SOUTHERN CO

Current report

II-8

Current report

Retail electric revenues increased $1.4 billion, or 8.9%, in 2024 as compared to 2023. The significant factors driving this change are shown in the preceding table. The increase in rates and pricing was primarily due to the inclusion of Plant Vogtle Units 3 and 4 in retail rates net of the elimination of the NCCR tariff at Georgia Power, customer bill credits in 2023 at Alabama Power related to the flowback of certain excess accumulated deferred income taxes, base tariff increases at Georgia Power in accordance with the 2022 ARP, higher contributions from commercial and industrial customers with variable demand-driven pricing at Georgia Power, and an increase in Rate CNP New Plant revenues at Alabama Power.

Current report

Other revenues increased $90 million, or 22.7%, in 2024 as compared to 2023. The increase was primarily due to increases of $71 million in unregulated sales at Georgia Power associated with power delivery construction and maintenance, energy conservation projects, and renewables and $13 million in unregulated outdoor lighting sales at the traditional electric operating companies.

Current report

II-10

Current report

(b)Excludes $55 million of credits recorded to nuclear fuel expense in 2024 resulting from litigation related to nuclear fuel disposal costs. See Note 3 to the financial statements under "Nuclear Fuel Disposal Costs" for additional information.

Current report

In 2024, total fuel and purchased power expenses were $5.0 billion, a decrease of $269 million, or 5.1%, as compared to 2023. The decrease was primarily the result of a $244 million decrease related to the average cost of fuel generated and purchased, partially offset by a $30 million net increase related to the volume of KWHs generated and purchased. Also contributing to the decrease was a $55 million credit to nuclear fuel expense at Georgia Power resulting from litigation related to nuclear fuel disposal costs. See Note 3 to the financial statements under "Nuclear Fuel Disposal Costs" for additional information.

Current report

Other operations and maintenance expenses increased $432 million, or 9.2%, in 2024 as compared to 2023. The increase was primarily due to increases of $170 million in generation expenses primarily associated with Plant Vogtle Units 3 and 4 being placed in service at Georgia Power, maintenance and scheduled outage expenses, and Rate CNP Compliance-related expenses at Alabama Power, $166 million in transmission and distribution expenses primarily related to line maintenance and billing adjustments with integrated transmission system owners at Georgia Power, $41 million in customer service and sales expenses including bad debt, $36 million related to an impairment loss associated with Alabama Power discontinuing the development of a multi-use commercial facility, $21 million associated with an additional Rate NDR accrual at Alabama Power, $20 million associated with reliability reserve accruals and reliability-related expenses at Alabama Power and Mississippi Power, $16 million associated with a gain on the sale of spare parts in 2023 at Southern Power, $11 million associated with an arbitration award received in 2023 at Southern Power related to losses previously incurred, and $10 million in amortization of deferred cloud implementation costs, partially offset by a $91 million increase in gains from sales of integrated transmission system assets at Georgia Power and a $31 million decrease in technology infrastructure and application production expenses. See Note 1 to the financial statements under "Storm Damage and Reliability Reserves" and "Impairment of Long-Lived Assets" and Note 2 to the financial statements under "Georgia Power – Transmission Asset Sales" and " – Nuclear Construction" for additional information.

Current report

Depreciation and amortization increased $169 million, or 4.4%, in 2024 as compared to 2023. The increase was primarily due to an increase of $244 million associated with additional plant in service, partially offset by a decrease of $59 million 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 and an increase of $24 million in amortization of federal ITCs at Georgia Power. See Note 2 to the financial statements under "Georgia Power – Rate Plans" for additional information. Also see Note 10 to the financial statements for additional information on amortization of federal ITCs.

Current report

Taxes other than income taxes increased $129 million, or 11.1%, in 2024 as compared to 2023. The increase was primarily due to increases of $92 million in property taxes primarily resulting from an increase in the assessed value of property at the traditional electric operating companies as well as a decrease in the capitalized portion of property taxes at Georgia Power primarily due to Plant Vogtle Units 3 and 4 being placed in service in July 2023 and April 2024, respectively, $23 million in municipal franchise fees resulting from higher retail revenues at Georgia Power, and $13 million in utility license taxes at Alabama Power resulting from an increase in the tax base. See Note 2 to the financial statements under "Georgia Power – Nuclear Construction" for additional information.

