ALABAMA POWER CO

12. STOCK COMPENSATION

Stock-based compensation in the form of Southern Company performance share units (PSU) and restricted stock units (RSU) may be granted through the Equity and Incentive Compensation Plan to eligible Southern Company system employees.

At December 31, 2025, the number of current and former employees participating in stock-based compensation programs for the Registrants was as follows:

The majority of PSUs and RSUs awarded contain terms where employees become immediately vested in PSUs and RSUs upon retirement. As a result, compensation expense for employees that are retirement eligible at the grant date is recognized immediately, while compensation expense for employees that are expected to become retirement eligible during the vesting period is recognized over the period from grant date to the date of retirement eligibility. In addition, the Registrants recognize forfeitures as they occur.

All unvested PSUs and RSUs vest immediately upon a change in control where Southern Company is not the surviving corporation. Stock-based compensation activity is immaterial for the Subsidiary Registrants.

In 2015, Southern Company discontinued granting stock options. As of December 31, 2017, all stock option awards were vested and compensation cost fully recognized, and the last exercise occurred in November 2024. Southern Company's cash receipts from issuances related to stock options exercised under the share-based payment arrangements, total intrinsic value of options exercised, and the related tax benefit were immaterial for the years ended December 31, 2024 and 2023.

Performance Share Units

PSUs granted to employees vest at the end of athree-year performance period. Shares of Southern Company common stock are delivered to employees at the end of the performance period with the number of shares issued ranging from 0% to 200% of the target number of PSUs granted, based on achievement of the performance goals established by the Compensation Committee of the Southern Company Board of Directors.

Southern Company has issuedtwo types of PSUs, each with a unique performance goal. These types of PSUs include total shareholder return (TSR) awards based on the TSR for Southern Company common stock during thethree-year performance period as compared to a group of industry peers and ROE awards based on Southern Company's equity-weighted return over the performance period.

The fair value of TSR awards is determined as of the grant date using a Monte Carlo simulation model. In determining the fair value of the TSR awards issued to employees, the expected volatility is based on the historical volatility of Southern Company's stock over a period equal to the performance period. The risk-free rate is based on the U.S. Treasury yield curve in effect at the

II-226 time of grant that covers the performance period of the awards. The following table shows the assumptions used in the pricing model and the weighted average grant-date fair value of TSR awards granted:

The Registrants recognize TSR award compensation expense on a straight-line basis over thethree-year performance period without remeasurement.

The fair values of ROE awards are based on the closing stock price of Southern Company common stock on the date of the grant. The weighted average grant-date fair value of the ROE awards granted during 2025, 2024, and 2023 was $84.06, $69.67, and $68.93, respectively. Compensation expense for ROE awards is generally recognized ratably over thethree-year performance period adjusted for expected changes in ROE performance. Total compensation cost recognized for vested ROE awards reflects final performance metrics.

Southern Company had 2.3 million unvested PSUs outstanding at December 31, 2024. In February 2025, the PSUs that vested for thethree-year performance period ended December 31, 2024 were converted into 2.0 million shares outstanding at a share price of $83.87. During 2025, Southern Company granted 1.0 million PSUs and 1.3 million PSUs were vested or forfeited, resulting in 2.0 million unvested PSUs outstanding at December 31, 2025. In February 2026, the PSUs that vested for thethree-year performance period ended December 31, 2025 were converted into 2.4 million shares outstanding at a weighted average share price of $90.86.

Southern Company's total PSU compensation cost and the related tax benefit recognized in income for the years ended December 31, 2025, 2024, and 2023 were as follows:

The compensation cost related to the grant of Southern Company PSUs to the employees of each Subsidiary Registrant is recognized in each Subsidiary Registrant's financial statements with a corresponding credit to equity representing a capital contribution from Southern Company.

At December 31, 2025, Southern Company's total unrecognized compensation cost related to PSUs was $32 million and is expected to be recognized over a weighted-average period of approximately 18 months.

Restricted Stock Units

The fair value of RSUs is based on the closing stock price of Southern Company common stock on the date of the grant. The weighted average grant-date fair values of RSUs granted during 2025, 2024, and 2023 were $85.18, $70.49, and $68.95, respectively. For most RSU awards, one-third of the RSUs vest each year throughout athree-year service period and compensation cost for RSUs is generally recognized over the correspondingone-, two-, orthree-year vesting period. Shares of Southern Company common stock are delivered to employees at the end of each vesting period.

Southern Company had 0.9 million RSUs outstanding at December 31, 2024. During 2025, Southern Company granted 0.5 million RSUs and 0.5 million RSUs were vested or forfeited, resulting in 0.9 million unvested RSUs outstanding at December 31, 2025, including RSUs related to employee retention agreements.

Southern Company's total RSU compensation cost and the related tax benefit recognized in income for the years ended December 31, 2025, 2024, and 2023 were as follows:

Total unrecognized compensation cost related to RSUs at December 31, 2025, which is being recognized over a weighted-average period of approximately 18 months, was immaterial for Southern Company.

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The compensation cost related to the grant of Southern Company RSUs to the employees of each Subsidiary Registrant is recognized in such Subsidiary Registrant's financial statements with a corresponding credit to equity representing a capital contribution from Southern Company.