ALABAMA POWER CO

AND RESULTS OF OPERATIONS

OVERVIEW

Southern Company is a holding company that owns all of the common stock of three traditional electric operating companies (Alabama Power, Georgia Power, and Mississippi Power), Southern Power, and Southern Company Gas and owns other direct and indirect subsidiaries. The primary businesses of the Southern Company system are electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. Southern Company's reportable segments are the sale of electricity by the traditional electric operating companies, the sale of electricity in the competitive wholesale market by Southern Power, and the distribution of natural gas and sale of other complementary products and services by Southern Company Gas. Alabama Power, Georgia Power, and Mississippi Power each operate with one reportable business segment, since substantially all of their business is providing electric service to customers. Southern Power also operates its business with one reportable business segment, the sale of electricity in the competitive wholesale market. Southern Company Gas' reportable segments are gas distribution operations, gas pipeline investments, and gas marketing services. See Note (L) to the Condensed Financial Statements herein for additional information on segment reporting. For additional information on the Registrants' primary business activities, see BUSINESS – "The Southern Company System" in Item 1 of the Form 10-K.

The Registrants continue to focus on several key performance indicators. For the traditional electric operating companies and Southern Company Gas, these indicators include, but are not limited to, customer satisfaction, plant availability, electric and natural gas system reliability, and execution of major construction projects. Southern Company Gas also continues to focus on several operating metrics, including customer count and volumes of natural gas sold. For Southern Power, key performance indicators include, but are not limited to, the equivalent forced outage rate and contract availability to evaluate operating results and help ensure its ability to meet its contractual commitments to customers. In addition, Southern Company and the Subsidiary Registrants focus on earnings per share and net income, respectively, as a key performance indicator.

Recent Developments

In December 2025, the Alabama PSC issued a consent order to keep retail rates stable through 2027. On April 2, 2026, the State of Alabama enacted legislation (Power to the People Act) providing that retail base rates established and in place on October 1, 2026 may not be increased before January 1, 2029 for utilities that are regulated by the Alabama PSC and that provide retail electric service. The ultimate outcome of this matter cannot be determined at this time. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Rate CNP New Plant

On November 4, 2026, in conjunction with a Rate CNP New Plant filing, Alabama Power requested authorization from the Alabama PSC to defer until 2029 the recovery of the costs associated with the Lindsay Hill Generating Station to reconcile the timing of that recovery with the apparent intent of the Power to the People Act. In this filing, Alabama Power proposed providing bill credits to retail customers during 2028 to offset any rate impact of the previously approved cost recovery associated with the Lindsay Hill Generating Station through Rate CNP New Plant beginning January 2028. Alabama Power also proposed establishing a regulatory asset for the associated costs in 2028 to be recovered over a five-year period starting in 2029 in order to effectuate the previously approved cost recovery. The ultimate outcome of this matter cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Alabama Power – Power to the People Act" herein and Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Potential Cost Exposure Petition

In addition to comprehensive pricing, early termination fees, and security features such as guarantees or surety bonds, Alabama Power has included in certain electric service contracts an Incremental Revenue Component (IRC) designed to further help mitigate Potential Cost Exposure (PCE) associated with expected incremental investments.

On October 16, 2026, Alabama Power filed a petition with the Alabama PSC seeking authorization to establish a regulatory liability effective October 1, 2026 for future PCE to align with the IRC.

Alabama Power proposed in this petition that when the IRC amounts are billed, Alabama Power would identify a corresponding amount of PCE and record that amount as a regulatory liability, with a corresponding charge to amortization. This would allow Alabama Power to establish a regulatory liability to mitigate PCE when and if it materializes while the related IRC amounts are billed. Once risk mitigation thresholds are achieved, Alabama Power would begin systematically reducing the regulatory liability with a corresponding credit to amortization.

The ultimate outcome of this matter cannot be determined at this time.

On May 28, 2026, the Georgia PSC approved a stipulation among Georgia Power, the staff of the Georgia PSC, and certain intervenors regarding Georgia Power's separate filings in February 2026 associated with recovery of fuel and storm restoration costs. The approved stipulation decreased annual fuel billings by 12.9%, or approximately $394 million, effective June 1, 2026. Under the stipulation, the Georgia PSC approved the following related to storm restoration costs:

•Recovery of $31 million annually for storm restoration costs incurred after December 31, 2025.

•Recovery of Georgia Power's adjusted regulatory asset balance totaling $869 million, as determined through the proceedings and stipulation, related to storm damage as of December 31, 2025 over a period of 67 months from June 1, 2026 through December 31, 2031, or $156 million annually.

Additionally, the stipulation provided for the treatment of the Internal Revenue Code §45U PTCs generated from Georgia Power's nuclear generating facilities in 2024 and 2025, in which Georgia Power agreed to use $77 million of these tax credits for the benefit of customers.

