000 issued and outstanding			—						—
Additional paid-in capital			1,451						1,111
Retained earnings			396						425
Accumulated other comprehensive loss, net			(1)						(1)
Total shareholder's equity			1,846						1,535
Total liabilities and shareholder's equity			$	4,415					$	4,223
The accompanying notes are an integral part of the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue:
Regulated electric			$	230					$	189					$	457					$	370
Regulated natural gas			28						20						80						59
Total operating revenue			258						209						537						429
Operating expenses:
Cost of fuel and energy			129						93						253						175
Cost of natural gas purchased for resale			16						8						50						29
Operations and maintenance			47						41						88						77
Depreciation and amortization			37						36						73						72
Property and other taxes			6						6						12						12
Total operating expenses			235						184						476						365
Operating income			23						25						61						64
Other income (expense):
Interest expense			(14)						(13)						(27)						(27)
Allowance for borrowed funds			—						1						1						1
Allowance for equity funds			2						2						4						3
Interest and dividend income			4						1						7						3
Other, net			—						2						2						6
Total other income (expense)			(8)						(7)						(13)						(14)
Income before income tax expense			15						18						48						50
Income tax expense			2						1						7						5
Net income			$	13					$	17					$	41					$	45
The accompanying notes are an integral part of these consolidated financial statements.

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SIERRA PACIFIC POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (Unaudited)

(Amounts in millions, except shares)

																														Accumulated
																		Additional												Other						Total
						Common Stock												Paid-in						Retained						Comprehensive						Shareholder's
						Shares						Amount						Capital						Earnings						Loss, Net						Equity
Balance, March 31, 2021						1,000						$	—					$	1,111					$	329					$	(1)					$	1,439
Net income						—						—						—						17						—						17
Balance, June 30, 2021						1,000						$	—					$	1,111					$	346					$	(1)					$	1,456
Balance, December 31, 2020						1,000						$	—					$	1,111					$	301					$	(1)					$	1,411
Net income						—						—						—						45						—						45
Balance, June 30, 2021						1,000						$	—					$	1,111					$	346					$	(1)					$	1,456
Balance, March 31, 2022						1,000						$	—					$	1,241					$	453					$	(1)					$	1,693
Net income						—						—						—						13						—						13
Dividends declared						—						—						—						(70)						—						(70)
Contributions						—						—						210						—						—						210
Balance, June 30, 2022						1,000						$	—					$	1,451					$	396					$	(1)					$	1,846
Balance, December 31, 2021						1,000						$	—					$	1,111					$	425					$	(1)					$	1,535
Net income						—						—						—						41						—						41
Dividends declared						—						—						—						(70)						—						(70)
Contributions						—						—						340						—						—						340
Balance, June 30, 2022						1,000						$	—					$	1,451					$	396					$	(1)					$	1,846
The accompanying notes are an integral part of these consolidated financial statements.

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SIERRA PACIFIC POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)

			Six-Month Periods
			Ended June 30,
			2022						2021
Cash flows from operating activities:
Net income			$	41					$	45
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization			73						72
Allowance for equity funds			(4)						(3)
Changes in regulatory assets and liabilities			(8)						(20)
Deferred income taxes and amortization of investment tax credits			5						8
Deferred energy			(67)						(47)
Amortization of deferred energy			46						2
Other, net			2						(2)
Changes in other operating assets and liabilities:
Trade receivables and other assets			(1)						(1)
Inventories			(10)						10
Accrued property, income and other taxes			3						(1)
Accounts payable and other liabilities			28						29
Net cash flows from operating activities			108						92
Cash flows from investing activities:
Capital expenditures			(191)						(128)
Net cash flows from investing activities			(191)						(128)
Cash flows from financing activities:
Proceeds from long-term debt			249						—
Long-term debt reacquired			(265)						—
Net (repayment of) proceeds from short-term debt			(159)						29
Dividends paid			(70)						—
Contributions from parent			340						—
Other, net			(4)						(4)
Net cash flows from financing activities			91						25
Net change in cash and cash equivalents and restricted cash and cash equivalents			8						(11)
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period			16						26
Cash and cash equivalents and restricted cash and cash equivalents at end of period			$	24					$	15
The accompanying notes are an integral part of these consolidated financial statements.

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SIERRA PACIFIC POWER COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)    General

Sierra Pacific Power Company, together with its subsidiaries ("Sierra Pacific"), is a wholly owned subsidiary of NV Energy, Inc. ("NV Energy"), a holding company that also owns Nevada Power Company and its subsidiaries ("Nevada Power") and certain other subsidiaries. Sierra Pacific is a U.S. regulated electric utility company serving retail customers, including residential, commercial and industrial customers and regulated retail natural gas customers primarily in northern Nevada. NV Energy is an indirect wholly owned subsidiary of Berkshire Hathaway Energy Company ("BHE"). BHE is a holding company based in Des Moines, Iowa that owns subsidiaries principally engaged in energy businesses. BHE is a consolidated subsidiary of Berkshire Hathaway Inc. ("Berkshire Hathaway").

The unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the United States Securities and Exchange Commission's rules and regulations for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements. Management believes the unaudited Consolidated Financial Statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary for the fair presentation of the unaudited Consolidated Financial Statements as of June 30, 2022 and for the three- and six-month periods ended June 30, 2022 and 2021. The Consolidated Statements of Comprehensive Income have been omitted as net income equals comprehensive income for the three- and six-month periods ended June 30, 2022 and 2021. The results of operations for the three- and six-month periods ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year.

The preparation of the unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenue and expenses during the period. Actual results may differ from the estimates used in preparing the unaudited Consolidated Financial Statements. Note 2 of Notes to Consolidated Financial Statements included in Sierra Pacific's Annual Report on Form 10-K for the year ended December 31, 2021 describes the most significant accounting policies used in the preparation of the unaudited Consolidated Financial Statements. There have been no significant changes in Sierra Pacific's assumptions regarding significant accounting estimates and policies during the six-month period ended June 30, 2022.

(2)    Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash equivalents consist of funds invested in money market mutual funds, U.S. Treasury Bills and other investments with a maturity of three months or less when purchased. Cash and cash equivalents exclude amounts where availability is restricted by legal requirements, loan agreements or other contractual provisions. Restricted cash and cash equivalents consist of funds restricted by the Public Utilities Commission of Nevada ("PUCN") for a certain renewable energy contract. A reconciliation of cash and cash equivalents and restricted cash and cash equivalents as presented in the Consolidated Statements of Cash Flows is outlined below and disaggregated by the line items in which they appear on the Consolidated Balance Sheets (in millions):

			As of
			June 30,						December 31,
			2022						2021
Cash and cash equivalents			$	17					$	10
Restricted cash and cash equivalents included in other current assets			7						6
Total cash and cash equivalents and restricted cash and cash equivalents			$	24					$	16

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(3)    Property, Plant and Equipment, Net

Property, plant and equipment, net consists of the following (in millions):

									As of
			Depreciable Life						June 30,						December 31,
									2022						2021
Utility plant:
Electric generation			25 - 60 years						$	1,297					$	1,163
Electric transmission			50 - 100 years						976						940
Electric distribution			20 - 100 years						1,905						1,846
Electric general and intangible plant			5 - 70 years						213						204
Natural gas distribution			35 - 70 years						447						438
Natural gas general and intangible plant			5 - 70 years						15						14
Common general			5 - 70 years						376						370
Utility plant									5,229						4,975
Accumulated depreciation and amortization									(1,936)						(1,854)
Utility plant, net									3,293						3,121
Construction work-in-progress									183						219
Property, plant and equipment, net									$	3,476					$	3,340

(4)    Recent Financing Transactions

Long-Term Debt

In June 2022, Sierra Pacific purchased $60 million of its variable-rate tax-exempt Gas & Water Facilities Refunding Revenue Bonds, Series 2016B, due 2036, as required by the bond indenture. Sierra Pacific is holding this bond and can re-offer it at a future date.

In May 2022, Sierra Pacific issued $250 million of 4.71% General and Refunding Mortgage bonds, Series W, due 2052. The net proceeds were used to repay the outstanding $200 million unsecured loan with NV Energy, Inc., repay amounts outstanding under its existing revolving credit facility and for general corporate purposes.

In April 2022, Sierra Pacific entered into a $200 million unsecured loan with NV Energy payable upon demand. The net proceeds were used to purchase certain tax-exempt refunding revenue bond obligations that were subject to mandatory purchase by Sierra Pacific in April 2022. The loan has an underlying variable interest rate based on 30-day U.S. dollar deposits offered on the London Interbank Offer Rate ("LIBOR") market plus a spread of 0.75%.

In April 2022, Sierra Pacific purchased the following series of bonds that were held by the public: $30 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016C, due 2036; $25 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016D, due 2036; $25 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016E, due 2036; $75 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016F, due 2036; $20 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016G, due 2036; and $30 million of its variable-rate tax-exempt Pollution Control Refunding Revenue Bonds, Series 2016B, due 2029. Sierra Pacific purchased these bonds as required by the bond indentures. Sierra Pacific is holding these bonds and can re-offer them at a future date.

Credit Facilities

In June 2022, Sierra Pacific amended and restated its existing $250 million secured credit facility expiring in June 2024. The amendment extended the expiration date to June 2025 and amended pricing from LIBOR to the Secured Overnight Financing Rate.

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(5)    Income Taxes

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax expense is as follows:

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Federal statutory income tax rate			21		%				21		%				21		%				21		%
Effects of ratemaking			(8)						(11)						(7)						(9)
Income tax credits			—						(1)						—						—
Other			—						(3)						1						(2)
Effective income tax rate			13		%				6		%				15		%				10		%

Effects of ratemaking is primarily attributable to the recognition of excess deferred income taxes related to the 2017 Tax Cuts and Jobs Act pursuant to an order issued by the PUCN effective January 1, 2020.

Berkshire Hathaway includes BHE and its subsidiaries in its U.S. federal income tax return. Consistent with established regulatory practice, Sierra Pacific's provision for federal income tax has been computed on a separate return basis, and substantially all of its currently payable or receivable income tax is remitted to or received from BHE. For the six-month periods ended June 30, 2022 and 2021, Sierra Pacific made no net cash payments for federal income tax to BHE.

(6)    Employee Benefit Plans

Sierra Pacific is a participant in benefit plans sponsored by NV Energy. The NV Energy Retirement Plan includes a qualified pension plan ("Qualified Pension Plan") and a supplemental executive retirement plan and a restoration plan (collectively, "Non‑Qualified Pension Plans") that provide pension benefits for eligible employees. The NV Energy Comprehensive Welfare Benefit and Cafeteria Plan provides certain postretirement health care and life insurance benefits for eligible retirees ("Other Postretirement Plans") on behalf of Sierra Pacific. Sierra Pacific contributed $2 million to the Other Postretirement Plans for the six-month period ended June 30, 2022. Amounts attributable to Sierra Pacific were allocated from NV Energy based upon the current, or in the case of retirees, previous, employment location. Offsetting regulatory assets and liabilities have been recorded related to the amounts not yet recognized as a component of net periodic benefit costs that will be included in regulated rates. Net periodic benefit costs not included in regulated rates are included in accumulated other comprehensive loss, net.

