Table of Contents                                Index to Financial Statements

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to            

Commission File Number

Registrant, State of Incorporation, Address and Telephone Number

I.R.S. Employer Identification No.

1-3526

The Southern Company

58-0690070

(A Delaware Corporation)

30 Ivan Allen Jr. Boulevard, N.W.

Atlanta, Georgia 30308

(404) 506-5000

1-3164

Alabama Power Company

63-0004250

(An Alabama Corporation)

600 North 18th Street

Birmingham, Alabama 35203

(205) 257-1000

1-6468

Georgia Power Company

58-0257110

(A Georgia Corporation)

241 Ralph McGill Boulevard, N.E.

Atlanta, Georgia 30308

(404) 506-6526

001-11229

Mississippi Power Company

64-0205820

(A Mississippi Corporation)

2992 West Beach Boulevard

Gulfport, Mississippi 39501

(228) 864-1211

001-37803

Southern Power Company

58-2598670

(A Delaware Corporation)

30 Ivan Allen Jr. Boulevard, N.W.

Atlanta, Georgia 30308

(404) 506-5000

1-14174

Southern Company Gas

58-2210952

(A Georgia Corporation)

Ten Peachtree Place, N.E.

Atlanta, Georgia 30309

(404) 584-4000

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Securities registered pursuant to Section 12(b) of the Act:

Registrant			Title of Each Class			Trading Symbol(s)			Name of Each Exchange on Which Registered
The Southern Company			Common Stock, par value $5 per share			SO			New York Stock Exchange
									(NYSE)
The Southern Company			Series 2017B 5.25% Junior Subordinated Notes due 2077			SOJC			NYSE
The Southern Company			2019 Series A Corporate Units			SOLN			NYSE
The Southern Company			Series 2020A 4.95% Junior Subordinated Notes due 2080			SOJD			NYSE
The Southern Company			Series 2020C 4.20% Junior Subordinated Notes due 2060			SOJE			NYSE
The Southern Company			Series 2021B 1.875% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2081			SO 81			NYSE
Alabama Power Company			5.00% Series Class A Preferred Stock			ALP PR Q			NYSE
Georgia Power Company			Series 2017A 5.00% Junior Subordinated Notes due 2077			GPJA			NYSE
Southern Power Company			Series 2016B 1.850% Senior Notes due 2026			SO/26A			NYSE

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Registrant

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

The Southern Company

X

Alabama Power Company

X

Georgia Power Company

X

Mississippi Power Company

X

Southern Power Company

X

Southern Company Gas

X

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ (Response applicable to all registrants.)

Registrant			Description of Common Stock			Shares Outstanding at September 30, 2022
The Southern Company			Par Value $5 Per Share			1,088,672,828
Alabama Power Company			Par Value $40 Per Share			30,537,500
Georgia Power Company			Without Par Value			9,261,500
Mississippi Power Company			Without Par Value			1,121,000
Southern Power Company			Par Value $0.01 Per Share			1,000
Southern Company Gas			Par Value $0.01 Per Share			100

This combined Form 10-Q is separately filed by The Southern Company, Alabama Power Company, Georgia Power Company, Mississippi Power Company, Southern Power Company, and Southern Company Gas. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.

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TABLE OF CONTENTS

						Page
			Definitions			4
			Cautionary Statement Regarding Forward-Looking Information			8
			PART I—FINANCIAL INFORMATION
Item 1.			Financial Statements (Unaudited)			10
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			100
Item 3.			Quantitative and Qualitative Disclosures about Market Risk			158
Item 4.			Controls and Procedures			158
			PART II—OTHER INFORMATION
Item 1.			Legal Proceedings			159
Item 1A.			Risk Factors			159
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			Inapplicable
Item 3.			Defaults Upon Senior Securities			Inapplicable
Item 4.			Mine Safety Disclosures			Inapplicable
Item 5.			Other Information			Inapplicable
Item 6.			Exhibits			159
			Signatures			163

3

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DEFINITIONS

Term			Meaning
2019 ARP			Alternate Rate Plan approved by the Georgia PSC in 2019 for Georgia Power for the years 2020 through 2022
AFUDC			Allowance for funds used during construction
Alabama Power			Alabama Power Company
Amended and Restated Loan Guarantee Agreement			Loan guarantee agreement entered into by Georgia Power with the DOE in 2014, as amended and restated in March 2019, under which the proceeds of borrowings may be used to reimburse Georgia Power for Eligible Project Costs incurred in connection with its construction of Plant Vogtle Units 3 and 4
ARO			Asset retirement obligation
Atlanta Gas Light			Atlanta Gas Light Company, a wholly-owned subsidiary of Southern Company Gas
Bechtel			Bechtel Power Corporation, the primary contractor for the remaining construction activities for Plant Vogtle Units 3 and 4
Bechtel Agreement			The 2017 construction completion agreement between the Vogtle Owners and Bechtel
CCR			Coal combustion residuals
CCR Rule			Disposal of Coal Combustion Residuals from Electric Utilities final rule published by the EPA in 2015
Chattanooga Gas			Chattanooga Gas Company, a wholly-owned subsidiary of Southern Company Gas
Clean Air Act			Clean Air Act Amendments of 1990
COD			Commercial operation date
Contractor Settlement Agreement			The December 31, 2015 agreement between Westinghouse and the Vogtle Owners resolving disputes between the Vogtle Owners and the EPC Contractor under the Vogtle 3 and 4 Agreement
COVID-19			The novel coronavirus disease declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention in March 2020
CWIP			Construction work in progress
Dalton			City of Dalton, Georgia, an incorporated municipality in the State of Georgia, acting by and through its Board of Water, Light, and Sinking Fund Commissioners
Dalton Pipeline			A pipeline facility in Georgia in which Southern Company Gas has a 50% undivided ownership interest
DOE			U.S. Department of Energy
ECCR			Georgia Power's Environmental Compliance Cost Recovery tariff
Eligible Project Costs			Certain costs of construction relating to Plant Vogtle Units 3 and 4 that are eligible for financing under the loan guarantee program established under Title XVII of the Energy Policy Act of 2005
EPA			U.S. Environmental Protection Agency
EPC Contractor			Westinghouse and its affiliate, WECTEC Global Project Services Inc.; the former engineering, procurement, and construction contractor for Plant Vogtle Units 3 and 4
FERC			Federal Energy Regulatory Commission
FFB			Federal Financing Bank
Fitch			Fitch Ratings, Inc.
Form 10-K			Annual Report on Form 10-K of Southern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas for the year ended December 31, 2021, as applicable
GAAP			U.S. generally accepted accounting principles
Georgia Power			Georgia Power Company
GRAM			Atlanta Gas Light's Georgia Rate Adjustment Mechanism
Guarantee Settlement Agreement			The June 9, 2017 settlement agreement between the Vogtle Owners and Toshiba related to certain payment obligations of the EPC Contractor guaranteed by Toshiba
Gulf Power			Gulf Power Company, until January 1, 2019 a wholly-owned subsidiary of Southern Company; effective January 1, 2021, Gulf Power Company merged with and into Florida Power and Light Company, with Florida Power and Light Company remaining as the surviving company

4

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DEFINITIONS

(continued)

Term			Meaning
Heating Degree Days			A measure of weather, calculated when the average daily temperatures are less than 65 degrees Fahrenheit
Heating Season			The period from November through March when Southern Company Gas' natural gas usage and operating revenues are generally higher
HLBV			Hypothetical liquidation at book value
IGCC			Integrated coal gasification combined cycle, the technology originally approved for Mississippi Power's Kemper County energy facility
IIC			Intercompany Interchange Contract
IRP			Integrated resource plan
ITAAC			Inspections, Tests, Analyses, and Acceptance Criteria, standards established by the NRC
ITC			Investment tax credit
JEA			Jacksonville Electric Authority
KWH			Kilowatt-hour
LIBOR			London Interbank Offered Rate
LIFO			Last-in, first-out
LOCOM			Lower of weighted average cost or current market price
LTSA			Long-term service agreement
MEAG Power			Municipal Electric Authority of Georgia
Mississippi Power			Mississippi Power Company
mmBtu			Million British thermal units
Moody's			Moody's Investors Service, Inc.
MRA			Municipal and Rural Associations
MW			Megawatt
natural gas distribution utilities			Southern Company Gas' natural gas distribution utilities (Nicor Gas, Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas)
NCCR			Georgia Power's Nuclear Construction Cost Recovery tariff
NDR			Alabama Power's Natural Disaster Reserve
Nicor Gas			Northern Illinois Gas Company, a wholly-owned subsidiary of Southern Company Gas
N/M			Not meaningful
NRC			U.S. Nuclear Regulatory Commission
NYMEX			New York Mercantile Exchange, Inc.
OCI			Other comprehensive income
OPC			Oglethorpe Power Corporation (an electric membership corporation)
PennEast Pipeline			PennEast Pipeline Company, LLC, a joint venture in which Southern Company Gas has a 20% ownership interest
PEP			Mississippi Power's Performance Evaluation Plan
PowerSecure			PowerSecure, Inc., a wholly-owned subsidiary of Southern Company
PPA			Power purchase agreements, as well as, for Southern Power, contracts for differences that provide the owner of a renewable facility a certain fixed price for the electricity sold to the grid
PSC			Public Service Commission
PTC			Production tax credit
Rate CNP			Alabama Power's Rate Certificated New Plant, consisting of Rate CNP New Plant, Rate CNP Compliance, and Rate CNP PPA
Rate ECR			Alabama Power's Rate Energy Cost Recovery
Rate NDR			Alabama Power's Rate Natural Disaster Reserve
Rate RSE			Alabama Power's Rate Stabilization and Equalization

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DEFINITIONS

(continued)

