SOUTHERN CO

Consolidated net income attributable to Southern Company was $1.2 billion ($1.10 per share) in the second quarter 2024 compared to $0.8 billion ($0.77 per share) for the corresponding period in 2023. For year-to-date 2024, consolidated net income attributable to Southern Company was $2.3 billion ($2.13 per share) compared to $1.7 billion ($1.56 per share) for the corresponding period in 2023. The increases were primarily due to increases in retail electric revenues associated with rates and pricing and warmer weather in the second quarter 2024 compared to the corresponding period in 2023, an increase in natural gas revenues from rate increases, an increase in other revenues, and a decrease in non-fuel operations and maintenance costs, partially offset by increases in interest expense, depreciation and amortization, taxes other than income taxes, and cost of other sales. 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.

Retail Electric Revenues

In the second quarter 2024, retail electric revenues were $4.5 billion compared to $3.9 billion for the corresponding period in 2023. For year-to-date 2024, retail electric revenues were $8.4 billion compared to $7.5 billion for the corresponding period in 2023. Details of the changes in retail electric 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 the inclusion of Plant Vogtle Units 3 and 4 in retail rates at Georgia Power, base tariff increases at Georgia Power in accordance with its 2022 ARP, customer bill credits in 2023 at Alabama Power related to the flowback of certain excess accumulated deferred income taxes, an increase in Rate CNP New Plant revenues at Alabama Power, and higher contributions from commercial and industrial customers with variable demand-driven pricing at Georgia Power, partially offset by a decrease in revenues recognized under the NCCR tariff at Georgia Power primarily due to its elimination in the second quarter 2024 following commercial operation of Plant Vogtle Unit 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Regulatory Matters" herein and Note 2 to the financial statements under "Alabama Power" and "Georgia Power" in Item 8 of the Form 10-K for additional information.

Revenues attributable to changes in sales increased in the second quarter and year-to-date 2024 when compared to the corresponding periods in 2023. Weather-adjusted residential KWH sales decreased 1.0% in the second quarter 2024 primarily due to decreased customer usage. Weather-adjusted residential KWH sales increased 0.1% for year-to-date 2024 primarily due to customer growth. Weather-adjusted commercial KWH sales increased 2.8% and 3.3% in the second quarter and year-to-date 2024, respectively, primarily due to increased customer usage. Industrial KWH sales were flat in the second quarter 2024 and increased 0.2% for year-to-date 2024 primarily due to increases in the transportation and lumber sectors, largely offset by decreases in the paper and primary metals sectors.

Fuel and other cost recovery revenues increased $57 million and $19 million in the second quarter and year-to-date 2024, respectively, compared to the corresponding periods in 2023 primarily due to higher recoverable fuel and purchased power costs. Electric rates for the traditional electric operating companies include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expe nses, including the energy component of PPA costs, and do not affect net income. The traditional electric operating companies each have one or more regulatory mechanisms to recover other costs such as environmental and other compliance costs, storm damage, new plants, and PPA capacity costs. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein for additional information.

Wholesale Electric Revenues

In the second quarter 2024, wholesale electric revenues were $627 million compared to $605 million for the corresponding period in 2023. The increase was due to a $20 million increase in energy revenues primarily resulting from an increase in the volume of KWHs sold under solar and wind PPAs at Southern Power and a $2 million increase in capacity revenues primarily resulting from new capacity contracts at Georgia Power and increased capacity revenues associated with natural gas PPAs at Southern Power, largely offset by a decrease resulting from power sales agreements that ended in May 2023 at Alabama Power.

Wholesale electric revenues consist of revenues from PPAs and short-term opportunity sales. Wholesale electric revenues from PPAs (other than solar and wind PPAs) have both capacity and energy components. Capacity revenues generally represent the greatest contribution to net income and are designed to provide recovery of fixed costs plus a return on investment. Energy revenues will vary depending on fuel prices, the market prices of wholesale energy compared to 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 have a significant impact on net income. Energy sales from solar and wind PPAs do not have a capacity charge and customers either purchase the energy output of a dedicated renewable facility through an energy charge or through a fixed price related to the energy. As a result, the 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. Wholesale electric revenues at Mississippi Power include FERC-regulated municipal and rural association sales under cost-based tariffs as well as market-based sales. Short-term opportunity sales are made at market-based rates that generally provide a margin above the Southern Company system's variable cost to produce the energy.