Amounts receivable from (payable to) NV Energy are included on the Consolidated Balance Sheets and consist of the following (in millions):

			As of
			June 30,						December 31,
			2022						2021
Qualified Pension Plan:
Other non-current assets			$	64					$	62
Non-Qualified Pension Plans:
Other current liabilities			(1)						(1)
Other long-term liabilities			(7)						(7)
Other Postretirement Plans:
Other long-term liabilities			(8)						(10)

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(7)    Risk Management and Hedging Activities

Sierra Pacific is exposed to the impact of market fluctuations in commodity prices and interest rates. Sierra Pacific is principally exposed to electricity, natural gas and coal market fluctuations primarily through Sierra Pacific's obligation to serve retail customer load in its regulated service territory. Sierra Pacific's load and generating facilities represent substantial underlying commodity positions. Exposures to commodity prices consist mainly of variations in the price of fuel required to generate electricity and wholesale electricity that is purchased and sold. Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable items, weather, market liquidity, generating facility availability, customer usage, storage, and transmission and transportation constraints. The actual cost of fuel and purchased power is recoverable through the deferred energy mechanism. Interest rate risk exists on variable-rate debt and future debt issuances. Sierra Pacific does not engage in proprietary trading activities.

Sierra Pacific has established a risk management process that is designed to identify, assess, manage and report on each of the various types of risk involved in its business. To mitigate a portion of its commodity price risk, Sierra Pacific uses commodity derivative contracts, which may include forwards, futures, options, swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. Sierra Pacific manages its interest rate risk by limiting its exposure to variable interest rates primarily through the issuance of fixed-rate long-term debt and by monitoring market changes in interest rates. Additionally, Sierra Pacific may from time to time enter into interest rate derivative contracts, such as interest rate swaps or locks, to mitigate Sierra Pacific's exposure to interest rate risk. Sierra Pacific does not hedge all of its commodity price and interest rate risks, thereby exposing the unhedged portion to changes in market prices.

There have been no significant changes in Sierra Pacific's accounting policies related to derivatives. Refer to Note 8 for additional information on derivative contracts.

The following table, which excludes contracts that have been designated as normal under the normal purchases and normal sales exception afforded by GAAP, summarizes the fair value of Sierra Pacific's derivative contracts, on a gross basis, and reconciles those amounts presented on a net basis on the Consolidated Balance Sheets (in millions):

															Derivative
			Other												Contracts -						Other
			Current						Other						Current						Long-term
			Assets						Assets						Liabilities						Liabilities						Total
As of June 30, 2022
Not designated as hedging contracts(1):
Commodity assets			$	—					$	1					$	—					$	—					$	1
Commodity liabilities			—						—						(38)						(17)						(55)
Total derivative - net basis			$	—					$	1					$	(38)					$	(17)					$	(54)
As of December 31, 2021
Not designated as hedging contracts(1):
Commodity assets			$	2					$	—					$	—					$	—					$	2
Commodity liabilities			—						—						(16)						(19)						(35)
Total derivative - net basis			$	2					$	—					$	(16)					$	(19)					$	(33)

(1)Sierra Pacific's commodity derivatives not designated as hedging contracts are included in regulated rates. As of June 30, 2022 a net regulatory asset of $54 million was recorded related to the net derivative liability of $54 million. As of December 31, 2021 a net regulatory asset of $33 million was recorded related to the net derivative liability of $33 million.

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The following table summarizes the net notional amounts of outstanding commodity derivative contracts with fixed price terms that comprise the mark-to-market values as of (in millions):

			Unit of						June 30,						December 31,
			Measure						2022						2021
Electricity purchases			Megawatt hours						1						1
Natural gas purchases			Decatherms						50						53

Credit Risk

Sierra Pacific is exposed to counterparty credit risk associated with wholesale energy supply and marketing activities with other utilities, energy marketing companies, financial institutions and other market participants. Credit risk may be concentrated to the extent Sierra Pacific's counterparties have similar economic, industry or other characteristics and due to direct and indirect relationships among the counterparties. Before entering into a transaction, Sierra Pacific analyzes the financial condition of each significant wholesale counterparty, establishes limits on the amount of unsecured credit to be extended to each counterparty and evaluates the appropriateness of unsecured credit limits on an ongoing basis. To further mitigate wholesale counterparty credit risk, Sierra Pacific enters into netting and collateral arrangements that may include margining and cross-product netting agreements and obtain third-party guarantees, letters of credit and cash deposits. If required, Sierra Pacific exercises rights under these arrangements, including calling on the counterparty's credit support arrangement.

Collateral and Contingent Features

In accordance with industry practice, certain wholesale agreements, including derivative contracts, contain credit support provisions that in part base certain collateral requirements on credit ratings for senior unsecured debt as reported by one or more of the recognized credit rating agencies. These agreements may either specifically provide bilateral rights to demand cash or other security if credit exposures on a net basis exceed specified rating-dependent threshold levels ("credit-risk-related contingent features") or provide the right for counterparties to demand "adequate assurance" if there is a material adverse change in Sierra Pacific's creditworthiness. These rights can vary by contract and by counterparty. As of June 30, 2022, Sierra Pacific's credit ratings for its senior secured debt and its issuer credit ratings for senior unsecured debt from the recognized credit rating agencies were investment grade.

The aggregate fair value of Sierra Pacific's derivative contracts in liability positions with specific credit-risk-related contingent features totaled $— million as of June 30, 2022 and December 31, 2021, which represents the amount of collateral to be posted if all credit risk related contingent features for derivative contracts in liability positions had been triggered. Sierra Pacific's collateral requirements could fluctuate considerably due to market price volatility, changes in credit ratings, changes in legislation or regulation or other factors.

(8)    Fair Value Measurements

The carrying value of Sierra Pacific's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. Sierra Pacific has various financial assets and liabilities that are measured at fair value on the Consolidated Balance Sheets using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that Sierra Pacific has the ability to access at the measurement date.

•Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•Level 3 — Unobservable inputs reflect Sierra Pacific's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. Sierra Pacific develops these inputs based on the best information available, including its own data.

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The following table presents Sierra Pacific's assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):

			Input Levels for Fair Value Measurements
			Level 1						Level 2						Level 3						Total
As of June 30, 2022:
Assets:
Commodity derivatives			$	—					$	—					$	1					$	1
Money market mutual funds			14						—						—						14
Investment funds			1						—						—						1
			$	15					$	—					$	1					$	16
Liabilities - commodity derivatives			$	—					$	—					$	(55)					$	(55)
As of December 31, 2021:
Assets:
Commodity derivatives			$	—					$	—					$	2					$	2
Money market mutual funds			10						—						—						10
Investment funds			1						—						—						1
			$	11					$	—					$	2					$	13
Liabilities - commodity derivatives			$	—					$	—					$	(35)					$	(35)

Sierra Pacific's investments in money market mutual funds and investment funds are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value.

The following table reconciles the beginning and ending balances of Sierra Pacific's commodity derivative assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Beginning balance			$	(52)					$	12					$	(33)					$	7
Changes in fair value recognized in regulatory assets			(7)						(1)						(26)						4
Settlements			5						1						5						1
Ending balance			$	(54)					$	12					$	(54)					$	12

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Sierra Pacific's long-term debt is carried at cost on the Consolidated Balance Sheets. The fair value of Sierra Pacific's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of Sierra Pacific's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of Sierra Pacific's long-term debt (in millions):

			As of June 30, 2022												As of December 31, 2021
			Carrying						Fair						Carrying						Fair
			Value						Value						Value						Value
Long-term debt			$	1,148					$	1,164					$	1,164					$	1,316

(9)    Commitments and Contingencies

Legal Matters

Sierra Pacific is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. Sierra Pacific does not believe that such normal and routine litigation will have a material impact on its consolidated financial results.

Environmental Laws and Regulations

Sierra Pacific is subject to federal, state and local laws and regulations regarding climate change, renewable portfolio standards, air and water quality, emissions performance standards, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact Sierra Pacific's current and future operations. Sierra Pacific believes it is in material compliance with all applicable laws and regulations.

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(10)    Revenue from Contracts with Customers

The following table summarizes Sierra Pacific's revenue from contracts with customers ("Customer Revenue") by line of business, with further disaggregation of retail by customer class, including a reconciliation to Sierra Pacific's reportable segment information included in Note 11 (in millions):

			Three-Month Periods
			Ended June 30,
			2022																		2021
			Electric						Natural Gas						Total						Electric						Natural Gas						Total
Customer Revenue:
Retail:
Residential			$	79					$	19					$	98					$	68					$	13					$	81
Commercial			82						6						88						64						5						69
Industrial			53						3						56						42						2						44
Other			1						—						1						1						—						1
Total fully bundled			215						28						243						175						20						195
Distribution only service			1						—						1						1						—						1
Total retail			216						28						244						176						20						196
Wholesale, transmission and other			14						—						14						12						—						12
Total Customer Revenue			230						28						258						188						20						208
Other revenue			—						—						—						1						—						1
Total revenue			$	230					$	28					$	258					$	189					$	20					$	209

			Six-Month Periods
			Ended June 30,
			2022																		2021
			Electric						Natural Gas						Total						Electric						Natural Gas						Total
Customer Revenue:
Retail:
Residential			$	162					$	51					$	213					$	138					$	38					$	176
Commercial			151						21						172						117						15						132
Industrial			102						7						109						81						5						86
Other			3						—						3						3						—						3
Total fully bundled			418						79						497						339						58						397
Distribution only service			3						—						3						2						—						2
Total retail			421						79						500						341						58						399
Wholesale, transmission and other			35						—						35						28						—						28
Total Customer Revenue			456						79						535						369						58						427
Other revenue			1						1						2						1						1						2
Total revenue			$	457					$	80					$	537					$	370					$	59					$	429

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(11)    Segment Information

Sierra Pacific has identified two reportable operating segments: regulated electric and regulated natural gas. The regulated electric segment derives most of its revenue from regulated retail sales of electricity to residential, commercial, and industrial customers and from wholesale sales. The regulated natural gas segment derives most of its revenue from regulated retail sales of natural gas to residential, commercial, and industrial customers and also obtains revenue by transporting natural gas owned by others through its distribution system. Pricing for regulated electric and regulated natural gas sales are established separately by the PUCN; therefore, management also reviews each segment separately to make decisions regarding allocation of resources and in evaluating performance.

The following tables provide information on a reportable segment basis (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue:
Regulated electric			$	230					$	189					$	457					$	370
Regulated natural gas			28						20						80						59
Total operating revenue			$	258					$	209					$	537					$	429
Operating income:
Regulated electric			$	19					$	21					$	49					$	52
Regulated natural gas			4						4						12						12
Total operating income			23						25						61						64
Interest expense			(14)						(13)						(27)						(27)
Allowance for borrowed funds			—						1						1						1
Allowance for equity funds			2						2						4						3
Interest and dividend income			4						1						7						3
Other, net			—						2						2						6
Income before income tax expense			$	15					$	18					$	48					$	50

									As of
															June 30,						December 31,
															2022						2021
Assets:
Regulated electric															$	3,995					$	3,829
Regulated natural gas															385						365
Other(1)															35						29
Total assets															$	4,415					$	4,223

(1)    Consists principally of cash and cash equivalents not included in either the regulated electric or regulated natural gas segments.

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

The following is management's discussion and analysis of certain significant factors that have affected the consolidated financial condition and results of operations of Sierra Pacific during the periods included herein. Explanations include management's best estimate of the impact of weather, customer growth, usage trends and other factors. This discussion should be read in conjunction with Sierra Pacific's historical unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q. Sierra Pacific's actual results in the future could differ significantly from the historical results.

