BERKSHIRE HATHAWAY ENERGY CO (Form: 10-Q, Received: 08/05/2019 06:19:50)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2019

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

For the transition period from ______ to _______



Commission File Number	Exact name of registrant as specified in its charter; State or other jurisdiction of incorporation or organization	IRS Employer Identification No.
001-14881	BERKSHIRE HATHAWAY ENERGY COMPANY	94-2213782
	(An Iowa Corporation)
	666 Grand Avenue, Suite 500
	Des Moines, Iowa 50309-2580
	515-242-4300

001-05152	PACIFICORP	93-0246090
	(An Oregon Corporation)
	825 N.E. Multnomah Street
	Portland, Oregon 97232
	888-221-7070

333-90553	MIDAMERICAN FUNDING, LLC	47-0819200
	(An Iowa Limited Liability Company)
	666 Grand Avenue, Suite 500
	Des Moines, Iowa 50309-2580
	515-242-4300

333-15387	MIDAMERICAN ENERGY COMPANY	42-1425214
	(An Iowa Corporation)
	666 Grand Avenue, Suite 500
	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

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



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



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

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	X
PACIFICORP	X
MIDAMERICAN FUNDING, LLC		X
MIDAMERICAN ENERGY COMPANY	X
NEVADA POWER COMPANY	X
SIERRA PACIFIC POWER COMPANY	X

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			X
PACIFICORP			X
MIDAMERICAN FUNDING, LLC			X
MIDAMERICAN ENERGY COMPANY			X
NEVADA POWER COMPANY			X
SIERRA PACIFIC POWER COMPANY			X

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

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

Yes o No x

All shares of outstanding common stock of Berkshire Hathaway Energy Company are privately held by a limited group of investors. As of July 31, 2019 , 76,549,232 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 July 31, 2019 , 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 July 31, 2019 .

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 July 31, 2019 , 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 July 31, 2019 , 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 July 31, 2019 , 1,000 shares of common stock, $3.75 par value, were outstanding.

This combined Form 10-Q is separately filed by Berkshire Hathaway Energy Company , PacifiCorp , MidAmerican Funding, LLC , MidAmerican Energy Company , Nevada Power Company and Sierra Pacific Power Company . 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.

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	166
Item 4.	Controls and Procedures	166

PART II



Item 1.	Legal Proceedings	167
Item 1A.	Risk Factors	167
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	167
Item 3.	Defaults Upon Senior Securities	167
Item 4.	Mine Safety Disclosures	167
Item 5.	Other Information	167
Item 6.	Exhibits	167
Signatures		170

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
Nevada Utilities		Nevada Power Company and Sierra Pacific Power Company
Registrants		Berkshire Hathaway Energy Company, PacifiCorp, MidAmerican Funding, MidAmerican Energy, Nevada Power and Sierra Pacific
Northern Powergrid		Northern Powergrid Holdings Company
BHE Pipeline Group		Consists of Northern Natural Gas Company and Kern River Gas Transmission Company
Northern Natural Gas		Northern Natural Gas Company
Kern River		Kern River Gas Transmission Company
BHE Transmission		Consists of BHE Canada Holdings Corporation and BHE U.S. Transmission, LLC
BHE Canada		BHE Canada Holdings Corporation
AltaLink		AltaLink, L.P.
BHE U.S. Transmission		BHE U.S. Transmission, LLC
BHE Renewables		Consists of BHE Renewables, LLC and CalEnergy Philippines
HomeServices		HomeServices of America, Inc. and its subsidiaries
Utilities		PacifiCorp, MidAmerican Energy Company, Nevada Power Company and Sierra Pacific Power Company
Domestic Regulated Businesses		PacifiCorp, MidAmerican Energy Company, Nevada Power Company, Sierra Pacific Power Company, Northern Natural Gas Company and Kern River Gas Transmission Company
Topaz		Topaz Solar Farms LLC
Agua Caliente		Agua Caliente Solar, LLC

Certain Industry Terms
2017 Tax Reform		The Tax Cuts and Jobs Act enacted on December 22, 2017, effective January 1, 2018
AB 1054		California Assembly Bill 1054
AESO		Alberta Electric System Operator
AFUDC		Allowance for Funds Used During Construction
AUC		Alberta Utilities Commission
CPUC		California Public Utilities Commission
DEAA		Deferred Energy Accounting Adjustment
Dth		Decatherm
EBA		Energy Balancing Account
ECAM		Energy Cost Adjustment Mechanism
EPA		United States Environmental Protection Agency
FERC		Federal Energy Regulatory Commission



FRMMA		Fire Risk Mitigation Memorandum Account
GAAP		Accounting principles generally accepted in the United States of America
GEMA		Gas and Electricity Markets Authority
GHG		Greenhouse Gases
GWh		Gigawatt Hour
GTA		General Tariff Application
IPUC		Idaho Public Utilities Commission
IRP		Integrated Resource Plan
IUB		Iowa Utilities Board
kV		Kilovolt
MW		Megawatt
MWh		Megawatt Hour
Ofgem		Office of Gas and Electric Markets
OPUC		Oregon Public Utility Commission
PUCN		Public Utilities Commission of Nevada
REC		Renewable Energy Credit
RPS		Renewable Portfolio Standards
RRA		Renewable Energy Credit and Sulfur Dioxide Revenue Adjustment Mechanism
SB 901		California Senate Bill 901
SEC		United States Securities and Exchange Commission
SIP		State Implementation Plan
TAM		Transition Adjustment Mechanism
UPSC		Utah Public Service Commission
WPSC		Wyoming Public Service Commission
WUTC		Washington Utilities and Transportation Commission

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;

iii


•	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 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, earthquakes, explosions, landslides, an electromagnetic pulse, mining incidents, litigation, wars, terrorism, embargoes, and cyber security attacks, data security breaches, disruptions, or other malicious acts;


•	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;


•	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 and changes in interest rates, legislation, healthcare cost trends, mortality and 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;


•	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.


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		60
Consolidated Balance Sheets		61
Consolidated Statements of Operations		63
Consolidated Statements of Changes in Shareholders' Equity		64
Consolidated Statements of Cash Flows		65
Notes to Consolidated Financial Statements		66
MidAmerican Energy Company
Report of Independent Registered Public Accounting Firm		87
Balance Sheets		88
Statements of Operations		90
Statements of Changes in Shareholder's Equity		91
Statements of Cash Flows		92
Notes to Financial Statements		93
MidAmerican Funding, LLC and its subsidiaries
Report of Independent Registered Public Accounting Firm		102
Consolidated Balance Sheets		103
Consolidated Statements of Operations		105
Consolidated Statements of Changes in Member's Equity		106
Consolidated Statements of Cash Flows		107
Notes to Consolidated Financial Statements		108
Nevada Power Company and its subsidiaries
Report of Independent Registered Public Accounting Firm		123
Consolidated Balance Sheets		124
Consolidated Statements of Operations		125
Consolidated Statements of Changes in Shareholder's Equity		126
Consolidated Statements of Cash Flows		127
Notes to Consolidated Financial Statements		128
Sierra Pacific Power Company
Report of Independent Registered Public Accounting Firm		144
Balance Sheets		145
Statements of Operations		146
Statements of Changes in Shareholder's Equity		147
Statements of Cash Flows		148
Notes to Financial Statements		149


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



Berkshire Hathaway Energy Company and its subsidiaries		30
PacifiCorp and its subsidiaries		78
MidAmerican Funding, LLC and its subsidiaries and MidAmerican Energy Company		112
Nevada Power Company and its subsidiaries		137
Sierra Pacific Power Company		159

Berkshire Hathaway Energy Company and its subsidiaries

Consolidated Financial Section

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, 2019 , the related consolidated statements of operations, comprehensive income and changes in equity for the three-month and six-month periods ended June 30, 2019 and 2018 , and of cash flows for the six-month periods ended June 30, 2019 and 2018 , 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, 2018 , 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 22, 2019 , 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, 2018 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 2, 2019

BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions)



	As of
	June 30,		December 31,
	2019		2018
ASSETS
Current assets:
Cash and cash equivalents	$	1,265	$	627
Restricted cash and cash equivalents	214		227
Trade receivables, net	1,979		2,038
Inventories	867		844
Mortgage loans held for sale	1,065		468
Amounts held in trust	351		145
Other current assets	763		798
Total current assets	6,504		5,147

Property, plant and equipment, net	69,939		68,087
Goodwill	9,675		9,595
Regulatory assets	2,849		2,896
Investments and restricted cash and cash equivalents and investments	5,092		4,903
Other assets	2,083		1,561

Total assets	$	96,142	$	92,189

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

BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)

(Amounts in millions)



	As of
	June 30,			December 31,
	2019			2018
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,666		$	1,809
Accrued interest	533			469
Accrued property, income and other taxes	419			599
Accrued employee expenses	345			275
Short-term debt	2,594			2,516
Current portion of long-term debt	1,906			2,081
Other current liabilities	1,444			1,021
Total current liabilities	8,907			8,770

BHE senior debt	8,229			8,577
BHE junior subordinated debentures	100			100
Subsidiary debt	27,861			25,492
Regulatory liabilities	7,382			7,346
Deferred income taxes	9,093			9,047
Other long-term liabilities	3,783			3,134
Total liabilities	65,355			62,466

Commitments and contingencies (Note 10)

Equity:
BHE shareholders' equity:
Common stock - 115 shares authorized, no par value, 77 shares issued and outstanding	—			—
Additional paid-in capital	6,355			6,371
Long-term income tax receivable	(457		)	(457		)
Retained earnings	26,651			25,624
Accumulated other comprehensive loss, net	(1,888		)	(1,945		)
Total BHE shareholders' equity	30,661			29,593
Noncontrolling interests	126			130
Total equity	30,787			29,723

Total liabilities and equity	$	96,142		$	92,189

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

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,
	2019			2018			2019			2018
Operating revenue:
Energy	$	3,567		$	3,720		$	7,392		$	7,399
Real estate	1,327			1,273			2,112			2,034
Total operating revenue	4,894			4,993			9,504			9,433

Operating expenses:
Energy:
Cost of sales	1,027			1,126			2,241			2,294
Operations and maintenance	822			849			1,624			1,633
Depreciation and amortization	728			739			1,448			1,443
Property and other taxes	148			142			297			286
Real estate	1,210			1,165			2,016			1,934
Total operating expenses	3,935			4,021			7,626			7,590

Operating income	959			972			1,878			1,843

Other income (expense):
Interest expense	(476		)	(461		)	(953		)	(927		)
Capitalized interest	17			15			33			27
Allowance for equity funds	38			24			70			45
Interest and dividend income	36			32			66			58
Gains (losses) on marketable securities, net	6			(387		)	(62		)	(596		)
Other, net	30			1			65			31
Total other income (expense)	(349		)	(776		)	(781		)	(1,362		)

Income before income tax benefit and equity income (loss)	610			196			1,097			481
Income tax benefit	(76		)	(168		)	(224		)	(389		)
Equity income (loss)	2			14			(8		)	26
Net income	688			378			1,313			896
Net income attributable to noncontrolling interests	4			6			7			11
Net income attributable to BHE shareholders	$	684		$	372		$	1,306		$	885

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

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,
	2019			2018			2019			2018

Net income	$	688		$	378		$	1,313		$	896

Other comprehensive (loss) income, net of tax:
Unrecognized amounts on retirement benefits, net of tax of $5, $16, $(2) and $12	18			54			(14		)	51
Foreign currency translation adjustment	(49		)	(307		)	106			(234		)
Unrealized (losses) gains on cash flow hedges, net of tax of $(9), $1, $(11) and $-	(27		)	3			(35		)	1
Total other comprehensive (loss) income, net of tax	(58		)	(250		)	57			(182		)

Comprehensive income	630			128			1,370			714
Comprehensive income attributable to noncontrolling interests	4			6			7			11
Comprehensive income attributable to BHE shareholders	$	626		$	122		$	1,363		$	703

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

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
	Common			Paid-in			Tax			Retained			Comprehensive			Noncontrolling			Total
	Shares	Stock		Capital			Receivable			Earnings			Loss, Net			Interests			Equity
Balance, March 31, 2018	77	$	—	$	6,363		$	—		$	23,719		$	(1,415	)	$	127		$	28,794
Net income	—	—		—			—			372			—			4			376
Other comprehensive income	—	—		—			—			—			(250		)	—			(250		)
Reclassification of long-term income tax receivable	—	—		—			(609		)	—			—			—			(609		)
Long-term income tax receivable adjustments	—	—		—			115			(115		)	—			—			—
Distributions	—	—		—			—			—			—			(3		)	(3		)
Other equity transactions	—	—		(5		)	—			—			—			1			(4		)
Balance, June 30, 2018	77	$	—	$	6,358		$	(494	)	$	23,976		$	(1,665	)	$	129		$	28,304

Balance, December 31, 2017	77	$	—	$	6,368		$	—		$	22,206		$	(398	)	$	132		$	28,308
Adoption of ASU 2016-01	—	—		—			—			1,085			(1,085		)	—			—
Net income	—	—		—			—			885			—			8			893
Other comprehensive income	—	—		—			—			—			(182		)	—			(182		)
Reclassification of long-term income tax receivable	—	—		—			(609		)	—			—			—			(609		)
Long-term income tax receivable adjustments	—	—		—			115			(115		)	—			—			—
Common stock purchases	—	—		(5		)	—			(85		)	—			—			(90		)
Distributions	—	—		—			—			—			—			(12		)	(12		)
Other equity transactions	—	—		(5		)	—			—			—			1			(4		)
Balance, June 30, 2018	77	$	—	$	6,358		$	(494	)	$	23,976		$	(1,665	)	$	129		$	28,304

Balance, March 31, 2019	77	$	—	$	6,355		$	(457	)	$	25,968		$	(1,830	)	$	126		$	30,162
Net income	—	—		—			—			684			—			4			688
Other comprehensive income	—	—		—			—			—			(58		)	—			(58		)
Distributions	—	—		—			—			—			—			(3		)	(3		)
Other equity transactions	—	—		—			—			(1		)	—			(1		)	(2		)
Balance, June 30, 2019	77	$	—	$	6,355		$	(457	)	$	26,651		$	(1,888	)	$	126		$	30,787

Balance, December 31, 2018	77	$	—	$	6,371		$	(457	)	$	25,624		$	(1,945	)	$	130		$	29,723
Net income	—	—		—			—			1,306			—			7			1,313
Other comprehensive income	—	—		—			—			—			57			—			57
Common stock purchases	—	—		(16		)	—			(277		)	—			—			(293		)
Distributions	—	—		—			—			—			—			(10		)	(10		)
Other equity transactions	—	—		—			—			(2		)	—			(1		)	(3		)
Balance, June 30, 2019	77	$	—	$	6,355		$	(457	)	$	26,651		$	(1,888	)	$	126		$	30,787

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

BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)



	Six-Month Periods
	Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	1,313		$	896
Adjustments to reconcile net income to net cash flows from operating activities:
Losses on marketable securities, net	62			596
Depreciation and amortization	1,472			1,466
Allowance for equity funds	(70		)	(45		)
Equity (income) loss, net of distributions	37			1
Changes in regulatory assets and liabilities	1			206
Deferred income taxes and amortization of investment tax credits	25			(264		)
Other, net	23			26
Changes in other operating assets and liabilities, net of effects from acquisitions:
Trade receivables and other assets	(550		)	(226		)
Derivative collateral, net	(30		)	(5		)
Pension and other postretirement benefit plans	(41		)	(23		)
Accrued property, income and other taxes, net	(140		)	174
Accounts payable and other liabilities	32			16
Net cash flows from operating activities	2,134			2,818

Cash flows from investing activities:
Capital expenditures	(2,750		)	(2,779		)
Acquisitions, net of cash acquired	(29		)	(107		)
Purchases of marketable securities	(190		)	(209		)
Proceeds from sales of marketable securities	185			184
Equity method investments	(211		)	(151		)
Other, net	36			43
Net cash flows from investing activities	(2,959		)	(3,019		)

Cash flows from financing activities:
Proceeds from BHE senior debt	—			2,176
Repayments of BHE senior debt	—			(650		)
Common stock purchases	(293		)	(90		)
Proceeds from subsidiary debt	3,464			1,313
Repayments of subsidiary debt	(1,763		)	(1,082		)
Net proceeds from (repayments of) short-term debt	64			(1,048		)
Purchase of redeemable noncontrolling interest	—			(131		)
Other, net	(25		)	(23		)
Net cash flows from financing activities	1,447			465

Effect of exchange rate changes	1			(3		)

Net change in cash and cash equivalents and restricted cash and cash equivalents	623			261
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period	883			1,283
Cash and cash equivalents and restricted cash and cash equivalents at end of period	$	1,506		$	1,544

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

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 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 , MidAmerican Funding, LLC (" MidAmerican Funding ") (which primarily consists of MidAmerican Energy Company (" MidAmerican Energy ")), NV Energy, Inc. (" NV Energy ") (which primarily consists of Nevada Power Company (" Nevada Power ") and Sierra Pacific Power Company (" Sierra Pacific ")), Northern Powergrid Holdings Company (" Northern Powergrid ") (which primarily consists of Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc ), BHE Pipeline Group (which consists of Northern Natural Gas Company (" Northern Natural Gas ") and Kern River Gas Transmission Company (" Kern River ")), BHE Transmission (which consists of BHE Canada Holdings Corporation (" BHE Canada ") (which primarily consists of AltaLink, L.P. (" AltaLink ")) and BHE U.S. Transmission, LLC ), BHE Renewables (which primarily consists of BHE Renewables, LLC and CalEnergy Philippines ) and HomeServices of America, Inc. (collectively with its subsidiaries, " HomeServices "). The Company, through these locally managed and operated businesses, owns four utility companies in the United States serving customers in 11 states, two electricity distribution companies in Great Britain, two interstate natural gas pipeline companies in the United States, an electric transmission business in Canada, interests in electric transmission businesses in the United States, a renewable energy business primarily investing in wind, solar, geothermal and hydroelectric projects, the largest residential real estate brokerage firm in the United States and one of the largest residential real estate brokerage franchise networks in the United States.

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, 2019 and for the three- and six-month periods ended June 30, 2019 and 2018 . The results of operations for the three- and six-month periods ended June 30, 2019 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, 2018 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, except as disclosed in Note 4 , during the six-month period ended June 30, 2019 .


( 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	2019			2018
Regulated assets:
Utility generation, transmission and distribution systems	5-80 years	$	78,087		$	76,707
Interstate natural gas pipeline assets	3-80 years	7,571			7,524
		85,658			84,231
Accumulated depreciation and amortization		(26,637		)	(25,894		)
Regulated assets, net		59,021			58,337

Nonregulated assets:
Independent power plants	5-30 years	6,962			6,826
Other assets	3-30 years	1,625			1,424
		8,587			8,250
Accumulated depreciation and amortization		(2,000		)	(1,610		)
Nonregulated assets, net		6,587			6,640

Net operating assets		65,608			64,977
Construction work-in-progress		4,331			3,110
Property, plant and equipment, net		$	69,939		$	68,087

Construction work-in-progress includes $4.1 billion as of June 30, 2019 and $2.9 billion as of December 31, 2018 , related to the construction of regulated assets.


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

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



	As of
	June 30,		December 31,
	2019		2018
Investments:
BYD Company Limited common stock	$	1,358	$	1,435
Rabbi trusts	392		371
Other	181		168
Total investments	1,931		1,974

Equity method investments:
BHE Renewables tax equity investments	1,797		1,661
Electric Transmission Texas, LLC	537		527
Bridger Coal Company	89		99
Other	172		153
Total equity method investments	2,595		2,440

Restricted cash and cash equivalents and investments:
Quad Cities Station nuclear decommissioning trust funds	562		504
Restricted cash and cash equivalents	241		256
Total restricted cash and cash equivalents and investments	803		760

Total investments and restricted cash and cash equivalents and investments	$	5,329	$	5,174

Reflected as:
Current assets	$	237	$	271
Noncurrent assets	5,092		4,903
Total investments and restricted cash and cash equivalents and investments	$	5,329	$	5,174

Investments

Gains (losses) 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,
	2019			2018			2019			2018
Unrealized gains (losses) recognized on marketable securities still held at the reporting date	$	7		$	(386	)	$	(61	)	$	(597	)
Net (losses) gains recognized on marketable securities sold during the period	(1		)	(1		)	(1		)	1
Gains (losses) on marketable securities, net	$	6		$	(387	)	$	(62	)	$	(596	)

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash equivalents consist of funds invested in money market mutual funds, United States 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 as of June 30, 2019 and December 31, 2018 , consist substantially of funds restricted for the purpose of constructing solid waste facilities under tax-exempt bond obligation agreements and 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 of June 30, 2019 and December 31, 2018 , 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,
	2019		2018
Cash and cash equivalents	$	1,265	$	627
Restricted cash and cash equivalents	214		227
Investments and restricted cash and cash equivalents and investments	27		29
Total cash and cash equivalents and restricted cash and cash equivalents	$	1,506	$	883

( 4 ) Leases

Adoption

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, which creates FASB Accounting Standards Codification ("ASC") Topic 842, "Leases" and supersedes Topic 840 "Leases." This guidance increases transparency and comparability among entities by recording lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize on the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous guidance. Following the issuance of ASU No. 2016-02, the FASB issued several ASUs that clarified the implementation guidance for ASU No. 2016-02 but did not change the core principle of the guidance. The Company adopted this guidance for all applicable contracts in-effect as of January 1, 2019 under a modified retrospective method and the adoption did not have a cumulative effect impact at the date of initial adoption.

The Company has elected to utilize various practical expedients available to adopt ASU No. 2016-02, including (1) the package of three not requiring a reassessment of (i) whether any expired or existing contracts are or contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases; (2) using hindsight in determining the lease term; and (3) not requiring a reassessment of whether existing or expired land easements that were not previously accounted for as leases under ASC Topic 840 are or contain a lease under ASC Topic 842.

Leases

Lessee

The Company has non-cancelable operating leases primarily for office space, office equipment, generating facilities, land and rail cars and finance leases consisting primarily of transmission assets, generating facilities and vehicles. These leases generally require the Company to pay for insurance, taxes and maintenance applicable to the leased property. Given the capital intensive nature of the utility industry, it is common for a portion of lease costs to be capitalized when used during construction or maintenance of assets, in which the associated costs will be capitalized with the corresponding asset and depreciated over the remaining life of that asset. Certain leases contain renewal options for varying periods and escalation clauses for adjusting rent to reflect changes in price indices. The Company does not include options in its lease calculations unless there is a triggering event indicating the Company is reasonably certain to exercise the option. The Company’s accounting policy is to not recognize lease obligations and corresponding right-of-use assets for leases with contract terms of one year or less and not separate lease components from non-lease components and instead account for each separate lease component and the non-lease components associated with a lease as a single lease component. Leases will be evaluated for impairment in line with ASC 360, "Property, Plant and Equipment" when a triggering event has occurred that might affect the value and use of the assets being leased.

The Company's leases of generating facilities generally are for the long-term purchase of electric energy, also known as power purchase agreements ("PPA"). PPAs are generally signed before or during the early stages of project construction and can yield a lease that has not yet commenced. These agreements are primarily for renewable energy and the payments are considered variable lease payments as they are based on the amount of output.

The Company's operating and finance right-of-use assets are recorded in other assets and the operating and finance lease liabilities are recorded in current and long-term other liabilities accordingly. The right-of-use assets and lease liabilities for finance leases as of December 31, 2018 have been reclassified from property, plant and equipment, net and current portion of long-term and subsidiary debt, respectively, to conform to the current period presentation. The following table summarizes the Company's leases recorded on the Consolidated Balance Sheet (in millions):



	As of
	June 30,
	2019
Right-of-use assets:
Operating leases	$	553
Finance leases	509
Total right-of-use assets	$	1,062

Lease liabilities:
Operating leases	$	597
Finance leases	523
Total lease liabilities	$	1,120

The following table summarizes the Company's lease costs (in millions):



	Three-Month Period		Six-Month Period
	Ended June 30,		Ending June 30,
	2019		2019

Variable	$	153	$	296
Operating	41		82
Finance:
Amortization	4		8
Interest	10		21
Short-term	1		3
Total lease costs	$	209	$	410

Weighted-average remaining lease term (years):
Operating leases			8.0
Finance leases			29.1

Weighted-average discount rate:
Operating leases			5.2		%
Finance leases			8.7		%

The following table summarizes the Company's supplemental cash flow information relating to leases (in millions):



	Six-Month Period
	Ended June 30,
	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(70	)
Operating cash flows from finance leases	(22		)
Financing cash flows from finance leases	(9		)
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	49
Finance leases	6

The Company has the following remaining lease commitments as of (in millions):



	June 30, 2019									December 31, 2018 ⁽¹⁾
	Operating			Finance			Total			Operating		Capital		Total
2019	$	77		$	39		$	116		$	147	$	69	$	216
2020	139			69			208			128		68		196
2021	117			75			192			110		73		183
2022	93			68			161			87		67		154
2023	66			57			123			61		56		117
Thereafter	236			776			1,012			159		772		931
Total undiscounted lease payments	728			1,084			1,812			$	692	$	1,105	$	1,797
Less - amounts representing interest	(131		)	(561		)	(692		)
Lease liabilities	$	597		$	523		$	1,120

(1) Amounts included for comparability and accounted for in accordance with ASC 840, "Leases".


( 5 )	Recent Financing Transactions

Long-Term Debt

In June 2019, Northern Natural Gas issued $200 million of its 4.30% Senior Bonds due January 2049. The bonds are part of the same series as the $450 million aggregate principal amount of 4.30% bonds due 2049 that were issued in July 2018. Northern Natural Gas intends to use the net proceeds to fund capital expenditures and for general corporate purposes.

In May 2019, Northern Electric Finance plc issued £150 million of its 2.75% Guaranteed Bonds due May 2049 and intends to use the net proceeds for general corporate purposes.

In March 2019, PacifiCorp issued $400 million of its 3.50% First Mortgage Bonds due June 2029 and $600 million of its 4.15% First Mortgage Bonds due February 2050. PacifiCorp used a portion of the net proceeds to repay short-term debt partially incurred in January 2019 to repay all of PacifiCorp's $350 million 5.50% First Mortgage Bonds due January 2019 and intends to use the remaining net proceeds to fund capital expenditures and for general corporate purposes.

In February 2019, MidAmerican Energy redeemed $500 million of its 2.40% First Mortgage Bonds due in March 2019 at a redemption price of 100% of the principal amount plus accrued interest.

In January 2019, Nevada Power issued $500 million of its 3.70% General and Refunding Mortgage Notes, Series CC, due May 2029. Nevada Power used the net proceeds to repay all of Nevada Power's $500 million 7.125% General and Refunding Mortgage Notes, Series V, maturing in March 2019.

In January 2019, MidAmerican Energy issued $600 million of its 3.65% First Mortgage Bonds due April 2029 and $900 million of its 4.25% First Mortgage Bonds due July 2049. An amount equal to the net proceeds was used to finance capital expenditures, disbursed during the period from November 1, 2017 to December 14, 2018, with respect to investments in MidAmerican Energy's 2,000-megawatt (nameplate capacity) Wind XI project, MidAmerican Energy's 591-megawatt (nameplate capacity) Wind XII project and the repowering of certain of MidAmerican Energy's existing wind facilities, which were previously financed with MidAmerican Energy's general funds.

Credit Facilities

In May 2019, BHE extended, with lender consent, the expiration date for its existing $3.5 billion unsecured credit facility to June 2022 by exercising the first of two available one-year extensions.

In May 2019, PacifiCorp extended, with lender consent, the expiration date for each of its two existing $600 million unsecured credit facilities to June 2022 by exercising the remaining one-year extension option for one facility and exercising the first of two available one-year extensions for the second facility.

In May 2019, MidAmerican Energy extended, with lender consent, the expiration date for its existing $900 million unsecured credit facility to June 2022 by exercising the remaining one-year extension option.

In May 2019, Nevada Power and Sierra Pacific extended, with lender consent, the expiration date for its $400 million and $250 million secured credit facilities, respectively, to June 2022 by exercising the remaining one-year extension options.


( 6 )	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,
	2019		2018		2019		2018

Federal statutory income tax rate	21	%	21	%	21	%	21	%
Income tax credits	(29	)	(78	)	(29	)	(58	)
State income tax, net of federal income tax benefit	—		(19	)	(8	)	(25	)
Income tax effect of foreign income	(1	)	(4	)	(2	)	(11	)
Effects of ratemaking	(2	)	(8	)	(2	)	(8	)
Equity income	—		1		—		1
Other, net	(1	)	1		—		(1	)
Effective income tax rate	(12	)%	(86	)%	(20	)%	(81	)%

Income tax credits relate primarily to production tax credits from wind-powered generating facilities owned by MidAmerican Energy , PacifiCorp and BHE Renewables . Federal renewable electricity production tax credits 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.

The Company's provision for income tax has been computed on a stand-alone basis. Berkshire Hathaway includes the Company in its United States federal and Iowa state income tax returns and the majority of all of its currently payable or receivable income tax is remitted to or received from Berkshire Hathaway . For the six-month periods ended June 30, 2019 and 2018 , the Company received net cash payments for federal income taxes from Berkshire Hathaway totaling $- million and $311 million , respectively.


( 7 )	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,
	2019			2018			2019			2018
Pension:
Service cost	$	4		$	5		$	8		$	10
Interest cost	28			26			55			52
Expected return on plan assets	(39		)	(41		)	(77		)	(82		)
Net amortization	7			7			16			15
Net periodic benefit cost (credit)	$	—		$	(3	)	$	2		$	(5	)

Other postretirement:
Service cost	$	3		$	3		$	5		$	5
Interest cost	8			6			14			12
Expected return on plan assets	(10		)	(12		)	(20		)	(22		)
Net amortization	(1		)	(3		)	(3		)	(6		)
Net periodic benefit credit	$	—		$	(6	)	$	(4	)	$	(11	)

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 $1 million , respectively, during 2019 . As of June 30, 2019 , $6 million and $- million of contributions had been made to the domestic pension and other postretirement benefit plans, respectively.

Foreign Operations

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



	Three-Month Periods						Six-Month Periods
	Ended June 30,						Ended June 30,
	2019			2018			2019			2018

Service cost	$	4		$	5		$	8		$	10
Interest cost	13			14			26			28
Expected return on plan assets	(25		)	(26		)	(50		)	(53		)
Settlement	—			24			—			24
Net amortization	9			14			18			29
Net periodic benefit cost	$	1		$	31		$	2		$	38

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 £44 million during 2019 . As of June 30, 2019 , £22 million , or $28 million , of contributions had been made to the United Kingdom pension plan.

( 8 ) Asset Retirement Obligations

In January 2018, MidAmerican Energy completed groundwater testing at its coal combustion residuals ("CCR") surface impoundments. Based on this information, MidAmerican Energy discontinued sending CCR to surface impoundments effective April 2018 and initiated analysis of additional actions to be taken. As a result of that analysis, MidAmerican Energy will remove all CCR material located below the water table and cap the material in such facilities, which is a more extensive closure activity than previously assumed. In the first quarter of 2019, MidAmerican Energy increased the asset retirement obligations for its fossil-fueled generating facilities by $237 million related to the cost of this closure activity. Closure activity on the six existing surface impoundments is estimated to extend through 2023.


( 9 )	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, 2019
Assets:
Commodity derivatives	$	—		$	38		$	106		$	(25	)	$	119
Interest rate derivatives	—			6			25			—			31
Mortgage loans held for sale	—			1,065			—			—			1,065
Money market mutual funds ⁽²⁾	951			—			—			—			951
Debt securities:
United States government obligations	193			—			—			—			193
International government obligations	—			4			—			—			4
Corporate obligations	—			49			—			—			49
Municipal obligations	—			2			—			—			2
Agency, asset and mortgage-backed obligations	—			1			—			—			1
Equity securities:
United States companies	311			—			—			—			311
International companies	1,358			—			—			—			1,358
Investment funds	182			—			—			—			182
	$	2,995		$	1,165		$	131		$	(25	)	$	4,266
Liabilities:
Commodity derivatives	$	(2	)	$	(187	)	$	(20	)	$	117		$	(92	)
Interest rate derivatives	(2		)	(24		)	(2		)	—			(28		)
	$	(4	)	$	(211	)	$	(22	)	$	117		$	(120	)



	Input Levels for Fair Value Measurements
	Level 1			Level 2			Level 3			Other ⁽¹⁾			Total
As of December 31, 2018
Assets:
Commodity derivatives	$	1		$	91		$	108		$	(52	)	$	148
Interest rate derivatives	1			13			10			—			24
Mortgage loans held for sale	—			468			—			—			468
Money market mutual funds ⁽²⁾	409			—			—			—			409
Debt securities:
United States government obligations	187			—			—			—			187
International government obligations	—			4			—			—			4
Corporate obligations	—			46			—			—			46
Municipal obligations	—			2			—			—			2
Agency, asset and mortgage-backed obligations	—			1			—			—			1
Equity securities:
United States companies	256			—			—			—			256
International companies	1,441			—			—			—			1,441
Investment funds	128			—			—			—			128
	$	2,423		$	625		$	118		$	(52	)	$	3,114
Liabilities:
Commodity derivatives	$	(1	)	$	(180	)	$	(9	)	$	111		$	(79	)
Interest rate derivatives	—			(32		)	—			—			(32		)
	$	(1	)	$	(212	)	$	(9	)	$	111		$	(111	)


(1)	Represents netting under master netting arrangements and a net cash collateral receivable of $92 million and $59 million as of June 30, 2019 and December 31, 2018 , respectively.


(2)	Amounts are included in cash and cash equivalents; other current assets; and noncurrent investments and restricted cash and investments on the Consolidated Balance Sheets. The fair value of these money market mutual funds approximates cost.

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 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.

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 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,
				Interest						Interest
	Commodity			Rate			Commodity			Rate
	Derivatives			Derivatives			Derivatives			Derivatives
2019:
Beginning balance	$	86		$	18		$	99		$	10
Changes included in earnings	8			94			5			147
Changes in fair value recognized in OCI	(1		)	—			(1		)	—
Changes in fair value recognized in net regulatory assets	(12		)	—			(23		)	—
Purchases	3			—			4			—
Settlements	2			(89		)	2			(134		)
Ending balance	$	86		$	23		$	86		$	23



2018:
Beginning balance	$	81		$	16		$	94		$	9
Changes included in earnings	4			56			4			86
Changes in fair value recognized in OCI	1			—			—			—
Changes in fair value recognized in net regulatory assets	(5		)	—			(14		)	—
Purchases	—			—			1			—
Settlements	2			(55		)	(2		)	(78		)
Ending balance	$	83		$	17		$	83		$	17

The Company's long-term debt is carried at cost 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, 2019				As of December 31, 2018
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value

Long-term debt	$	38,096	$	43,822	$	36,250	$	38,874


( 10 )	Commitments and Contingencies

Construction Commitments

During the six-month period ended June 30, 2019 , PacifiCorp entered into non-cancelable agreements through 2020 totaling $486 million related to repowering and development of certain existing and new wind facilities in Wyoming and Washington.

Easements

During the six-month period ended June 30, 2019 , PacifiCorp and MidAmerican Energy entered into non-cancelable easements with minimum payments totaling $392 million through 2059 for land in Iowa, Wyoming and Montana, on which some of its wind-powered generating facilities will be located.

Maintenance and Service Contracts

During the six-month period ended June 30, 2019 , PacifiCorp and MidAmerican Energy entered into non-cancelable maintenance and service contracts related to wind-powered generating facilities with minimum payment commitments totaling $474 million through 2030.

BHE Renewables' Counterparty Risk

On January 29, 2019, PG&E Corporation and Pacific Gas and Electric Company (the "PG&E Utility") (together "PG&E") filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of California ("PG&E Bankruptcy Filing"). The Company owns 100% of Topaz Solar Farm LLC ("Topaz") and owns a 49% interest in Agua Caliente Solar, LLC ("Agua Caliente"). Topaz is a 550 -MW solar photovoltaic electric power generating facility located in California. Topaz sells 100% of its energy, capacity and renewable energy credits generated from the facility to PG&E Utility under a 25-year wholesale PPA that is in effect until October 2039. As of June 30, 2019 , the Company's consolidated balance sheet includes $1.1 billion of property, plant and equipment, net and $0.9 billion of non-recourse project debt related to Topaz. Agua Caliente is a 290 -MW solar photovoltaic electric power generating facility located in Arizona. Agua Caliente sells 100% of its energy, capacity and renewable energy credits generated from the facility to PG&E Utility under a 25-year wholesale PPA that is in effect until June 2039. As of June 30, 2019 , the Company's equity investment in Agua Caliente totals $56 million and the project has $0.8 billion of non-recourse project debt owed to the United States Department of Energy. The PG&E Bankruptcy Filing is an event of default under the Topaz PPA ("PPA Default"). PG&E paid in full the invoices for December deliveries and all amounts invoiced to date for post-petition energy deliveries for both Topaz and Agua Caliente in 2019. PG&E has not paid for the power delivered from January 1 through January 28, 2019. The Company continues to perform on its obligations and deliver renewable energy to the PG&E Utility, and PG&E has publicly stated it will pay suppliers in full under normal terms for post-petition goods and services received. The Company maintains that, in light of the current facts and circumstances, the PPA Default could not reasonably be expected to result in a material adverse effect under the Topaz indenture and, therefore, no default has occurred under the Topaz indenture. In July 2019, California Governor Gavin Newsom signed California Assembly Bill 1054 ("AB 1054") into law. AB 1054 is comprehensive legislation addressing wildfire risk in the state of California that, among other items, authorizes a wildfire fund which would operate as an insurance fund to support the creditworthiness of electrical utilities, if certain utilities, including PG&E, participate by making the required contributions, among other things. In July 2019, PG&E notified the California Public Utilities Commission of its intent to participate in the insurance fund and such participation requires, among other items, PG&E to exit bankruptcy by June 30, 2020. The Company believes it is more likely than not that no impairment exists and current debt obligations will be met, as post-petition contractual revenue payments are expected to be paid by PG&E Utility to the Topaz and Agua Caliente projects. The Company will continue to monitor the situation, including continued receipt of future PG&E payments and the future risk of the PPAs being rejected or modified through the bankruptcy process.

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.

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 does not guarantee dam removal. Instead, it 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) PacifiCorp can 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 main-stem Klamath dams from PacifiCorp to the KRRC. Over the past two years, the KRRC has been supplementing the application with additional information about its financial, technical and legal capacity to become the licensee. In July 2019, the KRRC provided the FERC with additional information about its financial capacity to become a licensee, including updated cost estimates, and its insurance, bonding and liability transfer package. The FERC is evaluating the KRRC's information and the proposed license transfer. The KRRC will continue to refine its insurance, bonding and liability transfer package, and PacifiCorp will review the KRRC's capacity to fulfill its indemnity obligation under the KHSA. If certain conditions in the amended KHSA are not satisfied (e.g., inadequate funding or inability of KRRC to satisfy its indemnification obligation) and the license does not transfer to the KRRC, PacifiCorp will resume relicensing with the FERC.

The United States Court of Appeals for the District of Columbia Circuit issued a decision in the Hoopa Valley Tribe v. FERC litigation, in January 2019, finding that the states of California and Oregon have waived their Clean Water Act, Section 401, water quality certification authority over the Klamath hydroelectric project relicensing. This decision has the potential to limit the ability of the States to impose water quality conditions on new and relicensed projects. Environmental interests, supported by California, Oregon and other states, asked the court to rehear the case, which was denied.

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.


( 11 )	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 energy and nonregulated energy, with further disaggregation of regulated energy by customer class and line of business, including a reconciliation to the Company's reportable segment information included in Note 14 (in millions):



	For the Three-Month Period Ended June 30, 2019
	PacifiCorp		MidAmerican Funding		NV Energy		Northern Powergrid		BHE Pipeline Group		BHE Transmission		BHE Renewables		BHE and Other ⁽¹⁾			Total
Customer Revenue:
Regulated:
Retail electric	$	1,107	$	467	$	658	$	—	$	—	$	—	$	—	$	—		$	2,232
Retail gas	—		95		21		—		—		—		—		—			116
Wholesale	11		66		10		—		—		—		—		(1		)	86
Transmission and distribution	25		15		24		209		—		168		—		—			441
Interstate pipeline	—		—		—		—		212		—		—		(24		)	188
Other	—		—		—		—		—		—		—		—			—
Total Regulated	1,143		643		713		209		212		168		—		(25		)	3,063
Nonregulated	—		10		—		10		—		7		197		142			366
Total Customer Revenue	1,143		653		713		219		212		175		197		117			3,429
Other revenue	24		7		8		24		—		—		52		23			138
Total	$	1,167	$	660	$	721	$	243	$	212	$	175	$	249	$	140		$	3,567



	For the Six-Month Period Ended June 30, 2019
	PacifiCorp		MidAmerican Funding		NV Energy		Northern Powergrid		BHE Pipeline Group			BHE Transmission		BHE Renewables		BHE and Other ⁽¹⁾			Total
Customer Revenue:
Regulated:
Retail electric	$	2,293	$	910	$	1,185	$	—	$	—		$	—	$	—	$	—		$	4,388
Retail gas	—		355		58		—		—			—		—		—			413
Wholesale	39		176		28		—		—			—		—		(1		)	242
Transmission and distribution	50		31		48		439		—			335		—		—			903
Interstate pipeline	—		—		—		—		584			—		—		(61		)	523
Other	—		—		1		—		—			—		—		—			1
Total Regulated	2,382		1,472		1,320		439		584			335		—		(62		)	6,470
Nonregulated	—		16		—		18		—			8		323		281			646
Total Customer Revenue	2,382		1,488		1,320		457		584			343		323		219			7,116
Other revenue ⁽²⁾	44		14		15		49		(1		)	—		93		62			276
Total	$	2,426	$	1,502	$	1,335	$	506	$	583		$	343	$	416	$	281		$	7,392



	For the Three-Month Period Ended June 30, 2018
	PacifiCorp		MidAmerican Funding		NV Energy		Northern Powergrid		BHE Pipeline Group		BHE Transmission		BHE Renewables		BHE and Other ⁽¹⁾			Total
Customer Revenue:
Regulated:
Retail electric	$	1,115	$	505	$	691	$	—	$	—	$	—	$	—	$	—		$	2,311
Retail gas	—		99		19		—		—		—		—		—			118
Wholesale	9		87		6		—		—		—		—		(1		)	101
Transmission and distribution	30		14		25		216		—		174		—		—			459
Interstate pipeline	—		—		—		—		236		—		—		(25		)	211
Other	—		—		1		—		—		—		—		—			1
Total Regulated	1,154		705		742		216		236		174		—		(26		)	3,201
Nonregulated	—		5		1		10		—		3		186		158			363
Total Customer Revenue	1,154		710		743		226		236		177		186		132			3,564
Other revenue	39		8		7		20		—		—		60		22			156
Total	$	1,193	$	718	$	750	$	246	$	236	$	177	$	246	$	154		$	3,720



	For the Six-Month Period Ended June 30, 2018
	PacifiCorp		MidAmerican Funding		NV Energy		Northern Powergrid		BHE Pipeline Group		BHE Transmission		BHE Renewables		BHE and Other ⁽¹⁾			Total
Customer Revenue:
Regulated:
Retail electric	$	2,211	$	891	$	1,230	$	—	$	—	$	—	$	—	$	—		$	4,332
Retail gas	—		345		59		—		—		—		—		—			404
Wholesale	31		180		17		—		—		—		—		(2		)	226
Transmission and distribution	52		30		45		465		—		354		—		—			946
Interstate pipeline	—		—		—		—		610		—		—		(66		)	544
Other	—		—		1		—		—		—		—		—			1
Total Regulated	2,294		1,446		1,352		465		610		354		—		(68		)	6,453
Nonregulated	—		5		1		21		—		3		303		302			635
Total Customer Revenue	2,294		1,451		1,353		486		610		357		303		234			7,088
Other revenue	83		14		14		38		2		—		97		63			311
Total	$	2,377	$	1,465	$	1,367	$	524	$	612	$	357	$	400	$	297		$	7,399


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


(2)	Includes net payments to counterparties for the financial settlement of certain derivative contracts at BHE Pipeline Group.

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,
	2019		2018		2019		2018
Customer Revenue:
Brokerage	$	1,204	$	1,168	$	1,915	$	1,853
Franchise	19		19		33		34
Total Customer Revenue	1,223		1,187		1,948		1,887
Other revenue	104		86		164		147
Total	$	1,327	$	1,273	$	2,112	$	2,034

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, 2019 , by reportable segment (in millions):



	Performance obligations expected to be satisfied:
	Less than 12 months		More than 12 months		Total
BHE Pipeline Group	$	935	$	5,411	$	6,346


( 12 )	BHE Shareholders' Equity

For the six-month periods ended June 30, 2019 and 2018 , BHE repurchased 447,712 shares of its common stock for $293 million and 149,281 shares of its common stock for $90 million , respectively.


( 13 )	Components of Other Comprehensive Income (Loss), Net

The following table shows the change in AOCI attributable to BHE shareholders by each component of OCI, net of applicable income tax (in millions):



	Unrecognized			Foreign			Unrealized			Unrealized			AOCI
	Amounts on			Currency			Gains on			Gains (Losses)			Attributable
	Retirement			Translation			Marketable			on Cash			To BHE
	Benefits			Adjustment			Securities			Flow Hedges			Shareholders, Net

Balance, December 31, 2017	$	(383	)	$	(1,129	)	$	1,085		$	29		$	(398	)
Adoption of ASU 2016-01	—			—			(1,085		)	—			(1,085		)
Other comprehensive (loss) income	51			(234		)	—			1			(182		)
Balance, June 30, 2018	$	(332	)	$	(1,363	)	$	—		$	30		$	(1,665	)

Balance, December 31, 2018	$	(358	)	$	(1,623	)	$	—		$	36		$	(1,945	)
Other comprehensive (loss) income	(14		)	106			—			(35		)	57
Balance, June 30, 2019	$	(372	)	$	(1,517	)	$	—		$	1		$	(1,888	)


( 14 )	Segment Information

The Company's reportable segments with foreign operations include Northern Powergrid , whose business is principally in the United Kingdom, BHE Transmission , whose business includes operations in Canada, and BHE Renewables , whose business includes operations in the Philippines. 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,
	2019		2018		2019		2018
Operating revenue:
PacifiCorp	$	1,167	$	1,193	$	2,426	$	2,377
MidAmerican Funding	660		718		1,502		1,465
NV Energy	721		750		1,335		1,367
Northern Powergrid	243		246		506		524
BHE Pipeline Group	212		236		583		612
BHE Transmission	175		177		343		357
BHE Renewables	249		246		416		400
HomeServices	1,327		1,273		2,112		2,034
BHE and Other ⁽¹⁾	140		154		281		297
Total operating revenue	$	4,894	$	4,993	$	9,504	$	9,433



Depreciation and amortization:
PacifiCorp	$	209		$	197		$	414		$	399
MidAmerican Funding	179			208			356			366
NV Energy	120			114			240			227
Northern Powergrid	63			64			126			127
BHE Pipeline Group	29			30			57			72
BHE Transmission	60			61			118			123
BHE Renewables	69			66			139			130
HomeServices	11			11			24			23
BHE and Other ⁽¹⁾	(1		)	(1		)	(2		)	(1		)
Total depreciation and amortization	$	739		$	750		$	1,472		$	1,466



	Three-Month Periods						Six-Month Periods
	Ended June 30,						Ended June 30,
	2019			2018			2019			2018
Operating income:
PacifiCorp	$	268		$	284		$	552		$	531
MidAmerican Funding	94			87			210			166
NV Energy	150			144			234			233
Northern Powergrid	110			111			239			258
BHE Pipeline Group	68			57			311			283
BHE Transmission	77			81			153			162
BHE Renewables	97			104			115			132
HomeServices	117			108			96			100
BHE and Other ⁽¹⁾	(22		)	(4		)	(32		)	(22		)
Total operating income	959			972			1,878			1,843
Interest expense	(476		)	(461		)	(953		)	(927		)
Capitalized interest	17			15			33			27
Allowance for equity funds	38			24			70			45
Interest and dividend income	36			32			66			58
Gains (losses) on marketable securities, net	6			(387		)	(62		)	(596		)
Other, net	30			1			65			31
Total income before income tax expense and equity income	$	610		$	196		$	1,097		$	481



Interest expense:
PacifiCorp	$	102	$	96	$	198	$	192
MidAmerican Funding	74		61		149		124
NV Energy	56		59		118		117
Northern Powergrid	35		36		69		73
BHE Pipeline Group	12		10		24		20
BHE Transmission	39		42		78		85
BHE Renewables	44		49		88		101
HomeServices	7		6		14		10
BHE and Other ⁽¹⁾	107		102		215		205
Total interest expense	$	476	$	461	$	953	$	927



Operating revenue by country:
United States	$	4,476	$	4,570	$	8,653	$	8,548
United Kingdom	242		245		505		522
Canada	175		177		343		357
Philippines and other	1		1		3		6
Total operating revenue by country	$	4,894	$	4,993	$	9,504	$	9,433



Income before income tax benefit and equity income (loss) by country:
United States	$	482	$	93	$	818	$	211
United Kingdom	76		49		179		161
Canada	39		41		79		82
Philippines and other	13		13		21		27
Total income before income tax benefit and equity income (loss) by country	$	610	$	196	$	1,097	$	481



	As of
	June 30,		December 31,
	2019		2018
Assets:
PacifiCorp	$	24,528	$	23,478
MidAmerican Funding	21,140		20,029
NV Energy	14,189		14,119
Northern Powergrid	7,587		7,427
BHE Pipeline Group	5,627		5,511
BHE Transmission	8,720		8,424
BHE Renewables	8,942		8,666
HomeServices	4,056		2,797
BHE and Other ⁽¹⁾	1,353		1,738
Total assets	$	96,142	$	92,189


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

The following table shows the change in the carrying amount of goodwill by reportable segment for the six-month period ended June 30, 2019 (in millions):



										BHE Pipeline Group
	PacifiCorp		MidAmerican Funding		NV Energy		Northern Powergrid					BHE Transmission		BHE Renewables		HomeServices
	PacifiCorp		MidAmerican Funding		NV Energy		Northern Powergrid					BHE Transmission		BHE Renewables		HomeServices		Total

December 31, 2018	$	1,129	$	2,102	$	2,369	$	952		$	73	$	1,448	$	95	$	1,427	$	9,595
Acquisitions	—		—		—		—			—		—		—		23		23
Foreign currency translation	—		—		—		(3		)	—		60		—		—		57
June 30, 2019	$	1,129	$	2,102	$	2,369	$	949		$	73	$	1,508	$	95	$	1,450	$	9,675


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 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.

The Company'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) Limited and Northern Powergrid (Yorkshire) plc), BHE Pipeline Group (which consists of 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 United States serving customers in 11 states, two electricity distribution companies in Great Britain, two interstate natural gas pipeline companies in the United States, an electric transmission business in Canada, interests in electric transmission businesses in the United States, a renewable energy business primarily investing in wind, solar, geothermal and hydroelectric projects, the largest residential real estate brokerage firm in the United States and one of the largest residential real estate brokerage franchise networks in the United States. 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, corporate functions and intersegment eliminations.

Results of Operations for the Second Quarter and First Six Months of 2019 and 2018

Overview

Net income for the Company's reportable segments is summarized as follows (in millions):



	Second Quarter											First Six Months
	2019			2018			Change					2019			2018			Change
Net income attributable to BHE shareholders:
PacifiCorp	$	168		$	185		$	(17	)	(9	)%	$	348		$	333		$	15		5	%
MidAmerican Funding	153			103			50			49		343			206			137			67
NV Energy	81			77			4			5		110			110			—			—
Northern Powergrid	64			41			23			56		144			125			19			15
BHE Pipeline Group	48			40			8			20		229			207			22			11
BHE Transmission	51			53			(2		)	(4	)	107			109			(2		)	(2	)
BHE Renewables	120			111			9			8		168			165			3			2
HomeServices	90			77			13			17		68			67			1			1
BHE and Other	(91		)	(315		)	224			71		(211		)	(437		)	226			52
Total net income attributable to BHE shareholders	$	684		$	372		$	312		84		$	1,306		$	885		$	421		48

Net income attributable to BHE shareholders increased $312 million for the second quarter of 2019 compared to 2018 . The second quarter of 2019 included a pre-tax unrealized gain of $2 million ($2 million after-tax) compared to a pre-tax unrealized loss in the second quarter of 2018 of $391 million ($283 million after-tax), respectively, on the Company's investment in BYD Company Limited. Excluding the impact of this item, adjusted net income attributable to BHE shareholders for the second quarter of 2019 was $682 million, an increase of $27 million, or 4%, compared to adjusted net income attributable to BHE shareholders in the second quarter of 2018 of $655 million.

Net income attributable to BHE shareholders increased $421 million for the first six months of 2019 compared to 2018 . The first six months of 2019 and 2018 included a pre-tax unrealized loss of $77 million ($56 million after-tax) and $598 million ($432 million after-tax), respectively, on the Company's investment in BYD Company Limited. Excluding the impact of this item, adjusted net income attributable to BHE shareholders for the first six months of 2019 was $1,362 million, an increase of $45 million, or 3%, compared to adjusted net income attributable to BHE shareholders in the first six months of 2018 of $1,317 million.

In 2018, the Domestic Regulated Businesses began passing the benefits of lower income tax expense related to 2017 Tax Reform to customers through various regulatory mechanisms, including lower retail rates, higher depreciation expense and reductions to rate base. The increase in net income attributable to BHE shareholders for the second quarter of 2019 compared to 2018 was due to the following:

•

PacifiCorp's net income decreased $17 million primarily due to higher depreciation and amortization expense of $12 million , higher income tax expense of $11 million, lower utility margin of $8 million and higher interest expense of $6 million, partially offset by higher allowances for equity and borrowed funds of $12 million and lower operations and maintenance expense of $6 million. Utility margin decreased primarily due to lower retail and wholesale customer volumes, partially offset by lower coal costs and higher average retail rates. Retail customer volumes decreased 1.6% primarily due to the unfavorable impact of weather and lower customer usage, partially offset by an increase in the average number of customers.

•

MidAmerican Funding's net income increased $50 million primarily due to higher income tax benefit of $52 million driven by a $44 million increase in recognized production tax credits, $26 million of which was due to a change in the method of interim recognition, lower depreciation and amortization expense of $29 million and higher allowances for equity and borrowed funds of $7 million, partially offset by lower electric utility margin of $24 million and higher interest expense of $13 million. Electric utility margin decreased due to lower retail customer volumes, lower average retail rates, lower wholesale revenue and lower recoveries through bill riders, partially offset by lower generation and purchased power costs. Electric retail customer volumes decreased 3.7% primarily from lower residential and commercial volumes due to the unfavorable impact of weather, partially offset by higher industrial volumes of 4.6%.

•

NV Energy's net income increased $4 million primarily due to lower operations and maintenance expense of $34 million, partially offset by lower electric utility margin of $19 million, higher depreciation and amortization expense of $7 million and higher income tax expense of $4 million. Electric utility margin decreased primarily due to lower retail customer volumes, partially offset by an increase in the average number of customers and higher wholesale revenue. Electric retail customer volumes decreased 3.9% primarily due to the impacts of weather, net of increased distribution only service customer volumes.


•	Northern Powergrid's net income increased $23 million primarily due to lower overall pension expense of $29 million, largely resulting from pension settlement losses recognized in 2018 due to higher lump sum payments, partially offset by the stronger United States dollar of $3 million. A pension settlement loss is expected to occur in the third quarter of 2019.

•

BHE Pipeline Group's net income increased $8 million primarily due to higher transportation revenue of $22 million and $9 million of favorable margin on system balancing activities at Northern Natural Gas, partially offset by higher operations and maintenance expense of $14 million primarily from increased asset modernization and pipeline integrity projects and higher depreciation and amortization expense, net of the impact of period two rates at Kern River.


•	BHE Transmission's net income decreased $2 million primarily due to the unfavorable impact of a reduction in the Alberta provincial corporate income tax rate from the remeasurement of nonregulated deferred tax assets, partially offset by higher equity earnings at Electric Transmission Texas, LLC.

•

BHE Renewables' net income increased $9 million primarily due to higher wind earnings of $9 million and higher geothermal earnings of $8 million from higher generation, partially offset by unfavorable solar earnings of $6 million from lower insolation. Wind earnings were favorable primarily due to improved tax equity investment earnings of $7 million , a favorable change in the valuation of a power purchase agreement of $7 million and earnings from new projects of $6 million, partially offset by lower earnings on existing projects of $6 million and unfavorable changes in the valuation of interest rate swap derivatives of $5 million. Tax equity investment earnings were favorable primarily due to $9 million of earnings from projects reaching commercial operation and $8 million of higher commitment fee income, partially offset by $9 million of lower earnings from existing projects primarily due to derates caused by turbine blade repairs.


•	HomeServices' net income increased $13 million primarily due to higher earnings at existing mortgage businesses of $10 million and net income from acquired businesses of $6 million, partially offset by $11 million of lower earnings at existing brokerage businesses largely from lower closed units and margins.

•

BHE and Other's net loss improved $224 million primarily due to the change in the after-tax unrealized position of the Company's investment in BYD Company Limited of $285 million, partially offset by $33 million of lower federal income tax credits recognized on a consolidated basis, $20 million of income tax benefits recognized in 2018 related to the accrued repatriation tax on undistributed foreign earnings and lower margins at MidAmerican Energy Services, LLC.

The increase in net income attributable to BHE shareholders for the first six months of 2019 compared to 2018 was due to the following:

•

PacifiCorp's net income increased $15 million primarily due to higher utility margin of $35 million , higher allowances for equity and borrowed funds of $22 million and higher interest and dividend income of $6 million, partially offset by higher income tax expense of $28 million, higher depreciation and amortization expense of $15 million and higher interest expense of $6 million . Utility margin increased primarily due to higher retail customer volumes, higher average retail rates and higher net deferrals of incurred net power costs in accordance with established adjustment mechanisms, partially offset by lower wholesale customer volumes and higher natural gas costs. Retail customer volumes increased 1.4% primarily due to an increase in the average number of customers and the favorable impact of weather.

•

MidAmerican Funding's net income increased $137 million primarily due to higher income tax benefit of $96 million driven by an $82 million increase in recognized production tax credits, $56 million of which was due to a change in the method of interim recognition, higher electric utility margin of $43 million, higher allowances for equity and borrowed funds of $14 million, lower depreciation and amortization expense of $10 million and higher income from corporate-owned life insurance policies of $8 million, partially offset by higher interest expense of $25 million and higher operations and maintenance expense of $14 million. Electric utility margin increased due to higher recoveries through bill riders, higher retail customer volumes, lower generation and purchased power costs and higher wholesale revenue, partially offset by lower average retail rates. Electric retail customer volumes increased 0.5% as an increase in industrial volumes of 4.6% was largely offset by lower residential and commercial volumes from the unfavorable impact of weather.

•

NV Energy's net income was unchanged primarily due to lower operations and maintenance expense of $44 million, partially offset by lower electric utility margin of $26 million , higher depreciation and amortization expense of $13 million and higher income tax expense of $5 million . Electric utility margin decreased due to lower average retail rates from a tax rate reduction rider effective April 1, 2018 and lower retail customer volumes, partially offset by higher wholesale and transmission revenue and an increase in the average number of customers. Electric retail customer volumes decreased 0.4% primarily due to the impacts of weather, net of increased distribution only service customer volumes.


•	Northern Powergrid's net income increased $19 million primarily due to lower overall pension expense of $35 million, largely resulting from pension settlement losses recognized in 2018 due to higher lump sum payments, partially offset by the stronger United States dollar of $9 million. A pension settlement loss is expected to occur in the third quarter of 2019.

•

BHE Pipeline Group's net income increased $22 million primarily due to higher transportation revenue of $53 million and $8 million of favorable margin on system balancing activities at Northern Natural Gas, partially offset by higher operations and maintenance expense of $18 million primarily from increased asset modernization and pipeline integrity projects and higher depreciation and amortization expense, net of the impact of period two rates at Kern River.


•	BHE Transmission's net income decreased $2 million primarily due to the unfavorable impact of a reduction in the Alberta provincial corporate income tax rate from the remeasurement of nonregulated deferred tax assets, partially offset by higher equity earnings at Electric Transmission Texas, LLC.

•

BHE Renewables' net income increased $3 million primarily due to higher wind earnings of $15 million and higher geothermal earnings of $8 million due to higher generation and pricing, partially offset by higher operations and maintenance expense, partially offset by lower solar earnings of $15 million due to lower insolation and a settlement received in 2018 due to Solar Star transformer related outages in 2016 and lower hydro earnings of $6 million primarily due to lower rainfall and a declining financial asset balance. Wind earnings were favorable primarily due to earnings from new projects of $23 million, a favorable change in the valuation of a power purchase agreement of $9 million and improved tax equity investment earnings of $3 million, partially offset by lower earnings on existing projects of $10 million and unfavorable changes in the valuation of interest rate swap derivatives of $11 million. Tax equity investment earnings were favorable primarily due to $21 million of earnings from projects reaching commercial operation and $4 million of higher commitment fee income, partially offset by $21 million of lower earnings from existing projects mainly due to derates caused by turbine blade repairs.


•	HomeServices' net income increased $1 million primarily due to higher earnings at existing mortgage businesses of $10 million and net income of $7 million contributed from acquired businesses, largely offset by $19 million of lower earnings at existing brokerage businesses primarily from lower closed units and margins.

•

BHE and Other's net loss improved $226 million primarily due to the change in the after-tax unrealized position of the Company's investment in BYD Company Limited of $376 million, partially offset by $79 million of lower federal income tax credits recognized on a consolidated basis, $76 million of income tax benefits recognized in 2018 related to foreign earnings and the accrued repatriation tax on undistributed foreign earnings and lower margins at MidAmerican Energy Services, LLC.

Reportable Segment Results

Operating revenue and operating income for the Company's reportable segments are summarized as follows (in millions):



	Second Quarter									First Six Months
	2019		2018		Change					2019		2018		Change
Operating revenue:
PacifiCorp	$	1,167	$	1,193	$	(26	)	(2	)%	$	2,426	$	2,377	$	49		2	%
MidAmerican Funding	660		718		(58		)	(8	)	1,502		1,465		37			3
NV Energy	721		750		(29		)	(4	)	1,335		1,367		(32		)	(2	)
Northern Powergrid	243		246		(3		)	(1	)	506		524		(18		)	(3	)
BHE Pipeline Group	212		236		(24		)	(10	)	583		612		(29		)	(5	)
BHE Transmission	175		177		(2		)	(1	)	343		357		(14		)	(4	)
BHE Renewables	249		246		3			1		416		400		16			4
HomeServices	1,327		1,273		54			4		2,112		2,034		78			4
BHE and Other	140		154		(14		)	(9	)	281		297		(16		)	(5	)
Total operating revenue	$	4,894	$	4,993	$	(99	)	(2	)	$	9,504	$	9,433	$	71		1



Operating income:
PacifiCorp	$	268		$	284		$	(16	)	(6	)%	$	552		$	531		$	21		4	%
MidAmerican Funding	94			87			7			8		210			166			44			27
NV Energy	150			144			6			4		234			233			1			—
Northern Powergrid	110			111			(1		)	(1	)	239			258			(19		)	(7	)
BHE Pipeline Group	68			57			11			19		311			283			28			10
BHE Transmission	77			81			(4		)	(5	)	153			162			(9		)	(6	)
BHE Renewables	97			104			(7		)	(7	)	115			132			(17		)	(13	)
HomeServices	117			108			9			8		96			100			(4		)	(4	)
BHE and Other	(22		)	(4		)	(18		)	*		(32		)	(22		)	(10		)	45
Total operating income	$	959		$	972		$	(13	)	(1	)	$	1,878		$	1,843		$	35		2

* Not meaningful

PacifiCorp

Operating revenue decreased $26 million for the second quarter of 2019 compared to 2018 due to lower wholesale and other revenue of $14 million, primarily due to lower wholesale volumes, and lower retail revenue of $12 million. Retail revenue decreased due to lower customer volumes of $20 million, partially offset by higher average retail rates of $8 million due to lower net tax deferrals associated with 2017 Tax Reform and product mix. Retail customer volumes decreased 1.6% primarily due to the unfavorable impact of weather on residential and commercial customers in Utah, lower residential usage in Oregon and Washington, lower irrigation usage in Utah and Idaho and lower industrial usage in Oregon and Idaho, partially offset by an increase in the average number of residential and commercial customers across the service territory, higher commercial usage in Oregon and Utah and higher industrial usage in Washington and Utah.

Operating income decreased $16 million for the second quarter of 2019 compared to 2018 primarily due to higher depreciation and amortization expense of $12 million and lower utility margin of $8 million, partially offset by lower operations and maintenance expense of $6 million. Utility margin decreased primarily due to lower retail and wholesale customer volumes, partially offset by lower coal costs and higher average retail rates.

Operating revenue increased $49 million for the first six months of 2019 compared to 2018 due to higher retail revenue of $83 million , partially offset by lower wholesale and other revenue of $34 million due to lower wholesale volumes. Retail revenue increased due to higher average retail rates of $48 million due to lower net tax deferrals associated with 2017 Tax Reform and product mix and $35 million from higher customer volumes. Retail customer volumes increased 1.4% primarily due to an increase in the average number of residential and commercial customers across the service territory, the favorable impact of weather on residential customers across the service territory except Utah, higher industrial usage in Wyoming and Washington, higher commercial usage in Oregon and higher residential and commercial usage in Utah, partially offset by lower industrial usage in Idaho and Oregon, lower residential usage in Oregon and Washington and lower irrigation usage in Utah and Idaho.

Operating income increased $21 million for the first six months of 2019 compared to 2018 primarily due to higher utility margin of $35 million, partially offset by higher depreciation and amortization expense of $15 million. Utility margin increased primarily due to higher retail customer volumes, higher average retail rates and higher net deferrals of incurred net power costs in accordance with established adjustment mechanisms, partially offset by lower wholesale customer volumes and higher natural gas costs.

MidAmerican Funding

Operating revenue decreased $58 million for the second quarter of 2019 compared to 2018 primarily due to lower electric operating revenue of $51 million and lower natural gas operating revenue of $16 million , partially offset by higher other operating revenue of $9 million, primarily from nonregulated utility construction services. Electric operating revenue decreased due to lower retail revenue of $38 million and lower wholesale and other revenue of $13 million. Electric retail revenue decreased $29 million from the favorable impact of weather in 2018, $18 million from lower average rates due to sales mix and $8 million from lower recoveries through bill riders (substantially offset in cost of fuel and energy, operations and maintenance expense and income tax expense), primarily lower DSM program revenue, partially offset by $17 million of higher customer usage, primarily industrial. Electric retail customer volumes decreased 3.7% primarily from the unfavorable impact of weather as residential and commercial volumes declined, partially offset by higher industrial volumes of 4.6%. Electric wholesale and other revenue decreased due to lower average per-unit prices of $8 million and a 5.1% decrease in wholesale volumes. Natural gas operating revenue decreased primarily due to 11.9% lower retail sales volumes from the unfavorable impact of weather, lower DSM program revenue of $5 million and greater revenue reductions associated with 2017 Tax Reform.

Operating income increased $7 million for the second quarter of 2019 compared to 2018 primarily due to lower depreciation and amortization expense of $29 million and lower fossil-fueled generation costs of $8 million, partially offset by lower electric utility margin of $24 million, including the impact of a decrease in electric DSM program revenue of $8 million (offset in operations and maintenance expense), higher wind-powered generation costs of $7 million and higher electric and natural gas distribution costs of $5 million. The decrease in depreciation and amortization expense reflects lower Iowa revenue sharing of $48 million, partially offset by an increase related to new wind generation and other plant additions. Electric utility margin decreased due to lower retail customer volumes, lower average retail rates, lower wholesale revenue and lower recoveries through bill riders, partially offset by lower generation and purchased power costs.

Operating revenue increased $37 million for the first six months of 2019 compared to 2018 due to higher electric operating revenue of $22 million, higher other operating revenue of $11 million, primarily from nonregulated utility construction services, and higher natural gas operating revenue of $4 million. Electric operating revenue increased due to higher retail revenue of $17 million and higher wholesale and other revenue of $5 million. Electric retail revenue increased $38 million from higher customer usage, primarily industrial, and $30 million from higher recoveries through bill riders (substantially offset in cost of fuel and energy, operations and maintenance expense and income tax expense), partially offset by lower average rates of $27 million due to sales mix and $24 million from the unfavorable impact of weather. The increase in recoveries through bill riders is substantially due to the energy adjustment clause and a favorable outcome in 2018 of the ratemaking treatment for the impact of 2017 Tax Reform, partially offset by a decrease in DSM program revenue. Electric retail customer volumes increased 0.5% as an increase in industrial volumes of 4.6% was largely offset by the unfavorable impact of weather as residential and commercial volumes declined. Electric wholesale and other revenue increased $14 million due to an 11.7% increase in wholesale volumes, partially offset by lower average per-unit prices. Natural gas operating revenue increased primarily due to 4.1% higher retail sales volumes from the favorable impact of weather in 2019, partially offset by lower DSM program revenue of $6 million.

Operating income increased $44 million for the first six months of 2019 compared to 2018 primarily due to higher electric utility margin of $43 million, including the impact of a decrease in electric DSM program revenue of $10 million (offset in operations and maintenance expense), lower depreciation and amortization expense of $10 million and lower fossil-fueled generation costs of $8 million, partially offset by higher wind-powered generation costs of $15 million and higher electric and natural gas distribution costs of $10 million. The decrease in depreciation and amortization expense reflects lower Iowa revenue sharing of $48 million, partially offset by an increase related to new wind generation and other plant additions. Electric utility margin increased due to higher recoveries through bill riders, higher retail customer volumes, lower generation and purchased power costs and higher wholesale revenue, partially offset by lower average retail rates.