Term			Meaning
Registrants			Southern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power Company, and Southern Company Gas
ROE			Return on equity
S&P			S&P Global Ratings, a division of S&P Global Inc.
SAVE			Steps to Advance Virginia's Energy, an infrastructure replacement program at Virginia Natural Gas
SCS			Southern Company Services, Inc., the Southern Company system service company and a wholly-owned subsidiary of Southern Company
SEC			U.S. Securities and Exchange Commission
SEGCO			Southern Electric Generating Company, 50% owned by each of Alabama Power and Georgia Power
Sequent			Sequent Energy Management, L.P. and Sequent Energy Canada Corp., wholly-owned subsidiaries of Southern Company Gas through June 30, 2021
SNG			Southern Natural Gas Company, L.L.C., a pipeline system in which Southern Company Gas has a 50% ownership interest
SOFR			Secured Overnight Financing Rate
Southern Company			The Southern Company
Southern Company Gas			Southern Company Gas and its subsidiaries
Southern Company Gas Capital			Southern Company Gas Capital Corporation, a 100%-owned subsidiary of Southern Company Gas
Southern Company power pool			The operating arrangement whereby the integrated generating resources of the traditional electric operating companies and Southern Power (excluding subsidiaries) are subject to joint commitment and dispatch in order to serve their combined load obligations
Southern Company system			Southern Company, the traditional electric operating companies, Southern Power, Southern Company Gas, SEGCO, Southern Nuclear, SCS, Southern Communications Services, Inc., PowerSecure, and other subsidiaries
Southern Holdings			Southern Company Holdings, Inc., a wholly-owned subsidiary of Southern Company
Southern Nuclear			Southern Nuclear Operating Company, Inc., a wholly-owned subsidiary of Southern Company
Southern Power			Southern Power Company and its subsidiaries
SouthStar			SouthStar Energy Services, LLC (a Marketer), a wholly-owned subsidiary of Southern Company Gas
SP Solar			SP Solar Holdings I, LP, a limited partnership indirectly owning substantially all of Southern Power's solar and battery energy storage facilities, in which Southern Power has a 67% ownership interest
SP Wind			SP Wind Holdings II, LLC, a holding company owning a portfolio of eight operating wind facilities, in which Southern Power is the controlling partner in a tax equity arrangement
Subsidiary Registrants			Alabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas
Toshiba			Toshiba Corporation, the parent company of Westinghouse
traditional electric operating companies			Alabama Power, Georgia Power, and Mississippi Power
VCM			Vogtle Construction Monitoring
VIE			Variable interest entity
Virginia Commission			Virginia State Corporation Commission
Virginia Natural Gas			Virginia Natural Gas, Inc., a wholly-owned subsidiary of Southern Company Gas
Vogtle 3 and 4 Agreement			Agreement entered into with the EPC Contractor in 2008 by Georgia Power, acting for itself and as agent for the Vogtle Owners, and rejected in bankruptcy in July 2017, pursuant to which the EPC Contractor agreed to design, engineer, procure, construct, and test Plant Vogtle Units 3 and 4
Vogtle Owners			Georgia Power, OPC, MEAG Power, and Dalton

6

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DEFINITIONS

(continued)

Term			Meaning
Vogtle Services Agreement			The June 2017 services agreement between the Vogtle Owners and the EPC Contractor, as amended and restated in July 2017, for the EPC Contractor to transition construction management of Plant Vogtle Units 3 and 4 to Southern Nuclear and to provide ongoing design, engineering, and procurement services to Southern Nuclear
WACOG			Weighted average cost of gas
Westinghouse			Westinghouse Electric Company LLC

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements include, among other things, statements concerning the potential and expected effects of the continued COVID-19 pandemic, regulated rates, the strategic goals for the business, customer and sales growth, economic conditions, cost recovery and other rate actions, projected equity ratios, current and proposed environmental regulations and related compliance plans and estimated expenditures, pending or potential litigation matters, access to sources of capital, financing activities, completion dates and costs of construction projects, matters related to the abandonment of the Kemper IGCC, completion of announced dispositions, filings with state and federal regulatory authorities, and estimated construction plans and expenditures. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "would," "should," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "potential," or "continue" or the negative of these terms or other similar terminology. There are various factors that could cause actual results to differ materially from those suggested by the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include:

•the impact of recent and future federal and state regulatory changes, including tax, environmental, and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations;

•the potential effects of the continued COVID-19 pandemic, including, but not limited to, those described in Item 1A "Risk Factors" of the Form 10-K;

•the extent and timing of costs and legal requirements related to CCR;

•current and future litigation or regulatory investigations, proceedings, or inquiries, including litigation and other disputes related to the Kemper County energy facility and Plant Vogtle Units 3 and 4;

•the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company's subsidiaries operate, including from the development and deployment of alternative energy sources;

•variations in demand for electricity and natural gas;

•available sources and costs of natural gas and other fuels and commodities;

•the ability to complete necessary or desirable pipeline expansion or infrastructure projects, limits on pipeline capacity, and operational interruptions to natural gas distribution and transmission activities;

•transmission constraints;

•effects of inflation;

•the ability to control costs and avoid cost and schedule overruns during the development, construction, and operation of facilities or other projects, including Plant Vogtle Units 3 and 4 (which includes components based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale) and Plant Barry Unit 8, due to current and/or future challenges which include, but are not limited to, changes in labor costs, availability, and productivity; challenges with management of contractors or vendors; subcontractor performance; adverse weather conditions; shortages, delays, increased costs, or inconsistent quality of equipment, materials, and labor; contractor or supplier delay; delays due to judicial or regulatory action; nonperformance under construction, operating, or other agreements; operational readiness, including specialized operator training and required site safety programs; engineering or design problems or any remediation related thereto; design and other licensing-based compliance matters, including, for Plant Vogtle Unit 4, inspections and the timely submittal by Southern Nuclear of the ITAAC documentation and the related investigations, reviews, and approvals by the NRC necessary to support NRC authorization to load fuel; challenges with start-up activities, including major equipment failure, or system integration; and/or operational performance; and challenges related to the COVID-19 pandemic;

•the ability to overcome or mitigate the current challenges at Plant Vogtle Units 3 and 4, as described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" in Item 1 herein, that could further impact the cost and schedule for the project;

•legal proceedings and regulatory approvals and actions related to construction projects, such as Plant Vogtle Units 3 and 4 and Plant Barry Unit 8, including PSC approvals and FERC and NRC actions;

•under certain specified circumstances, a decision by holders of more than 10% of the ownership interests of Plant Vogtle Units 3 and 4 not to proceed with construction;

•the ability of certain other Vogtle Owners to tender a portion of their ownership interests to Georgia Power following certain construction cost increases, including the purported exercises by OPC and Dalton of their tender options and related litigation;

8

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

(continued)

•in the event Georgia Power becomes obligated to provide funding to MEAG Power with respect to the portion of MEAG Power's ownership interest in Plant Vogtle Units 3 and 4 involving JEA, any inability of Georgia Power to receive repayment of such funding;

•the ability to construct facilities in accordance with the requirements of permits and licenses (including satisfaction of NRC requirements), to satisfy any environmental performance standards and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction;

•investment performance of the employee and retiree benefit plans and nuclear decommissioning trust funds;

•advances in technology, including the pace and extent of development of low- to no-carbon energy and battery energy storage technologies and negative carbon concepts;

•performance of counterparties under ongoing renewable energy partnerships and development agreements;

•state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to ROE, equity ratios, additional generating capacity, and fuel and other cost recovery mechanisms;

•the ability to successfully operate the traditional electric operating companies' and SEGCO's generation, transmission, and distribution facilities, Southern Power's generation facilities, and Southern Company Gas' natural gas distribution and storage facilities and the successful performance of necessary corporate functions;

•the inherent risks involved in operating and constructing nuclear generating facilities;

•the inherent risks involved in transporting and storing natural gas;

•the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities;

•internal restructuring or other restructuring options that may be pursued;

•potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries;

•the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due and to perform as required;

•the ability to obtain new short- and long-term contracts with wholesale customers;

•the direct or indirect effect on the Southern Company system's business resulting from cyber intrusion or physical attack and the threat of physical attacks;

•interest rate fluctuations and financial market conditions and the results of financing efforts;

•access to capital markets and other financing sources;

•changes in Southern Company's and any of its subsidiaries' credit ratings;

•the replacement of LIBOR with an alternative reference rate;

•the ability of the traditional electric operating companies to obtain additional generating capacity (or sell excess generating capacity) at competitive prices;

•catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events, political unrest, wars, or other similar occurrences;

•the direct or indirect effects on the Southern Company system's business resulting from incidents affecting the U.S. electric grid, natural gas pipeline infrastructure, or operation of generating or storage resources;

•impairments of goodwill or long-lived assets;

•the effect of accounting pronouncements issued periodically by standard-setting bodies; and

•other factors discussed elsewhere herein and in other reports (including the Form 10-K) filed by the Registrants from time to time with the SEC.

The Registrants expressly disclaim any obligation to update any forward-looking statements.

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PART I

Item 1. Financial Statements (Unaudited).

			Page
The Southern Company and Subsidiary Companies:
Condensed Consolidated Statements of Income			11
Condensed Consolidated Statements of Comprehensive Income			12
Condensed Consolidated Statements of Cash Flows			13
Condensed Consolidated Balance Sheets			14
Condensed Consolidated Statements of Stockholders' Equity			16
Alabama Power Company:
Condensed Statements of Income			18
Condensed Statements of Comprehensive Income			18
Condensed Statements of Cash Flows			19
Condensed Balance Sheets			20
Condensed Statements of Common Stockholder's Equity			22
Georgia Power Company:
Condensed Statements of Income			23
Condensed Statements of Comprehensive Income			23
Condensed Statements of Cash Flows			24
Condensed Balance Sheets			25
Condensed Statements of Common Stockholder's Equity			27
Mississippi Power Company:
Condensed Statements of Income			28
Condensed Statements of Comprehensive Income			28
Condensed Statements of Cash Flows			29
Condensed Balance Sheets			30
Condensed Statements of Common Stockholder's Equity			32
Southern Power Company and Subsidiary Companies:
Condensed Consolidated Statements of Income			33
Condensed Consolidated Statements of Comprehensive Income			33
Condensed Consolidated Statements of Cash Flows			34
Condensed Consolidated Balance Sheets			35
Condensed Consolidated Statements of Stockholders' Equity			37
Southern Company Gas and Subsidiary Companies:
Condensed Consolidated Statements of Income			39
Condensed Consolidated Statements of Comprehensive Income			39
Condensed Consolidated Statements of Cash Flows			40
Condensed Consolidated Balance Sheets			41
Condensed Consolidated Statements of Stockholder's Equity			43
Combined Notes to the Condensed Financial Statements			44