Results of Operations for the Second Quarter and First Six Months of 2022 and 2021

Overview

Net income for the second quarter of 2022 was $13 million, a decrease of $4 million, or 24%, compared to 2021 primarily due to $6 million of higher operations and maintenance expenses, mainly due to higher plant operations and maintenance expenses, $2 million of unfavorable other, net, mainly due to lower cash surrender value of corporate-owned life insurance policies, and higher income tax expense, partially offset by $4 million of higher electric utility margin and higher interest and dividend income, mainly from carrying charges on regulatory balances. Electric utility margin increased primarily due to higher regulatory-related revenue deferrals and an increase in the average number of customers, partially offset by the unfavorable impact of weather, unfavorable price impacts from changes in sales mix and unfavorable changes in customer usage patterns. Energy generated decreased 33% for the second quarter of 2022 compared to 2021 primarily due to lower natural gas- and coal-fueled generation. Wholesale electricity sales volumes decreased 9% and purchased electricity volumes increased 38%.

Net income for the first six months of 2022 was $41 million, a decrease of $4 million, or 9%, compared to 2021 primarily due to $11 million of higher operations and maintenance expenses, mainly due to higher plant operations and maintenance expenses and higher earnings sharing, $4 million of unfavorable other, net, mainly due to lower cash surrender value of corporate-owned life insurance policies, and higher income tax expense, partially offset by $9 million of higher electric utility margin, $4 million of higher interest and dividend income, mainly from carrying charges on regulatory balances, and higher allowance for equity funds, mainly due to higher construction work-in-progress. Electric utility margin increased primarily due to higher transmission and wholesale revenue, higher regulatory-related revenue deferrals and an increase in the average number of customers, partially offset by the unfavorable impact of weather, unfavorable price impacts from changes in sales mix and unfavorable changes in customer usage patterns. Energy generated decreased 18% for the first six months of 2022 compared to 2021 primarily due to lower natural gas-fueled generation, partially offset by higher coal-fueled generation. Wholesale electricity sales volumes increased 35% and purchased electricity volumes increased 4%.

Non-GAAP Financial Measure

Management utilizes various key financial measures that are prepared in accordance with GAAP, as well as non-GAAP financial measures such as, electric utility margin and natural gas utility margin, to help evaluate results of operations. Electric utility margin is calculated as electric operating revenue less cost of fuel and energy while natural gas utility margin is calculated as natural gas operating revenue less cost of natural gas purchased for resale, which are captions presented on the Consolidated Statements of Operations.

Sierra Pacific's cost of fuel and energy and cost of natural gas purchased for resale are generally recovered from its customers through regulatory recovery mechanisms and as a result, changes in Sierra Pacific's expenses result in comparable changes to revenue. As such, management believes electric utility margin and natural gas utility margin more appropriately and concisely explain profitability rather than a discussion of revenue and cost of sales separately. Management believes the presentation of electric utility margin and natural gas utility margin provides meaningful and valuable insight into the information management considers important to running the business and a measure of comparability to others in the industry.

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Electric utility margin and natural gas utility margin are not measures calculated in accordance with GAAP and should be viewed as a supplement to, and not a substitute for, operating income which is the most directly comparable financial measure prepared in accordance with GAAP. The following table provides a reconciliation of utility margin to operating income (in millions):

						Second Quarter																					First Six Months
						2022						2021						Change									2022						2021						Change
Electric utility margin:
Operating revenue						$	230					$	189					$	41		22		%				$	457					$	370					$	87		24		%
Cost of fuel and energy						129						93						36			39						253						175						78			45
Electric utility margin						101						96						5			5		%				204						195						9			5		%
Natural gas utility margin:
Operating revenue						28						20						8			40		%				80						59						21			36		%
Natural gas purchased for resale						16						8						8			100						50						29						21			72
Natural gas utility margin						12						12						—			—		%				30						30						—			—		%
Utility margin						113						108						5			5		%				234						225						9			4		%
Operations and maintenance						47						41						6			15		%				88						77						11			14		%
Depreciation and amortization						37						36						1			3						73						72						1			1
Property and other taxes						6						6						—			—						12						12						—			—
Operating income						$	23					$	25					$	(2)		(8)		%				$	61					$	64					$	(3)		(5)		%

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Electric Utility Margin

A comparison of key operating results related to electric utility margin is as follows:

						Second Quarter																					First Six Months
						2022						2021						Change									2022						2021						Change
Utility margin (in millions):
Operating revenue						$	230					$	189					$	41		22		%				$	457					$	370					$	87		24		%
Cost of fuel and energy						129						93						36			39						253						175						78			45
Utility margin						$	101					$	96					$	5		5		%				$	204					$	195					$	9		5		%
Sales (GWhs):
Residential						573						626						(53)			(8)		%				1,236						1,297						(61)			(5)		%
Commercial						778						788						(10)			(1)						1,478						1,465						13			1
Industrial						721						900						(179)			(20)						1,476						1,797						(321)			(18)
Other						3						3						—			—						7						7						—			—
Total fully bundled(1)						2,075						2,317						(242)			(10)						4,197						4,566						(369)			(8)
Distribution only service						752						420						332			79						1,337						817						520			64
Total retail						2,827						2,737						90			3						5,534						5,383						151			3
Wholesale						114						125						(11)			(9)						405						300						105			35
Total GWhs sold						2,941						2,862						79			3		%				5,939						5,683						256			5		%
Average number of retail customers (in thousands)						370						365						5			1		%				370						364						6			2		%
Average revenue per MWh:
Retail - fully bundled(1)						$	103.25					$	75.42					$	27.83		37		%				$	99.79					$	74.31					$	25.48		34		%
Wholesale						$	65.84					$	52.18					$	13.66		26		%				$	55.28					$	56.84					$	(1.56)		(3)		%
Heating degree days						661						498						163			33		%				2,698						2,696						2			—		%
Cooling degree days						214						369						(155)			(42)		%				214						369						(155)			(42)		%
Sources of energy (GWhs)(2):
Natural gas						707						1,133						(426)			(38)		%				1,697						2,215						(518)			(23)		%
Coal						352						436						(84)			(19)						505						465						40			9
Renewables(3)						8						13						(5)			(38)						13						19						(6)			(32)
Total energy generated						1,067						1,582						(515)			(33)						2,215						2,699						(484)			(18)
Energy purchased						1,590						1,149						441			38						2,623						2,522						101			4
Total						2,657						2,731						(74)			(3)		%				4,838						5,221						(383)			(7)		%
Average cost of energy per MWh(4):
Energy generated						$	47.59					$	23.88					$	23.71		99		%				$	53.95					$	24.44					$	29.51		*
Energy purchased						$	49.73					$	48.21					$	1.52		3		%				$	51.09					$	43.16					$	7.93		18		%

*    Not meaningful

(1)    Fully bundled includes sales to customers for combined energy, transmission and distribution services.

(2)    GWh amounts are net of energy used by the related generating facilities.

(3)    Includes the Fort Churchill Solar Array which was under lease by Sierra Pacific until it was acquired in December 2021.

(4)    The average cost of energy per MWh includes only the cost of fuel associated with the generating facilities, purchased power and deferrals.

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Natural Gas Utility Margin

A comparison of key operating results related to natural gas utility margin is as follows:

						Second Quarter																					First Six Months
						2022						2021						Change									2022						2021						Change
Utility margin (in millions):
Operating revenue						$	28					$	20					$	8		40		%				$	80					$	59					$	21		36		%
Natural gas purchased for resale						16						8						8			*						50						29						21			72
Utility margin						$	12					$	12					$	—		—		%				$	30					$	30					$	—		—		%
Sold (000's Dths):
Residential						1,797						1,450						347			24		%				6,349						6,108						241			4		%
Commercial						751						775						(24)			(3)						3,263						3,079						184			6
Industrial						402						395						7			2						1,055						1,140						(85)			(7)
Total retail						2,950						2,620						330			13		%				10,667						10,327						340			3		%
Average number of retail customers (in thousands)						179						177						2			1		%				179						176						3			2		%
Average revenue per retail Dth sold						$	9.47					$	7.62					$	1.85		24		%				$	7.46					$	5.69					$	1.77		31		%
Heating degree days						661						498						163			33		%				2,698						2,696						2			—		%
Average cost of natural gas per retail Dth sold						$	5.48					$	3.21					$	2.27		71		%				$	4.67					$	2.86					$	1.81		63		%

*    Not meaningful

Quarter Ended June 30, 2022 Compared to Quarter Ended June 30, 2021

Electric utility margin increased $5 million, or 5%, for the second quarter of 2022 compared to 2021 primarily due to:

•$5 million of higher ON Line temporary rider (offset in operations and maintenance expense) for the recovery of deferred costs for the ON Line lease due to the regulatory-directed reallocation of costs between Nevada Power and Sierra Pacific and

•$4 million of higher regulatory-related revenue deferrals.

The increase in utility margin was offset by:

•$3 million of lower electric retail utility margin due to unfavorable price impacts from changes in sales mix, offset by higher retail customer volumes. Retail customer volumes, including distribution only service customers, increased 3.3% primarily due to an increase in the average number of customers, offset by the unfavorable impact of weather and unfavorable changes in customer usage patterns and

•$1 million of lower energy efficiency programs rates (offset in operations and maintenance expense).

Operations and maintenance increased $6 million, or 15%, for the second quarter of 2022 compared to 2021 primarily due to higher regulatory-approved cost recovery for the ON Line lease of $5 million (offset in operating revenue) and higher plant operations and maintenance expenses, partially offset by lower energy efficiency program costs (offset in operating revenue).

Interest and dividend income increased $3 million for the second quarter of 2022 compared to 2021 primarily due to higher interest income, mainly from carrying charges on regulatory balances.

Other, net is unfavorable $2 million, for the second quarter of 2022 compared to 2021 primarily due to lower cash surrender value of corporate-owned life insurance policies and higher pension costs.

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Income tax expense increased $1 million for the second quarter of 2022 compared to 2021 primarily due to the effects of ratemaking, offset by lower pretax income. The effective tax rate was 13% in 2022 and 6% in 2021.

First Six Months Ended June 30, 2022 Compared to First Six Months Ended June 30, 2021

Electric utility margin increased $9 million, or 5%, for the first six months of 2022 compared to 2021 primarily due to:

•$5 million of higher ON Line temporary rider (offset in operations and maintenance expense) for the recovery of deferred costs for the ON Line lease due to the regulatory-directed reallocation of costs between Nevada Power and Sierra Pacific;

•$3 million of higher transmission and wholesale revenue;

•$3 million of higher regulatory-related revenue deferrals; and

•$2 million of higher energy efficiency implementation rates.

The increase in utility margin was offset by:

•$2 million of lower electric retail utility margin due to unfavorable price impacts from changes in sales mix, offset by higher retail customer volumes. Retail customer volumes, including distribution only service customers, increased 2.8% primarily due to an increase in the average number of customers, offset by the unfavorable impact of weather and unfavorable changes in customer usage patterns and

•$2 million of lower energy efficiency programs rates (offset in operations and maintenance expense).

Operations and maintenance increased $11 million, or 14%, for the first six months of 2022 compared to 2021 primarily due to higher regulatory-approved cost recovery for the ON Line lease of $5 million (offset in operating revenue), higher plant operations and maintenance expenses of $5 million and higher earnings sharing, partially offset by lower energy efficiency program costs (offset in operating revenue).