NV Energy

Operating revenue decreased $29 million for the second quarter of 2019 compared to 2018 primarily due to lower electric operating revenue of $31 million, partially offset by higher natural gas operating revenue of $2 million. Electric operating revenue decreased due to lower retail revenue of $35 million, partially offset by higher wholesale and other revenue of $4 million. Electric retail revenue decreased primarily due to lower customer volumes of $28 million and lower energy rates (offset in cost of fuel and energy) of $13 million, partially offset by an increase in the average number of customers of $3 million. Electric retail customer volumes decreased 3.9% primarily due to the impacts of weather, net of increased distribution only service customer volumes.

Operating income increased $6 million for the second quarter of 2019 compared to 2018 due to lower operations and maintenance expense of $34 million primarily due to lower political activity expenses, partially offset by lower electric utility margin of $19 million and higher depreciation and amortization expense of $7 million. Electric utility margin decreased due to the lower operating revenue, partially offset by lower energy costs of $12 million. Energy costs decreased due to a lower average cost of fuel for generation of $6 million, lower net deferred power costs of $3 million and lower purchased power costs of $3 million.

Operating revenue decreased $32 million for the first six months of 2019 compared to 2018 primarily due to lower electric operating revenue of $29 million and lower natural gas operating revenue of $2 million. Electric operating revenue decreased due to lower retail revenue of $45 million, partially offset by higher wholesale and other revenue of $16 million primarily due to increases in wholesale revenue of $11 million and transmission revenue of $3 million. Electric retail revenue decreased primarily due to lower retail customer volumes of $18 million, a decrease from the tax rate reduction rider effective April 1, 2018 of $17 million and lower energy rates (offset in cost of fuel and energy) of $15 million, partially offset by an increase in the average number of customers of $5 million. Electric retail customer volumes decreased 0.4% primarily due to the impacts of weather, net of increased distribution only service customer volumes.

Operating income increased $1 million for the first six months of 2019 compared to 2018 due to lower operations and maintenance expense of $44 million primarily due to lower political activity expenses, partially offset by lower electric utility margin of $26 million and higher depreciation and amortization expense of $13 million. Electric utility margin decreased due to the lower operating revenue, partially offset by lower energy costs of $3 million. Energy costs decreased due to lower net deferred power costs of $56 million, partially offset by a higher average cost of fuel for generation of $39 million and higher purchased power costs of $14 million.

Northern Powergrid

Operating revenue decreased $3 million for the second quarter of 2019 compared to 2018 primarily due to the stronger United States dollar of $14 million and lower distributed units of $3 million, partially offset by higher distribution tariff rates of $10 million and higher smart meter revenue of $5 million from increased smart meter asset additions. Operating income decreased $1 million for the second quarter of 2019 compared to 2018 primarily due to the stronger United States dollar of $6 million, higher distribution-related operations and maintenance expense and higher depreciation expense related to additional distribution network and smart meter investments.

Operating revenue decreased $18 million for the first six months of 2019 compared to 2018 primarily due to the stronger United States dollar of $32 million and lower distributed units of $16 million, partially offset by higher distribution tariff rates of $20 million and higher smart meter revenue of $11 million from increased smart meter asset additions. Operating income decreased $19 million for the first six months of 2019 compared to 2018 primarily due to the stronger United States dollar of $16 million, higher distribution-related operations and maintenance expense and higher depreciation expense related to additional distribution network and smart meter investments.

BHE Pipeline Group

Operating revenue decreased $24 million for the second quarter of 2019 compared to 2018 due to lower gas sales of $40 million at Northern Natural Gas related to system balancing activities (largely offset in cost of sales), partially offset by higher transportation revenue of $16 million. Transportation revenue increased from generally higher volumes and rates, partially offset by the impact of period two rates at Kern River of $6 million (largely offset in depreciation and amortization expense) and $3 million from refunds related to 2017 Tax Reform. Operating income increased $11 million for the second quarter of 2019 compared to 2018 primarily due to higher transportation revenues of $22 million and favorable margins of $9 million on system balancing activities at Northern Natural Gas, partially offset by higher operations and maintenance expense of $14 million due to increased asset modernization and pipeline integrity projects and higher depreciation and amortization expense, net of the impact of period two rates at Kern River.

Operating revenue decreased $29 million for the first six months of 2019 compared to 2018 due to lower gas sales of $53 million at Northern Natural Gas related to system balancing activities (largely offset in cost of sales), partially offset by higher transportation revenue of $27 million. Transportation revenue increased from generally higher volumes and rates, partially offset by the impact of period two rates of $26 million at Kern River (largely offset in depreciation and amortization expense) and $6 million from refunds related to 2017 Tax Reform. Operating income increased $28 million for the first six months of 2019 compared to 2018 primarily due to higher transportation revenue of $53 million and favorable margins of $8 million on system balancing activities at Northern Natural Gas, partially offset by higher operations and maintenance expense of $18 million due to increased asset modernization and pipeline integrity projects and higher depreciation and amortization expense, net of the impact of period two rates at Kern River.

BHE Transmission

Operating revenue decreased $2 million for the second quarter of 2019 compared to 2018 primarily due to the stronger United States dollar of $6 million, partially offset by higher cost recoveries from other utilities for mutual assistance activities. Operating income decreased $4 million for the second quarter of 2019 compared to 2018 primarily due to the stronger United States dollar.

Operating revenue decreased $14 million and operating income decreased $9 million for the first six months of 2019 compared to 2018 primarily due to the stronger United States dollar.

BHE Renewables

Operating revenue increased $3 million for the second quarter of 2019 compared to 2018 primarily due to higher wind revenues of $9 million and higher natural gas revenues of $5 million due to higher generation, partially offset by lower solar revenues of $10 million due to lower insolation. Wind revenues increased primarily due to $8 million from new projects and a favorable change in the valuation of a power purchase agreement of $7 million, partially offset by lower generation of $6 million at existing projects. Operating income decreased $7 million for the second quarter of 2019 compared to 2018 primarily due to higher costs related to new wind-powered generation of $10 million, partially offset by the higher operating revenue.

Operating revenue increased $16 million for the first six months of 2019 compared to 2018 primarily due to higher wind revenues of $26 million, higher natural gas revenues of $6 million due to higher generation and higher geothermal revenues of $5 million due to higher pricing, partially offset by lower solar revenues of $17 million due to lower insolation and lower hydro revenues of $4 million due to lower rainfall. Wind revenues increased primarily due to $22 million from new projects and a favorable change in the valuation of a power purchase agreement of $9 million, partially offset by lower generation of $5 million at existing projects. Operating income decreased $17 million for the first six months of 2019 compared to 2018 primarily due to higher costs related to new wind-powered generation of $22 million and higher geothermal maintenance costs of $8 million primarily due to the timing of overhauls, partially offset by the higher operating revenue.

HomeServices

Operating revenue increased $54 million for the second quarter of 2019 compared to 2018 primarily due to an increase from acquired businesses of $88 million and higher mortgage revenue at existing businesses of $20 million, partially offset by lower brokerage revenue at existing businesses of $53 million largely from a 6% decrease in closed units. Operating income increased $9 million for the second quarter of 2019 compared to 2018 primarily due to an increase at existing mortgage businesses of $14 million primarily due to higher loan volume and an increase from acquired businesses of $6 million, partially offset by a decrease at existing brokerage companies of $13 million primarily from lower closed units and margins.

Operating revenue increased $78 million for the first six months of 2019 compared to 2018 primarily due to an increase from acquired businesses of $162 million and higher mortgage revenue at existing businesses of $22 million, partially offset by lower brokerage revenue at existing businesses of $99 million largely from an 8% decrease in closed units. Operating income decreased $4 million for the first six months of 2019 compared to 2018 due to a decrease at existing brokerage companies of $25 million primarily from lower closed units and margins, partially offset by an increase at existing mortgage businesses of $16 million primarily due to higher loan volume and an increase from acquired businesses of $6 million.

BHE and Other

Operating revenue decreased $14 million for the second quarter of 2019 compared to 2018 and $16 million for the first six months of 2019 compared to 2018 primarily due to lower electricity volumes at MidAmerican Energy Services, LLC. Operating loss increased $18 million for the second quarter of 2019 compared to 2018 and $10 million for the first six months of 2019 compared to 2018 due to lower margins from unrealized mark to market losses on contracts and lower volumes at MidAmerican Energy Services, LLC, partially offset by lower other operating expenses.

Consolidated Other Income and Expense Items

Interest expense

Interest expense is summarized as follows (in millions):



	Second Quarter								First Six Months
	2019		2018		Change				2019		2018		Change

Subsidiary debt	$	368	$	355	$	13	4	%	$	736	$	715	$	21	3	%
BHE senior debt and other	106		104		2		2		214		209		5		2
BHE junior subordinated debentures	2		2		—		—		3		3		—		—
Total interest expense	$	476	$	461	$	15	3		$	953	$	927	$	26	3

Interest expense increased $15 million for the second quarter of 2019 compared to 2018 and $26 million for the first six months of 2019 compared to 2018 primarily due to debt issuances at BHE, PacifiCorp, MidAmerican Energy and BHE Pipeline Group and higher short-term borrowing rates, partially offset by scheduled maturities, principal payments and the impact of foreign currency exchange rate movements.

Capitalized interest

Capitalized interest increased $2 million for the second quarter of 2019 compared to 2018 and $6 million for the first six months of 2019 compared to 2018 primarily due to higher construction work-in-progress balances at PacifiCorp and MidAmerican Energy, partially offset by a lower construction work-in-progress balance at BHE Renewables.

Allowance for equity funds

Allowance for equity funds increased $14 million for the second quarter of 2019 compared to 2018 and $25 million for the first six months of 2019 compared to 2018 primarily due to higher construction work-in-progress balances at PacifiCorp and MidAmerican Energy.

Interest and dividend income

Interest and dividend income increased $4 million for the second quarter of 2019 compared to 2018 and $8 million for the first six months of 2019 compared to 2018 primarily due to higher cash balances at PacifiCorp and NV Energy, partially offset by a declining financial asset balance at the Casecnan project.

Gains (losses) on marketable securities, net

Gains (losses) on marketable securities, net improved $393 million for the second quarter of 2019 compared to 2018 and $534 million for the first six months of 2019 compared to 2018 primarily due to the change in the unrealized position on the Company's investment in BYD Company Limited of $394 million and $521 million, respectively.

Other, net

Other, net increased $29 million for the second quarter of 2019 compared to 2018 primarily due to lower pension expense, largely resulting from pension settlement losses recognized in 2018 at Northern Powergrid due to higher lump sum payments, and higher commitment fee income of $8 million from new tax equity investments, partially offset by unfavorable changes in the valuation of interest rate swap derivatives of $5 million.

Other, net increased $34 million for the first six months of 2019 compared to 2018 primarily due to lower pension expense, largely resulting from pension settlement losses recognized in 2018 at Northern Powergrid due to higher lump sum payments, and higher investment earnings, partially offset by unfavorable changes in the valuation of interest rate swap derivatives of $11 million and a $7 million settlement received in 2018 due to transformer related outages at the Solar Star projects in 2016.

Income tax benefit

Income tax benefit decreased $92 million for the second quarter of 2019 compared to 2018 primarily due to $108 million related to the change in the unrealized position of the Company's investment in BYD Company Limited. The effective tax rate was (12)% for the second quarter of 2019 and (86)% for the second quarter of 2018 . The effective tax rate increased primarily due to the incremental income before taxes from the Company's investment in BYD Company Limited and $20 million of benefits recognized in 2018 for the accrued repatriation tax on undistributed foreign earnings, partially offset by higher production tax credits recognized of $24 million and the favorable impacts of ratemaking of $7 million.

Income tax benefit decreased $165 million for the first six months of 2019 compared to 2018 primarily due to $145 million related to the change in the unrealized position on the Company's investment in BYD Company Limited. The effective tax rate was (20)% for the first six months of 2019 and (81)% for the first six months of 2018 . The effective tax rate increased primarily due to the incremental income before taxes from the Company's investment in BYD Company Limited and $76 million of benefits recognized in 2018 related to foreign earnings and the accrued repatriation tax on undistributed foreign earnings, partially offset by higher production tax credits recognized of $45 million and the favorable impacts of ratemaking of $15 million.

Production tax credits are recognized in earnings for interim periods based on the application of an estimated annual effective tax rate to pretax earnings. Federal renewable electricity production tax credits are earned as energy from qualifying wind-powered generating facilities is produced and sold based on a per-kilowatt rate pursuant to the applicable federal income tax law and are eligible for the credit for 10 years from the date the qualifying generating facilities are placed in-service. Production tax credits recognized in 2019 were $310 million, or $45 million higher than 2018 , while production tax credits earned in 2019 were $359 million, or $55 million higher than 2018 . The difference between production tax credits recognized and earned of $49 million as of June 30, 2019 will be reflected in earnings over the remainder of 2019 .

Equity income (loss)

Equity income (loss) declined $12 million for the second quarter of 2019 compared to 2018 and $34 million for the first six months of 2019 compared to 2018 primarily due to higher pre-tax equity losses from tax equity investments at BHE Renewables.

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 16 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, 2018 for further discussion regarding the limitation of distributions from BHE 's subsidiaries.

As of June 30, 2019 , the Company's total net liquidity was as follows (in millions):



							MidAmerican			NV		Northern		BHE
	BHE			PacifiCorp			Funding			Energy		Powergrid		Canada			Other			Total

Cash and cash equivalents	$	11		$	536		$	186		$	135	$	95	$	65		$	237		$	1,265

Credit facilities ⁽¹⁾	3,500			1,200			909			650		190		668			1,810			8,927
Less:
Short-term debt	(837		)	—			—			—		—		(357		)	(1,400		)	(2,594		)
Tax-exempt bond support and letters of credit	—			(256		)	(370		)	—		—		(5		)	—			(631		)
Net credit facilities	2,663			944			539			650		190		306			410			5,702

Total net liquidity	$	2,674		$	1,480		$	725		$	785	$	285	$	371		$	647		$	6,967
Credit facilities:
Maturity dates ⁽¹⁾	2022			2022			2020, 2022			2022		2020		2023			2019, 2020, 2022


⁽¹⁾	Refer to Note 5 of the Notes to Consolidated Financial Statements in Item 1 of this Form 10-Q for further discussion regarding the Company's recent financing transactions.

Operating Activities

Net cash flows from operating activities for the six-month periods ended June 30, 2019 and 2018 were $2.1 billion and $2.8 billion , respectively. The decrease was primarily due to changes in working capital and 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 and assumptions used for each payment date.

Investing Activities

Net cash flows from investing activities for the six-month periods ended June 30, 2019 and 2018 were $(2.96) billion and $(3.02) billion , respectively. The change was primarily due to lower cash paid for acquisitions, net of cash acquired, of $78 million and lower capital expenditures of $29 million , partially offset by higher funding of tax equity investments. Refer to "Future Uses of Cash" for further discussion of capital expenditures.

Financing Activities

Net cash flows from financing activities for the six-month period ended June 30, 2019 was $1.4 billion . Sources of cash totaled $3.5 billion and consisted of proceeds from subsidiary debt issuances. Uses of cash totaled $2.1 billion and consisted mainly of repayments of subsidiary debt totaling $1.8 billion and common stock repurchases totaling $293 million .

For a discussion of recent financing transactions, refer to Note 5 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, 2018 was $465 million . Sources of cash totaled $3.5 billion and consisted of proceeds from BHE senior debt issuances totaling $2.2 billion and proceeds from subsidiary debt issuances totaling $1.3 billion . Uses of cash totaled $3.0 billion and consisted mainly of repayments of subsidiary debt totaling $1.1 billion , net repayments of short-term debt totaling $1.0 billion , repayments of BHE senior debt of $650 million and the purchase of redeemable noncontrolling interest of $131 million .

The Company may from time to time seek to acquire its outstanding debt securities through cash purchases in the open market, privately negotiated transactions or otherwise. Any debt securities repurchased by the Company may be reissued or resold by the Company from time to time and will depend on prevailing market conditions, the Company's liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

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. Expenditures for certain assets may ultimately include acquisitions of existing assets.

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
	2018		2019		2019
Capital expenditures by business:
PacifiCorp	$	499	$	817	$	2,275
MidAmerican Funding	818		1,017		3,002
NV Energy	229		290		693
Northern Powergrid	313		252		525
BHE Pipeline Group	118		173		750
BHE Transmission	150		104		249
BHE Renewables	624		70		122
HomeServices	25		24		50
BHE and Other	3		3		12
Total	$	2,779	$	2,750	$	7,678



Capital expenditures by type:
Wind generation	$	1,094	$	958	$	2,751
Electric transmission	56		263		671
Other growth	319		305		740
Operating	1,310		1,224		3,516
Total	$	2,779	$	2,750	$	7,678

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

• Wind generation includes the following:

◦

Construction of wind-powered generating facilities at MidAmerican Energy totaling $473 million and $313 million for the six-month periods ended June 30, 2019 and 2018 , respectively. MidAmerican Energy anticipates costs for wind-powered generating facilities will total an additional $991 million for 2019 . MidAmerican Energy has approval to construct up to 2,591 MW (nominal ratings) of wind-powered generating facilities expected to be placed in-service in 2017 through 2020, including 1,151 MW (nominal ratings) placed in-service as of June 30, 2019 . Additionally, MidAmerican Energy is constructing an additional 205 MW (nominal ratings) of wind-powered generating facilities expected to be placed in-service in 2020, with a forecasted investment of $300 million, including AFUDC. This project is not under pre-approved ratemaking principles. Production tax credits from this project will be included in MidAmerican Energy's Iowa energy adjustment clause. MidAmerican Energy expects all of these wind-powered generating facilities to qualify for 100% of production tax credits available.

◦

Repowering certain existing wind-powered generating facilities at MidAmerican Energy totaling $118 million and $141 million for the six-month periods ended June 30, 2019 and 2018 , respectively. The repowering projects entail the replacement of significant components of older turbines. MidAmerican Energy anticipate costs for these activities will total an additional $277 million for 2019 . Of the 1,479 MWs of current repowering projects not in-service as of June 30, 2019 , 303 MWs are currently expected to qualify for 100% of the federal production tax credits available for ten years following each facility's return to service, 769 MWs are expected to qualify for 80% of such credits and 407 MWs are expected to qualify for 60% of such credits.

◦

Construction of wind-powered generating facilities at PacifiCorp totaling $138 million and $2 million for the six-month periods ended June 30, 2019 and 2018 , respectively. PacifiCorp anticipates costs for these activities will total an additional $225 million for 2019 , which includes a new 240 MW wind-powered generating facility. The new wind-powered generating facilities are expected to be placed in-service in 2020. The energy production from the new wind-powered generating facilities is expected to qualify for 100% of the federal production tax credits available for ten years once the equipment is placed in-service.

◦

Repowering certain existing wind-powered generating facilities at PacifiCorp totaling $215 million and $53 million for the six-month periods ended June 30, 2019 and 2018 , respectively. PacifiCorp anticipates costs for these activities will total an additional $301 million for 2019 . The energy production from such repowered facilities is expected to qualify for 100% of the federal production tax credits available for ten years following each facility's return to service.


◦	Construction of wind-powered generating facilities at BHE Renewables totaling $12 million and $584 million for the six-month periods ended June 30, 2019 and 2018 , respectively.

•

Electric transmission includes PacifiCorp 's costs for the 140-mile 500-kV Aeolus-Bridger/Anticline transmission line, which is a major segment of PacifiCorp's Energy Gateway Transmission expansion program expected to be placed in service in 2020, MidAmerican Energy 's Multi-Value Projects approved by the Midcontinent Independent System Operator, Inc. for the construction of approximately 250 miles of 345 kV transmission line located in Iowa and Illinois and AltaLink's directly assigned projects from the AESO.


•	Other growth includes projects to deliver power and services to new markets, new customer connections, enhancements to existing customer connections and investments in solar generation.


•	Operating includes ongoing distribution systems infrastructure needed at the Utilities and Northern Powergrid , investments in routine expenditures for generation, transmission, distribution and other infrastructure needed to serve existing and expected demand, environmental spending relating to emissions control equipment and the management of coal combustion residuals.

Other Renewable Investments

The Company has invested in projects sponsored by third parties, commonly referred to as tax equity investments. Under the terms of these tax equity investments, the Company has entered into equity capital contribution agreements with the project sponsors that require contributions. The Company has made contributions of $202 million for the six-month period ended June 30, 2019 . Additionally, the Company has commitments as of June 30, 2019 , subject to satisfaction of certain specified conditions, to provide equity contributions of $1,365 million for the remainder of 2019 and $953 million in 2020 pursuant to these equity capital contribution agreements as the various projects achieve commercial operation. Once a project achieves commercial operation, the Company enters into a partnership agreement with the project sponsor that directs and allocates the operating profits and tax benefits from the project.

Contractual Obligations

As of June 30, 2019 , there have been no material changes outside the normal course of business in contractual obligations from the information provided in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2018 other than the recent financing transactions and the renewable tax equity investments previously discussed.

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, 2018 , and new regulatory matters occurring in 2019 .

PacifiCorp

Retirement Plan Settlement Charge

During 2018, the PacifiCorp Retirement Plan incurred a settlement charge of $22 million as a result of excess lump sum distributions over the defined threshold for the year ended December 31, 2018. In December 2018, PacifiCorp submitted filings with the UPSC, the OPUC, the WPSC and the WUTC seeking approval to defer the settlement charge. Also in December 2018, an advice letter was filed with the CPUC requesting a memo account to track the costs associated with pension and postretirement settlements and curtailments. In April 2019, WUTC approved PacifiCorp's requested deferral. In May 2019, the UPSC denied PacifiCorp's request. In June 2019 and July 2019, PacifiCorp filed testimony with the WPSC and OPUC, respectively.

2017 Tax Reform

2017 Tax Reform enacted significant changes to the Internal Revenue Code, including, among other things, a reduction in the United States federal corporate income tax rate from 35% to 21%. In 2018, PacifiCorp agreed to refund or defer the impact of the tax law change with each of its state regulatory commissions. The status of the remaining 2017 Tax Reform proceedings are noted in the applicable state section below.

Utah

In March 2018, PacifiCorp filed its annual EBA with the UPSC seeking approval to recover $3 million, or 0.1%, in deferred net power costs from customers for the period January 1, 2017 through December 31, 2017, reflecting the difference between base and actual net power costs in the 2017 deferral period. The rate change was approved by the UPSC effective May 1, 2018 on an interim basis. A hearing was held in February 2019, and final approval was issued March 2019.

In March 2019, PacifiCorp filed its annual EBA with the UPSC seeking approval to recover $24 million, or 1.1%, in deferred net power costs from customers for the period January 1, 2018 through December 31, 2018, reflecting the difference between base and actual net power costs in the 2018 deferral period. The rate change was approved by the UPSC effective May 1, 2019 on an interim basis. Following a decision from the Utah Supreme Court in June 2019 that found the UPSC did not have authority to approve interim rates in conjunction with the EBA, the UPSC directed PacifiCorp to terminate the interim rate change pending final approval in the proceeding. The hearing on final approval is scheduled for February 2020.

In May 2019, Utah House Bill 411 went into effect. The legislation, among other things, authorizes the UPSC to approve a renewable energy program for communities seeking 100% renewable electricity. Participating cities must adopt a resolution with a goal to be on 100% renewable electricity by 2030 before December 31, 2019. Customers within a participating community may opt out of the program and maintain existing rates. Rates approved for the program may not result in any shift of costs or benefits to nonparticipating customers. Several communities in Utah, including Salt Lake City, have either recently set renewable goals or are actively considering them.

Oregon

In December 2018, PacifiCorp proposed to reduce customer rates to reflect the lower annual current income tax expense in Oregon resulting from 2017 Tax Reform. PacifiCorp reached an all-party settlement on the amortization of the current income tax expense benefits and the deferral of the decision regarding the ratemaking treatment of excess deferred income tax balances until no later than PacifiCorp's next general rate proceeding. The settlement, which results in a rate reduction of $48 million, or 3.7%, effective February 1, 2019, was approved by the OPUC in January 2019.

In December 2018, PacifiCorp filed the 2019 Renewable Adjustment Clause ("RAC") application requesting recovery of $37 million, or a 2.8% increase in rates, associated with repowering of approximately 900 MWs of company-owned and installed wind facilities expected to be completed in 2019. In March 2019, the application was updated to request recovery of $32 million, or a 2.5% increase in rates. In August 2019, PacifiCorp filed an all-party settlement for the 2019 RAC. The settlement provides for an $11 million or 0.8% rate increase effective October 1, 2019, and a rate increase of $13 million or 1.0% effective December 1, 2019 for a total rate increase of $24 million or 1.8%. In addition parties agreed to use the excess deferred income tax balances not addressed in the 2017 Tax Reform proceeding to offset the majority of wind plant balances that will be retired as a result of repowering in 2019.

In April 2019, PacifiCorp submitted its annual TAM filing in Oregon requesting an annual decrease of $15 million, or an average price decrease of 1.2%, based on forecasted net power costs and loads for calendar year 2020. The filing includes the customer benefits of repowering, including an increase in production tax credits.

In May 2019, PacifiCorp filed an application for deferral of incremental costs associated with implementing wildfire mitigation measures in Oregon. Operations and maintenance costs associated with the implementation measures are estimated to be $5 million in 2019.

Wyoming

In April 2018, PacifiCorp filed a partial settlement related to the impact of 2017 Tax Reform with the WPSC that provided a rate reduction of $23 million, or 3.3%, effective July 1, 2018 through June 30, 2019, with the remaining tax savings to be deferred with offsets to other costs. In June 2018, PacifiCorp filed reports with the WPSC with the calculation of the full impact of the tax law change on revenue requirement of $28 million annually, comprised of $20 million in current tax savings and $8 million for the amortization of excess deferred income tax balances. In March 2019, the WPSC issued a written order approving the continued annual rate reduction of $23 million until base rates are reset in the next general rate proceeding and a $4 million offset to PacifiCorp's 2018 ECAM rates. The order reflected the $20 million of current tax savings and was updated to reflect a projection of $7 million for amortization of excess deferred income tax balances. In April 2019, PacifiCorp filed a new application updating the amount of benefits being returned to customers. PacifiCorp continued the interim rate reduction that includes the previously approved $23 million and an additional $4 million reduction to offset the 2019 ECAM, effective June 15, 2019.

In April 2019, PacifiCorp submitted a compliance filing to the WPSC regarding bonus tax depreciation resulting in a $2 million rate reduction for the period June 15, 2019 through June 14, 2020.

In February 2019, PacifiCorp filed a certificate of public convenience and necessity application with the WPSC requesting to repower the existing Foote Creek I wind facility, which was approved without conditions in April 2019. In connection with the repowering of Foote Creek, PacifiCorp acquired the joint owner's 21% interest in the facility in June 2019.

In April 2019, PacifiCorp filed its annual ECAM and RRA application with the WPSC. The filing requests approval to recover from customers $7 million, or approximately 1.0%, in deferred net power costs for the period January 1, 2018 through December 31, 2018. The rate change went into effect on an interim basis June 15, 2019. PacifiCorp has proposed to offset this increase with other rate credits that went into effect on June 15, 2019.

In July 2019, Wyoming Senate Enrolled Act No. 74 went into effect. The legislation, among other things, requires electric utilities to make a good faith effort to sell a coal-fired generation facility in Wyoming before it can receive recovery in rates for capital costs associated with new generation facilities built, in whole or in part, to replace the retiring coal facility. The electric utility is obligated to purchase the electricity from the facility through a power purchase agreement at a price that is no greater than the utility’s avoided cost, as determined by the WPSC. Costs associated with an approved power purchase agreement are expected to be recoverable in rates from Wyoming customers. PacifiCorp is working with the WPSC and other stakeholders to determine the implementation process. The overall impacts of this legislation cannot be determined at this time.

Washington

In June 2019, PacifiCorp submitted its 2018 PCAM filing with WUTC seeking approval to credit $7 million to the PCAM balancing account. No rate changes were requested.

Idaho

In May 2018, the IPUC approved a rate reduction of $6 million, or 2.2%, effective June 1, 2018 through May 31, 2019, to pass back a portion of the current tax benefits associated with 2017 Tax Reform. In March 2019 an all-party settlement resolving the treatment of the remaining tax savings was filed with the IPUC. In May 2019, the IPUC approved the all-party settlement resulting in the rate reduction for current tax savings being adjusted to $8 million per year, effective June 1, 2019 and $3 million related to amortization of excess deferred income taxes from the 2017 Tax Reform being applied as an offset to the 2019 ECAM.

In March 2019, PacifiCorp filed its annual ECAM application with the IPUC requesting recovery of $15 million, or 0.4%, for deferred costs in 2018. This filing includes recovery of the difference in actual net power costs to the base level in rates, an adder for recovery of the Lake Side 2 resource, recovery of Deer Creek Mine investment and changes in production tax credits and renewable energy credits. In May 2019, the IPUC approved recovery of the $15 million, effective June 1, 2019 to be offset by the $3 million related to amortization of excess deferred income taxes stemming from the all-party settlement related to the 2017 Tax Reform.

California

In April 2018, PacifiCorp filed a general rate case with the CPUC for an overall rate increase of $1 million, or 0.9%, effective January 1, 2019. A CPUC decision is pending.

On September 21, 2018, California's governor signed legislation to strengthen California's ability to prevent and recover from catastrophic wildfires, including SB 901. SB 901 requires electric utilities to prepare and submit wildfire mitigation plans that describe the utilities' plans to prevent, combat and respond to wildfires affecting their service territories. PacifiCorp filed its wildfire mitigation plan with the CPUC on February 6, 2019. The wildfire mitigation plan incorporates the requirements outlined in SB 901, including situational awareness, system hardening, vegetation management and procedures for proactive de-energization in certain high risk areas during times of extreme danger.

SB 901 also authorized utilities, including PacifiCorp, to establish two memorandum accounts to track costs related to California Wildfire Mitigation. In March 2019, PacifiCorp received approval to establish a FRMMA effective January 1, 2019 to track a range of fire risk mitigation activities incremental to what is already included in PacifiCorp's rates. The CPUC also granted PacifiCorp the ability to track costs related to complying with the implementation of Proactive Safety Power Shut-off, or de-energization events in the FRMMA.

In May 2019, the CPUC issued a decision approving PacifiCorp's 2019 Wildfire Mitigation Plan. In June 2019, following approval of its 2019 Wildfire Mitigation Plan, PacifiCorp filed to establish a second Wildfire Mitigation Plan Implementation Memorandum Account ("WMPIMA") effective May 31, 2019, to track costs related to the implementation of its approved 2019 Plan. Cost recovery is still contingent on the CPUC's review of activities tracked in the memorandum accounts.

SB 901 also required the CPUC to develop a financial stress test methodology to determine the maximum amount an electrical corporation's shareholders can pay for 2017 catastrophic wildfire damages without harming ratepayers or impacting the utility's ability to provide adequate and safe service. The CPUC's final decision in June 2019 regarding this test does not have an impact on PacifiCorp as its assets did not cause catastrophic wildfires in California in 2017.

In July 2019, California Governor Gavin Newsom signed AB 1054 into law. AB 1054 is comprehensive legislation addressing wildfire risk in the state of California. The new law authorizes a wildfire fund which would operate as an insurance fund to support the creditworthiness of electrical utilities, if certain utilities participate by making the required contributions, among other things. PacifiCorp does not intend to participate in the wildfire fund.

AB 1054 also amends CPUC requirements for recovery of wildfire-related costs regardless of participation in the insurance fund. The CPUC must allow cost recovery of the costs and expenses of a "covered wildfire" which is defined as a fire ignited on or after July 12, 2019, if they are determined to be just and reasonable, meaning the electrical corporation's conduct related to the ignition was consistent with actions that a reasonable utility would have undertaken in good faith under similar circumstances, at the relevant point in time, and based on the information available to the electrical corporation at the relevant point in time.

NV Energy (Nevada Power and Sierra Pacific)

Regulatory Rate Review

In June 2019, Sierra Pacific filed an electric regulatory rate review with the PUCN. The filing supported an annual revenue increase of $5 million but requested an annual revenue reduction of $5 million. An order is expected by the end of 2019 and, if approved, would be effective January 1, 2020.

In July 2019, as a part of the DEAA filing, the PUCN approved an order confirming the methodology of calculating the earnings sharing and directing Nevada Power, in its next regulatory rate review, to address the return of the earnings sharing to customers. The approved order is expected to be filed in August 2019.

2017 Tax Reform

In February 2018, the Nevada Utilities made filings with the PUCN proposing a tax rate reduction rider for the lower annual income tax expense anticipated to result from 2017 Tax Reform for 2018 and beyond. In March 2018, the PUCN issued an order approving the rate reduction proposed by the Nevada Utilities. The new rates were effective April 1, 2018. The order extended the procedural schedule to allow parties additional discovery relevant to 2017 Tax Reform and a hearing was held in July 2018. In September 2018, the PUCN issued an order directing the Nevada Utilities to record the amortization of any excess protected accumulated deferred income tax arising from the 2017 Tax Reform as a regulatory liability effective January 1, 2018. Subsequently, the Nevada Utilities filed a petition for reconsideration relating to the amortization of protected excess accumulated deferred income tax balances resulting from the 2017 Tax Reform. In November 2018, the PUCN issued an order granting reconsideration and reaffirming the September 2018 order. In December 2018, the Nevada Utilities filed a petition for judicial review. In January 2019, intervening parties filed statements of intent to participate in the petition for judicial review.

Optional Pricing Program

In November 2018, the Nevada Utilities made filings with the PUCN to implement the Optional Pricing Program ("OPP"). The Nevada Utilities have designed the OPP to provide certain customers, namely those eligible to file an application pursuant to Chapter 704B of the Nevada Revised Statutes, with a market-based pricing option that is based on renewable resources. The OPP provides for an energy rate that would replace the base tariff energy rate and deferred energy accounting adjustment. The goal is to have an energy rate that yields an all-in effective rate that is competitive with market options available to such customers. In February 2019, the PUCN granted several intervenors the ability to participate in the proceeding. In June 2019, the Nevada Utilities withdrew their filings but plan to refile a modified tariff in August 2019 that incorporates the considerations raised by intervenors.

Chapter 704B Applications

Chapter 704B of the Nevada Revised Statutes allows retail electric customers with an average annual load of one MW or more to file with the PUCN an application to purchase energy from alternative providers of a new electric resource and become distribution only service customers. On a case-by-case basis, the PUCN will assess the application and may deny or grant the application subject to conditions, including paying an impact fee, paying on-going charges and receiving approval for specific alternative energy providers and terms. The impact fee and on-going charges are assessed to alleviate the burden on other Nevada customers for the applicant's share of previously committed investments and long-term renewable contracts and are set at a level designed such that the remaining customers are not subjected to increased costs. In June 2019, the Nevada Legislature passed Senate Bill 547 ("SB 547") which modifies the 704B process. The modifications outlined in SB 547, among others, require a utility to establish limits in their integrated resource plan on the amount of load that can take service under Chapter 704B, customers taking service under Chapter 704B continue to pay for public program costs and requires the alternative energy providers to be licensed by the PUCN. In addition, SB 547 requires customers to file a 704B application with the PUCN in January allowing for alignment with the capacity amount established in the integrated resource plan.

Since 2016, five fully bundled retail customers have transitioned to distribution only service and are acquiring energy from an energy supplier other than the Nevada Utilities. The total estimated peak demand of these customers was approximately 400 MWs, as of the date their applications were filed with the PUCN, which represents approximately 5% of the annual hourly peak demand on the Nevada Utilities' electric system in 2018. The PUCN has imposed cumulative impact fees of $155 million on these customers which includes impact fee credits of $20 million established by the PUCN subsequent to the initial application approvals.

The Nevada Utilities have approximately 120 fully bundled retail customers that are eligible to file Chapter 704B applications. The PUCN has approved the applications of five additional fully bundled retail customers whose total estimated peak demand is approximately 95 MWs, as of the date their applications were filed with the PUCN. The PUCN has imposed impact fees of $30 million on these customers. Subsequent to approval, two customers with a total estimated peak demand of approximately 50 MWs and imposed impact fees of $17 million have withdrawn their applications leaving only three fully bundled customer applications open and approved. The PUCN has also approved the applications of four pending customers not yet receiving service. These seven customers have not yet become distribution only service customers.

As of June 2019, in addition to the approved 704B applications, the Nevada Utilities have also received communications from eight additional fully bundled or pending customers, three of which provided a letter of intent to file an application with the PUCN and five of which filed an application with the PUCN to purchase energy from another energy supplier and become distribution only service customers. Four applicants have subsequently withdrawn their applications leaving only one 704B application in process. The three letters of intent are no longer eligible to pursue 704B applications under the previous process due to the passing of SB 547.

The Nevada Utilities are addressing further Chapter 704B activity by evaluating options that include aligning with customer initiatives, implementing alternative pricing plans including the OPP, educating current customers on the value of the Nevada Utilities' fully bundled service and evaluating legislative or administrative changes to the Chapter 704B process as a result of SB 547.

Northern Powergrid Distribution Companies

GEMA, through the Ofgem, published its RIIO-2 sector methodology consultation in December 2018, continuing the process of developing the next set of price control arrangements that will be implemented for transmission and gas distribution networks in Great Britain. Ofgem explicitly states that this consultation does not set out proposals for Northern Powergrid's next price control, which will begin in April 2023. However, it also states that some of the proposals may be capable of application to that price control. Regarding allowed return on capital, Ofgem stated in the December 2018 consultation that it considered a cost of equity of 4.0% (plus inflation calculated using the United Kingdom's consumer prices index including owner occupiers' housing costs) would be appropriate for energy networks, which is approximately 2.5 percentage points lower than the current comparable cost of equity. This cost of equity assumption is based on a proposed debt capitalization assumption for the next price control of 60%, which is five percentage points lower than the 65% debt capitalization assumption for the current price control.

In May 2019, Ofgem published its sector methodology decision for the RIIO-2 price controls that will apply to transmission and gas distribution starting in April 2021. The decision confirmed a continued intention to move to lower returns, although Ofgem increased its initial view on the cost of equity of 4.0% to 4.3%. The transmission and gas distribution price control reviews are now moving into a detailed implementation phase, with draft and final determinations due in the summer and fall of 2020. Early discussions are now taking place for the next electricity distribution price control review, which is due to set price controls from April 2023 following determinations in 2022.

BHE Pipeline Group

Northern Natural Gas

In July 2018, the FERC issued a final rule adopting procedures for determining whether natural gas pipelines were collecting unjust and unreasonable rates in light of the reduction in the federal corporate tax rate from 2017 Tax Reform. Pursuant to the final rule, in October 2018, Northern Natural Gas filed an informational filing on FERC Form No. 501-G and a Statement Demonstrating Why No Rate Adjustment is Necessary. In January 2019, FERC initiated a Section 5 investigation to determine whether the rates currently charged by Northern Natural Gas are just and reasonable. As required by the FERC Section 5 order, Northern Natural Gas filed a full cost and revenue study on April 1, 2019. On July 1, 2019, Northern Natural Gas filed a Section 4 rate case. Northern Natural Gas has requested increases in various rates, including transportation reservation rates ranging from approximately 35% in the Field Area to 90% in the Market Area to be implemented, subject to refund, effective January 1, 2020. The Section 5 investigation remains pending as a separate case from the Section 4 rate case, although the cases may be consolidated in the future.

BHE Transmission

AltaLink

General Tariff Application

In August 2018, AltaLink filed its 2019-2021 GTA with the AUC, delivering on the first three years of its commitment to keep rates lower or flat for customers for the next five years. The three-year application achieves flat tariffs by keeping operating and maintenance expenses flat, with the exception of salaries and wages and software licensing fees, transitioning to a new salvage recovery approach and continuing the use of the flow-through income tax method. In addition, similar to the refund approved by the AUC for the 2017-2018 GTA of C$31 million, AltaLink proposes to provide a further tariff reduction over the three years by refunding previously collected accumulated depreciation surplus of an additional C$31 million. In November 2018, the AUC approved the 2019 interim refundable transmission tariff at C$74 million per month effective January 2019.

AltaLink provided responses to information requests in November 2018 and additional responses in December 2018 and April 2019. In April 2019, AltaLink filed an update to its 2019-2021 GTA application primarily to reflect its 2018 actual results and the impact of the AUC decision on AltaLink's 2014-2015 deferral account reconciliation application. The application update also included AltaLink's fire mitigation plan and a request for additional capital expenditures and operating expenses to enhance its current practices, operations and maintenance program to reduce the risk of fires being ignited by its transmission system. The application requests the approval of revised revenue requirements of C$879 million, C$882 million and C$885 million for 2019, 2020 and 2021 respectively, which are lower than the approved 2018 revenue requirement of C$904 million. The forecast revenue requirement is based on an 8.5% return on equity and 37% deemed equity approved by the AUC for 2019 and 2020 and assumes the same for 2021 as placeholders.

In July 2019, AltaLink filed a 2019-2021 partial negotiated settlement application with the AUC. The application consisted of negotiated reductions from the April 2019 GTA of C$23 million of operating expenses and C$58 million of transmission capital maintenance and information technology capital expenditures over three years, as well as lower forecast interest rates and lower depreciation for the steel poles asset class. These reductions resulted in a C$38 million, or 1.4%, net decrease to the three-year total revenue requirement applied for in AltaLink's 2019-2021 GTA updated in April 2019 before taking into account an additional C$20 million of forecast line clearance capital. The application excluded certain matters consisting of the new salvage study and salvage recovery approach, additional capital for operations and maintenance and capital programs to reduce risk of fires being ignited by its transmission system, and to comply with line clearance code compliance requirements, and certain retirements for towers and fixtures. Excluded matters will be examined by the AUC in an oral hearing scheduled for September 2019. The negotiated settlement application requests the approval of revised revenue requirements of C$873 million, C$870 million and C$870 million for 2019, 2020 and 2021, respectively, which are lower than the approved 2018 revenue requirement of C$904 million.

2021 Generic Cost of Capital Proceeding

In December 2018, the AUC initiated a Generic Cost of Capital ("GCOC") proceeding to consider returning to a formula-based approach to determining the return on equity for a given year, starting with 2021. On April 4, 2019, after receiving comments from interested parties, the AUC expanded the scope of the proceeding to include a traditional non-formulaic GCOC inquiry as well as the consideration of returning to a formula-based approach. The AUC also issued a process timeline for the proceeding to commence in January 2020, with a hearing scheduled in April 2020.

Deferral Account Reconciliation Application

In April 2017, AltaLink filed its application with the AUC with respect to AltaLink's 2014 projects and deferral accounts and specific 2015 projects. The application included approximately C$2.0 billion in net capital additions. In June 2017, the AUC ruled that the scope of the deferral account proceeding would not be extended to consider the utilization of assets for which final cost approval is sought. However, the AUC will initiate a separate proceeding to address the issue of transmission asset utilization and how the corporate and property law principles applied in the Utility Asset Disposition ("UAD") decision may relate.

In December 2017, AltaLink amended its application to include the remaining capital projects completed in 2015. The amended 2014 and 2015 deferral account reconciliation application includes 110 completed projects with total gross capital additions, excluding AFUDC, of C$3.8 billion. An oral hearing was held in September 2018 after the completion of an extensive information request process earlier in the year.

In December 2018 and January 2019 the AUC issued decisions approving C$3,833 million out of the C$4,017 million capital project additions, including AFUDC, included in the application. Project costs of C$155 million were deferred to a future hearing. The AUC disallowed capital additions of approximately C$30 million including applicable AFUDC, pending receipt of additional requested supporting documentation for certain specific items. In February 2019, AltaLink filed its 2014-2015 deferral accounts reconciliation application compliance filing to reflect the findings, conclusions and directions arising from this decision. In its compliance filing, AltaLink requested approval of interest in the amount of C$10 million on total outstanding amount of C$110 million to be recovered through a one-time payment from the AESO, upon AUC approval. In addition, the AUC ruled that it will put in placeholder amounts for the approved costs of the assets in the 2014-2015 DACDA proceeding until the AUC-initiated proceeding to consider the issue of transmission asset utilization.

In March 2019, AltaLink responded to information requests from the AUC. A decision from the AUC is expected in the third quarter of 2019.

In July 2019, AltaLink filed its 2016-2018 DACDA application with the AUC after a ruling on confidentiality. The application includes 116 projects with total actual gross capital additions, excluding AFUDC, of C$947 million.

First Nations Asset Transfer Application

In November 2018, the AUC approved, with conditions, AltaLink's application filed in April 2017 to sell and transfer approximately C$91 million of transmission assets located on reserve lands to new limited partnerships with First Nations. The transfers are part of the agreement which allowed AltaLink to route the Southwest Project on reserve land.

In December 2018, AltaLink filed an application with the Alberta Court of Appeal for permission to appeal the conditions imposed by the AUC decision. In January 2019, AltaLink also filed an application for review and variance with the AUC. In May 2019, the AUC issued a decision dismissing the application for review and variance on the basis that AltaLink had not met the requirements for a review of the findings in the original decision. The appeal on this matter is set for October 2019.

In March 2019, AltaLink filed correspondence informing the AUC that the Blood Tribe intends to proceed with the transfer of assets related to KainaiLink, L.P.

In June 2019, AltaLink closed the transaction with the Piikani Nation by transferring transmission assets of C$53 million and long-term debt of C$33 million to PiikaniLink, L.P. The Piikani Nation purchased a 51% interest in PiikaniLink, L.P. for C$10 million.

BHE Renewables' Counterparty Risk

On January 29, 2019, PG&E Corporation and Pacific Gas and Electric Company (the "PG&E Utility") (together "PG&E") filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of California ("PG&E Bankruptcy Filing"). The Company owns 100% of Topaz and owns a 49% interest in Agua Caliente. Topaz is a 550 -MW solar photovoltaic electric power generating facility located in California. Topaz sells 100% of its energy, capacity and renewable energy credits generated from the facility to PG&E Utility under a 25-year wholesale power purchase agreement ("PPA") that is in effect until October 2039. As of June 30, 2019 , the Company's consolidated balance sheet includes $1.1 billion of property, plant and equipment, net and $0.9 billion of non-recourse project debt related to Topaz. Agua Caliente is a 290 -MW solar photovoltaic electric power generating facility located in Arizona. Agua Caliente sells 100% of its energy, capacity and renewable energy credits generated from the facility to PG&E Utility under a 25-year wholesale PPA that is in effect until June 2039. As of June 30, 2019 , the Company's equity investment in Agua Caliente totals $56 million and the project has $0.8 billion of non-recourse project debt owed to the United States Department of Energy. The PG&E Bankruptcy Filing is an event of default under the Topaz PPA ("PPA Default"). PG&E paid in full the invoices for December deliveries and all amounts invoiced to date for post-petition energy deliveries for both Topaz and Agua Caliente in 2019. PG&E has not paid for the power delivered from January 1 through January 28, 2019. The Company continues to perform on its obligations and deliver renewable energy to the PG&E Utility, and PG&E has publicly stated it will pay suppliers in full under normal terms for post-petition goods and services received. The Company maintains that, in light of the current facts and circumstances, the PPA Default could not reasonably be expected to result in a material adverse effect under the Topaz indenture and, therefore, no default has occurred under the Topaz indenture. In July 2019, California Governor Gavin Newsom signed AB 1054 into law. AB 1054 is comprehensive legislation addressing wildfire risk in the state of California that, among other items, authorizes a wildfire fund which would operate as an insurance fund to support the creditworthiness of electrical utilities, if certain utilities, including PG&E, participate by making the required contributions, among other things. In July 2019, PG&E notified the CPUC of its intent to participate in the insurance fund and such participation requires, among other items, PG&E to exit bankruptcy by June 30, 2020. The Company believes it is more likely than not that no impairment exists and current debt obligations will be met, as post-petition contractual revenue payments are expected to be paid by PG&E Utility to the Topaz and Agua Caliente projects. The Company will continue to monitor the situation, including continued receipt of future PG&E payments and the future risk of the PPAs being rejected or modified through the bankruptcy process.

Quad Cities Generating Station Operating Status

Exelon Generation Company, LLC ("Exelon Generation"), 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, as a result of Illinois not passing adequate legislation and Quad Cities Station not clearing the 2019-2020 PJM Interconnection, L.L.C. capacity auction. MidAmerican Energy expressed to Exelon Generation its desire for the continued operation of the facility through the end of its operating license in 2032 and worked with Exelon Generation on solutions to that end. 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 zero emission credits ("ZECs") and recover the costs from certain ratepayers in Illinois, subject to certain limitations. The proceeds from the zero emission credits will provide Exelon Generation additional revenue through 2027 as an incentive for continued operation of Quad Cities Station. For the nuclear assets already in rate base, MidAmerican Energy's customers will not be charged for the subsidy, and MidAmerican Energy will not receive additional revenue from the subsidy.

On February 14, 2017, two lawsuits were filed with the United States District Court for the Northern District of Illinois ("Northern District of Illinois") against the Illinois Power Agency alleging that the state's zero emission credit program violates certain provisions of the United States Constitution. Both lawsuits were dismissed at the Northern District of Illinois, and the United States Court of Appeals for the Seventh Circuit affirmed the dismissals. On April 15, 2019, plaintiffs' petition seeking United States Supreme Court review of the case was denied.

On January 9, 2017, the Electric Power Supply Association filed two requests with the FERC seeking to expand Minimum Offer Price Rule ("MOPR") provisions to apply to existing resources receiving zero emission credit compensation. If successful, an expanded MOPR could result in an increased risk of Quad Cities Station not clearing in future capacity auctions and Exelon Generation no longer receiving capacity revenues for the facility. As majority owner and operator of Quad Cities Station, Exelon Generation has filed protests at the FERC in response to each filing. The FERC has not yet issued a decision on the requests.

On April 10, 2019, PJM Interconnection, L.L.C. ("PJM") notified the FERC of its intent to proceed with the next capacity auction in August 2019 under the existing market rules and asked the FERC to clarify that it would not require the PJM to re-run the auction in the event the FERC alters those market rules in its decision on the MOPR complaint. It is too early to predict the final outcome of each of these proceedings or their potential impact on the continued operation of Quad Cities Station.

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 laws and regulations 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, 2018, and new environmental matters occurring in 2019.

Climate Change

In December 2015, an international agreement was negotiated by 195 nations to create a universal framework for coordinated action on climate change in what is referred to as the Paris Agreement. The Paris Agreement reaffirms the goal of limiting global temperature increase well below 2 degrees Celsius, while urging efforts to limit the increase to 1.5 degrees Celsius; establishes commitments by all parties to make nationally determined contributions and pursue domestic measures aimed at achieving the commitments; commits all countries to submit emissions inventories and report regularly on their emissions and progress made in implementing and achieving their nationally determined commitments; and commits all countries to submit new commitments every five years, with the expectation that the commitments will get more aggressive. In the context of the Paris Agreement, the United States agreed to reduce greenhouse gas emissions 26% to 28% by 2025 from 2005 levels. After more than 55 countries representing more than 55% of global greenhouse gas emissions submitted their ratification documents, the Paris Agreement became effective November 4, 2016. Under the terms of the Paris Agreement, ratifying countries are bound for a three-year period and must provide one-year's notice of their intent to withdraw. On June 1, 2017, President Trump announced the United States would withdraw from the Paris Agreement. Under the terms of the agreement, the withdrawal would be effective in November 2020. The cornerstone of the United States' commitment was the Clean Power Plan which was finalized by the EPA in 2015 but has since been proposed for repeal by the EPA.

GHG Performance Standards

Under the Clean Air Act, the EPA may establish emissions standards that reflect the degree of emissions reductions achievable through the best technology that has been demonstrated, taking into consideration the cost of achieving those reductions and any non-air quality health and environmental impact and energy requirements. On August 3, 2015, the EPA issued final new source performance standards, establishing a standard of 1,000 pounds of carbon dioxide per MWh for large natural gas-fueled generating facilities and 1,400 pounds of carbon dioxide per MWh for new coal-fueled generating facilities with the "Best System of Emission Reduction" reflecting highly efficient supercritical pulverized coal facilities with partial carbon capture and sequestration or integrated gasification combined-cycle units that are co-fueled with natural gas or pre-combustion slipstream capture of carbon dioxide. The new source performance standards were appealed to the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") and oral argument was scheduled for April 17, 2017. However, oral argument was deferred and the court held the case in abeyance for an indefinite period of time. On December 6, 2018, the EPA announced revisions to new source performance standards for new and reconstructed coal-fueled units. The EPA proposes to revise carbon dioxide emission limits for new coal-fueled facilities to 1,900 pounds per MWh for small units and 2,000 pounds per MWh for large units. The EPA would define the best system of emission reduction for new and modified units as the most efficient demonstrated steam cycle, combined with best operating practices. The EPA accepted comment on the proposal through March 18, 2019. Until such time as the EPA undertakes further action on the proposed reconsideration or the court takes action, any new fossil-fueled generating facilities constructed by the relevant Registrants will be required to meet the GHG new source performance standards.

Clean Power Plan

In June 2014, the EPA released proposed regulations to address GHG 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 compliance period would have begun in 2022, with three interim periods of compliance and with the final goal to be achieved by 2030 and was expected to reduce carbon dioxide emissions in the power sector to 32% below 2005 levels by 2030. On February 9, 2016, the United States Supreme Court ordered that the EPA's emission guidelines for existing sources be stayed pending the disposition of the challenges to the rule in the D.C. Circuit and any action on a writ of certiorari before the United States Supreme Court. Oral argument was heard before the D.C. Circuit on September 27, 2016. The court has not yet issued its decision. On June 19, 2019, the EPA finalized the Affordable Clean Energy rule and fully repealed the Clean Power Plan. Under the Affordable Clean Energy rule, the EPA determined that the best system of emissions reduction for existing coal-fueled power plants is heat rate improvements based on a set of candidate technologies and measures that could improve heat rates. The EPA did not establish state emission limits or budgets. Instead, states will be required to develop unit-specific standards of performance that reflect the emission limitation achievable through application of the best system of emission reduction technologies. Measures taken to meet the standards of performance must be achieved at the source itself and standards of performance will be measured in terms of pounds of carbon dioxide per MWh. State compliance plans are due by September 2022, three years after the effective date of the rule. Litigation challenging the rule has already been filed in the D.C. Circuit and until all litigation is exhausted and state plans are developed, the full impacts on the Registrants cannot be determined. However, PacifiCorp, MidAmerican Energy, Nevada Power and Sierra Pacific have historically pursued cost-effective projects, including plant efficiency improvements, increased diversification of their generating fleets to include deployment of renewable and lower carbon generating resources, and advanced customer energy efficiency programs.

Renewable Portfolio Standards

Each state's RPS described below could significantly impact the relevant Registrant's consolidated financial results. Resources that meet the qualifying electricity requirements under each RPS vary from state to state. Each state's RPS requires some form of compliance reporting and the relevant Registrant can be subject to penalties in the event of noncompliance. Each Registrant believes it is in material compliance with all applicable RPS laws and regulations.

Since 1997, NV Energy has been required to comply with a RPS. Current law requires the Nevada Utilities to meet 18% of their energy requirements with renewable resources for 2014, 20% for 2015 through 2019, 22% for 2020 and 2024, and 25% for 2025 and thereafter. The RPS also requires 5% of the portfolio requirement come from solar resources through 2015 and increasing to 6% in 2016. Nevada law also permits energy efficiency measures to be used to satisfy a portion of the RPS through 2025, subject to certain limitations. In November 2018, Nevada voters approved a measure to increase the state's RPS to 50% by 2030; the measure must be voted on and approved a second time, in November 2020, in order to take effect. In the interim, the Nevada Legislature passed Senate Bill ("SB") 358 in June 2019 which raises Nevada's renewable portfolio standards to 50% by 2030.

Washington's Energy Independence Act establishes a renewable energy target for qualifying electric utilities, including PacifiCorp. The requirements are 3% of retail sales by January 1, 2012 through 2015, 9% of retail sales by January 1, 2016 through 2019 and 15% of retail sales by January 1, 2020 and each year thereafter. In April 2013, Washington State Senate Bill No. 5400 ("SB 5400") was signed into law. SB 5400 expands the geographic area in which eligible renewable resources may be located to beyond the Pacific Northwest, allowing renewable resources located in all states served by PacifiCorp to qualify. SB 5400 also provides PacifiCorp with additional flexibility and options to meet Washington's renewable mandates. In May 2019, the state of Washington enacted Senate Bill 5116, the Clean Energy Transformation Act. The legislation, among other things, establishes three targets for reducing and eventually eliminating fossil-fueled generation from Washington retail electricity rates between 2025 and 2045. The coal phase-out standard requires all electric utilities to eliminate from rates, coal-fired resources by December 31, 2025. PacifiCorp has begun discussions with regulators and other Washington investor-owned utilities regarding compliance obligations and implementation.

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.

Mercury and Air Toxics Standards

In March 2011, the EPA proposed a rule that requires coal-fueled generating facilities to reduce mercury emissions and other hazardous air pollutants through the establishment of "Maximum Achievable Control Technology" standards. The final MATS became effective on April 16, 2012, and required that new and existing coal-fueled generating facilities achieve emission standards for mercury, acid gases and other non-mercury hazardous air pollutants. Existing sources were required to comply with the new standards by April 16, 2015 with the potential for individual sources to obtain an extension of up to one additional year, at the discretion of the Title V permitting authority, to complete installation of controls or for transmission system reliability reasons. The relevant Registrants have completed emission reduction projects to comply with the final rule's standards for acid gases and non-mercury metallic hazardous air pollutants.

MidAmerican Energy retired certain coal-fueled generating units as the least-cost alternative to comply with the MATS. Walter Scott, Jr. Energy Center Units 1 and 2 were retired in 2015, and George Neal Energy Center Units 1 and 2 were retired in April 2016. A fifth unit, Riverside Generating Station, was limited to natural gas combustion in March 2015.

Numerous lawsuits have been filed in the D.C. Circuit challenging the MATS. In April 2014, the D.C. Circuit upheld the MATS requirements. In November 2014, the United States Supreme Court agreed to hear the MATS appeal on the limited issue of whether the EPA unreasonably refused to consider costs in determining whether it is appropriate to regulate hazardous air pollutants emitted by electric utilities. Oral argument in the case was held before the United States Supreme Court in March 2015, and a decision was issued by the United States Supreme Court in June 2015, which reversed and remanded the MATS rule to the D.C. Circuit for further action. The United States Supreme Court held that the EPA had acted unreasonably when it deemed cost irrelevant to the decision to regulate generating facilities, and that cost, including costs of compliance, must be considered before deciding whether regulation is necessary and appropriate. The United States Supreme Court's decision did not vacate or stay implementation of the MATS rule. In December 2015, the D.C. Circuit issued an order remanding the rule to the EPA, without vacating the rule. As a result, the relevant Registrants continue to have a legal obligation under the MATS rule and the respective permits issued by the states in which each respective Registrant operates to comply with the MATS rule, including operating all emissions controls or otherwise complying with the MATS requirements.

On December 27, 2018, the EPA issued a proposed revised supplemental cost finding for the MATS, as well as the required risk and technology review under Clean Air Act Section 112. EPA proposes to determine that it is not appropriate and necessary to regulate hazardous air pollutant emissions from power plants under Section 112; however, EPA proposes to retain the emission standards and other requirements of the MATS rule, because EPA is not proposing to remove coal- and oil-fueled power plants from the list of sources regulated under Section 112. The public comment period on the proposal closed April 17, 2019. Until EPA takes final action on the rule, the relevant Registrants cannot fully determine the impacts of the proposed changes to the MATS rule.

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 best available retrofit technology ("BART") requirements and demonstrate progress towards achieving natural visibility requirements in Class I areas by 2064.

The state of Utah issued a regional haze SIP requiring the installation of sulfur dioxide, nitrogen oxides and particulate matter controls on Hunter Units 1 and 2, and Huntington Units 1 and 2. In December 2012, the EPA approved the sulfur dioxide portion of the Utah regional haze SIP and disapproved the nitrogen oxides 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 nitrogen oxides controls and require the installation of selective catalytic reduction ("SCR") controls at Hunter Units 1 and 2 and Huntington Units 1 and 2 within five years. 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 federal implementation plan ("FIP") requiring the installation of SCR controls 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 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 ("CAMX") air quality dispersion model. On June 24, 2019, the Utah Air Quality Board unanimously voted to approve the Utah regional haze state implementation plan revision, which incorporates a best available retrofit technology alternative into Utah's regional haze state implementation plan. The best available retrofit technology alternative makes the shutdown of PacifiCorp's Carbon plant enforceable under the state implementation plan and removes the requirement to install selective catalytic reduction technology on Hunter Units 1 and 2 and Huntington Units 1 and 2. The Utah Division of Air Quality anticipates submitting the state implementation plan revision to the EPA for approval in July 2019.

The state of Wyoming issued two regional haze SIPs requiring the installation of sulfur dioxide, nitrogen oxides and particulate matter controls on certain PacifiCorp coal-fueled generating facilities in Wyoming. The EPA approved the sulfur dioxide 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 nitrogen oxides and particulate matter SIP and instead issue a FIP. The EPA withdrew its initial proposed actions on the nitrogen oxides 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-nitrogen oxides 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-nitrogen oxides 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 ("Wyodak 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 the Wyodak Facility 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 the Wyodak Facility, pending further action by the Tenth Circuit in the appeal. A stay remains in place and the case has not yet been set for oral argument. In June 2014, the Wyoming Department of Environmental Quality issued a revised BART permit allowing Naughton Unit 3 to operate on coal through 2017 and providing for natural gas conversion of the unit in 2018; in October 2016, an application was filed with the Wyoming Department of Environmental Quality requesting a revision of the dates for the end of coal firing and the start of gas firing for Naughton Unit 3 to align with the requirements of the Wyoming SIP. The Wyoming Department of Environmental Quality approved a change to the requirements for Naughton Unit 3, extending the requirement to cease coal firing to no later than January 30, 2019, and complete the gas conversion by June 30, 2019. On March 17, 2017, Wyoming Department of Environmental Quality issued an extension to operate the unit as a coal-fueled unit through January 30, 2019. The Wyoming Department of Environmental Quality submitted a proposed revision to the Wyoming SIP, including a change to the Naughton Unit 3 compliance date, to the EPA for approval on November 28, 2017. On November 7, 2018, the EPA published its proposed approval of the Wyoming SIP relative to the Naughton 3 gas conversion. The comment period closed December 7, 2018 and the EPA has not taken final action. PacifiCorp removed the unit from coal-fueled service on January 30, 2019, and is evaluating the economic benefits of converting it to a natural gas-fueled generation resource. 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 selective catalytic reduction, 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. The proposal is expected to be open for public comment in August 2019, and the state of Wyoming plans to hold a public hearing on August 20, 2019 to consider the proposal and public input.

The state of Arizona issued a regional haze SIP requiring, among other things, the installation of sulfur dioxide, nitrogen oxides and particulate matter controls on Cholla Unit 4. The EPA approved in part, and disapproved in part, the Arizona SIP and issued a FIP for the disapproved portions requiring SCR controls on Cholla Unit 4. PacifiCorp filed an appeal in the United States Court of Appeals for the Ninth Circuit ("Ninth Circuit") regarding the FIP as it relates to Cholla Unit 4, and the Arizona Department of Environmental Quality and other affected Arizona utilities filed separate appeals of the FIP as it relates to their interests. The Ninth Circuit issued an order in February 2015, holding the matter in abeyance while the parties pursued an alternate compliance approach for Cholla Unit 4. The Arizona Department of Environmental Quality's revision of the draft permit and revision to the Arizona regional haze SIP were approved by the EPA through final action published in the Federal Register on March 27, 2017, with an effective date of April 26, 2017. The final action allows Cholla Unit 4 to utilize coal until April 30, 2025 and convert to gas or otherwise cease burning coal by June 30, 2025.

The state of Colorado regional haze SIP requires SCR controls at Craig Unit 2 and Hayden Units 1 and 2, in which PacifiCorp has ownership interests. Each of those regional haze compliance projects are either already in service or currently being constructed. In addition, in February 2015, the state of Colorado finalized an amendment to its regional haze SIP relating to Craig Unit 1, in which PacifiCorp has an ownership interest, to require the installation of SCR controls by 2021. In September 2016, the owners of Craig Units 1 and 2 reached an agreement with state and federal agencies and certain environmental groups that were parties to the previous settlement requiring SCR to retire Unit 1 by December 31, 2025, in lieu of SCR installation, or alternatively to remove the unit from coal-fueled service by August 31, 2021 with an option to convert the unit to natural gas by August 31, 2023, in lieu of SCR installation. The terms of the agreement were approved by the Colorado Air Quality Board in December 2016. The terms of the agreement were incorporated into an amended Colorado regional haze SIP in 2017 and were submitted to the EPA for its review and approval. The EPA's approval of the amended Colorado regional haze SIP was published in the Federal Register on July 5, 2018, with an effective date of August 6, 2018.

Until the EPA takes final action in each state and decisions have been made in the pending appeals, PacifiCorp cannot fully determine the impacts of the Regional Haze Rule on its respective generating facilities.

The Navajo Generating Station, in which Nevada Power is a joint owner with an 11.3% ownership share, is also a source that is subject to the regional haze BART requirements. In January 2013, the EPA announced a proposed FIP addressing BART and an alternative for the Navajo Generating Station that includes a flexible timeline for reducing nitrogen oxides emissions. The EPA issued a final FIP on August 8, 2014 adopting, with limited changes, the Navajo Generating Station proposal as a "better than BART" determination. Nevada Power filed the ERCR Plan in May 2014 that proposed to eliminate its ownership participation in the Navajo Generating Station in 2019, which was approved by the PUCN. In February 2017, the non-federal owners of the Navajo Generating Station announced the facility will shut down on or before December 23, 2019, unless new owners can be found. All current owners have since approved a lease extension with the Navajo Nation to allow operations to continue through 2019. On March 21, 2019, the Navajo Nation Council voted to end efforts to transition ownership and extend facility operations. The plant will cease operations by the end of 2019. Ownership transfer negotiations and closure preparations are ongoing and, until concluded, the relevant Registrant cannot determine whether additional action may be required.

Water Quality Standards

The federal Water Pollution Control Act ("Clean Water Act") establishes the framework for maintaining and improving water quality in the United States through a program that regulates, among other things, discharges to and withdrawals from waterways. The Clean Water Act requires that cooling water intake structures reflect the "best technology available for minimizing adverse environmental impact" to aquatic organisms. After significant litigation, the EPA released a proposed rule under §316(b) of the Clean Water Act to regulate cooling water intakes at existing facilities. The final rule was released in May 2014, and became effective in October 2014. Under the final rule, existing facilities that withdraw at least 25% of their water exclusively for cooling purposes and have a design intake flow of greater than two million gallons per day are required to reduce fish impingement (i.e., when fish and other aquatic organisms are trapped against screens when water is drawn into a facility's cooling system) by choosing one of seven options. Facilities that withdraw at least 125 million gallons of water per day from waters of the United States must also conduct studies to help their permitting authority determine what site-specific controls, if any, would be required to reduce entrainment of aquatic organisms (i.e., when organisms are drawn into the facility). PacifiCorp and MidAmerican Energy are assessing the options for compliance at their generating facilities impacted by the final rule and will complete impingement and entrainment studies. PacifiCorp's Dave Johnston generating facility and all of MidAmerican Energy's coal-fueled generating facilities, except Louisa, Ottumwa and Walter Scott, Jr. Unit 4, which have water cooling towers, withdraw more than 125 million gallons per day of water from waters of the United States for once-through cooling applications. PacifiCorp's Jim Bridger, Naughton, Gadsby, Hunter and Huntington generating facilities currently utilize closed cycle cooling towers but are designed to withdraw more than two million gallons of water per day. The standards are required to be met as soon as possible after the effective date of the final rule, but no later than eight years thereafter. The costs of compliance with the cooling water intake structure rule cannot be fully determined until the prescribed studies are conducted and the respective state environmental agencies review the studies to determine whether additional mitigation technologies should be applied. In the event that PacifiCorp's or MidAmerican Energy's existing intake structures require modification, the costs are not anticipated to be significant to the consolidated financial statements. Nevada Power and Sierra Pacific do not utilize once-through cooling water intake or discharge structures at any of their generating facilities. All of the Nevada Power and Sierra Pacific generating stations are designed to have either minimal or zero discharge; therefore, they are not impacted by the §316(b) final rule.

In November 2015, the EPA published final effluent limitation guidelines and standards for the steam electric power generating sector which, among other things, regulate the discharge of bottom ash transport water, fly ash transport water, combustion residual leachate and non-chemical metal cleaning wastes. These guidelines, which had not been revised since 1982, were revised in response to the EPA's concerns that the addition of controls for air emissions has changed the effluent discharged from coal- and natural gas-fueled generating facilities. Under the originally-promulgated guidelines, permitting authorities were required to include the new limits in each impacted facility's discharge permit upon renewal with the new limits to be met as soon as possible, beginning November 1, 2018 and fully implemented by December 31, 2023. On April 5, 2017, a request for reconsideration and administrative stay of the guidelines was filed with the EPA. The EPA granted the request for reconsideration on April 12, 2017, imposed an immediate administrative stay of compliance dates in the rule that had not passed judicial review and requested the court stay the pending litigation over the rule until September 12, 2017. On June 6, 2017, the EPA proposed to extend many of the compliance deadlines that would otherwise occur in 2018 and on September 18, 2017, the EPA issued a final rule extending certain compliance dates for flue gas desulfurization wastewater and bottom ash transport water limits until November 1, 2020. In a separate action, on April 12, 2019, the Fifth Circuit Court of Appeal vacated two aspects of the final effluent limitation guidelines, concerning discharge limits for (1) legacy wastewater from ash transport or treatment systems and (2) combustion residual leachate from landfills or settling ponds. The Firth Circuit found that EPA's own data did not support the agency's conclusion that impoundments were the best technology available for these two waste streams. EPA must now complete a new effluent limitation guideline for these discharge limits. While most of the issues raised by effluent limitation guidelines are already being addressed through the coal combustion residuals rule and are not expected to impose significant additional requirements on the facilities, the impact of the rule cannot be fully determined until the reconsideration and remand actions are complete and any judicial review is conducted.