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

 

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Operating Revenues:
Retail electric revenues			$	5,961					$	4,551					$	14,363					$	11,492
Wholesale electric revenues			1,197						731						2,798						1,822
Other electric revenues			185						179						554						525
Natural gas revenues (includes alternative revenue programs of     $(1), $(1), $—, and $3, respectively)			857						623						3,998						2,994
Other revenues			178						154						519						513
Total operating revenues			8,378						6,238						22,232						17,346
Operating Expenses:
Fuel			2,423						1,234						5,249						2,930
Purchased power			645						288						1,285						712
Cost of natural gas			294						129						1,840						943
Cost of other sales			92						71						275						255
Other operations and maintenance			1,547						1,446						4,621						4,257
Depreciation and amortization			922						896						2,728						2,658
Taxes other than income taxes			352						312						1,073						969
Estimated loss on Plant Vogtle Units 3 and 4			(70)						264						(18)						772
Gain on dispositions, net			(20)						(125)						(53)						(179)
Total operating expenses			6,185						4,515						17,000						13,317
Operating Income			2,193						1,723						5,232						4,029
Other Income and (Expense):
Allowance for equity funds used during construction			59						49						163						140
Earnings from equity method investments			28						30						109						35
Interest expense, net of amounts capitalized			(511)						(451)						(1,461)						(1,352)
Other income (expense), net			132						131						414						290
Total other income and (expense)			(292)						(241)						(775)						(887)
Earnings Before Income Taxes			1,901						1,482						4,457						3,142
Income taxes			414						372						891						550
Consolidated Net Income			1,487						1,110						3,566						2,592
Dividends on preferred stock of subsidiaries			3						4						10						11
Net income (loss) attributable to noncontrolling interests			12						5						(55)						(27)
Consolidated Net Income Attributable to    Southern Company			$	1,472					$	1,101					$	3,611					$	2,608
Common Stock Data:
Earnings per share -
Basic			$	1.36					$	1.04					$	3.38					$	2.46
Diluted			$	1.35					$	1.03					$	3.36					$	2.44
Average number of shares of common stock outstanding (in millions)
Basic			1,082						1,061						1,070						1,060
Diluted			1,088						1,068						1,076						1,067

The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

 

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Consolidated Net Income			$	1,487					$	1,110					$	3,566					$	2,592
Other comprehensive income:
Qualifying hedges:
Changes in fair value, net of tax of     $2, $1, $(5), and $(4), respectively			—						1						(27)						(15)
Reclassification adjustment for amounts included in net income,    net of tax of $8, $10, $32, and $27, respectively			26						31						100						81
Pension and other postretirement benefit plans:
Reclassification adjustment for amounts included in net income,    net of tax of $1, $1, $3, and $4, respectively			2						4						8						10
Total other comprehensive income			28						36						81						76
Comprehensive Income			1,515						1,146						3,647						2,668
Dividends on preferred stock of subsidiaries			3						4						10						11
Comprehensive income (loss) attributable to noncontrolling interests			12						5						(55)						(27)
Consolidated Comprehensive Income Attributable to    Southern Company			$	1,500					$	1,137					$	3,692					$	2,684

The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

			For the Nine Months Ended September 30,
			2022						2021
			(in millions)
Operating Activities:
Consolidated net income			$	3,566					$	2,592
Adjustments to reconcile consolidated net income to net cash provided from operating activities —
Depreciation and amortization, total			3,084						2,944
Deferred income taxes			608						89
Utilization of federal investment tax credits			266						256
Allowance for equity funds used during construction			(163)						(140)
Mark-to-market adjustments			(33)						147
Pension, postretirement, and other employee benefits			(322)						(218)
Settlement of asset retirement obligations			(314)						(341)
Stock based compensation expense			116						134
Estimated loss on Plant Vogtle Units 3 and 4			(18)						772
Storm damage accruals			160						166
Gain on dispositions, net			(41)						(171)
Natural gas cost under recovery – long-term			207						(79)
Retail fuel cost under recovery – long-term			(1,701)						(209)
Other, net			(45)						156
Changes in certain current assets and liabilities —
-Receivables			(327)						2
-Materials and supplies			(138)						(91)
-Natural gas for sale, net of temporary LIFO liquidation			(136)						20
-Natural gas cost under recovery			(124)						(432)
-Other current assets			(343)						(180)
-Accounts payable			805						(45)
-Accrued taxes			167						288
-Accrued compensation			(123)						(93)
-Accrued interest			(101)						(110)
-Retail fuel cost over recovery			(1)						(150)
-Other current liabilities			(32)						(226)
Net cash provided from operating activities			5,017						5,081
Investing Activities:
Business acquisitions, net of cash acquired			—						(345)
Property additions			(5,502)						(5,222)
Nuclear decommissioning trust fund purchases			(858)						(1,301)
Nuclear decommissioning trust fund sales			854						1,297
Proceeds from dispositions			120						160
Cost of removal, net of salvage			(518)						(282)
Payments pursuant to LTSAs			(121)						(145)
Other investing activities			73						(12)
Net cash used for investing activities			(5,952)						(5,850)
Financing Activities:
Decrease in notes payable, net			(349)						(203)
Proceeds —
Long-term debt			3,800						6,793
Short-term borrowings			1,200						325
Common stock			1,803						62
Redemptions and repurchases —
Long-term debt			(1,932)						(3,060)
Short-term borrowings			(900)						(25)
Capital contributions from noncontrolling interests			73						415
Distributions to noncontrolling interests			(175)						(204)
Payment of common stock dividends			(2,166)						(2,077)
Other financing activities			(235)						(224)
Net cash provided from financing activities			1,119						1,802
Net Change in Cash, Cash Equivalents, and Restricted Cash			184						1,033
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period			1,829						1,068
Cash, Cash Equivalents, and Restricted Cash at End of Period			$	2,013					$	2,101
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $74 and $68 capitalized for 2022 and 2021, respectively)			$	1,425					$	1,417
Income taxes, net			160						92
Noncash transactions —
Accrued property additions at end of period			872						915
Contributions from noncontrolling interests			—						89
Contributions of wind turbine equipment			—						82
Right-of-use assets obtained under leases			141						92
Reassessment of right-of-use assets under operating leases			40						—

The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

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    Table of Contents                                Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

Assets						At September 30, 2022						At December 31, 2021
						(in millions)
Current Assets:
Cash and cash equivalents						$	2,009					$	1,798
Receivables —
Customer accounts						2,223						1,806
Unbilled revenues						593						711
Other accounts and notes						533						523
Accumulated provision for uncollectible accounts						(80)						(78)
Materials and supplies						1,657						1,543
Fossil fuel for generation						526						450
Natural gas for sale						498						362
Prepaid expenses						373						330
Assets from risk management activities, net of collateral						289						151
Regulatory assets – asset retirement obligations						284						219
Natural gas cost under recovery						390						266
Other regulatory assets						746						653
Other current assets						322						231
Total current assets						10,363						8,965
Property, Plant, and Equipment:
In service						116,236						115,592
Less: Accumulated depreciation						34,922						34,079
Plant in service, net of depreciation						81,314						81,513
Other utility plant, net						602						—
Nuclear fuel, at amortized cost						840						824
Construction work in progress						10,773						8,771
Total property, plant, and equipment						93,529						91,108
Other Property and Investments:
Goodwill						5,280						5,280
Nuclear decommissioning trusts, at fair value						2,031						2,542
Equity investments in unconsolidated subsidiaries						1,292						1,282
Other intangible assets, net of amortization of $331 and $307, respectively						415						445
Miscellaneous property and investments						590						653
Total other property and investments						9,608						10,202
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization						1,560						1,701
Deferred charges related to income taxes						854						824
Prepaid pension costs						2,019						1,657
Unamortized loss on reacquired debt						243						258
Deferred under recovered fuel clause revenues						1,697						410
Regulatory assets – asset retirement obligations, deferred						6,519						5,466
Other regulatory assets, deferred						6,121						5,577
Other deferred charges and assets						1,492						1,366
Total deferred charges and other assets						20,505						17,259
Total Assets						$	134,005					$	127,534

The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

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    Table of Contents                                Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

Liabilities and Stockholders' Equity						At September 30, 2022						At December 31, 2021
						(in millions)
Current Liabilities:
Securities due within one year						$	3,241					$	2,157
Notes payable						1,398						1,440
Accounts payable						3,079						2,169
Customer deposits						516						479
Accrued taxes —
Accrued income taxes						129						50
Other accrued taxes						882						641
Accrued interest						431						533
Accrued compensation						961						1,070
Asset retirement obligations						689						697
Operating lease obligations						191						250
Other regulatory liabilities						440						563
Other current liabilities						844						872
Total current liabilities						12,801						10,921
Long-term Debt						50,427						50,120
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes						9,916						8,862
Deferred credits related to income taxes						5,271						5,401
Accumulated deferred ITCs						2,154						2,216
Employee benefit obligations						1,466						1,550
Operating lease obligations, deferred						1,393						1,503
Asset retirement obligations, deferred						11,007						10,990
Other cost of removal obligations						1,950						2,103
Other regulatory liabilities, deferred						536						485
Other deferred credits and liabilities						1,366						816
Total deferred credits and other liabilities						35,059						33,926
Total Liabilities						98,287						94,967
Redeemable Preferred Stock of Subsidiaries						242						291
Total Stockholders' Equity (See accompanying statements)						35,476						32,276
Total Liabilities and Stockholders' Equity						$	134,005					$	127,534

The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

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    Table of Contents                                Index to Financial Statements

SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

			Southern Company Common Stockholders' Equity
			Number of Common Shares												Common Stock																								Accumulated Other Comprehensive Income (Loss)
			Issued						Treasury						Par Value						Paid-In Capital						Treasury						Retained Earnings												Noncontrolling Interests						Total
			(in millions)
Balance at December 31, 2020			1,058						(1)						$	5,268					$	11,834					$	(46)					$	11,311					$	(395)								$	4,262					$	32,234
Consolidated net income (loss)			—						—						—						—						—						1,135						—									(32)						1,103
Other comprehensive income			—						—						—						—						—						—						28									—						28
Stock issued			2						—						5						9						—						—						—									—						14
Stock-based compensation			—						—						—						9						—						—						—									—						9
Cash dividends of $0.64 per share			—						—						—						—						—						(678)						—									—						(678)
Capital contributions from    noncontrolling interests			—						—						—						—						—						—						—									403						403
Distributions to noncontrolling interests			—						—						—						—						—						—						—									(46)						(46)
Other			—						—						—						2						—						—						—									(1)						1
Balance at March 31, 2021			1,060						(1)						5,273						11,854						(46)						11,768						(367)									4,586						33,068
Consolidated net income			—						—						—						—						—						372						—									—						372
Other comprehensive income			—						—						—						—						—						—						12									—						12
Stock issued			—						—						1						9						—						—						—									—						10
Stock-based compensation			—						—						—						22						—						—						—									—						22
Cash dividends of $0.66 per share			—						—						—						—						—						(699)						—									—						(699)
Capital contributions from    noncontrolling interests			—						—						—						—						—						—						—									29						29
Distributions to noncontrolling interests			—						—						—						—						—						—						—									(68)						(68)
Other			—						—						—						1						(2)						1						—									—						—
Balance at June 30, 2021			1,060						(1)						5,274						11,886						(48)						11,442						(355)									4,547						32,746
Consolidated net income			—						—						—						—						—						1,101						—									5						1,106
Other comprehensive income			—						—						—						—						—						—						36									—						36
Stock issued			1						—						4						34						—						—						—									—						38
Stock-based compensation			—						—						—						22						—						—						—									—						22
Cash dividends of $0.66 per share			—						—						—						—						—						(700)						—									—						(700)
Capital contributions from    noncontrolling interests			—						—						—						—						—						—						—									72						72
Distributions to noncontrolling interests			—						—						—						—						—						—						—									(94)						(94)
Other			—						—						—						(10)						2						1						—									—						(7)
Balance at September 30, 2021			1,061						(1)						$	5,278					$	11,932					$	(46)					$	11,844					$	(319)								$	4,530					$	33,219

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    Table of Contents                                Index to Financial Statements

SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

			Southern Company Common Stockholders' Equity
			Number of Common Shares												Common Stock																								Accumulated Other Comprehensive Income (Loss)
			Issued						Treasury						Par Value						Paid-In Capital						Treasury						Retained Earnings												Noncontrolling Interests						Total
			(in millions)
Balance at December 31, 2021			1,061						(1)						$	5,279					$	11,950					$	(47)					$	10,929					$	(237)								$	4,402					$	32,276
Consolidated net income (loss)			—						—						—						—						—						1,032						—									(45)						987
Other comprehensive income			—						—						—						—						—						—						42									—						42
Stock issued			3						—						7						31						—						—						—									—						38
Stock-based compensation			—						—						—						6						—						—						—									—						6
Cash dividends of $0.66 per share			—						—						—						—						—						(702)						—									—						(702)
Capital contributions from    noncontrolling interests			—						—						—						—						—						—						—									73						73
Distributions to noncontrolling interests			—						—						—						—						—						—						—									(98)						(98)
Other			—						—						—						7						(2)						2						—									—						7
Balance at March 31, 2022			1,064						(1)						5,286						11,994						(49)						11,261						(195)									4,332						32,629
Consolidated net income (loss)			—						—						—						—						—						1,107						—									(22)						1,085
Other comprehensive income			—						—						—						—						—						—						11									—						11
Stock issued			—						—						2						21						—						—						—									—						23
Stock-based compensation			—						—						—						14						—						—						—									—						14
Cash dividends of $0.68 per share			—						—						—						—						—						(723)						—									—						(723)
Distributions to noncontrolling interests			—						—						—						—						—						—						—									(28)						(28)
Other			—						—						—						4						(2)						—						—									—						2
Balance at June 30, 2022			1,064						(1)						5,288						12,033						(51)						11,645						(184)									4,282						33,013
Consolidated net income			—						—						—						—						—						1,472						—									12						1,484
Other comprehensive income			—						—						—						—						—						—						28									—						28
Stock issued			26						—						129						1,613						—						—						—									—						1,742
Stock-based compensation			—						—						—						15						—						—						—									—						15
Cash dividends of $0.68 per share			—						—						—						—						—						(741)						—									—						(741)
Distributions to noncontrolling interests			—						—						—						—						—						—						—									(57)						(57)
Other			—						—						—						(4)						(1)						(2)						(1)									—						(8)
Balance at September 30, 2022			1,090						(1)						$	5,417					$	13,657					$	(52)					$	12,374					$	(157)								$	4,237					$	35,476

The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

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ALABAMA POWER COMPANY

CONDENSED STATEMENTS OF INCOME (UNAUDITED)

 

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Operating Revenues:
Retail revenues			$	2,008					$	1,651					$	5,015					$	4,357
Wholesale revenues, non-affiliates			250						107						522						285
Wholesale revenues, affiliates			70						53						170						109
Other revenues			116						93						316						268
Total operating revenues			2,444						1,904						6,023						5,019
Operating Expenses:
Fuel			666						373						1,399						927
Purchased power, non-affiliates			185						76						347						173
Purchased power, affiliates			113						45						260						114
Other operations and maintenance			418						401						1,270						1,175
Depreciation and amortization			220						214						652						640
Taxes other than income taxes			106						99						309						303
Total operating expenses			1,708						1,208						4,237						3,332
Operating Income			736						696						1,786						1,687
Other Income and (Expense):
Allowance for equity funds used during construction			18						14						51						38
Interest expense, net of amounts capitalized			(98)						(84)						(278)						(252)
Other income (expense), net			38						29						101						93
Total other income and (expense)			(42)						(41)						(126)						(121)
Earnings Before Income Taxes			694						655						1,660						1,566
Income taxes			166						152						394						366
Net Income			528						503						1,266						1,200
Dividends on Preferred Stock			3						4						10						11
Net Income After Dividends on Preferred Stock			$	525					$	499					$	1,256					$	1,189

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

 

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Net Income			$	528					$	503					$	1,266					$	1,200
Other comprehensive income:
Qualifying hedges:
Changes in fair value, net of tax of     $—, $1, $—, and $1, respectively			1						4						(1)						3
Reclassification adjustment for amounts included in net income,    net of tax of $—, $—, $1, and $1, respectively			1						1						3						3
Total other comprehensive income			2						5						2						6
Comprehensive Income			$	530					$	508					$	1,268					$	1,206

The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

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ALABAMA POWER COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

			For the Nine Months Ended September 30,
			2022						2021
			(in millions)
Operating Activities:
Net income			$	1,266					$	1,200
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total			817						748
Deferred income taxes			210						104
Pension, postretirement, and other employee benefits			(85)						(74)
Settlement of asset retirement obligations			(139)						(152)
Retail fuel cost under recovery – long-term			(413)						—
Other, net			(98)						(51)
Changes in certain current assets and liabilities —
-Receivables			(296)						(128)
-Fossil fuel stock			(40)						91
-Prepayments			(34)						(24)
-Retail fuel cost under recovery			(93)						(79)
-Other current assets			(41)						(32)
-Accounts payable			(22)						(230)
-Accrued taxes			110						178
-Other current liabilities			(70)						(132)
Net cash provided from operating activities			1,072						1,419
Investing Activities:
Property additions			(1,483)						(1,235)
Nuclear decommissioning trust fund purchases			(273)						(536)
Nuclear decommissioning trust fund sales			273						536
Cost of removal, net of salvage			(163)						(93)
Other investing activities			5						(7)
Net cash used for investing activities			(1,641)						(1,335)
Financing Activities:
Proceeds — Senior notes			1,700						600
Redemptions —
Senior notes			(550)						(200)
Other long-term debt			—						(206)
Capital contributions from parent company			660						630
Payment of common stock dividends			(762)						(738)
Other financing activities			(81)						(30)
Net cash provided from financing activities			967						56
Net Change in Cash, Cash Equivalents, and Restricted Cash			398						140
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period			1,060						530
Cash, Cash Equivalents, and Restricted Cash at End of Period			$	1,458					$	670
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $14 and $11 capitalized for 2022 and 2021, respectively)			$	278					$	246
Income taxes, net			178						183
Noncash transactions —
Accrued property additions at end of period			186						178
Right-of-use assets obtained under leases			9						2

The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

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ALABAMA POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)

 

Assets						At September 30, 2022						At December 31, 2021
						(in millions)
Current Assets:
Cash and cash equivalents						$	1,458					$	1,060
Receivables —
Customer accounts						573						410
Unbilled revenues						146						138
Affiliated						84						37
Other accounts and notes						131						55
Accumulated provision for uncollectible accounts						(13)						(14)
Fossil fuel stock						199						159
Materials and supplies						568						548
Prepaid expenses						67						41
Other regulatory assets						298						208
Other current assets						129						67
Total current assets						3,640						2,709
Property, Plant, and Equipment:
In service						33,042						33,135
Less: Accumulated provision for depreciation						10,393						10,313
Plant in service, net of depreciation						22,649						22,822
Other utility plant, net						602						—
Nuclear fuel, at amortized cost						242						247
Construction work in progress						1,524						1,147
Total property, plant, and equipment						25,017						24,216
Other Property and Investments:
Nuclear decommissioning trusts, at fair value						1,067						1,325
Equity investments in unconsolidated subsidiaries						58						57
Miscellaneous property and investments						128						126
Total other property and investments						1,253						1,508
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization						70						108
Deferred charges related to income taxes						248						240
Prepaid pension and other postretirement benefit costs						605						513
Regulatory assets – asset retirement obligations						1,952						1,547
Other regulatory assets, deferred						2,048						1,807
Other deferred charges and assets						413						334
Total deferred charges and other assets						5,336						4,549
Total Assets						$	35,246					$	32,982

The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

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ALABAMA POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)

 