Interest and dividend income increased $4 million for the first six months of 2022 compared to 2021 primarily due to higher interest income, mainly from carrying charges on regulatory balances.

Other, net unfavorable $4 million, or 67%, for the first six months of 2022 compared to 2021 primarily due to lower cash surrender value of corporate-owned life insurance policies and higher pension costs.

Income tax expense increased $2 million, or 40%, for the first six months of 2022 compared to 2021 primarily due to the effects of ratemaking, offset by lower pretax income. The effective tax rate was 15% in 2022 and 10% in 2021.

Liquidity and Capital Resources

As of June 30, 2022, Sierra Pacific's total net liquidity was as follows (in millions):

Cash and cash equivalents						$	17
Credit facility						250
Total net liquidity						$	267
Credit facility:
Maturity date						2025

Operating Activities

Net cash flows from operating activities for the six-month periods ended June 30, 2022 and 2021 were $108 million and $92 million, respectively. The change was primarily due to higher collections from customers, partially offset by higher payments related to fuel and energy costs and the timing of payments for operating costs.

Investing Activities

Net cash flows from investing activities for the six-month periods ended June 30, 2022 and 2021 were $(191) million and $(128) million, respectively. The change was primarily due to increased capital expenditures. Refer to "Future Uses of Cash" for further discussion of capital expenditures.

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Financing Activities

Net cash flows from financing activities for the six-month periods ended June 30, 2022 and 2021 were $91 million and $25 million, respectively. The change was primarily due to contributions from NV Energy, Inc. and higher proceeds from the issuance of long-term debt, partially offset by higher long-term debt reacquired, higher repayments of short-term debt and higher dividends paid to NV Energy, Inc.

Long-Term Debt

In June 2022, Sierra Pacific purchased $60 million of its variable-rate tax-exempt Gas & Water Facilities Refunding Revenue Bonds, Series 2016B, due 2036, as required by the bond indenture. Sierra Pacific is holding this bond and can re-offer it at a future date.

In May 2022, Sierra Pacific issued $250 million of 4.71% General and Refunding Mortgage bonds, Series W, due 2052. The net proceeds were used to repay the outstanding $200 million unsecured loan with NV Energy, Inc., repay amounts outstanding under its existing revolving credit facility and for general corporate purposes.

In April 2022, Sierra Pacific entered into a $200 million unsecured loan with NV Energy payable upon demand. The net proceeds were used to purchase certain tax-exempt refunding revenue bond obligations that were subject to mandatory purchase by Sierra Pacific in April 2022. The loan has an underlying variable interest rate based on 30-day U.S. dollar deposits offered on the London Interbank Offered Rate market plus a spread of 0.75%.

In April 2022, Sierra Pacific purchased the following series of bonds that were held by the public: $30 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016C, due 2036; $25 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016D, due 2036; $25 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016E, due 2036; $75 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016F, due 2036; $20 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016G, due 2036; and $30 million of its variable-rate tax-exempt Pollution Control Refunding Revenue Bonds, Series 2016B, due 2029. Sierra Pacific purchased these bonds as required by the bond indentures. Sierra Pacific is holding these bonds and can re-offer them at a future date.

Debt Authorizations

Sierra Pacific currently has financing authority from the PUCN consisting of the ability to: (1) establish debt issuances limited to a debt ceiling of $1.9 billion (excluding borrowings under Sierra Pacific's $250 million secured credit facility); and (2) maintain a revolving credit facility of up to $600 million.

Future Uses of Cash

Sierra Pacific has available a variety of sources of liquidity and capital resources, both internal and external, including net cash flows from operating activities, public and private debt offerings, the use of its secured revolving credit facility, capital contributions and other sources. These sources are expected to provide funds required for current operations, capital expenditures, debt retirements and other capital requirements. The availability and terms under which Sierra Pacific has access to external financing depends on a variety of factors, including regulatory approvals, Sierra Pacific's credit ratings, investors' judgment of risk and conditions in the overall capital markets, including the condition of the utility industry.

Capital Expenditures

Capital expenditure needs are reviewed regularly by management and may change significantly as a result of these reviews, which may consider, among other factors, changes in environmental and other rules and regulations; impacts to customers' rates; outcomes of regulatory proceedings; changes in income tax laws; general business conditions; load projections; system reliability standards; the cost and efficiency of construction labor, equipment and materials; commodity prices; and the cost and availability of capital. Prudently incurred expenditures for compliance-related items such as pollution-control technologies, replacement generation and associated operating costs are generally incorporated into Sierra Pacific's regulated retail rates.

151

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Historical and forecast capital expenditures, each of which exclude amounts for non-cash equity AFUDC and other non-cash items are as follows (in millions):

			Six-Month Periods												Annual
			Ended June 30,												Forecast
			2021						2022						2022
Electric distribution			$	42					$	46					$	114
Electric transmission			31						45						104
Other			55						100						186
Total			$	128					$	191					$	404

Sierra Pacific received PUCN approval through its recent IRP filings for an increase in solar generation and electric transmission. Sierra Pacific has included estimates from its latest IRP filing in its forecast capital expenditures for 2022. These estimates may change as a result of the RFP process. Sierra Pacific's historical and forecast capital expenditures include the following:

•Electric distribution includes both growth projects and operating expenditures consisting of routine expenditures for distribution needed to serve existing and expected demand.

•Electric transmission includes both growth projects and operating expenditures. Growth projects primarily relate to the Nevada Utilities' Greenlink Nevada transmission expansion program. In this project, the company has received approval from the PUCN to build a 350-mile, 525-kV transmission line, known as Greenlink West, connecting the Ft. Churchill substation to the Northwest substation to the Harry Allen substation; a 235-mile, 525-kV transmission line, known as Greenlink North, connecting the new Ft. Churchill substation to the Robinson Summit substation; a 46-mile, 345-kV transmission line from the new Ft. Churchill substation to the Mira Loma substations; and a 38-mile, 345-kV transmission line from the new Ft. Churchill substation to the Robinson Summit substations. Operating expenditures consist of routine expenditures for transmission and other infrastructure needed to serve existing and expected demand.

•Other includes both growth projects and operating expenditures consisting of turbine upgrades at the Tracy generating facility, routine expenditures for generation, other operating projects and other infrastructure needed to serve existing and expected demand.

Material Cash Requirements

As of June 30, 2022, there have been no material changes in cash requirements from the information provided in Item 7 of Sierra Pacific's Annual Report on Form 10-K for the year ended December 31, 2021, other than those disclosed in Note 4 of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

Regulatory Matters

Sierra Pacific is subject to comprehensive regulation. Refer to "Regulatory Matters" in Berkshire Hathaway Energy's Part I, Item 2 of this Form 10-Q for discussion regarding Sierra Pacific's current regulatory matters.

Environmental Laws and Regulations

Sierra Pacific is subject to federal, state and local laws and regulations regarding climate change, RPS, air and water quality, emissions performance standards, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact Sierra Pacific's current and future operations. In addition to imposing continuing compliance obligations, these laws and regulations provide regulators with the authority to levy substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. These laws and regulations are administered by various federal, state and local agencies. Sierra Pacific believes it is in material compliance with all applicable laws and regulations, although many are subject to interpretation that may ultimately be resolved by the courts. Environmental laws and regulations continue to evolve, and Sierra Pacific is unable to predict the impact of the changing laws and regulations on its operations and consolidated financial results.

Refer to "Environmental Laws and Regulations" in Berkshire Hathaway Energy's Part I, Item 2 of this Form 10-Q for additional information regarding environmental laws and regulations.

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Critical Accounting Estimates

Certain accounting measurements require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized on the Consolidated Financial Statements based on such estimates involve numerous assumptions subject to varying and potentially significant degrees of judgment and uncertainty and will likely change in the future as additional information becomes available. Estimates are used for, but not limited to, the accounting for the effects of certain types of regulation, derivatives, impairment of long-lived assets, income taxes and revenue recognition - unbilled revenue. For additional discussion of Sierra Pacific's critical accounting estimates, see Item 7 of Sierra Pacific's Annual Report on Form 10‑K for the year ended December 31, 2021. There have been no significant changes in Sierra Pacific's assumptions regarding critical accounting estimates since December 31, 2021.

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Eastern Energy Gas Holdings, LLC and its subsidiaries

Consolidated Financial Section

154

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PART I

Item 1.Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

Eastern Energy Gas Holdings, LLC

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheet of Eastern Energy Gas Holdings, LLC and subsidiaries ("Eastern Energy Gas") as of June 30, 2022, the related consolidated statements of operations, comprehensive income, and changes in equity for the three-month and six-month periods ended June 30, 2022 and 2021, and of cash flows for the six-month periods ended June 30, 2022 and 2021, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of Eastern Energy Gas as of December 31, 2021, and the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of Eastern Energy Gas' management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Eastern Energy Gas in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, 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.

/s/ Deloitte & Touche LLP

Richmond, Virginia

August 5, 2022

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EASTERN ENERGY GAS HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions)

			As of
			June 30, 2022						December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents			$	106					$	22
Trade receivables, net			174						183
Receivables from affiliates			26						47
Notes receivable from affiliates			198						7
Inventories			127						122
Natural gas imbalances			194						100
Other current assets			126						140
Total current assets			951						621
Property, plant and equipment, net			10,131						10,200
Goodwill			1,286						1,286
Investments			419						412
Other assets			140						129
Total assets			$	12,927					$	12,648

The accompanying notes are an integral part of these consolidated financial statements.

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EASTERN ENERGY GAS HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)

(Amounts in millions)

			As of
			June 30, 2022						December 31, 2021
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable			$	45					$	79
Accounts payable to affiliates			20						38
Accrued interest			14						19
Accrued property, income and other taxes			78						89
Regulatory liabilities			49						40
Current portion of long-term debt			250						—
Other current liabilities			187						100
Total current liabilities			643						365
Long-term debt			3,636						3,906
Regulatory liabilities			640						645
Other long-term liabilities			291						238
Total liabilities			5,210						5,154
Commitments and contingencies (Note 8)
Equity:
Member's equity:
Membership interests			3,733						3,501
Accumulated other comprehensive loss, net			(39)						(43)
Total member's equity			3,694						3,458
Noncontrolling interests			4,023						4,036
Total equity			7,717						7,494
Total liabilities and equity			$	12,927					$	12,648

The accompanying notes are an integral part of these consolidated financial statements.

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EASTERN ENERGY GAS HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Operating revenue			$	504					$	437					$	986					$	923
Operating expenses:
Excess gas			(21)						(10)						(22)						(10)
Operations and maintenance			124						113						242						237
Depreciation and amortization			80						81						165						161
Property and other taxes			37						38						66						77
Total operating expenses			220						222						451						465
Operating income			284						215						535						458
Other income (expense):
Interest expense			(36)						(42)						(72)						(86)
Allowance for equity funds			1						1						3						3
Other, net			—						1						(1)						2
Total other income (expense)			(35)						(40)						(70)						(81)
Income before income tax expense and equity income			249						175						465						377
Income tax expense			37						22						67						49
Equity income			9						7						28						23
Net income			221						160						426						351
Net income attributable to noncontrolling interests			118						100						229						202
Net income attributable to Eastern Energy Gas			$	103					$	60					$	197					$	149

The accompanying notes are an integral part of these consolidated financial statements.