In April 2014, the EPA and the United States Army Corps of Engineers issued a joint proposal to address "waters of the United States" to clarify protection under the Clean Water Act for streams and wetlands. The proposed rule comes as a result of United States Supreme Court decisions in 2001 and 2006 that created confusion regarding jurisdictional waters that were subject to permitting under either nationwide or individual permitting requirements. The final rule was released in May 2015 but is currently under appeal in multiple courts and a nationwide stay on the implementation of the rule was issued in October 2015. On January 13, 2017, the United States Supreme Court granted a petition to address jurisdictional challenges to the rule. The EPA plans to undertake a two-step process, with the first step to repeal the 2015 rule and the second step to carry out a notice-and-comment rulemaking in which a substantive re-evaluation of the definition of the "waters of the United States" will be undertaken. On July 27, 2017, the EPA and the Corps of Engineers issued a proposal to repeal the final rule and recodify the pre-existing rules pending issuance of a new rule and on November 16, 2017, the agencies proposed to extend the implementation day of the "waters of the United States" rule to 2020; neither of the proposals has been finalized. On January 22, 2018, the United States Supreme Court issued its decision related to the jurisdictional challenges to the rule, holding that federal district courts, rather than federal appeals courts, have proper jurisdiction to hear challenges to the rule and instructed the Sixth Circuit Court of Appeals to dismiss the petitions for review for lack of jurisdiction, clearing the way for imposition of the rule in certain states barring final action by the EPA to formalize the extension of the compliance deadline. On December 11, 2018, the EPA and the Corps of Engineers proposed a revised definition of "waters of the United States" that is intended further clarify jurisdictional questions, eliminate case-by-case determinations and narrow Clean Water Act jurisdiction to align with Justice Scalia's 2006 opinion in Rapanos v. United States . The public comment period closed April 15, 2019. Until the rule is fully litigated and finalized, the Registrants cannot determine whether projects that include construction and demolition will face more complex permitting issues, higher costs or increased requirements for compensatory mitigation.

Coal Combustion Byproduct Disposal

In May 2010, the EPA released a proposed rule to regulate the management and disposal of coal combustion byproducts under the RCRA. The final rule was released by the EPA on December 19, 2014, was published in the Federal Register on April 17, 2015 and was effective on October 19, 2015. The final rule regulates coal combustion byproducts as non-hazardous waste under RCRA Subtitle D and establishes minimum nationwide standards for the disposal of coal combustion residuals. Under the final rule, surface impoundments and landfills utilized for coal combustion byproducts may need to be closed unless they can meet the more stringent regulatory requirements. The final rule requires regulated entities to post annual groundwater monitoring and corrective action reports. The first of these reports was posted to the respective Registrant's coal combustion rule compliance data and information websites in March 2018. Based on the results in those reports, additional action may be required under the rule.

At the time the rule was published in April 2015, PacifiCorp operated 18 surface impoundments and seven landfills that contained coal combustion byproducts. Prior to the effective date of the rule in October 2015, nine surface impoundments and three landfills were either closed or repurposed to no longer receive coal combustion byproducts and hence are not subject to the final rule. As PacifiCorp proceeded to implement the final coal combustion rule, it was determined that two surface impoundments located at the Dave Johnston Generating Station were hydraulically connected and effectively constitute a single impoundment. In November 2017, a new surface impoundment was placed into service at the Naughton Generating Station. At the time the rule was published in April 2015, MidAmerican Energy owned or operated nine surface impoundments and four landfills that contain coal combustion byproducts. Prior to the effective date of the rule in October 2015, MidAmerican Energy closed or repurposed six surface impoundments to no longer receive coal combustion byproducts. Five of these surface impoundments were closed on or before December 21, 2017 and the sixth is undergoing closure. At the time the rule was published in April 2015, the Nevada Utilities operated ten evaporative surface impoundments and two landfills that contained coal combustion byproducts. Prior to the effective date of the rule in October 2015, the Nevada Utilities closed four of the surface impoundments, four impoundments discontinued receipt of coal combustion byproducts making them inactive and two surface impoundments remain active and subject to the final rule. The two landfills remain active and subject to the final rule. Refer to Note 13 of the Notes to Consolidated Financial Statements of Berkshire Hathaway Energy in Item 8 of the Form 10-K and Note 10 of the Notes to Consolidated Financial Statements of PacifiCorp in Item 8 of the Form 10-K for the impacts on asset retirement obligations as a result of the final rule.

Additional substantive revisions to the rule are expected to be finalized by the EPA by December 2019 but have not yet been released for public comment. If adopted, certain elements of the proposal have the potential to reduce costs of compliance. The D.C. Circuit issued a decision on August 21, 2018, vacating several elements of the rule, including closure provisions for unlined surface impoundments, and finding that the Resource Conservation and Recovery Act provides the EPA authority to regulate inactive surface impoundments at inactive facilities. The court's order was effective October 15, 2018, and as a result, the EPA will need to undertake additional rulemaking to implement the court's order. Until such time as additional rulemaking is final, the impacts on the Registrants cannot be determined.

Multiple parties filed challenges over various aspects of the final rule in the D.C. Circuit in 2015, resulting in settlement of some of the issues and subsequent regulatory action by the EPA, including subjecting inactive surface impoundments to regulation. Oral argument was held by the D.C. Circuit on November 20, 2017 over certain portions of the 2015 rule that had not been settled or otherwise remanded. On August 21, 2018, the D.C. Circuit issued its opinion in Utility Solid Waste Activities Group v. EPA , finding it was arbitrary and capricious for EPA to allow unlined ash ponds to continue operating until some unknown point in the future when groundwater contamination could be detected. The D.C. Circuit vacated the closure section of the CCR rule and remanded the issue of unlined ponds to EPA for reconsideration with specific instructions to consider harm to the environment, not just to human health. The D.C. Circuit also held EPA's decision to not regulate legacy ponds was arbitrary and capricious. While the D.C. Circuit's decision was pending, the EPA, on March 15, 2018, issued a proposal to address provisions of the final coal combustion rule that were remanded back to the agency on June 14, 2016, by the D.C. Circuit. The proposal included provisions that establish alternative performance standards for owners and operators of coal combustion residuals units located in states that have approved permit programs or are otherwise subject to oversight through a permit program administered by the EPA. The EPA published the first phase of the coal combustion rule amendments on July 30, 2018, with an effective date of August 28, 2018 (the "Phase 1, Part 1 rule"). In addition to adopting alternative performance standards and revising groundwater performance standards for certain constituents, EPA extended the deadline by which facilities must initiate closure of unlined ash ponds exceeding a groundwater protection standard and impoundments that do not meet the rule's aquifer location restrictions to October 31, 2020. Following submittal of competing motions from environmental groups and the EPA to stay or remand this deadline extension, on March 13, 2019, the D.C. Circuit granted EPA's request to remand the rule, without vacatur, leaving the October 31, 2020 deadline in place while the agency undertakes a new rulemaking establishing a new deadline for initiating closure. Until the rule is fully litigated and finalized, the Registrants cannot determine whether additional action may be required.

Separately, on August 10, 2017, the EPA issued proposed permitting guidance on how states' coal combustion residuals permit programs should comply with the requirements of the final rule as authorized under the December 2016 Water Infrastructure Improvements for the Nation Act. Utilizing that guidance, the state of Oklahoma submitted an application to the EPA for approval of its state program and, on June 28, 2018, the EPA's approval of the application was published in the Federal Register. Environmental groups, including Waterkeeper Alliance and the Sierra Club, filed suit in the United States District Court for the District of Columbia on September 26, 2018, alleging that the EPA unlawfully approved Oklahoma's permit program. This suit also incorporates claims first identified in a July 26, 2018 notice of intent to sue that alleged the EPA failed to perform nondiscretionary duties related to the development and publication of minimum guidelines for public participation in the approval of state permit programs for coal combustion residuals. To date, none of the states in which the Registrants operate has submitted an application for approval of state permitting authority. The state of Utah adopted the federal final rule in September 2016, which required two landfills to submit permit applications by March 2017. It is anticipated that the state of Utah will submit an application for approval of its coal combustion residuals permit program prior to the end of 2019.

Notwithstanding the status of the final coal combustion residuals rule, citizens' suits have been filed against regulated entities seeking judicial relief for contamination alleged to have been caused by releases of coal combustion byproducts. Some of these cases have been successful in imposing liability upon companies if coal combustion byproducts contaminate groundwater that is ultimately released or connected to surface water. In addition, actions have been filed against regulated entities seeking to require that surface impoundments containing coal combustion residuals be subject to closure by removal rather than being allowed to effectuate closure in place as provided under the final rule. The Registrants are not a party to these lawsuits and until they are resolved, the Registrants cannot predict the impact on overall compliance obligations.

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 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, 2018 . There have been no significant changes in the Company's assumptions regarding critical accounting estimates since December 31, 2018 .

PacifiCorp and its subsidiaries

Consolidated Financial Section

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, 2019 , the related consolidated statements of operations and changes in shareholders' equity for the three-month and six-month periods ended June 30, 2019 and 2018 , and of cash flows for the six-month periods ended June 30, 2019 and 2018 , 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, 2018 , 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 22, 2019 , 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, 2018 , 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.

/s/ Deloitte & Touche LLP

Portland, Oregon

August 2, 2019

PACIFICORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions)



	As of
	June 30,		December 31,
	2019		2018
ASSETS
Current assets:
Cash and cash equivalents	$	536	$	77
Trade receivables, net	606		640
Other receivables, net	76		92
Inventories	440		417
Other current assets	139		133
Total current assets	1,797		1,359

Property, plant and equipment, net	20,156		19,570
Regulatory assets	1,083		1,076
Other assets	330		308

Total assets	$	23,366	$	22,313

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

PACIFICORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)

(Amounts in millions)



	As of
	June 30,			December 31,
	2019			2018
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	670		$	597
Accrued interest	114			114
Accrued property, income and other taxes	190			75
Accrued employee expenses	115			79
Short-term debt	—			30
Current portion of long-term debt	—			350
Regulatory liabilities	82			77
Other current liabilities	197			193
Total current liabilities	1,368			1,515

Long-term debt	7,656			6,665
Regulatory liabilities	2,999			2,978
Deferred income taxes	2,543			2,543
Other long-term liabilities	783			767
Total liabilities	15,349			14,468

Commitments and contingencies (Note 10)

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	3,548			3,377
Accumulated other comprehensive loss, net	(12		)	(13		)
Total shareholders' equity	8,017			7,845

Total liabilities and shareholders' equity	$	23,366		$	22,313

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

PACIFICORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)



	Three-Month Periods						Six-Month Periods
	Ended June 30,						Ended June 30,
	2019			2018			2019			2018

Operating revenue	$	1,167		$	1,193		$	2,426		$	2,377

Operating expenses:
Cost of fuel and energy	384			402			849			835
Operations and maintenance	255			261			511			511
Depreciation and amortization	209			197			414			399
Property and other taxes	51			49			100			101
Total operating expenses	899			909			1,874			1,846

Operating income	268			284			552			531

Other income (expense):
Interest expense	(102		)	(96		)	(198		)	(192		)
Allowance for borrowed funds	8			4			15			8
Allowance for equity funds	16			8			30			15
Interest and dividend income	7			3			12			6
Other, net	9			8			16			16
Total other income (expense)	(62		)	(73		)	(125		)	(147		)

Income before income tax expense	206			211			427			384
Income tax expense	38			27			80			52
Net income	$	168		$	184		$	347		$	332

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

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, 2018	$	2	$	—	$	4,479	$	2,987		$	(15	)	$	7,453
Net income	—		—		—		184			—			184
Common stock dividends declared	—		—		—		(100		)	—			(100		)
Balance, June 30, 2018	$	2	$	—	$	4,479	$	3,071		$	(15	)	$	7,537

Balance, December 31, 2017	$	2	$	—	$	4,479	$	3,089		$	(15	)	$	7,555
Net income	—		—		—		332			—			332
Common stock dividends declared	—		—		—		(350		)	—			(350		)
Balance, June 30, 2018	$	2	$	—	$	4,479	$	3,071		$	(15	)	$	7,537

Balance, March 31, 2019	$	2	$	—	$	4,479	$	3,381		$	(12	)	$	7,850
Net income	—		—		—		168			—			168
Other comprehensive loss	—		—		—		(1		)	—			(1		)
Common stock dividends declared	—		—		—		—			—			—
Balance, June 30, 2019	$	2	$	—	$	4,479	$	3,548		$	(12	)	$	8,017

Balance, December 31, 2018	$	2	$	—	$	4,479	$	3,377		$	(13	)	$	7,845
Net income	—		—		—		347			—			347
Other comprehensive income	—		—		—		(1		)	1			—
Common stock dividends declared	—		—		—		(175		)	—			(175		)
Balance, June 30, 2019	$	2	$	—	$	4,479	$	3,548		$	(12	)	$	8,017

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

PACIFICORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)



	Six-Month Periods
	Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	347		$	332
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	414			399
Allowance for equity funds	(30		)	(15		)
Changes in regulatory assets and liabilities	(22		)	116
Deferred income taxes and amortization of investment tax credits	(8		)	(52		)
Other, net	(5		)	1
Changes in other operating assets and liabilities:
Trade receivables, other receivables and other assets	64			33
Inventories	(23		)	(16		)
Derivative collateral, net	4			(3		)
Accrued property, income and other taxes, net	115			111
Accounts payable and other liabilities	(14		)	11
Net cash flows from operating activities	842			917

Cash flows from investing activities:
Capital expenditures	(817		)	(499		)
Other, net	4			—
Net cash flows from investing activities	(813		)	(499		)

Cash flows from financing activities:
Proceeds from long-term debt	990			—
Repayments of long-term debt	(350		)	(86		)
Net (repayments of) proceeds from short-term debt	(30		)	28
Dividends paid	(175		)	(350		)
Other, net	(2		)	(2		)
Net cash flows from financing activities	433			(410		)

Net change in cash and cash equivalents and restricted cash and cash equivalents	462			8
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period	92			29
Cash and cash equivalents and restricted cash and cash equivalents at end of period	$	554		$	37

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

PACIFICORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


( 1 )	General

PacifiCorp, which includes PacifiCorp and its subsidiaries, is a United States 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, 2019 and for the three- and six-month periods ended June 30, 2019 and 2018 . 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, 2019 and 2018 . The results of operations for the three- and six-month periods ended June 30, 2019 and 2018 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, 2018 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, except as disclosed in Note 4 , during the six-month period ended June 30, 2019 .


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

Cash equivalents consist of funds invested in money market mutual funds, United States 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 escrow accounts for disputes, vendor retention, custodial and nuclear decommissioning 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 of June 30, 2019 and December 31, 2018 , 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,
	2019		2018
Cash and cash equivalents	$	536	$	77
Restricted cash included in other current assets	16		13
Restricted cash included in other assets	2		2
Total cash and cash equivalents and restricted cash and cash equivalents	$	554	$	92


( 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	2019			2018
Utility Plant:
Generation	14 - 67 years	$	12,588		$	12,606
Transmission	58 - 75 years	6,451			6,357
Distribution	20 - 70 years	7,150			7,030
Intangible plant ⁽¹⁾	5 - 75 years	974			970
Other	5 - 60 years	1,425			1,436
Utility plant in service		28,588			28,399
Accumulated depreciation and amortization		(10,234		)	(10,034		)
Utility plant in-service, net		18,354			18,365
Other non-regulated, net of accumulated depreciation and amortization	47 years	10			10
Plant, net		18,364			18,375
Construction work-in-progress		1,792			1,195
Property, plant and equipment, net		$	20,156		$	19,570


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

( 4 ) Leases

Adoption

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, which creates FASB Accounting Standards Codification ("ASC") Topic 842, "Leases" and supersedes Topic 840 "Leases." This guidance increases transparency and comparability among entities by recording lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize on the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous guidance. Following the issuance of ASU No. 2016-02, the FASB issued several ASUs that clarified the implementation guidance for ASU No. 2016-02 but did not change the core principle of the guidance. PacifiCorp adopted this guidance for all applicable contracts in effect as of January 1, 2019 under a modified retrospective method and the adoption did not have a cumulative effect impact at the date of initial adoption.

PacifiCorp has elected to utilize various practical expedients available to adopt ASU No. 2016-02, including (1) the package of three not requiring a reassessment of (i) whether any expired or existing contracts are or contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases; (2) using hindsight in determining the lease term; and (3) not requiring a reassessment of whether existing or expired land easements that were not previously accounted for as leases under ASC Topic 840 are or contain a lease under ASC Topic 842.

Leases

Lessee

PacifiCorp has non-cancelable operating leases primarily for land, office space, office equipment, and generating facilities and finance leases consisting primarily of office buildings, natural gas pipeline facilities, and generating facilities. These leases generally require PacifiCorp to pay for insurance, taxes and maintenance applicable to the leased property. Given the capital intensive nature of the utility industry, it is common for a portion of lease costs to be capitalized when used during construction or maintenance of assets, in which the associated costs will be capitalized with the corresponding asset and depreciated over the remaining life of that asset. Certain leases contain renewal options for varying periods and escalation clauses for adjusting rent to reflect changes in price indices. PacifiCorp does not include options in its lease calculations unless there is a triggering event indicating PacifiCorp is reasonably certain to exercise the option. PacifiCorp's accounting policy is to not recognize lease obligations and corresponding right-of-use assets for leases with contract terms of one year or less and not separate lease components from non-lease components and instead account for each separate lease component and the non-lease components associated with a lease as a single lease component. Leases will be evaluated for impairment in line with ASC 360, "Property, Plant and Equipment" when a triggering event has occurred that might affect the value and use of the assets being leased.

PacifiCorp's leases of generating facilities generally are for the long-term purchase of electric energy, also known as power purchase agreements ("PPA"). PPAs are generally signed before or during the early stages of project construction and can yield a lease that has not yet commenced. These agreements are primarily for renewable energy and the payments are considered variable lease payments as they are based on the amount of output.

PacifiCorp's operating and finance right-of-use assets are recorded in other assets and the operating and finance lease liabilities are recorded in current and long-term other liabilities accordingly. The right-of-use assets and lease liabilities for finance leases as of December 31, 2018 have been reclassified from property, plant and equipment, net and current portion of long-term and long-term debt, respectively, to conform to the current period presentation. The following table summarizes PacifiCorp's leases recorded on the Consolidated Balance Sheet (in millions):



	As of
	June 30,
	2019
Right-of-use assets:
Operating leases	$	14
Finance leases	20
Total right-of-use assets	$	34

Lease liabilities:
Operating leases	$	14
Finance leases	20
Total lease liabilities	$	34

The following table summarizes PacifiCorp's lease costs (in millions):



	Three-Month Period		Six-Month Period
	Ended June 30,		Ended June 30,
	2019		2019

Variable	$	16	$	26
Operating	1		1
Finance:
Amortization	—		1
Interest	1		1
Short-term	1		1
Total lease costs	$	19	$	30

Weighted-average remaining lease term (years):
Operating leases			13.6
Finance leases			9.5

Weighted-average discount rate:
Operating leases			3.7		%
Finance leases			10.6		%

Cash payments associated with operating and finance lease liabilities approximated lease cost for the three- and six-month periods ended June 30, 2019 and 2018 , respectively.

PacifiCorp has the following remaining lease commitments as of (in millions):



	June 30, 2019									December 31, 2018 ⁽¹⁾
	Operating			Finance			Total			Operating		Capital		Total
2019	$	2		$	2		$	4		$	3	$	4	$	7
2020	2			3			5			3		4		7
2021	2			7			9			3		7		10
2022	2			3			5			2		3		5
2023	2			2			4			2		2		4
Thereafter	8			16			24			7		16		23
Total undiscounted lease payments	18			33			51			$	20	$	36	$	56
Less - amounts representing interest	(4		)	(13		)	(17		)
Lease liabilities	$	14		$	20		$	34

(1) Amounts included for comparability and accounted for in accordance with ASC 840, "Leases".


( 5 )	Recent Financing Transactions

Long-Term Debt

In March 2019, PacifiCorp issued $400 million of its 3.50% First Mortgage Bonds due June 2029 and $600 million of its 4.15% First Mortgage Bonds due February 2050. PacifiCorp used a portion of the net proceeds to repay short-term debt that was partially incurred in January 2019 to repay all of PacifiCorp's $350 million 5.50% First Mortgage Bonds due January 2019 and intends to use the remaining net proceeds to fund capital expenditures and for general corporate purposes.

Credit Facilities

In March 2019, PacifiCorp completed a re-offering of variable rate tax-exempt bond obligations totaling $168 million , involving the cancellation, at PacifiCorp's request, of $170 million of letters of credit support by the issuing banks. As a result, PacifiCorp's credit facility support for outstanding variable rate tax-exempt bond obligations increased by $168 million .


( 6 )	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,
	2019		2018		2019		2018

Federal statutory income tax rate	21	%	21	%	21	%	21	%
State income tax, net of federal income tax benefit	3		4		3		4
Federal income tax credits	(4	)	(5	)	(4	)	(5	)
Effects of ratemaking	(1	)	(4	)	(1	)	(4	)
Other	(1	)	(3	)	—		(2	)
Effective income tax rate	18	%	13	%	19	%	14	%

Income tax credits relate primarily to production tax credits earned by PacifiCorp's wind-powered generating facilities. Federal renewable electricity production tax credits 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.


( 7 )	Employee Benefit Plans

Net periodic benefit 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,
	2019			2018			2019		2018
Pension:
Service cost	$	—		$	—		—		—
Interest cost	11			10			22		21
Expected return on plan assets	(16		)	(18		)	(33	)	(36	)
Net amortization	3			4			6		7
Net periodic benefit credit	$	(2	)	$	(4	)	(5	)	(8	)

Other postretirement:
Service cost	$	1		$	1		1		1
Interest cost	3			3			6		6
Expected return on plan assets	(5		)	(6		)	(10	)	(11	)
Net amortization	—			(2		)	—		(3	)
Net periodic benefit credit	$	(1	)	$	(4	)	(3	)	(7	)

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 2019 . As of June 30, 2019 , $2 million and $- million of contributions had been made to the pension and other postretirement benefit plans, respectively.


( 8 )	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 regulated 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.

PacifiCorp has established a risk management process that is designed to identify, assess, manage, mitigate, monitor and report 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, 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 9 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):



	Other						Other			Other
	Current			Other			Current			Long-term
	Assets			Assets			Liabilities			Liabilities			Total

As of June 30, 2019
Not designated as hedging contracts ⁽¹⁾ :
Commodity assets	$	13		$	5		$	9		$	—		$	27
Commodity liabilities	(6		)	(1		)	(63		)	(59		)	(129		)
Total	7			4			(54		)	(59		)	(102		)

Total derivatives	7			4			(54		)	(59		)	(102		)
Cash collateral (payable) receivable	(1		)	—			19			37			55
Total derivatives - net basis	$	6		$	4		$	(35	)	$	(22	)	$	(47	)

As of December 31, 2018
Not designated as hedging contracts ⁽¹⁾ :
Commodity assets	$	36		$	4		$	10		$	1		$	51
Commodity liabilities	(9		)	(1		)	(67		)	(71		)	(148		)
Total	27			3			(57		)	(70		)	(97		)

Total derivatives	27			3			(57		)	(70		)	(97		)
Cash collateral (payable) receivable	(2		)	—			16			45			59
Total derivatives - net basis	$	25		$	3		$	(41	)	$	(25	)	$	(38	)


(1)	PacifiCorp's commodity derivatives are generally included in rates and as of June 30, 2019 and December 31, 2018 , a regulatory asset of $101 million and $96 million , respectively, was recorded related to the net derivative liability of $102 million and $97 million , respectively.

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,
	2019			2018			2019			2018

Beginning balance	$	78		$	122		$	96		$	101
Changes in fair value	26			6			(28		)	34
Net gains (losses) reclassified to operating revenue	6			(1		)	(16		)	6
Net (losses) gains reclassified to cost of fuel and energy	(9		)	(11		)	49			(25		)
Ending balance	$	101		$	116		$	101		$	116

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	2019		2018

Electricity sales, net	Megawatt hours	(2	)	(6	)
Natural gas purchases	Decatherms	116		117

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 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 three recognized credit rating agencies. These derivative contracts 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," or in some cases terminate the contract, in the event of a material adverse change in PacifiCorp's creditworthiness. These rights can vary by contract and by counterparty. As of June 30, 2019 , PacifiCorp's credit ratings for its senior secured debt and its issuer credit ratings for senior unsecured debt by Moody's Investor Service and Standard & Poor's Rating Services were investment grade.

The aggregate fair value of PacifiCorp's derivative contracts in liability positions with specific credit-risk-related contingent features totaled $108 million and $113 million as of June 30, 2019 and December 31, 2018 , respectively, for which PacifiCorp had posted collateral of $56 million and $61 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, 2019 and December 31, 2018 , PacifiCorp would have been required to post $36 million and $35 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.


( 9 )	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 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, 2019
Assets:
Commodity derivatives	$	—	$	27		$	—	$	(17	)	$	10
Money market mutual funds ⁽²⁾	442		—			—		—			442
Investment funds	25		—			—		—			25
	$	467	$	27		$	—	$	(17	)	$	477

Liabilities - Commodity derivatives	$	—	$	(129	)	$	—	$	72		$	(57	)

As of December 31, 2018
Assets:
Commodity derivatives	$	—	$	51		$	—	$	(23	)	$	28
Money market mutual funds ⁽²⁾	69		—			—		—			69
Investment funds	24		—			—		—			24
	$	93	$	51		$	—	$	(23	)	$	121

Liabilities - Commodity derivatives	$	—	$	(148	)	$	—	$	82		$	(66	)


(1)	Represents netting under master netting arrangements and a net cash collateral receivable of $55 million and $59 million as of June 30, 2019 and December 31, 2018 , respectively.


(2)	Amounts are included in cash and cash equivalents, other current assets and other assets on the Consolidated Balance Sheets. The fair value of these money market mutual funds approximates cost.

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 8 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, 2019				As of December 31, 2018
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value

Long-term debt	$	7,656	$	9,141	$	7,015	$	7,833


( 10 )	Commitments and Contingencies

Construction Commitments

Easements

During the six-month period ended June 30, 2019 , PacifiCorp entered into non-cancelable easements with minimum payments totaling $175 million through 2050 for land in Wyoming and Montana, on which some of its wind-powered generating facilities will be located.

Maintenance and Service Contracts

During the six-month period ended June 30, 2019 , PacifiCorp entered into non-cancelable maintenance and service contracts related to wind-powered generating facilities with minimum payment commitments totaling $173 million through 2030.

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.

Environmental Laws and Regulations

PacifiCorp 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 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 does not guarantee dam removal. Instead, it 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.

In September 2016, the KRRC and PacifiCorp filed a joint application with the FERC to transfer the license for the four main-stem Klamath dams from PacifiCorp to the KRRC. Over the past two years, the KRRC has been supplementing the application with additional information about its financial, technical, and legal capacity to become the licensee. In July 2019, the KRRC provided the FERC with additional information about its financial capacity to become a licensee, including updated cost estimates, and its insurance, bonding and liability transfer package. The FERC is evaluating the KRRC's information and the proposed license transfer. The KRRC will continue to refine its insurance, bonding and liability transfer package, and PacifiCorp will review the KRRC's capacity to fulfill its indemnity obligation under the KHSA. If certain conditions in the amended KHSA are not satisfied (e.g., inadequate funding or inability of KRRC to satisfy its indemnification obligation) and the license does not transfer to the KRRC, PacifiCorp will resume relicensing with the FERC.

Guarantees

PacifiCorp 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 PacifiCorp's consolidated financial results.


( 11 )	Revenue from Contracts with Customers

The following table summarizes PacifiCorp's revenue from contracts with customers ("Customer Revenue") by customer class (in millions):



	Three-Month Periods				Six-Month Periods
	Ended June 30,				Ended June 30,
	2019		2018		2019		2018
Customer Revenue:
Retail:
Residential	$	349	$	365	$	838	$	806
Commercial	373		369		733		711
Industrial	289		288		581		557
Other retail	74		73		103		98
Total retail	1,085		1,095		2,255		2,172
Wholesale	11		9		39		31
Transmission	25		30		50		52
Other Customer Revenue	22		20		38		39
Total Customer Revenue	1,143		1,154		2,382		2,294
Other revenue	24		39		44		83
Total operating revenue	$	1,167	$	1,193	$	2,426	$	2,377


(12)	Related Party

Berkshire Hathaway includes BHE and its subsidiaries in its United States 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, 2019 and 2018, PacifiCorp made net cash payments for federal and state income tax to BHE totaling $11 million and $32 million , respectively.


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 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 2019 and 2018

Overview

Net income for the second quarter of 2019 was $168 million , a decrease of $16 million , or 9% , compared to 2018 . Net income decreased primarily due to higher depreciation and amortization expense of $12 million , higher income tax expense of $11 million , lower utility margin of $8 million and higher interest expense of $6 million, partially offset by higher allowance for equity and borrowed funds of $12 million and lower operations and maintenance expense of $6 million . Utility margin decreased primarily due to lower retail and wholesale sales volumes, partially offset by lower volumes and prices associated with coal-fueled generation, and higher average retail rates, primarily due to lower net tax deferrals associated with 2017 Tax Reform and higher wholesale rates. Retail customer volumes decreased 1.6% primarily due to unfavorable impact of weather on residential and commercial customers in Utah, lower residential usage in Oregon and Washington, lower irrigation usage in Utah and Idaho and lower industrial usage in Oregon and Idaho, partially offset by an increase in average number of customers, higher commercial usage in Oregon and Utah and higher industrial usage in Washington and Utah. Energy generated decreased 7% for the second quarter of 2019 compared to 2018 primarily due to lower coal, wind-powered and hydroelectric generation, partially offset by higher natural gas generation. Wholesale electricity sales volumes decreased 46% and purchased electricity volumes decreased 6% .

Net income for the first six months of 2019 was $347 million , an increase of $15 million , or 5% , compared to 2018 . Net income increased primarily due to higher utility margin of $35 million , higher allowance for equity and borrowed funds of $22 million and higher interest and dividend income of $6 million, partially offset by higher income tax expense of $28 million , higher depreciation and amortization expense of $15 million and higher interest expense of $6 million. Utility margin increased primarily due to lower net tax deferrals associated with 2017 Tax Reform, higher retail revenue from higher volumes and higher net deferrals of incurred net power costs in accordance with established adjustment mechanisms, partially offset by lower wholesale revenue, primarily from lower volumes and higher gas-fueled generation volumes. Retail customer volumes increased 1.4% primarily due to an increase in the average number of residential and commercial customers across the service territory, the favorable impact of weather on residential customers across the service territory except Utah, higher industrial usage in Wyoming and Washington, higher commercial usage in Oregon and higher residential and commercial usage in Utah, partially offset by lower industrial usage in Idaho and Oregon, lower residential usage in Oregon and Washington and lower irrigation usage in Utah and Idaho. Energy generated increased 2% for the first six months of 2019 compared to 2018 primarily due to higher natural gas generation, partially offset by lower wind-powered and hydroelectric generation. Wholesale electricity sales volumes decreased 32% and purchased electricity volumes decreased 17% .

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 directly 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.

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
	2019		2018		Change					2019		2018		Change
Utility margin:
Operating revenue	$	1,167	$	1,193	$	(26	)	(2	)%	$	2,426	2,377		$	49		2	%
Cost of fuel and energy	384		402		(18		)	(4	)	849		835		14			2
Utility margin	783		791		(8		)	(1	)	1,577		1,542		35			2
Operations and maintenance	255		261		(6		)	(2	)	511		511		—			—
Depreciation and amortization	209		197		12			6		414		399		15			4
Property and other taxes	51		49		2			4		100		101		(1		)	(1	)
Operating income	$	268	$	284	$	(16	)	(6	)	$	552	$	531	$	21		4

A comparison of PacifiCorp's key operating results is as follows:



	Second Quarter									First Six Months
	2019		2018		Change					2019		2018		Change
Utility margin (in millions):
Operating revenue	$	1,167	$	1,193	$	(26	)	(2	)%	$	2,426	$	2,377	$	49		2	%
Cost of fuel and energy	384		402		(18		)	(4	)	849		835		14			2
Utility margin	$	783	$	791	$	(8	)	(1	)	$	1,577	$	1,542	$	35		2

Sales (GWh):
Residential	3,307		3,458		(151		)	(4	)%	7,915		7,649		266			3	%
Commercial	4,300		4,291		9			—		8,745		8,589		156			2
Industrial, irrigation and other	5,297		5,360		(63		)	(1	)	10,007		10,066		(59		)	(1	)
Total retail	12,904		13,109		(205		)	(2	)	26,667		26,304		363			1
Wholesale	929		1,713		(784		)	(46	)	2,816		4,161		(1,345		)	(32	)
Total sales	13,833		14,822		(989		)	(7	)	29,483		30,465		(982		)	(3	)

Average number of retail customers
(in thousands)	1,928		1,895		33			2	%	1,924		1,893		31			2	%

Average revenue per MWh:
Retail	$	83.96	$	83.58	$	0.38		—	%	$	84.54	$	82.56	$	1.98		2	%
Wholesale	$	36.96	$	27.19	$	9.77		36	%	$	28.45	$	27.03	$	1.42		5	%

Heating degree days	1,376		1,111		265			24	%	6,468		5,447		1,021			19	%
Cooling degree days	311		448		(137		)	(31	)%	311		448		(137		)	(31	)%

Sources of energy (GWh) ⁽¹⁾ :
Coal	6,182		7,079		(897		)	(13	)%	15,668		15,721		(53		)	—	%
Natural gas	2,315		1,981		334			17		5,376		3,929		1,447			37
Hydroelectric ⁽²⁾	1,014		1,037		(23		)	(2	)	1,731		2,173		(442		)	(20	)
Wind and other ⁽²⁾	597		715		(118		)	(17	)	1,357		1,784		(427		)	(24	)
Total energy generated	10,108		10,812		(704		)	(7	)	24,132		23,607		525			2
Energy purchased	4,450		4,718		(268		)	(6	)	7,286		8,773		(1,487		)	(17	)
Total	14,558		15,530		(972		)	(6	)	31,418		32,380		(962		)	(3	)

Average cost of energy per MWh:
Energy generated ⁽³⁾	$	17.41	$	18.82	$	(1.41	)	(7	)%	$	19.55	$	18.64	$	0.91		5	%
Energy purchased	$	36.24	$	34.07	$	2.17		6	%	$	44.67	$	36.90	$	7.77		21	%


(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 RECs or other environmental commodities.


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

Utility margin decreased $8 million , or 1% , for the second quarter of 2019 compared to 2018 primarily due to:

•

$20 million of lower retail revenue from lower volumes. Retail customer volumes decreased 1.6% primarily due to the unfavorable impact of weather on residential and commercial customers in Utah, lower residential usage in Oregon and Washington, lower irrigation usage in Utah and Idaho and lower industrial usage in Oregon and Idaho, partially offset by an increase in average number of customers, higher commercial usage in Oregon and Utah and higher industrial usage in Washington and Utah;


•	$18 million of lower wholesale revenue primarily due to lower average volumes;


•	$6 million of higher wheeling expenses; and


•	$5 million of lower net deferrals of incurred net power costs in accordance with established adjustment mechanisms.

The decreases above were partially offset by:


•	$29 million of lower coal-fueled generation costs from lower volumes and prices;


•	$8 million of higher retail revenue primarily due to lower net tax deferrals associated with the 2017 Tax Reform and higher average rates due to product mix; and


•	$6 million of higher wholesale revenue from higher average market prices.

Operations and maintenance decreased $6 million , or 2% , for the second quarter of 2019 compared to 2018 primarily due to lower salary and benefits expense due to increased capitalized labor of $7 million due to greater construction activity, lower materials and supplies expense and a gain on the sale of certain property, partially offset by higher vegetation management and overhead line maintenance of $3 million.

Depreciation and amortization increased $12 million , or 6% , for the second quarter of 2019 compared to 2018 primarily due to an adjustment to the Oregon accelerated depreciation reserve based on the Oregon allocation factor in 2019 and higher plant-in-service.

Property and other taxes increased $2 million , or 4% for the second quarter of 2019 compared to 2018 primarily due to higher property taxes, primarily in Utah.

Interest expense increased $6 million , or 6% for the second quarter of 2019 compared to 2018 primarily due to higher average long-term debt balances.

Allowance for borrowed and equity funds increased $12 million , or 100% , for the second quarter of 2019 compared to 2018 primarily due to higher qualified construction work-in-progress balances.

Income tax expense increased $11 million , or 41% , for the second quarter of 2019 compared to 2018. The effective tax rate was 18% for 2019 and 13% for 2018. The effective tax rate increased primarily due to the effects of rate making and impacts of the 2017 Tax Reform settlements.

Utility margin increased $35 million , or 2% , for the first six months of 2019 compared to 2018 primarily due to:


•	$47 million of higher retail revenue from lower net tax deferrals associated with the 2017 Tax Reform and higher average rates due to product mix;

•

$35 million of higher retail revenue from higher volumes. Retail customer volumes increased 1.4% primarily due to an increase in the average number of residential and commercial customers across the service territory, the favorable impact of weather on residential customers across the service territory except Utah, higher industrial usage in Wyoming and Washington, higher commercial usage in Oregon and higher residential and commercial usage in Utah, partially offset by lower industrial usage in Idaho and Oregon, lower residential usage in Oregon and Washington and lower irrigation usage in Utah and Idaho; and


•	$27 million of higher net deferrals of incurred net power costs in accordance with established adjustment mechanisms.

The increases above were partially offset by:


•	$35 million of higher gas and coal-fueled generation costs from higher volumes;


•	$31 million of lower wholesale revenues from lower average volumes; and


•	$6 million of higher wheeling expenses.

Operations and maintenance remained constant for the first six months of 2019 compared to 2018 primarily due to lower salary and benefits expense driven by increased capitalized labor of $11 million due to greater construction activity, lower materials and supplies expense and a gain related to the sale of certain property, offset by higher overhead line maintenance of $7 million and higher vegetation management expenses of $6 million.

Depreciation and amortization increased $15 million , or 4% , for the first six months of 2019 compared to 2018 primarily due to an adjustment to the Oregon accelerated depreciation reserve based on the Oregon allocation factor in 2019 and higher plant-in-service.

Interest expense increased $6 million , or 3% for the first six months of 2019 compared to 2018 primarily due to higher average long-term debt balances.

Allowance for borrowed and equity funds increased $22 million , or 96% , for the first six months of 2019 compared to 2018 primarily due to higher qualified construction work-in-progress balances.

Interest and dividend income increased $6 million , or 100% for the first six months of 2019 compared to 2018 primarily due to higher average cash and cash equivalents balances.

Income tax expense increased $28 million , or 54% , for the first six months of 2019 compared to 2018. The effective tax rate was 19% for 2019 and 14% for 2018. The effective tax rate increased primarily due to the effects of rate making and impacts of the 2017 Tax Reform settlements.

Liquidity and Capital Resources

As of June 30, 2019 , PacifiCorp's total net liquidity was as follows (in millions):



Cash and cash equivalents	$	536

Credit facilities	1,200
Less:
Tax-exempt bond support	(256		)
Net credit facilities	944

Total net liquidity	$	1,480

Credit facilities:
Maturity dates	2022

Operating Activities

Net cash flows from operating activities for the six-month periods ended June 30, 2019 and 2018 were $842 million and $917 million , respectively. The change was primarily due to increased fuel payments and lower collections from retail customers, including 2017 Tax Reform refunds, and wholesale customers.

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, 2019 and 2018 were $(813) million and $(499) million , respectively. The change is due to an increase in capital expenditures of $318 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, 2019 was $433 million . Sources of cash consisted of net proceeds from the issuance of long-term debt of $990 million . Uses of cash consisted substantially of $350 million for the repayment of long term debt, $175 million for common stock dividends paid to PPW Holdings LLC and $30 million for the repayment of short-term debt.

Net cash flows from financing activities for the six-month period ended June 30, 2018 was $(410) million . Uses of cash consisted substantially of $350 million for common stock dividends paid to PPW Holdings LLC and $86 million for the repayment of long-term debt, offset by $28 million net proceeds from short-term debt.

Short-term Debt

Regulatory authorities limit PacifiCorp to $1.5 billion of short-term debt. As of June 30, 2019 , PacifiCorp had no short-term debt outstanding. As of December 31, 2018 , PacifiCorp had $30 million of short-term debt outstanding at a weighted average interest rate of 2.85% .

Long-term Debt

In March 2019, PacifiCorp issued $400 million of its 3.50% First Mortgage Bonds due June 2029 and $600 million of its 4.15% First Mortgage Bonds due February 2050. PacifiCorp used a portion of the net proceeds to repay the short-term debt that was partially incurred in January 2019 to repay all of PacifiCorp's $350 million of its 5.50% First Mortgage Bonds due January 2019. PacifiCorp intends to use the remaining net proceeds to fund capital expenditures and for general corporate purposes.

Credit Facilities

In March 2019 , PacifiCorp completed a re-offering of variable rate tax-exempt bond obligations totaling $168 million , involving the cancellation, at PacifiCorp's request, of $170 million of letters of credit support by the issuing banks. As a result, PacifiCorp's credit facility support for outstanding variable rate tax-exempt bond obligations increased by $168 million .

Debt Authorizations

PacifiCorp currently has regulatory authority from the OPUC and the IPUC to issue an additional $1 billion of long-term debt. PacifiCorp must make a notice filing with the WUTC prior to any future issuance. PacifiCorp currently has an effective shelf registration statement with the SEC to issue up to $1 billion additional first mortgage bonds through October 2021.

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 regulatory approvals, PacifiCorp's credit ratings, investors' judgment of risk 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
	2018		2019		2019

Transmission system investment	$	23	$	206	$	500
Wind investment	55		354		880
Operating and other	421		257		895
Total	$	499	$	817	$	2,275

PacifiCorp's historical and forecast capital expenditures include the following:


•	Transmission system investment primarily reflects initial costs for the 140-mile 500-kV Aeolus-Bridger/Anticline transmission line, a major segment of PacifiCorp's Energy Gateway Transmission expansion program expected to be placed in-service in 2020. Planned spending for the Aeolus-Bridger/Anticline line totals $401 million in 2019.


•	Wind investment includes the following:

◦

Repowering certain existing wind-powered generating facilities at PacifiCorp totaling $216 million and $53 million for the six-month periods ended June 30, 2019 and 2018 , respectively. PacifiCorp anticipates costs for these activities will total an additional $301 million for 2019 . The repowering projects are expected to be placed in-service at various dates in 2019 and 2020. The energy production from such repowered facilities is expected to qualify for 100% of the federal renewable electricity production tax credits available for 10 years following each facility's return to service.


•	Remaining investments relate to operating projects that consist of advanced meter infrastructure costs, routine expenditures for generation, transmission, distribution and other infrastructure needed to serve existing and expected demand.

Integrated Resource 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. As part of the 2019 IRP, in April 2019, PacifiCorp released an economic study of the coal fleet which informs how PacifiCorp will meet the long-term energy needs of its customers. While no resource decision will be made ahead of completion of the 2019 IRP, expected to be filed by October 2019, the study identified potential benefits for customers through retirement of some coal units as early as 2022.

Requests for Proposals

PacifiCorp issues individual Request for Proposals ("RFP"), each of which typically focuses on a specific category of generation resources consistent with the IRP or other customer-driven demands. The IRP and the RFPs provide for the identification and staged procurement of resources to meet load or renewable portfolio standard requirements. 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.

As required by applicable laws and regulations, PacifiCorp filed its draft 2017R RFP with the UPSC in June 2017 and with the OPUC in August 2017. The UPSC and the OPUC approved PacifiCorp's 2017R RFP in September 2017. The 2017R RFP sought up to approximately 1,270 MWs of new wind resources that can interconnect to PacifiCorp's transmission system in Wyoming once a proposed high-voltage transmission line is constructed. The 2017R RFP also sought proposals for wind resources located outside of Wyoming capable of delivering all-in economic benefits for PacifiCorp's customers. The proposed high-voltage transmission line and new wind resources must be placed in service by December 31, 2020, to maximize potential federal production tax credit benefits for PacifiCorp's customers. PacifiCorp finalized its bid-selection process and established a final shortlist in February 2018. PacifiCorp plans to deliver 1,150 MWs from three new wind facilities under various commercial structures including a power purchase agreement, a build-transfer agreement, and traditional self-build agreements. PacifiCorp has finalized a 200-MW power purchase agreement and a 200-MW build-transfer agreement for one of the three new wind facilities. PacifiCorp has also secured agreements for safe harbor wind turbine equipment, acquisition of development assets and balance-of-plant construction for the two remaining projects; one providing 250 MWs and a second providing 500 MWs. Agreements for acquisition of follow-on wind turbine equipment for the final two projects was completed in 2019.

Contractual Obligations

As of June 30, 2019 , there have been no material changes outside the normal course of business in contractual obligations from the information provided in Item 7 of PacifiCorp's Annual Report on Form 10-K for the year ended December 31, 2018 , except as disclosed in Note 10 .

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.

Environmental Laws and Regulations

PacifiCorp is subject to federal, state and local 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 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 the EPA and various state and local. All such laws and regulations are subject to a range of interpretation, which 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. PacifiCorp believes it is in material compliance with all applicable laws and regulations.

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.

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, 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, 2018 . There have been no significant changes in PacifiCorp's assumptions regarding critical accounting estimates since December 31, 2018 .

MidAmerican Funding, LLC and its subsidiaries and MidAmerican Energy Company

Consolidated Financial Section

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, 2019 , the related statements of operations and changes in shareholder's equity for the three-month and six-month periods ended June 30, 2019 and 2018 , and of cash flows for the six-month periods ended June 30, 2019 and 2018 , 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, 2018 , and the related statements of operations, comprehensive income, changes in shareholder's equity, and cash flows for the year then ended (not presented herein); and in our report dated February 22, 2019 , 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, 2018 , 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.

/s/ Deloitte & Touche LLP

Des Moines, Iowa

August 2, 2019

MIDAMERICAN ENERGY COMPANY

BALANCE SHEETS (Unaudited)

(Amounts in millions)



	As of
	June 30,		December 31,
	2019		2018
ASSETS
Current assets:
Cash and cash equivalents	$	185	$	—
Trade receivables, net	352		367
Income tax receivable	108		—
Inventories	184		204
Other current assets	91		90
Total current assets	920		661

Property, plant and equipment, net	16,952		16,157
Regulatory assets	282		273
Investments and restricted investments	773		708
Other assets	100		121

Total assets	$	19,027	$	17,920

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

MIDAMERICAN ENERGY COMPANY

BALANCE SHEETS (Unaudited) (continued)

(Amounts in millions)



	As of
	June 30,		December 31,
	2019		2018
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable	$	405	$	575
Accrued interest	73		53
Accrued property, income and other taxes	146		300
Short-term debt	—		240
Current portion of long-term debt	—		500
Other current liabilities	147		122
Total current liabilities	771		1,790

Long-term debt	6,341		4,879
Regulatory liabilities	1,612		1,620
Deferred income taxes	2,426		2,322
Asset retirement obligations	776		552
Other long-term liabilities	306		311
Total liabilities	12,232		11,474

Commitments and contingencies (Note 10)

Shareholder's equity:
Common stock - 350 shares authorized, no par value, 71 shares issued and outstanding	—		—
Additional paid-in capital	561		561
Retained earnings	6,234		5,885
Total shareholder's equity	6,795		6,446

Total liabilities and shareholder's equity	$	19,027	$	17,920

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

MIDAMERICAN ENERGY COMPANY

STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)



	Three-Month Periods						Six-Month Periods
	Ended June 30,						Ended June 30,
	2019			2018			2019			2018
Operating revenue:
Regulated electric	$	538		$	589		$	1,080		$	1,058
Regulated natural gas and other	121			128			421			405
Total operating revenue	659			717			1,501			1,463

Operating expenses:
Cost of fuel and energy	91			118			205			226
Cost of natural gas purchased for resale and other	62			67			257			246
Operations and maintenance	204			207			411			397
Depreciation and amortization	179			208			356			366
Property and other taxes	29			30			63			62
Total operating expenses	565			630			1,292			1,297

Operating income	94			87			209			166

Other income (expense):
Interest expense	(70		)	(56		)	(139		)	(114		)
Allowance for borrowed funds	7			4			13			8
Allowance for equity funds	17			13			32			23
Other, net	10			12			30			21
Total other income (expense)	(36		)	(27		)	(64		)	(62		)

Income before income tax benefit	58			60			145			104
Income tax benefit	(98		)	(46		)	(204		)	(108		)

Net income	$	156		$	106		$	349		$	212

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

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, 2018	$	—	$	561	$	5,309	$	5,870
Net income	—		—		106		106
Other equity transactions	—		—		1		1
Balance, June 30, 2018	$	—	$	561	$	5,416	$	5,977

Balance, December 31, 2017	$	—	$	561	$	5,203	$	5,764
Net income	—		—		212		212
Other equity transactions	—		—		1		1
Balance, June 30, 2018	$	—	$	561	$	5,416	$	5,977

Balance, March 31, 2019	$	—	$	561	$	6,078	$	6,639
Net income	—		—		156		156
Balance, June 30, 2019	$	—	$	561	$	6,234	$	6,795

Balance, December 31, 2018	$	—	$	561	$	5,885	$	6,446
Net income	—		—		349		349
Balance, June 30, 2019	$	—	$	561	$	6,234	$	6,795

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

MIDAMERICAN ENERGY COMPANY

STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)



	Six-Month Periods
	Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	349		$	212
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	356			366
Amortization of utility plant to other operating expenses	17			17
Allowance for equity funds	(32		)	(23		)
Deferred income taxes and amortization of investment tax credits	52			(10		)
Other, net	5			7
Changes in other operating assets and liabilities:
Trade receivables and other assets	(2		)	1
Inventories	20			45
Derivative collateral, net	1			—
Contributions to pension and other postretirement benefit plans, net	(6		)	(7		)
Accrued property, income and other taxes, net	(263		)	140
Accounts payable and other liabilities	(34		)	(97		)
Net cash flows from operating activities	463			651

Cash flows from investing activities:
Capital expenditures	(1,017		)	(818		)
Purchases of marketable securities	(99		)	(147		)
Proceeds from sales of marketable securities	95			125
Other, net	13			27
Net cash flows from investing activities	(1,008		)	(813		)

Cash flows from financing activities:
Proceeds from long-term debt	1,460			687
Repayments of long-term debt	(500		)	(350		)
Net repayments of short-term debt	(240		)	—
Other, net	—			(1		)
Net cash flows from financing activities	720			336

Net change in cash and cash equivalents and restricted cash and cash equivalents	175			174
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period	56			282
Cash and cash equivalents and restricted cash and cash equivalents at end of period	$	231		$	456

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

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 and related corporate services. MHC's nonregulated subsidiaries include Midwest Capital Group, Inc. and MEC Construction Services Co. 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, 2019 , and for the three- and six-month periods ended June 30, 2019 and 2018 . The Statements of Comprehensive Income have been omitted as net income equals comprehensive income for the three- and six-month periods ended June 30, 2019 and 2018 . The results of operations for the three- and six-month periods ended June 30, 2019 , 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, 2018 , 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, 2019 .


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

Cash equivalents consist of funds invested in money market mutual funds, United States 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 as of June 30, 2019 and December 31, 2018 , consist substantially of funds restricted for the purpose of constructing solid waste facilities under tax-exempt bond obligation agreements. A reconciliation of cash and cash equivalents and restricted cash and cash equivalents as of June 30, 2019 and December 31, 2018 , 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
	2019		2018

Cash and cash equivalents	$	185	$	—
Restricted cash and cash equivalents in other current assets	46		56
Total cash and cash equivalents and restricted cash and cash equivalents	$	231	$	56


( 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	2019			2018
Utility plant in service, net:
Generation	20-70 years	$	14,124		$	13,727
Transmission	52-75 years	1,974			1,934
Electric distribution	20-75 years	3,786			3,672
Natural gas distribution	29-75 years	1,750			1,724
Utility plant in service		21,634			21,057
Accumulated depreciation and amortization		(6,201		)	(5,941		)
Utility plant in service, net		15,433			15,116
Nonregulated property, net:
Nonregulated property gross	20-50 years	7			7
Accumulated depreciation and amortization		(1		)	(1		)
Nonregulated property, net		6			6
		15,439			15,122
Construction work-in-progress		1,513			1,035
Property, plant and equipment, net		$	16,952		$	16,157


( 4 )	Leases

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, which creates FASB Accounting Standards Codification ("ASC") Topic 842, "Leases" and supersedes Topic 840 "Leases." This guidance increases transparency and comparability among entities by recording lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize on the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous guidance. Following the issuance of ASU No. 2016-02, the FASB issued several ASUs that clarified the implementation guidance for ASU No. 2016-02 but did not change the core principle of the guidance. MidAmerican Energy adopted this guidance for all applicable contracts in-effect as of January 1, 2019 under a modified retrospective method, and the adoption did not have a cumulative effect impact at the date of initial adoption nor a material impact on MidAmerican Energy's Financial Statements and disclosures included within Notes to Financial Statements.


( 5 )	Recent Financing Transactions

Long-Term Debt

In February 2019, MidAmerican Energy redeemed $500 million of its 2.40% First Mortgage Bonds due in March 2019 at a redemption price of 100% of the principal amount plus accrued interest.

Credit Facilities


( 6 )	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,
	2019		2018		2019		2018

Federal statutory income tax rate	21	%	21	%	21	%	21	%
Income tax credits	(158	)	(80	)	(131	)	(104	)
State income tax, net of federal income tax benefit	(22	)	(7	)	(21	)	(8	)
Effects of ratemaking	(10	)	(9	)	(9	)	(13	)
Other, net	—		(2	)	(1	)	—
Effective income tax rate	(169	)%	(77	)%	(141	)%	(104	)%

Income tax credits relate primarily to production tax credits from MidAmerican Energy 's wind-powered generating facilities. Federal renewable electricity production tax credits 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.

Due to a combination of declines in pre-tax income and increases in production tax credits in recent years and changes in estimates for these values throughout the year, the volatility of the effective tax rate used to determine the recognition of income tax expense each quarter has similarly increased. MidAmerican Energy concluded that, due to such increased volatility, it was no longer able to reasonably estimate an annual effective tax rate for this purpose. Accordingly, beginning January 1, 2019, production tax credits are recognized in the Statement of Operations as they are earned, and excluded in the determination of the effective tax rate used in the recognition of all other income tax expense. Production tax credits recognized in income for the six-month periods ended June 30, 2019 and 2018 were $190 million and $108 million , respectively, with $56 million of the difference related to the change in the method of interim recognition in 2019.

Berkshire Hathaway includes BHE and subsidiaries in its United States 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 made net cash payments for income tax to BHE totaling $9 million for the six-month period ended June 30, 2019 , and received net cash payments for income tax from BHE totaling $228 million for the six-month period ended June 30, 2018 .


( 7 )	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 (credit) 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,
	2019			2018			2019			2018
Pension:
Service cost	$	1		$	2		$	3		$	4
Interest cost	8			7			15			14
Expected return on plan assets	(11		)	(11		)	(21		)	(22		)
Net amortization	—			—			—			1
Net periodic benefit credit	$	(2	)	$	(2	)	$	(3	)	$	(3	)

Other postretirement:
Service cost	$	2		$	2		$	3		$	3
Interest cost	3			2			5			4
Expected return on plan assets	(3		)	(4		)	(6		)	(7		)
Net amortization	(1		)	(1		)	(2		)	(2		)
Net periodic benefit cost (credit)	$	1		$	(1	)	$	—		$	(2	)

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 $1 million , respectively, during 2019 . As of June 30, 2019 , $3 million and $- million of contributions had been made to the pension and other postretirement benefit plans, respectively.

( 8 ) Asset Retirement Obligations



Beginning balance	$	562
Change in estimated costs	237
Retirements	(1		)
Accretion	14
Ending balance	$	812


( 9 )	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 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, 2019:
Assets:
Commodity derivatives	$	—	$	1		$	1		$	(1	)	$	1
Money market mutual funds ⁽²⁾	165		—			—			—			165
Debt securities:
United States government obligations	193		—			—			—			193
International government obligations	—		4			—			—			4
Corporate obligations	—		49			—			—			49
Municipal obligations	—		2			—			—			2
Agency, asset and mortgage-backed obligations	—		1			—			—			1
Equity securities:
United States companies	311		—			—			—			311
Investment funds	19		—			—			—			19
	$	688	$	57		$	1		$	(1	)	$	745

Liabilities - commodity derivatives	$	—	$	(5	)	$	(2	)	$	1		$	(6	)



	Input Levels for Fair Value Measurements
	Level 1		Level 2			Level 3			Other ⁽¹⁾			Total
As of December 31, 2018:
Assets:
Commodity derivatives	$	—	$	4		$	2		$	(3	)	$	3
Money market mutual funds ⁽²⁾	2		—			—			—			2
Debt securities:
United States government obligations	187		—			—			—			187
International government obligations	—		4			—			—			4
Corporate obligations	—		46			—			—			46
Municipal obligations	—		2			—			—			2
Agency, asset and mortgage-backed obligations	—		1			—			—			1
Equity securities:
United States companies	256		—			—			—			256
International companies	6		—			—			—			6
Investment funds	10		—			—			—			10
	$	461	$	57		$	2		$	(3	)	$	517

Liabilities - commodity derivatives	$	—	$	(4	)	$	(2	)	$	3		$	(3	)


(1)	Represents netting under master netting arrangements and a net cash collateral receivable of $- million as of June 30, 2019 and December 31, 2018 , respectively.


(2)	Amounts are included in cash and cash equivalents and investments and restricted investments on the Balance Sheets. The fair value of these money market mutual funds approximates cost.

MidAmerican Energy's investments in money market mutual funds and debt and equity securities are stated at fair value, with debt securities primarily 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.

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, 2019				As of December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value

Long-term debt	$	6,341	$	7,213	$	5,379	$	5,644


( 10 )	Commitments and Contingencies

Easements

During the six-month period ended June 30, 2019 , MidAmerican Energy entered into non-cancelable easements with minimum payments totaling $217 million through 2059 for land in Iowa on which some of its wind-powered generating facilities will be located.

Maintenance and Service Contracts

During the six-month period ended June 30, 2019 , MidAmerican Energy entered into non-cancelable maintenance and service contracts related to wind-powered generating facilities with minimum payment commitments totaling $301 million through 2029.

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 FERC-approved formula rates subject to true-up for actual cost of service. Prior to September 2016, the rates in effect were based on a 12.38% return on equity ("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. MidAmerican Energy is authorized by the FERC to include a 0.50% adder beyond the base ROE effective January 2015. 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. It is uncertain when the FERC will rule on the second complaint, covering the period from February 2015 through May 2016. MidAmerican Energy believes it is probable that the FERC will order a base ROE lower than 12.38% in the second complaint and, as of June 30, 2019 , has accrued a $10 million liability for refunds under the second complaint of amounts collected under the higher ROE from March 2015 through May 2016.


( 11 )	Revenue from Contracts with Customers

The following table summarizes MidAmerican Energy's revenue from contracts with customers ("Customer Revenue") by line of business and customer class, including a reconciliation to MidAmerican Energy's reportable segment information included in Note 12 , (in millions):



	For the Three-Month Period Ended June 30, 2019									For the Six-Month Period Ended June 30, 2019
	Electric		Natural Gas			Other		Total		Electric		Natural Gas		Other		Total
Customer Revenue:
Retail:
Residential	$	148	$	66		$	—	$	214	$	319	$	241	$	—	$	560
Commercial	79		19			—		98		154		85		—		239
Industrial	204		3			—		207		367		9		—		376
Natural gas transportation services	—		8			—		8		—		20		—		20
Other retail ⁽¹⁾	35		(1		)	—		34		70		—		—		70
Total retail	466		95			—		561		910		355		—		1,265
Wholesale	51		15			—		66		127		49		—		176
Multi-value transmission projects	14		—			—		14		30		—		—		30
Other Customer Revenue	—		—			10		10		—		—		15		15
Total Customer Revenue	531		110			10		651		1,067		404		15		1,486
Other revenue	7		1			—		8		13		2		—		15
Total operating revenue	$	538	$	111		$	10	$	659	$	1,080	$	406	$	15	$	1,501



	For the Three-Month Period Ended June 30, 2018								For the Six-Month Period Ended June 30, 2018
	Electric		Natural Gas		Other		Total		Electric		Natural Gas		Other		Total
Customer Revenue:
Retail:
Residential	$	173	$	65	$	—	$	238	$	334	$	233	$	—	$	567
Commercial	80		21		—		101		151		83		—		234
Industrial	195		5		—		200		340		10		—		350
Natural gas transportation services	—		6		—		6		—		19		—		19
Other retail ⁽¹⁾	57		6		—		63		67		—		—		67
Total retail	505		103		—		608		892		345		—		1,237
Wholesale	63		23		—		86		125		55		—		180
Multi-value transmission projects	14		—		—		14		29		—		—		29
Other Customer Revenue	—		—		1		1		—		—		3		3
Total Customer Revenue	582		126		1		709		1,046		400		3		1,449
Other revenue	7		1		—		8		12		2		—		14
Total operating revenue	$	589	$	127	$	1	$	717	$	1,058	$	402	$	3	$	1,463


(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.

100


( 12 )	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,
	2019			2018			2019			2018
Operating revenue:
Regulated electric	$	538		$	589		$	1,080		$	1,058
Regulated natural gas	111			127			406			402
Other	10			1			15			3
Total operating revenue	$	659		$	717		$	1,501		$	1,463

Operating income:
Regulated electric	$	87		$	78		$	153		$	114
Regulated natural gas	5			8			53			51
Other	2			1			3			1
Total operating income	94			87			209			166
Interest expense	(70		)	(56		)	(139		)	(114		)
Allowance for borrowed funds	7			4			13			8
Allowance for equity funds	17			13			32			23
Other, net	10			12			30			21
Income before income tax benefit	$	58		$	60		$	145		$	104



	As of
	June 30, 2019		December 31, 2018
Assets:
Regulated electric	$	17,735	$	16,511
Regulated natural gas	1,289		1,406
Other	3		3
Total assets	$	19,027	$	17,920

101

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, 2019 , the related consolidated statements of operations and changes in member's equity for the three-month and six-month periods ended June 30, 2019 and 2018 , and of cash flows for the six-month periods ended June 30, 2019 and 2018 , 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, 2018 , and the related consolidated statements of operations, comprehensive income, changes in member's equity, and cash flows for the year then ended (not presented herein); and in our report dated February 22, 2019 , 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, 2018 , 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 2, 2019

102

MIDAMERICAN FUNDING, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions)



	As of
	June 30,		December 31,
	2019		2018
ASSETS
Current assets:
Cash and cash equivalents	$	186	$	1
Trade receivables, net	352		365
Income tax receivable	110		—
Inventories	184		204
Other current assets	91		89
Total current assets	923		659

Property, plant and equipment, net	16,963		16,169
Goodwill	1,270		1,270
Regulatory assets	282		273
Investments and restricted investments	775		710
Other assets	100		121

Total assets	$	20,313	$	19,202

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

103

MIDAMERICAN FUNDING, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)

(Amounts in millions)



	As of
	June 30,		December 31,
	2019		2018
LIABILITIES AND MEMBER'S EQUITY
Current liabilities:
Accounts payable	$	406	$	575
Accrued interest	78		58
Accrued property, income and other taxes	147		300
Note payable to affiliate	166		156
Short-term debt	—		240
Current portion of long-term debt	—		500
Other current liabilities	146		122
Total current liabilities	943		1,951

Long-term debt	6,581		5,119
Regulatory liabilities	1,612		1,620
Deferred income taxes	2,423		2,319
Asset retirement obligations	776		552
Other long-term liabilities	306		312
Total liabilities	12,641		11,873

Commitments and contingencies (Note 10)

Member's equity:
Paid-in capital	1,679		1,679
Retained earnings	5,993		5,650
Total member's equity	7,672		7,329

Total liabilities and member's equity	$	20,313	$	19,202

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

104

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,
	2019			2018			2019			2018
Operating revenue:
Regulated electric	$	538		$	589		$	1,080		$	1,058
Regulated natural gas and other	122			129			422			407
Total operating revenue	660			718			1,502			1,465

Operating expenses:
Cost of fuel and energy	91			118			205			226
Cost of natural gas purchased for resale and other	62			67			256			247
Operations and maintenance	205			208			412			398
Depreciation and amortization	179			208			356			366
Property and other taxes	29			30			63			62
Total operating expenses	566			631			1,292			1,299

Operating income	94			87			210			166

Other income (expense):
Interest expense	(74		)	(61		)	(149		)	(124		)
Allowance for borrowed funds	7			4			13			8
Allowance for equity funds	17			13			32			23
Other, net	10			13			31			23
Total other income (expense)	(40		)	(31		)	(73		)	(70		)

Income before income tax benefit	54			56			137			96
Income tax benefit	(99		)	(47		)	(206		)	(110		)

Net income	$	153		$	103		$	343		$	206

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

105

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, 2018	$	1,679	$	5,084	$	6,763
Net income	—		103		103
Balance, June 30, 2018	$	1,679	$	5,187	$	6,866

Balance, December 31, 2017	$	1,679	$	4,981	$	6,660
Net income	—		206		206
Balance, June 30, 2018	$	1,679	$	5,187	$	6,866

Balance, March 31, 2019	$	1,679	$	5,840	$	7,519
Net income	—		153		153
Balance, June 30, 2019	$	1,679	$	5,993	$	7,672

Balance, December 31, 2018	$	1,679	$	5,650	$	7,329
Net income	—		343		343
Balance, June 30, 2019	$	1,679	$	5,993	$	7,672

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

106

MIDAMERICAN FUNDING, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)



	Six-Month Periods
	Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	343		$	206
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	356			366
Amortization of utility plant to other operating expenses	17			17
Allowance for equity funds	(32		)	(23		)
Deferred income taxes and amortization of investment tax credits	52			(10		)
Other, net	7			9
Changes in other operating assets and liabilities:
Trade receivables and other assets	(5		)	4
Inventories	20			45
Derivative collateral, net	1			—
Contributions to pension and other postretirement benefit plans, net	(6		)	(7		)
Accrued property, income and other taxes, net	(265		)	143
Accounts payable and other liabilities	(34		)	(96		)
Net cash flows from operating activities	454			654

Cash flows from investing activities:
Capital expenditures	(1,017		)	(818		)
Purchases of marketable securities	(99		)	(147		)
Proceeds from sales of marketable securities	95			125
Other, net	13			27
Net cash flows from investing activities	(1,008		)	(813		)

Cash flows from financing activities:
Proceeds from long-term debt	1,460			687
Repayments of long-term debt	(500		)	(350		)
Net change in note payable to affiliate	10			(3		)
Net repayments of short-term debt	(240		)	—
Other, net	(1		)	—
Net cash flows from financing activities	729			334

Net change in cash and cash equivalents and restricted cash and cash equivalents	175			175
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period	57			282
Cash and cash equivalents and restricted cash and cash equivalents at end of period	$	232		$	457

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

107

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 and related corporate services. MHC's principal subsidiary is MidAmerican Energy Company ("MidAmerican Energy"), a public utility with electric and natural gas operations. Direct, wholly owned nonregulated subsidiaries of MHC are Midwest Capital Group, Inc. and MEC Construction Services Co.

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, 2019 , and for the three- and six-month periods ended June 30, 2019 and 2018 . 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, 2019 and 2018 . The results of operations for the three- and six-month periods ended June 30, 2019 , 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, 2018 , 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, 2019 .


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

Cash equivalents consist of funds invested in money market mutual funds, United States 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 as of June 30, 2019 and December 31, 2018 , consist substantially of funds restricted for the purpose of constructing solid waste facilities under tax-exempt bond obligation agreements. A reconciliation of cash and cash equivalents and restricted cash and cash equivalents as of June 30, 2019 and December 31, 2018 , 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
	2019		2018

Cash and cash equivalents	$	186	$	1
Restricted cash and cash equivalents in other current assets	46		56
Total cash and cash equivalents and restricted cash and cash equivalents	$	232	$	57

108


( 3 )	Property, Plant and Equipment, Net

Refer to Note 3 of MidAmerican Energy's Notes to Financial Statements. In addition to MidAmerican Energy's property, plant and equipment, net, MidAmerican Funding had as of June 30, 2019 and December 31, 2018 , nonregulated property gross of $24 million and related accumulated depreciation and amortization of $13 million and $12 million , respectively, which consisted primarily of a corporate aircraft owned by MHC.


( 4 )	Leases

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


( 5 )	Recent Financing Transactions

Refer to Note 5 of MidAmerican Energy's Notes to Financial Statements.


( 6 )	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,
	2019		2018		2019		2018

Federal statutory income tax rate	21	%	21	%	21	%	21	%
Income tax credits	(171	)	(86	)	(139	)	(113	)
State income tax, net of federal income tax benefit	(25	)	(8	)	(23	)	(9	)
Effects of ratemaking	(11	)	(10	)	(9	)	(14	)
Other, net	3		(1	)	—		—
Effective income tax rate	(183	)%	(84	)%	(150	)%	(115	)%

Income tax credits relate primarily to production tax credits from MidAmerican Energy's wind-powered generating facilities. Federal renewable electricity production tax credits 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.

Due to a combination of declines in pre-tax income and increases in production tax credits in recent years and changes in estimates for these values throughout the year, the volatility of the effective tax rate used to determine the recognition of income tax expense each quarter has similarly increased. MidAmerican Energy concluded that, due to such increased volatility, it was no longer able to reasonably estimate an annual effective tax rate for this purpose. Accordingly, beginning January 1, 2019, production tax credits are recognized in the Statement of Operations as they are earned, and excluded in the determination of the effective tax rate used in the recognition of all other income tax expense. Production tax credits recognized in income for the six-month periods ended June 30, 2019 and 2018 were $190 million and $108 million , respectively with $56 million of the difference related to the change in the method of interim recognition in 2019.