Liabilities and Stockholder's Equity						At September 30, 2022						At December 31, 2021
						(in millions)
Current Liabilities:
Securities due within one year						$	202					$	751
Accounts payable —
Affiliated						401						309
Other						376						459
Customer deposits						106						106
Accrued taxes						209						98
Accrued interest						86						100
Accrued compensation						200						219
Asset retirement obligations						327						320
Other regulatory liabilities						89						215
Other current liabilities						97						125
Total current liabilities						2,093						2,702
Long-term Debt						10,628						8,936
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes						3,829						3,573
Deferred credits related to income taxes						1,930						1,968
Accumulated deferred ITCs						82						88
Employee benefit obligations						171						171
Operating lease obligations						65						66
Asset retirement obligations, deferred						3,987						4,014
Other cost of removal obligations						57						192
Other regulatory liabilities, deferred						226						210
Other deferred credits and liabilities						62						58
Total deferred credits and other liabilities						10,409						10,340
Total Liabilities						23,130						21,978
Redeemable Preferred Stock						242						291
Common Stockholder's Equity (See accompanying statements)						11,874						10,713
Total Liabilities and Stockholder's Equity						$	35,246					$	32,982

The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

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ALABAMA POWER COMPANY

CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)

			Number of Common Shares Issued						Common Stock						Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Total
			(in millions)
Balance at December 31, 2020			31						$	1,222					$	5,413					$	3,194					$	(19)					$	9,810
Net income after dividends on    preferred stock			—						—						—						359						—						359
Capital contributions from parent company			—						—						602						—						—						602
Other comprehensive income			—						—						—						—						1						1
Cash dividends on common stock			—						—						—						(246)						—						(246)
Balance at March 31, 2021			31						1,222						6,015						3,307						(18)						10,526
Net income after dividends on    preferred stock			—						—						—						331						—						331
Capital contributions from parent company			—						—						26						—						—						26
Other comprehensive income			—						—						—						—						1						1
Cash dividends on common stock			—						—						—						(246)						—						(246)
Other			—						—						—						(1)						—						(1)
Balance at June 30, 2021			31						1,222						6,041						3,391						(17)						10,637
Net income after dividends on    preferred stock			—						—						—						499						—						499
Capital contributions from parent company			—						—						9						—						—						9
Other comprehensive income			—						—						—						—						5						5
Cash dividends on common stock			—						—						—						(246)						—						(246)
Other			—						—						—						—						(1)						(1)
Balance at September 30, 2021			31						$	1,222					$	6,050					$	3,644					$	(13)					$	10,903
Balance at December 31, 2021			31						$	1,222					$	6,056					$	3,448					$	(13)					$	10,713
Net income after dividends on    preferred stock			—						—						—						347						—						347
Capital contributions from parent company			—						—						626						—						—						626
Cash dividends on common stock			—						—						—						(254)						—						(254)
Balance at March 31, 2022			31						1,222						6,682						3,541						(13)						11,432
Net income after dividends on    preferred stock			—						—						—						383						—						383
Capital contributions from parent company			—						—						32						—						—						32
Other comprehensive income			—						—						—						—						1						1
Cash dividends on common stock			—						—						—						(254)						—						(254)
Balance at June 30, 2022			31						1,222						6,714						3,670						(12)						11,594
Net income after dividends on    preferred stock			—						—						—						525						—						525
Capital contributions from parent company			—						—						7						—						—						7
Other comprehensive income			—						—						—						—						2						2
Cash dividends on common stock			—						—						—						(254)						—						(254)
Balance at September 30, 2022			31						$	1,222					$	6,721					$	3,941					$	(10)					$	11,874

The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

22

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    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED STATEMENTS OF INCOME (UNAUDITED)

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Operating Revenues:
Retail revenues			$	3,703					$	2,652					$	8,629					$	6,465
Wholesale revenues			56						63						186						143
Other revenues			130						141						403						442
Total operating revenues			3,889						2,856						9,218						7,050
Operating Expenses:
Fuel			841						432						1,887						1,088
Purchased power, non-affiliates			304						173						700						461
Purchased power, affiliates			571						288						1,100						573
Other operations and maintenance			595						544						1,686						1,558
Depreciation and amortization			359						345						1,066						1,025
Taxes other than income taxes			155						130						420						365
Estimated loss on Plant Vogtle Units 3 and 4			(70)						264						(18)						772
Total operating expenses			2,755						2,176						6,841						5,842
Operating Income			1,134						680						2,377						1,208
Other Income and (Expense):
Allowance for equity funds used during construction			37						33						102						94
Interest expense, net of amounts capitalized			(123)						(106)						(347)						(315)
Other income (expense), net			36						42						140						124
Total other income and (expense)			(50)						(31)						(105)						(97)
Earnings Before Income Taxes			1,084						649						2,272						1,111
Income taxes			226						113						421						81
Net Income			$	858					$	536					$	1,851					$	1,030

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Net Income			$	858					$	536					$	1,851					$	1,030
Other comprehensive income:
Qualifying hedges:
Changes in fair value, net of tax of     $—, $—, $8, and $—, respectively			—						—						23						—
Reclassification adjustment for amounts included in net income,    net of tax of $—, $1, $1, and $2, respectively			1						2						4						5
Total other comprehensive income			1						2						27						5
Comprehensive Income			$	859					$	538					$	1,878					$	1,035

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

23

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    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

			For the Nine Months Ended September 30,
			2022						2021
			(in millions)
Operating Activities:
Net income			$	1,851					$	1,030
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total			1,211						1,164
Deferred income taxes			266						(299)
Utilization of federal investment tax credits			49						19
Allowance for equity funds used during construction			(102)						(94)
Pension, postretirement, and other employee benefits			(178)						(112)
Settlement of asset retirement obligations			(149)						(154)
Storm damage accruals			160						160
Retail fuel cost under recovery – long-term			(1,287)						(203)
Estimated loss on Plant Vogtle Units 3 and 4			(18)						772
Other, net			(71)						70
Changes in certain current assets and liabilities —
-Receivables			(321)						(85)
-Fossil fuel stock			(23)						77
-Materials and supplies			(67)						(60)
-Contract assets			(51)						(32)
-Other current assets			(72)						(20)
-Accounts payable			211						164
-Accrued taxes			151						154
-Retail fuel cost over recovery			—						(113)
-Other current liabilities			(78)						(88)
Net cash provided from operating activities			1,482						2,350
Investing Activities:
Property additions			(2,658)						(2,411)
Nuclear decommissioning trust fund purchases			(585)						(766)
Nuclear decommissioning trust fund sales			581						761
Cost of removal, net of salvage			(250)						(99)
Change in construction payables, net of joint owner portion			148						(68)
Contributions in aid of construction			102						71
Proceeds from dispositions			56						4
Other investing activities			(47)						(64)
Net cash used for investing activities			(2,653)						(2,572)
Financing Activities:
Increase (decrease) in notes payable, net			415						(60)
Proceeds —
Senior notes			1,500						750
Pollution control revenue bonds			—						122
FFB loan			—						371
Short-term borrowings			650						—
Redemptions and repurchases —
Senior notes			(400)						(325)
Pollution control revenue bonds			(53)						(69)
FFB loan			(66)						(75)
Short-term borrowings			(250)						—
Other long-term debt			(125)						—
Capital contributions from parent company			813						1,054
Payment of common stock dividends			(1,268)						(1,237)
Other financing activities			(45)						(26)
Net cash provided from financing activities			1,171						505
Net Change in Cash, Cash Equivalents, and Restricted Cash			—						283
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period			33						9
Cash, Cash Equivalents, and Restricted Cash at End of Period			$	33					$	292
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $52 and $47 capitalized for 2022 and 2021, respectively)			$	332					$	325
Income taxes, net			151						237
Noncash transactions —
Accrued property additions at end of period			609						477
Right-of-use assets obtained under operating leases			7						(3)
Right-of-use assets obtained under finance leases			112						—

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

24

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    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)

 

Assets						At September 30, 2022						At December 31, 2021
						(in millions)
Current Assets:
Cash and cash equivalents						$	33					$	33
Receivables —
Customer accounts, net						866						547
Unbilled revenues						267						231
Joint owner accounts						64						116
Affiliated						66						25
Other accounts and notes						30						44
Fossil fuel stock						272						248
Materials and supplies						713						670
Regulatory assets – asset retirement obligations						244						178
Assets from risk management activities						88						48
Other regulatory assets						299						289
Other current assets						212						130
Total current assets						3,154						2,559
Property, Plant, and Equipment:
In service						41,159						41,332
Less: Accumulated provision for depreciation						12,942						12,854
Plant in service, net of depreciation						28,217						28,478
Nuclear fuel, at amortized cost						598						577
Construction work in progress						8,053						6,688
Total property, plant, and equipment						36,868						35,743
Other Property and Investments:
Nuclear decommissioning trusts, at fair value						964						1,217
Equity investments in unconsolidated subsidiaries						51						50
Miscellaneous property and investments						87						69
Total other property and investments						1,102						1,336
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization						1,034						1,157
Deferred charges related to income taxes						573						550
Prepaid pension costs						697						563
Deferred under recovered fuel clause revenues						1,697						410
Regulatory assets – asset retirement obligations, deferred						4,323						3,688
Other regulatory assets, deferred						2,579						1,964
Other deferred charges and assets						519						491
Total deferred charges and other assets						11,422						8,823
Total Assets						$	52,546					$	48,461

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

25

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    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)

 

Liabilities and Stockholder's Equity						At September 30, 2022						At December 31, 2021
						(in millions)
Current Liabilities:
Securities due within one year						$	900					$	675
Notes payable						814						—
Accounts payable —
Affiliated						880						757
Other						1,025						702
Customer deposits						254						259
Accrued taxes						486						335
Accrued interest						127						136
Accrued compensation						213						232
Operating lease obligations						148						156
Asset retirement obligations						309						317
Other regulatory liabilities						197						280
Other current liabilities						243						254
Total current liabilities						5,596						4,103
Long-term Debt						13,831						13,109
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes						3,588						3,019
Deferred credits related to income taxes						2,264						2,321
Accumulated deferred ITCs						321						328
Employee benefit obligations						370						402
Operating lease obligations, deferred						854						999
Asset retirement obligations, deferred						6,547						6,507
Other deferred credits and liabilities						518						439
Total deferred credits and other liabilities						14,462						14,015
Total Liabilities						33,889						31,227
Common Stockholder's Equity (See accompanying statements)						18,657						17,234
Total Liabilities and Stockholder's Equity						$	52,546					$	48,461

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

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    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)

