ALABAMA POWER CO
For the period ended Dec 31, 2025. Filed Feb 19, 2026.
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FY2025 · Filed Feb 19, 2026
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Alabama Power:
To the stockholder and the Board of Directors of Alabama Power Company
We have audited the accompanying balance sheets of Alabama Power Company (Alabama Power) (a wholly-owned subsidiary of The Southern Company) as of December 31, 2025 and 2024, the related statements of income, comprehensive income, common stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2025, the related notes, and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of Alabama Power as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of Alabama Power's management. Our responsibility is to express an opinion on Alabama Power's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to Alabama Power in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Alabama Power is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of Alabama Power's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the Audit Committee of Southern Company's Board of Directors and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impact of Rate Regulation on the Financial Statements – Refer to Note 1 (Summary of Significant Accounting Policies – Regulatory Assets and Liabilities) and Note 2 (Regulatory Matters – Alabama Power) to the financial statements
Alabama Power is subject to retail rate regulation by the Alabama Public Service Commission and wholesale regulation by the Federal Energy Regulatory Commission (collectively, the "Commissions"). Management has determined that it meets the requirements under accounting principles generally accepted in the United States of America to utilize specialized rules to account for the effects of rate regulation in the preparation of its financial statements. Accounting for the economics of rate regulation may impact multiple financial statement line items and disclosures.
The Commissions set the rates Alabama Power is permitted to charge customers. Rates are determined and approved in regulatory proceedings based on an analysis of Alabama Power's costs to provide utility service and a return on, and recovery of, its investment in the utility business. Current and future regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investments, and the timing and amount of assets to be recovered through rates. The Commissions' regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. While Alabama Power expects to recover costs from customers through regulated rates, there is a risk that the Commissions will not approve: (1) full recovery of the costs of providing utility service, or (2) full recovery of all amounts invested in the utility business and a reasonable return on those investments.
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We identified the impact of rate regulation related to certain assets and liabilities as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and/or the high degree of subjectivity involved in assessing the potential impact of future regulatory orders on incurred costs. Management judgments include assessing the likelihood of (1) recovery in future rates of incurred costs, (2) a disallowance of part of the cost of recently completed plant or plant under construction, and/or (3) a refund to customers. Auditing these judgments, which include assumptions about the outcome of future decisions by the Commissions, required specialized knowledge of accounting for rate regulations and the rate setting process due to its inherent complexities.
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 certain regulatory assets or liabilities.
We read and evaluated relevant regulatory orders issued 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.
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.
We evaluated Alabama Power's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments, including where there is a high degree of subjectivity involved in assessing the potential impact of future regulatory orders on incurred costs.
Birmingham, Alabama
We have served as Alabama Power's auditor since 2002.
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| 2025 | 2024 | 2023 | |
|---|---|---|---|
| (in millions) | |||
| Operating Revenues: | |||
| Retail revenues | $7,136 | $6,639 | $6,159 |
| Wholesale revenues, non-affiliates | 449 | 337 | 424 |
| Wholesale revenues, affiliates | 188 | 139 | 60 |
| Other revenues | 462 | 439 | 407 |
| Total operating revenues | 8,235 | 7,554 | 7,050 |