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EASTERN ENERGY GAS HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Amounts in millions)

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Net income			$	221					$	160					$	426					$	351
Other comprehensive (loss) income, net of tax:
Unrecognized amounts on retirement benefits, net of tax of $—, $—, $— and $—			—						2						1						4
Unrealized (losses) gains on cash flow hedges, net of tax of $—, $—, $1 and $3			(1)						3						3						13
Total other comprehensive (loss) income, net of tax			(1)						5						4						17
Comprehensive income			220						165						430						368
Comprehensive income attributable to noncontrolling interests			118						100						229						206
Comprehensive income attributable to Eastern Energy Gas			$	102					$	65					$	201					$	162

The accompanying notes are an integral part of these consolidated financial statements.

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EASTERN ENERGY GAS HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

(Amounts in millions)

																																	Accumulated
																																	Other
																											Membership						Comprehensive						Noncontrolling						Total
																											Interests						Loss, Net						Interests						Equity
Balance, March 31, 2021																											$	3,035					$	(45)					$	4,088					$	7,078
Net income																											60						—						100						160
Other comprehensive income																											—						5						—						5
Contributions																											271						—						—						271
Distributions																											—						—						(116)						(116)
Balance, June 30, 2021																											$	3,366					$	(40)					$	4,072					$	7,398
Balance, December 31, 2020																											$	2,957					$	(53)					$	4,091					$	6,995
Net income																											149						—						202						351
Other comprehensive income																											—						13						4						17
Contributions																											282						—						—						282
Distributions																											(22)						—						(225)						(247)
Balance, June 30, 2021																											$	3,366					$	(40)					$	4,072					$	7,398
Balance, March 31, 2022																											$	3,595					$	(38)					$	4,033					$	7,590
Net income																											103						—						118						221
Other comprehensive loss																											—						(1)						—						(1)
Contributions																											68						—						—						68
Distributions																											(33)						—						(128)						(161)
Balance, June 30, 2022																											$	3,733					$	(39)					$	4,023					$	7,717
Balance, December 31, 2021																											$	3,501					$	(43)					$	4,036					$	7,494
Net income																											197						—						229						426
Other comprehensive income																											—						4						—						4
Contributions																											68						—						—						68
Distributions																											(33)						—						(242)						(275)
Balance, June 30, 2022																											$	3,733					$	(39)					$	4,023					$	7,717

The accompanying notes are an integral part of these consolidated financial statements.

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EASTERN ENERGY GAS HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)

			Six-Month Periods
			Ended June 30,
			2022						2021
Cash flows from operating activities:
Net income			$	426					$	351
Adjustments to reconcile net income to net cash flows from operating activities:
Losses on other items, net			2						3
Depreciation and amortization			165						161
Allowance for equity funds			(3)						(3)
Equity income, net of distributions			(5)						(3)
Changes in regulatory assets and liabilities			(2)						1
Deferred income taxes			52						118
Other, net			5						(9)
Changes in other operating assets and liabilities:
Trade receivables and other assets			4						65
Derivative collateral, net			(3)						(1)
Accrued property, income and other taxes			(3)						(63)
Accounts payable and other liabilities			43						(39)
Net cash flows from operating activities			681						581
Cash flows from investing activities:
Capital expenditures			(151)						(150)
Repayment of notes by affiliates			15						268
Notes to affiliates			(204)						(158)
Other, net			(7)						(12)
Net cash flows from investing activities			(347)						(52)
Cash flows from financing activities:
Repayments of long-term debt			—						(500)
Repayment of notes payable, net			—						(9)
Proceeds from equity contributions			—						256
Distributions			(242)						(225)
Other, net			—						(2)
Net cash flows from financing activities			(242)						(480)
Net change in cash and cash equivalents and restricted cash and cash equivalents			92						49
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period			39						48
Cash and cash equivalents and restricted cash and cash equivalents at end of period			$	131					$	97

The accompanying notes are an integral part of these consolidated financial statements.

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EASTERN ENERGY GAS HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)    General

Eastern Energy Gas Holdings, LLC is a holding company, and together with its subsidiaries ("Eastern Energy Gas") conducts business activities consisting of Federal Energy Regulatory Commission ("FERC")-regulated interstate natural gas transportation pipeline and underground storage operations in the eastern region of the U.S. and operates Cove Point LNG, LP ("Cove Point"), a liquefied natural gas ("LNG") export, import and storage facility. Eastern Energy Gas owns 100% of the general partner interest and 25% of the limited partnership interest in Cove Point. In addition, Eastern Energy Gas owns a 50% noncontrolling interest in Iroquois Gas Transmission System, L.P. ("Iroquois"), a 416-mile FERC-regulated interstate natural gas transportation pipeline. Eastern Energy Gas is an indirect wholly owned subsidiary of Berkshire Hathaway Energy Company ("BHE"). BHE is a holding company based in Des Moines, Iowa that owns subsidiaries principally engaged in the energy industry. BHE is a consolidated subsidiary of Berkshire Hathaway Inc. ("Berkshire Hathaway").

The unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the United States Securities and Exchange Commission's rules and regulations for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements. Management believes the unaudited Consolidated Financial Statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary for the fair presentation of the unaudited Consolidated Financial Statements as of June 30, 2022 and for the three- and six-month periods ended June 30, 2022 and 2021. The results of operations for the three- and six-month periods ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year.

The preparation of the unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenue and expenses during the period. Actual results may differ from the estimates used in preparing the unaudited Consolidated Financial Statements. Note 2 of Notes to Consolidated Financial Statements included in Eastern Energy Gas' Annual Report on Form 10-K for the year ended December 31, 2021 describes the most significant accounting policies used in the preparation of the unaudited Consolidated Financial Statements. There have been no significant changes in Eastern Energy Gas' assumptions regarding significant accounting estimates and policies during the six-month period ended June 30, 2022.

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(2)    Property, Plant and Equipment, Net

Property, plant and equipment, net consists of the following (in millions):

									As of
									June 30,						December 31,
			Depreciable Life						2022						2021
Utility Plant:
Interstate natural gas pipeline assets			21 - 44 years						$	8,728					$	8,675
Intangible plant			5 - 10 years						106						110
Utility plant in-service									8,834						8,785
Accumulated depreciation and amortization									(2,962)						(2,901)
Utility plant in-service, net									5,872						5,884
Nonutility Plant:
LNG facility			40 years						4,484						4,475
Intangible plant			14 years						25						25
Nonutility plant in-service									4,509						4,500
Accumulated depreciation and amortization									(484)						(423)
Nonutility plant in-service, net									4,025						4,077
Plant, net									9,897						9,961
Construction work-in-progress									234						239
Property, plant and equipment, net									$	10,131					$	10,200

Construction work-in-progress includes $200 million and $209 million as of June 30, 2022 and December 31, 2021, respectively, related to the construction of utility plant.

(3)    Regulatory Matters

In September 2021, Eastern Gas Transmission and Storage, Inc. ("EGTS") filed a general rate case for its FERC-jurisdictional services, with proposed rates to be effective November 1, 2021. EGTS' previous general rate case was settled in 1998. EGTS proposed an annual cost-of-service of approximately $1.1 billion, and requested increases in various rates, including general system storage rates by 85% and general system transportation rates by 60%. In October 2021, the FERC issued an order that accepted the November 1, 2021 effective date for certain changes in rates, while suspending the other changes for five months following the proposed effective date, until April 1, 2022, subject to refund and the outcome of hearing procedures. In June 2022, the parties reached an agreement in principle and the litigation procedural schedule was ordered held in abeyance for 90 days to enable the parties to finalize a settlement. The settlement is expected to be filed by September 30, 2022. As of June 30, 2022, EGTS' provision for rate refund for April 2022 through June 2022 totaled $35 million and was included in other current liabilities on the Consolidated Balance Sheet.

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In July 2017, the FERC audit staff communicated to EGTS that it had substantially completed an audit of EGTS' compliance with the accounting and reporting requirements of the FERC's Uniform System of Accounts and provided a description of matters and preliminary recommendations. In November 2017, the FERC audit staff issued its audit report. In December 2017, EGTS provided its response to the audit report. EGTS requested FERC review of the contested findings and submitted its plan for compliance with the uncontested portions of the report. EGTS reached resolution of certain matters with the FERC in the fourth quarter of 2018. EGTS recognized a charge for a disallowance of plant, originally established beginning in 2012, for the resolution of one matter with the FERC. In December 2020, the FERC issued a final ruling on the remaining matter, which resulted in a $43 million ($31 million after-tax) estimated charge for disallowance of capitalized allowance for funds used during construction. As a condition of the December 2020 ruling, EGTS filed its proposed accounting entries and supporting documentation with the FERC during the second quarter of 2021. During the finalization of these entries, EGTS refined the estimated charge for disallowance of capitalized allowance for funds used during construction, which resulted in a reduction to the estimated charge of $11 million ($8 million after-tax) that was recorded in operations and maintenance expense in its Consolidated Statements of Operations in the second quarter of 2021. In September 2021, the FERC approved EGTS' accounting entries and supporting documentation.

(4)    Investments and Restricted Cash and Cash Equivalents

Investments and restricted cash and cash equivalents consists of the following (in millions):

			As of
			June 30,						December 31,
			2022						2021
Investments:
Investment funds			$	13					$	13
Equity method investments:
Iroquois			406						399
Total investments			419						412
Restricted cash and cash equivalents:
Customer deposits			25						17
Total restricted cash and cash equivalents			25						17
Total investments and restricted cash and cash equivalents			$	444					$	429
Reflected as:
Current assets			$	25					$	17
Noncurrent assets			419						412
Total investments and restricted cash and cash equivalents			$	444					$	429

Equity Method Investments

Eastern Energy Gas, through a subsidiary, owns 50% of Iroquois, which owns and operates an interstate natural gas pipeline located in the states of New York and Connecticut.

As of both June 30, 2022 and December 31, 2021, the carrying amount of Eastern Energy Gas' investments exceeded its share of underlying equity in net assets by $130 million. The difference reflects equity method goodwill and is not being amortized. Eastern Energy Gas received distributions from its investments of $23 million and $20 million for the six-month periods ended June 30, 2022 and 2021, respectively.

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Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash equivalents consist of funds invested in money market mutual funds, U.S. Treasury Bills and other investments with a maturity of three months or less when purchased. Cash and cash equivalents exclude amounts where availability is restricted by legal requirements, loan agreements or other contractual provisions. Restricted cash and cash equivalents consist of customer deposits as allowed under the FERC gas tariffs. A reconciliation of cash and cash equivalents and restricted cash and cash equivalents as presented in the Consolidated Statements of Cash Flows is outlined below and disaggregated by the line items in which they appear on the Consolidated Balance Sheets (in millions):

			As of
			June 30,						December 31,
			2022						2021
Cash and cash equivalents			$	106					$	22
Restricted cash and cash equivalents included in other current assets			25						17
Total cash and cash equivalents and restricted cash and cash equivalents			$	131					$	39

(5)    Income Taxes

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax expense is as follows:

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Federal statutory income tax rate			21		%				21		%				21		%				21		%
State income tax, net of federal income tax benefit			3						2						4						3
Equity interest			1						1						1						1
Effects of ratemaking			—						(1)						(2)						(1)
Noncontrolling interest			(10)						(12)						(10)						(11)
Other, net			—						2						—						—
Effective income tax rate			15		%				13		%				14		%				13		%

For the period ended June 30, 2022, Eastern Energy Gas' reconciliation of the federal statutory income tax rate to the effective income tax rate is driven primarily by an absence of tax on income attributable to Cove Point's 75% noncontrolling interest.