			Number of Common Shares Issued						Common Stock						Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Total
			(in millions)
Balance at December 31, 2020			9						$	398					$	12,361					$	3,789					$	(47)					$	16,501
Net income			—						—						—						351						—						351
Capital contributions from parent company			—						—						332						—						—						332
Other comprehensive income			—						—						—						—						2						2
Cash dividends on common stock			—						—						—						(412)						—						(412)
Balance at March 31, 2021			9						398						12,693						3,728						(45)						16,774
Net income			—						—						—						143						—						143
Capital contributions from parent company			—						—						40						—						—						40
Other comprehensive income			—						—						—						—						1						1
Cash dividends on common stock			—						—						—						(412)						—						(412)
Balance at June 30, 2021			9						398						12,733						3,459						(44)						16,546
Net income			—						—						—						536						—						536
Capital contributions from parent company			—						—						690						—						—						690
Other comprehensive income			—						—						—						—						2						2
Cash dividends on common stock			—						—						—						(413)						—						(413)
Balance at September 30, 2021			9						$	398					$	13,423					$	3,582					$	(42)					$	17,361
Balance at December 31, 2021			9						$	398					$	14,153					$	2,724					$	(41)					$	17,234
Net income			—						—						—						385						—						385
Capital contributions from parent company			—						—						443						—						—						443
Other comprehensive income			—						—						—						—						10						10
Cash dividends on common stock			—						—						—						(423)						—						(423)
Balance at March 31, 2022			9						398						14,596						2,686						(31)						17,649
Net income			—						—						—						608						—						608
Capital contributions from parent company			—						—						46						—						—						46
Other comprehensive income			—						—						—						—						16						16
Cash dividends on common stock			—						—						—						(422)						—						(422)
Balance at June 30, 2022			9						398						14,642						2,872						(15)						17,897
Net income			—						—						—						858						—						858
Capital contributions from parent company			—						—						324						—						—						324
Other comprehensive income			—						—						—						—						1						1
Cash dividends on common stock			—						—						—						(423)						—						(423)
Balance at September 30, 2022			9						$	398					$	14,966					$	3,307					$	(14)					$	18,657

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

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MISSISSIPPI POWER COMPANY

CONDENSED STATEMENTS OF INCOME (UNAUDITED)

 

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Operating Revenues:
Retail revenues			$	250					$	248					$	718					$	670
Wholesale revenues, non-affiliates			60						60						191						178
Wholesale revenues, affiliates			187						62						336						120
Other revenues			13						8						34						20
Total operating revenues			510						378						1,279						988
Operating Expenses:
Fuel and purchased power			262						145						601						351
Other operations and maintenance			86						85						252						230
Depreciation and amortization			45						46						135						138
Taxes other than income taxes			32						33						93						96
Total operating expenses			425						309						1,081						815
Operating Income			85						69						198						173
Other Income and (Expense):
Interest expense, net of amounts capitalized			(15)						(16)						(42)						(45)
Other income (expense), net			9						7						32						27
Total other income and (expense)			(6)						(9)						(10)						(18)
Earnings Before Income Taxes			79						60						188						155
Income taxes			17						10						38						22
Net Income			$	62					$	50					$	150					$	133

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Net Income			$	62					$	50					$	150					$	133
Other comprehensive income:
Qualifying hedges:
Reclassification adjustment for amounts included in net income,    net of tax of $—, $—, $—, and $—, respectively			—						—						—						1
Total other comprehensive income			—						—						—						1
Comprehensive Income			$	62					$	50					$	150					$	134

The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

28

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MISSISSIPPI POWER COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

			For the Nine Months Ended September 30,
			2022						2021
			(in millions)
Operating Activities:
Net income			$	150					$	133
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total			164						161
Settlement of asset retirement obligations			(15)						(18)
Other, net			20						(20)
Changes in certain current assets and liabilities —
-Receivables			(58)						(19)
-Other current assets			(17)						(9)
-Accounts payable			41						(12)
-Accrued taxes			(3)						(20)
-Retail fuel cost over recovery			—						(19)
-Other current liabilities			(3)						(18)
Net cash provided from operating activities			279						159
Investing Activities:
Property additions			(165)						(135)
Construction payables			(9)						(11)
Payments pursuant to LTSAs			(23)						(21)
Other investing activities			(22)						(15)
Net cash used for investing activities			(219)						(182)
Financing Activities:
Decrease in notes payable, net			—						(25)
Proceeds — Senior notes			—						525
Redemptions —
Other revenue bonds			—						(270)
Other long-term debt			—						(75)
Capital contributions from parent company			55						103
Payment of common stock dividends			(128)						(118)
Other financing activities			1						(10)
Net cash provided from (used for) financing activities			(72)						130
Net Change in Cash, Cash Equivalents, and Restricted Cash			(12)						107
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period			61						39
Cash, Cash Equivalents, and Restricted Cash at End of Period			$	49					$	146
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest			$	49					$	53
Income taxes, net			18						11
Noncash transactions — Accrued property additions at end of period			16						23

The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

29

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    Table of Contents                                Index to Financial Statements

MISSISSIPPI POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)

 

Assets						At September 30, 2022						At December 31, 2021
						(in millions)
Current Assets:
Cash and cash equivalents						$	49					$	61
Receivables —
Customer accounts, net						71						37
Unbilled revenues						43						34
Affiliated						39						29
Other accounts and notes						34						28
Fossil fuel stock						37						28
Materials and supplies						80						70
Assets from risk management activities						69						28
Other regulatory assets						60						54
Other current assets						16						13
Total current assets						498						382
Property, Plant, and Equipment:
In service						5,209						5,106
Less: Accumulated provision for depreciation						1,669						1,591
Plant in service, net of depreciation						3,540						3,515
Construction work in progress						168						127
Total property, plant, and equipment						3,708						3,642
Other Property and Investments						171						179
Deferred Charges and Other Assets:
Deferred charges related to income taxes						30						31
Prepaid pension costs						97						79
Regulatory assets – asset retirement obligations						238						232
Other regulatory assets, deferred						271						317
Accumulated deferred income taxes						108						118
Other deferred charges and assets						130						100
Total deferred charges and other assets						874						877
Total Assets						$	5,251					$	5,080

The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

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    Table of Contents                                Index to Financial Statements

MISSISSIPPI POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)

 

Liabilities and Stockholder's Equity						At September 30, 2022						At December 31, 2021
						(in millions)
Current Liabilities:
Securities due within one year						$	1					$	1
Accounts payable —
Affiliated						96						81
Other						68						47
Accrued taxes						116						120
Accrued compensation						33						36
Asset retirement obligations						20						30
Other regulatory liabilities						102						59
Other current liabilities						80						65
Total current liabilities						516						439
Long-term Debt						1,509						1,510
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes						465						464
Deferred credits related to income taxes						258						269
Employee benefit obligations						86						88
Asset retirement obligations, deferred						162						160
Other cost of removal obligations						197						195
Other regulatory liabilities, deferred						87						64
Other deferred credits and liabilities						25						24
Total deferred credits and other liabilities						1,280						1,264
Total Liabilities						3,305						3,213
Common Stockholder's Equity (See accompanying statements)						1,946						1,867
Total Liabilities and Stockholder's Equity						$	5,251					$	5,080

The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

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MISSISSIPPI POWER COMPANY

CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)

			Number of Common Shares Issued						Common Stock						Paid-In Capital						Retained Earnings (Accumulated Deficit)						Accumulated Other Comprehensive Income (Loss)						Total
			(in millions)
Balance at December 31, 2020			1						$	38					$	4,460					$	(2,754)					$	(2)					$	1,742
Net income			—						—						—						45						—						45
Capital contributions from parent company			—						—						100						—						—						100
Cash dividends on common stock			—						—						—						(39)						—						(39)
Balance at March 31, 2021			1						38						4,560						(2,748)						(2)						1,848
Net income			—						—						—						38						—						38
Capital contributions from parent company			—						—						2						—						—						2
Cash dividends on common stock			—						—						—						(39)						—						(39)
Other			—						—						—						(1)						1						—
Balance at June 30, 2021			1						38						4,562						(2,750)						(1)						1,849
Net income			—						—						—						50						—						50
Capital contributions from parent company			—						—						3						—						—						3
Cash dividends on common stock			—						—						—						(39)						—						(39)
Balance at September 30, 2021			1						$	38					$	4,565					$	(2,739)					$	(1)					$	1,863
Balance at December 31, 2021			1						$	38					$	4,582					$	(2,753)					$	—					$	1,867
Net income			—						—						—						42						—						42
Capital contributions from parent company			—						—						51						—						—						51
Cash dividends on common stock			—						—						—						(43)						—						(43)
Balance at March 31, 2022			1						38						4,633						(2,754)						—						1,917
Net income			—						—						—						45						—						45
Capital contributions from parent company			—						—						1						—						—						1
Cash dividends on common stock			—						—						—						(42)						—						(42)
Balance at June 30, 2022			1						38						4,634						(2,751)						—						1,921
Net income			—						—						—						62						—						62
Capital contributions from parent company			—						—						5						—						—						5
Cash dividends on common stock			—						—						—						(42)						—						(42)
Balance at September 30, 2022			1						$	38					$	4,639					$	(2,731)					$	—					$	1,946

The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

 

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Operating Revenues:
Wholesale revenues, non-affiliates			$	835					$	503					$	1,918					$	1,231
Wholesale revenues, affiliates			336						167						673						361
Other revenues			9						9						27						18
Total operating revenues			1,180						679						2,618						1,610
Operating Expenses:
Fuel			605						259						1,274						540
Purchased power			144						41						233						86
Other operations and maintenance			113						94						331						308
Depreciation and amortization			133						132						384						383
Taxes other than income taxes			13						12						38						35
Loss on sales-type leases			—						15						1						15
Gain on dispositions, net			—						—						(2)						(39)
Total operating expenses			1,008						553						2,259						1,328
Operating Income			172						126						359						282
Other Income and (Expense):
Interest expense, net of amounts capitalized			(32)						(36)						(105)						(111)
Other income (expense), net			3						2						5						10
Total other income and (expense)			(29)						(34)						(100)						(101)
Earnings Before Income Taxes			143						92						259						181
Income taxes (benefit)			36						9						49						(3)
Net Income			107						83						210						184
Net income (loss) attributable to noncontrolling interests			12						5						(55)						(27)
Net Income Attributable to Southern Power			$	95					$	78					$	265					$	211

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

 

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Net Income			$	107					$	83					$	210					$	184
Other comprehensive income (loss):
Qualifying hedges:
Changes in fair value, net of tax of     $(11), $(7), $(35), and $(16), respectively			(35)						(21)						(106)						(48)
Reclassification adjustment for amounts included in net income,    net of tax of $9, $9, $35, and $22, respectively			28						27						106						66
Pension and other postretirement benefit plans:
Reclassification adjustment for amounts included in net income,    net of tax of $—, $—, $—, and $1, respectively			—						1						1						2
Total other comprehensive income (loss)			(7)						7						1						20
Comprehensive Income			100						90						211						204
Comprehensive income (loss) attributable to noncontrolling interests			12						5						(55)						(27)
Comprehensive Income Attributable to Southern Power			$	88					$	85					$	266					$	231

The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.