Berkshire Hathaway includes BHE and subsidiaries in its United States 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 made net cash payments for income tax to BHE totaling $8 million for the six-month period ended June 30, 2019 , and received net cash payments for income tax from BHE totaling $234 million for the six-month period ended June 30, 2018 .


( 7 )	Employee Benefit Plans

Refer to Note 7 of MidAmerican Energy's Notes to Financial Statements.

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( 8 ) Asset Retirement Obligations

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


( 9 )	Fair Value Measurements

Refer to Note 9 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, 2019				As of December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value

Long-term debt	$	6,581	$	7,528	$	5,619	$	5,941


( 10 )	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 10 of MidAmerican Energy's Notes to Financial Statements.


( 11 )	Revenue from Contracts with Customers

Refer to Note 11 of MidAmerican Energy's Notes to Financial Statements. Additionally, MidAmerican Funding had other Accounting Standards Codification Topic 606 revenue of $1 million and $1 million for the three-month periods ended June 30, 2019 and 2018 , respectively, and $1 million and $2 million for the six-month periods ended June 30, 2019 and 2018 , respectively.


( 12 )	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 .

110

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



	Three-Month Periods						Six-Month Periods
	Ended June 30,						Ended June 30,
	2019			2018			2019			2018
Operating revenue:
Regulated electric	$	538		$	589		$	1,080		$	1,058
Regulated natural gas	111			127			406			402
Other	11			2			16			5
Total operating revenue	$	660		$	718		$	1,502		$	1,465

Operating income:
Regulated electric	$	87		$	78		$	153		$	114
Regulated natural gas	5			8			53			51
Other	2			1			4			1
Total operating income	94			87			210			166
Interest expense	(74		)	(61		)	(149		)	(124		)
Allowance for borrowed funds	7			4			13			8
Allowance for equity funds	17			13			32			23
Other, net	10			13			31			23
Income before income tax benefit	$	54		$	56		$	137		$	96



	As of
	June 30, 2019		December 31, 2018
Assets ⁽¹⁾ :
Regulated electric	$	18,926	$	17,702
Regulated natural gas	1,368		1,485
Other	19		15
Total assets	$	20,313	$	19,202



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

111


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

MidAmerican Funding is an Iowa limited liability company whose sole member is BHE. MidAmerican Funding owns all of the outstanding common stock of MHC Inc., which owns all of the common stock of MidAmerican Energy, Midwest Capital Group, Inc. and MEC Construction Services Co. MidAmerican Energy is a public utility company headquartered in Des Moines, Iowa. MHC Inc., MidAmerican Funding and BHE are also headquartered in Des Moines, Iowa.

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 as presented in this joint filing. 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 and other factors. This discussion should be read in conjunction with the historical unaudited Financial Statements and Notes to Financial Statements in Part I, Item 1 of this Form 10-Q. MidAmerican Energy's and MidAmerican Funding'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 2019 and 2018

Overview

MidAmerican Energy -

MidAmerican Energy's net income for the second quarter of 2019 was $156 million , an increase of $50 million , or 47% , compared to 2018 primarily due to higher income tax benefit of $52 million driven by a $44 million increase in recognized production tax credits, $26 million of which was due to a change in the method of interim recognition, lower depreciation and amortization of $29 million and higher allowances for equity and borrowed funds of $7 million, partially offset by higher interest expense of $14 million, lower electric utility margin of $24 million and lower natural gas utility margin of $4 million. Electric utility margin decreased due to lower retail customer volumes, lower average retail rates, lower wholesale revenue and lower recoveries through bill riders, partially offset by lower generation and purchased power costs. Electric retail customer volumes decreased 3.7% primarily from the unfavorable impact of weather, partially offset by higher industrial usage.

MidAmerican Energy's net income for the first six months of 2019 was $349 million , an increase of $137 million , or 65% , compared to 2018 due to higher income tax benefit of $96 million driven by an $82 million increase in recognized production tax credits, $56 million of which was due to a change in the method of interim recognition, higher electric utility margin of $43 million, higher allowances for equity and borrowed funds of $14 million, lower depreciation and amortization of $10 million and higher income from corporate-owned life insurance policies of $8 million, partially offset by higher interest expense of $25 million and higher operations and maintenance expense of $14 million. Electric utility margin increased due to higher recoveries through bill riders, higher retail customer volumes, lower generation and purchased power costs and higher wholesale revenue, partially offset by lower average retail rates. Electric retail customer volumes increased 0.5% as an increase in industrial usage was largely offset by the unfavorable impact of weather.

MidAmerican Funding -

MidAmerican Funding's net income for the second quarter of 2019 was $153 million , an increase of $50 million , or 49% , compared to 2018 . MidAmerican Funding's net income for the first six months of 2019 was $343 million , an increase of $137 million , or 67% , compared to 2018 . The increases were primarily due to the changes in MidAmerican Energy's earnings discussed above.

112

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 regulated cost of natural gas purchased for resale are generally recovered from its retail customers through regulatory recovery mechanisms, and as a result, changes in those expenses result in comparable changes to revenue from the related recovery mechanisms. 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.

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
	2019		2018		Change					2019		2018		Change
Electric utility margin:
Regulated electric operating revenue	$	538	$	589	$	(51	)	(9	)%	$	1,080	$	1,058	$	22		2	%
Cost of fuel and energy	91		118		(27		)	(23	)	205		226		(21		)	(9	)
Electric utility margin	447		471		(24		)	(5	)	875		832		43			5

Natural gas utility margin:
Regulated natural gas operating revenue	111		127		(16		)	(13	)%	406		402		4			1
Cost of natural gas purchased for resale	55		67		(12		)	(18	)	248		246		2			1
Natural gas utility margin	56		60		(4		)	(7	)	158		156		2			1

Utility margin	503		531		(28		)	(5	)%	1,033		988		45			5

Other operating revenue	10		1		9			*		15		3		12			*
Other cost of sales	7		—		7			*		9		—		9			*
Operations and maintenance	204		207		(3		)	(1	)%	411		397		14			4
Depreciation and amortization	179		208		(29		)	(14	)	356		366		(10		)	(3	)
Property and other taxes	29		30		(1		)	(3	)	63		62		1			2

Operating income	$	94	$	87	$	7		8	%	$	209	$	166	$	43		26	%

* Not meaningful.

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Regulated Electric Utility Margin

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



	Second Quarter									First Six Months
	2019		2018		Change					2019		2018		Change
Electric utility margin (in millions):
Operating revenue	$	538	$	589	$	(51	)	(9	)%	$	1,080	$	1,058	$	22		2	%
Cost of fuel and energy	91		118		(27		)	(23	)	205		226		(21		)	(9	)
Electric utility margin	$	447	$	471	$	(24	)	(5	)	$	875	$	832	$	43		5

Electricity Sales (GWh):
Residential	1,270		1,569		(299		)	(19	)%	3,155		3,355		(200		)	(6	)%
Commercial	853		934		(81		)	(9	)	1,893		1,919		(26		)	(1	)
Industrial	3,644		3,483		161			5		6,915		6,608		307			5
Other	381		400		(19		)	(5	)	780		803		(23		)	(3	)
Total retail	6,148		6,386		(238		)	(4	)	12,743		12,685		58			—
Wholesale	2,328		2,454		(126		)	(5	)	5,604		5,019		585			12
Total sales	8,476		8,840		(364		)	(4	)	18,347		17,704		643			4

Average number of retail customers (in thousands)	785		778		7			1	%	785		778		7			1	%

Average revenue per MWh:
Retail	$	76.02	$	79.32	$	(3.30	)	(4	)%	$	71.46	$	70.55	$	0.91		1	%
Wholesale	$	21.88	$	25.79	$	(3.91	)	(15	)%	$	22.75	$	24.19	$	(1.44	)	(6	)%

Heating degree days	605		700		(95		)	(14	)%	4,206		4,035		171			4	%
Cooling degree days	280		511		(231		)	(45	)%	280		511		(231		)	(45	)%

Sources of energy (GWh) ⁽¹⁾ :
Coal	2,434		3,405		(971		)	(29	)%	6,337		6,734		(397		)	(6	)%
Nuclear	968		957		11			1		1,884		1,848		36			2
Natural gas	46		229		(183		)	(80	)	64		274		(210		)	(77	)
Wind and other ⁽²⁾	3,954		3,280		674			21		8,298		7,265		1,033			14
Total energy generated	7,402		7,871		(469		)	(6	)	16,583		16,121		462			3
Energy purchased	1,197		1,168		29			2		2,046		1,956		90			5
Total	8,599		9,039		(440		)	(5	)	18,629		18,077		552			3


(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 renewable portfolio standards or other regulatory requirements or (b) sold to third parties in the form of renewable energy credits or other environmental commodities.

114

Regulated electric utility margin decreased $24 million for the second quarter of 2019 compared to 2018 primarily due to:


(1)	Lower retail utility margin of $31 million due to -


•	a decrease of $27 million from the favorable impact of weather in 2018;


•	a decrease of $18 million in average revenue rates due to sales mix; and


•	a decrease of $2 million from other revenue and factors, partially offset by


•	an increase of $16 million from non-weather-related sales growth, primarily higher industrial usage; and


(2)	Higher wholesale utility margin of $7 million due to higher margin per unit, reflecting lower costs, partially offset by lower sales volumes.

Regulated electric utility margin increased $43 million for the first six months of 2019 compared to 2018 primarily due to:


(1)	Higher wholesale utility margin of $22 million due to higher margin per unit from lower fuel costs and higher wholesale volumes; and


(2)	Higher retail utility margin of $20 million primarily due to -


•	an increase of $36 million from non-weather-related sales growth, primarily higher industrial usage; and


•	an increase of $35 million, net of energy costs, from higher recoveries through bill riders, including a decrease of $10 million in electric DSM program revenue (offset in operations and maintenance expense); partially offset by


•	a decrease of $27 million in averages rates, predominantly from sales mix; and


•	a decrease of $23 million from the favorable impact of weather in 2018.

Regulated Natural Gas Utility Margin

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



	Second Quarter									First Six Months
	2019		2018		Change					2019		2018		Change
Natural gas utility margin (in millions):
Operating revenue	$	111	$	127	$	(16	)	(13)	%	$	406	$	402	$	4		1	%
Cost of natural gas purchased for resale	55		67		(12		)	(18	)	248		246		2			1
Natural gas utility margin	$	56	$	60	$	(4	)	(7	)	$	158	$	156	$	2		1

Natural gas throughput (000's Dth):
Residential	6,928		7,641		(713		)	(9)	%	35,497		33,720		1,777			5	%
Commercial	3,297		3,757		(460		)	(12	)	16,581		16,010		571			4
Industrial	949		1,289		(340		)	(26	)	2,495		2,705		(210		)	(8	)
Other	13		8		5			63		48		30		18			60
Total retail sales	11,187		12,695		(1,508		)	(12	)	54,621		52,465		2,156			4
Wholesale sales	7,050		9,195		(2,145		)	(23	)	18,605		20,371		(1,766		)	(9	)
Total sales	18,237		21,890		(3,653		)	(17	)	73,226		72,836		390			1
Natural gas transportation service	23,824		22,632		1,192			5		54,367		52,092		2,275			4
Total natural gas throughput	42,061		44,522		(2,461		)	(6	)	127,593		124,928		2,665			2

Average number of retail customers (in thousands)	761		755		6			1	%	762		757		5			1	%
Average revenue per retail Dth sold	$	7.89	$	7.56	$	0.33		4	%	$	6.16	$	6.24	$	(0.08	)	(1)	%
Average cost of natural gas per retail Dth sold	$	3.56	$	3.42	$	0.14		4	%	$	3.63	$	3.63	$	—		—	%

Combined retail and wholesale average cost of natural gas per Dth sold	$	3.01	$	3.04	$	(0.03	)	(1)	%	$	3.38	$	3.37	$	0.01		—	%

Heating degree days	663		734		(71		)	(10)	%	4,389		4,177		212			5	%

115

Regulated natural gas utility margin decreased $4 million for the second quarter of 2019 compared to 2018 due to:


(1)	A decrease of $5 million from lower natural gas DSM program revenue (offset in operations and maintenance expense); and


(2)	A decrease of $3 million from greater tax reform revenue reductions; partially offset by


(3)	An increase of $4 million from a higher average rate due to sales mix.

Regulated natural gas utility margin increased $2 million for the first six months of 2019 compared to 2018 due to:


(1)	An increase of $7 million from non-weather rate and usage variances, in part due to sales mix; and


(2)	An increase of $2 million from the favorable impact of weather; partially offset by


(3)	A decrease of $6 million from lower natural gas DSM program revenue (offset in operations and maintenance expense); and


(4)	A decrease of $1 million from greater tax reform revenue reductions.

Operating Expenses

MidAmerican Energy -

Operations and maintenance decreased $3 million for the second quarter of 2019 compared to 2018 primarily due to lower DSM program expense of $12 million, which is recoverable in bill riders and offset in operating revenue, and lower fossil-fueled generation maintenance of $8 million, partially offset by higher wind-powered generation operations and maintenance of $7 million due to additional wind turbines and easements, higher electric and gas distribution operation and maintenance of $5 million and higher nonregulated operations costs of $3 million.

Operations and maintenance increased $14 million for the first six months of 2019 compared to 2018 primarily due to higher wind-powered generation operations and maintenance of $16 million due to additional wind turbines and easements, higher electric distribution operations and maintenance of $7 million from emergency outage and tree-trimming costs, higher nonregulated operations costs of $7 million, higher transmission costs from MISO of $4 million, which are recoverable in bill riders and offset in operating revenue, and higher gas distribution operations and maintenance of $3 million, partially offset by lower DSM program expense of $16 million, which is recoverable in bill riders and offset in operating revenue, and lower fossil-fueled generation maintenance of $8 million.

Depreciation and amortization for the second quarter and first six months of 2019 decreased $29 million and $10 million , respectively, compared to 2018 due to lower Iowa revenue sharing accruals of $48 million, partially offset by wind-powered generating facilities and other plant placed in-service.

Other Income (Expense)

MidAmerican Energy -

Interest expense increased $14 million and $25 million for the second quarter and first six months of 2019 compared to 2018 primarily due to higher interest expense from the issuance of $1.5 billion of first mortgage bonds in January 2019 , partially offset by the redemption of $500 million of first mortgage bonds in February 2019.

Allowance for borrowed and equity funds increased $7 million and $14 million for the second quarter and first six months of 2019 compared to 2018 primarily due to higher construction work-in-progress balances related to wind-powered generation.

Other, net decreased $2 million and increased $9 million for the second quarter and first six months of 2019 , respectively, compared to 2018 primarily due to fluctuation in returns on corporate-owned life insurance policies and, for the first six months , higher interest income from favorable cash positions.

116

Income Tax Benefit

MidAmerican Energy -

MidAmerican Energy's income tax benefit increased $52 million for the second quarter of 2019 compared to 2018 , and the effective tax rate was (169)% for 2019 and (77)% for 2018 . For the first six months of 2019 compared to 2018, MidAmerican Energy's income tax benefit increased $96 million , and the effective tax rate was (141)% for 2019 and (104)% for 2018 . The change in the effective tax rates for 2019 compared to 2018 were substantially due to the recognition of production tax credits.

Federal renewable electricity production tax credits 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, including those facilities where a significant portion of the equipment was replaced, commonly referred to as repowered facilities, are eligible for the credits for 10 years from the date the qualifying generating facilities were placed in-service. Due to a combination of declines in pre-tax income and increases in production tax credits in recent years and changes in estimates for these values throughout the year, the volatility of the effective tax rate used to determine the recognition of income tax expense each quarter has similarly increased. MidAmerican Energy concluded that, due to such increased volatility, it was no longer able to reasonably estimate an annual effective tax rate for this purpose. Accordingly, beginning January 1, 2019, production tax credits are recognized in the Statement of Operations as they are earned, and excluded in the determination of the effective tax rate used in the recognition of all other income tax expense. Production tax credits recognized in income for the first six months of 2019 and 2018 were $190 million and $108 million , respectively, with $56 million of the difference related to the change in the method of interim recognition in 2019.

MidAmerican Funding -

MidAmerican Funding's income tax benefit increased $52 million for the second quarter of 2019 compared to 2018 , and the effective tax rate was (183)% for 2019 and (84)% for 2018 . For the first six months of 2019 compared to 2018, MidAmerican Energy's income tax benefit increased $96 million , and the effective tax rate was (150)% for 2019 and (115)% for 2018 . The changes in the effective tax rates were principally due to the factors discussed for MidAmerican Energy.

Liquidity and Capital Resources

As of June 30, 2019 , MidAmerican Energy's and MidAmerican Funding's total net liquidity were as follows (in millions):



MidAmerican Energy:
Cash and cash equivalents	$	185

Credit facilities, maturing 2020 and 2022	905
Less:
Tax-exempt bond support	(370		)
Net credit facilities	535

MidAmerican Energy total net liquidity	$	720

MidAmerican Funding:
MidAmerican Energy total net liquidity	$	720
Cash and cash equivalents	1
MHC, Inc. credit facility, maturing 2020	4
MidAmerican Funding total net liquidity	$	725

117

Operating Activities

MidAmerican Energy's net cash flows from operating activities for the six-month periods ended June 30, 2019 and 2018 , were $463 million and $651 million , respectively. MidAmerican Funding's net cash flows from operating activities for the six-month periods ended June 30, 2019 and 2018 , were $454 million and $654 million , respectively. Cash flows from operating activities decreased primarily due to the timing of MidAmerican Energy's income tax cash flows with BHE, partially offset by higher cash margins for MidAmerican Energy's regulated electric wholesale business and lower payments to vendors. MidAmerican Energy's income tax cash flows with BHE totaled net cash payments of $9 million in 2019 and net cash receipts of $228 million in 2018. 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 and MidAmerican Funding's net cash flows from investing activities for the six-month periods ended June 30, 2019 and 2018 , were $(1,008) million and $(813) million , respectively. Net cash flows from investing activities consist almost entirely of capital expenditures, which increased due to higher wind-powered generating facility construction 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, 2019 and 2018 were $720 million and $336 million , respectively. MidAmerican Funding's net cash flows from financing activities for the six-month periods ended June 30, 2019 and 2018 , were $729 million and $334 million , respectively. In January 2019, MidAmerican Energy issued $600 million of its 3.65% First Mortgage Bonds due 2029 and $900 million of its 4.25% First Mortgage Bonds due 2049.

In February 2019, MidAmerican Energy redeemed $500 million of its 2.40% First Mortgage Bonds due in March 2019 at a redemption price of 100% of the principal amount plus accrued interest. In February 2018, MidAmerican Energy issued $700 million of its 3.65% First Mortgage Bonds due 2048, and in March 2018, MidAmerican Energy repaid $350 million of its 5.30% Senior Notes due March 2018. Through its commercial paper program, MidAmerican Energy made payments totaling $240 million in 2019. MidAmerican Funding received $10 million in 2019 and paid $3 million in 2018 through its note payable with BHE.

Debt Authorizations and Related Matters

MidAmerican Energy has authority from the FERC to issue, through July 31, 2020, commercial paper and bank notes aggregating $1.3 billion at interest rates not to exceed the applicable London Interbank Offered Rate plus a spread of 400 basis points.

MidAmerican Energy currently has an effective registration statement with the SEC to issue an indeterminate amount of long-term debt securities through June 26, 2021. Additionally, MidAmerican Energy has authorization from the FERC to issue, through June 30, 2021, preferred stock up to an aggregate of $500 million and long-term debt securities up to an aggregate of $1.7 billion at interest rates not to exceed the applicable United States Treasury rate plus a spread of 175 basis points and from the ICC to issue preferred stock up to an aggregate of $500 million through November 1, 2020.

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.

118

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
	2018		2019		2019

Wind-powered generation	$	313	$	473	$	1,463
Wind-powered generation repowering	141		118		395
Other	364		426		1,143
Total	$	818	$	1,017	$	3,001

MidAmerican Energy's forecast capital expenditures for 2019 include the following:


•	The construction of wind-powered generating facilities in Iowa. MidAmerican Energy currently has three wind-powered generation construction projects in progress, two of which are under ratemaking principles approved by the IUB.

In August 2016, the IUB issued an order approving ratemaking principles related to MidAmerican Energy's construction of up to 2,000 MW (nominal ratings) of additional wind-powered generating facilities ("Wind XI") expected to be placed in service in 2017 through 2019, including a total of 1,151 MW (nominal ratings) placed in-service through June 30, 2019 . Wind XI ratemaking principles established a cost cap of $3.6 billion, including AFUDC, a fixed rate of return on equity of 11.0% over the proposed 40-year useful lives of those facilities in any future Iowa rate proceeding and the revenue sharing mechanism that was effective in 2018. In December 2018, the IUB issued an order approving ratemaking principles related to MidAmerican Energy's construction of up to 591 MWs (nominal ratings) of additional wind-powered generating facilities ("Wind XII") expected to be placed in-service by the end of 2020. Wind XII ratemaking principles establish a cost cap of $922 million, including AFUDC, establish a fixed rate of return on equity of 11.0% over the proposed 40-year useful lives of those facilities in any future Iowa rate proceeding and provide that all Iowa retail energy benefits from Wind XII will reduce rate base and be excluded from the Iowa energy adjustment clause. Additionally, the ratemaking principles modify the Wind XI revenue sharing mechanism, effective January 1, 2019, such that revenue sharing will be triggered each year by actual equity returns above a threshold calculated annually or 11%, whichever is less, and MidAmerican Energy will share with customers 90% of the revenue in excess of the trigger, instead of 100% sharing. The threshold will be calculated each year-end and will be the weighted average of equity returns authorized via ratemaking principles for certain rate base and, for remaining rate base, interest rates on 30-year single A-rated utility bond yields plus 400 basis points, with a minimum return of 9.5%.The cost caps established by ratemaking principles ensure that as long as total costs for each project are below the cap, the investment will be deemed prudent in any future Iowa rate proceeding. MidAmerican Energy expects all of these wind-powered generating facilities to qualify for 100% of production tax credits available. Production tax credits from these projects are excluded from MidAmerican Energy's Iowa energy adjustment clause until these generation assets are reflected in base rates.

Additionally, MidAmerican Energy is constructing 205 MW (nominal ratings) of wind-powered generating facilities expected to be placed in-service in 2020, with a current forecast of $300 million, including AFUDC. This project is not subject to pre-approved ratemaking principles. MidAmerican Energy expects these wind-powered generating facilities to qualify for 100% of production tax credits available. Production tax credits from this project are expected to be included in MidAmerican Energy's Iowa energy adjustment clause.

119

•

The repowering of the oldest of MidAmerican Energy's wind-powered generating facilities in Iowa. The repowering projects entail the replacement of significant components of the facilities, which is expected to qualify such facilities for the re-establishment of production tax credits for ten years following each facility's return to service at rates that depend upon the year in which construction begins. Of the 1,479 MWs of current repowering projects not in-service as of June 30, 2019 , 303 MWs are currently expected to qualify for 100% of the federal production tax credits available for ten years following each facility's return to service, 769 MWs are expected to qualify for 80% of such credits and 407 MWs are expected to qualify for 60% of such credits.


•	Remaining costs primarily relate to routine expenditures for generation, transmission, distribution and other infrastructure needed to serve existing and expected demand.

Contractual Obligations

As of June 30, 2019 , there have been no material changes outside the normal course of business in MidAmerican Energy's and MidAmerican Funding's contractual obligations from the information provided in Item 7 of their Annual Report on Form 10-K for the year ended December 31, 2018 .

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.

Quad Cities Generating Station Operating Status

120

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 its current and future operations. In addition to imposing continuing compliance obligations and capital expenditure requirements, 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 the EPA and various state and local agencies. All such laws and regulations are subject to a range of interpretation, which 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. MidAmerican Energy believes it is in material compliance with all applicable laws and regulations.

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, 2018 . There have been no significant changes in MidAmerican Energy's and MidAmerican Funding's assumptions regarding critical accounting estimates since December 31, 2018 .

121

Nevada Power Company and its subsidiaries

Consolidated Financial Section

122

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, 2019 , the related consolidated statements of operations and changes in shareholder's equity for the three-month and six-month periods ended June 30, 2019 and 2018 , and of cash flows for the six-month periods ended June 30, 2019 and 2018 , 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, 2018 , 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 22, 2019 , 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, 2018 , 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.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada

August 2, 2019

123

NEVADA POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions, except share data)



	As of
	June 30,			December 31,
	2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	81		$	111
Trade receivables, net	280			233
Inventories	65			61
Regulatory assets	47			39
Other current assets	59			75
Total current assets	532			519

Property, plant and equipment, net	6,457			6,418
Finance lease right of use assets, net	449			450
Regulatory assets	845			878
Other assets	59			37

Total assets	$	8,342		$	8,302

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable	$	191		$	187
Accrued interest	30			38
Accrued property, income and other taxes	54			30
Current portion of long-term debt	575			500
Current portion of finance lease obligations	27			20
Regulatory liabilities	47			49
Customer deposits	85			67
Other current liabilities	43			29
Total current liabilities	1,052			920

Long-term debt	1,775			1,853
Finance lease obligations	434			443
Regulatory liabilities	1,153			1,137
Deferred income taxes	738			749
Other long-term liabilities	306			296
Total liabilities	5,458			5,398

Commitments and contingencies (Note 10)

Shareholder's equity:
Common stock - $1.00 stated value; 1,000 shares authorized, issued and outstanding	—			—
Additional paid-in capital	2,308			2,308
Retained earnings	580			600
Accumulated other comprehensive loss, net	(4		)	(4		)
Total shareholder's equity	2,884			2,904

Total liabilities and shareholder's equity	$	8,342		$	8,302

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

124

NEVADA POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)



	Three-Month Periods						Six-Month Periods
	Ended June 30,						Ended June 30,
	2019			2018			2019			2018

Operating revenue	$	527		$	562		$	922		$	957

Operating expenses:
Cost of fuel and energy	226			239			399			409
Operations and maintenance	78			107			154			198
Depreciation and amortization	89			84			178			168
Property and other taxes	11			10			23			20
Total operating expenses	404			440			754			795

Operating income	123			122			168			162

Other income (expense):
Interest expense	(41		)	(45		)	(88		)	(90		)
Allowance for borrowed funds	—			1			1			1
Allowance for equity funds	1			—			2			1
Other, net	5			5			13			9
Total other income (expense)	(35		)	(39		)	(72		)	(79		)

Income before income tax expense	88			83			96			83
Income tax expense	19			19			21			19
Net income	$	69		$	64		$	75		$	64

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

125

NEVADA 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, 2018	1,000	$	—	$	2,308	$	374		$	(4	)	$	2,678
Net income	—	—		—		64			—			64
Balance, June 30, 2018	1,000	$	—	$	2,308	$	438		$	(4	)	$	2,742

Balance, December 31, 2017	1,000	$	—	$	2,308	$	374		$	(4	)	$	2,678
Net income	—	—		—		64			—			64
Balance, June 30, 2018	1,000	$	—	$	2,308	$	438		$	(4	)	$	2,742

Balance, March 31, 2019	1,000	$	—	$	2,308	$	531		$	(4	)	$	2,835
Net income	—	—		—		69			—			69
Dividends declared	—	—		—		(20		)	—			(20		)
Balance, June 30, 2019	1,000	$	—	$	2,308	$	580		$	(4	)	$	2,884

Balance, December 31, 2018	1,000	$	—	$	2,308	$	600		$	(4	)	$	2,904
Net income	—	—		—		75			—			75
Dividends declared	—	—		—		(95		)	—			(95		)
Balance, June 30, 2019	1,000	$	—	$	2,308	$	580		$	(4	)	$	2,884

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

126

NEVADA POWER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)



	Six-Month Periods
	Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	75		$	64
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	178			168
Allowance for equity funds	(2		)	(1		)
Changes in regulatory assets and liabilities	3			28
Deferred income taxes and amortization of investment tax credits	(9		)	(14		)
Deferred energy	13			25
Amortization of deferred energy	12			7
Other, net	(6		)	9
Changes in other operating assets and liabilities:
Trade receivables and other assets	(47		)	(62		)
Inventories	(3		)	1
Accrued property, income and other taxes	21			12
Accounts payable and other liabilities	30			13
Net cash flows from operating activities	265			250

Cash flows from investing activities:
Capital expenditures	(191		)	(135		)
Proceeds from sale of assets	2			1
Net cash flows from investing activities	(189		)	(134		)

Cash flows from financing activities:
Proceeds from long-term debt	495			573
Repayments of long-term debt	(500		)	(325		)
Dividends paid	(95		)	—
Other, net	(7		)	(7		)
Net cash flows from financing activities	(107		)	241

Net change in cash and cash equivalents and restricted cash and cash equivalents	(31		)	357
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period	121			66
Cash and cash equivalents and restricted cash and cash equivalents at end of period	$	90		$	423

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

127

NEVADA POWER COMPANY AND SUBSIDIARIES

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 ("Sierra Pacific") and certain other subsidiaries. Nevada Power is a United States 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, 2019 and for the three- and six-month periods ended June 30, 2019 and 2018 . 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, 2019 and 2018 . The results of operations for the three- and six-month periods ended June 30, 2019 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, 2018 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, except as disclosed in Note 4 , during the six-month period ended June 30, 2019 .


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

Cash equivalents consist of funds invested in money market mutual funds, United States 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 as of June 30, 2019 and December 31, 2018 , 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 of June 30, 2019 and December 31, 2018 , 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,
	2019		2018
Cash and cash equivalents	$	81	$	111
Restricted cash and cash equivalents included in other current assets	9		10
Total cash and cash equivalents and restricted cash and cash equivalents	$	90	$	121

128


( 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,
	Depreciable Life	2019			2018
Utility plant:
Generation	30 - 55 years	$	3,724		$	3,720
Distribution	20 - 65 years	3,472			3,411
Transmission	45 - 70 years	1,446			1,439
General and intangible plant	5 - 65 years	709			716
Utility plant		9,351			9,286
Accumulated depreciation and amortization		(3,027		)	(2,966		)
Utility plant, net		6,324			6,320
Other non-regulated, net of accumulated depreciation and amortization	45 years	1			1
Plant, net		6,325			6,321
Construction work-in-progress		132			97
Property, plant and equipment, net		$	6,457		$	6,418


( 4 )	Leases

Adoption

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, which creates FASB Accounting Standards Codification ("ASC") Topic 842, "Leases" and supersedes Topic 840 "Leases." This guidance increases transparency and comparability among entities by recording lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize on the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous guidance. Following the issuance of ASU No. 2016-02, the FASB issued several ASUs that clarified the implementation guidance for ASU No. 2016-02 but did not change the core principle of the guidance. Nevada Power adopted this guidance for all applicable contracts in-effect as of January 1, 2019 under a modified retrospective method and the adoption did not have a cumulative-effect impact to the opening balance of retained earnings at the date of initial adoption.

Nevada Power has elected to utilize various practical expedients available to adopt ASU No. 2016-02, including (1) the package of three not requiring a reassessment of (i) whether any expired or existing contracts are or contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases; (2) using hindsight in determining the lease term; and (3) not requiring a reassessment of whether existing or expired land easements that were not previously accounted for as leases under ASC Topic 840 are or contain a lease under ASC Topic 842.

129

Leases

Lessee

Nevada Power has non-cancelable operating leases primarily for land, generating facilities, vehicles and office equipment and finance leases consisting primarily of transmission assets, generating facilities, office space and vehicles. These leases generally require Nevada Power to pay for insurance, taxes and maintenance applicable to the leased property. Given the capital intensive nature of the utility industry, it is common for a portion of lease costs to be capitalized when used during construction or maintenance of assets, in which the associated costs will be capitalized with the corresponding asset and depreciated over the remaining life of that asset. Certain leases contain renewal options for varying periods and escalation clauses for adjusting rent to reflect changes in price indices. Nevada Power does not include options in its lease calculations unless there is a triggering event indicating Nevada Power is reasonably certain to exercise the option. Nevada Power's accounting policy is to not recognize lease obligations and corresponding right-of-use assets for leases with contract terms of one year or less and not separate lease components from non-lease components and instead account for each separate lease component and the non-lease components associated with a lease as a single lease component. Leases will be evaluated for impairment in line with ASC Topic 360, "Property, Plant and Equipment" when a triggering event has occurred that might affect the value and use of the assets being leased.

Nevada Power's leases of generating facilities generally are for the long-term purchase of electric energy, also known as power purchase agreements ("PPA"). PPAs are generally signed before or during the early stages of project construction and can yield a lease that has not yet commenced. These agreements are primarily for renewable energy and the payments are considered variable lease payments as they are based on the amount of output

Nevada Power's operating right-of-use assets are recorded in other assets and the operating lease liabilities are recorded in current and long-term other liabilities accordingly. The right-of-use assets and lease liabilities for finance leases as of December 31, 2018 have been reclassified from property, plant and equipment, net and current portion of long-term and long-term debt, respectively, to conform to the current period presentation. The following table summarizes Nevada Power's leases recorded on the Consolidated Balance Sheet (in millions):



	As of
	June 30,
	2019
Right-of-use assets:
Operating leases	$	14
Finance leases	449
Total right-of-use assets	$	463

Lease liabilities:
Operating leases	$	18
Finance leases	462
Total lease liabilities	$	480

130

The following table summarizes Nevada Power's lease costs (in millions):



	Three-Month Period		Six-Month Period
	Ended June 30,		Ended June 30,
	2019		2019

Variable	$	112	$	220
Operating	—		1
Finance:
Amortization	3		6
Interest	10		20
Total lease costs	$	125	$	247

Weighted-average remaining lease term (years):
Operating leases			7.7
Finance leases			30.8

Weighted-average discount rate:
Operating leases			4.4		%
Finance leases			8.6		%

The following table summarizes Nevada Power's supplemental cash flow information relating to leases (in millions):



	Six-Month Period
	Ended June 30,
	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(1	)
Operating cash flows from finance leases	(20		)
Financing cash flows from finance leases	(7		)
Right-of-use assets obtained in exchange for lease liabilities:
Finance leases	$	4

Nevada Power has the following remaining lease commitments as of (in millions):



	June 30, 2019									December 31, 2018 ⁽¹⁾
	Operating			Finance			Total			Operating		Capital		Total
2019	$	1		$	34		$	35		$	3	$	59	$	62
2020	3			59			62			3		59		62
2021	3			63			66			3		61		64
2022	2			61			63			3		60		63
2023	2			50			52			2		50		52
Thereafter	10			712			722			10		709		719
Total undiscounted lease payments	21			979			1,000			$	24	$	998	$	1,022
Less - amounts representing interest	(3		)	(517		)	(520		)
Lease liabilities	$	18		$	462		$	480

(1) Amounts included for comparability and accounted for in accordance with ASC Topic 840, "Leases " .

131


( 5 )	Regulatory Matters

Deferred Energy

Nevada statutes permit regulated utilities to adopt deferred energy accounting procedures. The intent of these procedures is to ease the effect on customers of fluctuations in the cost of purchased natural gas, fuel and electricity and are subject to annual prudency review by the PUCN. Under deferred energy accounting, to the extent actual fuel and purchased power costs exceed fuel and purchased power costs recoverable through current rates that excess is not recorded as a current expense on the Consolidated Statements of Operations but rather is deferred and recorded as a regulatory asset on the Consolidated Balance Sheets. Conversely, a regulatory liability is recorded to the extent fuel and purchased power costs recoverable through current rates exceed actual fuel and purchased power costs. These excess amounts are reflected in quarterly adjustments to rates and recorded as cost of fuel and energy in future time periods.

2017 Tax Reform

In February 2018, Nevada Power made a filing with the PUCN proposing a tax rate reduction rider for the lower annual income tax expense anticipated to result from 2017 Tax Reform for 2018 and beyond. In March 2018, the PUCN issued an order approving the rate reduction proposed by Nevada Power. The new rates were effective April 1, 2018. The order extended the procedural schedule to allow parties additional discovery relevant to 2017 Tax Reform and a hearing was held in July 2018. In September 2018, the PUCN issued an order directing Nevada Power to record the amortization of any excess protected accumulated deferred income tax arising from the 2017 Tax Reform as a regulatory liability effective January 1, 2018. Subsequently, Nevada Power filed a petition for reconsideration relating to the amortization of protected excess accumulated deferred income tax balances resulting from the 2017 Tax Reform. In November 2018, the PUCN issued an order granting reconsideration and reaffirming the September 2018 order. In December 2018, Nevada Power filed a petition for judicial review. In January 2019, intervening parties filed statements of intent to participate in the petition for judicial review.

Chapter 704B Applications

Chapter 704B of the Nevada Revised Statutes allows retail electric customers with an average annual load of one megawatt (" MW ") or more to file with the PUCN an application to purchase energy from alternative providers of a new electric resource and become distribution only service customers. On a case-by-case basis, the PUCN will assess the application and may deny or grant the application subject to conditions, including paying an impact fee, paying on-going charges and receiving approval for specific alternative energy providers and terms. The impact fee and on-going charges are assessed to alleviate the burden on other Nevada customers for the applicant's share of previously committed investments and long-term renewable contracts and are set at a level designed such that the remaining customers are not subjected to increased costs. In June 2019, the Nevada Legislature passed Senate Bill 547 ("SB 547") which modifies the 704B process. The modifications outlined in SB 547, among others, require a utility to establish limits in their integrated resource plan on the amount of load that can take service under Chapter 704B, customers taking service under Chapter 704B continue to pay for public program costs and requires the alternative energy providers to be licensed by the PUCN. In addition, SB 547 requires customers to file a 704B application with the PUCN in January allowing for alignment with the capacity amount established in the integrated resource plan.

In June 2018, Station Casinos LLC ("Station"), a customer of Nevada Power, filed an application with the PUCN to purchase energy from an alternative provider and become a distribution only service customer of Nevada Power. In October 2018, the PUCN approved an order allowing Station to purchase energy from another energy supplier subject to conditions, including paying an impact fee of $15 million . In November 2018, Station filed a petition for reconsideration with the PUCN to allow Station to pay its share of the Renewable Base Tariff Energy Rate in a single lump sum, receive a credit for a portion of impact fees previously paid by past 704B applicants and receive a credit for a portion of incremental transmission revenue associated with expected sales to others. In December 2018, the PUCN issued an order granting reconsideration and reaffirming the October 2018 order. In February 2019, the PUCN issued an order allowing Station to alter their expected transition date from December 1, 2018 to October 1, 2019. In June 2019, Station withdrew their application.

In November 2018, Boyd Gaming Corporation ("Boyd"), a customer of Nevada Power, filed an application with the PUCN to purchase energy from an alternative provider and become a distribution only service customer of Nevada Power. In June 2019, the PUCN approved an order allowing Boyd to purchase energy from another energy supplier subject to conditions, including paying an impact fee of $11 million .

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( 6 )	Recent Financing Transactions

Long-Term Debt

Credit Facilities

In May 2019, Nevada Power extended, with lender consent, the expiration date for its $400 million secured credit facility to June 2022 by exercising the remaining one-year extension option.


( 7 )	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 Period				Six-Month Periods
	Ended June 30,				Ended June 30,
	2019		2018		2019		2018

Federal statutory income tax rate	21	%	21	%	21	%	21	%
Nondeductible expenses	—		2		—		2
Effects of ratemaking	—		(1	)	—		(1	)
Other	—		1		—		1
Effective income tax rate	21	%	23	%	21	%	23	%

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



	As of
	June 30,		December 31,
	2019		2018
Qualified Pension Plan:
Other long-term liabilities	$	26	$	26

Non-Qualified Pension Plans:
Other current liabilities	1		1
Other long-term liabilities	9		9

Other Postretirement Plans:
Other long-term liabilities	1		1

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( 9 )	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 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.

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, 2019
Assets:
Money market mutual funds ⁽¹⁾	$	71	$	—	$	—		$	71
Investment funds	2		—		—			2
	$	73	$	—	$	—		$	73

Liabilities - commodity derivatives	$	—	$	—	$	(11	)	$	(11	)

As of December 31, 2018
Assets:
Commodity derivatives	$	—	$	—	$	7		$	7
Money market mutual funds ⁽¹⁾	104		—		—			104
Investment funds	1		—		—			1
	$	105	$	—	$	7		$	112

Liabilities - commodity derivatives	$	—	$	—	$	(4	)	$	(4	)


(1)	Amounts are included in cash and cash equivalents on the Consolidated Balance Sheets. The fair value of these money market mutual funds approximates cost.

134

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, 2019 and December 31, 2018 , 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 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.

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,
	2019			2018			2019			2018

Beginning balance	$	(5	)	$	(8	)	$	3		$	(3	)
Changes in fair value recognized in regulatory assets	(8		)	(3		)	(17		)	(8		)
Settlements	2			2			3			2
Ending balance	$	(11	)	$	(9	)	$	(11	)	$	(9	)

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, 2019				As of December 31, 2018
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value

Long-term debt	$	2,350	$	2,787	$	2,353	$	2,651


( 10 )	Commitments and Contingencies

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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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. Nevada Power 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.


( 11 )	Revenue from Contracts with Customers

The following table summarizes Nevada Power's revenue from contracts with customers ("Customer Revenue") by customer class (in millions):



	Three-Month Periods				Six-Month Periods
	Ended June 30,				Ended June 30,
	2019		2018		2019		2018
Customer Revenue:
Retail:
Residential	$	266	$	312	$	466	$	505
Commercial	114		110		204		205
Industrial	112		108		182		187
Other	6		5		11		11
Total fully bundled	498		535		863		908
Distribution only service	8		8		15		15
Total retail	506		543		878		923
Wholesale, transmission and other	14		13		31		23
Total Customer Revenue	520		556		909		946
Other revenue	7		6		13		11
Total revenue	$	527	$	562	$	922	$	957

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

General

Nevada Power's revenues and operating income are subject to fluctuations during the year due to impacts that seasonal weather, rate changes, and customer usage patterns have on demand for electric energy and resources. Nevada Power is a summer peaking utility experiencing its highest retail energy sales in response to the demand for air conditioning. The variations in energy usage due to varying weather, customer growth and other energy usage patterns, including energy efficiency and conservation measures, necessitates a continual balancing of loads and resources and purchases and sales of energy under short- and long-term energy supply contracts. As a result, the prudent management and optimization of available resources has a direct effect on the operating and financial performance of Nevada Power. Additionally, the timely recovery of purchased power, fuel costs and other costs and the ability to earn a fair return on investments through rates are essential to the operating and financial performance of Nevada Power.

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 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.

137

Results of Operations for the Second Quarter and First Six Months of 2019 and 2018

Overview

Net income for the second quarter of 2019 was $69 million , an increas e of $5 million , or 8% , compared to 2018 primarily due to $29 million of lower operations and maintenance expense, mainly due to lower political activity expenses, and $4 million of lower interest expense. The increase is partially offset by $22 million of lower utility margin, mainly due to lower customer volumes from the unfavorable impacts of weather.

Net income for the first six months of 2019 was $75 million , an increase of $11 million , or 17% , compared to 2018 primarily due to $44 million of lower operations and maintenance expense, mainly due to lower political activity expenses and lower settlement costs associated with a personal injury claim in 2018, and higher other income, net primarily due to lower interest on long-term debt. The increase is partially offset by $25 million of lower utility margin, mainly due to lower customer volumes from the unfavorable impacts of weather and lower average retail rates related to the tax rate reduction rider effective April 2018.

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.

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
	2019		2018		Change					2019		2018		Change
Utility margin:
Operating revenue	$	527	$	562	$	(35	)	(6	)%	$	922	$	957	$	(35	)	(4	)%
Cost of fuel and energy	226		239		(13		)	(5	)	399		409		(10		)	(2	)
Utility margin	301		323		(22		)	(7	)	523		548		(25		)	(5	)
Operations and maintenance	78		107		(29		)	(27	)	154		198		(44		)	(22	)
Depreciation and amortization	89		84		5			6		178		168		10			6
Property and other taxes	11		10		1			10		23		20		3			15
Operating income	$	123	$	122	$	1		1		$	168	$	162	$	6		4

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A comparison of Nevada Power's key operating results is as follows:



	Second Quarter									First Six Months
	2019		2018		Change					2019		2018		Change
Utility margin (in millions):
Operating revenue	$	527	$	562	$	(35	)	(6	)%	$	922	$	957	$	(35	)	(4	)%
Cost of fuel and energy	226		239		(13		)	(5	)	399		409		(10		)	(2	)
Utility margin	$	301	$	323	$	(22	)	(7	)	$	523	$	548	$	(25	)	(5	)

GWhs sold:
Residential	2,176		2,604		(428		)	(16	)%	3,784		4,086		(302		)	(7	)%
Commercial	1,137		1,201		(64		)	(5	)	2,129		2,191		(62		)	(3	)
Industrial	1,380		1,416		(36		)	(3	)	2,540		2,650		(110		)	(4	)
Other	47		46		1			2		94		96		(2		)	(2	)
Total fully bundled ⁽¹⁾	4,740		5,267		(527		)	(10	)	8,547		9,023		(476		)	(5	)
Distribution only service	692		671		21			3		1,220		1,163		57			5
Total retail	5,432		5,938		(506		)	(9	)	9,767		10,186		(419		)	(4	)
Wholesale	120		84		36			43		264		128		136			106
Total GWhs sold	5,552		6,022		(470		)	(8	)	10,031		10,314		(283		)	(3	)

Average number of retail customers (in thousands):
Residential	839		824		15			2	%	837		821		16			2	%
Commercial	109		108		1			1		109		107		2			2
Industrial	2		2		—			—		2		2		—			—
Total	950		934		16			2		948		930		18			2

Average per MWh:
Revenue - fully bundled ⁽¹⁾	$	105.05	$	101.41	$	3.64		4	%	$	100.96	$	100.53	$	0.43		—	%
Wholesale	$	27.27	$	17.75	$	9.52		54	%	$	35.45	$	31.00	$	4.45		14	%
Total cost of energy ⁽²⁾⁽³⁾	$	44.92	$	41.75	$	3.17		8	%	$	44.21	$	42.89	$	1.32		3	%

Heating degree days	25		23		2			9	%	1,108		839		269			32	%
Cooling degree days	1,107		1,473		(366		)	(25	)%	1,119		1,492		(373		)	(25	)%

Sources of energy (GWhs) ⁽³⁾⁽⁴⁾ :
Natural gas	3,085		3,612		(527		)	(15	)%	5,254		6,013		(759		)	(13	)%
Coal	249		239		10			4		591		488		103			21
Renewables	18		21		(3		)	(14	)	30		36		(6		)	(17	)
Total energy generated	3,352		3,872		(520		)	(13	)	5,875		6,537		(662		)	(10	)
Energy purchased	1,696		1,849		(153		)	(8	)	3,171		2,995		176			6
Total	5,048		5,721		(673		)	(12	)	9,046		9,532		(486		)	(5	)

* Not meaningful


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


(2)	The average total cost of energy per MWh includes the cost of fuel, purchased power and deferrals and does not include other costs.

(3)

The average total cost of energy per MWh and sources of energy excludes 37 and 23 GWhs of coal and 426 and 363 GWhs of gas generated energy that is purchased at cost by related parties for the second quarter of 2019 and 2018 , respectively. The average total cost of energy per MWh and sources of energy excludes 118 and 93 GWhs of coal and 923 and 1,043 GWhs of gas generated energy that is purchased at cost by related parties for the first six months of 2019 and 2018 , respectively.


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

139

Utility margin decreased $22 million , or 7% , for the second quarter of 2019 compared to 2018 primarily due to $24 million of lower customer volumes primarily from the unfavorable impacts of weather, partially offset by $1 million of residential customer growth.

Operations and maintenance decreased $29 million , or 27% , for the second quarter of 2019 compared to 2018 primarily due to the impacts of adopting ASC 842, "Leases" ("ASC 842") and lower political activity expenses.

Depreciation and amortization increased $5 million , or 6% , for the second quarter of 2019 compared to 2018 primarily due to the impacts of adopting ASC 842.

Other income (expense) is favorable $4 million , or 10% , for the second quarter of 2019 compared to 2018 primarily due to lower interest expense on long-term debt and higher dividend and interest income, partially offset by the impacts of adopting ASC 842.

Utility margin decreased $25 million , or 5% , for the first six months of 2019 compared to 2018 primarily due to:


•	$18 million in lower customer volumes primarily from the unfavorable impacts of weather,


•	$11 million in lower retail rates due to the tax rate reduction rider effective April 2018, and


•	$3 million due to lower retail rates as a result of the 2017 regulatory rate review with rates effective February 2018.

The decrease in utility margin was offset by:


•	$3 million from higher transmission revenue, and


•	$3 million due to residential and commercial customer growth.

Operations and maintenance decreased $44 million , or 22% , for the first six months of 2019 compared to 2018 primarily due to the impacts of adopting ASC 842, lower political activity expenses and settlement costs associated with a personal injury claim in 2018.

Depreciation and amortization increased $10 million , or 6% , for the first six months of 2019 compared to 2018 primarily due to the impacts of adopting ASC 842.

Property and other taxes increased $3 million , or 15% , for the first six months of 2019 compared to 2018 due to a decrease in available abatements.

Other income (expense) is favorable $7 million , or 9% , for the first six months of 2019 compared to 2018 primarily due to lower interest expense on long-term debt, higher dividend and interest income and higher other income due to a licensing agreement with a third party, partially offset by the impacts of adopting ASC 842.

Income tax expense increased $2 million , or 11% , for the first six months of 2019 compared to 2018 . The effective tax rate was 21% in 2019 and 23% in 2018 and decreased due to lower nondeductible expenses.

Liquidity and Capital Resources

As of June 30, 2019 , Nevada Power's total net liquidity was as follows (in millions):



Cash and cash equivalents	$	81
Credit facility	400
Total net liquidity	$	481
Credit facility:
Maturity date	2022

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Operating Activities

Net cash flows from operating activities for the six-month periods ended June 30, 2019 and 2018 were $265 million and $250 million , respectively. The change was due to increased collections of customer advances, primarily relating to temporary deposits for solar power purchase agreements under construction, lower payments for operating costs, mainly due to lower political activity expenses, lower payments for income taxes, lower interest payments for long-term debt and proceeds from a licensing agreement with a third party, partially offset by an increase in fuel costs and lower collections from customers due to the unfavorable impact of weather.

Investing Activities

Net cash flows from investing activities for the six-month periods ended June 30, 2019 and 2018 were $(189) million and $(134) million , respectively. The change was primarily due to increased capital expenditures.

Financing Activities

Net cash flows from financing activities for the six-month periods ended June 30, 2019 and 2018 were $(107) million and $241 million , respectively. The change was due to lower proceeds from issuance of long-term debt, higher repayments of long-term debt and dividends paid to NV Energy, Inc. of $95 million in 2019.

Long-Term Debt

Debt Authorizations

Nevada Power currently has financing authority from the PUCN consisting of the ability to: (1) issue new long-term debt securities of up to $1.3 billion ; (2) refinance up to $156 million of long-term debt securities; and (3) maintain a revolving credit facility of up to $1.3 billion .

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.

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. Expenditures for certain assets may ultimately include acquisition of existing assets.

141

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
	2018		2019		2019

Distribution	55		96		201
Transmission system investment	5		10		29
Other	75		85		203
Total	$	135	$	191	$	433

Nevada Power's forecast capital expenditures include investments related to operating projects that consist of routine expenditures for transmission, distribution, generation and other infrastructure needed to serve existing and expected demand.

Integrated Resource Planning

In June 2019, the Nevada Utilities filed an amendment to their 2018 Joint Integrated Resource Plan requesting approval of three power purchase agreements for 1,190 MW of solar photovoltaic generating resources with an additional 590 MW of co-located battery storage.

Contractual Obligations

As of June 30, 2019 , there have been no material changes outside the normal course of business in contractual obligations from the information provided in Item 7 of Nevada Power's Annual Report on Form 10-K for the year ended December 31, 2018 .

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 and capital expenditure requirements, 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 the EPA and various state and local agencies. All such laws and regulations are subject to a range of interpretation, which 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. Nevada Power believes it is in material compliance with all applicable laws and regulations.

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, 2018 . There have been no significant changes in Nevada Power's assumptions regarding critical accounting estimates since December 31, 2018 .

142

Sierra Pacific Power Company

Financial Section

143

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 balance sheet of Sierra Pacific Power Company (" Sierra Pacific ") as of June 30, 2019 , the related statements of operations and changes in shareholder's equity for the three-month and six-month periods ended June 30, 2019 and 2018 , and of cash flows for the six-month periods ended June 30, 2019 and 2018 , 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 Sierra Pacific as of December 31, 2018 , 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 22, 2019 , 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, 2018 , 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 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.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada

August 2, 2019

144

SIERRA PACIFIC POWER COMPANY

BALANCE SHEETS (Unaudited)

(Amounts in millions, except share data)



	As of
	June 30,		December 31,
	2019		2018
ASSETS
Current assets:
Cash and cash equivalents	$	28	$	71
Trade receivables, net	90		100
Inventories	60		52
Regulatory assets	21		7
Other current assets	26		33
Total current assets	225		263

Property, plant and equipment, net	2,992		2,947
Regulatory assets	309		314
Other assets	68		45

Total assets	$	3,594	$	3,569

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable	$	86	$	116
Accrued interest	14		13
Accrued property, income and other taxes	21		14
Regulatory liabilities	27		18
Customer deposits	21		18
Other current liabilities	29		18
Total current liabilities	198		197

Long-term debt	1,135		1,120
Regulatory liabilities	485		491
Deferred income taxes	341		331
Other long-term liabilities	181		166
Total liabilities	2,340		2,305

Commitments and contingencies (Note 10)

Shareholder's equity:
Common stock - $3.75 stated value, 20,000,000 shares authorized and 1,000 issued and outstanding	—		—
Additional paid-in capital	1,111		1,111
Retained earnings	143		153
Total shareholder's equity	1,254		1,264

Total liabilities and shareholder's equity	$	3,594	$	3,569

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

145

SIERRA PACIFIC POWER COMPANY

STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)



	Three-Month Periods						Six-Month Periods
	Ended June 30,						Ended June 30,
	2019			2018			2019			2018
Operating revenue:
Regulated electric	$	172		$	169		$	354		$	350
Regulated natural gas	22			19			59			60
Total operating revenue	194			188			413			410

Operating expenses:
Cost of fuel and energy	79			78			161			155
Cost of natural gas purchased for resale	10			8			29			31
Operations and maintenance	40			48			84			87
Depreciation and amortization	32			29			63			59
Property and other taxes	6			6			12			12
Total operating expenses	167			169			349			344

Operating income	27			19			64			66

Other income (expense):
Interest expense	(12		)	(11		)	(24		)	(21		)
Allowance for borrowed funds	1			1			1			1
Allowance for equity funds	1			1			2			2
Other, net	1			3			3			5
Total other income (expense)	(9		)	(6		)	(18		)	(13		)

Income before income tax expense	18			13			46			53
Income tax expense	4			6			10			12
Net income	$	14		$	7		$	36		$	41

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

146

SIERRA PACIFIC POWER COMPANY

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, 2018	1,000	$	—	$	1,111	$	96		$	(1	)	$	1,206
Net income	—	—		—		7			—			7
Other equity transactions	—	—		—		(1		)	—			(1		)
Balance, June 30, 2018	1,000	$	—	$	1,111	$	102		$	(1	)	$	1,212

Balance, December 31, 2017	1,000	$	—	$	1,111	$	62		$	(1	)	$	1,172
Net income	—	—		—		41			—			41
Other equity transactions	—	—		—		(1		)	—			(1		)
Balance, June 30, 2018	1,000	$	—	$	1,111	$	102		$	(1	)	$	1,212

Balance, March 31, 2019	1,000	$	—	$	1,111	$	175		$	—		$	1,286
Net income	—	—		—		14			—			14
Dividends declared	—	—		—		(46		)	—			(46		)
Balance, June 30, 2019	1,000	$	—	$	1,111	$	143		$	—		$	1,254

Balance, December 31, 2018	1,000	$	—	$	1,111	$	153		$	—		$	1,264
Net income	—	—		—		36			—			36
Dividends declared	—	—		—		(46		)	—			(46		)
Balance, June 30, 2019	1,000	$	—	$	1,111	$	143		$	—		$	1,254

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

147

SIERRA PACIFIC POWER COMPANY

STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)



	Six-Month Periods
	Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	36		$	41
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	63			59
Allowance for equity funds	(1		)	(2		)
Changes in regulatory assets and liabilities	20			19
Deferred income taxes and amortization of investment tax credits	2			2
Deferred energy	(13		)	26
Amortization of deferred energy	(6		)	(5		)
Other, net	(1		)	—
Changes in other operating assets and liabilities:
Trade receivables and other assets	12			21
Inventories	(8		)	—
Accrued property, income and other taxes	7			11
Accounts payable and other liabilities	(23		)	(10		)
Net cash flows from operating activities	88			162

Cash flows from investing activities:
Capital expenditures	(99		)	(94		)
Net cash flows from investing activities	(99		)	(94		)

Cash flows from financing activities:
Proceeds from long-term debt	125			—
Repayments of long-term debt	(109		)	—
Dividends paid	(46		)	—
Other, net	(2		)	(1		)
Net cash flows from financing activities	(32		)	(1		)

Net change in cash and cash equivalents and restricted cash and cash equivalents	(43		)	67
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period	76			8
Cash and cash equivalents and restricted cash and cash equivalents at end of period	$	33		$	75

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

148

SIERRA PACIFIC POWER COMPANY

NOTES TO FINANCIAL STATEMENTS

(Unaudited)


( 1 )	General

Sierra Pacific Power Company ("Sierra Pacific"), is a wholly owned subsidiary of NV Energy, Inc. ("NV Energy"), a holding company that also owns Nevada Power Company ("Nevada Power") and certain other subsidiaries. Sierra Pacific is a United States 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 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, 2019 and for the three- and six-month periods ended June 30, 2019 and 2018 . The Statements of Comprehensive Income have been omitted as net income equals comprehensive income for the three- and six-month periods ended June 30, 2019 and 2018 . The results of operations for the three- and six-month periods ended June 30, 2019 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 Sierra Pacific's Annual Report on Form 10-K for the year ended December 31, 2018 describes the most significant accounting policies used in the preparation of the unaudited Financial Statements. There have been no significant changes in Sierra Pacific's assumptions regarding significant accounting estimates and policies, except as disclosed in Note 4 , during the six-month period ended June 30, 2019 .


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

Cash equivalents consist of funds invested in money market mutual funds, United States 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 as of June 30, 2019 and December 31, 2018 , 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 of June 30, 2019 and December 31, 2018 , 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,
	2019		2018
Cash and cash equivalents	$	28	$	71
Restricted cash and cash equivalents included in other current assets	5		5
Total cash and cash equivalents and restricted cash and cash equivalents	$	33	$	76

149


( 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,
	Depreciable Life	2019			2018
Utility plant:
Electric generation	25 - 60 years	$	1,134		$	1,132
Electric distribution	20 - 100 years	1,631			1,568
Electric transmission	50 - 100 years	828			812
Electric general and intangible plant	5 - 70 years	177			185
Natural gas distribution	35 - 70 years	408			403
Natural gas general and intangible plant	5 - 70 years	14			14
Common general	5 - 70 years	318			321
Utility plant		4,510			4,435
Accumulated depreciation and amortization		(1,604		)	(1,583		)
Utility plant, net		2,906			2,852
Other non-regulated, net of accumulated depreciation and amortization	70 years	5			5
Plant, net		2,911			2,857
Construction work-in-progress		81			90
Property, plant and equipment, net		$	2,992		$	2,947


( 4 )	Leases

Adoption

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, which creates FASB Accounting Standards Codification ("ASC") Topic 842, "Leases" and supersedes Topic 840 "Leases." This guidance increases transparency and comparability among entities by recording lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize on the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous guidance. Following the issuance of ASU No. 2016-02, the FASB issued several ASUs that clarified the implementation guidance for ASU No. 2016-02 but did not change the core principle of the guidance. Sierra Pacific adopted this guidance for all applicable contracts in-effect as of January 1, 2019 under a modified retrospective method and the adoption did not have a cumulative-effect impact at the date of initial adoption.

Sierra Pacific has elected to utilize various practical expedients available to adopt ASU No. 2016-02, including (1) the package of three not requiring a reassessment of (i) whether any expired or existing contracts are or contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases; (2) using hindsight in determining the lease term; and (3) not requiring a reassessment of whether existing or expired land easements that were not previously accounted for as leases under ASC Topic 840 are or contain a lease under ASC Topic 842.

150

Leases

Lessee

Sierra Pacific has non-cancelable operating leases primarily for transmission and delivery assets, generating facilities, vehicles and office equipment and finance leases consisting primarily of transmission assets, generating facilities and vehicles. These leases generally require Sierra Pacific to pay for insurance, taxes and maintenance applicable to the leased property. Given the capital intensive nature of the utility industry, it is common for a portion of lease costs to be capitalized when used during construction or maintenance of assets, in which the associated costs will be capitalized with the corresponding asset and depreciated over the remaining life of that asset. Certain leases contain renewal options for varying periods and escalation clauses for adjusting rent to reflect changes in price indices. Sierra Pacific does not include options in its lease calculations unless there is a triggering event indicating Sierra Pacific is reasonably certain to exercise the option. Sierra Pacific's accounting policy is to not recognize lease obligations and corresponding right-of-use assets for leases with contract terms of one year or less and not separate lease components from non-lease components and instead account for each separate lease component and the non-lease components associated with a lease as a single lease component. Leases will be evaluated for impairment in line with ASC Topic 360, "Property, Plant and Equipment" when a triggering event has occurred that might affect the value and use of the assets being leased.

Sierra Pacific's leases of generating facilities generally are for the long-term purchase of electric energy, also known as power purchase agreements ("PPA"). PPAs are generally signed before or during the early stages of project construction and can yield a lease that has not yet commenced. These agreements are primarily for renewable energy and the payments are considered variable lease payments as they are based on the amount of output.

Sierra Pacific's operating and finance right-of-use assets are recorded in other assets and the operating and finance lease liabilities are recorded in current and long-term other liabilities accordingly. The right-of-use assets and lease liabilities for finance leases as of December 31, 2018 have been reclassified from property, plant and equipment, net and current portion of long-term and long-term debt, respectively, to conform to the current period presentation. The following table summarizes Sierra Pacific's leases recorded on the Balance Sheet (in millions):



	As of
	June 30,
	2019
Right-of-use assets:
Operating leases	$	19
Finance leases	39
Total right-of-use assets	$	58

Lease liabilities:
Operating leases	$	19
Finance leases	40
Total lease liabilities	$	59

151

The following table summarizes Sierra Pacific's lease costs (in millions):



	Three-Month Period		Six-Month Period
	Ended June 30,		Ended June 30,
	2019		2019

Variable	$	15	$	30
Operating	1		1
Finance:
Amortization	—		1
Interest	—		1
Total lease costs	$	16	$	33

Weighted-average remaining lease term (years):
Operating leases			26.0
Finance leases			23.0

Weighted-average discount rate:
Operating leases			4.9		%
Finance leases			7.0		%

The following table summarizes Sierra Pacific's supplemental cash flow information relating to leases (in millions):



	Six-Month Period
	Ended June 30,
	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(1	)
Operating cash flows from finance leases	(1		)
Financing cash flows from finance leases	(1		)
Right-of-use assets obtained in exchange for lease liabilities:
Finance leases	$	2

Sierra Pacific has the following remaining lease commitments as of (in millions):



	June 30, 2019									December 31, 2018 ⁽¹⁾
	Operating			Finance			Total			Operating		Capital		Total
2019	$	2		$	3		$	5		$	2	$	6	$	8
2020	2			5			7			2		4		6
2021	2			5			7			2		5		7
2022	1			5			6			1		4		5
2023	1			5			6			1		4		5
Thereafter	27			48			75			28		47		75
Total undiscounted lease payments	35			71			106			$	36	$	70	$	106
Less - amounts representing interest	(16		)	(31		)	(47		)
Lease liabilities	$	19		$	40		$	59

(1) Amounts included for comparability and accounted for in accordance with ASC Topic 840, "Leases".

152


( 5 )	Regulatory Matters

Deferred Energy

Nevada statutes permit regulated utilities to adopt deferred energy accounting procedures. The intent of these procedures is to ease the effect on customers of fluctuations in the cost of purchased natural gas, fuel and electricity and are subject to annual prudency review by the PUCN. Under deferred energy accounting, to the extent actual fuel and purchased power costs exceed fuel and purchased power costs recoverable through current rates that excess is not recorded as a current expense on the Statements of Operations but rather is deferred and recorded as a regulatory asset on the Balance Sheets. Conversely, a regulatory liability is recorded to the extent fuel and purchased power costs recoverable through current rates exceed actual fuel and purchased power costs. These excess amounts are reflected in quarterly adjustments to rates and recorded as cost of fuel and energy in future time periods.

2017 Tax Reform

In February 2018, Sierra Pacific made a filing with the PUCN proposing a tax rate reduction rider for the lower annual income tax expense anticipated to result from 2017 Tax Reform for 2018 and beyond. In March 2018, the PUCN issued an order approving the rate reduction proposed by Sierra Pacific. The new rates were effective April 1, 2018. The order extended the procedural schedule to allow parties additional discovery relevant to 2017 Tax Reform and a hearing was held in July 2018. In September 2018, the PUCN issued an order directing Sierra Pacific to record the amortization of any excess protected accumulated deferred income tax arising from the 2017 Tax Reform as a regulatory liability effective January 1, 2018. Subsequently, Sierra Pacific filed a petition for reconsideration relating to the amortization of protected excess accumulated deferred income tax balances resulting from the 2017 Tax Reform. In November 2018, the PUCN issued an order granting reconsideration and reaffirming the September 2018 order. In December 2018, Sierra Pacific filed a petition for judicial review. In January 2019, intervening parties filed statements of intent to participate in the petition for judicial review.

Chapter 704B Applications

( 6 ) Recent Financing Transactions

Long-Term Debt

In April 2019, 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; and $25 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016E, due 2036. Sierra Pacific purchased the Series 2016C, Series 2016D and Series 2016E bonds as required by the bond indentures.

In April 2019, Sierra Pacific entered into a re-offering of the following series of bonds: $30 million of its variable-rate tax-exempt Pollution Control Refunding Revenue Bonds, Series 2016B, due 2029; the Series 2016D bonds; the Series 2016E bonds; $75 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016F, due 2036; and $20 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016G, due 2036. The Series 2016B and Series 2016G bonds were offered at a fixed rate of 1.85% . The Series 2016D, Series 2016E and Series 2016F bonds were offered at a fixed rate of 2.05% . Sierra Pacific previously purchased the Series 2016B, Series 2016F and Series 2016G bonds on their date of issuance. Sierra Pacific holds the Series 2016C bonds and the bonds could be issued at a future date if required by future regulatory proceedings. Sierra Pacific used the net proceeds of the re-offering for general corporate purposes.

153

In June 2019, Sierra Pacific purchased the following series of bonds that were held by the public: $59 million of its fixed-rate tax-exempt Gas Facilities Refunding Revenue Bonds, Series 2016A, due 2031 and $20 million of its fixed-rate tax-exempt Humboldt County Pollution Control Refunding Revenue Bonds, Series 2016A, due 2029. Sierra Pacific holds these bonds and the bonds could be issued at a future date if required by future regulatory proceedings.

Credit Facilities

In May 2019, Sierra Pacific extended, with lender consent, the expiration date for its $250 million secured credit facility to June 2022 by exercising the remaining one-year extension option.

( 7 ) 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,
	2019		2018		2019		2018

Federal statutory income tax rate	21	%	21	%	21	%	21	%
Nondeductible expenses	—		8		—		3
Effects of ratemaking	1		14		1		(1	)
Other	—		3		—		—
Effective income tax rate	22	%	46	%	22	%	23	%


( 8 )	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. 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 payable to NV Energy are included on the Balance Sheets and consist of the following (in millions):



	As of
	June 30,		December 31,
	2019		2018
Qualified Pension Plan:
Other long-term liabilities	$	18	$	19

Non-Qualified Pension Plans:
Other current liabilities	1		1
Other long-term liabilities	7		7

Other Postretirement Plans:
Other long-term liabilities	13		13

154


( 9 )	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 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 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.

The following table presents Sierra Pacific's 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			Total
As of June 30, 2019
Assets:
Commodity derivatives	$	—	$	—	$	1		$	1
Money market mutual funds ⁽¹⁾	25		—		—			25
	$	25	$	—	$	1		$	26

Liabilities - commodity derivatives	$	—	$	—	$	(3	)	$	(3	)

As of December 31, 2018
Assets:
Commodity derivatives	$	—	$	—	$	2		$	2
Money market mutual funds ⁽¹⁾	45		—		—			45
	$	45	$	—	$	2		$	47


(1)	Amounts are included in cash and cash equivalents on the Balance Sheets. The fair value of these money market mutual funds approximates cost.

Sierra Pacific's investments in money market mutual funds 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.

Sierra Pacific's long-term debt is carried at cost on the 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, 2019				As of December 31, 2018
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value

Long-term debt	$	1,135	$	1,240	$	1,120	$	1,167

155


( 10 )	Commitments and Contingencies

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.

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 financial results. Sierra Pacific 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.