(6)    Employee Benefit Plans

Eastern Energy Gas is a participant in benefit plans sponsored by MidAmerican Energy Company ("MidAmerican Energy"), an affiliate. The MidAmerican Energy Company Retirement Plan includes a qualified pension plan that provides pension benefits for eligible employees. The MidAmerican Energy Company Welfare Benefit Plan provides certain postretirement health care and life insurance benefits for eligible retirees on behalf of Eastern Energy Gas. Eastern Energy Gas contributed $6 million to the MidAmerican Energy Company Retirement Plan and $1 million to the MidAmerican Energy Company Welfare Benefit Plan for the six-month period ended June 30, 2022. Amounts attributable to Eastern Energy Gas were allocated from MidAmerican Energy in accordance with the intercompany administrative service agreement. Offsetting regulatory assets and liabilities have been recorded related to the amounts not yet recognized as a component of net periodic benefit costs that will be included in regulated rates. Net periodic benefit costs not included in regulated rates are included in accumulated other comprehensive loss, net. As of both June 30, 2022 and December 31, 2021, Eastern Energy Gas' amount due to MidAmerican Energy associated with these plans and reflected in other long-term liabilities on the Consolidated Balance Sheets was $95 million.

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(7)    Fair Value Measurements

The carrying value of Eastern Energy Gas' cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. Eastern Energy Gas has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that Eastern Energy Gas has the ability to access at the measurement date.

•Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•Level 3 - Unobservable inputs reflect Eastern Energy Gas' judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. Eastern Energy Gas develops these inputs based on the best information available, including its own data.

The following table presents Eastern Energy Gas' financial assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):

						Input Levels for Fair Value Measurements
						Level 1						Level 2						Level 3						Total
As of June 30, 2022:
Assets:
Money market mutual funds						$	66					$	—					$	—					$	66
Equity securities:
Investment funds						13						—						—						13
						$	79					$	—					$	—					$	79
Liabilities:
Commodity derivatives						$	—					$	(1)					$	—					$	(1)
Foreign currency exchange rate derivatives						—						(19)						—						(19)
						$	—					$	(20)					$	—					$	(20)
As of December 31, 2021:
Assets:
Foreign currency exchange rate derivatives						$	—					$	3					$	—					$	3
Equity securities:
Investment funds						13						—						—						13
						$	13					$	3					$	—					$	16
Liabilities:
Foreign currency exchange rate derivatives						$	—					$	(3)					$	—					$	(3)
						$	—					$	(3)					$	—					$	(3)

Eastern Energy Gas' investments in money market mutual funds and investment funds are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value.

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Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchase or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which Eastern Energy Gas transacts. When quoted prices for identical contracts are not available, Eastern Energy Gas uses forward price curves. Forward price curves represent Eastern Energy Gas' estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. Eastern Energy Gas bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent brokers, exchanges, direct communication with market participants and actual transactions executed by Eastern Energy Gas. Market price quotations are generally readily obtainable for the applicable term of Eastern Energy Gas' outstanding derivative contracts; therefore, Eastern Energy Gas' forward price curves reflect observable market quotes. Market price quotations for certain natural gas trading hubs are not as readily obtainable due to the length of the contracts. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, Eastern Energy Gas uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of underlying forward commodity prices, interest rates, currency rates, related volatility, counterparty creditworthiness and duration of contracts.

Eastern Energy Gas' long-term debt is carried at cost, including unamortized premiums, discounts and debt issuance costs as applicable, on the Consolidated Financial Statements. The fair value of Eastern Energy Gas' long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of Eastern Energy Gas' variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of Eastern Energy Gas' long-term debt (in millions):

						As of June 30, 2022												As of December 31, 2021
						Carrying						Fair						Carrying						Fair
						Value						Value						Value						Value
Long-term debt						$	3,886					$	3,656					$	3,906					$	4,266

(8)    Commitments and Contingencies

Legal Matters

Eastern Energy Gas is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. Eastern Energy Gas does not believe that such normal and routine litigation will have a material impact on its consolidated financial results.

Environmental Laws and Regulations

Eastern Energy Gas is subject to federal, state and local laws and regulations regarding climate change, renewable portfolio standards, air and water quality, emissions performance standards, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact Eastern Energy Gas' current and future operations. Eastern Energy Gas believes it is in material compliance with all applicable laws and regulations.

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(9)    Revenue from Contracts with Customers

The following table summarizes Eastern Energy Gas' revenue from contracts with customers ("Customer Revenue") by regulated and nonregulated, with further disaggregation of regulated by line of business (in millions):

			Three-Month Periods												Six-Month Periods
			Ended June 30,												Ended June 30,
			2022						2021						2022						2021
Customer Revenue:
Regulated:
Gas transportation and storage			$	286					$	246					$	571					$	525
Wholesale			—						—						—						17
Total regulated			286						246						571						542
Nonregulated			216						190						419						380
Total Customer Revenue			502						436						990						922
Other revenue(1)			2						1						(4)						1
Total operating revenue			$	504					$	437					$	986					$	923

(1)Other revenue consists primarily of revenue recognized in accordance with Accounting Standards Codification 815, "Derivative and Hedging" and includes unrealized gains and losses for derivatives not designated as hedges related to natural gas sales contracts.

Remaining Performance Obligations

The following table summarizes Eastern Energy Gas' revenue it expects to recognize in future periods related to significant unsatisfied remaining performance obligations for fixed contracts with expected durations in excess of one year as of June 30, 2022 (in millions):

			Performance obligations expected to be satisfied
			Less than 12 months						More than 12 months						Total
Eastern Energy Gas			$	2,228					$	16,609					$	18,837

(10)    Components of Accumulated Other Comprehensive Loss, Net

The following table shows the change in accumulated other comprehensive loss by each component of other comprehensive income (loss), net of applicable income tax (in millions):

						Unrecognized																		Accumulated
						Amounts On						Unrealized												Other
						Retirement						Losses on Cash						Noncontrolling						Comprehensive
						Benefits						Flow Hedges						Interests						Loss, Net
Balance, December 31, 2020						$	(12)					$	(51)					$	10					$	(53)
Other comprehensive income (loss)						4						13						(4)						13
Balance, June 30, 2021						$	(8)					$	(38)					$	6					$	(40)
Balance, December 31, 2021						$	(6)					$	(42)					$	5					$	(43)
Other comprehensive income						1						3						—						4
Balance, June 30, 2022						$	(5)					$	(39)					$	5					$	(39)

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

The following is management's discussion and analysis of certain significant factors that have affected the consolidated financial condition and results of operations of Eastern Energy Gas during the periods included herein. This discussion should be read in conjunction with Eastern Energy Gas' historical Consolidated Financial Statements and Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q. Eastern Energy Gas' actual results in the future could differ significantly from the historical results.

Results of Operations for the Second Quarter and First Six Months of 2022 and 2021

Overview

Net income attributable to Eastern Energy Gas for the second quarter of 2022 was $103 million, an increase of $43 million compared to 2021. Net income increased primarily due to higher margins from regulated gas transportation and storage operations of $52 million, partially offset by an increase in income tax expense of $15 million primarily due to higher pre-tax income.

Net income attributable to Eastern Energy Gas for the first six months of 2022 was $197 million, an increase of $48 million compared to 2021. Net income increased primarily due to higher margins from regulated gas transportation and storage operations of $37 million, lower interest expense of $13 million primarily due to the repayment of long-term debt in the second quarter of 2021 and lower than estimated 2021 tax assessments of $11 million, partially offset by an increase in income tax expense of $18 million primarily due to higher pre-tax income.

Quarter Ended June 30, 2022 Compared to Quarter Ended June 30, 2021

Operating revenue increased $67 million, or 15%, for the second quarter of 2022 compared to 2021, primarily due to an increase in regulated gas transportation and storage services rates due to an agreement in principle for EGTS' general rate case of $25 million, an increase in Cove Point liquefied natural gas variable revenue of $25 million, an increase in variable revenue related to park and loan activity of $6 million and a $4 million increase from the West Loop transmission pipeline being placed into service in the third quarter of 2021.

Excess gas increased $11 million for the second quarter of 2022 compared to 2021, primarily due to favorable valuations of system gas of $27 million, partially offset by a decrease in retained volumes of $16 million.

Operations and maintenance increased $11 million, or 10%, for the second quarter of 2022 compared to 2021, primarily due to a 2021 benefit from the finalization of entries for the disallowance of capitalized AFUDC of $11 million and an increase in post-retirement benefit related costs of $6 million, partially offset by bank and legal fees recorded in 2021 related to Eastern Energy Gas' debt exchange of $4 million.

Depreciation and amortization decreased $1 million, or 1%, for the second quarter of 2022 compared to 2021, primarily due to a decrease due to an agreement in principle for EGTS' general rate case of $6 million, partially offset by higher plant placed in-service of $5 million.

Interest expense decreased $6 million, or 14%, for the second quarter of 2022 compared to 2021, primarily due to the repayment of $500 million of long-term debt in the second quarter of 2021.

Income tax expense increased $15 million, or 68%, for the second quarter of 2022 compared to 2021, primarily due to higher pre-tax income. The effective tax rate was 15% for the second quarter of 2022 and 13% for the second quarter of 2021.

Net income attributable to noncontrolling interests increased $18 million, or 18%, for the second quarter of 2022 compared to 2021, primarily due to an increase in Cove Point liquefied natural gas variable revenue.

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First Six Months Ended June 30, 2022 Compared to First Six Months Ended June 30, 2021

Operating revenue increased $63 million, or 7%, for the first six months of 2022 compared to 2021, primarily due to an increase in Cove Point liquefied natural gas variable revenue of $38 million, an increase in regulated gas transportation and storage services rates due to an agreement in principle for EGTS' general rate case of $25 million, an increase in variable revenue related to park and loan activity of $11 million and a $7 million increase from the West Loop transmission pipeline being placed into service in the third quarter of 2021, partially offset by a decrease in regulated gas sales of $17 million for operational and system balancing purposes due to decreased volumes.

Excess gas increased $12 million for the first six months of 2022 compared to 2021, primarily due to a decrease in volumes sold of $14 million and favorable valuations of system gas of $18 million, partially offset by an unfavorable change to volumes of $20 million.

Operations and maintenance increased $5 million, or 2%, for the first six months of 2022 compared to 2021, primarily due to a 2021 benefit from the finalization of entries for the disallowance of capitalized AFUDC of $11 million, partially offset by bank and legal fees recorded in 2021 related to Eastern Energy Gas' debt exchange of $4 million.

Depreciation and amortization increased $4 million, or 2%, for the first six months of 2022 compared to 2021, primarily due to higher plant placed in-service of $10 million, partially offset by a decrease due to an agreement in principle for EGTS' general rate case of $6 million.

Property and other taxes decreased $11 million, or 14%, for the first six months of 2022 compared to 2021, primarily due to lower than estimated 2021 tax assessments.

Interest expense decreased $14 million, or 16%, for the first six months of 2022 compared to 2021, primarily due to the repayment of $500 million of long-term debt in the second quarter of 2021.

Income tax expense increased $18 million, or 37%, for the first six months of 2022 compared to 2021, primarily due to higher pre-tax income. The effective tax rate was 14% for the first six months of 2022 and 13% for the first six months of 2021.