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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

			For the Nine Months Ended September 30,
			2022						2021
			(in millions)
Operating Activities:
Net income			$	210					$	184
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total			404						402
Deferred income taxes			21						(16)
Utilization of federal investment tax credits			218						237
Amortization of investment tax credits			(44)						(44)
Gain on dispositions, net			(2)						(39)
Other, net			1						14
Changes in certain current assets and liabilities —
-Receivables			(124)						(117)
-Prepaid income taxes			22						63
-Other current assets			(15)						(5)
-Accounts payable			95						55
-Accrued taxes			55						15
-Other current liabilities			(14)						1
Net cash provided from operating activities			827						750
Investing Activities:
Business acquisitions, net of cash acquired			—						(345)
Property additions			(64)						(355)
Proceeds from dispositions			48						22
Change in construction payables			(60)						(22)
Payments pursuant to LTSAs			(52)						(61)
Other investing activities			—						8
Net cash used for investing activities			(128)						(753)
Financing Activities:
Decrease in notes payable, net			(5)						(148)
Proceeds — Senior notes			—						400
Redemptions — Senior notes			(677)						—
Capital contributions from parent company			330						4
Return of capital to parent company			—						(271)
Capital contributions from noncontrolling interests			73						415
Distributions to noncontrolling interests			(175)						(204)
Payment of common stock dividends			(148)						(153)
Other financing activities			(1)						(10)
Net cash provided from (used for) financing activities			(603)						33
Net Change in Cash, Cash Equivalents, and Restricted Cash			96						30
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period			135						183
Cash, Cash Equivalents, and Restricted Cash at End of Period			$	231					$	213
Supplemental Cash Flow Information:
Cash paid (received) during the period for —
Interest (net of $— and $5 capitalized for 2022 and 2021, respectively)			$	120					$	118
Income taxes, net			(202)						(235)
Noncash transactions —
Contributions from noncontrolling interests			—						89
Contributions of wind turbine equipment			—						82
Accrued property additions at end of period			30						53
Right-of-use assets obtained under operating leases			—						66
Reassessment of right-of-use assets under operating leases			40						—

The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.

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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

Assets						At September 30, 2022						At December 31, 2021
						(in millions)
Current Assets:
Cash and cash equivalents						$	229					$	107
Receivables —
Customer accounts, net						232						139
Affiliated						95						51
Other						24						29
Materials and supplies						112						106
Prepaid income taxes						5						27
Other current assets						51						46
Total current assets						748						505
Property, Plant, and Equipment:
In service						14,641						14,585
Less: Accumulated provision for depreciation						3,589						3,241
Plant in service, net of depreciation						11,052						11,344
Construction work in progress						48						45
Total property, plant, and equipment						11,100						11,389
Other Property and Investments:
Intangible assets, net of amortization of $124 and $109, respectively						268						282
Equity investments in unconsolidated subsidiaries						49						86
Net investment in sales-type leases						155						161
Total other property and investments						472						529
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization						491						479
Prepaid LTSAs						210						210
Other deferred charges and assets						262						278
Total deferred charges and other assets						963						967
Total Assets						$	13,283					$	13,390

The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.

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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

Liabilities and Stockholders' Equity						At September 30, 2022						At December 31, 2021
						(in millions)
Current Liabilities:
Securities due within one year						$	290					$	679
Notes payable						208						211
Accounts payable —
Affiliated						179						92
Other						70						85
Accrued taxes						208						14
Accrued interest						22						32
Other current liabilities						96						140
Total current liabilities						1,073						1,253
Long-term Debt						2,642						3,009
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes						315						215
Accumulated deferred ITCs						1,571						1,614
Operating lease obligations						515						497
Other deferred credits and liabilities						287						204
Total deferred credits and other liabilities						2,688						2,530
Total Liabilities						6,403						6,792
Total Stockholders' Equity (See accompanying statements)						6,880						6,598
Total Liabilities and Stockholders' Equity						$	13,283					$	13,390

The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.

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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

															Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Total Common Stockholders' Equity						Noncontrolling Interests						Total
															(in millions)
Balance at December 31, 2020															$	914					$	1,522					$	(67)					$	2,369					$	4,262					$	6,631
Net income (loss)															—						97						—						97						(32)						65
Return of capital to parent company															(271)						—						—						(271)						—						(271)
Other comprehensive income															—						—						16						16						—						16
Cash dividends on common stock															—						(51)						—						(51)						—						(51)
Capital contributions from    noncontrolling interests															—						—						—						—						403						403
Distributions to noncontrolling interests															—						—						—						—						(46)						(46)
Other															(2)						1						(1)						(2)						(1)						(3)
Balance at March 31, 2021															641						1,569						(52)						2,158						4,586						6,744
Net income															—						36						—						36						—						36
Other comprehensive income (loss)															—						—						(3)						(3)						—						(3)
Cash dividends on common stock															—						(51)						—						(51)						—						(51)
Capital contributions from    noncontrolling interests															—						—						—						—						29						29
Distributions to noncontrolling interests															—						—						—						—						(68)						(68)
Other															2						—						1						3						—						3
Balance at June 30, 2021															643						1,554						(54)						2,143						4,547						6,690
Net income															—						78						—						78						5						83
Other comprehensive income															—						—						7						7						—						7
Cash dividends on common stock															—						(51)						—						(51)						—						(51)
Capital contributions from    noncontrolling interests															—						—						—						—						73						73
Distributions to noncontrolling interests															—						—						—						—						(95)						(95)
Balance at September 30, 2021															$	643					$	1,581					$	(47)					$	2,177					$	4,530					$	6,707

The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.

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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

															Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Total Common Stockholders' Equity						Noncontrolling Interests						Total
															(in millions)
Balance at December 31, 2021															$	638					$	1,585					$	(27)					$	2,196					$	4,402					$	6,598
Net income (loss)															—						72						—						72						(45)						27
Other comprehensive income															—						—						5						5						—						5
Cash dividends on common stock															—						(49)						—						(49)						—						(49)
Capital contributions from    noncontrolling interests															—						—						—						—						73						73
Distributions to noncontrolling interests															—						—						—						—						(98)						(98)
Balance at March 31, 2022															638						1,608						(22)						2,224						4,332						6,556
Net income (loss)															—						98						—						98						(22)						76
Capital contributions from parent company															322						—						—						322						—						322
Other comprehensive income															—						—						3						3						—						3
Cash dividends on common stock															—						(50)						—						(50)						—						(50)
Distributions to noncontrolling interests															—						—						—						—						(28)						(28)
Balance at June 30, 2022															960						1,656						(19)						2,597						4,282						6,879
Net income															—						95						—						95						12						107
Capital contributions from parent company															9						—						—						9						—						9
Other comprehensive income (loss)															—						—						(7)						(7)						—						(7)
Cash dividends on common stock															—						(49)						—						(49)						—						(49)
Distributions to noncontrolling interests															—						—						—						—						(57)						(57)
Other															—						(1)						(1)						(2)						—						(2)
Balance at September 30, 2022															$	969					$	1,701					$	(27)					$	2,643					$	4,237					$	6,880

The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.

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SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

 

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Operating Revenues:
Natural gas revenues (includes revenue taxes of     $15, $12, $118, and $89, respectively)			$	858					$	624					$	3,998					$	2,991
Alternative revenue programs			(1)						(1)						—						3
Total operating revenues			857						623						3,998						2,994
Operating Expenses:
Cost of natural gas			294						129						1,840						943
Other operations and maintenance			252						238						829						776
Depreciation and amortization			140						133						414						396
Taxes other than income taxes			45						36						208						166
Gain on dispositions, net			—						(121)						(5)						(127)
Total operating expenses			731						415						3,286						2,154
Operating Income			126						208						712						840
Other Income and (Expense):
Earnings from equity method investments			34						25						105						14
Interest expense, net of amounts capitalized			(65)						(57)						(187)						(175)
Other income (expense), net			15						13						47						(66)
Total other income and (expense)			(16)						(19)						(35)						(227)
Earnings Before Income Taxes			110						189						677						613
Income taxes			27						133						161						224
Net Income			$	83					$	56					$	516					$	389

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

 

			For the Three Months Ended September 30,												For the Nine Months Ended September 30,
			2022						2021						2022						2021
			(in millions)												(in millions)
Net Income			$	83					$	56					$	516					$	389
Other comprehensive income:
Qualifying hedges:
Changes in fair value, net of tax of     $8, $8, $16, and $11, respectively			19						23						39						32
Reclassification adjustment for amounts included in net income,     net of tax of $(2), $—, $(7), and $1, respectively			(5)						(2)						(17)						1
Total other comprehensive income			14						21						22						33
Comprehensive Income			$	97					$	77					$	538					$	422

The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.