Current report

Interest expense, net of amounts capitalized increased $98 million, or 7.7%, in 2024 as compared to 2023. The increase primarily reflects approximately $43 million related to higher interest rates and $37 million related to higher average outstanding borrowings, as well as a net decrease of $35 million in AFUDC debt and capitalized interest primarily related to Plant Vogtle Units 3 and 4 at Georgia Power and Plant Barry Unit 8 at Alabama Power. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein, Note 2 to the financial statements under "Alabama Power – Rate CNP New Plant" and "Georgia Power – Nuclear Construction," and Note 8 to the financial statements for additional information.

Current report

Depreciation and amortization increased $68 million, or 11.7%, in 2024 as compared to 2023. The increase was primarily due to continued investments at the natural gas distribution utilities. See Note 2 to the financial statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" for additional information.

Current report

Interest expense, net of amounts capitalized increased $31 million, or 10.0%, in 2024 as compared to 2023. The increase reflects approximately $17 million related to higher average outstanding borrowings and $14 million related to higher interest rates. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein and Note 8 to the financial statements for additional information.

Current report

Income taxes increased $47 million, or 22.3%, in 2024 as compared to 2023. The increase was primarily due to higher pre-tax earnings. See Note 10 to the financial statements for additional information.

Current report

Earnings (Loss) from Equity Method Investments

Current report

Earnings (loss) from equity method investments for these other business activities decreased $21 million in 2024 as compared to 2023. The decrease was primarily due to investment losses at Southern Holdings. See Note 7 to the financial statements under "Southern Company" for additional information on Southern Holdings' equity method investments.

Current report

II-15

Current report

Income Taxes (Benefit)

Current report

Alabama Power's 2024 net income was $1.4 billion, representing a $33 million, or 2.4%, increase from 2023. The increase was primarily due to an increase in retail electric revenues associated with weather impacts, as well as an increase in Rate CNP New Plant revenues and an increase in other revenues. These increases to income were partially offset by increases in non-fuel operations and maintenance expenses, depreciation, and taxes other than income taxes. See Note 2 to the financial statements under "Alabama Power" for additional information.

Current report

Operating revenues for 2024 were $7.6 billion, reflecting a $504 million, or 7.1%, increase from 2023. Details of operating revenues were as follows:

Current report

Retail revenues increased $480 million, or 7.8%, in 2024 as compared to 2023. The significant factors driving this change are shown in the preceding table. The increase in rates and pricing was 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 – Rate CNP New Plant" for additional information.

Current report

In 2024, wholesale revenues from sales to affiliates increased $79 million, or 131.7%, as compared to 2023. The revenue increase was primarily due to an increase of 165.5% in the volume of KWH sales due to affiliated company energy needs.

Current report

In 2024, other operating revenues increased $32 million, or 7.9%, as compared to 2023 primarily due to a $30 million increase in transmission revenue primarily associated with open access transmission tariff sales.

Current report

Fuel and purchased power expenses were $1.7 billion in 2024, a decrease of $71 million, or 3.9%, compared to 2023. Thedecrease was primarily due to a $54 million net decrease related to the average cost of fuel and purchased power and a $17 million net decrease related to the volume of KWHs generated and purchased.

Current report

Purchased power expense from non-affiliates was $199 million in 2024, a decrease of $54 million, or 21.3%, compared to 2023. The decrease was primarily due to a 31.3% 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, partially offset by a 12.5% increase in the average cost per KWH purchased.

Current report

Other operations and maintenance expenses increased $126 million, or 7.1%, in 2024 as compared to 2023. The increase was primarily due to increases of $36 million related to an impairment loss associated with Alabama Power discontinuing the development of a multi-use commercial facility, $21 million associated with an additional Rate NDR accrual, $16 million in certain employee compensation and benefits, $15 million in Rate CNP Compliance-related expenses, $10 million associated with reliability reserve accruals and reliability-related expenses, $10 million in customer accounts primarily associated with bad debt expense, $9 million in transmission and distribution expenses primarily due to vegetation management, and $8 million related to the injuries and damages reserve. These increases were partially offset by a decrease of $28 million in technology infrastructure and application production costs.

Current report

See Note 1 to the financial statements under "Impairment of Long-Lived Assets" and Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance," " – Rate NDR," and " – Reliability Reserve Accounting Order" for additional information.

Current report

Depreciation and amortization increased $58 million, or 4.1%, in 2024 as compared to 2023 primarily due to additional plant in service related to transmission and distribution facilities as well as 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" for additional information.

Current report

Allowance for equity funds used during construction decreased $25 million, or 30.5%, in 2024 as compared to 2023 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" for additional information.

