ALABAMA POWER CO

Alabama Power's net income was $1.5 billion in 2025, representing a $113 million, or 8.1%, increase from 2024. The increase was primarily due to higher retail electric revenues resulting from changes in rates and pricing, partially offset by increases in other operations and maintenance expenses and depreciation and amortization.

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A condensed income statement for Alabama Power follows:

Retail revenues increased $497 million, or 7.5%, in 2025 as compared to 2024. Details of the changes in retail revenues were as follows:

Changes in rates and pricing resulted in an increase in revenues primarily due to an increase in Rate RSE. See Note 2 to the financial statements under "Alabama Power – Rate RSE" for additional information.

Changes in sales resulted in an increase in retail revenues in 2025 as compared to 2024. Changes in retail revenues are influenced heavily by the change in the volume of energy sold from year to year, which generally results from changes in electricity usage by

II-17 customers, weather, and the number of customers. Total retail KWH sales for 2025 and the percent change from 2024 were as follows:

(*)Weather-adjusted KWH sales are estimated using statistical models of the historical relationship between temperatures and energy sales, and then removing the estimated effect of deviations from the normal temperature conditions. Normal temperature conditions are defined as those experienced in Alabama Power's service territory over a specified historical period. This metric is useful because it allows trends in historical operations to be evaluated apart from the influence of weather conditions. Management also considers this metric in developing long-term capital and financial plans.

Weather-adjusted retail energy sales increased by 0.3 billion KWHs in 2025 as compared to 2024. Weather-adjusted residential and commercial KWH sales increased 0.5% and 0.2%, respectively, primarily due to customer growth. Industrial KWH sales increased 1.1% primarily due to increases in the primary metals sector.

Changes in fuel and other cost recovery revenues resulted in an increase in retail revenues in 2025 as compared to 2024 primarily due to higher recoverable fuel costs, as discussed further under "Fuel and Purchased Power Expenses" herein. 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" for additional information.

Wholesale revenues from sales to non-affiliates increased $112 million, or 33.2%, in 2025 as compared to 2024. Details of wholesale revenues from sales to non-affiliated utilities were as follows:

The increase in wholesale revenues from sales to non-affiliates was due to increases of $45 million related to the volume of KWH sales associated with higher demand, $40 million related to the average cost per KWH sold due to higher Southern Company system fuel and purchased power prices, and $27 million related to non-fuel revenues from wholesale capacity contracts. Wholesale energy sales to non-affiliates totaled 7.6 billion KWHs in 2025, an 18.4% increase as compared to 2024.

Wholesale revenues from sales to non-affiliates consist of PPAs and short-term opportunity sales. Wholesale revenues from PPAs have both capacity and energy components. Wholesale capacity revenues from PPAs are recognized in amounts billable under the contract terms and provide for recovery of fixed costs and a return on investment. 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 made at market-based rates that generally provide a margin above Alabama Power's variable cost to produce the energy.

Wholesale revenues from sales to affiliates increased $49 million, or 35.3%, in 2025 as compared to 2024. The increase was primarily due to an increase of $48 million related to the average price of energy due to an increase in natural gas prices. Wholesale energy sales to affiliates totaled 5.7 billion KWHs in 2025, a 0.4% increase as compared to 2024.

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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. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost.

In 2025, other operating revenues increased $23 million, or 5.2%, as compared to 2024 primarily due to an $11 million increase in open access transmission tariff sales, a $10 million increase in regulated energy services revenues, $7 million related to undistributed customer bill credits associated with nuclear fuel disposal costs litigation, which was offset by an additional NDR accrual within other operations and maintenance expenses, and a $4 million increase in cogeneration revenues primarily related to higher fuel prices. These increases were partially offset by a $10 million decrease in pole attachment revenues and an $8 million decrease in sales of unregulated products and services. See Note 3 to the financial statements under "Nuclear Fuel Disposal Costs" for additional information.

Fuel and purchased power expenses were $2.0 billion in 2025, an increase of $300 million, or 17.3%, as compared to 2024. The increase was primarily due to a $159 million increase related to the volume of KWHs generated and purchased and a $141 million increase 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. Alabama Power, along with the Alabama PSC, continuously monitors the under/over recovered balance to determine whether adjustments to billing rates are required. See Note 2 to the financial statements under "Alabama Power – Rate ECR" for additional information.

The mix of fuel sources for the generation of electricity is determined primarily by demand, the unit cost of fuel consumed, and the availability of generating units. Additionally, Alabama Power purchases a portion of its electricity needs from the wholesale market. 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. 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.

Details of Alabama Power's generation and purchased power and the related costs 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.

Other operations and maintenance expenses increased $131 million, or 6.9%, in 2025 as compared to 2024. The increase was primarily due to increases of $65 million associated with reliability reserve accruals and reliability-related expenses, $62 million associated with NDR accruals, $27 million in certain employee compensation and benefit expenses, and $21 million in generation expenses primarily associated with planned outages, partially offset by a $36 million impairment loss in 2024 associated with

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Alabama Power discontinuing the development of a multi-use commercial facility. See Note 1 to the financial statements under "Impairment of Long-Lived Assets" and Note 2 to the financial statements under "Alabama Power – Reliability Reserve Accounting Order" and – "Rate NDR" for additional information.

Depreciation and amortization increased $51 million, or 3.5%, in 2025 as compared to 2024 primarily due to additional plant in service related to transmission and distribution facilities.

Taxes other than income taxes increased $27 million, or 5.7%, in 2025 as compared to 2024 primarily due to an increase in utility license taxes resulting from an increase in the tax base.

Allowance for equity funds used during construction increased $12 million, or 21.1%, in 2025 as compared to 2024 primarily due to an increase in capital expenditures subject to AFUDC. See Note 1 to the financial statements under "Allowance for Funds Used During Construction and Interest Capitalized" for additional information.

Interest expense, net of amounts capitalized increased $17 million, or 3.8%, in 2025 as compared to 2024. The increase was primarily associated with higher average outstanding borrowings. See FINA NCIAL CONDITION AND LIQUIDITY – "Financing Activities" and – "Sources of Capital" herein and Note 8 to the financial statements for additional information.

Other income (expense), net increased $11 million, or 7.0%, in 2025 as compared to 2024 primarily due to the receipt of liquidated damages associated with the termination of two solar projects.

Income taxes increased $65 million in 2025 as compared to 2024 primarily due to higher pre-tax earnings and a decrease of $39 million in the flowback of certain excess deferred income taxes. See Note 2 to the financial statements under "Alabama Power – Excess Accumulated Deferred Income Tax Accounting Order" and Note 10 to the financial statements for additional information.