Net income attributable to noncontrolling interests increased $27 million, or 13%, for the first six months of 2022 compared to 2021, primarily due to an increase in Cove Point liquefied natural gas variable revenue.

Liquidity and Capital Resources

As of June 30, 2022, Eastern Energy Gas' total net liquidity was $506 million as follows (in millions):

Cash and cash equivalents						$	106
Intercompany revolving credit agreement						400
Total net liquidity						$	506
Intercompany revolving credit agreement:
Maturity date						2022

Operating Activities

Net cash flows from operating activities for the six-month periods ended June 30, 2022 and 2021 were $681 million and $581 million, respectively. The change is primarily due to the timing of income tax payments, the impacts from the proposed rates in effect April 1, 2022 for the EGTS general rate case and other working capital adjustments.

The timing of Eastern Energy Gas' income tax cash flows from period to period can be significantly affected by the estimated federal income tax payment methods elected and assumptions for each payment date.

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Investing Activities

Net cash flows from investing activities for the six-month periods ended June 30, 2022 and 2021 were $(347) million and $(52) million, respectively. The increase is primarily due to a decrease in repayments of loans by affiliates of $253 million and an increase in loans to its parent under an intercompany revolving credit agreement of $46 million.

Financing Activities

Net cash flows from financing activities for the six-month period ended June 30, 2022 were $(242) million and consisted of distributions to noncontrolling interests from Cove Point.

Net cash flows from financing activities for the six-month period ended June 30, 2021 were $(480) million. Sources of cash totaled $256 million and consisted of proceeds from equity contributions, that primarily included a contribution from its indirect parent, BHE, to Eastern Energy Gas to assist in the repayment of $500 million of debt. Uses of cash totaled $736 million and consisted mainly of repayments of long-term debt of $500 million, distributions to noncontrolling interests from Cove Point of $225 million and repayment of notes to affiliates of $9 million.

Future Uses of Cash

Eastern Energy Gas has available a variety of sources of liquidity and capital resources, both internal and external, including net cash flows from operating activities, public and private debt offerings, intercompany revolving credit agreements, capital contributions and other sources. These sources are expected to provide funds required for current operations, capital expenditures, investments, debt retirements and other capital requirements. The availability and terms under which Eastern Energy Gas and each subsidiary has access to external financing depends on a variety of factors, including regulatory approvals, Eastern Energy Gas' credit ratings, investors' judgment of risk and conditions in the overall capital markets, including the condition of the natural gas transportation pipeline and storage and LNG export, import and storage industries.

Capital Expenditures

Capital expenditure needs are reviewed regularly by management and may change significantly as a result of these reviews, which may consider, among other factors, changes in environmental and other rules and regulations; impacts to customers' rates; outcomes of regulatory proceedings; changes in income tax laws; general business conditions; system reliability standards; the cost and efficiency of construction labor, equipment and materials; commodity prices; and the cost and availability of capital.

Eastern Energy Gas' historical and forecasted capital expenditures, each of which exclude amounts for non-cash equity AFUDC and other non-cash items, are as follows (in millions):

			Six-Month Periods												Annual
			Ended June 30,												Forecast
			2021						2022						2022
Natural gas transmission and storage			$	11					$	23					$	51
Other			139						128						314
Total			$	150					$	151					$	365

Eastern Energy Gas' natural gas transmission and storage capital expenditures primarily include growth capital expenditures related to planned regulated projects. Eastern Energy Gas' other capital expenditures consist primarily of non-regulated and routine capital expenditures for natural gas transmission, storage and liquefied natural gas terminalling infrastructure needed to serve existing and expected demand.

Material Cash Requirements

As of June 30, 2022, there have been no material changes in cash requirements from the information provided in Item 7 of Eastern Energy Gas' Annual Report on Form 10-K for the year ended December 31, 2021, other than natural gas supply and transportation cash requirements increasing $87 million, primarily due to rate increases for pipeline transportation and storage purchase obligations as a result of a recent rate case.

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Regulatory Matters

Eastern Energy Gas is subject to comprehensive regulation. Refer to "Regulatory Matters" in Berkshire Hathaway Energy's Part I, Item 2 of this Form 10-Q for discussion regarding Eastern Energy Gas' current regulatory matters.

Environmental Laws and Regulations

Eastern Energy Gas is subject to federal, state and local laws and regulations regarding climate change, RPS, air and water quality, emissions performance standards, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact Eastern Energy Gas' current and future operations. In addition to imposing continuing compliance obligations, these laws and regulations provide regulators with the authority to levy substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. These laws and regulations are administered by various federal, state and local agencies. Eastern Energy Gas believes it is in material compliance with all applicable laws and regulations, although many are subject to interpretation that may ultimately be resolved by the courts. Environmental laws and regulations continue to evolve, and Eastern Energy Gas is unable to predict the impact of the changing laws and regulations on its operations and consolidated financial results.

Refer to "Environmental Laws and Regulations" in Berkshire Hathaway Energy's Part I, Item 2 of this Form 10-Q for additional information regarding environmental laws and regulations.

Critical Accounting Estimates

Certain accounting measurements require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized on the Consolidated Financial Statements based on such estimates involve numerous assumptions subject to varying and potentially significant degrees of judgment and uncertainty and will likely change in the future as additional information becomes available. Estimates are used for, but not limited to, the accounting for the effects of certain types of regulation, impairment of goodwill and long-lived assets and income taxes. For additional discussion of Eastern Energy Gas' critical accounting estimates, see Item 7 of Eastern Energy Gas' Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes in Eastern Energy Gas' assumptions regarding critical accounting estimates since December 31, 2021.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk affecting the Registrants, see Item 7A of each Registrant's Annual Report on Form 10-K for the year ended December 31, 2021. Each Registrant's exposure to market risk and its management of such risk has not changed materially since December 31, 2021. Refer to Note 7 of the Notes to Consolidated Financial Statements of PacifiCorp, Note 7 of the Notes to Consolidated Financial Statements of Nevada Power and Note 7 of the Notes to Consolidated Financial Statements of Sierra Pacific in Part I, Item 1 of this Form 10-Q for disclosure of the respective Registrant's derivative positions as of June 30, 2022.

Item 4.Controls and Procedures

At the end of the period covered by this Quarterly Report on Form 10-Q, each of Berkshire Hathaway Energy Company, PacifiCorp, MidAmerican Funding, LLC, MidAmerican Energy Company, Nevada Power Company, Sierra Pacific Power Company and Eastern Energy Gas Holdings, LLC carried out separate evaluations, under the supervision and with the participation of each such entity's management, including its Chief Executive Officer (principal executive officer) and its Chief Financial Officer (principal financial officer), or persons performing similar functions, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended). Based upon these evaluations, management of each such entity, including its Chief Executive Officer (principal executive officer) and its Chief Financial Officer (principal financial officer), or persons performing similar functions, in each case, concluded that the disclosure controls and procedures for such entity were effective to ensure that information required to be disclosed by such entity in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission's rules and forms, and is accumulated and communicated to its management, including its Chief Executive Officer (principal executive officer) and its Chief Financial Officer (principal financial officer), or persons performing similar functions, in each case, as appropriate to allow timely decisions regarding required disclosure by it. Each such entity hereby states that there has been no change in its internal control over financial reporting during the quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

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PART II

Item 1.Legal Proceedings

Berkshire Hathaway Energy and PacifiCorp

On September 30, 2020, a putative class action complaint against PacifiCorp was filed, captioned Jeanyne James et al. v. PacifiCorp et al., Case No. 20cv33885, Circuit Court, Multnomah County, Oregon. The complaint was filed by Oregon residents and businesses who seek to represent a class of all Oregon citizens and entities whose real or personal property was harmed beginning on September 7, 2020, by wildfires in Oregon allegedly caused by PacifiCorp. On November 3, 2021, the plaintiffs filed an amended complaint to limit the class to include Oregon citizens allegedly impacted by the Echo Mountain, South Obenchain, Two Four Two and Santiam Canyon (also known as Beachie Creek) fires, as well as to add claims for noneconomic damages. The amended complaint alleges that PacifiCorp's assets contributed to the Oregon wildfires occurring on or after September 7, 2020 and that PacifiCorp acted with gross negligence, among other things. The amended complaint seeks the following damages for the plaintiffs and the putative class: (i) noneconomic damages, including mental suffering, emotional distress, inconvenience and interference with normal and usual activities, in excess of $1 billion; (ii) damages for real and personal property and other economic losses of not less than $600 million; (iii) double the amount of property and economic damages; (iv) treble damages for specific costs associated with loss of timber, trees and shrubbery; (v) double the damages for the costs of litigation and reforestation; (vi) prejudgment interest; and (vii) reasonable attorney fees, investigation costs and expert witness fees. The plaintiffs demand a trial by jury and have reserved their right to further amend the complaint to allege claims for punitive damages. In May 2022, the Multnomah Circuit Court granted issue class certification and consolidated this case with others as described below. PacifiCorp requested an immediate appeal of the issue class certification before the Oregon Court of Appeals.

On August 20, 2021, a complaint against PacifiCorp was filed, captioned Shylo Salter et al. v. PacifiCorp, Case No. 21cv33595, Multnomah County, Oregon, in which two complaints, Case No. 21cv09339 and Case No. 21cv09520, previously filed in Circuit Court, Marion County, Oregon, were combined. The plaintiffs voluntarily dismissed the previously filed complaints in Marion County, Oregon. The refiled complaint was filed by Oregon residents and businesses who allege that they were injured by the Beachie Creek Fire, which the plaintiffs allege began on or around September 7, 2020, but which government reports indicate began on or around August 16, 2020. The complaint alleges that PacifiCorp's assets contributed to the Beachie Creek Fire and that PacifiCorp acted with gross negligence, among other things. The complaint seeks the following damages: (i) damages related to real and personal property in an amount determined by the jury to be fair and reasonable, estimated not to exceed $75 million; (ii) other economic losses in an amount determined by the jury to be fair and reasonable, but not to exceed $75 million; (iii) noneconomic damages in the amount determined by the jury to be fair and reasonable, but not to exceed $500 million; (iv) double the damages for economic and property damages under specified Oregon statutes; (v) alternatively, treble the damages under specified Oregon statutes; (vi) attorneys' fees and other costs; and (vii) pre- and post-judgment interest. The plaintiffs demand a trial by jury and have reserved their right to amend the complaint with an intent to add a claim for punitive damages. In May 2022, this case was consolidated with others as described below.

In May 2022, the Multnomah Circuit Court granted plaintiffs' motion to consolidate Shylo Salter et al. v. PacifiCorp, Case No. 21cv33595 (described above) and Amy Allen, et al. v. PacifiCorp, Case No. 20cv37430 ("Allen") into Jeanyne James et al. v. PacifiCorp et al., Case No. 20cv33885 (described above). Plaintiffs' motion to bifurcate issues for trial between class-wide liability and individual damages was also granted. The Allen case was filed by five individuals as amended in September 2021 claiming in excess of $32 million in economic and noneconomic damages, as well as claims for statutory doubling or trebling of damages, attorneys' fees and other costs and pre- and post-judgment interest.