| Operating Expenses: | |||
| Fuel | 1,524 | 1,358 | 1,299 |
| Purchased power, non-affiliates | 235 | 199 | 253 |
| Purchased power, affiliates | 273 | 175 | 251 |
| Other operations and maintenance | 2,026 | 1,895 | 1,769 |
| Depreciation and amortization | 1,510 | 1,459 | 1,401 |
| Taxes other than income taxes | 498 | 471 | 442 |
| Total operating expenses | 6,066 | 5,557 | 5,415 |
| Operating Income | 2,169 | 1,997 | 1,635 |
| Other Income and (Expense): | |||
| Allowance for equity funds used during construction | 69 | 57 | 82 |
| Interest expense, net of amounts capitalized | (465) | (448) | (425) |
| Other income (expense), net | 168 | 157 | 159 |
| Total other income and (expense) | (228) | (234) | (184) |
| Earnings Before Income Taxes | 1,941 | 1,763 | 1,451 |
| Income taxes | 425 | 360 | 81 |
| Net Income | $1,516 | $1,403 | $1,370 |
| 2025 | 2024 | 2023 | |
|---|---|---|---|
| (in millions) | |||
| Net Income | $1,516 | $1,403 | $1,370 |
| Other comprehensive income: | |||
| Qualifying hedges: | |||
| Reclassification adjustment for amounts included in net income, net of tax of $1, $1, and $1, respectively | 2 | 2 | 2 |
| Total other comprehensive income | 2 | 2 | 2 |
| Comprehensive Income | $1,518 | $1,405 | $1,372 |
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| 2025 | 2024 | 2023 | |
|---|---|---|---|
| (in millions) | |||
| Operating Activities: | |||
| Net income | $1,516 | $1,403 | $1,370 |
| Adjustments to reconcile net income to net cash provided from operating activities — | |||
| Depreciation and amortization, total | 1,654 | 1,608 | 1,554 |
| Deferred income taxes | 220 | (55) | (242) |
| Allowance for equity funds used during construction | (69) | (57) | (82) |
| Pension, postretirement, and other employee benefits | (211) | (213) | (204) |
| Settlement of asset retirement obligations | (269) | (254) | (270) |
| Natural disaster reserve and reliability reserve accruals | 179 | 96 | 70 |
| Retail fuel cost under recovery – long-term | (146) | — | — |
| Other, net | (55) | 103 | 4 |
| Changes in certain current assets and liabilities — | |||
| -Receivables | (34) | (32) | (24) |
| -Fossil fuel stock | 36 | 55 | (165) |
| -Materials and supplies | (29) | (57) | (105) |
| -Retail fuel cost under recovery | — | 246 | 376 |
| -Other current assets | 18 | (32) | (20) |
| -Accounts payable | (99) | (127) | (162) |
| -Customer refunds | (108) | 87 | (39) |
| -Other current liabilities | (31) | 124 | 18 |
| Net cash provided from operating activities | 2,572 | 2,895 | 2,079 |
| Investing Activities: | |||
| Property additions | (1,935) | (1,881) | (2,022) |
| Business acquisition | (635) | — | — |
| Nuclear decommissioning trust fund purchases | (564) | (593) | (301) |
| Nuclear decommissioning trust fund sales | 564 | 592 | 300 |
| Cost of removal net of salvage | (175) | (166) | (178) |
| Change in construction payables, net of joint owner portion | (48) | 10 | (44) |
| Other investing activities | (21) | 51 | 49 |
| Net cash used for investing activities | (2,814) | (1,987) | (2,196) |
| Financing Activities: | |||
| Increase (decrease) in notes payable, net | — | (40) | 40 |
| Proceeds — | |||
| Senior notes | 1,100 | — | 500 |
| Revenue bonds | — | — | 326 |
| Short-term borrowings | — | 50 | — |
| Other long-term debt | 5 | 8 | 29 |
| Redemptions and repurchases — | |||
| Senior notes | (250) | — | (300) |
| Revenue bonds | — | (21) | — |
| Short-term borrowings | — | (50) | — |
| Other long-term debt | (1) | (22) | — |
| Capital contributions from parent company | 601 | 527 | 407 |
| Payment of common stock dividends | (1,219) | (1,182) | (1,141) |
| Other financing activities | (13) | (2) | (22) |
| Net cash provided from (used for) financing activities | 223 | (732) | (161) |
| Net Change in Cash, Cash Equivalents, and Restricted Cash | (19) | 176 | (278) |
| Cash, Cash Equivalents, and Restricted Cash at Beginning of Year | 585 | 409 | 687 |
| Cash, Cash Equivalents, and Restricted Cash at End of Year | $566 | $585 | $409 |
| Supplemental Cash Flow Information: | |||
| Cash paid during the period for — | |||
| Interest (net of $20, $18, and $27 capitalized, respectively) | $431 | $428 | $397 |
| Income taxes, net | 243 | 387 | 315 |
| Noncash transactions — Accrued property additions at year-end | 100 | 148 | 138 |
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| Assets | 2025 | 2024 |
|---|---|---|
| (in millions) | ||
| Current Assets: | ||
| Cash and cash equivalents | $566 | $585 |
| Receivables — | ||
| Customer accounts | 470 | 512 |
| Unbilled revenues | 189 | 187 |
| Affiliated | 126 | 91 |