( 11 )	Revenue from Contracts with Customers

The following table summarizes Sierra Pacific's revenue from contracts with customers ("Customer Revenue") by customer class, including a reconciliation to Sierra Pacific's reportable segment information included in Note 12 (in millions):



	Three-Month Periods
	Ended June 30,
	2019						2018
	Electric		Gas		Total		Electric		Gas		Total
Customer Revenue:
Retail:
Residential	$	58	$	14	$	72	$	59	$	13	$	72
Commercial	54		5		59		58		4		62
Industrial	46		2		48		38		2		40
Other	1		—		1		1		—		1
Total fully bundled	159		21		180		156		19		175
Distribution only service	1		—		1		1		—		1
Total retail	160		21		181		157		19		176
Wholesale, transmission and other	11		—		11		10		—		10
Total Customer Revenue	171		21		192		167		19		186
Other revenue	1		1		2		2		—		2
Total revenue	$	172	$	22	$	194	$	169	$	19	$	188

156



	Six-Month Periods
	Ended June 30,
	2019						2018
	Electric		Gas		Total		Electric		Gas		Total
Customer Revenue:
Retail:
Residential	$	126	$	38	$	164	$	127	$	39	$	166
Commercial	108		15		123		115		15		130
Industrial	85		5		90		77		5		82
Other	3		—		3		3		—		3
Total fully bundled	322		58		380		322		59		381
Distribution only service	2		—		2		2		—		2
Total retail	324		58		382		324		59		383
Wholesale, transmission and other	28		—		28		23		—		23
Total Customer Revenue	352		58		410		347		59		406
Other revenue	2		1		3		3		1		4
Total revenue	$	354	$	59	$	413	$	350	$	60	$	410


( 12 )	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,
	2019			2018			2019			2018
Operating revenue:
Regulated electric	$	172		$	169		$	354		$	350
Regulated natural gas	22			19			59			60
Total operating revenue	$	194		$	188		$	413		$	410

Operating income:
Regulated electric	$	23		$	18		$	52		$	55
Regulated natural gas	4			1			12			11
Total operating income	27			19			64			66
Interest expense	(12		)	(11		)	(24		)	(21		)
Allowance for borrowed funds	1			1			1			1
Allowance for equity funds	1			1			2			2
Other, net	1			3			3			5
Income before income tax expense	$	18		$	13		$	46		$	53

157



	As of
	June 30,		December 31,
	2019		2018
Assets:
Regulated electric	$	3,237	$	3,177
Regulated natural gas	316		314
Regulated common assets ⁽¹⁾	41		78
Total assets	$	3,594	$	3,569


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

158

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

General

Sierra Pacific's revenues and operating income are subject to fluctuations during the year due to impacts that seasonal weather, rate changes, and customer usage patterns have on demand for electric energy, natural gas and resources. Sierra Pacific's electric segment is summer peaking experiencing its highest retail energy sales in response to the demand for air conditioning and its natural gas segment is winter peaking due to sales in response to the demand for heating. The variations in energy usage due to varying weather, customer growth and other energy usage patterns, including energy efficiency and conservation measures, necessitates a continual balancing of loads and resources and purchases and sales of energy under short- and long-term energy supply contracts. As a result, the prudent management and optimization of available resources has a direct effect on the operating and financial performance of Sierra Pacific. Additionally, the timely recovery of purchased power, fuel costs and other costs and the ability to earn a fair return on investments through rates are essential to the operating and financial performance of Sierra Pacific.

The following is management's discussion and analysis of certain significant factors that have affected the 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 and other factors. This discussion should be read in conjunction with Sierra Pacific's historical unaudited Financial Statements and Notes to 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.

159

Results of Operations for the Second Quarter and First Six Months of 2019 and 2018

Overview

Net income for the second quarter of 2019 was $14 million , an increase of $7 million , or 100% , compared to 2018 primarily due to $8 million of lower operations and maintenance expense, mainly due to lower political activity expenses, and $2 million of higher electric utility margin, mainly due to customer growth.

Net income for the first six months of 2019 was $36 million , a decrease of $5 million , or 12% , compared to 2018 primarily due to $5 million of higher other expense, mainly due to higher pension expense, and $2 million of lower electric utility margin, mainly due to lower average retail rates related to the tax rate reduction rider effective April 2018, partially offset by higher customer growth. The decrease is partially offset by $3 million of lower operations and maintenance expense, mainly due to lower political activity expenses.

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 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.

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
	2019		2018		Change					2019		2018		Change
Electric utility margin:
Electric operating revenue	$	172	$	169	$	3		2	%	$	354	$	350	$	4		1	%
Cost of fuel and energy	79		78		1			1		161		155		6			4
Electric utility margin	93		91		2			2		193		195		(2		)	(1	)

Natural gas utility margin:
Natural gas operating revenue	22		19		3			16	%	59		60		(1		)	(2	)%
Cost of natural gas purchased for resale	10		8		2			25		29		31		(2		)	(6	)
Natural gas utility margin	12		11		1			9		30		29		1			3

Utility margin	105		102		3			3	%	223		224		(1		)	—	%

Operations and maintenance	40		48		(8		)	(17	)%	84		87		(3		)	(3	)%
Depreciation and amortization	32		29		3			10		63		59		4			7
Property and other taxes	6		6		—			—		12		12		—			—
Operating income	$	27	$	19	$	8		42	%	$	64	$	66	$	(2	)	(3	)%

160

A comparison of Sierra Pacific's key operating results is as follows:

Electric Utility Margin



	Second Quarter									First Six Months
	2019		2018		Change					2019		2018		Change
Electric utility margin (in millions):
Electric operating revenue	$	172	$	169	$	3		2	%	$	354	$	350	$	4		1	%
Cost of fuel and energy	79		78		1			1		161		155		6			4
Electric utility margin	$	93	$	91	$	2		2		$	193	$	195	$	(2	)	(1	)

GWhs sold:
Residential	530		527		3			1	%	1,185		1,140		45			4	%
Commercial	678		711		(33		)	(5	)	1,378		1,408		(30		)	(2	)
Industrial	1,005		811		194			24		1,929		1,630		299			18
Other	4		4		—			—		8		8		—			—
Total fully bundled ⁽¹⁾	2,217		2,053		164			8		4,500		4,186		314			8
Distribution only service	405		387		18			5		796		749		47			6
Total retail	2,622		2,440		182			7		5,296		4,935		361			7
Wholesale	139		111		28			25		358		282		76			27
Total GWhs sold	2,761		2,551		210			8		5,654		5,217		437			8

Average number of retail customers (in thousands):
Residential	304		299		5			2	%	303		298		5			2	%
Commercial	47		47		—			—		48		47		1			2
Total	351		346		5			1		351		345		6			2

Average per MWh:
Revenue - fully bundled ⁽¹⁾	$	71.87	$	76.36	$	(4.49	)	(6	)%	$	71.68	$	77.16	$	(5.48	)	(7	)%
Revenue - wholesale	$	48.51	$	42.54	$	5.97		14	%	$	50.97	$	46.76	$	4.21		9	%
Total cost of energy ⁽²⁾	$	31.34	$	33.99	$	(2.65	)	(8	)%	$	31.42	$	33.24	$	(1.82	)	(5	)%

Heating degree days	519		485		34			7	%	2,763		2,625		138			5	%
Cooling degree days	216		240		(24		)	(10	)%	216		240		(24		)	(10	)%

Sources of energy (GWhs) ⁽²⁾⁽³⁾ :
Natural gas	1,152		1,078		74			7	%	2,246		2,135		111			5	%
Coal	212		197		15			8		552		197		355			180
Renewables ⁽⁴⁾	12		12		—			—		17		18		(1		)	(6	)
Total energy generated	1,376		1,287		89			7		2,815		2,350		465			20
Energy purchased	1,127		999		128			13		2,306		2,305		1			—
Total	2,503		2,286		217			9		5,121		4,655		466			10

* Not meaningful

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


(2)	The average total cost of energy per MWh and sources of energy excludes 19 GWhs of coal and 49 GWhs of gas generated energy that is purchased at cost by related parties for the second quarter and first six months of 2018 . There were no GWhs of coal or gas generated energy excluded in the second quarter and first six months of 2019 .


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


(4)	Includes the Fort Churchill Solar Array which is under lease by Sierra Pacific.

161

Natural Gas Utility Margin



	Second Quarter								First Six Months
	2019		2018		Change				2019		2018		Change
Natural gas utility margin (in millions):
Natural gas operating revenue	$	22	$	19	$	3	16	%	$	59	$	60	$	(1	)	(2	)%
Cost of natural gas purchased for resale	10		8		2		25		29		31		(2		)	(6	)
Natural gas utility margin	$	12	$	11	$	1	9		$	30	$	29	$	1		3

Dths sold:
Residential	1,627		1,461		166		11	%	6,640		5,780		860			15	%
Commercial	890		788		102		13		3,387		2,900		487			17
Industrial	409		407		2		—		1,079		1,097		(18		)	(2	)
Total retail	2,926		2,656		270		10		11,106		9,777		1,329			14

Average number of retail customers (in thousands)	170		167		3		2	%	170		166		4			2	%
Average revenue per retail Dth sold	$	7.52	$	7.13	$	0.39	5	%	$	5.31	$	6.02	$	(0.71	)	(12	)%
Average cost of natural gas per retail Dth sold	$	3.42	$	2.73	$	0.69	25	%	$	2.61	$	3.09	$	(0.48	)	(16	)%
Heating degree days	519		485		34		7	%	2,763		2,625		138			5	%

Electric utility margin increased $2 million , or 2% , for the second quarter of 2019 compared to 2018 primarily due to customer growth.

Operations and maintenance decreased $8 million , or 17% , for the second quarter of 2019 compared to 2018 primarily due to lower political activity expenses and the impacts of adopting ASC 842, "Leases" ("ASC 842").

Depreciation and amortization increased $3 million , or 10% , for the second quarter of 2019 compared to 2018 primarily due to higher plant placed in service and the impacts of adopting ASC 842.

Other income (expense) is unfavorable $3 million , or 50% , for the second quarter of 2019 compared to 2018 primarily due to higher pension expense and the impacts of adopting ASC 842.

Income tax expense decreased $2 million , or 33% , for the second quarter of 2019 compared to 2018 . The effective tax rate was 22% in 2019 and 46% in 2018 and decreased due to the effects of ratemaking and lower nondeductible expenses.

Electric utility margin decreased $2 million , or 1% , for the first six months of 2019 compared to 2018 primarily due to $6 million in lower retail rates due to the tax rate reduction rider effective April 2018, partially offset by $2 million in higher residential volumes primarily from the impacts of weather and $2 million of customer growth.

Operations and maintenance decreased $3 million , or 3% , for the first six months of 2019 compared to 2018 primarily due to lower political activity expenses and the impacts of adopting ASC 842, partially offset by higher generation plant costs.

Depreciation and amortization increased $4 million , or 7% , for the first six months of 2019 compared to 2018 primarily due to higher plant placed in service and the impacts of adopting ASC 842.

Other income (expense) is unfavorable $5 million , or 38% , for the first six months of 2019 compared to 2018 primarily due to higher pension expense and the impacts of adopting ASC 842.

Income tax expense decreased $2 million , or 17% , for the first six months of 2019 compared to 2018 . The effective tax rate was 22% in 2019 and 23% in 2018 and decreased due to lower nondeductible expenses.

162

Liquidity and Capital Resources

As of June 30, 2019 , Sierra Pacific's total net liquidity was as follows (in millions):



Cash and cash equivalents	$	28
Credit facility	250
Total net liquidity	$	278
Credit facility:
Maturity date	2022

Operating Activities

Net cash flows from operating activities for the six-month periods ended June 30, 2019 and 2018 were $88 million and $162 million , respectively. The change was primarily due to an increase in fuel costs, lower collections from customers due to lower deferred energy rates, higher inventory purchases, higher payments for operating costs and the refunding of a credit deposit to a customer, partially offset by lower contributions to the pension plan.

Investing Activities

Net cash flows from investing activities for the six-month periods ended June 30, 2019 and 2018 were $(99) million and $(94) million , respectively. The change was due to increased capital expenditures.

Financing Activities

Net cash flows from financing activities for the six-month periods ended June 30, 2019 and 2018 were $(32) million and $(1) million , respectively. The change was due to higher payments to repurchase long-term debt and dividends paid to NV Energy, Inc. of $46 million , partially offset by higher proceeds from the re-offering of previously repurchased long-term debt.

Long-Term Debt

In April 2019, Sierra Pacific entered into a re-offering of the following series of bonds: $30 million of its variable-rate tax-exempt Pollution Control Refunding Revenue Bonds, Series 2016B, due 2029; the Series 2016D bonds; the Series 2016E bonds; $75 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016F, due 2036; and $20 million of its variable-rate tax-exempt Water Facilities Refunding Revenue Bonds, Series 2016G, due 2036. The Series 2016B and Series 2016G bonds were offered at a fixed rate of 1.85%. The Series 2016D, Series 2016E and Series 2016F bonds were offered at a fixed rate of 2.05%. Sierra Pacific previously purchased the Series 2016B, Series 2016F and Series 2016G bonds on their date of issuance. Sierra Pacific holds the Series 2016C bonds and the bonds could be issued at a future date if required by future regulatory proceedings. Sierra Pacific used the net proceeds of the re-offering for general corporate purposes.

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 $1.6 billion (excluding borrowings under Sierra Pacific's $250 million secured credit facility); and (2) maintain a revolving credit facility of up to $600 million .

163

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. Expenditures for certain assets may ultimately include acquisition of existing assets.

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
	2018		2019		2019

Distribution	$	69	$	79	$	186
Transmission system investment	2		6		19
Other	23		14		54
Total	$	94	$	99	$	259

Sierra Pacific's forecast capital expenditures include investments related to operating projects that consist of routine expenditures for transmission, distribution, generation and other infrastructure needed to serve existing and expected demand.

Contractual Obligations

As of June 30, 2019 , there have been no material changes outside the normal course of business in contractual obligations from the information provided in Item 7 of Sierra Pacific's Annual Report on Form 10-K for the year ended December 31, 2018 .

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.

164

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 and capital expenditure requirements, 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 the EPA and various state and local agencies. All such laws and regulations are subject to a range of interpretation, which 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 financial results. Sierra Pacific believes it is in material compliance with all applicable laws and regulations.

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 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, 2018 . There have been no significant changes in Sierra Pacific's assumptions regarding critical accounting estimates since December 31, 2018 .

165


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, 2018 . Each Registrant's exposure to market risk and its management of such risk has not changed materially since December 31, 2018 . Refer to Note 8 of the Notes to Consolidated Financial Statements of PacifiCorp in Part I, Item 1 of this Form 10-Q for disclosure of the respective Registrant's derivative positions as of June 30, 2019 .


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 and Sierra Pacific Power Company 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, 2019 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

166

PART II


Item 1.	Legal Proceedings

Not applicable.


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, 2018 .


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.

167


Exhibit No.	Description

BERKSHIRE HATHAWAY ENERGY


4.1	Trust Deed, dated as of May 24, 2019, among Northern Electric Finance plc, as issuer, Northern Powergrid (Northeast) Limited, as Guarantor, and HSBC Corporate Trustee Company (UK) Limited, as Trustee, relating to the £150,000,000 in aggregate principal amount of 2.75% Guaranteed Bonds due 2049.


4.2	Amendment No. 1 to the Fiscal Agency Agreement, dated as of July 17, 2018, by and between Northern Natural Gas Company and The Bank of New York Mellon Trust Company, N.A., Fiscal Agent, relating to an additional $200,000,000 in principal amount of the 4.30% Senior Bonds due 2049.


10.1	$3,500,000,000 Amended and Restated Credit Agreement, dated as of May 31, 2019, among Berkshire Hathaway Energy Company, as Borrower, the Banks, Financial Institutions and Other Institutional Lenders, as Initial Lenders, MUFG Union Bank, N.A, 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


4.3	Thirtieth Supplemental Indenture, dated as of March 1, 2019, to PacifiCorp's Mortgage and Deed of Trust dated as of January 9, 1989 (incorporated by reference to Exhibit 4.1 to the PacifiCorp Current Report on Form 8-K dated March 1, 2019) .


10.2	$600,000,000 Amended and Restated Credit Agreement, dated as of May 31, 2019, among PacifiCorp, as Borrower, the Banks, Financial Institutions and Other Institutional Lenders, as Initial Lenders, JPMorgan Chase Bank, N.A., as Administrative Agent, and the LC Issuing Banks.


10.3	$600,000,000 Amended and Restated Credit Agreement, dated as of May 31, 2019, among PacifiCorp, as Borrower, the Banks, Financial Institutions and Other Institutional Lenders, as Initial Lenders, JPMorgan 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.

168


Exhibit No.	Description

BERKSHIRE HATHAWAY ENERGY AND MIDAMERICAN ENERGY


10.4	$900,000,000 Amended and Restated Credit Agreement, dated as of May 31, 2019, 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


10.5	$400,000,000 Third Amended and Restated Credit Agreement, dated as of May 31, 2019, 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


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.

BERKSHIRE HATHAWAY ENERGY AND SIERRA PACIFIC


10.6	$250,000,000 Third Amended and Restated Credit Agreement, dated as of May 31, 2019, 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.

ALL REGISTRANTS

101

The following financial information from each respective Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 , is formatted in XBRL (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.

169

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 2, 2019	/s/ Patrick J. Goodman
	Patrick J. Goodman
	Executive Vice President and Chief Financial Officer
	(principal financial and accounting officer)

	PACIFICORP

Date: August 2, 2019	/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 2, 2019	/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 2, 2019	/s/ Michael E. Cole
	Michael E. Cole
	Vice President and Chief Financial Officer
	(principal financial and accounting officer)

	SIERRA PACIFIC POWER COMPANY

Date: August 2, 2019	/s/ Michael E. Cole
	Michael E. Cole
	Vice President and Chief Financial Officer
	(principal financial and accounting officer)

170

EXHIBIT 4.1



C L I F F O R D		CLIFFORD CHANCE LLP
C H A N C E
		EXECUTION VERSION

	NORTHERN ELECTRIC FINANCE PLC
	£150,000,000
	2.750 PER CENT. GUARANTEED BY BONDS DUE 2049
	GUARANTEED BY
	NORTHERN POWERGRID (NORTHEAST) LIMITED

	TRUST DEED



CONTENTS
Clause		Page
1.	Interpretation	1
2.	Amount of the Bonds and Covenant to Pay	6
3.	Form and Issue of the Bonds	8
4.	Guarantee and Indemnity	10
5.	Stamp Duties and Taxes	12
6.	The Trust Deed and the Bonds	13
7.	Application of Moneys Received by the Trustee	14
8.	Covenants by the Issuer and the Guarantor	15
9.	Remuneration and Indemnification of the Trustee	19
10.	Provisions Supplemental to the Trustee Act 1925 and the Trustee Act 2000	20
11.	Trustee Liable for Negligence	27
12.	Consequential Loss	27
13.	Waiver	27
14.	Trustee not Precluded from Entering into Contracts	28
15.	Modification and Substitution	29
16.	Appointment, Retirement and Removal of the Trustee	30
17.	Coupons	32
18.	Currency Indemnity	32
19.	Communications	33
20.	Governing Law	34
21.	Jurisdiction	34
22.	Severability	35
23.	Sanctions	35
24.	Contracts (Rights of Third Parties) Act 1999	35
25.	Counterparts	36
Schedule 1 Form of Temporary Global Bond		37
Schedule 2 Form of Permanent Global Bond		46
Schedule 3 Form of Definitive Bond		53
Schedule 4 Terms and Conditions of the Bonds		57
Schedule 5 Provisions for Meetings of Bondholders		75

THIS TRUST DEED is made on 24 May 2019

BETWEEN :


(1)	NORTHERN ELECTRIC FINANCE PLC (the " Issuer "), a public company incorporated in England and Wales with limited liability under registered number 03070482 ;


(2)	NORTHERN POWERGRID (NORTHEAST) LIMITED (the " Guarantor "), a public company incorporated in England and Wales with limited liability under registered number 02906593 ; and


(3)	HSBC CORPORATE TRUSTEE COMPANY (UK) LIMITED (the " Trustee ", which expression shall, where the content so admits, include all persons for the time being the trustee or trustees of this Trust Deed (as defined below)).

WHEREAS


(A)	The Issuer has authorised the issue of £150,000,000 in aggregate principal amount of 2.750 per cent. Guaranteed Bonds due 2049 to be constituted by this Trust Deed.


(B)	The Guarantor has authorised the giving of its guarantee in relation to these Bonds.


(C)	The Trustee has agreed to act as trustee of this Trust Deed on the following terms and conditions.

NOW THIS DEED WITNESSES AND IT IS HEREBY DECLARED as follows:


1.	INTERPRETATION


1.1	Definitions

The following expressions shall have the following meanings:

" Auditors " means the auditors for the time being of the Issuer or, as the context may require, the Guarantor and, if there are joint auditors, means all or any one of such joint auditors or, in the event of any of them being unable or unwilling to carry out any action requested of them pursuant to this Trust Deed, means such other firm of chartered accountants in England as may be nominated in writing by the Trustee for the purpose;

" Authorised Signatory " means:

(a)

in relation to the Issuer, a director of the Issuer or any person in respect of whom the Issuer has supplied to the Trustee a copy, certified by a director or the secretary of the Issuer, to be a true copy and in full force and effect, of a resolution or resolutions of the board of directors (or a committee of the board of directors) of the Issuer, authorising such person to sign on behalf of the Issuer all such certificates and other documents as are referred to therein, together with a certified specimen signature of such person, and in respect of whom the Trustee has not received written notification from the Issuer, that such person has ceased to be so authorised; and



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(b)

in relation to the Guarantor, a director of the Guarantor or any person in respect of whom the Guarantor has supplied to the Trustee a copy, certified by a director or the secretary of the Guarantor, to be a true copy and in full force and effect, of a resolution or resolutions of the board of directors (or a committee of the board of directors) of the Guarantor, authorising such person to sign on behalf of the Guarantor all such certificates and other documents as are referred to therein, together with a certified specimen signature of such person, and in respect of whom the Trustee has not received written notification from the Guarantor, that such person has ceased to be so authorised;

" Bondholder " and (in relation to a Bond) " holder " means the bearer of a Bond;

" Bonds " means the £150,000,000 2.750 per cent. Guaranteed Bonds due 2049 constituted by this Trust Deed and for the time being outstanding or, as the context may require, a specific number of them and includes the Temporary Global Bond (or any part thereof), the Permanent Global Bond (or any part thereof) and the Definitive Bonds (or any of them), including any replacement Definitive Bonds issued pursuant to Condition 13 ( Replacement of Bonds and Coupons );

" Clearstream, Luxembourg " means Clearstream Banking, S.A.;

" Code " means the U.S. Internal Revenue Code of 1986, as amended.

" Conditions " means the terms and conditions set out in Schedule 4 ( Terms and Conditions of the Bonds ) as modified, with respect to any Bonds represented by a Global Bond, by the provisions of such Global Bond and as from time to time modified in accordance with this Trust Deed and any reference to a particularly numbered Condition shall be construed accordingly;

" Couponholder " and (in relation to a Coupon) " holder " means the bearer of a Coupon;

" Coupons " means the bearer interest coupons appertaining to the Definitive Bonds in or substantially in the form set out in Schedule 3 ( Form of Definitive Bond ), or as the context may require, a specific number of them and includes any replacement Coupons issued pursuant to Condition 13 ( Replacement of Bonds and Coupons );

" Definitive Bonds " means the Bonds in definitive form to be issued pursuant to, and in the circumstances specified in, Clause 3.3 ( Exchange for Definitive Bonds ), in or substantially in the form set out in Schedule 3 ( Form of Definitive Bond ), and includes any replacements therefor issued pursuant to Condition 13 ( Replacement of Bonds and Coupons );

" Euroclear " means Euroclear Bank SA/NV, as operator of the Euroclear system;

" Event of Default " means any of the events set out in Condition 10 ( Events of Default );

" Extraordinary Resolution " has the meaning set out in paragraph 1 of Schedule 5 ( Provisions for Meetings of Bondholders );



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" FATCA " means Sections 1471 to 1474 of the Code, any regulations thereunder or official interpretations thereof, an IGA or an agreement described in Section 1471(b) of the Code.

" FCA " means the Financial Conduct Authority in its capacity as competent authority under FSMA;

" FSMA " means the Financial Services and Markets Act 2000;

" Further Bonds " means all further bonds created and issued by the Issuer in accordance with Condition 17 ( Further Bonds ) and/or for the time being outstanding or, as the context may require, a specific proportion thereof;

" Global Bonds " means the Temporary Global Bond and the Permanent Global Bond and " Global Bond " means either of them;

" IGA " means an intergovernmental agreement between the United States and another jurisdiction to improve tax compliance and to implement FATCA.

" outstanding " means, in relation to the Bonds, all the Bonds issued other than (a) those Bonds which have been redeemed in full and cancelled pursuant to Conditions 7 ( Redemption and Purchase ) or 11 ( Restructuring Event ) or otherwise pursuant to this Trust Deed; (b) those Bonds in respect of which the date for redemption in accordance with the Conditions has occurred and, in any such case, the redemption moneys for which (including all interest payable thereon) have been duly paid to the Trustee or to the Principal Paying Agent in the manner provided in the Paying Agency Agreement (and, where appropriate, notice to that effect has been given to the Bondholders in accordance with Condition 14 ( Notices )) and remain available for payment against presentation of the relevant Bonds and/or Coupons; (c) those Bonds which have been purchased and surrendered for cancellation in accordance with Condition 7(e) ( Cancellation ); (d) those Bonds which have become void under Condition 9 ( Prescription ); (e) those mutilated or defaced Definitive Bonds which have been surrendered and cancelled and in respect of which replacements have been issued pursuant to Condition 13 ( Replacement of Bonds and Coupons ); (f) (for the purpose only of ascertaining the amount of Bonds outstanding and without prejudice to the status for any other purpose of the relevant Bonds) those Definitive Bonds which are alleged to have been lost, stolen or destroyed and in respect of which replacements have been issued pursuant to Condition 13 ( Replacement of Bonds and Coupons ); (g) the Temporary Global Bond to the extent that it shall have been exchanged for the Permanent Global Bond pursuant to the provisions contained therein and in Clause 3.3 ( Exchange for Definitive Bonds ), and (h) the Permanent Global Bond to the extent that it shall be exchanged for the Definitive Bonds pursuant to the provisions contained therein and in Clause 3.3 ( Exchange for Definitive Bonds ),

provided that for each of the following purposes, namely:


(a)	the right to attend and vote at any meeting of the Bondholders;


(b)	the determination of how many and which Bonds are for the time being outstanding for the purposes of the Conditions and Schedule 5 ( Provisions for Meetings of Bondholders );



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(c)	any discretion, power or authority contained in this Trust Deed which the Trustee is required, expressly or impliedly, to exercise in or by reference to the interests of any of the Bondholders; and


(d)	the determination by the Trustee whether any of the events specified in Condition 10 ( Events of Default ) is materially prejudicial to the interests of the Bondholders,

those Bonds which are for the time being held beneficially by or for the account of the Issuer, the Guarantor or any Subsidiary of either the Issuer or the Guarantor, or Berkshire Hathaway Energy Company or any other Subsidiary of Berkshire Hathaway Energy Company shall (unless and until ceasing to be so held) be deemed not to remain outstanding;

" Paying Agency Agreement " means the Paying Agency Agreement dated 24 May 2019, as the same may be amended and/or supplemented from time to time, between the Issuer, the Guarantor, the Trustee and the Principal Paying Agent and includes any other agreements approved in writing by the Trustee appointing Successor Paying Agents or altering any such agreements;

" Paying Agents " means the institutions (including the Principal Paying Agent) at their respective Specified Offices referred to in Condition 6 ( Payments ) and/or any Successor Paying Agents, in each case at their respective Specified Offices;

" Permanent Global Bond " means the permanent global Bond to be issued by the Issuer pursuant to Clause 3.1 ( The Global Bonds ) representing the Bonds, in or substantially in the form set out in Schedule 2 ( Form of Permanent Global Bond );

" Person " means any person, firm, company or body corporate, corporation, government, state or agency of a state or any association or partnership (whether or not having separate legal personality) or two or more of the foregoing;

" Potential Event of Default " means an event or circumstance which would with the giving of notice and/or lapse of time and/or the issuing of a certificate become an Event of Default;

" principal " and " principal amount " in relation to any payment in respect of Bonds includes, where applicable, the Redemption Price referred to in Condition 7(b) ( Redemption at the option of the Issuer );

" Principal Paying Agent " means HSBC Bank plc or any Successor Principal Paying Agent appointed under the Paying Agency Agreement;

" Specified Office " means, in relation to any Paying Agent, either the office identified with its name at the end of the Conditions or any other office approved by the Trustee and notified to the Bondholders pursuant to Clause 8.12 ( Change in Agents );

" Subscription Agreement " means the subscription agreement dated 22 May 2019 between the Issuer, Banco Santander, S.A., Lloyds Bank Corporate Markets plc and NatWest Markets Plc;



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" Successor " means, in relation to the Paying Agents, such other or further person as may from time to time be appointed by the Issuer and the Guarantor as a Paying Agent, with the written approval of, and on terms approved in writing by, the Trustee and notice of whose appointment is given to Bondholders pursuant to Clause 8.12 ( Change in Agents );

" Temporary Global Bond " means the temporary global Bond to be issued by the Issuer pursuant to Clause 3.1 ( The Global Bonds ) representing the Bonds, in or substantially in the form set out in Schedule 1 ( Form of Temporary Global Bond );

" this Trust Deed " means this Deed, the Schedules (as from time to time altered in accordance with this Deed), the Conditions, the Bonds and the Coupons and any other document executed in accordance with this Deed (as from time to time altered in accordance with its terms) and expressed to be supplemental to this Deed; and

" trust corporation " means a corporation entitled by rules made under the Public Trustee Act 1906 or entitled pursuant to any other legislation applicable to a trustee in any jurisdiction other than England to carry out the functions of a custodian trustee.


1.2	Terms defined elsewhere

Unless otherwise defined herein, terms defined in the Conditions shall have the same meanings in this Trust Deed.


1.3	Construction of Certain References

References to:


1.3.1	costs, charges, remuneration or expenses shall include any value added tax, turnover tax or similar tax charged in respect thereof;


1.3.2	" £ ", " pounds " and " Sterling " shall be construed as references to the lawful currency for the time being of the United Kingdom;


1.3.3	any action, remedy or method of judicial proceedings for the enforcement of rights of creditors shall include, in respect of any jurisdiction other than England, references to such action, remedy or method of judicial proceedings available or appropriate in such jurisdiction as shall most nearly approximate thereto;

1.3.4

all references in this Trust Deed or the Conditions involving compliance by the Trustee with a test of reasonableness shall be deemed to include a reference to a requirement that such reasonableness shall be determined by reference primarily to the interests of the holders of the Bonds as a class and in the event of any conflict between such interests and the interests of any other person, the former shall prevail as being paramount;


1.3.5	in this Trust Deed references to Coupons and Couponholders shall apply only if Definitive Bonds have been issued by the Issuer in accordance with Clause 3 ( Form and Issue of the Bonds ); and



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1.3.6	any provision of any statute shall be deemed also to refer to any statutory modification or re-enactment thereof or any statutory instrument, order or regulation made thereunder or under such modification or re-enactment.


1.4	Headings

Headings shall be ignored in construing this Trust Deed.


1.5	Schedules

The Schedules are part of this Trust Deed and shall have effect accordingly.


2.	AMOUNT OF THE BONDS AND COVENANT TO PAY


2.1	Amount of the Bonds

The aggregate principal amount of the Bonds is limited to £150,000,000.


2.2	Covenant to pay

The Issuer covenants with the Trustee that it will in accordance with this Trust Deed on any date when the Bonds or any of them become due to be redeemed or any principal on the original Bonds or any of them becomes due to be repaid in accordance with the conditions unconditionally pay or procure to be paid to or to the order of the Trustee in London in Sterling in immediately available funds the principal amount of the Bonds or any of them becoming due for redemption or repayment on that date together with any applicable premium and will (subject to the Conditions) until such payment (both before and after judgment of a court of competent jurisdiction) unconditionally pay to or to the order of the Trustee as aforesaid interest on the principal amount of the Bonds outstanding as set out in the Conditions provided that (1) subject to sub-clause 2.4.2 of Clause 2.4 ( Payment after a Default ), every payment of any sum due in respect of the Bonds made to the Principal Paying Agent as provided in the Paying Agency Agreement shall, to such extent, satisfy such obligation except to the extent that there is failure in its subsequent payment (in the case of the Global Bonds) to or to the order of the bearer thereof in accordance with the provisions of the Temporary Global Bond or the Permanent Global Bond, as the case may be, or (in the case of the Definitive Bonds) to the relevant Bondholders or (as the case may be) Couponholders under the Conditions and (2) in the case of any payment made after the due date or pursuant to Condition 10 ( Events of Default ), payment will be deemed to have been made when the full amount due has been received by the Principal Paying Agent or the Trustee and notice to that effect has been given to the Bondholders (if required in accordance with Clause 8.9 ( Notice of late payment )), except to the extent that there is failure in the subsequent payment to the relevant Bondholders or (as the case may be) Couponholders under the Conditions. The Trustee will hold the benefit of this covenant and the covenant in Clause 6 on trust for the original Bondholders and original Couponholders.


2.3	Discharge

Subject to Clause 2.4 ( Payment after a Default ), any payment to be made in respect of the Bonds, the Coupons or this Trust Deed, as the case may be, by the Issuer, the Guarantor



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or the Trustee may be made as provided herein, in the Conditions and the Paying Agency Agreement, and any payment so made will (subject to Clause 2.4 ( Payment after a Default )) to such extent be a good discharge to the Issuer, the Guarantor or the Trustee, as the case may be.


2.4	Payment after a Default

At any time after an Event of Default or a Potential Event of Default has occurred the Trustee may:


2.4.1	by notice in writing to the Issuer, the Guarantor and the Paying Agents (or such of them as are specified by the Trustee), require the Paying Agents (or such of them as are specified by the Trustee):

(a)

to act thereafter, until otherwise instructed by the Trustee, as agents of the Trustee under this Trust Deed and the Bonds on the terms of the Paying Agency Agreement (with consequential amendments as necessary and save that the Trustee's liability for the indemnification, remuneration and all other out-of-pocket expenses of any of the Paying Agents shall be limited to the amounts for the time being held by the Trustee on the trusts of this Trust Deed and available to the Trustee for such purpose) and thereafter to hold all Definitive Bonds and Coupons and all sums, documents and records held by them in respect of the Bonds and Coupons to the order of the Trustee; and/or


(b)	to deliver all Definitive Bonds and Coupons and all sums, documents and records held by them in respect of the Bonds and Coupons (save for such documents and records which the Paying Agents are obliged not to release by virtue of any applicable law or regulation or by order of any court of competent jurisdiction) to the Trustee or as the Trustee directs in such notice; and


2.4.2	by notice in writing to the Issuer and the Guarantor require each of them to make all subsequent payments in respect of the Bonds, the Coupons and the Guarantee (as applicable) to or to the order of the Trustee and not to the Principal Paying Agent.


2.5	Further Issues

2.5.1

The Issuer shall be at liberty from time to time (but subject always to the provisions of this Trust Deed) without the consent of the Bondholders or Couponholders to create and issue Further Bonds (whether in bearer or registered form) ranking pari passu in all respects (or in all respects save for the first payment of interest thereon), and so that the same shall be consolidated and form a single series, with the original Bonds and/or any Further Bonds of any series, provided that :


(a)	the Trustee is satisfied (by means of a confirmation from S&P in the case of any rating by S&P and Fitch in the case of any rating by Fitch) that



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the rating granted in respect of the Bonds by S&P and Fitch will not thereby be adversely affected; and


(b)	the Issuer shall not create and issue such Further Bonds while any default exists in relation to any payment by the Issuer of any amounts due under this Trust Deed.

2.5.2

Any Further Bonds which are to be created and issued pursuant to the provisions of sub-clause 2.5.1 above shall be constituted by a deed supplemental to this Trust Deed in such form as the Trustee may approve. In such case the Issuer and the Guarantor shall, prior to the issue of such Further Bonds, execute and deliver to the Trustee a deed supplemental to this Trust Deed (in relation to which all applicable stamp duties or other documentation fees, duties or taxes have been paid and, if applicable, duly stamped or denoted accordingly) and containing a covenant by the Issuer in the form mutatis mutandis of Clause 2.2 ( Covenant to pay ) in relation to the principal, premium (if any) and interest in respect of such Further Bonds and such other provisions (corresponding to the provisions contained in this Trust Deed) as the Trustee shall require.


2.5.3	A memorandum of every such supplemental Trust Deed shall be endorsed by the Trustee on this Trust Deed and by the Issuer and the Guarantor on their duplicates of this Trust Deed.


2.5.4	Whenever it is proposed to create and issue any Further Bonds the Issuer shall give to the Trustee not less than 14 days' notice in writing of its intention so to do stating the amount of Further Bonds proposed to be created and issued.


3.	FORM AND ISSUE OF THE BONDS


3.1	The Global Bonds

The Bonds will initially be represented by the Temporary Global Bond without Coupons in the principal amount at the date hereof of £150,000,000 which, when duly executed and authenticated, will be deposited by the Issuer with HSBC Bank plc (the " Common Depositary ") as common depositary for Euroclear and Clearstream, Luxembourg on the date hereof on terms that the Common Depositary shall hold the Temporary Global Bond to or to the order of the Issuer against payment of the net proceeds of the issue of the Bonds in accordance with the Subscription Agreement, following which it shall hold the Temporary Global Bond for the account of the Bondholders. The Issuer shall also deposit on the date hereof the Permanent Global Bond without Coupons in the principal amount of up to £150,000,000 with the Common Depositary who shall hold the Permanent Global Bond pending exchange of the Temporary Global Bond (in whole or in part) therefore in accordance with their respective terms. Following exchange of the Temporary Global Bond in whole for the Permanent Global Bond in accordance with their respective terms the Bonds shall (subject as provided in Clause 3.3 ( Exchange for Definitive Bonds ) below) thereafter be represented by the Permanent Global Bond.

The procedures as regards the issue, exchange, execution, authentication, delivery, surrender, cancellation, presentation and endorsement of the Temporary Global Bond and the Permanent Global Bond (or part thereof) and any other matters to be carried out



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by the relevant parties upon such exchange (in whole or in part) shall be made in accordance with this Clause 3, their respective terms and the rules and procedures of Euroclear and Clearstream, Luxembourg for the time being.


3.2	Signature and Authentication

The Global Bonds and the Definitive Bonds will be signed manually or in facsimile by a director of the Issuer. The Issuer may use the facsimile signature of any person who at the date of this Trust Deed is a director of the Issuer even if at the time of issue of any Bonds he/she no longer holds such office. The Issuer shall procure that, prior to the issue and delivery of each Global Bond, each Global Bond will be authenticated by an authorised signatory on behalf of the Principal Paying Agent and no Global Bond shall be valid for any purpose unless and until so authenticated. The Bonds so executed and, if applicable, so authenticated shall be binding and valid obligations of the Issuer. Until it (or part thereof) has been exchanged pursuant to Clauses 3.1 ( The Global Bonds ) or 3.3 ( Exchange for Definitive Bonds ) (but without prejudice to the escrow arrangements referred to in Clause 3.1 ( The Global Bonds )), each Global Bond (or part thereof) shall in all respects be entitled to the same benefits as a Definitive Bond and each Global Bond shall be subject to the provisions hereof except that the bearer thereof shall be the only person entitled to receive payments of principal and interest as set out therein.


3.3	Exchange for Definitive Bonds

If while the Bonds are represented by one or more Global Bonds (i) either Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces an intention permanently to cease business or (ii) as a result of any change in, or amendment to, the laws or regulations of the United Kingdom or of any political sub-division of, or any authority in, the United Kingdom having power to tax or any change in the application or official interpretation of such laws or regulations which becomes effective on or after 22 May 2019, the Issuer or any Paying Agent is or will be required to make any withholding or deduction from any payment in respect of the Bonds which would not be required if the Bonds were in definitive form, then the Issuer shall, (subject as mentioned below), within 30 days of the occurrence of such relevant event but not prior to the expiry of a period of 40 days commencing on the date hereof, issue Definitive Bonds (with all unmatured Coupons attached) in exchange for the whole (or the remaining part(s) outstanding) of the Permanent Global Bond. If either of the events mentioned in (i) or (ii) occurs whilst the Bonds are represented by the Temporary Global Bond (or part thereof) the Temporary Global Bond (or that part) shall forthwith be exchanged for the Permanent Global Bond (or part thereof) in accordance with its terms and Clause 3.1 ( The Global Bonds ) above so that the Bonds are then represented solely by the Permanent Global Bond. All Definitive Bonds shall be printed, proofed, executed and delivered as aforesaid but shall be held by the Principal Paying Agent until a Bondholder requests the Issuer through the Principal Paying Agent that his interest in the Permanent Global Bond be exchanged for Definitive Bonds whereupon such Definitive Bonds shall be issued to such Bondholder as aforesaid without charge. The procedures to be carried out by the relevant parties upon such exchange shall be made in accordance with the provisions of the Permanent Global Bond and the rules and procedures of Euroclear and Clearstream, Luxembourg for the time being. The Permanent Global Bond shall be endorsed by or



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on behalf of the Principal Paying Agent in respect of those Definitive Bonds which are so delivered.


3.4	The Definitive Bonds

The Definitive Bonds shall be serially numbered and issued in bearer form in the denominations of £100,000 and integral multiples of £1,000 in excess thereof up to and including £199,000 each with all unmatured Coupons attached. The Definitive Bonds and the Coupons will be security printed in accordance with all applicable stock exchange requirements in or substantially in the respective forms set out in Schedule 3 ( Form of Definitive Bond ) and the Definitive Bonds will be endorsed with the Conditions.


3.5	Entitlement to treat holder as owner

The Issuer, the Guarantor, the Trustee and any Paying Agent may deem and treat the holder of any Bond or Coupon (except as ordered by a court of competent jurisdiction or as otherwise required by law) as the absolute owner of such Bond or Coupon (as the case may be) for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust, or any interest in it, any writing on it, or its theft or loss) and no person will be liable for so treating the holder.


4.	GUARANTEE AND INDEMNITY


4.1	Guarantee

The Guarantor hereby unconditionally and irrevocably guarantees to the Trustee payment of all sums expressed to be payable by the Issuer under this Trust Deed or in respect of the Bonds or Coupons, as and when the same becomes due and payable, whether at maturity, upon early redemption, upon acceleration or otherwise, according to the terms of this Trust Deed and the Bonds and Coupons. In case of the failure of the Issuer to pay any such sum as and when the same shall become due and payable, the Guarantor hereby agrees to cause such payment to be made as and when the same becomes due and payable, whether at maturity, upon early redemption, upon acceleration or otherwise, as if such payment were made by the Issuer.


4.2	Guarantor as principal debtor

The Guarantor agrees, as an independent primary obligation, that it shall pay to the Trustee on demand sums sufficient to indemnify the Trustee and each Bondholder and Couponholder against any loss sustained by the Trustee or such Bondholder or Couponholder by reason of the non-payment as and when the same shall become due and payable of any sum expressed to be payable by the Issuer under this Trust Deed or in respect of the Bonds, whether by reason of any of the obligations expressed to be assumed by the Issuer in this Trust Deed or the Bonds being or becoming void, voidable or unenforceable for any reason, whether or not known to the Trustee or such Bondholder or Couponholder or for any other reason whatsoever.


4.3	Unconditional payment



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If the Issuer defaults in the payment of any sum expressed to be payable by the Issuer under this Trust Deed or in respect of the Bonds or Coupons as and when the same shall become due and payable, the Guarantor shall forthwith unconditionally pay or procure to be paid to or to the order of the Trustee in Sterling in London in same day, freely transferable funds the amount in respect of which such default has been made; provided that every payment of such amount made by the Guarantor to the Principal Paying Agent in the manner provided in the Paying Agency Agreement shall be deemed to cure pro tanto such default by the Issuer and shall be deemed for the purposes of this Clause 4 to have been paid to or for the account of the Trustee except to the extent that there is failure in the subsequent payment of such amount to the Bondholders and Couponholders in accordance with the Conditions, and everything so paid by the Guarantor in accordance with the Paying Agency Agreement shall have the same effect as if it had been paid thereunder by the Issuer.


4.4	Unconditional obligation

The Guarantor agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of this Trust Deed or any Bond or Coupon, or any change in or amendment hereto or thereto, the absence of any action to enforce the same, any waiver or consent by any Bondholder or Couponholder or by the Trustee with respect to any provision of this Trust Deed or the Bonds, the obtaining of any judgment against the Issuer or any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defence of a guarantor.


4.5	Guarantor's obligations continuing

The Guarantor waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest or notice with respect to any Bond or the indebtedness evidenced thereby and all demands whatsoever. The Guarantor agrees that the guarantee and indemnity contained in this Clause 4 is a continuing guarantee and indemnity and shall remain in full force and effect until all amounts due as principal, interest or otherwise in respect of the Bonds or Coupons or under this Trust Deed shall have been paid in full and that the Guarantor shall not be discharged by anything other than a complete performance of the obligations contained in this Trust Deed and the Bonds and Coupons.


4.6	Subrogation of Guarantor's rights

The Guarantor shall be subrogated to all rights of the Bondholders against the Issuer in respect of any amounts paid by such Guarantor pursuant hereto; provided that the Guarantor shall not without the consent of the Trustee be entitled to enforce, or to receive any payments arising out of or based upon or prove in any insolvency or winding up of the Issuer in respect of, such right of subrogation until such time as the principal of and interest on all outstanding Bonds and Coupons and all other amounts due under this Trust Deed and the Bonds and Coupons have been paid in full. Furthermore, until such time as aforesaid the Guarantor shall not take any security or counter indemnity from the Issuer in respect of the Guarantor's obligations under this Clause 4.


4.7	Repayment to the Issuer



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If any payment received by the Trustee or the Principal Paying Agent pursuant to the provisions of this Trust Deed or the Conditions shall, on the subsequent bankruptcy, insolvency, corporate reorganisation or other similar event affecting the Issuer, be avoided, reduced, invalidated or set aside under any laws relating to bankruptcy, insolvency, corporate reorganisation or other similar events, such payment shall not be considered as discharging or diminishing the liability of the Guarantor whether as guarantor, principal debtor or indemnifier and the guarantee and indemnity contained in this Clause 4 shall continue to apply as if such payment had at all times remained owing by the Issuer and the Guarantor shall indemnify and keep indemnified the Trustee and the Bondholders on the terms of the guarantee and indemnity contained in this Clause.


4.8	Suspense account

Any amount received or recovered by the Trustee from the Guarantor in respect of any sum payable by the Issuer under this Trust Deed or the Bonds or the Coupons may be placed in a suspense account and kept there for so long as the Trustee thinks fit.


5.	STAMP DUTIES AND TAXES


5.1	Stamp Duties

The Issuer will pay any stamp, issue, registration, documentary or other taxes and duties, including interest and penalties, payable in Belgium, Luxembourg and the United Kingdom in respect of the creation, issue and offering of the Bonds and the Coupons and the execution or delivery of this Trust Deed. The Issuer will also indemnify the Trustee, the Bondholders and the Couponholders from and against all stamp, issue, registration, documentary or other taxes paid by any of them in any jurisdiction in connection with any action properly taken by or on behalf of the Trustee or, as the case may be, (where entitled under Condition 12 ( Enforcement ) to do so) the Bondholders or the Couponholders to enforce the obligations of the Issuer or the Guarantor under this Trust Deed, the Bonds or the Coupons.


5.2	Change of taxing jurisdiction

If the Issuer or the Guarantor becomes subject generally to the taxing jurisdiction of any territory or any authority of or in that territory having power to tax other than or in addition to the United Kingdom or any such authority of or in the United Kingdom then the Issuer and Guarantor will (unless the Trustee otherwise agrees) in a trust deed supplemental hereto give to the Trustee an undertaking in form and manner satisfactory to the Trustee in terms corresponding to the terms of Condition 8 ( Taxation ) with the substitution for, or (as the case may be) the addition to, the references in that Condition to the United Kingdom or any authority thereof or therein having power to tax of references to that other or additional territory or authority to whose taxing jurisdiction the Issuer or Guarantor, as the case may be has become so subject and in such event this Trust Deed, the Bonds and the Coupons will be read accordingly. In addition, such supplemental Trust Deed shall also modify Condition 7(c) ( Redemption for tax reasons ) by the substitution for, or (as the case may be) the addition to, the references in that Condition to the United Kingdom or any authority in or of the United Kingdom having power to tax, of references to that other territory or authority to whose taxing jurisdiction



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the Issuer or Guarantor, as the case may be, has become so subject and in such event this Trust Deed, the Bonds and the Coupons will be read accordingly.

5.3

The Issuer and the Guarantor shall, within ten business days of a written request by the Trustee, supply to the Trustee such forms, documentation and other information relating to the Issuer or the Guarantor, their operations, or the Bonds as the Trustee reasonably requests for the purposes of the Trustee's compliance with applicable law and shall notify the Trustee reasonably promptly in the event that the Issuer or the Guarantor becomes aware that any of the forms, documentation or other information provided by the Issuer or the Guarantor is (or becomes) inaccurate in any material respect; provided, however, the Issuer and the Guarantor shall not be required to provide any forms, documentation or other information pursuant to this Clause 5.3 to the extent that: (i) any such form, documentation or other information (or the information required to be provided on such form or documentation) is not reasonably available to the Issuer or the Guarantor and cannot be obtained by the Issuer or the Guarantor using reasonable efforts; or (ii) doing so would or might in the reasonable opinion of the Issuer or the Guarantor constitute a breach of any: (a) applicable law; (b) fiduciary duty; or (c) duty of confidentiality.

5.4

Notwithstanding any other provision of this Trust Deed, the Trustee shall be entitled to make a deduction or withholding from any payment which it makes under the Bonds for or on account of any tax, if and only to the extent so required by applicable law, in which event the Trustee shall make such payment after such deduction or withholding has been made and shall account to the relevant authority within the time allowed for the amount so deducted or withheld or, at its option, shall reasonably promptly after making such payment return to the Issuer or the Guarantor the amount so deducted or withheld, in which case, the Issuer or the Guarantor shall so account to the relevant authority for such amount. The Trustee shall have no obligation to gross-up any payment hereunder or to pay any additional amount as a result of such withholding or deduction.


6.	THE TRUST DEED AND THE BONDS


6.1	Bonds incorporated by reference

Each of the Issuer and the Guarantor hereby covenants with the Trustee that it will perform and comply with those provisions of this Trust Deed and the Conditions which are expressed to be binding on it. Subject to Condition 12 ( Enforcement ), the Trustee shall be entitled to enforce the obligations of the Issuer and the Guarantor under the Bonds and the Coupons in the manner therein provided as if the Bonds and the Coupon were incorporated in this Trust Deed, which shall be read and construed as one document with the Bonds. The provisions contained in Schedule 4 ( Terms and Conditions of the Bonds ) shall have effect in the same manner as if herein set forth.


6.2	Bonds subject to Trust Deed

The Bonds shall be subject to the provisions of this Trust Deed, all of which shall be binding upon the Issuer, the Guarantor, the Bondholders and the Couponholders and all persons claiming through or under them respectively.


6.3	Evidence of Default



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If the Trustee makes any claim, institutes any legal proceeding or lodges any proof in a winding up of the Issuer or the Guarantor, proof that the Issuer has failed to pay any principal or interest due and payable in respect of any particular Bond or Coupon shall (unless the contrary is proved) be sufficient evidence that the Issuer has made the same default as regards all other Bonds or Coupons in respect of which a corresponding payment is due and payable.


7.	APPLICATION OF MONEYS RECEIVED BY THE TRUSTEE


7.1	Declaration of Trust

All moneys received by the Trustee in respect of the Bonds and all other amounts payable under this Trust Deed will be held by the Trustee upon trust to apply them (subject to Clause 7.2 ( Accumulation )):


7.1.1	firstly , in payment of all costs, charges, expenses and liabilities incurred by the Trustee in carrying out the preparation and execution of the trusts of this Trust Deed (including remuneration payable to the Trustee);


7.1.2	secondly , in payment of any interest owing in respect of the Bonds pari passu and rateably;


7.1.3	thirdly , in payment of any principal and premium (if any) owing in respect of the Bonds pari passu and rateably, and


7.1.4	fourthly, in payment to the Issuer or, if such moneys were received from the Guarantor, the Guarantor.

Without prejudice to this Clause 7.1, if the Trustee holds any moneys which represent principal, premium or interest in respect of Bonds or Coupons which have become void under Condition 9 ( Prescription ), the Trustee will hold such moneys upon the above trusts provided that the Trustee shall be required to treat the payments of interest and/or principal and/or premium as having been satisfied and no amounts as outstanding or owing in respect thereof. The Trustee shall as soon as practicable apply such moneys as aforesaid and promptly thereafter return such moneys (or the balance thereof, as the case may be) to the Issuer.


7.2	Accumulation

The Trustee may, at its discretion, accumulate such moneys until the accumulations, together with any other funds for the time being under the control of the Trustee and available for such purpose, amount to at least 10 per cent. of the principal amount of the Bonds then outstanding and then such accumulations and funds (after deduction of, or provision for, any applicable taxes) shall be applied under Clause 7 ( Application of Moneys Received by the Trustee ). For the avoidance of doubt, the Trustee shall, in no circumstances, have any discretion to invest any moneys referred to in this Clause 7.2 in any investments or other assets.


7.3	Investment



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Moneys held by the Trustee may, at its election, be placed on deposit into an account bearing a market rate of interest (and for the avoidance of doubt, the Trustee shall not be required to obtain best rates, be responsible for any loss occasioned by such deposit or exercise any other form of investment discretion with respect to such deposits) in the name or under the control of the Trustee at such bank or other financial institution and in such currency as the Trustee may think fit in light of the cash needs of the transaction and not for purposes of generating income. If such moneys are placed on deposit with a bank or financial institution which is a Subsidiary, holding company, affiliate or associated company of the Trustee, it need only account for an amount of interest equal to the standard amount of interest payable by it on a deposit to an independent customer.


8.	COVENANTS BY THE ISSUER AND THE GUARANTOR

Each of the Issuer and the Guarantor hereby covenants with the Trustee that so long as any Bond is outstanding, it will:


8.1	Books of account

Keep proper books of account and, at any time after the occurrence of an Event of Default or a Potential Event of Default or if the Trustee has reasonable grounds to believe that any such event has occurred so far as permitted by applicable law, allow and procure that each of its Subsidiaries (if any) will allow the Trustee and anyone appointed by any of them access to the books of account of the Issuer and the Guarantor and/or the relevant Subsidiary respectively at all reasonable times during normal business hours and to discuss the same with a responsible officer of the Issuer or the Guarantor.


8.2	Notice of Event of Default

Notify the Trustee in writing immediately upon becoming aware of the occurrence of any Event of Default or Potential Event of Default and without waiting for the Trustee to take any further action.


8.3	Information

So far as permitted by applicable law and regulations, give to the Trustee such information, opinions, certificates and/or evidence as it shall require and in such form as it shall require (including without limitation the procurement by the Issuer and Guarantor of all such certificates called for by the Trustee pursuant to Clause 10 ( Provisions Supplemental to the Trustee Act 1925 and the Trustee Act 2000 )) for the performance or the discharge or exercise of their respective duties, powers, trusts, authorities and discretions vested in it under this Trust Deed, the Bonds or the Paying Agency Agreement or by operation of law.


8.4	Financial statements etc.

Send to the Trustee at the time of their publication and in the case of annual financial statements in any event not more than 180 days after the end of each financial year one copy (in the English language) of every balance sheet and income statement prepared (in either case) in accordance with IFRS applied on a consistent basis (unless otherwise stated in the notes thereto) and one copy of every other document issued or sent by the



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Issuer or the Guarantor, as the case may be, to the holders of its publicly held securities generally.


8.5	Certificate of director

So long as any Bonds remain outstanding, send to the Trustee, within 14 days of its annual audited balance sheet and income statement being made available to its members, and also within 14 days after any request by the Trustee, a certificate of the Issuer or the Guarantor, as the case may be, signed by two directors on behalf of the Issuer or the Guarantor, as the case may be, to the effect that, having made all reasonable enquiries, as at a date (the " Certification Date ") being not more than five days before the date of the certificate no Event of Default or Potential Event of Default had occurred since the date of this Trust Deed or, if later, the Certification Date of the last such certificate (if any) and is continuing or, if such an event had occurred, giving details of it.


8.6	Notices to Bondholders

Send, or procure to be sent, to the Trustee at least five business days before the date of publication, a copy of the form of each notice to the Bondholders to be published in accordance with Condition 14 ( Notices ) and upon publication two copies of each notice so published, (such notice to be in a form approved by the Trustee such approval not to be unreasonably withheld or delayed), but such approval shall not, unless so stated, constitute approval of such notice for the purposes of section 21 of the FSMA.


8.7	Further assurance

So far as permitted by applicable law, at all times execute all such further documents and do all such further acts and things as may be necessary in the opinion of the Trustee to give effect to the obligations of the Issuer and the Guarantor under this Trust Deed.


8.8	Notice of non-payment

Use its best efforts to procure that the Principal Paying Agent notifies the Trustee forthwith in accordance with the Paying Agency Agreement in the event that it does not receive unconditionally the full amount in the relevant currency of the moneys payable on the date on which such amount is to be received by the Principal Paying Agent in accordance with the terms of the Paying Agency Agreement.


8.9	Notice of late payment

Give notice to the Bondholders of any unconditional payment to the Principal Paying Agent or the Trustee of any sum due in respect of the Bonds or Coupons made after the due date for such payment.


8.10	Listing

Use all reasonable endeavours to maintain the admission of the Bonds to listing on the Official List of the FCA and to trading on the Regulated Market of the London Stock Exchange plc. If, however, it is unable to do so, having used such endeavours, or if the maintenance of such listing is agreed by the Trustee to be unduly onerous and the Trustee



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is satisfied that the interests of the Bondholders would not be thereby materially prejudiced, the Issuer and the Guarantor will instead use all reasonable endeavours to obtain and maintain a listing or quotation of the Bonds on such other stock exchange (giving notice to the Bondholders of any such new listing), which shall be in any case a "recognised stock exchange" for the purposes of section 1005 of the UK Income Tax Act 2007, as they may (with the written approval of the Trustee) decide, and the Issuer and the Guarantor shall also use all reasonable endeavours to procure that there will at all times be furnished to any stock exchange or listing authority on which the Bonds are for the time being listed such information as such stock exchange or listing authority may require to be furnished in accordance with its normal requirements or in accordance with any arrangements for the time being made with any such stock exchange or listing authority.


8.11	Maintenance of Paying Agents

At all times maintain a principal paying agent.


8.12	Change in Agents

Give not less than 14 days' prior notice to the Bondholders of any future appointment or any resignation or removal of any Paying Agent or of any change by any Paying Agent of its specified office and not make any such appointment or removal or change without the written approval of the Trustee.


8.13	Early Redemption

Give prior notice to the Trustee (within the period set out in such Conditions as applicable) of any proposed redemption pursuant to Condition 7(b) ( Redemption at the option of the Issuer ) or 7(c) ( Redemption for tax reasons ) and redeem Bonds accordingly.


8.14	Negative Pledge

Give notice to the Trustee as soon as practicable after the Issuer or the Guarantor, as the case may be, has formed the intention to create or permit to arise or subsist any Security Interest to secure any Relevant Indebtedness or any guarantee of or indemnity in respect of any Relevant Indebtedness or becomes aware of the existence of any such Security Interest, in each case where the creation or existence of which would oblige the Security Interest to be extended to the Bonds or, as the case may be, the Guarantee pursuant to Condition 4 ( Negative Pledge ).


8.15	Obligations under Paying Agency Agreement

Comply with and perform all its obligations under the Paying Agency Agreement and use all its best endeavours to procure that the Paying Agents comply with and perform all their respective obligations thereunder and any notice given by the Trustee pursuant to sub-clause 2.4.1 of Clause 2.4 ( Payment after a Default ) and notify the Trustee forthwith on being notified in writing by the relevant Paying Agent of any material breach of the Paying Agency Agreement by such Paying Agent and not make any amendment or modification to such Agreement without the prior written approval of the Trustee.



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8.16	List of authorised signatories

Upon the execution of this Trust Deed and thereafter upon any change of the same, deliver to the Trustee (with a copy to the Principal Paying Agent) a list of the Authorised Signatories of the Issuer or, as the case may be, the Guarantor, together with a certified specimen signature of each such Authorised Signatory.


8.17	Payments

Pay moneys payable by it to the Trustee for the Trustee's own account hereunder without set off, counterclaim, deduction or withholding, unless otherwise compelled by law and in the event of any deduction or withholding compelled by law will pay such additional amount as will result in the payment to the Trustee of the amount which would otherwise have been payable by it to the Trustee hereunder.


8.18	Directors' certificate

Give to the Trustee a certificate of two directors of the Issuer or, as the case may be, the Guarantor on which the Trustee may conclusively rely without further enquiry:

8.18.1

specifying the aggregate amount of any Relevant Indebtedness of the Issuer or, as the case may be, the Guarantor or guaranteed by the Issuer or, as the case may be, the Guarantor or any of their respective Subsidiaries in respect of which a Security Interest or Security Interests has or have been created or is or are outstanding, such certificate to be provided before the Issuer, the Guarantor or such Subsidiary creates or has outstanding any new Security Interest in respect of Relevant Indebtedness;


8.18.2	specifying details of:


(a)	any revocation or surrender or any modification to the terms and conditions of the Guarantor's Electricity Distribution Licence which is requisite to the conduct of the Guarantor's business at the relevant time; and


(b)	any legislation enacted which removes, qualifies or amends (other than an amendment which is of a formal, minor or technical nature) the duties of the Secretary of State (or any successor) and/or OFGEM under the Electricity Act as in force on the Issue Date; and


8.18.3	at the request of the Trustee confirming any of the matters set out in Condition 10 ( Events of Default ).


8.19	Rating of the Bonds

Promptly notify the Trustee of any change in the then current rating of the Bonds.


8.20	Certificate of outstandings

In order to enable the Trustee to ascertain the amount of Bonds for the time being outstanding, deliver to the Trustee promptly upon being requested in writing by the



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Trustee, a certificate in writing signed by two directors of the Issuer or, as the case may be, the Guarantor on behalf of the Issuer or, as the case may be, the Guarantor setting out the total number and principal amount of Bonds which as at the date of such certificate have been purchased and not cancelled and are held by or on behalf of the Issuer, the Guarantor or any Subsidiary of the Issuer or Guarantor, or Berkshire Hathaway Energy Company or any other Subsidiary of Berkshire Hathaway Energy Company.


9.	REMUNERATION AND INDEMNIFICATION OF THE TRUSTEE


9.1	Normal remuneration

So long as any Bond is outstanding the Issuer will pay to the Trustee by way of remuneration for its services as Trustee such sum as may from time to time be agreed between them. Such remuneration will accrue from day to day from the date of this Trust Deed and shall be payable on such dates as may from time to time be agreed between the Issuer and the Trustee. However, if any payment to a Bondholder or Couponholder of the moneys due in respect of any Bond or Coupon is improperly withheld or refused upon due presentation of such Bond or Coupon, such remuneration will again accrue as from the date of such presentation until payment to such Bondholder or Couponholder is duly made.


9.2	Extra remuneration

At any time after the occurrence of an Event of Default or if the Trustee finds it expedient or necessary or is requested by the Issuer or Guarantor to undertake duties which the Trustee and the Issuer or Guarantor agree to be of an exceptional nature or otherwise outside the scope of the normal duties of the Trustee under this Trust Deed, the Issuer or, as the case may be, the Guarantor will pay such additional remuneration as may be agreed between them or, failing agreement as to any of the matters in this Clause 9.2 (or as to such sums referred to in Clause 9.1 ( Normal remuneration )) as determined by a merchant or investment bank (acting as an expert) selected by the Trustee and approved by the Issuer or, as the case may be, the Guarantor or, failing such approval, nominated by the President for the time being of The Law Society of England and Wales, the expenses involved in such nomination and the fee of such merchant or investment bank being paid by the Issuer or Guarantor. The determination of such merchant or investment bank will be conclusive and binding on the Issuer, the Guarantor, the Trustee, the Bondholders and the Couponholders, save in the case of manifest error.


9.3	Expenses

The Issuer will also pay or discharge all fees, costs, charges, liabilities and expenses properly incurred by the Trustee or any receiver (including any VAT) in relation to the preparation and execution of, the exercise of its powers and the performance of its duties under, and in any other manner in relation to, this Trust Deed, the Paying Agency Agreement and the Bonds or the Coupons including but not limited to, legal and travelling expenses and any stamp, issue, registration, documentary or other taxes or duties paid or payable by the Trustee or any receiver in connection with any action taken or contemplated by or on behalf of the Trustee or any receiver in relation to this transaction



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for enforcing or resolving any doubt concerning, or for any other purpose in relation to, the Trust Deed or the Paying Agency Agreement, the Bonds or the Coupons.


9.4	Payment of expenses

All costs, charges, liabilities and expenses properly incurred and payments properly made by the Trustee in the lawful performance of its functions under this Trust Deed will be payable or reimbursable by the Issuer on demand by the Trustee and:


9.4.1	in the case of payments made by the Trustee prior to such demand will carry interest from the date on which the demand is made at the rate of 2 per cent. per annum over the base rate of HSBC Bank plc on the date on which such payments were made by the Trustee; and


9.4.2	in all other cases will carry interest at such rate from 30 days after the date on which the demand is made or (where the demand specifies that payment is to be made on an earlier date) from such earlier date.


9.5	Indemnity

Subject to the provisions of Clause 11 ( Trustee Liable for Negligence ), without prejudice to the right of indemnity given by law to trustees, the Issuer will indemnify the Trustee and every receiver, attorney, manager, agent or other person appointed by the Trustee hereunder and keep it or him indemnified in respect of all liabilities and expenses (including any VAT payable) to which it or he may become subject or which may be incurred by it or him in the negotiation and preparation of this Trust Deed and the Paying Agency Agreement and the Bonds or the Coupons and the execution or purported execution or exercise in relation to this transaction of any of its or his trusts, duties, rights, powers, authorities and discretions under this Trust Deed or the Paying Agency Agreement or the Bonds or the Coupons or its or his functions under any such appointment or in respect of any other matter or thing done or omitted in any way relating to this Trust Deed or the Paying Agency Agreement or the Bonds or the Coupons or any such appointment (including, but not limited to, all liabilities, costs, charges and expenses paid or incurred in disputing or defending any of the foregoing).


9.6	Provisions continuing

The provisions of Clauses 9.3 ( Expenses ), 9.4 ( Payment of Expenses ) and 9.5 ( Indemnity ) will continue in full force and effect in relation to the Trustee even if it may have ceased to be Trustee.


10.	PROVISIONS SUPPLEMENTAL TO THE TRUSTEE ACT 1925 AND THE TRUSTEE ACT 2000

By way of supplement to the Trustee Act 1925 and the Trustee Act 2000 it is expressly declared as follows:


10.1	Advice



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The Trustee may act on the opinion or advice of or report or information obtained from, any lawyer, valuer, accountant (including the Auditors), surveyor, banker, broker, auctioneer or other expert (whether obtained by the Issuer, the Guarantor, the Trustee, the Principal Paying Agent, or any other person whatsoever, whether or not addressed to the Trustee, and whether or not the advice, opinion, report or information, or any engagement letter or other related document, contains a monetary or other limit on liability or limits the scope and/or basis of such advice, opinion, report or information) and which opinion, report, information or advice may be provided on such terms (including as to limitations on liability) as the Trustee may consider in its sole discretion to be consistent with prevailing market practice with regard to advice or opinions of that nature and will not be responsible to anyone for any loss occasioned by so acting. Any such opinion, advice or information may be sent or obtained by letter, telex or facsimile transmission and the Trustee will not be liable to anyone for acting in good faith on any opinion, advice or information purporting to be conveyed by such means even if it contains some error or is not authentic.


10.2	Certificates and reports by valuers, Auditors and other experts

The Trustee shall be entitled to rely on any certificate, valuation or report given by the valuers, accountants, financial advisors, the Auditors or other experts approved by the Trustee under any provision of these presents whether or not such certificate, valuation or report is addressed to the Trustee and, if the Trustee does so rely, such certificate, valuation or report shall, save only for manifest error, be conclusive and binding for all the purposes of these presents as between the Trustee, the Bondholders and the Couponholders. Each of the Issuer and the Guarantor hereby covenants with the Trustee that it shall use reasonable endeavours to obtain all such certificates, valuations and reports by the valuers, accountants, financial advisors, the Auditors or other experts as the Trustee may reasonably request for the purposes of these presents. The Trustee shall be at liberty to accept any such certificate, report or confirmation notwithstanding that it, or the terms on which it was provided, may contain a limitation on the liability of the valuers or of the Auditors (whether in time, quantum or otherwise) and the Trustee shall not incur any liability to any Bondholders or Couponholders or any other person in connection with the acceptance by it of any such certificate, report or confirmation.


10.3	Trustee to assume due performance

The Trustee need not notify anyone of the execution of this Trust Deed or any related documents or do anything to ascertain whether any Event of Default, Potential Event of Default, Restructuring Event, Negative Rating Event, Rating Downgrade or any event which could lead to the occurrence of or could constitute an Event of Default, a Potential Event of Default, a Restructuring Event, a Negative Rating Event or a Rating Downgrade has occurred and, until it has actual knowledge or express notice pursuant to this Trust Deed to the contrary, the Trustee may assume that no such event has occurred and that the Issuer and the Guarantor are performing all of their respective obligations under this Trust Deed, the Bonds and the Coupons.


10.4	Resolutions of Bondholders



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The Trustee will not be responsible for having acted in good faith upon a resolution purporting to be a written resolution or to have been passed at a meeting of Bondholders in respect of which minutes have been made and signed even though it may later be found that there was a defect in the constitution of such meeting or the passing of such resolution or that such resolution was not valid or binding upon the Bondholders or the Couponholders.