Current report

Interest expense, net of amounts capitalized increased $23 million, or 5.4%, in 2024 as compared to 2023. The increase was primarily associated with increases of approximately $8 million related to higher interest rates and $8 million related to higher average outstanding borrowings, as well as a decrease of $8 million in AFUDC debt primarily due to Plant Barry Unit 8 being placed in service in November 2023. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital," Note 2 to the financial statements under "Alabama Power – Rate CNP New Plant," and Note 8 to the financial statements for additional information.

Current report

Georgia Power's 2024 net income was $2.5 billion, representing a $0.5 billion, or 22.3%, increase from the previous year. The increase was primarily due to higher retail revenues associated with the inclusion of Plant Vogtle Units 3 and 4 in retail rates, base tariff increases in accordance with the 2022 ARP, and weather impacts, partially offset by a $112 million increase in charges to a valuation allowance on certain state tax credit carryforwards.

Current report

Operating revenues for 2024 were $11.3 billion, reflecting a $1.2 billion, or 12.0%, increase from 2023. Details of operating revenues were as follows:

Current report

Retail revenues increased $1.0 billion, or 10.5%, in 2024 as compared to 2023. The significant factors driving this change are shown in the preceding table. The increase in rates and pricing was primarily due to the inclusion of Plant Vogtle Units 3 and 4 in retail rates net of the elimination of the NCCR tariff, base tariff increases in accordance with the 2022 ARP, and higher contributions from commercial and industrial customers with variable demand-driven pricing. See Note 2 to the financial statements under "Georgia Power" for additional information.

Current report

II-22 customer growth. Weather-adjusted industrial KWH sales increased 0.2% primarily due to an increase in the transportation sector, largely offset by a decrease in the electronics sector.

Current report

(b)Excludes $55 million of credits recorded to nuclear fuel expense in 2024 resulting from litigation related to nuclear fuel disposal costs. See Note 3 to the financial statements under "Nuclear Fuel Disposal Costs" for additional information.

Current report

Fuel and purchased power expenses were $3.0 billion in 2024, a decrease of $44 million, or 1.4%, compared to 2023. The decrease was due to a net decrease of $96 million related to the average cost of fuel and purchased power and $55 million of credits recorded to nuclear fuel expense resulting from litigation related to nuclear fuel disposal costs, partially offset by an increase of $107 million related to the volume of KWHs generated and purchased. See Note 3 to the financial statements under "Nuclear Fuel Disposal Costs" for additional information.

Current report

Fuel expense was $1.7 billion in 2024, a decrease of $123 million, or 6.9%, compared to 2023. The decrease was primarily due to $55 million of credits recorded to nuclear fuel expense resulting from litigation related to nuclear fuel disposal costs and decreases of 11.6% in the average cost per KWH generated by coal, 6.2% in the average cost per KWH generated by natural gas, and 3.5% in the volume of KWHs generated by natural gas, partially offset by increases of 26.8% in the volume of KWHs generated by nuclear, 17.1% in the average cost per KWH generated by nuclear, and 6.9% in the volume of KWHs generated by coal.

Current report

Purchased power expense from non-affiliates was $615 million in 2024, an increase of $98 million, or 19.0%, compared to 2023. The increase was primarily due to an increase of 28.8% in the volume of KWHs purchased as Georgia Power and other Southern Company system units generally dispatched at a higher cost than available market resources, partially offset by a decrease of 10.3% in the average cost per KWH purchased primarily due to lower natural gas prices.

Current report

Purchased power expense from affiliates was $745 million in 2024, a decrease of $19 million, or 2.5%, compared to 2023. The decrease was primarily due to a decrease of 6.3% in the volume of KWHs purchased as Southern Company system units generally dispatched at a higher cost than available market resources, partially offset by capacity purchased through a new PPA with Mississippi Power and an increase of 3.8% in the average cost per KWH purchased.

Current report

Other operations and maintenance expenses increased $289 million, or 13.9%, in 2024 as compared to 2023. The increase was primarily due to increases of $167 million in transmission and distribution costs primarily associated with line maintenance and billing adjustments with integrated transmission system owners, $126 million in generation expenses largely resulting from Plant Vogtle Units 3 and 4 being placed in service in July 2023 and April 2024, respectively, $40 million in expenses associated with unregulated power delivery construction and maintenance contracts, and $27 million in customer service and sales costs primarily associated with bad debt expense. Partially offsetting the increase was an increase of $91 million in gains from sales of integrated transmission system assets. See Note 2 to the financial statements under "Georgia Power – Transmission Asset Sales" and " – Nuclear Construction" for additional information.

