ALABAMA POWER CO

Alabama Power's net income in the third quarter 2026 was $661 million compared to $588 million for the corresponding period in 2025. The increase was primarily due to increases in non-fuel retail revenues and other income (expense), net, partially offset by increases in other operations and maintenance expenses and depreciation and amortization.

For year-to-date 2026, net income was $1.5 billion compared to $1.3 billion for the corresponding period in 2025. The increase was primarily due to an increase in non-fuel retail revenues, a decrease in other operations and maintenance expenses, and an increase in other income (expense), net, partially offset by an increase in depreciation and amortization.

In the third quarter 2026, retail revenues were $2.2 billion compared to $2.0 billion for the corresponding period in 2025. For year-to-date 2026, retail revenues were $5.7 billion compared to $5.5 billion for the corresponding period in 2025. Details of the changes in retail revenues were as follows:

Changes in rates and pricing resulted in increases in revenues in the third quarter and year-to-date 2026 as compared to the corresponding periods in 2025 primarily due to an increase in Rate CNP Compliance revenues resulting from higher recoverable costs. See Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance" in Item 8 of the Form 10-K for additional information.

Changes in sales resulted in increases in revenues in the third quarter and year-to-date 2026 as compared to the corresponding periods in 2025. Weather-adjusted residential KWH sales increased 1.6% in the third quarter 2026 primarily due to an increase in customer usage and customer growth. Weather-adjusted residential KWH sales increased 0.9% for year-to-date 2026 primarily due to customer growth. Weather-adjusted commercial KWH sales increased 0.8% in the third quarter 2026 primarily due to an increase in customer usage. Weather-adjusted commercial KWH sales increased 0.1% for year-to-date 2026. Industrial KWH sales increased 4.7% and 3.6% in the third quarter and year-to-date 2026, respectively, primarily due to increases in the primary metals and pipeline sectors, partially offset by decreases in the chemicals and pulp and paper sectors. An increase in the mining sector also contributed to the increase for year-to-date 2026.

Fuel and other cost recovery revenues increased in the third quarter and year-to-date 2026 as compared to the corresponding periods in 2025 primarily as a result of higher recoverable fuel costs. 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" in Item 8 of the Form 10-K for additional information.

Wholesale Revenues– Non-Affiliates

In the third quarter 2026, wholesale revenues from sales to non-affiliates were $99 million compared to $137 million for the corresponding period in 2025. The decrease consisted of a $23 million decrease in energy revenues, primarily due to a decrease of $21 million related to the volume of KWH sales associated with lower market demand, and a $15 million decrease in non-fuel revenues from wholesale capacity contracts.

For year-to-date 2026, wholesale revenues from sales to non-affiliates were $302 million compared to $326 million for the corresponding period in 2025. The decrease consisted of a $36 million decrease in non-fuel revenues from wholesale capacity contracts, partially offset by a $12 million increase in energy revenues due to increases of $6 million related to the volume of KWH sales associated with higher market demand and $6 million related to the average cost per KWH sold due to higher Southern Company system fuel and purchased power prices.

The decreases in capacity revenues in the third quarter and year-to-date 2026 were primarily due to the expiration of a power sales agreement in December 2025, partially offset by the commencement of a new power sales agreement in October 2025 associated with the acquisition of the Lindsay Hill Generating Station. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

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 also included in wholesale energy sales to non-affiliates. These opportunity sales are made at market-based rates that generally provide a margin above Alabama Power's variable cost to produce the energy.

Wholesale Revenues– Affiliates

In the third quarter 2026, wholesale revenues from sales to affiliates were $56 million compared to $28 million for the corresponding period in 2025. The increase was primarily due to increases of 86.6% in the volume of KWH sales due to affiliated company energy needs and 8.8% in the price of energy due to an increase in fuel prices.

For year-to-date 2026, wholesale revenues from sales to affiliates were $230 million compared to $132 million for the corresponding period in 2025. The increase was primarily due to increases of 57.4% in the volume of KWH sales due to affiliated company energy needs and 10.5% in the price of energy due to an increase in fuel prices.

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. Energy revenues related to 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.

In the third quarter 2026, other revenues were $115 million compared to $107 million for the corresponding period in 2025. For year-to-date 2026, other revenues were $354 million compared to $353 million for the corresponding period in 2025. The increases in the third quarter and year-to-date 2026 were primarily due to increases of $8 million and $22 million, respectively, in open access transmission tariff sales. Largely offsetting the increase for year-to-date 2026 was a $16 million decrease in sales of unregulated products and services.

In the third quarter 2026, total fuel and purchased power expenses were $641 million compared to $569 million for the corresponding period in 2025. The increase was due to a $37 million increase related to the average cost of fuel and purchased power and a $35 million net increase related to the volume of KWHs generated and purchased.

For year-to-date 2026, total fuel and purchased power expe nses were $1.67 billion compared to $1.54 billion for the corresponding period in 2025. The increase was due to a $74 million net increase related to the volume of KWHs generated and purchased and a $55 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. See Note 2 to the financial statements under "Alabama Power – Rate ECR" in Item 8 of the Form 10-K for additional information.

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.

In the third quarter 2026, other operations and maintenance expenses were $452 million compared to $434 million for the corresponding period in 2025. The increase was primarily due to increases of $11 million in planned outages, $10 million in generation expenses associated with Rate CNP Compliance-related expenses, and $10 million associated with decreased utilization of the reliability reserve to offset reliability-related transmission, distribution, and generation expenses, partially offset by $12 million of deferred costs related to the Jurisdictional Separation Study Order.

For year-to-date 2026, other operations and maintenance expenses were $1.3 billion compared to $1.4 billion for the corresponding period in 2025. The decrease was primarily due to $35 million of deferred costs related to the Jurisdictional Separation Study Order, as well as decreases of $30 million associated with increased utilization of the reliability reserve to offset reliability-related transmission, distribution, and generation expenses, $28 million in expenses related to sales of unregulated products and services, $24 million related to the acquisition of the Lindsay Hill Generating Station, and $23 million in planned outages. Partially offsetting the decreases was an $11 million increase in NDR accruals.

See Note (B) to the Condensed Financial Statements under "Alabama Power – Reliability Reserve Accounting Order" herein and Note 2 to the financial statements under "Alabama Power – Jurisdictional Separation Study Order," " – Rate CNP Compliance," and " – Rate NDR" and Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

In the third quarter 2026, depreciation and amortization was $390 million compared to $380 million for the corresponding period in 2025. For year-to-date 2026, depreciation and amortization was $1.16 billion compared to $1.12 billion for the corresponding period in 2025. The increases were primarily related to the acquisition of the Lindsay Hill Generating Station in September 2025 and other additional plant in service, partially offset by the deferral of expenses related to the Jurisdictional Separation Study Order. See Notes 2 and 15 to the financial statements under "Alabama Power – Jurisdictional Separation Study Order" and "Alabama Power," respectively, in Item 8 of the Form 10-K for additional information.

In the third quarter 2026, other income (expense), net was $61 million compared to $44 million for the corresponding period in 2025. For year-to-date 2026, other income (expense), net was $177 million compared to $128 million for the corresponding period in 2025. The increases were primarily due to increases in customer charges related to contributions in aid of construction.

In the third quarter 2026, income taxes were $210 million compared to $175 million for the corresponding period in 2025. For year-to-date 2026, income taxes were $473 million compared to $401 million for the corresponding period in 2025. The increases were primarily due to higher pre-tax earnings.