Other Electric Revenues

For year-to-date 2024, other electric revenues were $409 million compared to $399 million for the corresponding period in 2023. The increase was primarily due to increases of $20 million in transmission revenues primarily associated with open access transmission tariff sales, $11 million in regulated outdoor lighting sales at Georgia Power, and $7 million in customer fees, partially offset by decreases of $11 million associated with price stability products for retail customers on variable demand-driven pricing tariffs at Georgia Power, $7 million in rent revenues at Alabama Power, and $7 million in receipts of liquidated damages associated with generation facility production guarantees at Southern Power.

Natural Gas Revenues

In the second quarter 2024, natural gas revenues were $831 million compared to $852 million for the corresponding period in 2023. For year-to-date 2024, natural gas revenues were $2.5 billion compared to $2.7 billion for the corresponding period in 2023. Details of the changes in natural gas revenues were as follows:

Revenues from rate changes at the natural gas distribution utilities increased in the second quarter and year-to-date 2024 compared to the corresponding periods in 2023 primarily due to rate increases and a change in timing of revenues at Nicor Gas. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K for additional information.

Revenues from gas costs and other cost recovery decreased in the second quarter and year-to-date 2024 compared to the corresponding periods in 2023 primarily due to lower natural gas cost recovery associated with lower natural gas prices and lower demand associated with warmer weather when compared to the corresponding periods in 2023. Natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities.

Revenues from gas marketing services decreased in the second quarter and year-to-date 2024 compared to the corresponding periods in 2023 primarily due to lower commodity prices.

In the second quarter 2024, other revenues were $309 million compared to $223 million for the corresponding period in 2023. For year-to-date 2024, other revenues were $537 million compared to $440 million for the corresponding period in 2023. The increases in the second quarter and year-to-date 2024 were primarily due to increases of $48 million and $49 million, respectively, at PowerSecure primarily related to distributed infrastructure and energy efficiency projects, $35 million and $42 million, respectively, in unregulated sales at Georgia Power primarily associated with power delivery construction and maintenance projects, energy conservation projects, and outdoor lighting, and $8 million for both periods in unregulated sales of products and services at Alabama Power, partially offset by decreases of $13 million and $12 million, respectively, at Southern Linc primarily related to sales associated with commercial customers.

In the second quarter 2024, total fuel and purchased power expenses were $1.3 billion compared to $1.2 billion 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 $2.4 billion compared to $2.5 billion for the corresponding period in 2023. The decrease was due to a $56 million net decrease related to the average cost of fuel and purchased power, partially offset by a $22 million net increase related to the volume of KWHs generated and purchased.

Fuel and purchased power energy transactions at the traditional electric operating companies are generally offset by fuel revenues and do not have a significant impact on net income. See Note 2 to the financial statements in Item 8 of the Form 10-K for additional information. Fuel expenses incurred under Southern Power's PPAs are generally the responsibility of the counterparties and do not significantly impact net income.

Details of the Southern Company system's generation and purchased power were as follows:

(a)Excludes KWHs generated from test period energy at Plant Vogtle Units 3 and 4 prior to their respective in-service dates. The related fuel costs were charged to CWIP in accordance with FERC guidance. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on Plant Vogtle Units 3 and 4.

(b)Average cost of purchased power includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider.

Fuel

In the second quarter 2024, fuel expense was $1.03 billion compared to $959 million for the corresponding period in 2023. The increase was primarily due to a 25.4% increase in the average cost per KWH generated by nuclear, a 23.4% increase in the volume of KWHs generated by coal, a 23.4% decrease in the volume of KWHs generated by hydro, a 15.2% increase in the volume of KWHs generated by nuclear, and a 5.8% increase in the average cost per KWH generated by natural gas, partially offset by a 13.2% decrease in the average cost per KWH generated by coal.

For year-to-date 2024, fuel expense was $2.03 billion compared to $2.01 billion for the corresponding period in 2023. The increase was primarily due to a 20.7% increase in the volume of KWHs generated by coal, a 19.7% increase in the average cost per KWH generated by nuclear, a 16.7% increase in the volume of KWHs generated by nuclear, and a 16.7% decrease in the volume of KWHs generated by hydro, partially offset by a 9.8% decrease in the average cost per KWH generated by coal, a 3.3% decrease in the volume of KWHs generated by natural gas, and a 2.2% decrease in the average cost per KWH generated by natural gas.