Current report

Depreciation and amortization increased $93 million, or 5.5%, in 2024 as compared to 2023 primarily due to an increase of $173 million associated with additional plant in service, partially offset by a decrease of $59 million in amortization of regulatory assets related to CCR AROs as approved in the 2024 compliance filing under the terms of the 2022 ARP and an increase of $24 million in amortization of federal ITCs. See Note 2 to the financial statements under "Georgia Power – Rate Plans" for additional information. Also see Note 10 to the financial statements for additional information on amortization of federal ITCs.

Previous report

Retail electric revenues decreased $1.9 billion, or 10.2%, in 2023 as compared to 2022. The significant factors driving this change are shown in the preceding table. The increase in rates and pricing in 2023 was primarily due to base tariff increases in accordance with Georgia Power's 2022 ARP, revenue reductions in 2022 resulting from Georgia Power's retail ROE exceeding the allowed

Previous report

II-10 retail ROE range, an increase in Rate CNP Compliance revenues at Alabama Power, and a lower Rate RSE customer refund accrual in 2023 compared to 2022 at Alabama Power, partially offset by lower contributions from commercial and industrial customers with variable demand-driven pricing and a decrease in the revenues recognized under the NCCR tariff, both at Georgia Power.

Previous report

Other Electric Revenues

Previous report

Other Revenues

Previous report

(a)Excludes Central Alabama Generating Station KWHs and associated cost of fuel through July 12, 2022 as its fuel was previously provided by the purchaser under a power sales agreement. See Note 15 to the financial statements under "Alabama Power" for additional information.

Previous report

In 2023, total fuel and purchased power expenses were $5.2 billion, a decrease of $3.2 billion, or 37.7%, as compared to 2022. The decrease was primarily the result of a $2.7 billion decrease in the average cost of fuel generated and purchased and a $513 million net decrease in the volume of KWHs generated and purchased.

Previous report

Cost of other sales increased $57 million, or 50.0%, in 2023 as compared to 2022. The increase was primarily due to increases of $40 million from unregulated power delivery construction and maintenance projects at Georgia Power and $20 million in expenses related to unregulated products and services at Alabama Power.

Previous report

Other operations and maintenance expenses decreased $550 million, or 10.5%, in 2023 as compared to 2022. The decrease reflects a decrease of $189 million associated with the reliability reserve accruals and reliability-related expenditures incurred at Alabama Power. Excluding this decrease, there were decreases of $223 million in transmission and distribution expenses primarily related to line maintenance, $182 million in storm damage recovery as authorized in Georgia Power's 2022 ARP, $91 million in generation non-outage maintenance expenses and planned outages, and $50 million in employee compensation and benefit expenses, partially offset by an $86 million increase in technology infrastructure and application production costs and a $73 million increase in generation environmental projects primarily at Georgia Power. See Note 1 to the financial statements under "Storm Damage and Reliability Reserves" for additional information.

Previous report

Depreciation and amortization increased $836 million, or 27.6%, in 2023 as compared to 2022. The increase was primarily due to increases of $541 million and $190 million resulting from higher depreciation rates at Alabama Power and Georgia Power, respectively, and $79 million from additional plant in service. See Note 2 to the financial statements under "Alabama Power – Rate CNP Depreciation" for additional information.

Previous report

Interest expense, net of amounts capitalized increased $207 million, or 19.4%, in 2023 as compared to 2022. The increase reflects approximately $120 million related to higher interest rates and $96 million related to higher average outstanding borrowings. See Note 8 to the financial statements for additional information.

Previous report

Other income (expense), net increased $17 million, or 3.3%, in 2023 as compared to 2022 primarily due to a $48 million decrease in charitable donations primarily at Georgia Power, a $15 million increase in interest income, and a $14 million decrease in non-operating benefit-related expenses at Alabama Power, partially offset by a $42 million decrease in non-service cost-related retirement benefits income and a $13 million decrease in customer charges related to contributions in aid of construction at Georgia Power. See Note 11 to the financial statements for additional information.

Previous report

Depreciation and amortization increased $23 million, or 4.1%, in 2023 compared to 2022. The increase was primarily due to continued infrastructure investments at the natural gas distribution utilities. See Note 2 to the financial statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" for additional information.