10.5	Reliance on certification of clearing system

The Trustee may call for any certificate or other document issued by Euroclear, Clearstream, Luxembourg or any other relevant clearing system to the effect that at any particular time or throughout any particular period any particular person is, was or will be shown in the relevant clearing systems records as having a particular principal or nominal amount of Bonds credited to his securities account. Any such certificate or other document shall, in the absence of manifest error, be conclusive and binding for all purposes. Any such certificate or other document may comprise any form of statement or print out of electronic records provided by the relevant clearing system (including Euroclear's EUCLID or Clearstream, Luxembourg's Cedcom system) in accordance with its usual procedures and in which the holder of a particular principal or nominal amount of the Bonds is clearly identified together with the amount of such holding. The Trustee shall not be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document to such effect purporting to be issued by Euroclear or Clearstream, Luxembourg or any other relevant clearing system and subsequently found to be forged or not authentic.


10.6	Certificate signed by a director or Authorised Signatory

If the Trustee, in the exercise of its functions, requires to be satisfied or to have information as to any fact or the expediency of any act, it may call for and may accept as sufficient evidence of any fact or matter or of the expediency of any act a certificate by any two directors or Authorised Signatories of the Issuer or Guarantor, as the case may be, and the Trustee need not call for further evidence and will not be responsible for any loss that may be occasioned by acting on any such certificate.


10.7	Custodians and nominees

The Trustee may appoint and pay any person to act as a custodian or nominee on any terms in relation to such assets of the trust as the Trustee may determine, including for the purpose of depositing with a custodian this Trust Deed or any document relating to the trust created hereunder and the Trustee shall not be responsible for any loss, liability, expense, demand, cost, claim or proceedings incurred by reason of the misconduct, omission or default on the part of any person appointed by it hereunder or be bound to supervise the proceedings or acts of any such person; the Trustee is not obliged to appoint a custodian if the Trustee invests in securities payable to bearer.


10.8	Agents

Whenever it considers it expedient in the interests of the Bondholders, the Trustee may, in the conduct of its trust business, instead of acting personally, employ and pay an agent selected by it, whether or not a lawyer or other professional person, to transact or conduct,



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or concur in transacting or conducting, any business and to do or concur in doing all acts required to be done by the Trustee (including the receipt and payment of money). Provided that it has exercised reasonable care in the selection of such agent the Trustee will not be responsible to anyone for any misconduct or omission on the part of any such agent so employed by it. In any case the Trustee shall not be bound to supervise the proceedings or acts of any such agent.


10.9	Delegation

Whenever it considers it expedient in the interests of the Bondholders, the Trustee may delegate to any person and on any terms (including power to sub-delegate) all or any of its functions. The Trustee will not be under any obligation to supervise such delegate and if the Trustee exercises reasonable care in the selection of such delegate it will not be responsible for any loss, liability, cost, claim, action, demand or expense incurred by reason of any misconduct or default by any such delegate or sub-delegate.


10.10	No obligation to monitor

The Trustee shall be under no obligation to monitor or supervise the functions of any other person under the Bonds or Coupons or any other agreement or document relating to the transactions herein or therein contemplated and shall be entitled, in the absence of actual knowledge of a breach of obligation, to assume that each such person is properly performing and complying with its obligations.


10.11	Bonds held by the Issuer or Guarantor

In the absence of knowledge or express notice to the contrary, the Trustee may assume without enquiry (other than requesting certificates of the Issuer and Guarantor under Clause 8.20 ( Certificate of outstandings )), that no Bonds are for the time being held by or for the benefit of the Issuer, the Guarantor or any of their respective Subsidiaries, or Berkshire Hathaway Energy Company or any other Subsidiary of Berkshire Hathaway Energy Company.


10.12	Forged Bonds

The Trustee will not be liable to the Issuer, Guarantor or any Bondholder or Couponholder by reason of having accepted as valid or not having rejected any Bond or Coupon purporting to be such and later found to be forged or not authentic.


10.13	Confidentiality

Unless ordered to do so by a court of competent jurisdiction the Trustee shall not be required to disclose to any Bondholder or Couponholder any confidential financial or other information made available to the Trustee by the Issuer, Guarantor or any of their respective Subsidiaries.


10.14	Determinations conclusive

As between itself and the Bondholders and Couponholders the Trustee may determine all questions and doubts arising in relation to any of the provisions of this Trust Deed.



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Every such determination, whether made upon such a question actually raised or implied in the acts or proceedings of the Trustee, will be conclusive and shall bind the Trustee, the Bondholders and the Couponholders.


10.15	Currency conversion

Where it is necessary or desirable to convert any sum from one currency to another, it will (unless otherwise provided hereby or required by law) be converted at such rate or rates, in accordance with such method and as at such date as may be specified by the Trustee but having regard to current rates of exchange, if available. Any rate, method and date so specified will be binding on the Issuer, the Guarantor, the Bondholders and the Couponholders. This Clause 10.15 applies both to actual conversions and to notional conversions made for the purposes of establishing the equivalent of a sum in one currency in another currency.


10.16	Events of Default

The Trustee may determine whether or not a default in the performance or observance by the Issuer of any of its obligations under this Trust Deed or contained in the Bonds or Coupons is in its opinion capable of remedy and/or whether or not any event is in its opinion materially prejudicial to the interests of the Bondholders. Any such determination will be conclusive and binding upon the Issuer, the Bondholders and the Couponholders.


10.17	Right to deduct or withhold

Notwithstanding anything contained in this Trust Deed, to the extent required by any applicable law, if the Trustee is or will be required to make any deduction or withholding from any distribution or payment made by it hereunder or if the Trustee is or will be otherwise charged to, or is or may become liable to, tax as a consequence of performing its duties hereunder whether as principal, agent or otherwise, and whether by reason of any assessment, prospective assessment or other imposition of liability to taxation of whatsoever nature and whensoever made upon the Trustee, and whether in connection with or arising from any sums received or distributed by it or to which it may be entitled under this Trust Deed (other than in connection with its remuneration as provided for herein) or any investments or deposits from time to time representing the same, including any income or gains arising therefrom or any action of the Trustee in connection with the trusts of this Trust Deed (other than the remuneration herein specified) or otherwise, then the Trustee shall be entitled to make such deduction or withholding or, as the case may be, to retain out of sums received by it an amount sufficient to discharge any liability to tax which relates to sums so received or distributed or to discharge any such other liability of the Trustee to tax from the funds held by the Trustee upon the trusts of this Trust Deed.


10.18	Payment for and delivery of Bonds

The Trustee will not be responsible for the receipt or application by the Issuer of the proceeds of the issue of the Bonds, the exchange of the Temporary Global Bond for the Permanent Global Bond or of the Permanent Global Bond for any Definitive Bonds or the delivery of Definitive Bonds to the persons entitled to them.



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10.19	Responsibility

The Trustee assumes no responsibility for the correctness of Recital (A) to this Trust Deed which shall be taken as a statement by the Issuer and the Guarantor, nor shall the Trustee by the execution of these presents be deemed to make any representation as to the validity, sufficiency or enforceability of this Trust Deed or any part thereof and makes no representation with respect thereto.


10.20	Trustee's discretion

Save as expressly otherwise provided in this Trust Deed (including the Conditions), the Trustee shall have absolute and uncontrolled discretion as to the exercise or non-exercise of its trusts, powers, authorities and discretions under these presents (the exercise or non-exercise of which as between the Trustee, the Bondholders and the Couponholders shall be conclusive and binding on the Bondholders and Couponholders) and, subject to Clause 11 ( Trustee Liable for Negligence ), shall not be responsible for any loss, liability, cost, claim, action, demand, expense or inconvenience which may result from their exercise or non-exercise.


10.21	Consents

Save as expressly otherwise provided in this Trust Deed (including the Conditions), any consent or approval given by the Trustee for the purposes of this Trust Deed may be given on such terms and subject to such conditions (if any) as the Trustee thinks fit and notwithstanding anything to the contrary in this Trust Deed may be given retrospectively.


10.22	Error of judgement

The Trustee shall not be liable for any error of judgement made in good faith by any officer or employee of the Trustee assigned by the Trustee to administer its corporate trust matters.


10.23	Professional charges

Any trustee of this Trust Deed being a lawyer, accountant, broker or other person engaged in any professional or business shall be entitled to charge and be paid all usual professional and other charges for business transacted and acts done by him or his firm in connection with the trusts of this Trust Deed and also his reasonable charges in addition to disbursements for all other work and business done and all time spent by him or his firm in connection with matters arising in connection with this Trust Deed.


10.24	Bondholders as a class

In connection with the exercise of its trusts, powers or discretions (including but not limited to those in relation to any proposed modification, waiver, authorisation, or substitution) the Trustee shall have regard to the general interests of the Bondholders as a class and, in particular, but without limitation, shall not have regard to the consequences of such exercise for individual Bondholders and Couponholders resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory and the Trustee shall not be entitled to



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require, nor shall any Bondholder or Couponholder be entitled to claim, from the Issuer, the Guarantor or the Trustee any indemnification or payment in respect of any tax consequences of any such exercise upon individual Bondholders or Couponholders except to the extent provided for in Condition 8 ( Taxation ) and/or any undertaking given in addition to, or in substitution for, Condition 8 ( Taxation ) pursuant to this Trust Deed.


10.25	Ratings

The Trustee shall have no responsibility for the maintenance of any rating of the Bonds by any rating agency or any other person.


10.26	Validity of documents

The Trustee shall not be responsible for, or for investigating any matter which is the subject of, any recital, statement, representation, warranty or covenant of any person contained in this Trust Deed, the Bonds, or any other agreement or document relating to the transactions herein or therein contemplated or for the execution, delivery, legality, effectiveness, adequacy, genuineness, validity enforceability or admissibility in evidence of this Trust Deed or any other document relating or expressed to be supplemental thereto and shall not be liable for any failure to obtain any licence, consent or other authority for the execution, delivery, legality, effectiveness, adequacy, genuineness, validity, performance, enforceability or admissibility in evidence of this Trust Deed or any other document relating to or expressed to be supplemental thereto.


10.27	Disapplication

10.27.1

Section 1 of the Trustee Act 2000 shall not apply to the duties of the Trustee in relation to the trusts constituted by this Trust Deed. Where there are any inconsistencies between the Trustee Acts and the provisions of this Trust Deed, the provisions of this Trust Deed shall, to the extent allowed by law, prevail and, in the case of any such inconsistency with the Trustee Act 2000, the provisions of this Trust Deed shall constitute a restriction or exclusion for the purposes of that Act.

10.27.2

Nothing contained in the Trust Deed or the Paying Agency Agreement or the Bonds shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of any right, power, authority or discretion hereunder if it has grounds for believing the repayment of such funds or adequate indemnity against, or security for, such risk or liability is not reasonably assured to it.

10.27.3

Notwithstanding anything else contained in the Trust Deed or the Paying Agency Agreement or the Bonds, the Trustee may refrain from (a) doing anything which would or might in its opinion be illegal or contrary to any law of any jurisdiction or any directive or regulation of any agency of any state (including, without limitation, Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act), or which would or might otherwise render it liable to any person and may do anything which is, in its opinion, necessary to comply with any such law, directive or regulation or (b) doing anything which may cause the Trustee to be considered a sponsor of a covered fund under Section 619 of the Dodd-



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Frank Wall Street Reform and Consumer Protection Act and any regulations promulgated there under.

10.27.4

In relation to any discretion to be exercised or action to be taken by the Trustee under the Trust Deed or the Paying Agency Agreement or the Bonds, the Trustee may, at its discretion and without further notice or shall, if it has been so directed by an Extraordinary Resolution of the Bondholders then outstanding or so requested in writing by the holders of at least 25 per cent. in principal amount of such Bonds, exercise such discretion or take such action, provided that , in either case, the Trustee shall not be obliged to exercise such discretion or take such action unless it shall have been indemnified, secured and/or prefunded to its satisfaction against all liabilities and provided that the Trustee shall not be held liable to the Bondholders for the consequences of exercising its discretion or taking any such action and may do so without having regard to the effect of such action on individual Bondholders or Couponholders.


11.	TRUSTEE LIABLE FOR NEGLIGENCE

Subject to Sections 750 and 751 of the Companies Act 2006 (if applicable) and notwithstanding anything to the contrary in this Trust Deed, the Bonds or the Paying Agency Agreement:


11.1.1	the Trustee shall not be liable to any person for any matter or thing done or omitted in any way in connection with or in relation to this Trust Deed, the Bonds or the Paying Agency Agreement save in relation to its own gross negligence, wilful default, or fraud; and


11.1.2	nothing in this Trust Deed, the Bonds or the Paying Agency Agreement shall relieve the Trustee of any liability which would otherwise attach to it in respect of its own gross negligence, wilful default, or fraud,

in each case having regard to the provisions of this Trust Deed, the Bonds and the Paying Agency Agreement conferring on it any trusts, powers, authorities or discretions.


12.	CONSEQUENTIAL LOSS

Any liability of the trustee arising out of the Trust Deed, the Bonds, the Coupons and the Paying Agency Agreement shall be limited to the amount of actual loss suffered (such loss shall be determined as at the date of default of the Trustee or, if later, the day on which the loss arises as a result of such default) but without reference to any special conditions or circumstances known to the Trustee at the time of entering into the Trust Deed, the Bonds, the Coupons and the Paying Agency Agreement, or at the time of accepting any relevant instructions, which increases the amount of the loss. In no event shall the Trustee be liable for any loss of profits, goodwill, reputation, business opportunity or anticipated saving, or for special, punitive or consequential damages, whether or not the Trustee has been advised of the possibility of such loss or damages.


13.	WAIVER


13.1	Waiver



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The Trustee may, other than in respect of Reserved Matters (as specified and defined in Schedule 5 ( Provisions for Meetings of Bondholders )), without the consent of the Bondholders or Couponholders and without prejudice to its rights in respect of any subsequent breach, from time to time and at any time, if in its opinion the interests of the Bondholders will not be materially prejudiced thereby, waive or authorise, on such terms and conditions as seems expedient to it, any breach or proposed breach by the Issuer, the Guarantor or both of them of any of the provisions of this Trust Deed or the Conditions or determine that any event, condition or act which would otherwise be an Event of Default or Potential Event of Default or Restructuring Event shall not be treated as such provided that it will not do so in contravention of any express direction given by any Extraordinary Resolution or a written request made pursuant to Condition 10 ( Events of Default ) but no such direction or request will affect any previous waiver, authorisation or determination. Any such waiver, authorisation or determination will be binding on the Bondholders and the Couponholders and, if the Trustee so requires, will be notified to the Bondholders as soon as practicable.


13.2	Enforcement proceedings

At any time after amounts in respect of principal of and interest on the Bonds shall have become due and payable but are unpaid, the Trustee may, at its discretion, and without further notice but subject as mentioned below, take such proceedings against, the Issuer or the Guarantor as it may think fit to enforce the provisions of this Trust Deed in accordance with the terms hereof.

The Trustee shall only be bound to take proceedings pursuant to this Clause 13.2 if (i) it has been indemnified and/or prefunded and/or secured to its satisfaction against all liabilities, proceedings, claims and demands to which it may thereby become liable and all costs, charges and expenses which may be incurred by it in connection therewith and provided that the Trustee shall not be held liable for the consequence of taking any such action on individual Bondholders or Couponholders and (ii) it has been so requested in writing by the holders of not less than 25 per cent. of the principal amount outstanding of the Bonds or has been so directed by an Extraordinary Resolution.


13.3	No action by Bondholders or Couponholders

Only the Trustee may pursue the remedies available under general law or under this Trust Deed to enforce the rights of the Bondholders or Couponholders and no such holder will be entitled to proceed against the Issuer or the Guarantor unless the Trustee, having become bound to act in accordance with the terms of this Trust Deed, fails to do so within a reasonable amount of time and such failure is continuing.


14.	TRUSTEE NOT PRECLUDED FROM ENTERING INTO CONTRACTS

No person, whether acting for itself or in any other capacity, will be precluded from becoming the owner of, or acquiring any interest in, holding or disposing of any Bond or Coupon or any shares or securities of the Issuer or the Guarantor or any of their respective subsidiaries, holding or associated companies with the same rights as it would have had if the Trustee were not Trustee or from entering into or being interested in any contracts or transactions with the Issuer or its Subsidiary, holding or associated



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companies or from acting on, or as depositary or agent for, any committee or body of holders of any securities of the Issuer or its Subsidiary, holding or associated companies and will not be liable to account for any profit.


15.	MODIFICATION AND SUBSTITUTION


15.1	Modification

The Trustee may, without the consent of the Bondholders or Couponholders, agree (i) to any modification to the provisions of this Trust Deed or the Conditions which is of a formal, minor or technical nature or is made to correct a manifest error or (ii) other than in respect of Reserved Matters (as specified and defined in Schedule 5 ( Provisions for Meetings of Bondholders )) to any modification to the provisions of this Trust Deed or the Conditions which is in its opinion not materially prejudicial to the interests of the Bondholders provided that it will not do so in contravention of any express direction given by any Extraordinary Resolution or a written request made pursuant to Condition 10 ( Events of Default ) but no such direction or request will affect any previous waiver, authorisation or determination. Any such modification shall be binding on the Bondholders and the Couponholders and, unless the Trustee agrees otherwise, the Issuer shall cause such modification to be notified to the Bondholders as soon as practicable thereafter in accordance with the Conditions.


15.2	Substitution

15.2.1

The Trustee may, without the consent of the Bondholders or Couponholders, agree with the Issuer and the Guarantor to the substitution of the Guarantor or of any wholly-owned Subsidiary of the Issuer or the Guarantor (the " Substituted Obligor ") in place of the Issuer (or of any previous substitute under this sub-clause 15.2.1) as the principal debtor under this Trust Deed, the Bonds and the Coupons provided that , in the opinion of the Trustee, the interests of the Bondholders will not be materially prejudiced thereby and also provided that :

(a)

a trust deed is executed or some other form of undertaking is given by the Substituted Obligor to the Trustee, in form and manner satisfactory to the Trustee, agreeing to be bound by the terms of this Trust Deed, the Bonds and the Coupons with any consequential amendments which the Trustee may deem appropriate as fully as if the Substituted Obligor had been named in this Trust Deed and on the Bonds and Coupons as the principal debtor in place of the Issuer (or any previous substitute under this Clause);

(b)

the Issuer, the Guarantor and the Substituted Obligor execute such other deeds, documents and instruments (if any) as the Trustee may require in order that the substitution is fully effective and (unless the Substituted Obligor is the Guarantor) the guarantee contained in Clause 4 ( Guarantee and Indemnity ) is fully effective in relation to the obligations of the Substituted Obligor and comply with such other requirements as the Trustee may direct in the interests of the Bondholders;



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(c)

the Trustee is satisfied that (i) the Substituted Obligor has obtained all governmental and regulatory approvals and consents necessary for its assumption of liability as principal debtor in respect of the Bonds and the Coupons in place of the Issuer (or such previous substitute as aforesaid), (ii) the Guarantor has obtained all governmental and regulatory approvals and consents necessary for the guarantee to be fully effective and (iii) such approvals and consents are at the time of substitution in full force and effect;

(d)

where the Substituted Obligor is subject generally to the taxing jurisdiction of any territory or any authority of or in that territory having power to tax (the " Substituted Territory ") other than the territory to the taxing jurisdiction of which (or to any such authority of or in which) the Issuer is subject generally (the " Issuer's Territory ") the Substituted Obligor will (unless the Trustee otherwise agrees) give to the Trustee an undertaking in form and manner satisfactory to the Trustee in terms corresponding to the terms of Condition 8 ( Taxation ) with the substitution for the references in that Condition to the Issuer's Territory of references to the Substituted Territory and Condition 7(c) ( Redemption for tax reasons ) shall be modified accordingly; and in such event the Trust Deed, the Bonds and the Coupons will be read accordingly; and


(e)	if any two of the directors of the Substituted Obligor certify that it will be solvent immediately after such substitution, the Trustee need not have regard to the financial condition, profits or prospects of the Substituted Obligor or compare them with those of the Issuer.

15.2.2

Release of Substituted Issuer : Any such agreement by the Trustee pursuant to this Clause 15.2 will, if so expressed, operate to release the Issuer (or any such previous substitute) from any or all of its obligations under this Trust Deed, the Bonds and the Coupons. Not later than 14 days after the execution of any such documents and after compliance with such requirements, notice of the substitution will be given to the Bondholders.

15.2.3

Completion of Substitution : Upon the execution of such documents and compliance with such requirements, the Substituted Obligor will be deemed to be named in this Trust Deed and on the Bonds and Coupons as the principal debtor in place of the Issuer (or of any previous substitute under this Clause 15.2) and this Trust Deed, the Bonds, the Coupons and the Paying Agency Agreement will be deemed to be modified in such manner as shall be necessary to give effect to the substitution and without prejudice to the generality of the foregoing any references in this Trust Deed, the Bonds, the Coupons or the Paying Agency Agreement to the Issuer shall be deemed to be references to the Substituted Obligor.


16.	APPOINTMENT, RETIREMENT AND REMOVAL OF THE TRUSTEE


16.1	Appointment



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The Issuer and the Guarantor acting together will have the power of appointing new trustees, but no person will be so appointed unless previously approved by an Extraordinary Resolution. A trust corporation may be appointed sole trustee hereof but subject thereto there shall be at least two trustees hereof one at least of which shall be a trust corporation. Any appointment of a new Trustee will be notified by the Issuer to the Bondholders as soon as practicable. The Bondholders shall together have the power exercisable by an Extraordinary Resolution, to remove any trustee or trustees for the time being hereof. The removal of any trustee shall not become effective unless there remains a trustee hereof (being a trust corporation) in office after such removal.


16.2	Retirement and removal

Any Trustee for the time being of this Trust Deed may retire at any time giving not less than three calendar months' notice in writing to the Issuer and the Guarantor without assigning any reason therefor and without being responsible for any costs occasioned by such retirement. The Trustee may not resign its appointment unless there remains a trustee hereof (being a trust corporation) in office after such retirement. If a sole trustee or sole trust corporation gives notice of retirement or an Extraordinary Resolution is passed for its removal under this Clause 16.2, the Issuer and the Guarantor will use their best endeavours to procure that another trust corporation be appointed as Trustee provided that if, having given notice in writing to the Issuer and the Guarantor of its intention to resign its appointment, a successor is not appointed within 30 days before the expiry of such notice then, in that case, the Trustee shall be entitled to procure forthwith a new Trustee. The Bondholders may by Extraordinary Resolution remove any Trustee provided that the retirement or removal of any sole trustee or sole trust corporation will not become effective until a trust corporation is appointed as successor Trustee.


16.3	Co-Trustees

The Trustee may, despite Clause 16.1 ( Appointment ), by notice in writing to the Issuer and the Guarantor but without the consent of the Issuer, the Guarantor or the Bondholders appoint anyone to act as a separate trustee or as a co-trustee in either case jointly with the Trustee:


16.3.1	if the Trustee considers such appointment to be in the interests of the Bondholders and/or the Couponholders;


16.3.2	for the purpose of conforming with any legal requirement, restriction or condition in any jurisdiction in which any particular act is to be performed; or


16.3.3	for the purpose of obtaining a judgment in any jurisdiction or the enforcement in any jurisdiction against the Issuer of either a judgment already obtained or any of the provisions of this Trust Deed.

Subject to the provisions of this Trust Deed the Trustee may confer on any person so appointed such functions as it thinks fit. The Trustee may by notice in writing to the Issuer and the Guarantor and such person remove any person so appointed. At the request of the Trustee, the Issuer or Guarantor, as applicable, will forthwith do all things as may be required to perfect such appointment or removal and it irrevocably appoints the Trustee



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to be its attorney in its name and on its behalf to do so. Such proper remuneration as the Trustee may pay to such separate trustee or co-trustee, together with any attributable costs, charges and expenses incurred by it in performing its function as a separate trustee or co-trustee, shall for the purposes of this Trust Deed be treated as costs and expenses incurred by the Trustee.


16.4	Competence of a majority of Trustees

If there are more than two Trustees, the majority of such Trustees will (provided such majority includes a trust corporation) be competent to carry out all or any of the Trustee's functions.


16.5	Powers additional

The powers conferred by this Trust Deed upon the Trustee shall be in addition to any powers which may from time to time be vested in it by general law or as the holder of any of the Bonds or Coupons.


17.	COUPONS


17.1	Notices

Neither the Trustee, the Issuer nor the Guarantor need give any notice to the Couponholders and the Couponholders will be deemed to have notice of the contents of any notice given to the Bondholders in accordance with the Conditions.


17.2	Bondholders assumed to hold Coupons

Even if it has express notice to the contrary, whenever the Trustee is required to exercise any of its functions by reference to the interests of the Bondholders, the Trustee will assume that each Bondholder is the holder of all Coupons appertaining to each Bond of which he is the bearer. The holders of Coupons shall be bound by and subject to the terms of this Trust Deed to the same extent as if they were Bondholders; provided that no holder of a Coupon shall have any right of action by virtue of this Trust Deed or its holding of such Coupon.


18.	CURRENCY INDEMNITY


18.1	Currency of account and payment

Sterling (the " Contractual Currency ") is the sole currency of account and payment for all sums payable by the Issuer and the Guarantor under or in connection with this Trust Deed, the Bonds and the Coupons, including damages.


18.2	Extent of discharge

Any amount received or recovered in a currency other than the Contractual Currency (whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the winding-up or dissolution of the Issuer or otherwise), by the Trustee any Bondholder or Couponholder in respect of any sum expressed to be due to it from the Issuer or the Guarantor will only constitute a discharge to the Issuer and the Guarantor



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to the extent of the Contractual Currency amount which the recipient is able to purchase with the amount so received or recovered in that other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is practicable to do so).


18.3	Indemnities

If that Contractual Currency amount is less than the Contractual Currency amount expressed to be due to the recipient under this Trust Deed, the Bonds or the Coupons, the Issuer will indemnify it against any loss sustained by it as a result. In any event, the Issuer will indemnify the recipient against the cost of making any such purchases.


18.4	Indemnities separate

These indemnities constitute a separate and independent obligation from the other obligations in this Trust Deed, will give rise to a separate and independent cause of action, will apply irrespective of any indulgence granted by the Trustee and/or any Bondholder or Couponholder and will continue in full force and effect despite any judgment, order, claim or proof for a liquidated amount in respect of any sum due under this Trust Deed, the Bonds and/or the Coupons or any judgment or order. No proof of evidence of any actual loss may be required.


18.5	Merger

Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Trust Deed, without the execution or filing of any paper or any further act on the part of any of the parties hereto.


19.	COMMUNICATIONS

[REDACTED]


20.	GOVERNING LAW

This Trust Deed, and any issues or disputes arising out of or in connection with it (whether such disputes are contractual or non-contractual in nature) should be governed by and construed in accordance with English law.


21.	JURISDICTION


21.1	English courts

The courts of England have exclusive jurisdiction to settle any dispute (a " Dispute "), arising from or connected with this Trust Deed or the Bonds (including a dispute relating to non-contractual obligations arising from or in connection with this Trust Deed or the



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Bonds, or a dispute regarding the existence, validity or termination of this Trust Deed or the Bonds) or the consequences of their nullity.


21.2	Appropriate forum

The parties agree that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that they will not argue to the contrary.


21.3	Rights of the Trustee and Bondholders to take proceedings outside England

Clause 21.1 ( English courts ) is for the benefit of the Trustee and the Bondholders only. As a result, nothing in this Clause 21 prevents the Trustee or, without prejudice to Clause 13.3, any of the Bondholders from taking proceedings relating to a Dispute (" Proceedings ") in any other courts with jurisdiction. To the extent allowed by law, the Trustee or any of the Bondholders may take concurrent Proceedings in any number of jurisdictions.


22.	SEVERABILITY

In case any provision in or obligation under this Trust Deed shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.


23.	SANCTIONS

23.1

In connection with HSBC Group's commitment to comply with all applicable sanctions regimes, the Trustee and any affiliate or subsidiary of HSBC Holdings plc may take any action in its sole and absolute discretion that it considers appropriate to comply with any law, regulation, request of a public or regulatory authority, any agreement between any member of the HSBC Group and any government authority or any HSBC Group policy that relates to the prevention of fraud, money laundering, terrorism, tax evasion, evasion of economic or trade sanctions or other criminal activities (collectively the " Relevant Requirements ").

Such action may include, but is not limited to,


23.1.1	screening, intercepting and investigating any transaction, instruction or communication, including the source of, or intended recipient of, funds;


23.1.2	delaying or preventing the processing of instructions or transactions or the Trustee's performance of its obligations under this Deed;


23.1.3	the blocking of any payment; or


23.1.4	requiring the Issuer to enter into a financial crime compliance representations letter from time to time in a form and substance reasonably acceptable to the HSBC Group.


23.2	Where possible and permitted, the Trustee will endeavour to notify the Issuer of the existence of such circumstances. To the extent permissible by law, neither the Trustee



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nor any member of the HSBC Group will be liable for loss (whether direct or consequential and including, without limitation, loss of profit or interest) or damage suffered by any party arising out of, or caused in whole or in part by, any actions that are taken by the Trustee or any other member of the HSBC Group to comply with any Relevant Requirement.

In this Clause 23, " HSBC Group " means HSBC Holdings plc together with its subsidiary undertakings from time to time.


24.	CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

No person shall have any right to enforce any provision of this Trust Deed under the Contracts (Rights of Third Parties) Act 1999.


25.	COUNTERPARTS

This Trust Deed may be executed in any number of counterparties and by the parties hereto on separate counterparts, each of which shall be an original, but all the counterparts shall together constitute one and the same instrument.

IN WITNESS WHEREOF this Trust Deed has been executed as a deed by the parties hereto and is intended to be and is hereby delivered the day and year first before written.



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SCHEDULE 1
FORM OF TEMPORARY GLOBAL BOND

ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.

ISIN: XS1999869370

NORTHERN ELECTRIC FINANCE PLC

( incorporated with limited liability under

the laws of England and Wales with registered number 03070482 )

£150,000,000 2.750 per cent. Guaranteed Bonds due 2049

guaranteed by

NORTHERN POWERGRID (NORTHEAST) LIMITED

( incorporated with limited liability under

the laws of England and Wales with registered number 02906593 )

TEMPORARY GLOBAL BOND


1.	INTRODUCTION

This Temporary Global Bond is issued in respect of the £150,000,000 2.750 per cent. Guaranteed Bonds due 2049 (the " Bonds ") of Northern Electric Finance plc (the " Issuer "). The Bonds are subject to, and have the benefit of, a trust deed dated 24 May 2019 (as amended or supplemented from time to time, the " Trust Deed ") between the Issuer, Northern Powergrid (Northeast) Limited (the " Guarantor ") and HSBC Corporate Trustee (UK) Limited as trustee (the " Trustee ", which expression includes all persons for the time being appointed trustee or trustees under the Trust Deed) and are the subject of a paying agency agreement dated 24 May 2019 (as amended or supplemented from time to time, the " Paying Agency Agreement ") and made between the Issuer, the Guarantor, HSBC Bank plc as principal paying agent (the " Principal Paying Agent ", which expression includes any successor principal paying agent appointed from time to time in connection with the Bonds), the other paying agent named therein (together with the Principal Paying Agent, the " Paying Agents ", which expression includes any successor or additional paying agents appointed from time to time in connection with the Bonds) and the Trustee.


2.	REFERENCES TO CONDITIONS

Any reference herein to the " Conditions " is to the terms and conditions of the Bonds set out in Schedule 4 ( Terms and Conditions of the Bonds ) of the Trust Deed and any reference to a numbered " Condition " is to the correspondingly numbered provision



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thereof. Words and expressions defined in the Conditions shall have the same meanings when used in this Temporary Global Bond.


3.	PROMISE TO PAY

The Issuer, for value received, promises to pay to the bearer of this Temporary Global Bond the principal sum of

£150,000,000

One Hundred and Fifty Million Pounds Sterling

on 24 May 2049 or on such earlier date or dates as the same may become payable in accordance with the Conditions, and to pay interest on such principal sum in arrear on the dates and at the rate specified in the Conditions, together with any additional amounts payable in accordance with the Conditions, all subject to and in accordance with the Conditions; provided, however, that such interest shall be payable only:

3.1

in the case of interest falling due before the Exchange Date (as defined below), to the extent that a certificate or certificates issued by Euroclear Bank S.A./N.V. as operator of the Euroclear System (" Euroclear ") and/or Clearstream Banking, S.A. (" Clearstream, Luxembourg ") dated not earlier than the date on which such interest falls due and in substantially the form set out in Schedule 3 ( Form of Euroclear/Clearstream, Luxembourg Certification ) hereto is/are delivered to the Specified Office (as defined in the Conditions) of the Principal Paying Agent; or


3.2	in the case of interest falling due at any time, to the extent that the Issuer has failed to procure the exchange for a permanent global bond of that portion of this Temporary Global Bond in respect of which such interest has accrued.


4.	NEGOTIABILITY

This Temporary Global Bond is negotiable and, accordingly, title to this Temporary Global Bond shall pass by delivery.


5.	EXCHANGE

On or after the day following the expiry of 40 days after the date of issue of this Temporary Global Bond (the " Exchange Date "), the Issuer shall procure (in the case of first exchange) the delivery of a permanent global bond (the " Permanent Global Bond ") in substantially the form set out in Schedule 2 ( Form of Permanent Global Bond ) to the Trust Deed to the bearer of this Temporary Global Bond or (in the case of any subsequent exchange) an increase in the principal amount of the Permanent Global Bond in accordance with its terms against:


5.1	presentation and (in the case of final exchange) surrender of this Temporary Global Bond at the specified office of the Principal Paying Agent; and


5.2	receipt by the Principal Paying Agent of a certificate or certificates issued by Euroclear and/or Clearstream, Luxembourg dated not earlier than the Exchange Date and in



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substantially the form set out in Schedule 3 ( Form of Euroclear/Clearstream, Luxembourg Certification ) hereto.

The principal amount of the Permanent Global Bond shall be equal to the aggregate of the principal amounts specified in the certificates issued by Euroclear and/or Clearstream, Luxembourg and received by the Principal Paying Agent; provided, however, that in no circumstances shall the principal amount of the Permanent Global Bond exceed the initial principal amount of this Temporary Global Bond.


6.	WRITING DOWN

On each occasion on which:


6.1	the Permanent Global Bond is delivered, or the principal amount thereof is increased in accordance with its terms in exchange for a further portion of this Temporary Global Bond; or


6.2	Bonds represented by this Temporary Global Bond are to be cancelled in accordance with Condition 7(e) ( Redemption and Purchase - Cancellation ),

the Issuer shall procure that (a) the principal amount of the Permanent Global Bond, the principal amount of such increase or (as the case may be) the aggregate principal amount of such Bonds and (b) the remaining principal amount of this Temporary Global Bond (which shall be the previous principal amount hereof less the aggregate of the amounts referred to in (a)) are noted in Schedule 1 ( Payments, Exchange and Cancellation of Bonds ) hereto, whereupon the principal amount of this Temporary Global Bond shall for all purposes be as most recently so noted.


7.	PAYMENTS

All payments in respect of this Temporary Global Bond shall be made against presentation and (in the case of payment of principal in full with all interest accrued thereon) surrender of this Temporary Global Bond at the Specified Office of any Paying Agent and shall be effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Bonds. On each occasion on which a payment of interest is made in respect of this Temporary Global Bond, the Issuer shall procure that the same is noted in Schedule 1 ( Payments, Exchange and Cancellation of Bonds ) hereto.


8.	CONDITIONS APPLY

Until this Temporary Global Bond has been exchanged as provided herein or cancelled in accordance with the Paying Agency Agreement, the bearer of this Temporary Global Bond shall be subject to the Conditions and, subject as otherwise provided herein, shall be entitled to the same rights and benefits under the Conditions as if the bearer were the holder of Bonds in definitive form in substantially the form set out in Schedule 3 ( Form of Definitive Bond ) to the Trust Deed and the related interest coupons in the denomination of £100,000 and integral multiples of £1,000 in excess thereof in an aggregate principal amount equal to the principal amount of this Global Bond.



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9.	NOTICES

Notwithstanding Condition 14 ( Notices ), while all the Bonds are represented by this Temporary Global Bond (or by this Temporary Global Bond and the Permanent Global Bond) and this Temporary Global Bond is (or this Temporary Global Bond and the Permanent Global Bond are) deposited with a common depositary for Euroclear and Clearstream, Luxembourg, notices to Bondholders may be given by delivery of the relevant notice to Euroclear and Clearstream, Luxembourg and, in any case, such notices shall be deemed to have been given to the Bondholders in accordance with the Condition 14 ( Notices ) on the date of delivery to Euroclear and Clearstream, Luxembourg.


10.	AUTHENTICATION

This Temporary Global Bond shall not be valid for any purpose until it has been authenticated for and on behalf of HSBC Bank plc as principal paying agent.


11.	GOVERNING LAW

This Temporary Global Bond and all matters arising from or connected with it are governed by, and shall be construed in accordance with, English law.

AS WITNESS the manual or facsimile signature of a duly authorised person on behalf of the Issuer.

NORTHERN ELECTRIC FINANCE PLC

By:

( duly authorised )

ISSUED on 24 May 2019

AUTHENTICATED for and on behalf of

HSBC BANK PLC

as principal paying agent

without recourse, warranty or liability

By:

( duly authorised )



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Schedule 1
PAYMENTS, EXCHANGE AND CANCELLATION OF BONDS



Date of payment, delivery or cancellation	Amount of interest then paid	Principal amount of Permanent Global Bond then delivered or by which Permanent Global Bond then increased	Aggregate principal amount of Bonds then cancelled	Remaining principal amount of this Temporary Global Bond	Authorised Signature



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Schedule 2
FORM OF ACCOUNTHOLDER'S CERTIFICATION

[REDACTED]



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Schedule 3
FORM OF EUROCLEAR/CLEARSTREAM, LUXEMBOURG CERTIFICATION

[REDACTED]



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SCHEDULE 2
FORM OF PERMANENT GLOBAL BOND

ISIN: XS1999869370

NORTHERN ELECTRIC FINANCE PLC

( incorporated with limited liability under

the laws of England and Wales with registered number 03070482 )

£150,000,000 2.750 per cent. Guaranteed Bonds due 2049

guaranteed by

NORTHERN POWERGRID (NORTHEAST) LIMITED

( incorporated with limited liability under

the laws of England and Wales with registered number 02906593 )

PERMANENT GLOBAL BOND


1.	INTRODUCTION

This Permanent Global Bond is issued in respect of the £150,000,000 2.750 per cent. Guaranteed Bonds due 2049 (the " Bonds ") of Northern Electric Finance plc (the " Issuer "). The Bonds are subject to, and have the benefit of, a trust deed dated 24 May 2019 (as amended or supplemented from time to time, the " Trust Deed ") between the Issuer, Northern Powergrid (Northeast) Limited (the " Guarantor ") and HSBC Corporate Trustee Company (UK) Limited as trustee (the " Trustee ", which expression includes all persons for the time being appointed trustee or trustees under the Trust Deed) and are the subject of a paying agency agreement dated 24 May 2019 (as amended or supplemented from time to time, the " Paying Agency Agreement ") and made between the Issuer, the Guarantor, HSBC Bank plc as principal paying agent (the " Principal Paying Agent ", which expression includes any successor principal paying agent appointed from time to time in connection with the Bonds), the other paying agent named therein (together with the Principal Paying Agent, the " Paying Agents ", which expression includes any successor or additional paying agents appointed from time to time in connection with the Bonds) and the Trustee.


2.	REFERENCES TO CONDITIONS

Any reference herein to the " Conditions " is to the terms and conditions of the Bonds set out in Schedule 2 ( Terms and Conditions of the Bonds ) hereto and any reference to a numbered " Condition " is to the correspondingly numbered provision thereof. Words



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and expressions defined in the Conditions shall have the same meanings when used in this Global Bond.


3.	PROMISE TO PAY

The Issuer, for value received, promises to pay to the bearer of this Global Bond, in respect of each Bond represented by this Global Bond, its principal amount on 24 May 2049 or on such earlier date or dates as the same may become payable in accordance with the Conditions, and to pay interest on each such Bond on the dates and in the manner specified in the Conditions, together with any additional amounts payable in accordance with the Conditions, all subject to and in accordance with the Conditions. The Issuer shall procure that the initial aggregate principal amount of Bonds represented by this Global Bond is noted in Schedule 1 ( Payments, Exchanges against Temporary Global Bond, Delivery of Definitive Bonds and Cancellation of Bonds ) hereto, whereupon the principal amount of this Global Bond shall for all purposes be such amount, subject as provided in paragraph 7 ( Writing Down ) and paragraph 8 ( Writing Up ) below.


4.	NEGOTIABILITY

This Global Bond is negotiable and, accordingly, title to this Global Bond shall pass by delivery.


5.	EXCHANGE

This Global Bond will be exchanged, in whole but not in part only, for Bonds in definitive form (" Definitive Bonds ") in substantially the form set out in Schedule 3 ( Form of Definitive Bond ) to the Trust Deed if any of the events specified in Clause 3.3 ( Exchange for Definitive Bonds ) of the Trust Deed occurs.


6.	DELIVERY OF DEFINITIVE BONDS

Whenever this Global Bond is to be exchanged for Definitive Bonds, the Issuer shall procure the prompt delivery of such Definitive Bonds, duly authenticated and with interest coupons (" Coupons ") attached, in an aggregate principal amount equal to the principal amount of this Global Bond to the bearer of this Global Bond against the surrender of this Global Bond at the Specified Office (as defined in the Conditions) of the Principal Paying Agent within 30 days of the occurrence of the relevant Exchange Event.


7.	WRITING DOWN

On each occasion on which:


7.1	a payment of principal is made in respect of this Global Bond;


7.2	Definitive Bonds are delivered; or


7.3	Bonds represented by this Global Bond are to be cancelled in accordance with Condition 7(e) ( Redemption and Purchase - Cancellation ),



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the Issuer shall procure that (i) the amount of such payment and the aggregate principal amount of such Bonds and (ii) the remaining principal amount of this Global Bond (which shall be the previous principal amount hereof less the aggregate of the amounts referred to in (i) above) are noted in Schedule 1 ( Payments, Exchanges against Temporary Global Bond, Delivery of Definitive Bonds and Cancellation of Bonds ) hereto, whereupon the principal amount of this Global Bond shall for all purposes be as most recently so noted.


8.	WRITING UP

If this Global Bond was originally issued in exchange for part only of a temporary global bond representing the Bonds, then all references in this Global Bond to its principal amount shall be construed as references to the principal amount of the part of the temporary global bond in exchange for which this Global Bond was originally issued which the Issuer shall procure is noted in Schedule 1 ( Payments, Exchanges against Temporary Global Bond, Delivery of Definitive Bonds and Cancellation of Bonds ) hereto. If at any subsequent time any further portion of such temporary global bond is exchanged for an interest in this Global Bond, the principal amount of this Global Bond shall be increased by the amount of such further portion, and the Issuer shall procure that the principal amount of this Global Bond (which shall be the previous principal amount hereof plus the amount of such further portion) is noted in Schedule 1 ( Payments, Exchanges against Temporary Global Bond, Delivery of Definitive Bonds and Cancellation of Bonds ) hereto, whereupon the principal amount of this Global Bond shall for all purposes be as most recently so noted.


9.	PAYMENTS

All payments in respect of this Global Bond shall be made against presentation and (in the case of payment of principal in full with all interest accrued thereon) surrender of this Global Bond at the specified office of any Paying Agent and shall be effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Bonds. On each occasion on which a payment of interest is made in respect of this Global Bond, the Issuer shall procure that the same is noted in Schedule 1 ( Payments, Exchanges against Temporary Global Bond, Delivery of Definitive Bonds and Cancellation of Bonds ) hereto.


10.	CONDITIONS APPLY

Until this Global Bond has been exchanged as provided herein or cancelled in accordance with the Paying Agency Agreement, the bearer of this Global Bond shall be subject to the Conditions and, subject as otherwise provided herein, shall be entitled to the same rights and benefits under the Conditions as if it were the holder of Definitive Bonds and the related Coupons in the denomination of £100,000 and integral multiples of £1,000 in excess thereof and in an aggregate principal amount equal to the principal amount of this Global Bond.


11.	EXERCISE OF PUT OPTION

In order to exercise the option contained in Condition 11 ( Restructuring Event ) (the " Put Option "), the bearer of this Global Bond must, within the period specified in the



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Conditions for the deposit of the relevant Bond and Put Event Notice (as defined in Condition 11), give written notice (or electronic notice in accordance with the rules and procedures of Euroclear and Clearstream, Luxembourg) of such exercise to the Principal Paying Agent specifying the principal amount of Bonds in respect of which the Put Option is being exercised. Any such notice shall be irrevocable and may not be withdrawn.


12.	EXERCISE OF CALL OPTION

In connection with an exercise of the option contained in Condition 7(b) ( Redemption at the option of the Issuer ) in relation to some only of the Bonds, this Global Bond may be redeemed in part in the principal amount specified by the Issuer in accordance with the Conditions, and the Bonds to be redeemed will not be selected as provided in the Conditions but in accordance with the rules and procedures of Euroclear and Clearstream, Luxembourg and the notice of redemption will not specify the serial numbers of the Bonds called for redemption or the serial numbers of the Bonds previously called for redemption and not presented for payment. The rules and procedures of Euroclear and Clearstream, Luxembourg provide that a partial redemption will be reflected in the records of Euroclear and Clearstream Luxembourg as either a pool factor or a reduction in nominal amount, at their discretion.


13.	NOTICES

Notwithstanding Condition 14 ( Notices ), while all the Bonds are represented by this Global Bond (or by this Global Bond and a temporary global bond) and this Global Bond is (or this Global Bond and a temporary global bond are) deposited with a common depositary for Euroclear and Clearstream, Luxembourg, notices to Bondholders may be given by delivery of the relevant notice to Euroclear and Clearstream, Luxembourg and, in any case, such notices shall be deemed to have been given to the Bondholders in accordance with the Condition 14 ( Notices ) on the date of delivery to Euroclear and Clearstream, Luxembourg.


14.	AUTHENTICATION

This Global Bond shall not be valid for any purpose until it has been authenticated for and on behalf of HSBC Bank plc as principal paying agent.


15.	GOVERNING LAW

This Global Bond and all matters arising from or connected with it are governed by, and shall be construed in accordance with, English law.



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AS WITNESS the manual or facsimile signature of a duly authorised person on behalf of the Issuer.

NORTHERN ELECTRIC FINANCE PLC

By:

( duly authorised )

ISSUED as of 24 May 2019

AUTHENTICATED for and on behalf of

HSBC BANK PLC

as principal paying agent

without recourse, warranty or liability

By:

( duly authorised )



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Schedule 1

Payments, Exchanges against Temporary Global Bond, Delivery of Definitive Bonds and Cancellation of Bonds



Date of payment, exchange, delivery or cancellation	Amount of interest then paid	Principal amount of Temporary Global Bond then exchanged	Aggregate principal amount of Definitive Bonds then delivered	Aggregate principal amount of Bonds then cancelled	New principal amount of this Global Bond	Authorised signature



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Schedule 2
Terms and Conditions of the Bonds

To be included in the Permanent Global Bond as set out in Schedule 4 ( Terms and Conditions of the Bonds ) of the Trust Deed.



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SCHEDULE 3
FORM OF DEFINITIVE BOND

[On the face of the Bond:]

[ currency ][ denomination ]

NORTHERN ELECTRIC FINANCE PLC

( incorporated with limited liability under

the laws of England and Wales with registered number 03070482 )

£150,000,000 2.750 per cent. Guaranteed Bonds due 2049

guaranteed by

NORTHERN POWERGRID (NORTHEAST) LIMITED

( incorporated with limited liability under

the laws of England and Wales with registered number 02906593 )

The Issuer, for value received, promises to pay to the bearer the principal sum of

£100,000

(ONE HUNDRED THOUSAND POUNDS)

on 24 May 2049, or on such earlier date or dates as the same may become payable in accordance with the conditions endorsed hereon (the " Conditions "), and to pay interest on such principal sum in arrear on the dates and at the rate specified in the Conditions, together with any additional amounts payable in accordance with the Conditions, all subject to and in accordance with the Conditions.

Interest is payable on the above principal sum at the rate of 2.750 per cent. per annum, payable annually in arrear on 24 May in each year, all subject to and in accordance with the Conditions.

This Bond and the interest coupons relating hereto shall not be valid for any purpose until this Bond has been authenticated for and on behalf of HSBC Bank plc as principal paying agent.



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AS WITNESS the facsimile signature of a duly authorised person on behalf of the Issuer.

NORTHERN ELECTRIC FINANCE PLC

By:

[ facsimile signature ]

( duly authorised )

ISSUED as of [•] 2019

AUTHENTICATED for and on behalf of

HSBC BANK PLC

as principal paying agent

without recourse, warranty or liability

By:

[ manual signature ]

( duly authorised )



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[On the reverse of the Bond:]

TERMS AND CONDITIONS

[As set out in Schedule 4 ( Terms and Conditions of the Bonds ) of the Trust Deed]

[At the foot of the Terms and Conditions:]

PRINCIPAL PAYING AGENT

HSBC Bank plc

Level 28

8 Canada Square

London E14 5HQ



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Form of Coupon

[On the face of the Coupon:]

NORTHERN ELECTRIC FINANCE PLC

£150,000,000 2.750 per cent. Guaranteed Bonds due 2049

Coupon for £[ amount of interest payment ] due on [ interest payment date ].

Such amount is payable, subject to the terms and conditions (the " Conditions ") endorsed on the Bond to which this Coupon relates (which are binding on the holder of this Coupon whether or not it is for the time being attached to such Bond), against presentation and surrender of this Coupon at the specified office for the time being of any of the agents shown on the reverse of this Coupon (or any successor or additional agents appointed from time to time in accordance with the Conditions).

[On the reverse of the Coupon:]

Principal Paying Agent : HSBC Bank plc, Level 28, 8 Canada Square, London E14 5HQ



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SCHEDULE 4
TERMS AND CONDITIONS OF THE BONDS

The £150,000,000 2.750 per cent Guaranteed Bonds due 2049 (the " Bonds ", which expression shall, unless the context otherwise requires, include any Further Bonds (as defined in Condition 3 ( Definitions )) of Northern Electric Finance plc (the " Issuer ") are constituted by and subject to a trust deed dated 24 May 2019 (as the same may be amended and/or supplemented from time to time, the " Trust Deed ") between the Issuer, Northern Powergrid (Northeast) Limited in its capacity as guarantor of the Bonds (the " Guarantor ") and HSBC Corporate Trustee Company (UK) Limited (the " Trustee ", which expression shall, wherever the context so admits, include its successors as trustee under the Trust Deed) as trustee for the holders of the Bonds (the " Bondholders "). The statements in these Terms and Conditions include summaries of and are subject to, the detailed provisions of the Trust Deed. Copies of the Trust Deed and the Paying Agency Agreement dated 24 May 2019 (the " Paying Agency Agreement ") between the Issuer, the Guarantor, HSBC Bank plc (the " Principal Paying Agent ") and any paying agent appointed thereunder (each a " Paying Agent " and together with the Principal Paying Agent, the " Paying Agents ") and the Trustee will be available for inspection by Bondholders and the holders of the interest coupons appertaining to the Bonds (respectively, the " Couponholders " and the " Coupons ") at the specified office(s) of each of the Paying Agents. The Bondholders and the Couponholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and the provisions of the Paying Agency Agreement applicable to them.


1.	Form, Denomination and Title

The Bonds are serially numbered and in bearer form in the denominations of £100,000 and integral multiples of £1,000 in excess thereof up to and including £199,000, each with Coupons attached on issue. No definitive Bonds will be issued with a denomination above £199,000. Title to the Bonds and to the Coupons will pass by delivery. Bonds of one denomination may not be exchanged for Bonds of the other denomination. The holder of any Bond or Coupon will (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust, or any interest in it, any writing on it, or its theft or loss) and no person will be liable for so treating the holder. No person shall have any right to enforce any term or condition of the Bonds or the Trust Deed under the Contracts (Rights of Third Parties) Act 1999.


2.	Status of the Bonds and the Guarantee

(a)

Status of the Bonds: The Bonds and Coupons constitute direct, unconditional and (subject to the provisions of Condition 4(a) ( Negative Pledge )) unsecured obligations of the Issuer and rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds and the Coupons shall, subject as aforesaid and save for such obligations as may be preferred by laws that are both mandatory and of general application, at all times rank at least equally with all its present and future unsecured and unsubordinated obligations.



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(b)

Guarantee of the Bonds: The Guarantor has in the Trust Deed unconditionally and irrevocably guaranteed the due and punctual payment of all sums from time to time payable by the Issuer in respect of the Bonds. This guarantee (the " Guarantee ") constitutes a direct, unconditional and (subject to the provisions of Condition 4 ( Negative Pledge )) unsecured obligation of the Guarantor. The payment obligations of the Guarantor under the Guarantee shall, subject as aforesaid and save for certain obligations required to be preferred by laws that are both mandatory and of general application, at all times rank at least equally with all its present and future unsecured and unsubordinated obligations.


3.	Definitions

" Business Day " means any day (other than a Saturday or Sunday) on which banks and other financial institutions are open for business in London.

" Companies Act " means the Companies Act 2006 as amended or re-enacted from time to time and all subordinate legislation made pursuant thereto.

" Electricity Act " means the Electricity Act 1989 as amended or re-enacted from time to time and all subordinate legislation made pursuant thereto.

" Electricity Distribution Licence " means the electricity distribution licence granted or treated as granted to the Guarantor under section 6(1)(c) of the Electricity Act.

" Energy Act " means the Energy Act 2004 as amended or re-enacted from time to time and all subordinate legislation made pursuant thereto.

" Energy Administrator " means an energy administrator appointed pursuant to Part 3 of the Energy Act.

" Event of Default " means any of the events set out in Condition 10 ( Events of Default ).

" Final Determination " means the final determination document published by Ofgem for each electricity distribution price control review.

" Fitch " means Fitch Ratings Limited.

" Further Bonds " means all further bonds created and issued by the Issuer and guaranteed by the Guarantor in accordance with Condition 17 ( Further Bonds ) and/or for the time being outstanding or, as the context may require, a specific proportion thereof.

" Indebtedness For Borrowed Money " means any indebtedness (whether being principal, premium, interest or other amounts) for (i) money borrowed, (ii) payment obligations under or in respect of any acceptance or acceptance credit, or (iii) any notes, bonds, debentures, debenture stock, loan stock or other debt securities offered, issued or distributed whether by way of public offer, private placing, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash.



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" Investment Grade Rating " means a credit rating assigned by a Rating Agency of BBB- (in the case of such ratings assigned by S&P and/or Fitch) or Baa3 (in the case of such ratings assigned by Moody's) or the equivalents of such ratings for the time being, or better.

" Issue Date " means 24 May 2019.

" Moody's " means Moody's Investors Service Limited.

A " Negative Rating Event " shall be deemed to have occurred if (i) the Issuer or the Guarantor does not, either prior to or no later than 14 days after the date of a Negative Certification (as defined in Condition 11 ( Restructuring Event )) in respect of the relevant Restructuring Event, seek, and thereupon use all reasonable endeavours to obtain, from a Rating Agency, a rating of the Reference Rated Securities or these Bonds or any other unsecured and unsubordinated debt of the Guarantor, or of the Issuer which is guaranteed on an unsecured and unsubordinated basis by the Guarantor, and in each case having an initial maturity of five years or more or (ii) if it does so seek and use such endeavours, it is unable, as a result of such Restructuring Event, to obtain such a rating which is an Investment Grade Rating.

" Ofgem " means the Gas and Electricity Markets Authority and/or the Office of Gas and Electricity Markets, including their successor office or body, as appropriate.

" Potential Event of Default " means an event or circumstance which would with the giving of notice and/or lapse of time and/or the issuing of a certificate become an Event of Default.

A " Put Event " occurs on the date of the last to occur of (i) a Restructuring Event, (ii) either a Rating Downgrade or, as the case may be, a Negative Rating Event, and (iii) the relevant Negative Certification.

" Rating Agencies " means S&P and Fitch, and " Rating Agency " means any one of them.

A " Rating Downgrade " shall be deemed to have occurred (i) if the then current rating assigned to any Reference Rated Securities by any Rating Agency (whether provided by a Rating Agency at the invitation of the Issuer or the Guarantor or by its own volition) is withdrawn or reduced from an Investment Grade Rating to a non-Investment Grade Rating (BB+/Ba1, or their respective equivalents for the time being, or worse) or, (ii) if any Rating Agency shall then have already assigned a non-Investment Grade Rating (as described above) to the Reference Rated Securities, such rating is lowered one full rating category, provided that, in the case of (i) or (ii), if during the Restructuring Period the Reference Rated Securities have at least one Investment Grade Rating then it shall be deemed that no Rating Downgrade shall have occurred.

" Reference Gilt " means the 4.25 per cent Treasury Stock due December 2049 or such other conventional (i.e. not index linked) UK Government Stock as the Issuer (with the advice of an independent financial institution of international repute appointed by the Issuer) may determine to be the most appropriate benchmark conventional UK Government Stock.



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" Reference Rated Securities " means the Bonds for so long as they have a rating from a Rating Agency, and otherwise any other unsecured and unsubordinated debt securities of the Guarantor or of the Issuer which are guaranteed on an unsecured and unsubordinated basis by the Guarantor and in each case having an initial maturity of five years or more which are rated by a Rating Agency.

" Regulated Asset Value " means the regulatory asset value of the Guarantor as set out in the most recent Final Determination or, if any electricity distribution price control financial model has been published on Ofgem's website since the most recent Final Determination, the regulatory asset value of the Guarantor as set out in such financial model, in each case, adjusted for inflation, as of the 31 March nearest to the date of determination, provided that if at any time Ofgem alters its methodology of determining Regulated Asset Value in a manner which results in a change in Regulated Asset Value, appropriate adjustments to this definition (and to other terms defined or described herein solely for the purposes of this definition) so as to preserve the original intent of Condition 10(c) ( Events of Default ) shall be determined by an independent accountant experienced in the regulated electricity distribution market selected by the Guarantor.

" Relevant Indebtedness " means any indebtedness (whether being principal, premium, interest or other amounts) in the form of or represented by notes, bonds, debentures, debenture stock, loan stock or other securities, whether issued for cash or in whole or in part for a consideration other than cash, and which, with the agreement of the person issuing the same, are quoted, listed or ordinarily dealt in on any stock exchange or recognised over-the-counter or other securities market.

" Restructuring Event " means the occurrence of any one or more of the following events:

(i)

(a) written notice being given to the Guarantor of revocation of its Electricity Distribution Licence which is requisite to the conduct of the Guarantor's business at the relevant time or (b) the Guarantor agreeing in writing to any revocation or surrender of its Electricity Distribution Licence which is requisite to the conduct of the Guarantor's business at the relevant time or (c) any legislation (whether primary or subordinate) being enacted terminating or revoking its Electricity Distribution Licence which is requisite to the conduct of the Guarantor's business at the relevant time, except in any such case in circumstances where a licence or licences is or are granted to the Guarantor or a Subsidiary of the Guarantor 100 per cent of the ordinary share capital of which is owned directly or indirectly by the Guarantor (the " Relevant Transferee ") and provided that the terms of such licence or licences are substantially no less favourable than the Electricity Distribution Licence in which event all references in these Terms and Conditions to the Electricity Distribution Licence and the Guarantor in its capacity as holder of the Electricity Distribution Licence shall hereafter be deemed to be references to the licence or licences on substantially no less favourable terms and the Relevant Transferee respectively; or


(ii)	any modification (other than a modification which is of a formal, minor or technical nature) being made to the terms and conditions of the Electricity Distribution Licence on or after the Issue Date unless two Directors of the Guarantor have certified in good faith to the Trustee (and the Trustee may rely



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absolutely on such certification) that the modified terms and conditions are not materially less favourable to the business of the Guarantor. For the purposes of this paragraph (ii) a modification which (a) results in a licence or licences being granted to the Guarantor or a Subsidiary of the Guarantor 100 per cent of the ordinary share capital of which is owned directly or indirectly by the Guarantor (collectively, the " Applicable Transferees ") and provided that the terms of such licence or licences are substantially no less favourable than the terms of the Electricity Distribution Licence or (b) results in a licence or licences being granted to an Applicable Transferee provided that the terms of such licence or licences are substantially no less favourable than the terms of the Electricity Distribution Licence, shall not be deemed to be a modification within this paragraph (ii). In the event of such a modification as is referred to in (a) or (b), all references in these Terms and Conditions to the Electricity Distribution Licence and the Guarantor in its capacity as holder of the Electricity Distribution Licence shall thereafter be deemed to be references to the licence or licences granted to the Applicable Transferee and to the Applicable Transferee, respectively; or

(iii)

any legislation (whether primary or subordinate) is enacted which removes, qualifies or amends (other than an amendment which is of a formal, minor or technical nature) the duties of the Secretary of State (or any successor) and/or Ofgem under the Electricity Act as in force on the Issue Date, unless two Directors of the Guarantor have certified in good faith to the Trustee (and the Trustee may rely absolutely on such certification) that such removal, qualification or amendment does not have a materially adverse effect on the financial condition of the Guarantor.

" Restructuring Period " means:


(i)	if at the time a Restructuring Event occurs there are Reference Rated Securities, the period of 90 days starting from and including the day on which the Restructuring Event occurs; or

(ii)

if at the time a Restructuring Event occurs there are not Reference Rated Securities, the period starting from and including the day on which the Restructuring Event occurs and ending on the day 90 days following the later of (a) the date on which the Issuer shall seek to obtain a rating pursuant to the definition of Negative Rating Event prior to the expiry of the 14 days referred to in the definition of Negative Rating Event and (b) the date on which a Negative Certification shall have been given to the Issuer in respect of the Restructuring Event.

" S&P " means S&P Global Ratings Europe Limited, a division of The McGraw-Hill Companies, Inc.

" Security Interest " means a mortgage, charge, lien, pledge or other security interest.

" Subsidiary " means a subsidiary or subsidiary undertaking within the meaning of the Companies Act.



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4.	Negative Pledge

So long as any of the Bonds remain outstanding (as defined in the Trust Deed), each of the Issuer and the Guarantor will ensure that none of its Relevant Indebtedness or the Relevant Indebtedness of any of their respective Subsidiaries nor any guarantee given by it or by any such Subsidiary of the Relevant Indebtedness of any other person will be secured by a Security Interest upon, or with respect to, any of the present or future business, undertaking, assets or revenues (including any uncalled capital) of the Issuer, the Guarantor or any such Subsidiary unless the Issuer or, as applicable, the Guarantor shall, before or at the same time as the creation of the Security Interest, take any and all action necessary to ensure that:


(a)	all amounts payable by the Issuer under the Bonds, the Coupons and the Trust Deed or, as the case may be, all amounts payable by the Guarantor under the Guarantee and the Trust Deed are secured to the satisfaction of the Trustee equally and rateably with the Relevant Indebtedness or guarantee of Relevant Indebtedness, as the case may be, by such Security Interest; or

(b)

such other Security Interest or guarantee or other arrangement (whether or not including the giving of a Security Interest) is provided in respect of all amounts payable by the Issuer under the Bonds, the Coupons and the Trust Deed or, as the case may be, all amounts payable by the Guarantor under the Guarantee and the Trust Deed either (i) as the Trustee shall in its absolute discretion deem not materially less beneficial to the interests of the Bondholders, or (ii) as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders.


5.	Interest

The Bonds bear interest from (and including) the Issue Date at the rate of 2.750 per cent per annum payable annually in arrear on 24 May in each year (each, an " Interest Payment Date "). Each Bond will cease to bear interest from the due date for redemption thereof, unless upon due presentation, payment of principal or premium (if any) is improperly withheld or refused. In such event, each Bond shall continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (i) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant holder and (ii) the day falling seven days after the Trustee or the Principal Paying Agent has notified Bondholders in accordance with Condition 14 ( Notices ) of receipt of all sums then due in respect of all the Bonds up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant holder under these Terms and Conditions). In these Conditions, the period beginning on and including 24 May 2019 and ending on but excluding the first Interest Payment Date and each successive period beginning on and including an Interest Payment Date and ending on but excluding the next succeeding Interest Payment Date is called an " Interest Period ". Where interest is to be calculated in respect of a period which is equal to or shorter than an Interest Period the day-count fraction used will be the number of days in the relevant period, from and including the date from which interest begins to accrue to but excluding the date on which it falls due, divided by the number of days in the Interest Period in which the relevant period falls (including the first such day but excluding the last). Interest in



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respect of each £1,000 in principal amount of the Bonds (the " Calculation Amount ") for any period shall be equal to the product of 2.750 per cent, the Calculation Amount and the day-count fraction for the relevant period, rounding the resulting figure to the nearest pence (half a pence being rounded upwards).


6.	Payments

Payments of principal, premium (if any) or interest in respect of the Bonds will be made against surrender of Bonds or, in the case of payments of interest due on an Interest Payment Date, against surrender of Coupons, at the specified office of any Paying Agent by a sterling cheque drawn on, or at the option of the holder, by transfer to a sterling account maintained by the payee with a branch of a bank in the City of London, subject in all cases to (i) any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 8 ( Taxation ) and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the " Code ") or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or (without prejudice to the provisions of Condition 8 ( Taxation )) any law implementing an intergovernmental approach thereto.

Upon the due date for redemption of any Bond, all unmatured Coupons relating to such Bond (whether or not attached) shall become void and no payment shall be made in respect of them. Where any Bond is presented for redemption without all unmatured Coupons relating to it, redemption shall be made only against the provision of such indemnity as the Issuer or the Guarantor may require.

If the due date for redemption of any Bond is not 24 May in any year, interest accrued in respect of such Bond from (and including) the last preceding 24 May will be paid only against presentation and surrender of such Bond.

If the due date for payment of any amount in respect of any Bond or Coupon is not a business day, then the holder thereof shall not be entitled to payment of the amount due until the next following business day nor to any further interest or other payment in respect of such delay. The expression " business day " in this Condition means a day other than a Saturday or Sunday on which banks are open for business in the place where the Bond or Coupon is presented and, in the case of payment by transfer to a sterling account as referred to above, in the City of London.

The names of the initial Principal Paying Agent and the other initial Paying Agents and their initial specified offices are set out at the end of these Terms and Conditions. The Issuer and the Guarantor reserve the right, subject to the prior written approval of the Trustee, at any time to vary or terminate the appointment of any Paying Agent and to appoint additional or other Paying Agents provided that the Issuer and the Guarantor will at all times maintain a principal paying agent. Notice of any such termination or appointment and of any changes in the specified offices of the Paying Agents will be given to the Bondholders in accordance with Condition 14 ( Notices ) as soon as practicable thereafter. Under no circumstances will interest be payable in the United States of America or any possession of the United States of America.



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7.	Redemption and Purchase


(a)	Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Issuer will redeem the Bonds on 24 May 2049 (the " Maturity Date ") at their outstanding principal amount.

(b)

Redemption at the option of the Issuer : The Issuer may, having given not less than 30 nor more than 45 days' notice in accordance with Condition 14 ( Notices ) (which notice shall be irrevocable), redeem the whole or part (in principal amount of £5,000,000 or integral multiples thereof) of the Bonds at any time prior to the Maturity Date at a price equal to the Redemption Price together with interest accrued up to and including the date of redemption.

In this Condition, " Redemption Price " means:


(i)	in relation to any date fixed for redemption which falls in the period up to and including the date falling three months prior to the Maturity Date, the higher of the following:

(1) par; and

(2)

that price, expressed as a percentage (rounded to three decimal places, 0.0005 being rounded upwards), at which the Gross Real Redemption Yield (calculated as described below) on the Bonds, if they were to be purchased at such price on the third dealing day prior to the publication of the notice of redemption, would be equal to the Gross Real Redemption Yield on such dealing day of the Reference Gilt, on the basis of the middle market price of the Reference Gilt prevailing at 11:00 a.m. on such dealing day, as determined by NatWest Markets Plc (or such other investment bank of international repute as the Trustee may approve); and


(ii)	in relation to any date fixed for redemption which falls in the period from but excluding the date falling three months prior to the Maturity Date to but excluding the Maturity Date, par.

Any reference in these Terms and Conditions to principal shall be deemed to include any sum payable as the Redemption Price.

Notices of redemption will specify the date fixed for redemption, the applicable Redemption Price and, in the case of partial redemption, the aggregate principal amount of the Bonds to be redeemed, the serial numbers of the Bonds called for redemption, the serial numbers of the Bonds previously called for redemption and not presented for payment and the aggregate principal amount of the Bonds to remain outstanding after the redemption. No such notice of redemption may be given by the Issuer unless it shall have presented to the Trustee a certificate signed by two Directors of the Issuer (upon which the Trustee may rely absolutely) that it will have the funds, not subject to the interest of any other person, required to redeem the Bonds at the Redemption Price plus accrued interest on the date specified for redemption. Upon the expiry of any notice of redemption the Issuer



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shall be bound to redeem the Bonds called for redemption at the applicable Redemption Price. Any partial redemption of the Bonds shall be on the basis of selection by drawings (the method of such drawings to be approved by the Trustee in its absolute discretion).

" Gross Real Redemption Yield " means a yield expressed as a percentage and calculated on a basis consistent with the basis indicated by the United Kingdom Debt Management Office publication "Formulae for calculating Gilt Prices from Yields" published on 8 June 1998 with effect from 1 November 1998, page 5 and updated on 15 January 2002 and 16 March 2005 and as further updated or amended from time to time.

