SOUTHERN CO

Alabama Power's net income in the second quarter 2024 was $369 million compared to $312 million for the corresponding period in 2023. For year-to-date 2024, net income was $702 million compared to $568 million for the corresponding period in 2023. These increases were primarily due to an increase in retail revenues associated with warmer weather in the second quarter 2024 in the Alabama Power service territory compared to the corresponding period in 2023 and an increase in Rate CNP New Plant revenues, as well as a decrease in non-fuel operations and maintenance expenses. These increases to income were partially offset by increases in income tax expense and depreciation. Also contributing to the year-to-date 2024 increase was an increase in retail electric revenues associated with colder weather in the first quarter 2024 compared to the corresponding period in 2023. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

In the second quarter 2024, retail revenues were $1.65 billion compared to $1.47 billion for the corresponding period in 2023. For year-to-date 2024, retail revenues were $3.21 billion compared to $2.85 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 second quarter and year-to-date 2024 when compared to the corresponding periods 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 second quarter and year-to-date 2024 when compared to the corresponding periods in 2023. Weather-adjusted residential KWH sales decreased 1.3% and 0.9% in the second quarter and year-to-date 2024, respectively, primarily due to a decrease in customer usage. Weather-adjusted commercial KWH sales increased 0.4% and 1.4% in the second quarter and year-to-date 2024, respectively, primarily due to an increase in customer usage. Industrial KWH sales increased 0.5% in the second quarter primarily due to an increase in the chemicals sector. Industrial KWH sales decreased 0.2% for year-to-date 2024 primarily due to a decrease in the primary metals sector.

Fuel and other cost recovery revenues increased in the second quarter and year-to-date 2024 when compared to the corresponding periods 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 second quarter 2024, wholesale revenues from sales to non-affiliates were $84 million compared to $112 million for the corresponding period in 2023. The decrease was primarily due to a 39.5% decrease in the volume of KWHs sold as a result of power sales agreements that ended in May 2023, partially offset by a 24.8% increase in the price of energy as a result of higher natural gas prices.

For year-to-date 2024, wholesale revenues from sales to non-affiliates were $169 million compared to $252 million for the corresponding period in 2023. The decrease was primarily due to a 50.7% decrease in the volume of KWHs sold as a result of power sales agreements that ended in May 2023, partially offset by a 36.3% increase in the price of energy as a result of higher 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 thesecond quarter 2024, wholesale revenues from sales to affiliates were $27 million compared to $10 million for the corresponding period in 2023. For year-to-date 2024, wholesale revenues from sales to affiliates were $68 million compared to $29 million for the corresponding period in 2023. The increases for the second quarter and year-to-date 2024 were primarily due to increases of 166.5% and 191.9%, respectively, in the volume of KWH sales due to affiliated company energy needs.

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 second quarter 2024, other revenues were $115 million compared to $100 million for the corresponding period in 2023. The increase was primarily due to an $8 million increase in unregulated sales of products and services, a $4 million increase in gains on the resale of gas, and a $4 million increase in transmission revenue primarily associated with open access transmission tariff sales, partially offset by a $5 million decrease in rent revenues.

In the second quarter 2024, total fuel and purchased power expenses were $426 million compared to $411 million for the corresponding period in 2023. The increase was primarily due to a net increase related to the volume of KWHs generated and purchased.

For year-to-date 2024, total fuel and purchased power expenses were $852 million compared to $879 million for the corresponding period in 2023. The decrease was due to a $19 million net decrease related to the volume of KWHs generated and purchased and an $8 million net decrease related to the average 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 second quarter 2024, fuel expense was $335 million compared to $303 million for the corresponding period in 2023. The increase was primarily due to a 39.4% increase in the volume of KWHs generated by natural gas, a 15.4% increase in the volume of KWHs generated by coal, and a 24.8% decrease in the volume of KWHs generated by hydro facilities as a result of less rainfall, partially offset by a 17.1% decrease in the volume of KWHs generated by nuclear and an 11.7% decrease in the average cost per KWH generated by coal.