In June 2022, an amended complaint against PacifiCorp was filed, captioned Tim Goforth et al. v. PacifiCorp, Case No. 20cv37637, Douglas County, Oregon, in which a previously filed complaint associated with the Archie Creek Fire, Susan Creek Fire and Smith Springs Road Fire in Douglas County in September 2020 was amended to add punitive damages. The complaint alleges (i) PacifiCorp's conduct not only constituted common law negligence but gross negligence and contributed to or was the cause of ignition and spread of the aforementioned fires; (ii) PacifiCorp violated certain Oregon rules and regulations; and (iii) as an alternative to negligence, inverse condemnation. The complaint seeks the following damages: (i) economic and property damages of $11 million under a determination of negligence or inverse condemnation and subject to doubling under Oregon statute if applicable; (ii) doubling of those economic and property damages to $22 million under a determination of gross negligence; (iii) damages for injuries in excess of $47 million; (iv) punitive damages not to exceed 10 times the amount of non-economic damages awarded; (v) all costs of the lawsuit; (vi) pre- and post-judgment interest as allowed by law; and (vii) attorneys' fees and other costs.

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Other individual lawsuits alleging similar claims have been filed in Oregon and California related to the 2020 Wildfires. Investigations into the causes and origins of those wildfires are ongoing. For more information regarding certain legal proceedings affecting Berkshire Hathaway Energy, refer to Note 8 of the Notes to Consolidated Financial Statements of Berkshire Hathaway Energy in Part I, Item 1 of this Form 10-Q, and PacifiCorp, refer to Note 9 of the Notes to Consolidated Financial Statements of PacifiCorp in Part I, Item 1 of this Form 10-Q.

PacifiCorp

On March 17, 2022, a complaint against PacifiCorp was filed, captioned Roseburg Resources Co et al. v. PacifiCorp, Case No. 22cv09346, Circuit Court, Douglas County, Oregon. The complaint was filed by nine businesses and public pension plans that own and/or operate timberlands or possess property in Douglas County who allege damages, losses and injuries associated with their timberlands as a result of the French Creek Fire, the Archie Creek Fire, the Susan Creek Fire and the Smith Springs Road Fire in Douglas County in September 2020. The complaint alleges (i) PacifiCorp's conduct constituted not only common law negligence but also gross negligence and that such conduct contributed to or caused the ignition and spread of the aforementioned fires; (ii) PacifiCorp violated certain Oregon rules and regulations; and (iii) as an alternative to negligence, inverse condemnation. The complaint seeks the following damages: (i) economic and property damages in excess of $175 million under a determination of negligence or inverse condemnation; (ii) doubling of those economic damages to in excess of $350 million under a determination of gross negligence pursuant to Oregon statutes; (iii) all costs of the lawsuit; (iv) prejudgment and post-judgment interest as allowed by law; and (v) attorneys' fees and other costs.

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Item 1A.Risk Factors

There has been no material change to each Registrant's risk factors from those disclosed in Item 1A of each Registrant's Annual Report on Form 10-K for the year ended December 31, 2021, except as disclosed below.

Potential terrorist activities and the impact of military or other actions, including sanctions, export controls and similar measures, could adversely affect each Registrant's financial results.

The ongoing threat of terrorism and the impact of military or other actions by nations or politically, ethnically or religiously motivated organizations regionally or globally may create increased political, economic, social and financial market instability, which could subject each Registrant's operations to increased risks. Additionally, the U.S. government has issued warnings that energy assets, specifically pipeline, nuclear generation, transmission and other electric utility infrastructure, are potential targets for terrorist attacks. Further, the potential or actual outbreak of war or other hostilities, such as Russia's invasion of Ukraine in February 2022 and the resulting economic sanctions on Russia and the sale of Russian natural gas and petroleum, as well as the existing and potential further responses from Russia or other countries to such sanctions and military actions, could adversely affect global and regional economies and financial markets. For instance, the current ban on imports of Russian oil, liquefied natural gas and coal to the U.S. could contribute to increases in prices for such commodities in the U.S. and elsewhere which could adversely affect each Registrant's business. Further, each Registrant's business must be conducted in compliance with applicable economic and trade sanctions laws and regulations, including those administered and enforced by the U.S. Department of Treasury's Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council and other relevant governmental authorities in the U.S., Canada, the United Kingdom and European Union, which include sanctions that could potentially restrict or prohibit each Registrant's relationships with certain suppliers and customers. Political, economic, social or financial market instability or damage to or interference with the operating assets of the Registrants, customers or suppliers, or continued increases in the price of natural gas and other petroleum commodities may result in business interruptions, lost revenue, higher costs, disruption in fuel supplies, lower energy consumption and unstable markets, particularly with respect to electricity and natural gas, and increased security, repair or other costs, any of which may materially adversely affect each Registrant in ways that cannot be predicted at this time. Any of these risks could materially affect its consolidated financial results. Furthermore, instability in the financial markets as a result of terrorism or war could also materially adversely affect each Registrant's ability to raise capital.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.Defaults Upon Senior Securities

Not applicable.

Item 4.Mine Safety Disclosures

Information regarding Berkshire Hathaway Energy's and PacifiCorp's mine safety violations and other legal matters disclosed in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 95 to this Form 10-Q.

Item 5.Other Information

Not applicable.

Item 6.Exhibits

The following is a list of exhibits filed as part of this Quarterly Report.

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Exhibit No.			Description

BERKSHIRE HATHAWAY ENERGY

4.1			Seventeenth Supplemental Indenture, dated as of April 21, 2022, by and between Berkshire Hathaway Energy Company and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 4.600% Senior Notes due 2053 (incorporated by reference to Exhibit 4.1 to the Berkshire Hathaway Energy Company Current Report on Form 8-K dated April 25, 2022).
4.2			Trust Deed, dated as of April 1, 2022, among Northern Powergrid (Northeast) plc and HSBC Corporate Trustee Company (UK) Limited, relating to the £350,000,000 in principal amount of the 3.250% Bonds due 2052 (incorporated by reference to Exhibit 4.2 to the Berkshire Hathaway Energy Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2022).
10.1			$3,500,000,000 Third Amended and Restated Credit Agreement, dated as of June 30, 2022, among Berkshire Hathaway Energy Company, as Borrower, the Banks, Financial Institutions and Other Institutional Lenders, as Initial Lenders, MUFG Bank, Ltd. as Administrative Agent and the LC Issuing Banks.
15.1			Awareness Letter of Independent Registered Public Accounting Firm.
31.1			Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

PACIFICORP

15.2			Awareness Letter of Independent Registered Public Accounting Firm.
31.3			Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4			Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.3			Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.4			Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

BERKSHIRE HATHAWAY ENERGY AND PACIFICORP

10.2			$1,200,000,000 Third Amended and Restated Credit Agreement, dated as of June 30, 2022, among PacifiCorp, as Borrower, the Banks, Financial Institutions and Other Institutional Lenders, as Initial Lenders, JP Morgan Chase Bank, N.A. as Administrative Agent and the LC Issuing Banks.
95			Mine Safety Disclosures Required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

MIDAMERICAN ENERGY

15.3			Awareness Letter of Independent Registered Public Accounting Firm.
31.5			Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.6			Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.5			Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.6			Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Exhibit No.			Description

BERKSHIRE HATHAWAY ENERGY AND MIDAMERICAN ENERGY

10.3			$1,500,000,000 Third Amended and Restated Credit Agreement, dated as of June 30, 2022, among MidAmerican Energy Company, as Borrower, the Banks, Financial Institutions and Other Institutional Lenders, as Initial Lenders, Mizuho Bank, Ltd. as Administrative Agent and the LC Issuing Banks.

MIDAMERICAN FUNDING

31.7			Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.8			Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.7			Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.8			Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

NEVADA POWER

15.4			Awareness Letter of Independent Registered Public Accounting Firm.
31.9			Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.10			Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.9			Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.10			Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

BERKSHIRE HATHAWAY ENERGY AND NEVADA POWER

10.4			$400,000,000 Fifth Amended and Restated Credit Agreement, dated as of June 30, 2022, among Nevada Power Company, as Borrower, the Banks, Financial Institutions and Other Institutional Lenders, as Initial Lenders, Wells Fargo Bank, National Association, as Administrative Agent and the LC Issuing Banks.

SIERRA PACIFIC

10.5			$200,000,000 Demand Promissory Note, dated as of April 14, 2022, among Sierra Pacific Power Company, as the Maker, and NV Energy Inc., as the Holder (incorporated by reference to Exhibit 10.1 to the Sierra Pacific Power Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2022).
31.11			Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.12			Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.11			Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.12			Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

178

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Exhibit No.			Description

BERKSHIRE HATHAWAY ENERGY AND SIERRA PACIFIC

4.3			Bond Purchase Agreement, dated as of May 31, 2022, by and among Sierra Pacific Power Company and the Purchasers, relating to the $250,000,000 in principal amount of the 4.71% General and Refunding Mortgage Bonds due 2052 (incorporated by reference to Exhibit 4.1 to the Sierra Pacific Power Company Current Report on Form 8-K dated June 3, 2022).
4.4			Third Supplemental Indenture, dated as of May 31, 2022, by and between Sierra Pacific Power Company and the Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to the Sierra Pacific Power Company Current Report on Form 8-K dated June 3, 2022).
4.5			Officer's Certificate establishing the terms of Sierra Pacific Power Company's 4.71% General and Refunding Mortgage Bonds, Series W, due 2052 (incorporated by reference to Exhibit 4.3 to the Sierra Pacific Power Company Current Report on Form 8-K dated June 3, 2022).
10.6			$250,000,000 Fifth Amended and Restated Credit Agreement, dated as of June 30, 2022, among Sierra Pacific Power Company, as Borrower, the Banks, Financial Institutions and Other Institutional Lenders, as Initial Lenders, Wells Fargo Bank, National Association, as Administrative Agent and the LC Issuing Banks.

EASTERN ENERGY GAS

31.13			Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.14			Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.13			Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.14			Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

ALL REGISTRANTS

101			The following financial information from each respective Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, is formatted in iXBRL (Inline eXtensible Business Reporting Language) and included herein: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements, tagged in summary and detail.
104			Cover Page Interactive Data File formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.

179

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SIGNATURES

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

			BERKSHIRE HATHAWAY ENERGY COMPANY
Date: August 5, 2022			/s/ Calvin D. Haack
			Calvin D. Haack
			Senior Vice President and Chief Financial Officer
			(principal financial and accounting officer)
			PACIFICORP
Date: August 5, 2022			/s/ Nikki L. Kobliha
			Nikki L. Kobliha
			Vice President, Chief Financial Officer and Treasurer
			(principal financial and accounting officer)
			MIDAMERICAN FUNDING, LLC
			MIDAMERICAN ENERGY COMPANY
Date: August 5, 2022			/s/ Thomas B. Specketer
			Thomas B. Specketer
			Vice President and Controller
			of MidAmerican Funding, LLC and
			Vice President and Chief Financial Officer
			of MidAmerican Energy Company
			(principal financial and accounting officer)
			NEVADA POWER COMPANY
Date: August 5, 2022			/s/ Michael E. Cole
			Michael E. Cole
			Senior Vice President, Chief Financial Officer and Treasurer
			(principal financial and accounting officer)
			SIERRA PACIFIC POWER COMPANY
Date: August 5, 2022			/s/ Michael E. Cole
			Michael E. Cole
			Senior Vice President, Chief Financial Officer and Treasurer
			(principal financial and accounting officer)
			EASTERN ENERGY GAS HOLDINGS, LLC
Date: August 5, 2022			/s/ Scott C. Miller
			Scott C. Miller
			Vice President, Chief Financial Officer and Treasurer
			(principal financial and accounting officer)

180