ALABAMA POWER CO

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(A)INTRODUCTION

The condensed quarterly financial statements of each Registrant included herein have been prepared by such Registrant, without audit, pursuant to the rules and regulations of the SEC. The Condensed Balance Sheets at December 31, 2025 have been derived from the audited financial statements of each Registrant. In the opinion of each Registrant's management, the information regarding such Registrant furnished herein reflects all adjustments, which, except as otherwise disclosed, are of a normal recurring nature, necessary to present fairly the results of operations for the periods ended September 30, 2026 and 2025. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although each Registrant believes that the disclosures regarding such Registrant are adequate to make the information presented not misleading. Disclosures which would substantially duplicate the disclosures in the Form 10-K and details which have not changed significantly in amount or composition since the filing of the Form 10-K are generally omitted from this Quarterly Report on Form 10-Q unless specifically required by GAAP. Therefore, these Condensed Financial Statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K. Due to the seasonal variations in the demand for energy and other factors, operating results for the periods presented are not necessarily indicative of the operating results to be expected for the full year.

The preparation of financial statements in conformity with GAAP requires the use of estimates, and the actual results may differ from those estimates. Certain prior year data presented in the financial statements have been reclassified to conform to the current year presentation. These reclassifications had no impact on the overall results of operations, financial position, or cash flows of any Registrant.

Goodwill and Other Intangible Assets

Goodwill at both September 30, 2026 and December 31, 2025 was as follows:

Goodwill is not amortized but is subject to an annual impairment test during the fourth quarter of each year, or more frequently if goodwill impairment indicators exist.

Other intangible assets were as follows:

(*)All subject to amortization.

Amortization associated with other intangible assets was as follows:

(a)Includes $5 million for the three months ended September 30, 2026 and 2025 and $15 million for the nine months ended September 30, 2026 and 2025 recorded as a reduction to operating revenues.

(b)Recorded as a reduction to operating revenues.

Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed balance sheets that total to the amount shown in the condensed statements of cash flows for the applicable Registrants:

(a)For Southern Company Gas, reflects funds held to support letters of credit. For Southern Company, also reflects collateral for life insurance and long-term disability insurance held at Southern Holdings.

(b)Total may not add due to rounding.

Natural Gas for Sale

With the exception of Nicor Gas, Southern Company Gas records natural gas inventories on a weighted average cost basis. For any declines in market prices below the weighted average cost considered to be non-temporary, an adjustment is recorded to reduce the value of natural gas inventories to market value. Nicor Gas' natural gas inventory is carried at cost on a LIFO basis. Inventory decrements occurring during the year that are restored prior to year-end are charged to cost of natural gas at the estimated average replacement cost. Inventory decrements that are not restored prior to year-end are charged to cost of natural gas at the actual LIFO cost of the inventory layers liquidated.

Southern Company Gas recorded no material adjustments to natural gas inventories for either period presented. Nicor Gas' inventory decrements that occurred during the year have been restored as of September 30, 2026.

Asset Retirement Obligations

See BUSINESS – "Regulation – Federal Power Act" in Item 1 and Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.

On April 16, 2026, the FERC issued a surrender order for Georgia Power's Langdale and Riverview hydroelectric projects, which includes dam removal obligations and other post-dam removal activities. As a result, in June 2026, Georgia Power recorded AROs of $46 million.