Previous report

Taxes other than income taxes decreased $20 million, or 7.1%, in 2023 compared to 2022. The decrease was primarily due to a $29 million decrease in revenue taxes, partially offset by increases in payroll and property taxes.

Previous report

In 2022, Southern Company Gas recorded pre-tax impairment charges totaling approximately $131 million ($99 million after tax) as a result of an agreement to sell two natural gas storage facilities. See Note 15 to the financial statements under "Southern Company Gas" for additional information.

Previous report

In 2023, Southern Company Gas recorded pre-tax charges related to the disallowance of certain capital investments at Nicor Gas, $88 million of which was recorded in estimated loss on regulatory disallowance. See Note 2 under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects – Nicor Gas" for additional information.

Previous report

Interest expense, net of amounts capitalized increased $47 million, or 17.9%, in 2023 compared to 2022. The increase reflects approximately $43 million related to higher interest rates and $8 million related to higher average outstanding borrowings. See Note 8 to the financial statements for additional information.

Previous report

Income taxes increased $31 million, or 17.2%, in 2023 compared to 2022. The increase was primarily due to $33 million of tax benefit in 2022 related to the impairment charges associated with the sale of two natural gas storage facilities and higher taxes related to increased earnings, partially offset by approximately $24 million related to the regulatory disallowances at Nicor Gas. See Notes 2 and 15 to the financial statements under "Southern Company Gas" and Note 10 to the financial statements for additional information.

Previous report

In 2022, a goodwill impairment charge of $119 million was recorded at PowerSecure. See Note 1 to the financial statements under "Goodwill and Other Intangible Assets" for additional information.

Previous report

In 2022, a $14 million gain was recorded at the parent company as a result of the early termination of the transition services agreement related to the 2019 sale of Gulf Power.

Previous report

Other income (expense), net for these other business activities increased $39 million, or 70.9%, in 2023 as compared to 2022 primarily due to a $29 million decrease in charitable donations and a $12 million increase in interest income, both primarily at the parent company. See Note 15 to the financial statements under "Southern Company" for additional information.

Previous report

Alabama Power's 2023 net income after dividends on preferred stock was $1.37 billion, representing a $30 million, or 2.2%, increase from 2022. The increase was primarily due to a decrease in income tax expense, an increase in Rate CNP Compliance revenues, a decrease in operations and maintenance expenses primarily related to the reliability reserve, and a lower Rate RSE customer refund accrual in 2023 compared to 2022. These increases to net income were offset by an increase in depreciation rates effective January 2023, a decrease in retail revenues associated with milder weather in Alabama Power's service territory in the first and second quarters of 2023 compared to the corresponding periods in 2022, and increases in capacity-related expenses and interest expense. See Note 2 to the financial statements under "Alabama Power" for additional information.

Previous report

Operating revenues for 2023 were $7.1 billion, reflecting a $767 million, or 9.8%, decrease from 2022. Details of operating revenues were as follows:

Previous report

Retail revenues decreased $311 million, or 4.8%, in 2023 as compared to 2022. The significant factors driving this change are shown in the preceding table. The decrease was primarily due to a decrease in fuel and other cost recovery, partially offset by an increase in revenues associated with rates and pricing primarily due to an increase in Rate CNP Compliance revenues and a lower Rate RSE customer refund accrual in 2023 compared to 2022.

Previous report

See Note 2 to the financial statements under "Alabama Power – Rate ECR," " – Rate RSE," and " – Rate CNP Compliance" for additional information. See "Energy Sales" herein for a discussion of changes in the volume of energy sold, including estimated changes related to sales and weather.

Previous report

In 2023, wholesale revenues from sales to affiliates decreased $142 million, or 70.3%, as compared to 2022. The revenue decrease reflects a 47.7% decrease in the price of energy due to lower natural gas prices and a 42.9% decrease in KWH sales due to lower customer demand as a result of milder weather in 2023.

Previous report

In 2023, other operating revenues decreased $12 million, or 2.9%, as compared to 2022 primarily due to decreases of $25 million in cogeneration steam revenue associated with lower natural gas prices and $17 million in rent revenues, partially offset by a $34 million increase in unregulated sales of products and services.

Previous report

Changes in retail energy sales are generally the result of changes in electricity usage by customers, weather, and the number of customers. Revenues attributable to changes in sales decreased in 2023 when compared to 2022. In 2023, weather-adjusted residential KWH sales decreased 0.9% primarily due to decreased customer usage. Weather-adjusted commercial KWH sales increased 0.4% primarily due to increased customer usage and customer growth. Industrial KWH sales decreased 2.8% as a result of a decrease in demand resulting from changes in production levels primarily in the chemicals and forest products sectors.

