SOUTHERN CO

Net Income Attributable to Southern Power

Net income attributable to Southern Power in the first quarter 2024 was $96 million compared to $102 million for the corresponding period in 2023. The decrease was primarily related to a gain on the sale of spare parts in 2023.

Operating Revenues

Total operating revenues include PPA capacity revenues, which are derived primarily from long-term contracts involving natural gas facilities, and PPA energy revenues from Southern Power's generation facilities. To the extent Southern Power has capacity not contracted under a PPA, it may sell power into an accessible wholesale market, or, to the extent those generation assets are part of the FERC-approved IIC, it may sell power into the Southern Company power pool.

Natural Gas Capacity and Energy Revenue

Capacity revenues generally represent the greatest contribution to operating income and are designed to provide recovery of fixed costs plus a return on investment.

Energy is generally sold at variable cost or is indexed to published natural gas indices. Energy revenues will vary depending on the energy demand of Southern Power's customers and their generation capacity, as well as the market prices of wholesale energy compared to the cost of Southern Power's energy. Energy revenues also include fees for support services, fuel storage, and unit start charges. Increases and decreases in energy revenues under PPAs that are driven by fuel or purchased power prices are accompanied by an increase or decrease in fuel and purchased power costs and do not have a significant impact on net income.

Solar and Wind Energy Revenue

Southern Power's energy sales from solar and wind generating facilities are predominantly through long-term PPAs that do not have capacity revenue. Customers either purchase the energy output of a dedicated renewable facility through an energy charge or pay a fixed price related to the energy generated from the respective facility and sold to the grid. As a result, Southern Power's ability to recover fixed and variable operations and maintenance expenses is dependent upon the level of energy generated from these facilities, which can be impacted by weather conditions, equipment performance, transmission constraints, and other factors.

See FUTURE EARNINGS POTENTIAL – "Southern Power's Power Sales Agreements" in Item 7 of the Form 10-K for additional information regarding Southern Power's PPAs.

Operating Revenues Details

Details of Southern Power's operating revenues were as follows:

In the first quarter 2024, total operating revenues were $473 million, reflecting a $35 million, or 6.9%, decrease from the corresponding period in 2023. The change in operating revenues was primarily due to the following:

•PPA capacity revenues increased $8 million, or 7.1%, primarily due to an increase associated with a change in rates from natural gas PPAs.

•Non-PPA revenues decreased $48 million, or 44.4%, primarily due to a $51 million decrease in the volume of KWHs sold through short-term sales.

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

Southern Power's PPAs for natural gas generation generally provide that the purchasers are responsible for either procuring the fuel (tolling agreements) or reimbursing Southern Power for substantially all of the cost of fuel relating to the energy delivered under such PPAs. Consequently, changes in such fuel costs are generally accompanied by a corresponding change in related fuel revenues and do not have a significant impact on net income. Southern Power is responsible for the cost of fuel for generating units that are not covered under PPAs. Power from these generating units is sold into the wholesale market or into the Southern Company power pool for capacity owned directly by Southern Power.

Purchased power expenses will vary depending on demand, availability, and the cost of generating resources throughout the Southern Company system and other contract resources. Load requirements are submitted to the Southern Company power pool on an hourly basis and are fulfilled with the lowest cost alternative, whether that is generation owned by Southern Power, an affiliate company, or external parties. Such purchased power costs are generally recovered through PPA revenues.

Details of Southern Power's fuel and purchased power expenses were as follows:

In the first quarter 2024, total fuel and purchased power expenses decreased $43 million, or 19.8%, compared to the corresponding period in 2023. Fuel expense decreased $35 million primarily due to a $36 million decrease associated with the volume of KWHs generated. Purchased power expense decreased $8 million primarily due to a $10 million decrease associated with the volume of KWHs purchased.

In the first quarter 2024, other operations and maintenance expenses were $121 million compared to $107 million for the corresponding period in 2023. The increase was primarily due to the timing of generation maintenance and scheduled outage expenses.

In the first quarter 2024, depreciation and amortization was $118 million compared to $128 million for the corresponding period in 2023. The decrease was primarily due to insurance proceeds received for damaged generation equipment and a decrease in units-of-production depreciation related to lower production from natural gas generating facilities.

Gain on Dispositions, Net

In the first quarter 2024, gain on dispositions, net decreased by $20 million compared to the corresponding period in 2023. The decrease was primarily due to a $16 million gain on the sale of spare parts in 2023.