(c)

Redemption for tax reasons: If, as a result of any change in, or amendment to, the laws or regulations of the United Kingdom or any political sub-division of, or any authority in, or of, the United Kingdom having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective after 22 May 2019, the Issuer or the Guarantor (if a demand were made under the Guarantee) has or will become obliged to pay additional amounts as provided or referred to in Condition 8 ( Taxation ) (and such amendment or change has been evidenced by the delivery by the Issuer or, as applicable, the Guarantor to the Trustee (who shall accept such certificate as sufficient evidence thereof) of a certificate signed by two Directors of the Issuer or, as applicable, the Guarantor stating that such amendment or change has occurred (irrespective of whether such amendment or change is then effective), describing the facts leading thereto and stating that such obligation cannot be avoided by the Issuer or, as applicable, the Guarantor taking reasonable measures available to it) the Issuer may at its option, having given not less than 30 nor more than 60 days' notice to the Bondholders in accordance with Condition 14 ( Notices ) (which notice shall be irrevocable), redeem all the Bonds (other than Bonds in respect of which the Issuer shall have given a notice of redemption pursuant to Condition 7(b) ( Redemption at the option of the Issuer ) prior to any notice being given under this Condition 7(c)), but not some only, at their outstanding principal amount together with interest accrued to (but excluding) the date of redemption, provided that no notice of redemption shall be given earlier than 90 days before the earliest date on which the Issuer or the Guarantor would be required to pay the additional amounts were a payment in respect of the Bonds (or, as the case may be, the Guarantee) then due and provided further that no notice of redemption may be given by the Issuer unless two Directors of the Issuer shall have certified to the Trustee that it will have the funds, not subject to the interest of any other person, required to redeem the Bonds at their principal amounts outstanding plus accrued interest on the date specified for redemption (the Trustee being able to rely on such certificate absolutely).


(d)	Purchase: The Issuer, the Guarantor or any of their respective Subsidiaries may at any time purchase or otherwise acquire Bonds (provided that all unmatured Coupons are attached thereto or are surrendered therewith) at any price in the open market or otherwise.



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(e)

Cancellation: All Bonds which are redeemed pursuant to this Condition by the Issuer shall be cancelled (together with all relative unmatured Coupons attached thereto or surrendered therewith) and accordingly may not be reissued or resold. Bonds purchased by or on behalf of the Issuer, the Guarantor or any of their respective Subsidiaries may be held or reissued or resold or surrendered for cancellation.


8.	Taxation

(a)

All payments in respect of the Bonds and Coupons by or on behalf of the Issuer or the Guarantor shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (" Taxes ") imposed or levied by or on behalf of the United Kingdom, or any political subdivision of, or authority in, or of, the United Kingdom having power to tax, unless the withholding or deduction of the Taxes is required by law. In that event, the Issuer or (as the case may be) the Guarantor will pay such additional amounts as may be necessary in order that the net amounts received by the Bondholders and Couponholders after the withholding or deduction shall equal the respective amounts which would have been receivable in respect of the Bonds or, as the case may be, Coupons in the absence of the withholding or deduction; except that no additional amounts shall be payable in relation to any payment in respect of any Bond or Coupon:


(i)	to, or to a third party on behalf of, a holder who is liable to the Taxes in respect of the Bond or Coupon by reason of such holder having some connection with the United Kingdom other than the mere holding of the Bond or Coupon; or


(ii)	to, or to a third party on behalf of, a holder who would not be liable or subject to the withholding or deduction by making a declaration of non-residence or other similar claim for exemption to the relevant tax authority; or


(iii)	presented for payment more than 30 days after the Relevant Date except to the extent that the holder would have been entitled to additional amounts on presenting the same for payment on the last day of the period of 30 days.

(b)

In these Terms and Conditions, " Relevant Date " means the date on which the payment first becomes due, but if the full amount of the money payable has not been received in London by the Principal Paying Agent or the Trustee on or before the due date, it means the date on which, the full amount of the money having been so received, notice to that effect shall have been duly given to the Bondholders by the Issuer in accordance with Condition 14 ( Notices ).


(c)	Any reference in these Terms and Conditions to any amounts in respect of the Bonds shall be deemed also to refer to any additional amounts which may be payable under this Condition or under any undertakings given in addition to, or in substitution for, this Condition 8 pursuant to the Trust Deed.



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9.	Prescription

Bonds and Coupons will become void unless presented for payment within periods of ten years and five years, respectively, from the Relevant Date for payment in respect thereof, subject to the provisions of Condition 6 ( Payments ).


10.	Events of Default

If:


(a)	default is made in the payment of any principal or premium (if any) in respect of any Bond pursuant to Condition 7 ( Redemption and Purchase ), or for a period of 14 days or more in the payment of any interest due in respect of the Bonds; or

(b)

the Issuer or the Guarantor, as the case may be, fails to perform or observe any of its other obligations, covenants, conditions or provisions under the Bonds or the Trust Deed and (except where the Trustee shall have certified to the Issuer or the Guarantor, as applicable, in writing that it considers such failure to be incapable of remedy in which case no such notice or continuation as is hereinafter mentioned will be required) such failure continues for the period of 60 days (or such longer period as the Trustee may permit) following the service by the Trustee on the Issuer or the Guarantor, as applicable, of notice requiring the same to be remedied; or

(c)

(i) any other Indebtedness For Borrowed Money of the Issuer, the Guarantor or any of their respective Subsidiaries becomes due and repayable prior to its stated maturity by reason of an event of default (however described) or (ii) any such Indebtedness For Borrowed Money is not paid when due or (iii) the Issuer, the Guarantor or any of their respective Subsidiaries fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of any Indebtedness For Borrowed Money of any person or (iv) any security given by the Issuer, the Guarantor or any of their respective Subsidiaries for any Indebtedness For Borrowed Money of any person or any guarantee or indemnity of Indebtedness For Borrowed Money of any person becomes enforceable by reason of default in relation thereto and steps are taken to enforce such security save in any such case referred to in (i), (ii), (iii) or (iv) where there is a bona fide dispute as to whether the relevant Indebtedness For Borrowed Money or any such guarantee or indemnity as aforesaid shall be due and payable, and provided that the aggregate amount of the relevant Indebtedness For Borrowed Money in respect of which any one or more of the events mentioned above in this sub-paragraph (c) has or have occurred equals or exceeds 5 per cent of Regulated Asset Value and such event shall continue unremedied or unwaived for more than 14 days (or such longer grace period as may have been originally provided in the applicable instrument) and the time for payment of such amount has not been expressly extended (until such time as any payment default is remedied, cured or waived); or



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(d)	any order shall be made by any competent court or any resolution shall be passed for the winding up or dissolution of the Issuer or the Guarantor, save for the purposes of amalgamation, merger, consolidation, reorganisation, reconstruction or other similar arrangement on terms previously approved by an Extraordinary Resolution of the Bondholders; or

(e)

the Issuer, the Guarantor or any of their respective Subsidiaries shall cease to carry on the whole or substantially the whole of its business, save in each case for the purposes of amalgamation, merger, consolidation, reorganisation, reconstruction or other arrangement (i) not involving or arising out of the insolvency of the Issuer, the Guarantor or such Subsidiary and under which all or substantially all of its assets are transferred, in the case of the Issuer, to a Subsidiary of the Issuer or the Guarantor, in the case of the Guarantor, to a Subsidiary of the Guarantor or, in the case of a Subsidiary, to the Issuer, the Guarantor or another Subsidiary of either of them or to a transferee which is, or immediately upon such transfer becomes such a Subsidiary or (ii) under which all or substantially all of its assets are transferred to a third party or parties (whether a Subsidiary or Subsidiaries of the Issuer or the Guarantor or not) for full consideration by the Issuer, the Guarantor or any such Subsidiary on an arm's length basis or (iii) the terms of which have previously been approved by an Extraordinary Resolution of the Bondholders provided that if the Guarantor shall cease to hold or shall transfer the Electricity Distribution Licence (other than where the Electricity Distribution Licence is revoked, terminated or surrendered in the circumstances envisaged by paragraph (i)(a), (b) or (c) of the definition of Restructuring Event in Condition 3 ( Definitions ) and such revocation, termination or surrender does not constitute a Restructuring Event pursuant to paragraph (i) of such definition) the Guarantor shall be deemed to have ceased to carry on the whole or substantially the whole of its business (and neither of exceptions (i) and (ii) above shall apply) unless the transferee of the Electricity Distribution Licence is the Issuer or a Subsidiary of the Guarantor, at least 51 per cent of the ordinary share capital of which is owned directly or indirectly by the Guarantor (the " NE Transferee ") and in such event all references in these Terms and Conditions to the Guarantor in its capacity as holder of the Electricity Distribution Licence shall thereafter be deemed to be references to the NE Transferee; or

(f)

the Issuer, the Guarantor or any of their respective Subsidiaries shall suspend or shall threaten to suspend payment of its debts generally or shall be declared or adjudicated by a competent court to be unable, or shall admit in writing its inability, to pay its debts (within the meaning of Section 123(1) or (2) of the Insolvency Act 1986) as they fall due, or shall be adjudicated or found insolvent by a competent court or shall enter into any composition or other similar arrangement with its creditors under Part I of the Insolvency Act 1986; or

(g)

a receiver, administrative receiver, Energy Administrator, administrator or other similar official shall be appointed in relation to the Issuer, the Guarantor or any of their respective Subsidiaries or in relation to the whole or a substantial part of the undertaking or assets of any of them or a distress, execution or other process shall be levied or enforced upon or sued out against, or any encumbrancer shall



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take possession of, the whole or a substantial part of the assets of any of them and in any of the foregoing cases it or he shall not be paid out or discharged within 120 days (or such longer period as the Trustee may in its absolute discretion permit); or


(h)	the Guarantee of the Bonds is not (or is claimed by the Guarantor not to be) in full force and effect;

and, in the case of sub-paragraphs (b), (c) and (e) to (g) (inclusive) the Trustee shall have certified in writing that the relevant event is in its opinion materially prejudicial to the interests of the Bondholders, the Trustee may at its discretion (and the Trustee shall on the request in writing of the holders of at least one quarter in principal amount of the Bonds then outstanding or upon being so directed by an Extraordinary Resolution of the Bondholders), by notice in writing to the Issuer and the Guarantor declare that the Bonds are, and they shall accordingly thereby forthwith become, immediately due and repayable at their principal amount together with accrued interest (as provided in the Trust Deed), provided always that the giving of any notice in relation to any Event of Default shall not operate as a waiver of any of the Trustee's rights (including the right to give a further notice) or prevent the Trustee from giving a further notice in the manner referred to above in relation to that Event of Default at any time thereafter.

So long as any of the Bonds remain outstanding the Issuer or the Guarantor will, forthwith upon becoming aware of any Event of Default or Potential Event of Default, give notice in writing thereof to the Trustee.

For the purpose of sub-paragraph (f) above, Section 123(1)(a) of the Insolvency Act 1986 shall have effect as if for "£750" there was substituted "£250,000" or such higher figure as Ofgem may from time to time determine by notice in writing to the Guarantor for the purposes of Schedule 2 (Revocation) of its Electricity Distribution Licence.

Neither the Issuer, the Guarantor nor any Subsidiary shall be deemed to be unable to pay its debts for the purposes of sub-paragraph (f) above if any such demand as is mentioned in Section 123(1)(a) of the Insolvency Act 1986 is being contested in good faith by the Issuer, the Guarantor or the relevant Subsidiary with recourse to all appropriate measures and procedures.


11.	Restructuring Event

(a)

(i)

If, at any time while any of the Bonds remains outstanding, a Restructuring Event occurs and during the Restructuring Period an Independent Financial Adviser (as defined below) shall have certified in writing to the Trustee that such Restructuring Event is not, in its opinion, materially prejudicial to the interests of the Bondholders, the following provisions of this Condition shall cease to have any further effect in relation to such Restructuring Event.


(ii)	If, at any time while any of the Bonds remains outstanding, a Restructuring Event occurs and (subject to paragraph (a)(i) above):



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(1)	within the Restructuring Period, either:


(A)	if at the time such Restructuring Event occurs there are Reference Rated Securities, a Rating Downgrade in respect of such Restructuring Event also occurs; or


(B)	if at such time there are not Reference Rated Securities, a Negative Rating Event in respect of such Restructuring Event also occurs; and


(2)	an Independent Financial Adviser shall have certified in writing to the Trustee that such Restructuring Event is, in its opinion, materially prejudicial to the interests of the Bondholders (a " Negative Certification "),

then, unless at any time the Issuer shall have given a notice under Condition 7(b) ( Redemption at the option of the Issuer ) or Condition 7(c) ( Redemption for tax reasons ), in each case expiring prior to the Put Date (as defined below), the holder of each Bond will, upon the giving of a Put Event Notice (as defined below), have the option (the " Put Option ") to require the Issuer to redeem or, at the option of the Issuer, purchase (or procure the purchase of) that Bond on the Put Date at its principal amount together with (or, where purchased, together with an amount equal to) interest (if any) accrued to (but excluding) the Put Date.

Notwithstanding the occurrence of a Rating Downgrade or a Negative Rating Event, no Bondholder shall be entitled to exercise the Put Option and to serve a Put Notice if the rating assigned to the Reference Rated Securities or these Bonds by any Rating Agency is subsequently increased to, or, as the case may be, there is assigned to the Reference Rated Securities or these Bonds by any Rating Agency an Investment Grade Rating or, in the event that the rating assigned to the Reference Rated Securities immediately prior to the occurrence of the Rating Downgrade or Negative Rating Event was not an Investment Grade Rating, if such rating is restored, in either case prior to any Negative Certification being issued.

Any certification by an Independent Financial Adviser as aforesaid as to whether or not, in its opinion, any Restructuring Event is materially prejudicial to the interest of the Bondholders shall, in the absence of manifest error, be conclusive and binding on the Trustee, the Issuer, the Guarantor and the Bondholders. For the purposes of this Condition, an " Independent Financial Adviser " means a financial adviser appointed by the Issuer or the Guarantor and approved by the Trustee or, if neither the Issuer nor the Guarantor shall have appointed such an adviser within 21 days after either the Issuer or Guarantor becoming aware of the occurrence of such Restructuring Event and the Trustee is indemnified and/or prefunded and/or secured to its satisfaction against the costs of such adviser, appointed by the Trustee.

A Rating Downgrade or a Negative Rating Event or a non-Investment Grade Rating shall be deemed not to have occurred as a result of or in respect of a Restructuring Event if the Rating Agency making the relevant reduction in rating or, where applicable, declining to assign an Investment Grade Rating as provided



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in this Condition does not announce or publicly confirm or inform the Trustee in writing at its request that the reduction or, where applicable, declining to assign a rating of at least investment grade was the result, in whole or in part, of any event or circumstance comprised in or arising as a result of the applicable Restructuring Event.

The Trust Deed provides that the Trustee is under no obligation to ascertain whether a Restructuring Event, a Negative Rating Event, a Rating Downgrade or any event which could lead to the occurrence of or could constitute a Restructuring Event, a Negative Rating Event or a Rating Downgrade has occurred and until it shall have actual knowledge or express notice pursuant to the Trust Deed to the contrary the Trustee may assume that no Restructuring Event, Negative Rating Event, Rating Downgrade or other such event has occurred.

(b)

Promptly upon the Issuer or the Guarantor becoming aware that a Put Event (as defined in Condition 3 ( Definitions )) has occurred, and in any event not later than 14 days after the occurrence of a Put Event, the Issuer or the Guarantor (as the case may be) shall, and at any time upon the Trustee becoming similarly so aware the Trustee may, and (subject to it being indemnified and/or prefunded and/or secured to its satisfaction) if so requested by the holders of at least one-quarter in principal amount of the Bonds then outstanding shall, give notice (a " Put Event Notice ") to the Bondholders in accordance with Condition 14 ( Notices ) specifying the nature of the Put Event and the procedure for exercising the Put Option.

(c)

To exercise the Put Option, the holder of a Bond must deliver such Bond to the specified office of any Paying Agent, on a day which is a business day (as defined in Condition 6 ( Payments )) in London and in the place of such specified office falling within the period (the " Put Period ") of 45 days after that on which a Put Event Notice is given, accompanied by a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent (a " Put Notice ") and in which the holder may specify a bank account complying with the requirements of Condition 6 ( Payments ) to which payment is to be made under this Condition. Each Bond should be delivered together with all Coupons appertaining thereto maturing after the day (the " Put Date ") being the fifteenth day after the date of expiry of the Put Period, failing which any such missing Coupon will become void and no payment shall be made in respect of it. The Paying Agent to which such Bond and Put Notices are delivered shall issue to the Bondholder concerned a non-transferable receipt in respect of the Bond so delivered. Payment in respect of any Bond so delivered shall be made, if the holder duly specifies a bank account in the Put Notice to which payment is to be made on the Put Date, by transfer to that bank account and, in every other case, on or after the Put Date, in each case against presentation and surrender or (as the case may be) endorsement of such receipt at any specified office of any Paying Agent, subject in any such case as provided in Condition 6 ( Payments ). A Put Notice, once given, shall be irrevocable. For the purposes of Conditions 9 ( Prescription ), 10 ( Events of Default ), 12 ( Enforcement ), 13 ( Replacement of Bonds and Coupons ) and 15 ( Meetings of Bondholders ,



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Modification and Waiver ) receipts issued pursuant to this Condition shall be treated as if they were Bonds. The Issuer shall redeem or, at the option of the Issuer, purchase (or procure the purchase of) the relevant Bond on the applicable Put Date unless previously redeemed or purchased.


12.	Enforcement

(a)

Limitation on Bondholders : Only the Trustee may pursue the remedies available under general law or under the Trust Deed to enforce the rights of the Bondholders and Couponholders and no such holder will be entitled to proceed against the Issuer or the Guarantor unless the Trustee, having become bound to act in accordance with the terms of the Trust Deed, fails to do so within a reasonable amount of time and such failure is continuing.

(b)

Enforcement Proceedings : At any time after amounts in respect of principal of and interest on the Bonds shall have become due and payable but are unpaid, the Trustee may, at its discretion, and without further notice but subject as mentioned below, take such proceedings against the Issuer and/or the Guarantor as it may think fit to enforce the provisions of the Trust Deed in accordance with the terms thereof.

The Trustee shall only be bound to take proceedings pursuant to this Condition 12(b) if it has been indemnified and/or prefunded and/or secured to its satisfaction by the Bondholders and if it has been so requested in writing by the holders of not less than 25 per cent of the principal amount outstanding (as defined in the Trust Deed) of the Bonds or has been so directed by an Extraordinary Resolution (as defined in the Trust Deed)).


13.	Replacement of Bonds and Coupons

Should any Bond or Coupon be lost, stolen, mutilated, defaced or destroyed it may, subject to all applicable laws and stock exchange requirements, be replaced at the specified office of the Principal Paying Agent (or such other Paying Agent as may be approved by the Trustee for such purpose) upon payment by the claimant of the expenses, taxes and duties incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Bonds or Coupons must be surrendered before replacements will be issued.


14.	Notices

All notices to Bondholders shall be valid if published in a leading English language national daily newspaper (which is expected to be the Financial Times ) or, if this is not practicable, in a leading English language daily newspaper with a circulation in Europe. Such notices shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, on the date of the first such publication. If publication is not practicable, notice shall be given in such other manner, and shall be deemed to have been given on such date, as the Trustee may approve.

Couponholders will be deemed for all purposes to have notice of the contents of any notice given to the Bondholders in accordance with this Condition.



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15.	Meetings of Bondholders, Modification and Waiver

(a)

The Trust Deed contains provisions for convening meetings of the Bondholders to consider any matter affecting their interests, including modification by Extraordinary Resolution of these Terms and Conditions or the provisions of the Trust Deed. The quorum at any such meeting for passing an Extraordinary Resolution shall be two or more persons holding or representing more than half in principal amount of the Bonds for the time being outstanding, or at any adjourned such meeting two or more persons being or representing Bondholders whatever the principal amount of the Bonds so held or represented, except that, at any meeting the business of which includes the modification of certain of these Terms and Conditions and certain of the provisions of the Trust Deed (including altering the currency of payment of the Bonds or Coupons), the necessary quorum for passing an Extraordinary Resolution will be two or more persons holding or representing not less than two-thirds, or at any adjourned such meeting not less than one-third, in principal amount of the Bonds for the time being outstanding. An Extraordinary Resolution passed at any meeting of Bondholders shall be binding on all Bondholders, whether or not they are present or represented at the meeting, and on all Couponholders.

(b)

The Trustee may, without the consent of the Bondholders or Couponholders, agree (i) other than in respect of Reserved Matters (as specified and defined in Schedule 5 to the Trust Deed), to any modification to these Terms and Conditions or to any of the provisions of the Trust Deed or to any waiver or authorisation of any breach or proposed breach by the Issuer or the Guarantor of these Terms and Conditions or of any of the provisions of the Trust Deed or determine that any event, condition or act which would otherwise be an Event of Default, Potential Event of Default or Restructuring Event shall not be so treated provided that, in the opinion of the Trustee, so to do would not be materially prejudicial to the interests of the Bondholders, and provided further that the Trustee will not do so in contravention of any express direction given by any Extraordinary Resolution or a written request made pursuant to Condition 10 ( Events of Default ) but no such direction or request will affect any previous waiver, authorisation or determination, or (ii) to any modification to these Terms and Conditions or to any of the provisions of the Trust Deed which is made to correct a manifest error or which is of a formal, minor or technical nature.

(c)

In connection with the exercise of its trusts, powers, authorities or discretions (including, but not limited to, any modification, waiver, authorisation or substitution) the Trustee shall have regard to the interests of Bondholders as a class and, in particular, but without limitation, shall not have regard to the consequences of the exercise of its trusts, powers or discretions for individual Bondholders and Couponholders resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory and the Trustee shall not be entitled to require, nor shall any Bondholder or Couponholder be entitled to claim, from the Issuer, the Guarantor or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders or Couponholders, except to the extent already provided for in Condition 8



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( Taxation ) and/or any undertaking given to, or in substitution for, Condition 8 ( Taxation ) pursuant to the Trust Deed.

(d)

Any modification to these Terms and Conditions or to any of the provisions of the Trust Deed or any waiver or authorisation of any breach or proposed breach by the Issuer or the Guarantor of these Terms and Conditions or any of the provisions of the Trust Deed shall be binding on the Bondholders and the Couponholders and, unless the Trustee agrees otherwise, any modification shall be notified by the Issuer to the Bondholders as soon as practicable thereafter in accordance with Condition 14 ( Notices ).


16.	Substitution

The Trustee may, without the consent of the Bondholders or Couponholders, agree with the Issuer and the Guarantor to the substitution of the Guarantor or any wholly-owned Subsidiary of the Issuer or the Guarantor in place of the Issuer (or of any previous substitute under this Condition) as the principal debtor under the Bonds, the Coupons and the Trust Deed, subject to the Trustee being of the opinion that the interests of the Bondholders will not be materially prejudiced thereby and certain other conditions set out in the Trust Deed (including, in the case of a Substitution of the Issuer with a company other than the Guarantor, a requirement that the Guarantee of the Bonds is fully effective in relation to the obligations of the new principal debtor under the Trust Deed) being complied with.


17.	Further Bonds


(a)	Subject as mentioned below, power will be reserved to the Issuer to create and issue Further Bonds forming (or so as to form after the first payment of interest thereon) a single series with the Bonds provided that :


(i)	the Trustee is satisfied that the rating granted in respect of the Bonds by S&P and Fitch will not thereby be adversely affected; and


(ii)	such issue shall be constituted by a deed supplemental to the Trust Deed (in such form as the Trustee may approve) and guaranteed by the Guarantor.


(b)	The Issuer shall not be entitled to exercise the power reserved in this Condition 17 ( Further Bonds ) while any default exists in relation to any payment by the Issuer of any amounts due under the Trust Deed.


18.	Trustee

The Trust Deed contains provisions governing the responsibility of the Trustee and providing for its indemnification and relief from responsibility in certain circumstances, (including provisions relieving it from taking proceedings against the Issuer and/or the Guarantor unless indemnified and/or secured and/or prefunded to its satisfaction) and to be paid its costs and expenses in priority to the claims of the Bondholders. The Trustee may not resign its appointment unless a successor, willing to act in such capacity, has been appointed by the Issuer and the Guarantor (acting together) and the Bondholders



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by Extraordinary Resolution, provided that the Trustee shall not be prevented from resigning its appointment if, having given notice in writing to the Issuer and the Guarantor of its intention to so resign its appointment, a successor is not appointed within the period of three months from the date of such notice.


19.	Governing Law

The Trust Deed, the Bonds and the Guarantee and any non-contractual obligations arising out of or in connection with the Trust Deed, the Bonds and the Guarantee are governed by, and shall be construed in accordance with, English law.



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SCHEDULE 5
PROVISIONS FOR MEETINGS OF BONDHOLDERS


1.	DEFINITIONS

In this Trust Deed and the Conditions, the following expressions have the following meanings:

" Block Voting Instruction " means, in relation to any Meeting, a document in the English language issued by a Paying Agent:


(a)	certifying that certain specified Bonds (each a " Deposited Bond ") have been deposited with such Paying Agent (or to its order at a bank or other depositary) or blocked in an account with a clearing system and will not be released until the earlier of:


(i)	the conclusion of the Meeting; and


(ii)	the surrender to such Paying Agent, not less than 48 hours before the time fixed for the Meeting (or, if the Meeting has been adjourned, the time fixed for its resumption), of the receipt for the deposited or blocked Bonds and notification thereof by such Paying Agent to the Issuer, the Guarantor and the Trustee; and


(b)	certifying that the depositor of each Deposited Bond or a duly authorised person on its behalf has instructed the relevant Paying Agent that the votes attributable to such Deposited Bond are to be cast in a particular way on each resolution to be put to the Meeting and that, during the period of 48 hours before the time fixed for the Meeting, such instructions may not be amended or revoked;


(c)	listing the total number and (if in definitive form) the certificate numbers of the Deposited Bonds, distinguishing for each resolution between those in respect of which instructions have been given to vote for, or against, the resolution; and


(d)	authorising a named individual or individuals to vote in respect of the Deposited Bonds in accordance with such instructions;

" Chairman " means, in relation to any Meeting, the individual who takes the chair in accordance with paragraph 7 ( Chairman );

" Extraordinary Resolution " means a resolution passed at a Meeting duly convened and held in accordance with this Schedule by a majority of not less than three quarters of the votes cast;

" Meeting " means a meeting of Bondholders (whether originally convened or resumed following an adjournment);



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" Proxy " means, in relation to any Meeting, a person appointed to vote under a Block Voting Instruction other than:


(a)	any such person whose appointment has been revoked and in relation to whom the relevant Paying Agent has been notified in writing of such revocation by the time which is 48 hours before the time fixed for such Meeting; and


(b)	any such person appointed to vote at a Meeting which has been adjourned for want of a quorum and who has not been re‑appointed to vote at the Meeting when it is resumed;

" Relevant Fraction " means:


(a)	for all business other than voting on an Extraordinary Resolution, one tenth;


(b)	for voting on any Extraordinary Resolution other than one relating to a Reserved Matter, more than half; and


(c)	for voting on any Extraordinary Resolution relating to a Reserved Matter, two thirds;

provided, however, that , in the case of a Meeting which has resumed after adjournment for want of a quorum, it means:


(i)	for all business other than voting on an Extraordinary Resolution relating to a Reserved Matter, the fraction of the aggregate principal amount of the outstanding Bonds represented or held by the Voters actually present at the Meeting; and


(ii)	for voting on any Extraordinary Resolution relating to a Reserved Matter, one third;

" Reserved Matter " means any proposal:


(a)	to effect the exchange or substitution of the Bonds for, or the conversion of the Bonds into, shares, bonds or other obligations or securities of the Issuer, the Guarantor or any other person or body corporate formed or to be formed (other than as permitted under Clause 15.2 of this Trust Deed);


(b)	(other than as permitted under Clause 15.2 of this Trust Deed) to approve the substitution of any person for the Issuer (or any previous substitute) as principal debtor under the Bonds;


(c)	to modify any provision of the guarantee of the Bonds (other than as permitted under Clause 15.2 of this Trust Deed);


(d)	to postpone the maturity of the Bonds or the dates on which interest is payable in respect of the Bonds;


(e)	to reduce or cancel the principal amount of, any premium payable on redemption of, or interest on the Bonds;



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(f)	to change the currency in which amounts due in respect of the Bonds are payable;


(g)	to change the quorum required at any Meeting or the majority required to pass an Extraordinary Resolution; or


(h)	to amend this definition;

" Voter " means, in relation to any Meeting, the bearer of a Voting Certificate, a Proxy or the bearer of a definitive Bond who produces such definitive Bond at the Meeting;

" Voting Certificate " means, in relation to any Meeting, a certificate in the English language issued by a Paying Agent and dated in which it is stated:


(a)	that the Deposited Bonds have been deposited with such Paying Agent (or to its order at a bank or other depositary) or blocked in an account with a clearing system and will not be released until the earlier of:


(i)	the conclusion of the Meeting; and


(ii)	the surrender of such certificate to such Paying Agent; and


(b)	that the bearer of such certificate is entitled to attend and vote at the Meeting in respect of the Deposited Bonds;

" Written Resolution " means a resolution in writing signed by or on behalf of all holders of Bonds who for the time being are entitled to receive notice of a Meeting in accordance with the provisions of this Schedule, whether contained in one document or several documents in the same form, each signed by or on behalf of one or more such holders of the Bonds;

" 24 hours " means a period of 24 hours including all or part of a day (disregarding for this purpose the day upon which such Meeting is to be held) upon which banks are open for business in both the place where the relevant Meeting is to be held and in each of the places where the Paying Agents have their Specified Offices and such period shall be extended by one period or, to the extent necessary, more periods of 24 hours until there is included as aforesaid all or part of a day upon which banks are open for business as aforesaid; and

" 48 hours " means 2 consecutive periods of 24 hours.


2.	ISSUE OF VOTING CERTIFICATES AND BLOCK VOTING INSTRUCTIONS

The holder of a Bond may obtain a Voting Certificate from any Paying Agent or require any Paying Agent to issue a Block Voting Instruction by depositing such Bond with such Paying Agent or arranging for such Bond to be (to its satisfaction) held to its order or under its control or blocked in an account with a clearing system not later than 48 hours before the time fixed for the relevant Meeting. A Voting Certificate or Block Voting Instruction shall be valid until the release of the Deposited Bonds to which it relates. So long as a Voting Certificate or Block Voting Instruction is valid, the bearer thereof (in



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the case of a Voting Certificate) or any Proxy named therein (in the case of a Block Voting Instruction) shall be deemed to be the holder of the Bonds to which it relates for all purposes in connection with the Meeting. A Voting Certificate and a Block Voting Instruction cannot be outstanding simultaneously in respect of the same Bond.


3.	REFERENCES TO DEPOSIT/RELEASE OF BONDS

Where Bonds are within Euroclear or Clearstream, Luxembourg or any other clearing system, references to the deposit, or release, of Bonds shall be construed in accordance with the usual practices (including blocking the relevant account) of Euroclear or Clearstream, Luxembourg or such other clearing system.


4.	VALIDITY OF BLOCK VOTING INSTRUCTIONS

Block Voting Instruction shall be valid only if deposited at the Specified Office of the relevant Paying Agent or at some other place approved by the Trustee, at least 24 hours before the time fixed for the relevant Meeting unless the Chairman decides otherwise before the Meeting proceeds to business. If the Trustee requires, a notarised copy (or copy certified to the satisfaction of the Trustee) of each Block Voting Instruction and satisfactory proof of the identity of each Proxy named therein shall be produced at the Meeting, but the Trustee shall not be obliged to investigate the validity of any Block Voting Instruction or the authority of any Proxy.


5.	CONVENING OF MEETING

The Issuer and the Guarantor (acting together) or the Trustee may convene a Meeting at any time, and the Trustee shall be obliged to do so subject to its being indemnified and/or secured to its satisfaction upon the request in writing of Bondholders holding not less than one tenth of the aggregate principal amount of the outstanding Bonds. Every Meeting shall be held on a date, and at a time and place, approved by the Trustee.


6.	NOTICE

At least 21 days' notice (exclusive of the day on which the notice is given and of the day on which the relevant Meeting is to be held) specifying the date, time and place of the Meeting shall be given to the Bondholders and the Paying Agents (with a copy to the Issuer and the Guarantor) where the Meeting is convened by the Trustee or, where the Meeting is convened by the Issuer and the Guarantor, the Trustee. The notice shall set out the full text of any resolutions to be proposed unless the Trustee agrees that the notice shall instead specify the nature of the resolutions without including the full text and shall state that the Bonds may be deposited with, or to the order of, any Paying Agent for the purpose of obtaining Voting Certificates or appointing Proxies not later than 48 hours before the time fixed for the Meeting.


7.	CHAIRMAN

An individual (who may, but need not, be a Bondholder) nominated in writing by the Trustee may take the chair at any Meeting but, if no such nomination is made or if the individual nominated is not present within 15 minutes after the time fixed for the Meeting, those present shall elect one of themselves to take the chair failing which, the Issuer or



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the Guarantor may appoint a Chairman. The Chairman of an adjourned Meeting need not be the same person as was the Chairman of the original Meeting.


8.	QUORUM

The quorum at any Meeting shall be at least two Voters representing or holding not less than the Relevant Fraction of the aggregate principal amount of the outstanding Bonds; provided, however, that , so long as at least the Relevant Fraction of the aggregate principal amount of the outstanding Bonds is represented by the Temporary Global Bond and/or the Permanent Global Bond, a single Voter appointed in relation thereto or being the holder of the Bonds represented thereby shall be deemed to be two Voters for the purpose of forming a quorum.


9.	ADJOURNMENT FOR WANT OF QUORUM

If within 15 minutes after the time fixed for any Meeting a quorum is not present, then:


(a)	in the case of a Meeting requested by Bondholders, it shall be dissolved; and


(b)	in the case of any other Meeting (unless the Issuer, the Guarantor and the Trustee otherwise agree), it shall be adjourned for such period (which shall be not less than 14 days and not more than 42 days) and to such place as the Chairman determines (with the approval of the Trustee); provided, however, that :


(i)	the Meeting shall be dissolved if the Issuer, the Guarantor and the Trustee together so decide; and


(ii)	no Meeting may be adjourned more than once for want of a quorum.


10.	ADJOURNED MEETING

The Chairman may, with the consent of, and shall if directed by, any Meeting adjourn such Meeting from time to time and from place to place, but no business shall be transacted at any adjourned Meeting except business which might lawfully have been transacted at the Meeting from which the adjournment took place.


11.	NOTICE FOLLOWING ADJOURNMENT

Paragraph 6 ( Notice ) shall apply to any Meeting which is to be resumed after adjournment for want of a quorum save that:


(a)	10 days' notice (exclusive of the day on which the notice is given and of the day on which the Meeting is to be resumed) shall be sufficient; and


(b)	the notice shall specifically set out the quorum requirements which will apply when the Meeting resumes.

It shall not be necessary to give notice of the resumption of a Meeting which has been adjourned for any other reason.



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12.	PARTICIPATION

The following may attend and speak at a Meeting:


(a)	Voters;


(b)	representatives of the Issuer, the Guarantor and the Trustee;


(c)	the financial advisers of the Issuer, the Guarantor and the Trustee;


(d)	the legal counsel to the Issuer, the Guarantor and the Trustee and such advisers; and


(e)	any other person approved by the Meeting or the Trustee.


13.	SHOW OF HANDS

Every question submitted to a Meeting shall be decided in the first instance by a show of hands. Unless a poll is validly demanded before or at the time that the result is declared, the Chairman's declaration that on a show of hands a resolution has been passed, passed by a particular majority, rejected or rejected by a particular majority shall be conclusive, without proof of the number of votes cast for, or against, the resolution. Where there is only one Voter, this paragraph shall not apply and the resolution will immediately be decided by means of a poll.


14.	POLL

A demand for a poll shall be valid if it is made by the Chairman, the Issuer, the Guarantor, the Trustee or one or more Voters representing or holding not less than one fiftieth of the aggregate principal amount of the outstanding Bonds. The poll may be taken immediately or after such adjournment as the Chairman directs, but any poll demanded on the election of the Chairman or on any question of adjournment shall be taken at the Meeting without adjournment. A valid demand for a poll shall not prevent the continuation of the relevant Meeting for any other business as the Chairman directs.


15.	VOTES

Every Voter shall have:


(a)	on a show of hands, one vote; and


(b)	on a poll, one vote in respect of each £100,000 in aggregate face amount of the outstanding Bond(s) represented or held by him.

Unless the terms of any Block Voting Instruction state otherwise, a Voter shall not be obliged to exercise all the votes to which he is entitled or to cast all the votes which he exercises in the same way. In the case of a voting tie the Chairman shall have a casting vote.



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16.	VALIDITY OF VOTES BY PROXIES

Any vote by a Proxy in accordance with the relevant Block Voting Instruction shall be valid even if such Block Voting Instruction or any instruction pursuant to which it was given has been amended or revoked, provided that neither the Issuer, the Guarantor, the Trustee nor the Chairman has been notified in writing of such amendment or revocation by the time which is 24 hours before the time fixed for the relevant Meeting. Unless revoked, any appointment of a Proxy under a Block Voting Instruction in relation to a Meeting shall remain in force in relation to any resumption of such Meeting following an adjournment; provided, however, that no such appointment of a Proxy in relation to a Meeting originally convened which has been adjourned for want of a quorum shall remain in force in relation to such Meeting when it is resumed. Any person appointed to vote at such a Meeting must be re-appointed under a Block Voting Instruction to vote at the Meeting when it is resumed.


17.	POWERS

A Meeting shall have power (exercisable only by Extraordinary Resolution), without prejudice to any other powers conferred on it or any other person:


(a)	to approve any Reserved Matter proposed or accepted by the Issuer and the Guarantor (acting together);


(b)	to approve any proposal by the Issuer and the Guarantor (acting together) for any modification, abrogation, variation or compromise of, or arrangement in respect of, the rights of the Bondholders and/or the Couponholders against the Issuer (whether such rights shall arise under the Trust Deed or otherwise);


(c)	to approve any proposal by the Guarantor for any modification of any provision of the guarantee of the Bonds or any arrangement in respect of the obligations of the Guarantor thereunder;


(d)	to waive or authorise any breach by the Issuer, the Guarantor or both of them of their obligations under this Trust Deed;


(e)	to assent to any modification of this Trust Deed, the Bonds or the Paying Agency Agreement proposed or accepted by the Issuer and the Guarantor;


(f)	to approve a person proposed to be appointed as a new Trustee and to remove any Trustee;


(g)	to authorise the Trustee (subject to its being indemnified and/or secured and/or prefunded) or any other persons to execute all documents and do all things necessary to carry out and give effect to any Extraordinary Resolution;


(h)	to discharge or exonerate the Trustee from any liability in respect of any act or omission for which it may become responsible under this Trust Deed, the Bonds or the Coupons;



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(i)	to give any authority, direction or sanction which under this Trust Deed or the Bonds is required to be given by Extraordinary Resolution; and


(j)	to appoint any persons (whether Bondholders or not) as a committee or committees to represent the interests of the Bondholders and to confer upon such committee or committees any powers which the Bondholders could themselves exercise by Extraordinary Resolution.


18.	EXTRAORDINARY RESOLUTION BINDS ALL HOLDERS

An Extraordinary Resolution shall be binding upon all Bondholders and Couponholders, whether or not present at the relevant Meeting (if any), and each of the Bondholders and Couponholders shall be bound to give effect to it accordingly. Notice of the result of every vote on an Extraordinary Resolution shall be given to the Bondholders and the Paying Agents (with a copy to the Issuer, the Guarantor and the Trustee) within 14 days of the conclusion of the Meeting.


19.	MINUTES

Minutes of all resolutions and proceedings at each Meeting shall be made. The Chairman shall sign the minutes, which shall be prima facie evidence of the proceedings recorded therein. Unless and until the contrary is proved, every such Meeting in respect of the proceedings of which minutes have been summarised and signed shall be deemed to have been duly convened and held and all resolutions passed or proceedings transacted at it to have been duly passed and transacted.


20.	WRITTEN RESOLUTION

A Written Resolution shall take effect as if it were an Extraordinary Resolution.


21.	FURTHER REGULATIONS

Subject to all other provisions contained in this Trust Deed, the Trustee may with the consent of the Issuer and the Guarantor (such consent not to be unreasonably withheld or delayed) but without the consent of the Bondholders prescribe such further regulations regarding the holding of Meetings of Bondholders and attendance and voting at them as the Trustee may in its sole discretion determine.



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SIGNATURES

EXECUTED as a DEED and delivered by )

NORTHERN ELECTRIC FINANCE PLC )

acting by a director and the secretary )

Director /s/ Tom Fielden

Secretary /s/ Jenny Riley

EXECUTED as a DEED and delivered by )

NORTHERN POWERGRID (NORTHEAST) LIMITED )

acting by a director and the secretary )

Director /s/ Tom France

Secretary /s/ Jenny Riley



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EXECUTED and DELIVERED as a DEED )

By HSBC CORPORATE TRUSTEE (UK) LIMITED )

in the presence of: )

Authorised Signatory /s/ Chloe Slattery

Chloe Slattery

Authorised Signator



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EXHIBIT 4.2

AMENDMENT No. 1

THE FISCAL AGENCY AGREEMENT

dated July 17, 2018

Between

NORTHERN NATURAL GAS COMPANY,
as Issuer

and

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Fiscal Agent

__________

Dated as of June 17, 2019

__________

4.30% Senior Bonds due 2049

US-DOCS\108220951.14



TABLE OF CONTENTS
		Page
1.	Definition and Interpretation	1
2.	Full Force and Effect	1
3.	Amendment to the Fiscal Agency Agreement	2
4.	Authentication	3
5.	Global Securities	4
6.	Temporary ISIN and CUSIP	4
7.	Governing Law	4
8.	Notices	4
9.	Headings	5
10.	Counterparts	5
11.	Successors and Assigns	5
12.	Separability Clause	5
13.	Waiver of Jury Trial	5
14.	FATCA	5



US-DOCS\108220951.14	i

AMENDMENT No. 1 to the FISCAL AGENCY AGREEMENT (this “ Amendment No. 1 ”), dated as of June 17, 2019 between NORTHERN NATURAL GAS COMPANY, a corporation duly organized under the laws of the State of Delaware (the “ Issuer ”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association, as Fiscal Agent (the “ Fiscal Agent ”) which term shall include any successor thereto appointed from time to time in accordance with Section 10 ( Resignation and Appointment of Successor ) of the Fiscal Agency Agreement (as defined below).

RECITALS OF THE ISSUER

(A) On July 17, 2018, the Issuer issued $450,000,000 aggregate principal amount of its 4.30% Senior Bonds due January 15, 2049 (the “ Original Securities ”) pursuant to a fiscal agency agreement dated as of July 17, 2018 between the Issuer and the Fiscal Agent (the “ Fiscal Agency Agreement ”).

(B) Section 12(a) of the Fiscal Agency Agreement provides for the amendment thereof without the consent of any holder of the Original Securities to provide for the issuance of additional securities in accordance with the Fiscal Agency Agreement.

(C) The Issuer has duly authorized the creation of an additional $200,000,000 aggregate principal amount of its 4.30% Senior Bonds due January 15, 2049 (the “ New Securities ” and, together with the Original Securities, the “ Securities ”), and to provide therefor the Issuer has duly authorized the execution and delivery of this Amendment No. 1. The New Securities will be consolidated and form a single series with the Original Securities on or after the termination of the Distribution Compliance Period as set forth herein.

(D) All things necessary to make the New Securities, when executed by the Issuer and authenticated and delivered hereunder and duly issued by the Issuer, the valid and legally binding obligations of the Issuer, and to make this Amendment No. 1 a valid and legally binding agreement of the Issuer, in accordance with their and its terms, have been done.

(E) This Amendment No. 1 is executed and accepted by the Fiscal Agent subject to all the terms and conditions set forth in the Fiscal Agency Agreement, as amended by this Amendment No. 1 with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Fiscal Agent with respect hereto.

1. Definition and Interpretation . Capitalized terms not defined herein shall have the meanings specified in the Fiscal Agency Agreement.

2. Full Force and Effect .

2.1 Save as modified and supplemented by this Amendment No. 1 to the Fiscal Agency Agreement, the Fiscal Agency Agreement shall remain in full force and effect, and all provisions therein contained shall apply to the New Securities in the same way and to the same extent as they apply to the Original Securities.

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2.2 This Amendment No. 1 and the Fiscal Agency Agreement shall henceforth be read and construed together as one Fiscal Agency Agreement. For the avoidance of doubt, all references to “this Agreement” herein shall be deemed to refer to the Fiscal Agency Agreement as amended and modified by this Amendment No. 1.

3. Amendment to the Fiscal Agency Agreement .

3.1 The first sentence of Section 1(a) of the Fiscal Agency Agreement is hereby amended to provide for the issuance of the New Securities in accordance with the terms of this Agreement by adding immediately after the first sentence the following new sentence: “On June 17, 2019, an additional $200,000,000 aggregate principal amount of Securities will be issued under this Agreement.”

3.2 With effect from the date hereof, for the avoidance of doubt, the parties agree that the Fiscal Agency Agreement shall be amended so that any references therein to the “Securities” shall include the New Securities and any references therein to the “Fiscal Agency Agreement” shall be deemed to refer to the Fiscal Agency Agreement as amended and modified by this Amendment No. 1.

3.3 The last sentence of Section 1(b)(i) of the Fiscal Agency Agreement is hereby replaced in its entirety with the following: “As used herein, the term “ Holding Period ,” with respect to Rule 144A Securities, means the period referred to in Rule 144(d) under the Act or any successor provision thereto (“ Rule 144(d) ”) and as may be amended or revised from time to time, beginning from the later of (i) the last issue date of any Securities issued under the Fiscal Agency Agreement, or (ii) the last date on which the Issuer or any affiliate of the Issuer was the beneficial owner of such Securities (or any predecessor thereof).”

3.4 The last sentence of Section (1)(b)(iii) of the Fiscal Agency Agreement is hereby replaced in its entirety with the following: “As used herein, the term “ Holding Period ,” with respect to Restricted Definitive Securities, means the period referred to in Rule 144(d) or any successor provision thereto and as may be amended or revised from time to time, beginning from the later of (i) the last issue date of any Securities issued under the Fiscal Agency Agreement, or (ii) the last date on which the Issuer or any affiliate of the Issuer was the beneficial owner of such Securities (or any predecessor thereof).”

3.5 Section (1)(d) of the Fiscal Agency Agreement is hereby replaced in its entirety with the following:

“ Legends . Securities shall be stamped or otherwise be imprinted with the legends substantially in the form set forth on the face of the text of the Securities attached as Exhibit A , including any legend provided for pursuant to Section 1(e) hereof. The legends so provided on the face of the text of the Securities may be removed from any Security, upon written order signed in the name of the Issuer by the Authorized Officers and delivered to the Fiscal Agent (“ Order ”), (i) one year from the later of (x) the last issue date of any Securities issued under the



US-DOCS\108220951.14	2

Fiscal Agency Agreement, or (y) the date such Security (or any predecessor) was last acquired from an “affiliate” of the Issuer within the meaning of Rule 144 (“ Rule 144 ”) under the Act or (ii) in connection with a sale made pursuant to the volume (and other restrictions) of Rule 144 following one year from such time, provided that, if the legend is removed and the Security is subsequently held by such an affiliate of the Issuer, the legend shall be reinstated. Any legends provided pursuant to Section 1(e) hereof may be removed in the event the applicable Global Securities cease to be Global Securities in accordance with Section 5 hereof.”

3.6 The first paragraph of Section 3 is hereby replaced by the following:

“The Fiscal Agent is authorized, upon receipt of Securities duly executed on behalf of the Issuer (i) for the purposes of the original issuance of the Securities, to authenticate said Securities in an aggregate principal amount of $450,000,000 and to deliver said Securities in accordance with an Order or Orders and (ii) for the purposes of any additional issuance of the Securities, to authenticate any additional Securities for which it has received Orders and deliver said Securities, each in accordance with the provisions hereinafter set forth.”

3.7 Section (8)(b) of the Fiscal Agency Agreement is hereby replaced in its entirety with the following:

“ Limitation on Obligation to Delivery of 144A Information . Neither the Issuer nor the Fiscal Agent shall be required to furnish Rule 144A Information with respect to the Issuer as contemplated by Section 8(a) hereof, (x) to the holder or a prospective purchaser of a Security in connection with any request made on or after the date which is one year from the latest of (i) the last date on which any Security (or any predecessor Security) issued under the Fiscal Agency Agreement was acquired from the Issuer, (ii) the date such Security (or any predecessor Security) was last acquired from an “affiliate” of the Issuer within the meaning of Rule 144 under the Act, or (iii) the last date any Security (excluding any replacement Security) was issued under this Fiscal Agency Agreement, or (y) at any time to a prospective purchaser located outside the United States who is not a U.S. person within the meaning of Regulation S under the Act.”

3.8 Exhibit I of the Fiscal Agency Agreement is hereby replaced in its entirety with Attachment B hereto and all references to Exhibit I in the Fiscal Agency Agreement shall be interpreted as referring to the certificate contained in Attachment B hereto.



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4. Authentication . The New Securities shall be authenticated in accordance with the terms of this Agreement. The New Securities shall be in the form of Global Securities substantially in the form provided for in Exhibit A to the Fiscal Agency Agreement and attached hereto as Attachment A .

5. Global Securities .

5.1 Beneficial interests in the New Securities sold pursuant to Regulation S under the Securities Act initially in the principal amount of $0 will be represented by a temporary Regulation S Global Security (the “ Temporary Regulation S Global Security ”).

5.2 Beneficial interests in the New Securities sold pursuant to Rule 144A under the Securities Act initially in the principal amount of $200,000,000 will be represented by a Rule 144A Global Security (the “ Rule 144A Global Security ”).

6. Temporary ISIN and CUSIP . The Temporary Regulation S Global Security will be assigned a temporary ISIN and a temporary CUSIP until the expiry of the Distribution Compliance Period, at which time the interests in the Temporary Regulation S Global Security will be exchanged for interests in the Regulation S Global Security, and the New Securities will become fully consolidated and form a single series with the Original Securities.

7. Governing Law . THIS AGREEMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.

8. Notices .

8.1 All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Fiscal Agent shall be mailed, delivered or transmitted by facsimile to it at 2 N. LaSalle Street, Suite 700, Chicago, Illinois 60602, Attention: Corporate Trust Administration, facsimile no. (312) 827-8542 or if sent to the Issuer shall be mailed, delivered or transmitted by facsimile to it at 1111 South 103rd Street, Omaha, Nebraska 68124, Attention: General Counsel, facsimile no. (402) 398-7426 and electronic mail address: Kirk.Lavengood@nngco.com@nngco.com. The foregoing addresses for notices or communications may be changed by written notice given by the addressee to each party hereto, and the addressee’s address shall be deemed changed for all purposes from and after the giving of such notice.

8.2 If the Fiscal Agent shall receive any notice or demand addressed to the Issuer by the holder of a Security, the Fiscal Agent shall promptly forward such notice or demand to the Issuer.

8.3 The Fiscal Agent agrees to accept and act upon instructions or directions pursuant to this Agreement sent by unsecured e-mail, pdf, facsimile transmission or other similar unsecured electronic methods, provided, however, that the Fiscal Agent shall have received an incumbency certificate listing persons designated to give such instructions or directions and



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containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. The Fiscal Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Fiscal Agent’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Issuer agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Fiscal Agent, including without limitation the risk of the Fiscal Agent acting on unauthorized instructions, and the risk or interception and misuse by third parties.

9. Headings . The section headings herein are for convenience only and shall not affect the construction hereof.

10. Counterparts . This Agreement may be executed in one or more counterparts, and by each party separately on a separate counterpart, and each such counterpart when executed and delivered shall be deemed to be an original. Such counterparts shall together constitute one and the same instrument.

11. Successors and Assigns . All covenants and agreements in this Agreement by the Issuer shall bind its respective successors and assigns, whether so expressed or not.

12. Separability Clause . In case any provision in this Agreement or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

13. Waiver of Jury Trial . EACH OF THE ISSUER AND THE FISCAL AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREBY.

14. FATCA . The Issuer agrees (i) to provide the Fiscal Agent with such reasonable information as it has in its possession to enable the Fiscal Agent to determine whether any payments pursuant to this Agreement are subject to the withholding requirements described in Section 1471(b) of the US Internal Revenue Code of 1986 (the “Code”) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code and any regulations, or agreements thereunder or official interpretations thereof (“Applicable Law”), and (ii) that the Fiscal Agent shall be entitled to make any withholding or deduction from payments under this Agreement to the extent necessary to comply with Applicable Law, for which the Fiscal Agent shall not have any liability.

[ Signature Page Follows ]



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IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 as of the date first above written.

NORTHERN NATURAL GAS COMPANY


By:	/s/ Joseph M. Lillo Name: Joseph M. Lillo

Title: Vice President, Finance

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Fiscal Agent

By:
Name:
Title:

[Signature Page to Amendment No.1 to Fiscal Agency Agreement]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 as of the date first above written.

NORTHERN NATURAL GAS COMPANY

By:
Name:
Title:

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Fiscal Agent


By	/s/ R. Tarnas Name: R. Tarnas Title: Vice President

ATTACHMENT A

FORM OF SECURITY

[Form of Face
of Security]

[ If this Security is a Global Security, insert —THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE FISCAL AGENCY AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE U.S. DEPOSITORY OR A NOMINEE OF THE U.S. DEPOSITORY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE U.S. DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE FISCAL AGENCY AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE U.S. DEPOSITORY TO A NOMINEE OF THE U.S. DEPOSITORY OR BY A NOMINEE OF THE U.S. DEPOSITORY TO THE U.S. DEPOSITORY OR ANOTHER NOMINEE OF THE U.S. DEPOSITORY OR BY THE U.S. DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR U.S. DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR U.S. DEPOSITORY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE U.S. DEPOSITORY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE IS ISSUED IN THE NAME OR NAMES AS DIRECTED IN WRITING BY THE U.S. DEPOSITORY, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED HOLDER HEREOF, THE U.S. DEPOSITORY, HAS AN INTEREST HEREIN.]

[ If this Security is a Regulation S Temporary Global Security, insert— THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE SECURITIES, ARE AS SPECIFIED IN THE FISCAL AGENCY AGREEMENT (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL SECURITY SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.]

[ If this Security is a Regulation S Global Security, insert— THIS BOND (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED



US-DOCS\108220951.14	A-1

ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.]

THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. BY ITS ACQUISITION OF THIS SECURITY OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:

1. REPRESENTS THAT [(A)] IT IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OR (B) [ If this Security is a Regulation S Global Security, insert the following text and delete all other text in this Section 1— IT IS NOT A U.S. PERSON AND IT HAS ACQUIRED THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT];

2. AGREES THAT IT WILL OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE LATER OF THE LAST ISSUE DATE OF ANY SECURITIES ISSUED UNDER THE FISCAL AGENCY AGREEMENT AND THE LAST DATE ON WHICH NORTHERN NATURAL GAS COMPANY, OR ANY OF ITS AFFILIATES WAS THE HOLDER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO NORTHERN NATURAL GAS COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ‘‘ACCREDITED INVESTOR’’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THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION;

3. AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; AND

4. AGREES THAT, BEFORE THE HOLDER OFFERS, SELLS OR OTHERWISE TRANSFERS THIS SECURITY PURSUANT TO CLAUSES (D), (E) OR (G) OF SECTION 2 ABOVE, NORTHERN NATURAL GAS COMPANY MAY REQUIRE THE HOLDER OF THIS SECURITY TO DELIVER A WRITTEN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION THAT IT REASONABLY REQUIRES TO CONFIRM THAT SUCH PROPOSED TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

AS USED IN THIS SECURITY, THE TERMS “OFFSHORE TRANSACTION,” “U.S. PERSON” AND “UNITED STATES” HAVE THE MEANINGS GIVEN TO THEM WITHIN REGULATION S.

[ If this Security is a Rule 144A Global Security, insert— EACH PURCHASER OF THE SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.]

THE FOREGOING LEGENDS MAY BE REMOVED FROM THE SECURITIES ON THE CONDITIONS SPECIFIED IN THE FISCAL AGENCY AGREEMENT.



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NORTHERN NATURAL GAS COMPANY
4.30% Senior Bonds due 2049

$[______________]

CUSIP No. [______________]

No. ___ [ISIN No. [______________]]

NORTHERN NATURAL GAS COMPANY, a corporation duly organized under the laws of the State of Delaware (herein called the “ Issuer ”), for value received, hereby promises to pay to [name of registered holder or its registered assigns] [ if this Security is a Global Security, insert‑ the Initial Principal Amount specified on Schedule A hereto (such Initial Principal Amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as the “ Principal Amount ”)] [ if this Security is not a Global Security, insert‑ the principal sum of ________________ Dollars (the “ Principal Amount ”)] on January 15, 2049 and to pay interest thereon from January 15, 2019 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on July 15 and January 15 in each year, commencing July 15, 2019 (each an “ Interest Payment Date ”), at the rate of 4.30% per annum, until the principal hereof is paid or made available for payment and (to the extent that the payment of such interest shall be legally enforceable) at the rate per annum equal to the above rate plus 1% per annum on any overdue principal and on any overdue installment of interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Fiscal Agency Agreement hereinafter referred to, be paid to the person (the “ registered holder ”) in whose name this Security (or one or more predecessor Securities) is registered at the close of business on July 1 or January 1 (whether or not a Business Day), as the case may be (each a “ Regular Record Date ”), next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the registered holder on such Regular Record Date and shall be paid to the person in whose name this Security (or one or more predecessor Securities) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Issuer, notice whereof shall be given to registered holders of Securities not less than 10 days prior to such special record date.

[If this Security is a Regulation S Temporary Global Security, insert-- Until this Regulation S Temporary Global Security is exchanged for one or more Regulation S Permanent Global Securities, the holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Security shall in all other respects be entitled to the same benefits as other Securities under the Fiscal Agency Agreement. ]

Principal of this Security shall be payable against surrender hereof at the corporate trust office or office of an agent of the Fiscal Agent hereinafter referred to or at such other offices or agencies as the Issuer may designate and at the offices of such other Paying Agents as the Issuer shall have appointed pursuant to the Fiscal Agency Agreement. Payments of principal shall be made against surrender of this Security, and payments of interest on this Security shall be made, in



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accordance with the foregoing and subject to applicable laws and regulations, by check mailed on or before the due date for such payment to the person entitled thereto at such person’s address appearing on the aforementioned register or, in the case of payments of principal to such other address as the registered holder may specify upon such surrender; provided , however , that any payments shall be made, in the case of a registered holder of at least $1,000,000 aggregate principal amount of Securities, by transfer to an account maintained by the payee with a bank if such registered holder so elects by giving notice to the Fiscal Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept at its discretion) prior to the date of the payments to be obtained, of such election and of the account to which payments are to be made. The Issuer covenants that until this Security has been delivered to the Fiscal Agent for cancellation, or monies sufficient to pay the principal of, premium, if any, and interest on this Security have been made available for payment and either paid or returned to the Issuer as provided herein, it will at all times maintain an established place of business or agency in the Borough of Manhattan, The City of New York for the payment of the principal of and interest on the Securities as herein provided.

Reference is hereby made to the further provisions of this Security set forth on the following pages hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Fiscal Agent by manual signature, this Security shall not be valid or obligatory for any purpose.



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IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.

Date:____________ NORTHERN NATURAL GAS COMPANY

By:

Name:

Title:

Attest:

By:

Name:

Title:



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FISCAL AGENT’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities referred to in the within-mentioned Fiscal Agency Agreement.

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Fiscal Agent

By:

Authorized Signatory

Date of Authentication:_________________



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[Form of reverse
of Security]

1. This Security is one of a duly authorized issue of securities of the Issuer designated as its 4.30% Senior Bonds due 2049 (herein called the “ Securities ”), issued in aggregate principal amount of $[200],000,000 and to be issued in accordance with a Fiscal Agency Agreement, dated as of July 17, 2018, as amended by Amendment No. 1 to the Fiscal Agency Agreement dated as of June [•], 2019 (herein called the “ Fiscal Agency Agreement ,” as further amended and/or supplemented from time to time), between the Issuer and The Bank of New York Mellon Trust Company, N.A., as Fiscal Agent (herein called the “ Fiscal Agent ,” which term includes any successor fiscal agent under the Fiscal Agency Agreement), copies of which Fiscal Agency Agreement are on file and available for inspection at the corporate trust office of the Fiscal Agent which at the date hereof is at 2 N. LaSalle Street, Suite 700, Chicago, Illinois 60602.

The Securities are unsecured direct, unconditional and general obligations of the Issuer and will rank equally with all other unsecured and unsubordinated indebtedness of the Issuer.

The Securities will be consolidated and form a single series with the $450,000,000 4.30% Senior Bonds due 2049 of the Issuer issued pursuant to the Fiscal Agency Agreement on July 17, 2018.

2. [ If this Security is a Global Security, insert —This Security is issuable only in fully registered form, without coupons, in minimum denominations of U.S. $2,000 and integral multiples of $1,000 in excess of $2,000.] [ If this Security is a Restricted Definitive Security, insert —This Security is issuable only in fully registered form, without coupons, in minimum denominations of U.S. $200,000 and integral multiples of $1,000 in excess of $200,000.]

3. The Issuer shall maintain in the Borough of Manhattan, The City of New York, an established place of business or agency where Securities may be surrendered for registration of transfer or exchange. The Issuer has initially appointed the Fiscal Agent acting through its corporate trust office in Chicago, and at its agent’s office in the Borough of Manhattan, The City of New York, as its agent for such purpose and the Issuer has agreed to cause to be kept at such offices a register in which, subject to such reasonable regulations as it may prescribe, the Issuer will provide for the registration of Securities and of transfers of Securities. The Issuer reserves the right to vary or terminate the appointment of the Fiscal Agent as security registrar or of any Transfer Agent or to appoint additional or other registrars or Transfer Agents or to approve any change in the office through which any security registrar or any Transfer Agent acts, provided that there will at all times be a security registrar or agent thereof in the Borough of Manhattan, The City of New York. Registered holders of the Securities will receive notice of any such change.

The transfer of a Security is registrable on the aforementioned register upon surrender of such Security at the corporate trust office of the Fiscal Agent or the office of the agent of the Fiscal Agent or any Transfer Agent duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Fiscal Agent duly executed by, the registered holder thereof or such holder’s attorney duly authorized in writing. Upon such surrender of this



US-DOCS\108220951.14	A-8

Security for registration of transfer, the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities, dated the date of authentication thereof of any authorized denominations and of a like aggregate principal amount.

At the option of the registered holder upon request confirmed in writing, Securities may be exchanged for Securities of any authorized denominations and of a like tenor, form and aggregate principal amount upon surrender of the Securities to be exchanged at the office of any Transfer Agent or at the corporate trust office of the Fiscal Agent or agent thereof. Whenever any Securities are so surrendered for exchange, the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver, the Securities which the registered holder making the exchange is entitled to receive. Any registration of transfer or exchange will be effected upon the Transfer Agent or the Fiscal Agent, as the case may be, being satisfied with the documents of title and identity of the person making the request and subject to such reasonable regulations as the Issuer may from time to time agree with the Transfer Agent and the Fiscal Agent.

All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Issuer evidencing the same debt, and entitled to the same benefits, as the Securities surrendered upon such registration of transfer or exchange. No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the Issuer, the Fiscal Agent and any agent of the Issuer or the Fiscal Agent may treat the person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Issuer, the Fiscal Agent nor any such agent shall be affected by notice to the contrary.

[If this Security is a Regulation S Temporary Global Security, insert-- This Regulation S Temporary Global Security is exchangeable in whole or in part for one or more Global Securities only (i) on or after the termination of the 40-day Distribution Compliance Period (as defined in Regulation S) and (ii) upon presentation of certificates required by Section 5(d) of the Fiscal Agency Agreement. Upon exchange of this Regulation S Temporary Global Security for one or more Global Securities, the Fiscal Agent shall cancel this Regulation S Temporary Global Security. ]

4. (a) The Issuer shall pay to the Fiscal Agent at its Corporate Trust Office, on or prior to each Interest Payment Date and the maturity date of the Securities, in such amounts sufficient (with any amounts then held by the Fiscal Agent and available for the purpose) to pay the interest on, principal of and premium, if any, on the Securities due and payable on such Interest Payment Date or maturity date, as the case may be, in funds available on such date. The Fiscal Agent shall apply the amounts so paid to it to the payment of such interest and principal in accordance with the terms of the Securities. Any monies paid by the Issuer to the Fiscal Agent for the payment of the principal of, premium, if any, or interest on any Securities and remaining unclaimed at the end of two years after such principal, premium, if any, or interest shall have become due and payable (whether at maturity or otherwise) shall then be repaid to the Issuer upon its written request, and



US-DOCS\108220951.14	A-9

upon such repayment all liability of the Fiscal Agent with respect thereto shall cease, without, however, limiting in any way any obligation the Issuer may have to pay the principal of, premium, if any, and interest on this Security as the same shall become due.

(b) In any case where the due date for the payment of the principal of, premium, if any, or interest on any Security shall be at any place of payment on a day on which banking institutions are authorized or obligated by law to close, then payment of principal, premium, if any, or interest need not be made on such date at such place but may be made on the next succeeding day at such place which is not a day on which banking institutions are authorized or obligated by law to close, with the same force and effect as if made on the date for such payment, and no interest shall accrue for the period after such date.

5. The Securities are subject to redemption upon not less than 30 or more than 60 days’ notice to the registered holders of such Securities, at any time, as a whole or in part, at the election of the Issuer, at a redemption price equal to the greater of: (i) 100% of the Principal Amount of the Securities being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities being redeemed discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 25 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities to the Redemption Date.

The Securities are also subject to redemption upon not less than 30 or more than 60 days’ notice to the registered holders of such Securities, at any time on or after July 15, 2048 (which is the date that is six months prior to the maturity date of the Securities), as a whole or in part, at the election of the Issuer, at a redemption price equal to 100% of the Principal Amount of the Securities being redeemed, plus accrued and unpaid interest on the Securities to the Redemption Date.

If fewer than all the Securities are to be redeemed, selection of Securities for redemption will be made (i) in the case of Securities held in definitive form, such selection will be by lot, and (ii) in the case of Securities in Global form, such selection by the U.S. Depository in accordance with its applicable procedures.

Unless the Issuer defaults in payment of the redemption price, from and after the Redemption Date, the Securities or portions thereof called for redemption will cease to bear interest, and the holders thereof will have no right in respect of such Securities except the right to receive the redemption price thereof.

[ If this Security is a Global Security, insert —In the event of redemption of this Security in part only, the Fiscal Agent will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Principal Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.]



US-DOCS\108220951.14	A-10

For purposes of the Securities,

“ Business Day ” means any day other than a Saturday, Sunday or a day on which banking institutions in The City of New York or the City of Chicago or at a place of payment are authorized by law, regulation or executive order to remain closed.

“ Comparable Treasury Issue ” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities.

“ Comparable Treasury Price ” means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.

“ Independent Investment Banker ” means an investment banking institution of international standing appointed by the Issuer.

“ Redemption Date ” means any date on which the Issuer redeems all or any portion of the Securities in accordance with the terms hereof.

“ Reference Treasury Dealer ” means a primary U.S. government securities dealer in the United States appointed by the Issuer.

“ Reference Treasury Dealer Quotation ” means, with respect to the Reference Treasury Dealer and any Redemption Date, the average, as determined by the Issuer, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount and quoted in writing to the Issuer by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day in New York City preceding such Redemption Date).

“ Treasury Yield ” means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.

The Issuer shall pay all stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority of or in the foregoing with respect to the Fiscal Agency Agreement or the issuance of this Security. Except as otherwise provided in this Security, the Issuer shall not be required to make any payment with respect to any tax, assessment or other



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governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein with respect to this Security.

6. In the event of:

(i) default in the payment of any interest on any Security for a period of 30 days after the date when due; or

(ii) default in the payment of the principal of any Security when due (whether at maturity or otherwise); or

(iii) default in the performance or breach of any other covenant or agreement of the Issuer contained in the Securities or in the Fiscal Agency Agreement for a period of 60 days after the date on which written notice of such default requiring the Issuer to remedy the same and stating that such notice is a “Notice of Default” shall first have been given to the Issuer and the Fiscal Agent by the holders of at least 25% in principal amount of the Securities at the time Outstanding (as defined in the Fiscal Agency Agreement); or

(iv) the entry by a court having jurisdiction in the premises of (1) a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (2) a decree or order adjudging the Issuer bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or of any substantial part of the property of the Issuer, or ordering the winding up or liquidation of the affairs of the Issuer, and any such decree or order for relief or any such other decree or order shall continue unstayed and in effect for a period of 60 consecutive days; or

(v) commencement by the Issuer of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Issuer to the entry of a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Issuer, or the filing by the Issuer of a petition or answer or consent seeking reorganization or relief under any such applicable Federal or State law, or the consent by the Issuer to the filing of such petition or to the appointment of or the taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or of any substantial part of its property, or the making by the Issuer of an assignment for the benefit of creditors, or the taking of action by the Issuer in furtherance of any such action;

the registered holders of this Security may, at such holder’s option, declare the principal of this Security and the interest accrued hereon to be due and payable immediately by written notice to the Issuer and the Fiscal Agent at its Corporate Trust Office, and unless all such defaults shall have



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been cured by the Issuer prior to receipt of such written notice, the principal of the Security and the interest accrued thereon shall become and be immediately due and payable. For purposes of the Securities, “ Subsidiary ” of the Issuer means a corporation all of the outstanding voting stock of which is owned, directly or indirectly, by the Issuer and/or one or more Subsidiaries of the Issuer. For the purposes of this definition, “ voting stock ” means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.