Previous report

(a)Excludes Central Alabama Generating Station KWHs and associated cost of fuel through July 12, 2022 as its fuel was previously provided by the purchaser under a power sales agreement. See Note 15 to the financial statements under "Alabama Power" for additional information.

Previous report

Fuel and purchased power expenses were $1.8 billion in 2023, a decrease of $838 million, or 31.7%, compared to 2022. The decrease was primarily due to a $674 million decrease in the average cost of fuel and purchased power and a$164 million decrease related to the volume of KWHs generated and purchased.

Previous report

Purchased power expense from non-affiliates was $253 million in 2023, a decrease of $188 million, or 42.6%, compared to 2022. The decrease was primarily due to a 32.9% decrease in the average cost per KWH purchased primarily due to lower natural gas prices and a 25.5% decrease in the volume of KWHs purchased primarily due to the availability of lower cost generation in the Southern Company system.

Previous report

II-22

Previous report

Other operations and maintenance expenses decreased $166 million, or 8.6%, in 2023 as compared to 2022. The change was primarily due to a decrease of $189 million associated with the reliability reserve accruals and reliability-related expenditures incurred, as well as decreases of $33 million in transmission and distribution expenses and $21 million in certain employee compensation and benefit expenses. These decreases were partially offset by increases of $30 million in technology infrastructure and application production costs and $25 million in expenses related to unregulated products and services, as well as a $14 million decrease in nuclear property insurance refunds. See Note 2 to the financial statements under "Alabama Power – Reliability Reserve Accounting Order" for additional information.

Previous report

Depreciation and amortization increased $526 million, or 60.1%, in 2023 as compared to 2022 primarily due to an increase in depreciation rates effective in 2023. See Note 2 to the financial statements under "Alabama Power – Rate CNP Depreciation" for additional information.

Previous report

Allowance for equity funds used during construction increased $12 million, or 17.1%, in 2023 as compared to 2022 primarily due to increases in capital expenditures related to hydro production and Plant Barry Unit 8 construction. See Note 2 to the financial statements under "Alabama Power – Rate CNP New Plant" for additional information.

Previous report

Interest expense, net of amounts capitalized increased $43 million, or 11.3%, in 2023 as compared to 2022. The increase reflects approximately $30 million related to higher average outstanding borrowings and $20 million related to higher interest rates. See Note 8 to the financial statements for additional information.

Previous report

Other income (expense), net increased $15 million, or 10.4%, in 2023 as compared to 2022 primarily due to a decrease in non-operating benefit-related expenses and an increase in interest income, partially offset by a decrease in non-service cost-related retirement benefits income. See Note 11 to the financial statements for additional information.

Previous report

Georgia Power's 2023 net income was $2.1 billion, representing a $0.3 billion, or 14.7%, increase from the previous year. The increase was primarily due to lower non-fuel operations and maintenance costs, revenue reductions in 2022 as a result of Georgia Power exceeding its allowed retail return range, a $187 million decrease in after-tax charges related to the construction of Plant Vogtle Units 3 and 4, and an increase in other revenues, partially offset by a decrease in retail revenues associated with lower contributions from customers with variable demand-driven pricing and milder weather in 2023, as well as higher interest expense. Also contributing to the net income growth were the impacts of the 2022 ARP effective January 1, 2023, including increased retail rates, largely offset by higher depreciation and amortization. See Note 2 to the financial statements under "Georgia Power" for additional information.

Previous report

Operating revenues for 2023 were $10.1 billion, reflecting a $1.5 billion, or 12.7%, decrease from 2022. Details of operating revenues were as follows:

Previous report

Retail revenues decreased $1.6 billion, or 14.5%, in 2023 as compared to 2022. The significant factors driving this change are shown in the preceding table. The increase in rates and pricing was primarily due to base tariff increases in accordance with the 2022 ARP and revenue reductions in 2022 resulting from Georgia Power's retail ROE exceeding the allowed retail ROE range, partially offset by lower contributions from commercial and industrial customers with variable demand-driven pricing and a decrease in revenues recognized under the NCCR tariff. See Note 2 to the financial statements under "Georgia Power – Rate Plans" and " – Nuclear Construction" for additional information.

Previous report

See "Energy Sales" below for a discussion of changes in the volume of energy sold, including estimated changes related to sales and weather in 2023.

