SOUTHERN CO

Net Income Attributable to Southern Power

Net income attributable to Southern Power in the second quarter 2024 was $86 million compared to $85 million for the corresponding period in 2023. The increase was primarily due to an increase in capacity revenues related to natural gas PPAs.

Net income attributable to Southern Power foryear-to-date 2024 was $182 million compared to $187 million for the corresponding period in 2023. The decrease was primarily related to a gain on the sale of spare parts in 2023 and an increase in other operations and maintenance expenses due to increases in scheduled outage expenses and maintenance, partially offset by an increase in capacity revenues related to natural gas PPAs.

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 second quarter 2024, total operating revenues were $524 million, reflecting a $1 million, or 0.2%, 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 7.0%, due to a net increase in MW capacity under contract from natural gas PPAs and an increase associated with a change in rates from natural gas PPAs.

•PPA energy revenues increased $24 million, or 7.8%, primarily due to a $20 million increase related to the volume of KWHs sold under solar and wind PPAs.

•Non-PPA revenues decreased $28 million, or 31.8%, primarily due to a $37 million decrease related to the volume of KWHs sold through short-term sales, partially offset by an $10 million increase related to the market price of energy.

For year-to-date 2024, total operating revenues were $997 million, reflecting a $36 million, or 3.5%, decrease from the corresponding period in 2023. The change in operating revenues was primarily due to the following:

•PPA capacity revenues increased $17 million, or 7.5%, due to an increase associated with a change in rates from natural gas PPAs and a net increase in MW capacity under contract from natural gas PPAs.

•PPA energy revenues increased $29 million, or 5.0%, primarily due to a $16 million increase related to the price of fuel and purchased power primarily associated with natural gas PPAs and a $13 million increase related to the volume of KWHs sold under solar PPAs.

•Non-PPA revenues decreased $76 million, or 38.8%, primarily due to an $88 million decrease related to the volume of KWHs sold through short-term sales, partially offset by a $13 million increase related to the market price of energy.

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 second quarter 2024, total fuel and purchased power expenses decreased $13 million, or 7.8%, compared to the corresponding period in 2023. Fuel expense decreased $7 million primarily due to a $22 million decrease associated with the volume of KWHs generated, partially offset by a $15 million increase in the average cost of fuel. Purchased power expense decreased $6 million primarily due to a $5 million decrease associated with the volume of KWHs purchased.

For year-to-date 2024, total fuel and purchased power expenses decreased $56 million, or 14.6%, compared to the corresponding period in 2023. Fuel expense decreased $42 million primarily due to a $58 million decrease associated with the volume of KWHs generated, partially offset by a $16 million increase in the average cost of fuel. Purchased power expense decreased $14 million due to a decrease associated with the volume of KWHs purchased.

In the second quarter 2024, other operations and maintenance expenses were $119 million compared to $117 million for the corresponding period in 2023. For year-to-date 2024, other operations and maintenance expenses were $241 million compared to $224 million for the corresponding period in 2023. The increases were primarily due to an increase in generation maintenance and scheduled outage expenses.

Gain on Dispositions, Net

For year-to-date 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.

Income Taxes (Benefit)

In the second quarter 2024, income tax expense was $13 million compared to $6 million for the corresponding period in 2023. The increase was primarily due to higher pre-tax earnings, partially offset by higher PTCs.