See Note (B) to the Condensed Financial Statements under "Georgia Power" herein for additional information.

On August 26, 2026, as a result of additional large load contracts, Georgia Power filed a joint statement with the Georgia PSC Staff in which Georgia Power agreed to increase the amount of downward pressure on rates for non-large load customers to be included in its next base rate case to at least $949 million per year, on a levelized basis, for the years 2029, 2030, and 2031.

See Note (B) to the Condensed Financial Statements under "Georgia Power – Integrated Resource Plans" herein for additional information.

On June 18, 2026, the Mississippi PSC approved Mississippi Power's annual retail PEP Evaluation Report for 2026, resulting in an annual increase in revenues of approximately 1.8%, or $20 million, primarily due to increases in investment and depreciation. In accordance with the PEP rate schedule, the increase became effective with the first billing cycle of January 2026. In the PEP filing, the Mississippi PSC approved the use of approximately $7 million of the reliability reserve balance, which Mississippi Power utilized for reliability-related generation, transmission, and distribution expenses during the first six months of 2026. In conjunction with the PEP filing, the Mississippi PSC approved approximately $21 million associated with certain federal excess accumulated deferred income taxes resulting from the Tax Reform Legislation to be credited back to customers over an 18-month period starting with the first billing cycle of July 2026.

See Note (B) to the Condensed Financial Statements under "Mississippi Power" herein for additional information.

In the first quarter 2026, Southern Power committed to development projects to uprate certain turbines at its existing Franklin and Wansley natural gas facilities, which are projected to add up to 400 MWs of incremental capacity.

Commercial operations for the incremental capacity at the natural gas facilities are projected to occur between the second quarter 2029 and the fourth quarter 2030. The ultimate outcome of these matters cannot be determined at this time.

During the first nine months of 2026, Southern Power placed in service the 180-MW second phase of the Millers Branch solar facility, as well as all 200 MWs and all 152 MWs of the repowering projects at the Kay and Grant wind facilities, respectively.

In addition, during the first nine months of 2026 and subsequent to September 30, 2026, Southern Power placed in service 82 MWs of the 147-MW repowering project at the Grant Plains wind facility. The ultimate outcome of this matter cannot be determined at this time.

See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

At September 30, 2026, Southern Power's average investment coverage ratio for its generating assets, including those owned with various partners, based on the ratio of investment under contract to total investment using the respective facilities' net book value (or expected in-service value for facilities under construction) as the investment amount was 98% through 2030 and 89% through 2035, with an average remaining contract duration of approximately 12 years.

Nicor Gas

On June 16, 2026, in connection with Nicor Gas' 2023 general base rate case proceeding, the Illinois Appellate Court determined that the Illinois Commission did not provide sufficient support for its disallowance of $43 million of Nicor Gas' planned capital investments that were expected to be completed by December 31, 2024. As the disallowance related to planned capital investments for which costs had not yet been incurred, it was not included in the pre-tax charge to income recorded in 2023. This matter remains subject to further proceedings before the Illinois Commission and had no impact on the current period financial statements. The ultimate outcome of this matter cannot be determined at this time.

On July 21, 2026, Nicor Gas filed a petition for leave to appeal with the Illinois Supreme Court related to the capital structure approved in Nicor Gas' 2023 general base rate case proceeding. On September 30, 2026, the Illinois Supreme Court denied Nicor Gas' petition. This matter is now concluded.

On September 8, 2026, Nicor Gas, the staff of the Illinois Commission, and certain other parties entered into a stipulation to resolve Nicor Gas' general base rate case filed on January 9, 2026. On October 15, 2026, the Illinois Commission entered an order approving the stipulation, which provides for an annual base rate revenue increase of approximately $82 million, an ROE of 9.48%, and an equity ratio of 50%, effective November 16, 2026. Under the stipulation, Nicor Gas has agreed that once the order approving the stipulation becomes final, including the resolution of any rehearing requests, it will file a motion to dismiss its pending appeal of the Illinois Commission's November 19, 2025 base rate case decision. The order remains subject to rehearing requests and related procedural actions. The ultimate outcome of this matter cannot be determined at this time.

Virginia Natural Gas

On August 4, 2026, Virginia Natural Gas filed a base rate case with the Virginia Commission seeking an increase in annual base revenues of $67 million, including $18 million related to the recovery of investments under the SAVE program. The requested increase is based on a projected 12-month period beginning January 1, 2027, an ROE of 10.45%, and an equity ratio of 54.86%. Rate adjustments will be effective January 1, 2027, subject to refund. The Virginia Commission is expected to issue an order on the requested increase in the third quarter 2027. The ultimate outcome of this matter cannot be determined at this time.