Current report — wording carried from elsewhere

II-7 share, respectively, as a result of increases in the average shares outstanding. See Note 8 to the financial statements under "Outstanding Classes of Capital Stock – Southern Company" for additional information.

Current report — wording carried from elsewhere

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

Current report — wording carried from elsewhere

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.

Current report — wording carried from elsewhere

Southern Company Gas measures weather and the effect on its business using Heating Degree Days. Generally, increased Heating Degree Days result in higher demand for natural gas on Southern Company Gas' distribution system. Southern Company Gas has various regulatory mechanisms, such as weather and revenue normalization and straight-fixed-variable rate design, which limit its exposure to weather changes within typical ranges in each of its utility's respective service territory. Southern Company Gas also utilizes weather hedges to limit the negative income impacts in the event of warmer-than-normal weather in Illinois for gas distribution operations and in Illinois and Georgia for gas marketing services. Therefore, weather typically does not have a significant net income impact.

Current report — wording carried from elsewhere

II-31 operating results can vary significantly from quarter to quarter as a result of seasonality. The impact of Heating Season on Southern Company Gas' annual results is illustrated in the table below.

Current report — wording carried from elsewhere

"Income Tax Matters" herein for information regarding the IRA's expansion of the availability of federal ITCs and PTCs. Also see Notes 10 and 15 to the financial statements for additional information.

Current report — wording carried from elsewhere

Environmental Accounting Order, the regulatory asset would be amortized and recovered over an affected unit's remaining useful life, as established prior to the decision regarding early retirement, through Rate CNP Compliance. See Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance" and " – Environmental Accounting Order" for additional information.

Current report — wording carried from elsewhere

II-41 cast-iron pipe), resulting in mitigation of more than 3.3 million metric tons of CO 2 equivalents from its natural gas distribution system since 1998.

Current report — wording carried from elsewhere

The consolidated income tax provision and deferred income tax assets and liabilities, as well as any unrecognized tax benefits and valuation allowances, require significant judgment and estimates. These estimates are supported by historical tax return data,

Current report — wording carried from elsewhere

II-49 estimates and because these estimates form the basis for the determination of whether or not an impairment charge should be recorded, the applicable Registrants consider these estimates to be critical accounting estimates.

Current report — wording carried from elsewhere

II-50 acquired that do not meet the definition of a business are accounted for as an asset acquisition. The purchase price of each asset acquisition is allocated based on the relative fair value of assets acquired.

Current report — wording carried from elsewhere

II-51 systems as well as to update and expand these systems, and to comply with environmental regulations. See "Cash Requirements" herein for additional information.

Current report — wording carried from elsewhere

The traditional electric operating companies also anticipate continued expenditures associated with closure and monitoring of surface impoundments and landfills in accordance with the CCR Rule and the related state rules, which are reflected in the applicable Registrants' ARO liabilities. The cost estimates for Alabama Power are based on closure-in-place for all surface

Current report — wording carried from elsewhere

II-53 included in the table below. Purchased power costs represent estimated minimum obligations for various PPAs for the purchase of capacity and energy, except for those accounted for as leases, which are discussed in Note 9 to the financial statements.

Current report — wording carried from elsewhere

In December 2024, a subsidiary of Alabama Power borrowed $1 million under a $15 million credit line entered into in December 2024 with a maturity date of December 11, 2026.

Current report — wording carried from elsewhere

II-63 operating companies and Southern Power may enter into physical fixed-price contracts for the purchase and sale of electricity through the wholesale electricity market and, to a lesser extent, financial hedge contracts for natural gas purchases; however, a significant portion of contracts are priced at market.

Current report — wording carried from elsewhere

The Registrants are exposed to risk in the event of nonperformance by counterparties to energy-related and interest rate derivative contracts, as applicable. The Registrants generally enter into agreements and material transactions with counterparties that have

Previous report — wording carried elsewhere

II-15 the Heating Season (January through March and November through December) were 67% and 73%, respectively. For 2022, the percentage of operating revenues and net income generated during the Heating Season were 67% and 66%, respectively.

Previous report — wording carried elsewhere

Southern Company Gas hedged its exposure to warmer-than-normal weather in Illinois for gas distribution operations and in Illinois and Georgia for gas marketing services. The remaining impacts of weather on earnings were immaterial.