| Other accounts and notes | 113 | 126 |
| Accumulated provision for uncollectible accounts | (23) | (22) |
| Fossil fuel stock | 303 | 339 |
| Materials and supplies | 732 | 699 |
| Prepaid expenses | 86 | 63 |
| Other regulatory assets | 344 | 332 |
| Other current assets | 80 | 79 |
| Total current assets | 2,986 | 2,991 |
| Property, Plant, and Equipment: | ||
| In service | 38,915 | 36,501 |
| Less: Accumulated provision for depreciation | 12,816 | 11,741 |
| Plant in service, net of depreciation | 26,099 | 24,760 |
| Other utility plant, net | 307 | 410 |
| Nuclear fuel, at amortized cost | 290 | 262 |
| Construction work in progress | 1,441 | 1,377 |
| Total property, plant, and equipment | 28,137 | 26,809 |
| Other Property and Investments: | ||
| Nuclear decommissioning trusts, at fair value | 1,542 | 1,386 |
| Equity investments in unconsolidated subsidiaries | 48 | 48 |
| Miscellaneous property and investments | 123 | 129 |
| Total other property and investments | 1,713 | 1,563 |
| Deferred Charges and Other Assets: | ||
| Operating lease right-of-use assets, net of amortization | 86 | 84 |
| Deferred charges related to income taxes | 261 | 264 |
| Prepaid pension and other postretirement benefit costs | 1,016 | 841 |
| Regulatory assets – asset retirement obligations | 1,518 | 1,780 |
| Other regulatory assets, deferred | 1,982 | 1,815 |
| Other deferred charges and assets | 425 | 391 |
| Total deferred charges and other assets | 5,288 | 5,175 |
| Total Assets | $38,124 | $36,538 |
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| Liabilities and Stockholder's Equity | 2025 | 2024 |
|---|---|---|
| (in millions) | ||
| Current Liabilities: | ||
| Securities due within one year | $625 | $655 |
| Accounts payable — | ||
| Affiliated | 294 | 299 |
| Other | 576 | 625 |
| Customer deposits | 113 | 113 |
| Accrued taxes | 105 | 78 |
| Accrued interest | 134 | 120 |
| Accrued compensation | 275 | 240 |
| Asset retirement obligations | 256 | 364 |
| Other regulatory liabilities | 89 | 165 |
| Other current liabilities | 135 | 219 |
| Total current liabilities | 2,602 | 2,878 |
| Long-Term Debt | 11,388 | 10,499 |
| Deferred Credits and Other Liabilities: | ||
| Accumulated deferred income taxes | 4,209 | 4,178 |
| Deferred credits related to income taxes | 1,585 | 1,398 |
| Accumulated deferred ITCs | 115 | 113 |
| Employee benefit obligations | 152 | 148 |
| Operating lease obligations | 78 | 76 |
| Asset retirement obligations, deferred | 3,423 | 3,694 |
| Other regulatory liabilities, deferred | 252 | 271 |
| Other deferred credits and liabilities | 326 | 195 |
| Total deferred credits and other liabilities | 10,140 | 10,073 |
| Total Liabilities | 24,130 | 23,450 |
| Common Stockholder's Equity: | ||
| Common stock, par value $40 per share (Authorized - 40 million shares; Outstanding - 31 million shares) | 1,222 | 1,222 |
| Paid-in capital | 8,263 | 7,657 |
| Retained earnings | 4,512 | 4,214 |
| Accumulated other comprehensive loss | (3) | (5) |
| Total common stockholder's equity (See accompanying statements) | 13,994 | 13,088 |
| Total Liabilities and Stockholder's Equity | $38,124 | $36,538 |
| Commitments and Contingent Matters (See notes) | ||
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| Number ofCommonSharesIssued | CommonStock | Paid-InCapital | RetainedEarnings | AccumulatedOtherComprehensiveIncome (Loss) | Total | |
|---|---|---|---|---|---|---|
| (in millions) | ||||||
| Balance at December 31, 2022 | 31 | $1,222 | $6,710 | $3,764 | $(9) | $11,687 |
| Net income | — | — | — | 1,370 | — | 1,370 |
| Capital contributions from parent company | — | — | 415 | — | — | 415 |
| Other comprehensive income | — | — | — | — | 2 | 2 |
| Cash dividends on common stock | — | — | — | (1,141) | — | (1,141) |
| Balance at December 31, 2023 | 31 | 1,222 | 7,125 | 3,993 | (7) | 12,333 |
| Net income | — | — | — | 1,403 | — | 1,403 |
| Capital contributions from parent company | — | — | 532 | — | — | 532 |
| Other comprehensive income | — | — | — | — | 2 | 2 |
| Cash dividends on common stock | — | — | — | (1,182) | — | (1,182) |
| Balance at December 31, 2024 | 31 | 1,222 | 7,657 | 4,214 | (5) | 13,088 |
| Net income | — | — | — | 1,516 | — | 1,516 |
| Capital contributions from parent company | — | — | 606 | — | — | 606 |
| Other comprehensive income | — | — | — | — | 2 | 2 |
| Cash dividends on common stock | — | — | — | (1,219) | — | (1,219) |
| Other | — | — | — | 1 | — | 1 |
| Balance at December 31, 2025 | 31 | $1,222 | $8,263 | $4,512 | $(3) | $13,994 |
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