Purchased Power

In the second quarter 2024, purchased power expense was $222 million compared to $231 million for the corresponding period in 2023. For year-to-date 2024, purchased power expense was $420 million compared to $473 million for the corresponding period in 2023. The decreases in the second quarter and year-to-date 2024 were primarily due to decreases of 9.7% and 15.3%, respectively, in the volume of KWHs purchased primarily 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, both at Alabama Power, partially offset by increases of 3.4% and 3.3%, respectively, in the average cost per KWH purchased.

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

Cost of Natural Gas

Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, the natural gas distribution utilities' rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities. See Note 2 to the financial statements under "Southern Company Gas – Natural Gas Cost Recovery" in Item 8 of the Form 10-K for additional information. Cost of natural gas at the natural gas distribution utilities represented 81% of the total cost of natural gas for both the second quarter and year-to-date 2024.

In the second quarter 2024, cost of natural gas was $149 million compared to $199 million for the corresponding period in 2023. For year-to-date 2024, cost of natural gas was $0.8 billion compared to $1.1 billion for the corresponding period in 2023. The decreases reflect lower gas cost recovery as a result of decreases of 10% and 25% in natural gas prices in the second quarter and year-to-date 2024, respectively.

Cost of Other Sales

In the second quarter 2024, cost of other sales was $167 million compared to $128 million for the corresponding period in 2023. For year-to-date 2024, cost of other sales was $298 million compared to $255 million for the corresponding period in 2023. The increases in the second quarter and year-to-date 2024 were primarily due to increases of $31 million and $30 million, respectively, at PowerSecure primarily related to distributed infrastructure and energy efficiency projects and $15 million and $16 million, respectively, in unregulated power delivery construction and maintenance contracts at Georgia Power, partially offset by decreases of $10 million and $9 million, respectively, at Southern Linc primarily related to sales associated with commercial customers.

In the second quarter 2024, other operations and maintenance expenses were $1.4 billion compared to $1.5 billion for the corresponding period in 2023. The decrease was primarily due to a $115 million increase in gains from sales of integrated transmission system assets at Georgia Power, a $30 million prior year regulatory disallowance at Nicor Gas, and a decrease of $20 million in technology infrastructure and application production costs, partially offset by increases of $20 million in employee compensation and benefit expenses, $18 million in generation expenses primarily associated with Plant Vogtle Units 3 and 4 being placed in service at Georgia Power, $16 million in customer service and sales expenses primarily associated with demand-side management costs at Georgia Power, $10 million in expenses associated with unregulated energy conservation projects at Georgia Power, and $7 million related to the injuries and damages reserve primarily at Alabama Power, as well as a gain of $6 million on the sale of a service center in 2023 at Southern Company Gas.

For year-to-date 2024, other operations and maintenance expenses were $2.88 billion compared to $2.93 billion for the corresponding period in 2023. The decrease was primarily due to a $95 million increase in gains from sales of integrated transmission system assets at Georgia Power, a decrease of $49 million in technology infrastructure and application production costs, a $30 million prior year regulatory disallowance at Nicor Gas, and a $20 million decrease in expenses passed through to customers primarily related to bad debt and energy efficiency programs at Southern Company Gas, partially offset by increases of $70 million in generation expenses primarily associated with Plant Vogtle Units 3 and 4 being placed in service at Georgia Power, Rate CNP Compliance-related expenses at Alabama Power, and maintenance and scheduled outage expenses at Southern Power, $33 million in employee compensation and benefit expenses, $24 million in customer service and sales expenses primarily associated with demand-side management costs at Georgia Power, $13 million in expenses associated with unregulated energy conservation projects at Georgia Power, and $10 million in transmission and distribution costs primarily associated with line maintenance and billing adjustments with integrated transmission system owners at Georgia Power.

See Note (B) to the Condensed Financial Statements under "Georgia Power – Transmission Asset Sales" and " – Nuclear Construction" herein and Note 2 to the financial statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects – Nicor Gas" in Item 8 of the Form 10-K for additional information.