7. So long as any of the Securities are Outstanding, the Issuer will not pledge, mortgage or hypothecate, or permit to exist, and will not cause, suffer or permit any Subsidiary of it to pledge, mortgage or hypothecate, or permit to exist, except in favor of the Issuer or any Subsidiary of it, any mortgage, pledge or other lien upon, any Principal Property (as hereinafter defined) at any time owned by it, to secure any Indebtedness (as hereinafter defined) of it, without making effective provision whereby the Outstanding Securities shall be equally and ratably secured with any and all such Indebtedness of the Issuer and with any other Indebtedness of it similarly entitled to be equally and ratably secured; provided , however , that this restriction shall not apply to or prevent the creation or existence of:

(i) undetermined or inchoate liens and charges incidental to construction, maintenance, development or operation;

(ii) any liens of taxes and assessments for the then current year;

(iii) any liens of taxes and assessments not at the time delinquent;

(iv) any liens of specified taxes and assessments which are delinquent but the validity of which is being contested in good faith at the time by the Issuer or any Subsidiary of it;

(v) any liens reserved in leases for rent and for compliance with the terms of the lease in the case of leasehold estates;

(vi) any obligations or duties, affecting the property of the Issuer or any Subsidiary of it, to any municipality or public authority with respect to any franchise, grant, license, permit or similar arrangement;

(vii) the liens of any judgments or attachments in an aggregate amount not in excess of $10,000,000, or the lien of any judgment or attachment the execution or enforcement of which has been stayed or which has been appealed and secured, if necessary, by the filing of an appeal bond;

(viii) any mortgage, pledge, lien or encumbrance on any property held or used by the Issuer or any Subsidiary of it in connection with the exploration for, development of or production of oil, gas, natural gas (including liquefied gas and storage gas), other hydrocarbons, helium, coal, metals, minerals, steam, timber, geothermal or other natural resources or synthetic fuels, such properties to include, but not be limited to, the interest of



US-DOCS\108220951.14	A-13

the Issuer or such Subsidiary in any mineral fee interests, oil, gas or other mineral leases, royalty, overriding royalty or net profits interests, production payments and other similar interests, wellhead production equipment, tanks, field gathering lines, leasehold or field separation and processing facilities, compression facilities and other similar personal property and fixtures;

(ix) any mortgage, pledge, lien or encumbrance on oil, gas, natural gas (including liquefied gas and storage gas), and other hydrocarbons, helium, coal, metals, minerals, steam, timber, geothermal or other natural resources or synthetic fuels produced or recovered from any property, an interest in which is owned or leased by the Issuer or any Subsidiary of it;

(x) mortgages, pledges, liens or encumbrances upon any property heretofore or hereafter acquired, created at the time of acquisition or within 365 days thereafter to secure all or a portion of the purchase price thereof, or existing thereon at the date of acquisition, whether or not assumed by the Issuer or any Subsidiary of it, provided that every such mortgage, pledge, lien or encumbrance shall apply only to the property so acquired and fixed improvements thereon;

(xi) any extension, renewal or refunding, in whole or in part, of any mortgage, pledge, lien or encumbrance permitted by Section (x) above, if limited to the same property or any portion thereof subject to, and securing not more than the amount secured by, the mortgage, pledge, lien or encumbrance extended, renewed or refunded;

(xii) mortgages, pledges, liens or encumbrances upon any property heretofore or hereafter acquired by any corporation that is or becomes such a Subsidiary of the Issuer after the date of the Fiscal Agency Agreement (“ Acquired Entity ”), provided that every such mortgage, pledge, lien or encumbrance (1) shall either (a) exist prior to the time the Acquired Entity becomes such a Subsidiary or (b) be created at the time the Acquired Entity becomes such a Subsidiary or within 365 days thereafter to secure all or a portion of the acquisition price thereof and (2) shall only apply to those properties owned by the Acquired Entity at the time it becomes such a Subsidiary or thereafter acquired by it from sources other than the Issuer or any other Subsidiary of it;

(xiii) the pledge of current assets, in the ordinary course of business, to secure current liabilities;

(xiv) mechanics’ or materialmen’s liens, any liens or charges arising by reason of pledges or deposits to secure payment of workmen’s compensation or other insurance, good faith deposits in connection with tenders, leases of real estate, bids or contracts (other than contracts for the payment of money), deposits to secure duties or public or statutory obligations, deposits to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or similar charges;

(xv) any lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time in connection with the financing of



US-DOCS\108220951.14	A-14

the acquisition or construction of property to be used in the business of the Issuer or any Subsidiary of it or as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable the Issuer or any such Subsidiary to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workmen’s compensation, unemployment insurance, old age pensions or other social security, or to share in the privileges or benefits required for companies participating in such arrangements;

(xvi) any lien to secure Indebtedness of the Issuer other than Funded Debt (as hereinafter defined);

(xvii) any mortgage, pledge, lien or encumbrance of or upon any office equipment, data processing equipment (including, without limitation, computer and computer peripheral equipment), or transportation equipment (including without limitation, motor vehicles, tractors, trailers, marine vessels, barges, towboats, rolling stock and aircraft);

(xviii) any mortgage, pledge, lien or encumbrance created or assumed by the Issuer or any Subsidiary of it in connection with the issuance of debt securities the interest on which is excludable from gross income of the holder of such security pursuant to the Internal Revenue Code of 1986, as amended, for the purpose of financing, in whole or in part, the acquisition or construction of property to be used by the Issuer or any such Subsidiary;

(xix) the pledge or assignment of accounts receivable, or the pledge or assignment of conditional sales contracts or chattel mortgages and evidences of indebtedness secured thereby, received in connection with the sale by the Issuer or any Subsidiary of it of goods or merchandise to customers of the Issuer or any Subsidiary;

(xx) mortgages, pledges, liens or encumbrances upon any property (i) arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business (provided such Indebtedness is extinguished within five business days of its incurrence), and (ii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

(xxi) mortgages, pledges, liens or encumbrances upon any property arising out of conditional sale, title retention, consignment or similar arrangements for the sale or purchase of goods or services or arrangements for the treatment, separation or processing of gas liquids entered into by us or any Subsidiary in the ordinary course of business; or

(xxii) rights reserved to or vested in any Government Authority to use, control or regulate any property of us or any of our Subsidiaries.

In case the Issuer or any Subsidiary of it shall propose to pledge, mortgage or hypothecate any Principal Property at any time owned by it to secure any of its Indebtedness, other than as permitted by subdivisions (i) to (xxii) , inclusive, of this Paragraph 8 , the Issuer will prior thereto give written notice thereof to the Fiscal Agent, and the Issuer will, or will cause such



US-DOCS\108220951.14	A-15

Subsidiary to, prior to or simultaneously with such pledge, mortgage or hypothecation, effectively secure all the Securities equally and ratably with such Indebtedness.

Notwithstanding the foregoing provisions of this Paragraph 8 , the Issuer or any Subsidiary of it may incur, assume or guarantee indebtedness secured by a mortgage which would otherwise be subject to the foregoing restrictions in an aggregate amount which, together with all other Indebtedness of the Issuer or a Subsidiary of it secured by a mortgage which (if originally issued, assumed or guaranteed at such time) would otherwise be subject to the foregoing restrictions (not including Indebtedness permitted to be secured under clauses (i) through (xix) above), does not at the time exceed 10% of the Consolidated Net Tangible Assets of the Issuer as shown on its audited consolidated financial statements as of the end of the fiscal year preceding the date of determination.

For purposes of the Securities,

“ Consolidated Net Tangible Assets ” of any corporation means total assets less (a) total current liabilities (excluding Indebtedness due within 365 days) and (b) goodwill, patents and trademarks, all as reflected in such corporation’s audited consolidated balance sheet preceding the date of a determination under the immediately preceding paragraph of this Paragraph 8 .

“ Funded Debt ” as applied to any corporation means all Indebtedness incurred, created, assumed or guaranteed by such corporation, or upon which it customarily pays interest charges; provided , however , that the term “Funded Debt” shall not include (i) Indebtedness incurred in the ordinary course of business representing borrowings, regardless of when payable, of such corporation from time to time against, but not in excess of the face amount of, its installment accounts receivable for the sale of appliances and equipment sold in the regular course of business or (ii) advances for construction and security deposits received by such corporation in the ordinary course of business.

“ Government Authority ” means any nation or government, any state, province, territory or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative function of or pertaining to government.

“ Indebtedness ” as applied to any corporation, means bonds, debentures, notes and other instruments representing obligations created or assumed by any such corporation for the repayment of money borrowed (other than unamortized debt discount or premium). All Indebtedness secured by a lien upon property owned by any corporation and upon which Indebtedness any such corporation customarily pays interest, although any such corporation has not assumed or become liable for the payment of such Indebtedness, shall for all purposes of the Securities be deemed to be Indebtedness of any such corporation. All Indebtedness for money borrowed or incurred by other persons which is directly guaranteed as to payment of principal by any corporation shall for all purposes of the Securities be deemed to be Indebtedness of such corporation, but no other contingent obligation of such corporation in respect of Indebtedness incurred by other persons shall for any purpose be deemed Indebtedness of such corporation. Indebtedness of any corporation shall not include: (i) amounts which are payable only out of all or a portion of the oil, gas, natural gas, helium, coal, metal, mineral, steam, timber, hydrocarbons, or geothermal or other natural resources



US-DOCS\108220951.14	A-16

produced, derived or extracted from properties owned or developed by such corporation; (ii) any amount representing capitalized lease obligations; (iii) any indebtedness incurred to finance oil, gas, natural gas, helium, coal, metals, minerals, steam, timber, hydrocarbons or geothermal or other natural resources or synthetic fuel exploration or development, payable with respect to principal and interest, solely out of proceeds of oil, gas, natural gas, helium, coal, metals, minerals, steam, timber, hydrocarbons or geothermal or other natural resources or synthetic fuel to be produced, sold and/or delivered by any such corporation; (iv) indirect guarantees or other contingent obligations in connection with the Indebtedness of others, including agreements, contingent or otherwise, with such other persons or with third persons with respect to, or to permit or ensure the payment of, obligations of such other persons, including, without limitation, agreements to purchase or repurchase obligations of such other persons, agreements to advance or supply funds to or to invest in such other persons, or agreements to pay for property, products or services of such other persons (whether or not conferred, delivered or rendered), and any demand charge, throughput, take-or-pay, keep-well, make-whole, cash deficiency, maintenance of working capital or earnings or similar agreements; and (v) any guarantees with respect to lease or other similar periodic payments to be made by other persons.

“ Principal Property ” of the Issuer means any oil or gas pipeline, gas processing plant or chemical plant located in the United States, except any such pipeline, facility, station or plant that in the opinion of the Board of Directors of the Issuer is not of material importance to the total business conducted by the Issuer or its Subsidiaries. “Principal Property” shall not include any oil or gas property or the production or any proceeds of production from an oil or gas producing property or the production or any proceeds of production of gas processing plants or oil or gas or petroleum products in any pipeline. “Principal Property” shall also include any gas storage facility or gas compressor station located in the United States, except any such facility or station that in the opinion of the Board of Directors of the Issuer is not of material importance to the total business conducted by the Issuer or its Subsidiaries, and “Principal Property” shall not include any liquefied natural gas plants and related storage facilities or any natural gas liquids processing plants.

(a) The Issuer shall not consolidate with or merge into any other person or convey, transfer or lease its properties and assets substantially as an entirety to any person, and the Issuer shall not permit any person to consolidate with or merge into the Issuer or convey, transfer or lease its properties and assets substantially as an entirety to the Issuer unless:

(i) in case the Issuer shall consolidate with or merge into another person or convey, transfer or lease its properties and assets substantially as an entirety to any person, the person formed by such consolidation or into which the Issuer is merged or the person which acquires by conveyance or transfer, or which leases, the properties and assets of the Issuer substantially as an entirety shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia (the “ Successor Person ”) and shall expressly assume, by amendment to the Fiscal Agency Agreement signed by the Issuer and such Successor Person and delivered to the Fiscal Agent, the due and punctual payment of the principal of and interest on at the Securities and the performance or observance of every covenant hereof and of the Fiscal Agency Agreement on the part of the Issuer to be performed or observed;



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(ii) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Issuer or any Subsidiary of it as a result of such transaction as having been incurred by the Issuer or any such Subsidiary at the time of such transaction, no event of default (as set forth in Paragraph 7 ), and no event which, with notice or lapse of time or both, would become such an event of default, shall have happened and be continuing;

(iii) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Issuer or any Subsidiary of it would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by Paragraph 8 hereof, the Issuer, or the Successor Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all Indebtedness secured by such mortgage, pledge, lien, security interest or other encumbrance; and

(iv) the Issuer has delivered to the Fiscal Agent an Officers’ Certificate and a written opinion or opinions of counsel satisfactory to the Fiscal Agent (who may be counsel to the Issuer), stating that such consolidation, merger, conveyance, transfer or lease and such amendment to the Fiscal Agency Agreement comply with this Paragraph 9 and that all conditions precedent herein provided for relating to such transaction have been complied with.

(b) Upon any such consolidation or merger, or any conveyance, transfer or lease of the properties and assets of the Issuer substantially as an entirety in accordance with Paragraph 9(a) , the Successor Person shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under the Fiscal Agency Agreement and the Securities with the same effect as if the Successor Person had been named as the Issuer in the Fiscal Agency Agreement and the Securities, and thereafter the Issuer, except in the case of a lease of its properties and assets, shall be released from its liability as obligor on any of the Securities and under the Fiscal Agency Agreement.

9. Section 8 of the Fiscal Agency Agreement, which requires the Issuer to provide registered holders of Securities or, in the case of clauses (a) and (b) thereof, designated prospective purchasers of Securities with certain information and an Officers’ Certificate, is hereby incorporated mutatis mutandis by reference herein.

10. Until the date that is one year from the last date of issuance of any Securities issued pursuant to the Fiscal Agency Agreement, the Issuer will not, and will not permit any of its “affiliates” (as defined under Rule 144 under the Act or any successor provision thereto) to, resell any Securities which constitute “restricted securities” under Rule 144 that have been reacquired by any of them.

11. If any mutilated Security is surrendered to the Fiscal Agent, the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver in exchange therefor, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding.



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If there be delivered to the Issuer and the Fiscal Agent (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of each of them harmless, then, in the absence of notice to the Issuer or the Fiscal Agent that such Security has been acquired by a bona fide purchaser, the Issuer shall execute, and upon its written request the Fiscal Agent shall authenticate and deliver in lieu of any such destroyed, lost or stolen Security a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding.

Upon the issuance of any new Security under this Paragraph 12 , the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and the expenses of the Fiscal Agent) connected therewith.

Every new Security issued pursuant to this Paragraph 12 in lieu of any destroyed, lost or stolen Security, shall constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone.

Any new Security delivered pursuant to this Paragraph 12 shall be so dated that neither gain nor loss in interest shall result from such exchange.

The provisions of this Paragraph 12 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

12. Section 12 of the Fiscal Agency Agreement, which Section is hereby incorporated mutatis mutandis by reference herein, provides that, with certain exceptions as therein provided and by written consent of a majority in the principal amount of all Outstanding Securities, the Issuer and the Fiscal Agent may modify, amend or supplement the Fiscal Agency Agreement or the terms of the Securities or may give consents or waivers or take other actions with respect thereto. Any such modification, amendment, supplement, consent, waiver or other action shall be conclusive and binding on the holder of this Security and on all future holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange heretofore or in lieu hereof, whether or not notation thereof is made upon this Security. The Fiscal Agency Agreement and the terms of the Securities may be modified or amended by the Issuer and the Fiscal Agent, without the consent of any holders of Securities, for the purpose of (i) adding to the covenants of the Issuer for the benefit of the holders of Securities, or (ii) surrendering any right or power conferred upon the Issuer, or (iii) securing the Securities pursuant to the requirements of the Securities or otherwise, or (iv) evidencing the succession of another corporation to the Issuer and the assumption by any such successor of the covenants and obligations of the Issuer in the Securities or in the Fiscal Agency Agreement pursuant to Paragraph 9 hereof, (v) providing for the issuance of additional Securities in accordance with the Fiscal Agency Agreement, or (vi) correcting or supplementing any defective provision contained in the Securities or in the Fiscal Agency Agreement, to all of which each holder of any Security, by acceptance thereof, consents.

13. No reference herein to the Fiscal Agency Agreement and no provision of this Security or of the Fiscal Agency Agreement shall alter or impair the obligation of the Issuer, which



US-DOCS\108220951.14	A-19

is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

14. This Security is subject to the provisions of Section 15 of the Fiscal Agency Agreement (which are incorporated mutatis mutandis by reference herein) which provide for the defeasance at any time of (i) the entire indebtedness of this Security or (ii) certain covenants and events of default, in each case upon compliance with certain conditions set forth therein.

15. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures (“ CUSIP ”), the Issuer will cause CUSIP numbers to be printed on the Securities as a convenience to the holders of the Securities. This Security will also bear an ISIN number. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon.

16. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.



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[IF THIS SECURITY IS A GLOBAL SECURITY, INSERT AS A SEPARATE PAGE]

Schedule A

SCHEDULE OF ADJUSTMENTS

Initial Principal Amount: U.S. $___________________



Date adjustment made	Principal amount increase	Principal amount decrease	Principal amount following adjustment	Notation made on behalf of the Transfer Agent



US-DOCS\108220951.14	A-1

ATTACHMENT B

EXHIBIT I

FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 700

Chicago, Illinois 60602

Attention: Corporate Trust Administration


Re:	NORTHERN NATURAL GAS COMPANY 4.30% SENIOR BONDS DUE 2049

Reference is hereby made to the Fiscal Agency Agreement, dated as of July 17, 2018 (the “ Fiscal Agency Agreement ”), between Northern Natural Gas Company (the “ Company ”) and The Bank of New York Mellon Trust Company, N.A., as Fiscal Agent (the “ Fiscal Agent ”). Capitalized terms used but not defined herein shall have the meanings given to them in the Fiscal Agency Agreement.

In connection with our proposed purchase of $____________ aggregate principal amount of the Company’s 4.30% Senior Bonds due 2049 (the “ Bonds ”) we confirm that:

1. We will take delivery of the entire aggregate principal amount of Bonds we are acquiring only in the form of a Restrictive Definitive Security.

2. We understand that any subsequent transfer of the Bonds or any interest therein is subject to certain restrictions and conditions set forth in the Fiscal Agency Agreement and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Bonds or any interest therein except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the “ Securities Act ”).

3. We understand that the offer and sale of the Bonds have not been registered under the Securities Act, and that the Bonds and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the securities we are acquiring or any interest therein prior to the date which is one year after the later of the last issue date of any Bonds issued under the Fiscal Agency Agreement and the last date on which Northern Natural Gas Company, or any of its affiliates, was the holder of such securities (or any predecessor securities thereof), such sales will be made only (A) to Northern Natural Gas Company or any of its Subsidiaries, (B) pursuant to a registration statement that has been declared effective under the Securities Act, (C) for so long as the securities are eligible for resale pursuant to Rule 144, to a person reasonably believed to be a qualified institutional buyer (as defined in Rule 144A) that



US-DOCS\108220951.14	A-1

purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the transfer is being made in reliance on Rule 144A, (D) in a transaction meeting the requirements of Rule 144 under the Securities Act, (E) to an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of an institutional accredited investor, and that executes and delivers a certificate substantially in the form of this certificate, (F) pursuant to offers and sales that occur outside the United States in an offshore transaction in accordance with Rule 904 under the Securities Act, or (G) pursuant to any other available exemption from the registration requirements of the Securities Act and, in each of the cases above, in accordance with the applicable Securities laws of any state of the United States or any other applicable jurisdiction, and, for so long as the Bonds we are acquiring are represented by a Restricted Definitive Security, we further agree to provide (i) to any Person purchasing the Restrictive Definitive Security or a beneficial interest in a Global Security from us in a transaction meeting the requirements of clauses (A) or (C) through (G) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein and (ii) to the Fiscal Agent and the Company, a duly completed certificate in the form of Exhibit H to the Fiscal Agency Agreement.

4. We understand that, on any proposed resale of the Bonds or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Bonds purchased by us will bear a legend to the foregoing effect.

5. We are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Bonds, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment.

6. We are acquiring the Bonds purchased by us for our own account or for one or more accounts (each of which is an institutional “accredited investor”) as to each of which we exercise sole investment discretion.

You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.

    [Insert Name of Accredited Investor]

By:
    Name:
    Title:

Dated: _______________________



US-DOCS\108220951.14	I-2

EXHIBIT 10.1

EXTENSION AGREEMENT

May 31, 2019

MUFG UNION BANK, N.A., as Administrative Agent under the Credit Agreement referred to below

MUFG Union Bank, N.A., as Administrative Agent

1980 Saturn Street

Monterey Park, CA, 91754

Attention: Gena Robles

Email: gena.robles@unionbank.com and #clo_agency@unionbank.com

MUFG Union Bank, N.A., as Administrative Agent

445 South Figueroa Street

Los Angeles, CA, 90071

Attention: Jeffrey Fesenmaier

Email: JFesenmaier@us.mufg.jp

Ladies and Gentlemen:

Reference is made to (i) the Amended and Restated Credit Agreement, dated as of April 30, 2018 (as amended, restated, modified or otherwise supplemented from time to time prior to the date hereof, the “ Credit Agreement ”), among Berkshire Hathaway Energy Company , an Iowa corporation (the “ Borrower ”) , the banks and other financial institutions party thereto as Lenders, and MUFG UNION BANK, N.A., as Administrative Agent, and (ii) the Borrower’s Termination Date Extension Request, dated April 15, 2019, requesting an extension of the Termination Date to June 30, 2022 (the “ Extension Request ”). Unless otherwise indicated, capitalized terms used herein and not otherwise defined herein have the meanings given such terms in the Credit Agreement.

Solely in connection with the extension of the Termination Date to June 30, 2022 as set forth in the Extension Request, each undersigned Lender agrees, subject to the Administrative Agent’s receipt of the documents described in Section 2.06(c) of the Credit Agreement, to extend the Termination Date applicable to such Lender’s Commitment to June 30, 2022, such extension to be effective on May 31, 2019. The undersigned Lenders, constituting Required Lenders, hereby waive the time period requirements set forth in Section 2.06(a) of the Credit Agreement for each Lender to provide notice of such Lender’s decision to consent to, or decline, the extension of the Termination Date to June 30, 2022. The Required Lenders hereby agree that (a) this Extension Agreement shall be dated as of the date first set forth above, (b) the deadline for each consenting Lender to provide a signature page to this Extension Agreement is May 6, 2019, and (c) subject to the Administrative Agent’s receipt of the documents described in Section 2.06(c) of the Credit Agreement, the “Extension Effective Date” with respect to the Extension Request shall be May 31, 2019.

Furthermore, each of the undersigned Lenders that is an LC Issuing Bank as of the date hereof agrees to continue to serve as an LC Issuing Bank in accordance with its Fronting Commitment after giving effect to the extension of the Termination Date as set forth herein.

This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. This Extension Agreement is a Loan Document. Except as specifically provided above, (i) the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed in all respects by the parties hereto, and (ii) the execution and delivery of this Extension Agreement shall not operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under the Credit Agreement or any Loan Documents, nor constitute a waiver of any provision of the Credit Agreement or any Loan Documents. This Extension Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[Signature pages follow]

JPMORGAN CHASE BANK, N.A.

By: /s/ Juan Javellana

Name: Juan Javellana

Title: Executive Director

Extension Agreement – Berkshire Hathaway Energy Company (2019)

Wells Fargo Bank, National Association

By: /s/ Gregory R. Gredvig

Name: Gregory R. Gredvig

Title: Director

Extension Agreement – Berkshire Hathaway Energy Company (2019)

MIZUHO BANK, LTD.

By: /s/ Donna DeMagistris

Name: Donna DeMagistris

Title: Authorized Signatory

Extension Agreement – Berkshire Hathaway Energy Company (2019)

CITIBANK, N.A.

By: /s/ Richard Rivera

Name: Richard Rivera

Title: Vice President

Extension Agreement – Berkshire Hathaway Energy Company (2019)

BARCLAYS BANK PLC

By: /s/ Sydney G. Dennis

Name: Sydney G. Dennis

Title: Director

Extension Agreement – Berkshire Hathaway Energy Company (2019)

Royal Bank of Canada

By: /s/ Frank Lambrinos

Name: Frank Lambrinos

Title: Authorized Signatory

Extension Agreement – Berkshire Hathaway Energy Company (2019)

U.S. BANK NATIONAL ASSOCIATION

By: /s/ Karen Nelsen

Name: Karen Nelsen

Title: Vice President

Extension Agreement – Berkshire Hathaway Energy Company (2019)

BNP Paribas

By: /s/ Denis O' Meara

Name: Denis O' Meara

Title: Managing Director

By: /s/ Ravina Advani

Name: Ravina Advani

Title: Managing Director

Extension Agreement – Berkshire Hathaway Energy Company (2019)

The Bank of Nova Scotia

By: /s/ David Dewar

Name: David Dewar

Title: Director

Extension Agreement – Berkshire Hathaway Energy Company (2019)

SUMITOMO MITSUI BANKING

CORPORATION

By: /s/ Katsuyuki Kubo

Name: Katsuyuki Kubo

Title: Managing Director

Extension Agreement – Berkshire Hathaway Energy Company (2019)

Bank of Montreal, Chicago Branch

By: /s/ Brian L. Banke

Name: Brian L. Banke

Title: Managing Director

Extension Agreement – Berkshire Hathaway Energy Company (2019)

KeyBank National Association

By: /s/ Benjamin C. Cooper

Name: Benjamin C. Cooper

Title: Vice President

Extension Agreement – Berkshire Hathaway Energy Company (2019)

CoBank, ACB

By: /s/ Ryan Spearman

Name: Ryan Spearman

Title: Vice President

Extension Agreement – Berkshire Hathaway Energy Company (2019)

SUNTRUST BANK

By: /s/ Carmen Malizia

Name: Carmen Malizia

Title: Director

Extension Agreement – Berkshire Hathaway Energy Company (2019)

PNC BANK, NATIONAL ASSOCIATION,

as Lender

By: /s/ Kelly Miller

Name: Kelly Miller

Title: Vice President

Extension Agreement – Berkshire Hathaway Energy Company (2019)

CANADIAN IMPERIAL BANK OF

COMMERCE, NEW TORK BRANCH, as

Lender

By: /s/ Robert Casey

Name: Robert Casey

Title: Authorized Signatory

By: /s/ Farhad Merali

Name: Farhad Merali

Title: Authorized Signatory

Extension Agreement – Berkshire Hathaway Energy Company (2019)

TD BANK, N.A.

By: /s/ Vijay Prasad

Name: Vijay Prasad

Title: Sr. Vice President

Extension Agreement – Berkshire Hathaway Energy Company (2019)

Banco Santander, S.A., New York Branch

By: /s/ Rita Walz-Cuccioli

Name: Rita Walz-Cuccioli

Title: Executive Director

By: /s/ Terence Corcoran

Name: Terence Corcoran

Title: Executive Director

Extension Agreement – Berkshire Hathaway Energy Company (2019)

The Bank of New York Mellon

By: /s/ Richard K. Fronapfel, Jr.

Name: Richard K. Fronapfel, Jr.

Title: Director

Extension Agreement – Berkshire Hathaway Energy Company (2019)

The Northern Trust Company

By: /s/ Lisa DeCristofaro

Name: Lisa DeCristofaro

Title: SVP

Extension Agreement – Berkshire Hathaway Energy Company (2019)

NATIONAL COOPERATIVE SERVICES

CORPORATION, as Lender

By: /s/ Uzma Rahman

Name: Uzma Rahman

Title: Assistant Secretary-Treasurer

Extension Agreement – Berkshire Hathaway Energy Company (2019)

National Australia Bank Limited

By: /s/ Eli Davis

Name: Eli Davis

Title: Director

Extension Agreement – Berkshire Hathaway Energy Company (2019)

Bankers Trust Company

By: /s/ Dave P. Gregory

Name: Dave P. Gregory

Title: VP, Senior Commercial

Relationship Manager

Extension Agreement – Berkshire Hathaway Energy Company (2019)

MUFG UNION BANK, N.A. ,

as Administrative Agent, an LC Issuing Bank

and a Lender

By: /s/ Cherese Joseph

Name: Cherese Joseph

Title: Vice President

Extension Agreement – Berkshire Hathaway Energy Company (2019)

AGREED AND ACCEPTED:

BERKSHIRE HATHAWAY ENERGY COMPANY

By: /s/ Calvin D. Haack

Name: Calvin D. Haack

Title: Vice President and Treasurer

Extension Agreement – Berkshire Hathaway Energy Company (2019)

EXHIBIT 10.2

EXTENSION AGREEMENT

May 31, 2019

JPMorgan Chase Bank, N.A., as Administrative Agent under the Credit Agreement

referred to below

JPMorgan Chase Bank, N.A., as Administrative Agent

500 Stanton Christiana Road, NCC5, Floor 1

Newark, Delaware, 19713

Attention: Tom Defosse

Email: thomas.defosseiv@chase.com

JPMorgan Chase Bank, N.A., as Administrative Agent

383 Madison Avenue, Floor 24

New York, New York, 10179

Attention: Juan Javellana

Email: juan.j.javellana@jpmorgan.com

Ladies and Gentlemen:

Reference is made to (i) the Amended and Restated Credit Agreement, dated as of April 30, 2018 (as amended, restated, modified or otherwise supplemented from time to time prior to the date hereof, the “ Credit Agreement ”), among PacifiCorp , an Oregon corporation (the “ Borrower ”), the banks and other financial institutions party thereto as Lenders, and JPMorgan Chase Bank, N.A., as Administrative Agent, and (ii) the Borrower’s Termination Date Extension Request, dated April 15, 2019, requesting an extension of the Termination Date to June 30, 2022 (the “ Extension Request ”). Unless otherwise indicated, capitalized terms used herein and not otherwise defined herein have the meanings given such terms in the Credit Agreement.

Solely in connection with the extension of the Termination Date to June 30, 2022 as set forth in the Extension Request, each undersigned Lender agrees, subject to the Administrative Agent’s receipt of the documents described in Section 2.06(c) of the Credit Agreement, to extend the Termination Date applicable to such Lender’s Commitment to June 30, 2022, such extension to be effective on May 31, 2019. The undersigned Lenders, constituting Required Lenders, hereby waive the time period requirements set forth in Section 2.06(a) of the Credit Agreement for each Lender to provide notice of such Lender’s decision to consent to, or decline, the extension of the Termination Date to June 30, 2022. The Required Lenders hereby agree that (a) this Extension Agreement shall be dated as of the date first set forth above, (b) the deadline for each consenting Lender to provide a signature page to this Extension Agreement is May 6, 2019 and (c) subject to the Administrative Agent’s receipt of the documents described in Section 2.06(c) of the Credit Agreement, the “Extension Effective Date” with respect to the Extension Request shall be May 31, 2019.

[Signature pages follow]

MIZUHO BANK, LTD.

By: /s/ Donna DeMagistris

Name: Donna DeMagistris

Title: Authorized Signatory

Extension Agreement – PacifiCorp I (2019)

PNC BANK, NATIONAL ASSOCIATION,

as Lender

By: /s/ Kelly Miller

Name: Kelly Miller

Title: Vice President

Extension Agreement – PacifiCorp I (2019)

Banco Santander, S.A., New York Branch

By: /s/ Rita Walz-Cuccioli

Name: Rita Walz-Cuccioli

Title: Executive Director

By: /s/ Terence Corcoran

Name: Terence Corcoran

Title: Executive Director

Extension Agreement – PacifiCorp I (2019)

SUMITOMO MITSUI BANKING

CORPORATION

By: /s/ Katsuyuki Kubo

Name: Katsuyuki Kubo

Title: Managing Director

Extension Agreement – PacifiCorp I (2019)

TD BANK, N.A.

By: /s/ Vijay Prasad

Name: Vijay Prasad

Title: Sr. Vice President

Extension Agreement – PacifiCorp I (2019)

The Bank of New York Mellon

By: /s/ Richard K. Fronapfel, Jr.

Name: Richard K. Fronapfel, Jr.

Title: Director

Extension Agreement – PacifiCorp I (2019)

The Bank of Nova Scotia

By: /s/ David Dewar

Name: David Dewar

Title: Director

Extension Agreement – PacifiCorp I (2019)

Royal Bank of Canada

By: /s/ Frank Lambrinos

Name: Frank Lambrinos

Title: Authorized Signatory

Extension Agreement – PacifiCorp I (2019)

The Northern Trust Company

By: /s/ Lisa DeCristofaro

Name: Lisa DeCristofaro

Title: SVP

Extension Agreement – PacifiCorp I (2019)

National Australia Bank Limited

By: /s/ Eli Davis

Name: Eli Davis

Title: Director

Extension Agreement – PacifiCorp I (2019)

KeyBank National Association

By: /s/ Benjamin C. Cooper

Name: Benjamin C. Cooper

Title: Vice President

Extension Agreement – PacifiCorp I (2019)

NATIONAL COOPERATIVE SERVICES

CORPORATION, as Lender

By: /s/ Uzma Rahman

Name: Uzma Rahman

Title: Assistant Secretary-Treasurer

Extension Agreement – PacifiCorp I (2019)

CANADIAN IMPERIAL BANK OF

COMMERCE, NEW TORK BRANCH, as

Lender

By: /s/ Robert Casey

Name: Robert Casey

Title: Authorized Signatory

By: /s/ Farhad Merali

Name: Farhad Merali

Title: Authorized Signatory

Extension Agreement – PacifiCorp I (2019)

CITIBANK, N.A.

By: /s/ Richard Rivera

Name: Richard Rivera

Title: Vice President

Extension Agreement – PacifiCorp I (2019)

SUNTRUST BANK

By: /s/ Carmen Malizia

Name: Carmen Malizia

Title: Director

Extension Agreement – PacifiCorp I (2019)

BARCLAYS BANK PLC

By: /s/ Sydney G. Dennis

Name: Sydney G. Dennis

Title: Director

Extension Agreement – PacifiCorp I (2019)

Wells Fargo Bank, National Association

By: /s/ Gregory R. Gredvig

Name: Gregory R. Gredvig

Title: Director

Extension Agreement – PacifiCorp I (2019)

U.S. Bank National Association

By: /s/ Kevin Murphy

Name: Kevin Murphy

Title: Vice President

Extension Agreement – PacifiCorp I (2019)

Bank of Montreal, Chicago Branch

By: /s/ Brian L. Banke

Name: Brian L. Banke

Title: Managing Director

Extension Agreement – PacifiCorp I (2019)

BNP Paribas

By: /s/ Denis O' Meara

Name: Denis O' Meara

Title: Managing Director

By: /s/ Ravina Advani

Name: Ravina Advani

Title: Managing Director

Extension Agreement – PacifiCorp I (2019)

MUFG UNION BANK, N.A.,

By: /s/ Cherese Joseph

Name: Cherese Joseph

Title: Vice President

Extension Agreement – PacifiCorp I (2019)

JPMORGAN CHASE BANK, N.A.

By: /s/ Juan Javellana

Name: Juan Javellana

Title: Executive Director

Extension Agreement – PacifiCorp I (2019)

CoBank, ACB

By: /s/ Ryan Spearman

Name: Ryan Spearman

Title: Vice President

Extension Agreement – PacifiCorp I (2019)

AGREED AND ACCEPTED:

PACIFICORP

By: /s/ Ryan Weems

Name: Ryan Weems

Title: Vice President, Controller and Asst.

Treasurer

Extension Agreement – PacifiCorp I (2019)

EXHIBIT 10.3

EXTENSION AGREEMENT

May 31, 2019

JPMorgan Chase Bank, N.A., as Administrative Agent under the Credit Agreement

referred to below

JPMorgan Chase Bank, N.A., as Administrative Agent

500 Stanton Christiana Road, NCC5, Floor 1

Newark, Delaware, 19713

Attention: Tom Defosse

Email: thomas.defosseiv@chase.com

JPMorgan Chase Bank, N.A., as Administrative Agent

383 Madison Avenue, Floor 24

New York, New York, 10179

Attention: Juan Javellana

Email: juan.j.javellana@jpmorgan.com

Ladies and Gentlemen:

Reference is made to (i) the Amended and Restated Credit Agreement, dated as of April 30, 2018 (as amended, restated, modified or otherwise supplemented from time to time prior to the date hereof, the “ Credit Agreement ”), among PacifiCorp , an Oregon corporation (the “ Borrower ”), the banks and other financial institutions party thereto as Lenders, and JPMorgan Chase Bank, N.A., as Administrative Agent, and (ii) the Borrower’s Termination Date Extension Request, dated April 15, 2019, requesting an extension of the Termination Date to June 30, 2022 (the “ Extension Request ”). Unless otherwise indicated, capitalized terms used herein and not otherwise defined herein have the meanings given such terms in the Credit Agreement.

Solely in connection with the extension of the Termination Date to June 30, 2022 as set forth in the Extension Request, each undersigned Lender agrees, subject to the Administrative Agent’s receipt of the documents described in Section 2.06(c) of the Credit Agreement, to extend the Termination Date applicable to such Lender’s Commitment to June 30, 2022, such extension to be effective on May 31, 2019. The undersigned Lenders, constituting Required Lenders, hereby waive the time period requirements set forth in Section 2.06(a) of the Credit Agreement for each Lender to provide notice of such Lender’s decision to consent to, or decline, the extension of the Termination Date to June 30, 2022. The Required Lenders hereby agree that (a) this Extension Agreement shall be dated as of the date first set forth above, (b) the deadline for each consenting Lender to provide a signature page to this Extension Agreement is May 6, 2019 and (c) subject to the Administrative Agent’s receipt of the documents described in Section 2.06(c) of the Credit Agreement, the “Extension Effective Date” with respect to the Extension Request shall be May 31, 2019.

[Signature pages follow]

Royal Bank of Canada

By: /s/ Frank Lambrinos

Name: Frank Lambrinos

Title: Authorized Signatory

Extension Agreement – PacifiCorp II (2019)

Banco Santander, S.A., New York Branch

By: /s/ Rita Walz-Cuccioli

Name: Rita Walz-Cuccioli

Title: Executive Director

By: /s/ Terence Corcoran

Name: Terence Corcoran

Title: Executive Director

Extension Agreement – PacifiCorp II (2019)

BARCLAYS BANK PLC

By: /s/ Sydney G. Dennis

Name: Sydney G. Dennis

Title: Director

Extension Agreement – PacifiCorp II (2019)

CITIBANK, N.A.

By: /s/ Richard Rivera

Name: Richard Rivera

Title: Vice President

Extension Agreement – PacifiCorp II (2019)

BNP Paribas

By: /s/ Denis O' Meara

Name: Denis O' Meara

Title: Managing Director

By: /s/ Ravina Advani

Name: Ravina Advani

Title: Managing Director

Extension Agreement – PacifiCorp II (2019)

Wells Fargo Bank, National Association

By: /s/ Gregory R. Gredvig

Name: Gregory R. Gredvig

Title: Director

Extension Agreement – PacifiCorp II (2019)

MUFG UNION BANK, N.A.,

By: /s/ Cherese Joseph

Name: Cherese Joseph

Title: Vice President

Extension Agreement – PacifiCorp II (2019)

MIZUHO BANK, LTD.

By: /s/ Donna DeMagistris

Name: Donna DeMagistris

Title: Authorized Signatory

Extension Agreement – PacifiCorp II (2019)

The Bank of Nova Scotia

By: /s/ David Dewar

Name: David Dewar

Title: Director

Extension Agreement – PacifiCorp II (2019)

The Bank of New York Mellon

By: /s/ Richard K. Fronapfel, Jr.

Name: Richard K. Fronapfel, Jr.

Title: Director

Extension Agreement – PacifiCorp II (2019)

TD BANK, N.A.

By: /s/ Vijay Prasad

Name: Vijay Prasad

Title: Sr. Vice President

Extension Agreement – PacifiCorp II (2019)

SUNTRUST BANK

By: /s/ Carmen Malizia

Name: Carmen Malizia

Title: Director

Extension Agreement – PacifiCorp II (2019)

CANADIAN IMPERIAL BANK OF

COMMERCE, NEW TORK BRANCH, as

Lender

By: /s/ Robert Casey

Name: Robert Casey

Title: Authorized Signatory

By: /s/ Farhad Merali

Name: Farhad Merali

Title: Authorized Signatory

Extension Agreement – PacifiCorp II (2019)

PNC BANK, NATIONAL ASSOCIATION,

as Lender

By: /s/ Kelly Miller

Name: Kelly Miller

Title: Vice President

Extension Agreement – PacifiCorp II (2019)

NATIONAL COOPERATIVE SERVICES

CORPORATION, as Lender

By: /s/ Uzma Rahman

Name: Uzma Rahman

Title: Assistant Secretary-Treasurer

Extension Agreement – PacifiCorp II (2019)

KeyBank National Association

By: /s/ Benjamin C. Cooper

Name: Benjamin C. Cooper

Title: Vice President

Extension Agreement – PacifiCorp II (2019)

The Northern Trust Company

By: /s/ Lisa DeCristofaro

Name: Lisa DeCristofaro

Title: SVP

Extension Agreement – PacifiCorp II (2019)

National Australia Bank Limited

By: /s/ Eli Davis

Name: Eli Davis

Title: Director

Extension Agreement – PacifiCorp II (2019)

CoBank, ACB

By: /s/ Ryan Spearman

Name: Ryan Spearman

Title: Vice President

Extension Agreement – PacifiCorp II (2019)

U.S. Bank National Association

By: /s/ Kevin Murphy

Name: Kevin Murphy

Title: Vice President

Extension Agreement – PacifiCorp II (2019)

Bank of Montreal, Chicago Branch

By: /s/ Brian L. Banke

Name: Brian L. Banke

Title: Managing Director

Extension Agreement – PacifiCorp II (2019)

SUMITOMO MITSUI BANKING

CORPORATION

By: /s/ Katsuyuki Kubo

Name: Katsuyuki Kubo

Title: Managing Director

Extension Agreement – PacifiCorp II (2019)

AGREED AND ACCEPTED:

PACIFICORP

By: /s/ Ryan Weems

Name: Ryan Weems

Title: Vice President, Controller and Assistant

Treasurer

Extension Agreement – PacifiCorp II (2019)

JPMORGAN CHASE BANK, N.A.

By: /s/ Juan Javellana

Name: Juan Javellana

Title: Executive Director

Extension Agreement – PacifiCorp II (2019)

EXHIBIT 10.4

EXTENSION AGREEMENT

May 31, 2019

Mizuho Bank, Ltd., as Administrative Agent under the Credit Agreement

referred to below

Mizuho Bank, Ltd., as Administrative Agent

1800 Plaza Ten Harborside Financial Center

Jersey City, NJ 07311

Attention: Maria Sherry

Phone: (201) 626-9384

Fax No.: (201) 626-9935

Ladies and Gentlemen:

Reference is made to (i) the Amended and Restated Credit Agreement, dated as of April 30, 2018 (as amended, restated, modified or otherwise supplemented from time to time prior to the date hereof, the “ Credit Agreement ”), among MidAmerican Energy Company , an Iowa corporation (the “ Borrower ”), the banks and other financial institutions party thereto as Lenders, and Mizuho Bank, Ltd., as Administrative Agent, and (ii) the Borrower’s Termination Date Extension Request, dated April 15, 2019, requesting an extension of the Termination Date to June 30, 2022 (the “ Extension Request ”). Unless otherwise indicated, capitalized terms used herein and not otherwise defined herein have the meanings given such terms in the Credit Agreement.

[Signature pages follow]

BNP Paribas

By: /s/ Denis O' Meara

Name: Denis O' Meara

Title: Managing Director

By: /s/ Ravina Advani

Name: Ravina Advani

Title: Managing Director

Extension Agreement – MidAmerican Energy Company (2019)

CITIBANK, N.A.

By: /s/ Richard Rivera

Name: Richard Rivera

Title: Vice President

Extension Agreement – MidAmerican Energy Company (2019)

BARCLAYS BANK PLC

By: /s/ Sydney G. Dennis

Name: Sydney G. Dennis

Title: Director

Extension Agreement – MidAmerican Energy Company (2019)

CoBank, ACB

By: /s/ Ryan Spearman

Name: Ryan Spearman

Title: Vice President

Extension Agreement – MidAmerican Energy Company (2019)

MUFG UNION BANK, N.A.,

By: /s/ Cherese Joseph

Name: Cherese Joseph

Title: Vice President

Extension Agreement – MidAmerican Energy Company (2019)

Wells Fargo Bank, National Association

By: /s/ Gregory R. Gredvig

Name: Gregory R. Gredvig

Title: Director

Extension Agreement – MidAmerican Energy Company (2019)

JPMORGAN CHASE BANK, N.A.

By: /s/ Juan Javellana

Name: Juan Javellana

Title: Executive Director

Extension Agreement – MidAmerican Energy Company (2019)

The Northern Trust Company

By: /s/ Lisa DeCristofaro

Name: Lisa DeCristofaro

Title: SVP

Extension Agreement – MidAmerican Energy Company (2019)

National Australia Bank Limited

By: /s/ Eli Davis

Name: Eli Davis

Title: Director

Extension Agreement – MidAmerican Energy Company (2019)

KeyBank National Association

By: /s/ Benjamin C. Cooper

Name: Benjamin C. Cooper

Title: Vice President

Extension Agreement – MidAmerican Energy Company (2019)

NATIONAL COOPERATIVE SERVICES

CORPORATION, as Lender

By: /s/ Uzma Rahman

Name: Uzma Rahman

Title: Assistant Secretary-Treasurer

Extension Agreement – MidAmerican Energy Company (2019)

PNC BANK, NATIONAL ASSOCIATION,

as Lender

By: /s/ Kelly Miller

Name: Kelly Miller

Title: Vice President

Extension Agreement – MidAmerican Energy Company (2019)

CANADIAN IMPERIAL BANK OF

COMMERCE, NEW TORK BRANCH, as

Lender

By: /s/ Robert Casey

Name: Robert Casey

Title: Authorized Signatory

By: /s/ Farhad Merali

Name: Farhad Merali

Title: Authorized Signatory

Extension Agreement – MidAmerican Energy Company (2019)

SUNTRUST BANK

By: /s/ Carmen Malizia

Name: Carmen Malizia

Title: Director

Extension Agreement – MidAmerican Energy Company (2019)

TD BANK, N.A.

By: /s/ Vijay Prasad

Name: Vijay Prasad

Title: Sr. Vice President

Extension Agreement – MidAmerican Energy Company (2019)

The Bank of New York Mellon

By: /s/ Richard K. Fronapfel, Jr.

Name: Richard K. Fronapfel, Jr.

Title: Director

Extension Agreement – MidAmerican Energy Company (2019)

Bankers Trust Company

By: /s/ Dave P. Gregory

Name: Dave P. Gregory

Title: VP, Senior Commercial

Relationship Manager

Extension Agreement – MidAmerican Energy Company (2019)

U.S. BANK NATIONAL ASSOCIATION

By: /s/ Karen Nelsen

Name: Karen Nelsen

Title: Vice President

Extension Agreement – MidAmerican Energy Company (2019)

SUMITOMO MITSUI BANKING

CORPORATION

By: /s/ Katsuyuki Kubo

Name: Katsuyuki Kubo

Title: Managing Director

Extension Agreement – MidAmerican Energy Company (2019)

Bank of Montreal, Chicago Branch

By: /s/ Brian L. Banke

Name: Brian L. Banke

Title: Managing Director

Extension Agreement – MidAmerican Energy Company (2019)

Banco Santander, S.A., New York Branch

By: /s/ Rita Walz-Cuccioli

Name: Rita Walz-Cuccioli

Title: Executive Director

By: /s/ Terence Corcoran

Name: Terence Corcoran

Title: Executive Director

Extension Agreement – MidAmerican Energy Company (2019)

Royal Bank of Canada

By: /s/ Frank Lambrinos

Name: Frank Lambrinos

Title: Authorized Signatory

Extension Agreement – MidAmerican Energy Company (2019)

The Bank of Nova Scotia

By: /s/ David Dewar

Name: David Dewar

Title: Director

Extension Agreement – MidAmerican Energy Company (2019)

AGREED AND ACCEPTED:

MIDAMERICAN ENERGY COMPANY

By: /s/ James C. Galt

Name: James C. Galt

Title: Treasurer

Extension Agreement – MidAmerican Energy Company (2019)

MIZUHO BANK, LTD. ,

as Administrative Agent, an LC Issuing Bank

and a Lender

By: /s/ Donna DeMagistris

Name: Donna DeMagistris

Title: Authorized Signatory

Extension Agreement – MidAmerican Energy Company (2019)

EXHIBIT 10.5

EXTENSION AGREEMENT

May 31, 2019

Wells Fargo Bank, National Association, as Administrative Agent under the Credit Agreement referred to below

Wells Fargo Bank, National Association

90 S. 7 ^th Street

MAC: N9305-156

Minneapolis, MN 55402

Attention: Greg Gredvig

Phone: (612) 667-4832

Fax No.: (612) 316-0506

Ladies and Gentlemen:

Reference is made to (i) the Third Amended and Restated Credit Agreement, dated as of April 30, 2018 (as amended, restated, modified or otherwise supplemented from time to time prior to the date hereof, the “ Credit Agreement ”), among Nevada Power Company , a Nevada corporation (the “ Borrower ”) , the banks and other financial institutions party thereto as Lenders, and Wells Fargo Bank, National Association, as Administrative Agent, and (ii) the Borrower’s Termination Date Extension Request, dated April 15, 2019, requesting an extension of the Termination Date to June 30, 2022 (the “ Extension Request ”). Unless otherwise indicated, capitalized terms used herein and not otherwise defined herein have the meanings given such terms in the Credit Agreement.

[Signature pages follow]

The Bank of Nova Scotia

By: /s/ David Dewar

Name: David Dewar

Title: Director

Extension Agreement – Nevada Power Company (2019)

PNC BANK, NATIONAL ASSOCIATION,

as Lender

By: /s/ Kelly Miller

Name: Kelly Miller

Title: Vice President

Extension Agreement – Nevada Power Company (2019)

TD BANK, N.A.

By: /s/ Vijay Prasad

Name: Vijay Prasad

Title: Sr. Vice President

Extension Agreement – Nevada Power Company (2019)

The Bank of New York Mellon

By: /s/ Richard K. Fronapfel, Jr.

Name: Richard K. Fronapfel, Jr.

Title: Director

Extension Agreement – Nevada Power Company (2019)

CoBank, ACB

By: /s/ Ryan Spearman

Name: Ryan Spearman

Title: Vice President

Extension Agreement – Nevada Power Company (2019)

U.S. Bank National Association

By: /s/ Kevin Murphy

Name: Kevin Murphy

Title: Vice President

Extension Agreement – Nevada Power Company (2019)

JPMORGAN CHASE BANK, N.A.

By: /s/ Juan Javellana

Name: Juan Javellana

Title: Executive Director

Extension Agreement – Nevada Power Company (2019)

MUFG UNION BANK, N.A.,

By: /s/ Cherese Joseph

Name: Cherese Joseph

Title: Vice President

Extension Agreement – Nevada Power Company (2019)

Bank of Montreal, Chicago Branch

By: /s/ Brian L. Banke

Name: Brian L. Banke

Title: Managing Director

Extension Agreement – Nevada Power Company (2019)

Banco Santander, S.A., New York Branch

By: /s/ Rita Walz-Cuccioli

Name: Rita Walz-Cuccioli

Title: Executive Director

By: /s/ Terence Corcoran

Name: Terence Corcoran

Title: Executive Director

Extension Agreement – Nevada Power Company (2019)

SUMITOMO MITSUI BANKING

CORPORATION

By: /s/ Katsuyuki Kubo

Name: Katsuyuki Kubo

Title: Managing Director

Extension Agreement – Nevada Power Company (2019)

Royal Bank of Canada

By: /s/ Frank Lambrinos

Name: Frank Lambrinos

Title: Authorized Signatory

Extension Agreement – Nevada Power Company (2019)

The Northern Trust Company

By: /s/ Lisa DeCristofaro

Name: Lisa DeCristofaro

Title: SVP

Extension Agreement – Nevada Power Company (2019)

National Australia Bank Limited

By: /s/ Eli Davis

Name: Eli Davis

Title: Director

Extension Agreement – Nevada Power Company (2019)

KeyBank National Association

By: /s/ Benjamin C. Cooper

Name: Benjamin C. Cooper

Title: Vice President

Extension Agreement – Nevada Power Company (2019)

BNP Paribas

By: /s/ Denis O' Meara

Name: Denis O' Meara

Title: Managing Director

By: /s/ Ravina Advani

Name: Ravina Advani

Title: Managing Director

Extension Agreement – Nevada Power Company (2019)

CANADIAN IMPERIAL BANK OF

COMMERCE, NEW TORK BRANCH, as

Lender

By: /s/ Robert Casey

Name: Robert Casey

Title: Authorized Signatory

By: /s/ Farhad Merali

Name: Farhad Merali

Title: Authorized Signatory

Extension Agreement – Nevada Power Company (2019)

SUNTRUST BANK

By: /s/ Carmen Malizia

Name: Carmen Malizia

Title: Director

Extension Agreement – Nevada Power Company (2019)

BARCLAYS BANK PLC

By: /s/ Sydney G. Dennis

Name: Sydney G. Dennis

Title: Director

Extension Agreement – Nevada Power Company (2019)

CITIBANK, N.A.

By: /s/ Richard Rivera

Name: Richard Rivera

Title: Vice President

Extension Agreement – Nevada Power Company (2019)

MIZUHO BANK, LTD.

By: /s/ Donna DeMagistris

Name: Donna DeMagistris

Title: Authorized Signatory

Extension Agreement – Nevada Power Company (2019)

AGREED AND ACCEPTED:

NEVADA POWER COMPANY

By: /s/ Michael E. Cole

Name: Michael E. Cole

Title: Vice President and Chief Financial Officer

Extension Agreement – Nevada Power Company (2019)

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent, an LC Issuing Bank

and a Lender

By: /s/ Gregory R. Gredvig

Name: Gregory R. Gredvig

Title: Director

EXHIBIT 10.6

EXTENSION AGREEMENT

May 31, 2019

Wells Fargo Bank, National Association, as Administrative Agent under the Credit Agreement referred to below

Wells Fargo Bank, National Association

90 S. 7 ^th Street

MAC: N9305-156

Minneapolis, MN 55402

Attention: Greg Gredvig

Phone: (612) 667-4832

Fax No.: (612) 316-0506

Ladies and Gentlemen:

Reference is made to (i) the Third Amended and Restated Credit Agreement, dated as of April 30, 2018 (as amended, restated, modified or otherwise supplemented from time to time prior to the date hereof, the “ Credit Agreement ”), among Sierra Pacific Power Company , a Nevada corporation (the “ Borrower ”) , the banks and other financial institutions party thereto as Lenders, and Wells Fargo Bank, National Association, as Administrative Agent, and (ii) the Borrower’s Termination Date Extension Request, dated April 15, 2019, requesting an extension of the Termination Date to June 30, 2022 (the “ Extension Request ”). Unless otherwise indicated, capitalized terms used herein and not otherwise defined herein have the meanings given such terms in the Credit Agreement.

[Signature pages follow]

The Bank of Nova Scotia

By: /s/ David Dewar

Name: David Dewar

Title: Director

Extension Agreement – Sierra Pacific Power Company (2019)

SUMITOMO MITSUI BANKING

CORPORATION

By: /s/ Katsuyuki Kubo

Name: Katsuyuki Kubo

Title: Managing Director

Extension Agreement – Sierra Pacific Power Company (2019)

JPMORGAN CHASE BANK, N.A.

By: /s/ Juan Javellana

Name: Juan Javellana

Title: Executive Director

Extension Agreement – Sierra Pacific Power Company (2019)

BNP Paribas

By: /s/ Denis O' Meara

Name: Denis O' Meara

Title: Managing Director

By: /s/ Ravina Advani

Name: Ravina Advani

Title: Managing Director

Extension Agreement – Sierra Pacific Power Company (2019)

BARCLAYS BANK PLC

By: /s/ Sydney G. Dennis

Name: Sydney G. Dennis

Title: Director

Extension Agreement – Sierra Pacific Power Company (2019)

Royal Bank of Canada

By: /s/ Frank Lambrinos

Name: Frank Lambrinos

Title: Authorized Signatory

Extension Agreement – Sierra Pacific Power Company (2019)

CANADIAN IMPERIAL BANK OF

COMMERCE, NEW TORK BRANCH, as

Lender

By: /s/ Robert Casey

Name: Robert Casey

Title: Authorized Signatory

By: /s/ Farhad Merali

Name: Farhad Merali

Title: Authorized Signatory

Extension Agreement – Sierra Pacific Power Company (2019)

MUFG UNION BANK, N.A.,

By: /s/ Cherese Joseph

Name: Cherese Joseph

Title: Vice President

Extension Agreement – Sierra Pacific Power Company (2019)

CoBank, ACB

By: /s/ Ryan Spearman

Name: Ryan Spearman

Title: Vice President

Extension Agreement – Sierra Pacific Power Company (2019)

The Bank of New York Mellon

By: /s/ Richard K. Fronapfel, Jr.

Name: Richard K. Fronapfel, Jr.

Title: Director

Extension Agreement – Sierra Pacific Power Company (2019)

TD BANK, N.A.

By: /s/ Vijay Prasad

Name: Vijay Prasad

Title: Sr. Vice President

Extension Agreement – Sierra Pacific Power Company (2019)

SUNTRUST BANK

By: /s/ Carmen Malizia

Name: Carmen Malizia

Title: Director

Extension Agreement – Sierra Pacific Power Company (2019)

PNC BANK, NATIONAL ASSOCIATION,

as Lender

By: /s/ Kelly Miller

Name: Kelly Miller

Title: Vice President

Extension Agreement – Sierra Pacific Power Company (2019)

The Northern Trust Company

By: /s/ Lisa DeCristofaro

Name: Lisa DeCristofaro

Title: SVP

Extension Agreement – Sierra Pacific Power Company (2019)

National Australia Bank Limited

By: /s/ Eli Davis

Name: Eli Davis

Title: Director

Extension Agreement – Sierra Pacific Power Company (2019)

KeyBank National Association

By: /s/ Benjamin C. Cooper

Name: Benjamin C. Cooper

Title: Vice President

Extension Agreement – Sierra Pacific Power Company (2019)

MIZUHO BANK, LTD.

By: /s/ Donna DeMagistris

Name: Donna DeMagistris

Title: Authorized Signatory

Extension Agreement – Sierra Pacific Power Company (2019)

CITIBANK, N.A.

By: /s/ Richard Rivera

Name: Richard Rivera

Title: Vice President

Extension Agreement – Sierra Pacific Power Company (2019)

AGREED AND ACCEPTED:

SIERRA PACIFIC POWER COMPANY

By: /s/ Michael E. Cole

Name: Michael E. Cole

Title: Vice President and Chief Financial Officer

Extension Agreement – Sierra Pacific Power Company (2019)

U.S. Bank National Association

By: /s/ Kevin Murphy

Name: Kevin Murphy

Title: Vice President

Extension Agreement – Sierra Pacific Power Company (2019)

Bank of Montreal, Chicago Branch

By: /s/ Brian L. Banke

Name: Brian L. Banke

Title: Managing Director

Extension Agreement – Sierra Pacific Power Company (2019)

Banco Santander, S.A., New York Branch

By: /s/ Rita Walz-Cuccioli

Name: Rita Walz-Cuccioli

Title: Executive Director

By: /s/ Terence Corcoran

Name: Terence Corcoran

Title: Executive Director

Extension Agreement – Sierra Pacific Power Company (2019)

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Administrative Agent, an LC Issuing Bank

and a Lender

By: /s/ Gregory R. Gredvig

Name: Gregory R. Gredvig

Title: Director

EXHIBIT 15.1

August 2, 2019

To the Board of Directors and Shareholders of

Berkshire Hathaway Energy Company

Des Moines, Iowa

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited consolidated interim financial information of Berkshire Hathaway Energy Company and subsidiaries for the periods ended June 30, 2019 and 2018 , as indicated in our report dated August 2, 2019 ; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 , is incorporated by reference in Registration Statement No. 333-228511 on Form S-8.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/ Deloitte & Touche LLP

Des Moines, Iowa

EXHIBIT 15.2

August 2, 2019

To the Board of Directors and Shareholders of

PacifiCorp

Portland, Oregon

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited consolidated interim financial information of PacifiCorp and subsidiaries for the periods ended June 30, 2019 and 2018 , as indicated in our report dated August 2, 2019 ; because we did not perform an audit, we expressed no opinion on that information.

/s/ Deloitte & Touche LLP

Portland, Oregon

EXHIBIT 15.3

August 2, 2019

To the Board of Directors and Shareholder of

MidAmerican Energy Company

Des Moines, Iowa

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of MidAmerican Energy Company for the periods ended June 30, 2019 and 2018 , as indicated in our report dated August 2, 2019 ; because we did not perform an audit, we expressed no opinion on that information.

/s/ Deloitte & Touche LLP

Des Moines, Iowa

EXHIBIT 15.4

August 2, 2019

To the Board of Directors and Shareholder of

Nevada Power Company

Las Vegas, Nevada

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited consolidated interim financial information of Nevada Power Company and subsidiaries for the periods ended June 30, 2019 and 2018 , as indicated in our report dated August 2, 2019 ; because we did not perform an audit, we expressed no opinion on that information.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, William J. Fehrman , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Berkshire Hathaway Energy Company ;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ William J. Fehrman
	William J. Fehrman
	President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Patrick J. Goodman , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Berkshire Hathaway Energy Company ;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ Patrick J. Goodman
	Patrick J. Goodman
	Executive Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 31.3

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, William J. Fehrman , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of PacifiCorp ;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ William J. Fehrman
	William J. Fehrman
	Chairman of the Board of Directors and Chief Executive Officer
	(principal executive officer)

EXHIBIT 31.4

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Nikki L. Kobliha , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of PacifiCorp ;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ Nikki L. Kobliha
	Nikki L. Kobliha
	Vice President, Chief Financial Officer and Treasurer
	(principal financial officer)

EXHIBIT 31.5

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Adam L. Wright , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of MidAmerican Energy Company ;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ Adam L. Wright
	Adam L. Wright
	President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 31.6

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Thomas B. Specketer , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of MidAmerican Energy Company ;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ Thomas B. Specketer
	Thomas B. Specketer
	Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 31.7

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Adam L. Wright , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of MidAmerican Funding, LLC ;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ Adam L. Wright
	Adam L. Wright
	President
	(principal executive officer)

EXHIBIT 31.8

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Thomas B. Specketer , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of MidAmerican Funding, LLC ;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ Thomas B. Specketer
	Thomas B. Specketer
	Vice President and Controller
	(principal financial officer)

EXHIBIT 31.9

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Douglas A. Cannon , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Nevada Power Company (dba NV Energy );


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ Douglas A. Cannon
	Douglas A. Cannon
	President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 31.10

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Michael E. Cole , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Nevada Power Company (dba NV Energy );


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ Michael E. Cole
	Michael E. Cole
	Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 31.11

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Douglas A. Cannon , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Sierra Pacific Power Company (dba NV Energy );


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ Douglas A. Cannon
	Douglas A. Cannon
	President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 31.12

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Michael E. Cole , certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Sierra Pacific Power Company (dba NV Energy );


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 2, 2019	/s/ Michael E. Cole
	Michael E. Cole
	Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, William J. Fehrman , President and Chief Executive Officer of Berkshire Hathaway Energy Company (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2019 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.



Date: August 2, 2019	/s/ William J. Fehrman
	William J. Fehrman
	President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Patrick J. Goodman , Executive Vice President and Chief Financial Officer of Berkshire Hathaway Energy Company (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2019 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.



Date: August 2, 2019	/s/ Patrick J. Goodman
	Patrick J. Goodman
	Executive Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 32.3

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, William J. Fehrman , Chairman of the Board of Directors and Chief Executive Officer of PacifiCorp , certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of PacifiCorp for the quarterly period ended June 30, 2019 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of PacifiCorp .



Date: August 2, 2019	/s/ William J. Fehrman
	William J. Fehrman
	Chairman of the Board of Directors and Chief Executive Officer
	(principal executive officer)

EXHIBIT 32.4

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Nikki L. Kobliha , Vice President, Chief Financial Officer and Treasurer of PacifiCorp , certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of PacifiCorp for the quarterly period ended June 30, 2019 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of PacifiCorp .



Date: August 2, 2019	/s/ Nikki L. Kobliha
	Nikki L. Kobliha
	Vice President, Chief Financial Officer and Treasurer
	(principal financial officer)

EXHIBIT 32.5

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Adam L. Wright , President and Chief Executive Officer of MidAmerican Energy Company , certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of MidAmerican Energy Company for the quarterly period ended June 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of MidAmerican Energy Company .



Date: August 2, 2019	/s/ Adam L. Wright
	Adam L. Wright
	President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 32.6

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Thomas B. Specketer , Vice President and Chief Financial Officer of MidAmerican Energy Company , certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of MidAmerican Energy Company for the quarterly period ended June 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of MidAmerican Energy Company .



Date: August 2, 2019	/s/ Thomas B. Specketer
	Thomas B. Specketer
	Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 32.7

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Adam L. Wright , President of MidAmerican Funding, LLC , certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of MidAmerican Funding, LLC for the quarterly period ended June 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of MidAmerican Funding, LLC .



Date: August 2, 2019	/s/ Adam L. Wright
	Adam L. Wright
	President
	(principal executive officer)

EXHIBIT 32.8

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Thomas B. Specketer , Vice President and Controller of MidAmerican Funding, LLC , certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of MidAmerican Funding, LLC for the quarterly period ended June 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of MidAmerican Funding, LLC .



Date: August 2, 2019	/s/ Thomas B. Specketer
	Thomas B. Specketer
	Vice President and Controller
	(principal financial officer)

EXHIBIT 32.9

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Douglas A. Cannon , President and Chief Executive Officer of Nevada Power Company (dba NV Energy ), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of Nevada Power Company for the quarterly period ended June 30, 2019 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Nevada Power Company .



Date: August 2, 2019	/s/ Douglas A. Cannon
	Douglas A. Cannon
	President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 32.10

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Michael E. Cole , Vice President and Chief Financial Officer of Nevada Power Company (dba NV Energy ), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of Nevada Power Company for the quarterly period ended June 30, 2019 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Nevada Power Company .



Date: August 2, 2019	/s/ Michael E. Cole
	Michael E. Cole
	Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 32.11

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Douglas A. Cannon , President and Chief Executive Officer of Sierra Pacific Power Company (dba NV Energy ), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of Sierra Pacific Power Company for the quarterly period ended June 30, 2019 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Sierra Pacific Power Company .



Date: August 2, 2019	/s/ Douglas A. Cannon
	Douglas A. Cannon
	President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 32.12

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Michael E. Cole , Vice President and Chief Financial Officer of Sierra Pacific Power Company (dba NV Energy ), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of Sierra Pacific Power Company for the quarterly period ended June 30, 2019 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Sierra Pacific Power Company .



Date: August 2, 2019	/s/ Michael E. Cole
	Michael E. Cole
	Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 95

MINE SAFETY VIOLATIONS AND OTHER LEGAL MATTER DISCLOSURES

PURSUANT TO SECTION 1503(a) OF THE DODD-FRANK WALL STREET

REFORM AND CONSUMER PROTECTION ACT

PacifiCorp and its subsidiaries operate certain coal mines and coal processing facilities (collectively, the "mining facilities") that are regulated by the Federal Mine Safety and Health Administration ("MSHA") under the Federal Mine Safety and Health Act of 1977 (the "Mine Safety Act"). MSHA inspects PacifiCorp's mining facilities on a regular basis. The total number of reportable Mine Safety Act citations, orders, assessments and legal actions for the three-month period ended June 30, 2019 are summarized in the table below and are subject to contest and appeal. The severity and assessment of penalties may be reduced or, in some cases, dismissed through the contest and appeal process. Amounts are reported regardless of whether PacifiCorp has challenged or appealed the matter. Mines that are closed or idled are not included in the information below if no reportable events occurred at those locations during the three-month period ended June 30, 2019 . There were no mining-related fatalities during the three-month period ended June 30, 2019 . PacifiCorp has not received any notice of a pattern, or notice of the potential to have a pattern, of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health or safety hazards under Section 104(e) of the Mine Safety Act during the three-month period ended June 30, 2019 .



	Mine Safety Act							Legal Actions
						Total
	Section 104				Section	Value of
	Significant		Section		107(a)	Proposed		Pending
	and	Section	104(d)	Section	Imminent	MSHA		as of Last	Instituted	Resolved
	Substantial	104(b)	Citations/	110(b)(2)	Danger	Assessments		Day of	During	During
Mining Facilities	Citations ⁽¹⁾	Orders ⁽²⁾	Orders ⁽³⁾	Violations ⁽⁴⁾	Orders ⁽⁵⁾	(in thousands)		Period ⁽⁶⁾	Period	Period

Bridger (surface)	—	—	—	—	—	—		—	—	—
Bridger (underground)	2	—	—	—	—	$	5	—	—	2
Wyodak Coal Crushing Facility	—	—	—	—	—	—		—	—	—


(1)	Citations for alleged violations of mandatory health and safety standards that could significantly or substantially contribute to the cause and effect of a safety or health hazard under Section 104 of the Mine Safety Act.


(2)	For alleged failure to totally abate the subject matter of a Mine Safety Act Section 104(a) citation within the period specified in the citation.


(3)	For an alleged unwarrantable failure (i.e., aggravated conduct constituting more than ordinary negligence) to comply with a mandatory health or safety standard.


(4)	For alleged flagrant violations (i.e., reckless or repeated failure to make reasonable efforts to eliminate a known violation of a mandatory health or safety standard that substantially and proximately caused, or reasonably could have been expected to cause, death or serious bodily injury).


(5)	For the existence of any condition or practice in a coal or other mine which could reasonably be expected to cause death or serious physical harm before such condition or practice can be abated.


(6)	For the existence of any proposed penalties under Subpart C of the Federal Mine Safety and Health Review Commission's procedural rules. The pending legal actions are not exclusive to citations, notices, orders and penalties assessed by MSHA during the reporting period.