For year-to-date 2024, fuel expense was $666 million compared to $611 million for the corresponding period in 2023. The increase was primarily due to a 34.0% increase in the volume of KWHs generated by natural gas, a 12.0% increase in the volume of KWHs generated by coal, and an 18.3% decrease in the volume of KWHs generated by hydro facilities as a result of less rainfall, partially offset by an 8.3% decrease in the average cost per KWH generated by natural gas, which excludes tolling agreements, a 7.6% decrease in the volume of KWHs generated by nuclear, and a 7.3% decrease in the average cost per KWH generated by coal.

Purchased Power – Non-Affiliates

In the second quarter 2024, purchased power expense from non-affiliates was $47 million compared to $54 million for the corresponding period in 2023. For year-to-date 2024, purchased power expense from non-affiliates was $99 million compared to $155 million for the corresponding period in 2023. The decreases for the second quarter and year-to-date 2024 were primarily due to decreases of 40.4% and 49.0%, respectively, 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, partially offset by increases of 35.2% and 22.6%, respectively, in the average cost per KWH purchased due to higher natural gas prices.

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 second quarter 2024, purchased power expense from affiliates was $44 million compared to $54 million for the corresponding period in 2023. For year-to-date 2024, purchased power expense from affiliates was $87 million compared to $113 million for the corresponding period in 2023. The decreases for the second quarter and year-to-date 2024 were primarily due to decreases of 43.7% and 41.4%, respectively, in the volume of KWHs purchased due to the availability of Plant Barry Unit 8 and Central Alabama Generating Station generation, partially offset by increases of 44.5% and 30.8%, respectively, in the average cost per KWH purchased due to higher natural gas prices.

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 second quarter 2024, other operations and maintenance expenses were $429 million compared to $440 million for the corresponding period in 2023. The decrease was primarily due to decreases of $10 million in technology infrastructure and application production costs, $7 million in transmission and distribution expenses primarily due to vegetation management, and $4 million in generation expenses primarily associated with planned and unplanned outages, partially offset by an increase in Rate CNP Compliance-related expenses. The decreases were partially offset by increases of $5 million in employee compensation and benefits, $5 million in expenses related to unregulated products and services, and $5 million related to the injuries and damages reserve.

For year-to-date 2024, other operations and maintenance expenses were $840 million compared to $862 million for the corresponding period in 2023. The decrease was primarily due to decreases of $17 million in technology infrastructure and application production costs and $7 million in transmission and distribution expenses primarily due to vegetation management, as well as a $5 million increase in nuclear property insurance refunds. The decreases were partially offset by a $13 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 second quarter 2024, depreciation and amortization was $364 million compared to $349 million for the corresponding period in 2023. For year-to-date 2024, depreciation and amortization was $725 million compared to $694 million for the corresponding period in 2023. The increases were 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.

In the second quarter 2024, taxes other than income taxes were $118 million compared to $107 million for the corresponding period in 2023. For year-to-date 2024, taxes other than income taxes were $238 million compared to $223 million for the corresponding period in 2023. The increases for the second quarter and year-to-date 2024 were primarily due to increases of $6 million and $7 million, respectively, in property taxes primarily resulting from an increase in the assessed value of property and increases of $5 million and $8 million, respectively, in utility license taxes resulting from an increase in the tax base.

In the second quarter 2024, allowance for equity funds used during construction was $12 million compared to $21 million for the corresponding period in 2023. For year-to-date 2024, allowance for equity funds used during construction was $26 million compared to $42 million for the corresponding period in 2023. The decreases were 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.

In the second quarter 2024, income taxes were $102 million compared to $25 million for the corresponding period in 2023. For year-to-date 2024, income taxes were $187 million compared to $23 million for the corresponding period in 2023. The increases for the second quarter and year-to-date 2024 were primarily due to decreases of $39 million and $81 million, respectively, in the flowback of certain excess deferred income taxes, as well as higher pre-tax earnings. 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.