SOUTHERN CO

Alabama Power's net income in the first quarter 2024 was $333 million compared to $255 million for the corresponding period in 2023. The increase was primarily due to an increase in retail revenues associated with customer bill credits in 2023 related to the flowback of certain excess accumulated deferred income taxes, an increase in Rate CNP New Plant revenues, and colder weather in the Alabama Power service territory in the first quarter 2024 compared to the corresponding period in 2023. These increases to income were partially offset by an increase in income tax expense related to a decrease in the flowback of certain excess deferred income taxes. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

In the first quarter 2024, retail revenues were $1.57 billion compared to $1.38 billion for the corresponding period in 2023. Details of the changes in retail revenues were as follows:

Revenues associated with changes in rates and pricing increased in the first quarter 2024 when compared to the corresponding period in 2023 primarily due to customer bill credits in 2023 related to the flowback of certain excess accumulated deferred income taxes as well as an increase in Rate CNP New Plant revenues. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Revenues attributable to changes in sales were relatively flat in the first quarter 2024 when compared to the corresponding period in 2023. Weather-adjusted residential KWH sales decreased 0.6% primarily due to a decrease in customer usage. Weather-adjusted commercial KWH sales increased 2.5% primarily due to an increase in customer usage. Industrial KWH sales decreased 0.8% primarily due to a decrease in the primary metals sector.

Fuel and other cost recovery revenues increased in the first quarter 2024 when compared to the corresponding period in 2023 primarily as a result of higher recoverable fuel costs.

Electric rates include provisions to recognize the recovery of fuel costs, purchased power costs, PPAs certificated by the Alabama PSC, and costs associated with the NDR. Under these provisions, fuel and other cost recovery revenues generally equal fuel and other cost recovery expenses and do not affect net income. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Wholesale Revenues– Non-Affiliates

In the first quarter 2024, wholesale revenues from sales to non-affiliates were $85 million compared to $141 million for the corresponding period in 2023. The decrease was primarily due to a 59.5% decrease in the volume of KWHs sold as a result of power sales agreements that ended in May 2023 and a 49.5% decrease in the price of energy due to lower natural gas prices.

Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Alabama Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not affect net income. Short-term opportunity energy sales are also included in wholesale energy sales to non-affiliates. These opportunity sales are made at market-based rates that generally provide a margin above Alabama Power's variable cost to produce the energy.

Wholesale Revenues– Affiliates

In the first quarter 2024, wholesale revenues from sales to affiliates were $41 million compared to $19 million for the corresponding period in 2023. The increase was primarily due to a 207.9% increase in the volume of KWH sales due to affiliated company energy needs, partially offset by a 31.6% decrease in the price of energy due to lower gas prices.

Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. Energy revenues related to these transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost and energy purchases are generally offset by energy revenues through Alabama Power's energy cost recovery clause.

In the first quarter 2024, total fuel and purchased power expenses were$425 million compared to $468 million for the corresponding period in 2023. The decrease was due to a $38 million net decrease related to the volume of KWHs generated and purchased and a $5 million net decrease in the cost of fuel and purchased power.

Fuel and purchased power energy transactions do not have a significant impact on earnings, since energy expenses are generally offset by energy revenues through Alabama Power's energy cost recovery clause. See Note 2 to the financial statements under "Alabama Power – Rate ECR" in Item 8 of the Form 10-K for additional information.

Details of Alabama Power's generation and purchased power were as follows:

(*)Average cost of purchased power includes fuel, energy, and transmission purchased by Alabama Power for tolling agreements where power is generated by the provider.

Fuel

In the first quarter 2024, fuel expense was $331 million compared to $308 million for the corresponding period in 2023. The increase was primarily due to a 28.8% increase in the volume of KWHs generated by natural gas, an 8.3% increase in the volume of KWHs generated by coal, and a 15.0% decrease in the volume of KWHs generated by hydro facilities as a result of less rainfall, partially offset by a 12.5% decrease in the average cost of natural gas per KWH generated, which excludes tolling agreements.

Purchased Power – Non-Affiliates

In the first quarter 2024, purchased power expense from non-affiliates was $52 million compared to $101 million for the corresponding period in 2023. The decrease was primarily due to a 55.5% decrease in the volume of KWHs purchased as a result of a PPA that ended in May 2023 and the availability of Plant Barry Unit 8 and Central Alabama Generating Station generation.

Energy purchases from non-affiliates will vary depending on the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation.

Purchased Power – Affiliates

In the first quarter 2024, purchased power expense from affiliates was $42 million compared to $59 million for the corresponding period in 2023. The decrease was primarily due to a 35.8% decrease in the volume of KWHs purchased due to the availability of Plant Barry Unit 8 and Central Alabama Generating Station generation.

Energy purchases from affiliates will vary depending on demand for energy and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC or other contractual agreements, as approved by the FERC.

In the first quarter 2024, other operations and maintenance expenses were $412 million compared to $424 million for the corresponding period in 2023. The decrease was primarily due to decreases of $7 million in technology infrastructure and application production costs, $7 million related to the injuries and damages reserve, $5 million in expenses related to unregulated products and services, and $3 million in employee compensation and benefits, as well as a $5 million increase in nuclear property insurance refunds. The decreases were partially offset by a $17 million increase in generation expenses primarily associated with Rate CNP Compliance-related expenses. See Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance" in Item 8 of the Form 10-K for additional information.

In the first quarter 2024, depreciation and amortization was $361 million compared to $345 million for the corresponding period in 2023. The increase was primarily due to additional plant in service related to transmission and distribution systems as well as Plant Barry Unit 8 being placed in service in November 2023. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Allowance for Equity Funds Used During Construction

In the first quarter 2024, allowance for equity funds used during construction was $14 million compared to $21 million for the corresponding period in 2023. The decrease was primarily due to Plant Barry Unit 8 being placed in service in November 2023. See Note 2 to the financial statements under "Alabama Power – Rate CNP New Plant" in Item 8 of the Form 10-K for additional information.

Income Taxes (Benefit)

In the first quarter 2024, income tax expense was $85 million compared to income tax benefit of $2 million for the corresponding period in 2023. The change was primarily due to higher pre-tax earnings and a $42 million decrease in the flowback of certain excess deferred income taxes. See Note 2 to the financial statements under "Alabama Power – Excess Accumulated Deferred Income Tax Accounting Order" in Item 8 of the Form 10-K and Note (G) to the Condensed Financial Statements herein for additional information.