In the second quarter 2024, depreciation and amortization was $1.2 billion compared to $1.1 billion for the corresponding period in 2023. For year-to-date 2024, depreciation and amortization was $2.3 billion compared to $2.2 billion for the corresponding period in 2023. The increases in the second quarter and year-to-date 2024 were primarily due to increases of $81 million and $141 million, respectively, associated with additional plant in service, partially offset by decreases of $15 million and $30 million, respectively, in amortization of regulatory assets related to CCR AROs at Georgia Power as approved in the 2024 compliance filing under the terms of the 2022 ARP. See Note 2 to the financial statements under "Georgia Power" in Item 8 of the Form 10-K for additional information.

In the second quarter 2024, taxes other than income taxes were $384 million compared to $340 million for the corresponding period in 2023. For year-to-date 2024, taxes other than income taxes were $780 million compared to $734 million for the corresponding period in 2023. The increases in the second quarter and year-to-date 2024 were primarily due to increases of $28 million and $40 million, respectively, in property taxes primarily resulting from an increase in assessed value of property, $11 million and $14 million, respectively, in municipal franchise fees resulting from higher retail revenues at Georgia Power, and $5 million and $8 million, respectively, in utility license taxes resulting from an increase in the tax base at Alabama Power. Partially offsetting the increase for year-to-date 2024 was a decrease of $15 million in revenue taxes as a result of lower natural gas revenues at Nicor Gas.

Estimated Loss on Plant Vogtle Units 3 and 4

Georgia Power recorded a pre-tax credit to income related to the estimated probable loss on Plant Vogtle Units 3 and 4 totaling $21 million in the second quarter 2024. This credit reflects a revision to the total project capital cost forecast for the completion of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information.

In the second quarter 2024, allowance for equity funds used during construction was $51 million compared to $70 million for the corresponding period in 2023. For year-to-date 2024, allowance for equity funds used during construction was $109 million compared to $135 million for the corresponding period in 2023. The decreases were primarily associated with Plant Vogtle Units 3 and 4 being placed in service in July 2023 and April 2024, respectively, at Georgia Power and Plant Barry Unit 8 being placed in service in November 2023 at Alabama Power, partially offset by an increase in capital expenditures subject to AFUDC at Georgia Power. See Note 2 to the financial statements under "Alabama Power" and "Georgia Power" in Item 8 of the Form 10-K for additional information.

In the second quarter 2024, interest expense, net of amounts capitalized was $694 million compared to $610 million for the corresponding period in 2023. For year-to-date 2024, interest expense, net of amounts capitalized was $1.4 billion compared to $1.2 billion for the corresponding period in 2023. The increases in the second quarter and year-to-date 2024 primarily reflect increases of approximately $43 million and $96 million, respectively, related to higher interest rates and $33 million and $78 million, respectively, related to higher average outstanding borrowings. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

In the second quarter 2024, other income (expense), net was $151 million compared to $142 million for the corresponding period in 2023. For year-to-date 2024, other income (expense), net was $302 million compared to $286 million for the corresponding period in 2023. The increases in the second quarter and year-to-date 2024 were primarily due to increases of $8 million and $9 million, respectively, in customer charges related to contributions in aid of construction at Georgia Power, a $7 million charge in the second quarter 2023 under a stipulation approved by the Georgia PSC related to Georgia Power's fuel cost recovery case, and increases of $3 million and $5 million, respectively, in non-service cost-related retirement benefits income, partially offset by a $7 million decrease in interest income for both periods presented. See Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Fuel Cost Recovery" for additional information.

In the second quarter 2024, income taxes were $290 million compared to $98 million for the corresponding period in 2023. For year-to-date 2024, income taxes were $513 million compared to $194 million for the corresponding period in 2023. The increases in the second quarter and year-to-date 2024 were primarily due to higher pre-tax earnings, decreases of $39 million and $81 million, respectively, in the flowback of certain excess deferred income taxes at Alabama Power, and a $56 million increase in charges to a valuation allowance on certain state tax credit carryforwards at Georgia Power, partially offset by the generation of $31 million and $51 million, respectively, of advanced nuclear PTCs at Georgia Power and $33 million from the recognition of certain state tax positions from amended returns at Georgia Power. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (G) to the Condensed Financial Statements herein for additional information.