Previous report — wording carried elsewhere

Revenues associated with gas costs and other cost recovery decreased in 2023 primarily due to lower natural gas cost recovery associated with lower natural gas prices, the timing of natural gas purchases, and the recovery of those costs from customers. The natural gas distribution utilities have weather or revenue normalization mechanisms that mitigate revenue fluctuations from

Previous report — wording carried elsewhere

II-38 services is weather sensitive and uses a variety of hedging strategies, such as weather derivative instruments and other risk management tools, to partially mitigate potential weather impacts.

Previous report — wording carried elsewhere

Fifth Circuit. On June 8, 2023, the U.S. Court of Appeals for the Fifth Circuit stayed the EPA's disapproval of the Mississippi SIP, pending appeal. On April 13, 2023 and April 14, 2023, the State of Alabama, Alabama Power, and PowerSouth Energy Cooperative challenged the EPA's disapproval of the Alabama SIP in the U.S. Court of Appeals for the Eleventh Circuit. On August 17, 2023, the U.S. Court of Appeals for the Eleventh Circuit stayed the EPA's disapproval of the Alabama SIP, pending appeal.

Previous report — wording carried elsewhere

Southern Company system management has established an intermediate goal of a 50% reduction in GHG emissions from 2007 levels by 2030 and a long-term goal of net zero GHG emissions by 2050. Based on the preliminary 2023 emissions, the Southern Company system has achieved an estimated GHG emission reduction of 49% since 2007. GHG emissions decreased in 2023 when compared to 2022 as coal generation was displaced by lower carbon generation, including from Plant Vogtle Unit 3, as discussed further under RESULTS OF OPERATIONS – "Southern Company – Electricity Business" herein. Southern Company system management expects to achieve GHG reductions of greater than 50% as early as 2025, five years earlier than the established interim goal, and remain close to 50% through the late 2020s, followed thereafter by continued reductions. While none

Previous report — wording carried elsewhere

II-48 the amounts of such regulatory assets and liabilities and could adversely impact the financial statements of the applicable Registrants.

Previous report — wording carried elsewhere

Estimating AROs requires significant judgment. AROs are computed as the present value of the estimated costs for an asset's future retirement and are recorded in the period in which the liability is incurred. The estimated costs are capitalized as part of the

Previous report — wording carried elsewhere

If the power sales contract is not classified as a lease, Southern Power further considers whether the contract meets the definition of a derivative. If the contract does meet the definition of a derivative, Southern Power will assess whether it can be designated as

Previous report — wording carried elsewhere

II-56 acquisitions may vary due to market opportunities and the execution of its growth strategy. See Note 15 to the financial statements under "Southern Power" for additional information regarding Southern Power's plant acquisitions and construction projects.

Previous report — wording carried elsewhere

II-58 arrangements are several and there is no cross-affiliate credit support. Alabama Power also maintains its own separate commercial paper program.

Previous report — wording carried elsewhere

See "Financing Activities" herein and Notes 2, 5, 6, 8, and 10 to the financial statements for additional information.

Previous report — wording carried elsewhere

•an increase of $0.6 billion in long-term debt (including securities due within one year) primarily due to the issuance of senior notes and revenue bonds;

Previous report — wording carried elsewhere

•an increase of $1.8 billion in long-term debt (including securities due within one year) primarily due to net issuances of senior notes;

Previous report — wording carried elsewhere

•an increase of $161 million in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities;

Previous report — wording carried elsewhere

•a decrease of $268 million in long-term debt (including securities due within one year) primarily due to the repayment of senior notes at maturity;

Previous report — wording carried elsewhere

See "Financing Activities – Southern Power" herein and Notes 5, 8, and 15 to the financial statements for additional information.

Previous report — wording carried elsewhere

Also in April 2023, Georgia Power repaid at maturity a $200 million short-term floating rate bank loan entered into in April 2022.

Previous report — wording carried elsewhere

•We tested the effectiveness of management's controls over the evaluation of the likelihood of (1) the recovery in future rates of certain incurred costs and (2) refunds or future reductions in rates that should be reported as regulatory liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering certain costs in future rates or of a future reduction in rates. We also tested the effectiveness of management's controls over the initial recognition of regulatory assets or liabilities.

Previous report — wording carried elsewhere

•We read and evaluated relevant regulatory orders and/or other relevant publicly available information to assess the likelihood of recovery of certain incurred costs in future rates or of a future reduction in rates based on precedents of the treatment of similar costs under similar circumstances.

Previous report — wording carried elsewhere

•We obtained representation from management regarding the likelihood of recoverability of incurred costs and potential refund or future reduction in rates to assess management's assertions about the likelihood of recovery, refund, or a future reduction in rates.