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SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

			For the Nine Months Ended September 30,
			2022						2021
			(in millions)
Operating Activities:
Net income			$	516					$	389
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total			414						396
Deferred income taxes			109						289
Mark-to-market adjustments			(34)						147
Impairment of PennEast Pipeline investment			—						84
Gain on dispositions, net			(5)						(127)
Natural gas cost under recovery – long-term			207						(79)
Other, net			27						32
Changes in certain current assets and liabilities —
-Receivables			301						311
-Natural gas for sale, net of temporary LIFO liquidation			(136)						20
-Prepaid income taxes			(77)						(148)
-Natural gas cost under recovery			(124)						(432)
-Other current assets			7						(98)
-Accounts payable			342						30
-Other current liabilities			(15)						(57)
Net cash provided from operating activities			1,532						757
Investing Activities:
Property additions			(1,063)						(1,045)
Cost of removal, net of salvage			(84)						(74)
Change in construction payables, net			(103)						4
Proceeds from dispositions			—						126
Other investing activities			11						23
Net cash used for investing activities			(1,239)						(966)
Financing Activities:
Increase (decrease) in notes payable, net			(749)						38
Proceeds —
Short-term borrowings			50						300
First mortgage bonds			100						100
Senior notes			500						450
Redemptions —
Short-term borrowings			(150)						—
Senior notes			—						(300)
Medium-term notes			(46)						(30)
Capital contributions from parent company			357						63
Payment of common stock dividends			(389)						(397)
Other financing activities			14						(2)
Net cash provided from (used for) financing activities			(313)						222
Net Change in Cash, Cash Equivalents, and Restricted Cash			(20)						13
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period			48						19
Cash, Cash Equivalents, and Restricted Cash at End of Period			$	28					$	32
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $7 and $6 capitalized for 2022 and 2021, respectively)			$	186					$	173
Income taxes, net			193						85
Noncash transactions — Accrued property additions at end of period			10						146

The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.

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SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

Assets						At September 30, 2022						At December 31, 2021
						(in millions)
Current Assets:
Cash and cash equivalents						$	26					$	45
Receivables —
Customer accounts						296						462
Unbilled revenues						122						278
Other accounts and notes						58						49
Accumulated provision for uncollectible accounts						(41)						(39)
Natural gas for sale						498						362
Prepaid expenses						192						114
Natural gas cost under recovery						390						266
Other regulatory assets						121						136
Other current assets						118						82
Total current assets						1,780						1,755
Property, Plant, and Equipment:
In service						19,656						18,880
Less: Accumulated depreciation						5,270						5,067
Plant in service, net of depreciation						14,386						13,813
Construction work in progress						871						684
Total property, plant, and equipment						15,257						14,497
Other Property and Investments:
Goodwill						5,015						5,015
Equity investments in unconsolidated subsidiaries						1,125						1,173
Other intangible assets, net of amortization of $154 and $145, respectively						28						37
Miscellaneous property and investments						27						19
Total other property and investments						6,195						6,244
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization						61						70
Prepaid pension costs						200						175
Other regulatory assets, deferred						468						689
Other deferred charges and assets						136						130
Total deferred charges and other assets						865						1,064
Total Assets						$	24,097					$	23,560

The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.

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SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

Liabilities and Stockholder's Equity						At September 30, 2022						At December 31, 2021
						(in millions)
Current Liabilities:
Securities due within one year						$	—					$	47
Notes payable						360						1,209
Accounts payable —
Affiliated						64						58
Other						592						361
Customer deposits						137						95
Accrued taxes						71						124
Accrued interest						67						59
Accrued compensation						92						110
Other regulatory liabilities						15						8
Other current liabilities						168						155
Total current liabilities						1,566						2,226
Long-term Debt						7,361						6,855
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes						1,662						1,555
Deferred credits related to income taxes						793						816
Employee benefit obligations						158						176
Operating lease obligations						53						59
Other cost of removal obligations						1,696						1,683
Accrued environmental remediation						217						197
Other deferred credits and liabilities						153						77
Total deferred credits and other liabilities						4,732						4,563
Total Liabilities						13,659						13,644
Common Stockholder's Equity (See accompanying statements)						10,438						9,916
Total Liabilities and Stockholder's Equity						$	24,097					$	23,560

The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.

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SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (UNAUDITED)

															Paid-In Capital						Retained Earnings (Accumulated Deficit)						Accumulated Other Comprehensive Income (Loss)						Total
															(in millions)
Balance at December 31, 2020															$	9,930					$	(141)					$	(22)					$	9,767
Net income															—						398						—						398
Capital contributions from parent company															57						—						—						57
Other comprehensive income															—						—						4						4
Cash dividends on common stock															—						(132)						—						(132)
Balance at March 31, 2021															9,987						125						(18)						10,094
Net loss															—						(65)						—						(65)
Capital contributions from parent company															25						—						—						25
Other comprehensive income															—						—						8						8
Cash dividends on common stock															—						(133)						—						(133)
Balance at June 30, 2021															10,012						(73)						(10)						9,929
Net income															—						56						—						56
Capital contributions from parent company															2						—						—						2
Other comprehensive income															—						—						21						21
Cash dividends on common stock															—						(132)						—						(132)
Balance at September 30, 2021															$	10,014					$	(149)					$	11					$	9,876
Balance at December 31, 2021															$	10,024					$	(132)					$	24					$	9,916
Net income															—						319						—						319
Capital contributions from parent company															50						—						—						50
Other comprehensive income															—						—						20						20
Cash dividends on common stock															—						(130)						—						(130)
Balance at March 31, 2022															10,074						57						44						10,175
Net income															—						115						—						115
Capital contributions from parent company															312						—						—						312
Other comprehensive income (loss)															—						—						(12)						(12)
Cash dividends on common stock															—						(130)						—						(130)
Balance at June 30, 2022															10,386						42						32						10,460
Net income															—						83						—						83
Capital contributions from parent company															11						—						—						11
Other comprehensive income															—						—						14						14
Cash dividends on common stock															—						(130)						—						(130)
Balance at September 30, 2022															$	10,397					$	(5)					$	46					$	10,438

The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

ALABAMA POWER COMPANY

GEORGIA POWER COMPANY

MISSISSIPPI POWER COMPANY

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

(UNAUDITED)

INDEX TO THE NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Note						Page
A			Introduction			45
B			Regulatory Matters			48
C			Contingencies			60
D			Revenue from Contracts with Customers and Lease Income			64
E			Consolidated Entities and Equity Method Investments			69
F			Financing and Leases			72
G			Income Taxes			74
H			Retirement Benefits			75
I			Fair Value Measurements			78
J			Derivatives			83
K			Acquisitions and Dispositions			94
L			Segment and Related Information			95

INDEX TO APPLICABLE NOTES TO FINANCIAL STATEMENTS BY REGISTRANT

The following unaudited notes to the condensed financial statements are a combined presentation; however, information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf and each Registrant makes no representation as to information related to the other Registrants. The list below indicates the Registrants to which each footnote applies.

Registrant			Applicable Notes
Southern Company			A, B, C, D, E, F, G, H, I, J, K, L
Alabama Power			A, B, C, D, F, G, H, I, J, K
Georgia Power			A, B, C, D, F, G, H, I, J
Mississippi Power			A, B, C, D, F, G, H, I, J
Southern Power			A, C, D, E, F, G, H, I, J, K
Southern Company Gas			A, B, C, D, E, F, G, H, I, J, K, L

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(UNAUDITED)

(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, 2021 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, 2022 and 2021. Certain information and footnote 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.

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 September 30, 2022 and December 31, 2021 was as follows:

			Goodwill
			(in millions)
Southern Company			$	5,280
Southern Company Gas:
Gas distribution operations			$	4,034
Gas marketing services			981
Southern Company Gas total			$	5,015

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

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(UNAUDITED)

Other intangible assets were as follows:

			At September 30, 2022												At December 31, 2021
			Gross Carrying Amount			Accumulated Amortization			Other Intangible Assets, Net						Gross Carrying Amount			Accumulated Amortization			Other Intangible Assets, Net
			(in millions)												(in millions)
Southern Company
Other intangible assets subject to amortization:
Customer relationships			$	212		$	(159)		$	53					$	212		$	(150)		$	62
Trade names			64			(44)			20						64			(38)			26
PPA fair value adjustments			390			(124)			266						390			(109)			281
Other			5			(4)			1						11			(10)			1
Total other intangible assets subject to amortization			$	671		$	(331)		$	340					$	677		$	(307)		$	370
Other intangible assets not subject to amortization:
Federal Communications Commission licenses			75			—			75						75			—			75
Total other intangible assets			$	746		$	(331)		$	415					$	752		$	(307)		$	445
Southern Power
Other intangible assets subject to amortization:
PPA fair value adjustments			$	390		$	(124)		$	266					$	390		$	(109)		$	281
Southern Company Gas
Other intangible assets subject to amortization:
Gas marketing services
Customer relationships			$	156		$	(137)		$	19					$	156		$	(130)		$	26
Trade names			26			(17)			9						26			(15)			11
Total other intangible assets subject to amortization			$	182		$	(154)		$	28					$	182		$	(145)		$	37

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(UNAUDITED)

Amortization associated with other intangible assets was as follows:

			Three Months Ended			Nine Months Ended
			September 30, 2022
			(in millions)
Southern Company(a)			$	11		$	30
Southern Power(b)			5			15
Southern Company Gas			4			9

(a)Includes $5 million and $15 million for the three and nine months ended September 30, 2022, respectively, 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:

			Southern Company						Southern Power									Southern Company Gas
			September 30, 2022			December 31, 2021			September 30, 2022			December 31, 2021						September 30, 2022			December 31, 2021
			(in millions)
Cash and cash equivalents			$	2,009		$	1,798		$	229		$	107					$	26		$	45
Restricted cash(a):
Other current assets			2			2			—			—						2			2
Other deferred charges and assets			3			29			3			29						—			—
Total cash, cash equivalents, and restricted cash(b)			$	2,013		$	1,829		$	231		$	135					$	28		$	48

(a)For Southern Power, reflects $3 million and $10 million at September 30, 2022 and December 31, 2021, respectively, held to fund estimated construction completion costs at the Deuel Harvest wind facility and $19 million at December 31, 2021 related to tax equity contributions restricted until the Garland battery energy storage facility achieved final contracted capacity. For Southern Company Gas, reflects collateral for workers' compensation, life insurance, and long-term disability insurance.

(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 WACOG basis. For any declines in market prices below the WACOG considered to be other than 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 annual 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 had no inventory decrement at September 30, 2022.

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(UNAUDITED)

Depreciation and Amortization

See Note 5 to the financial statements under "Depreciation and Amortization" in Item 8 of the Form 10-K for additional information.

Alabama Power

On September 23, 2022, the FERC authorized Alabama Power to use updated depreciation rates from its 2021 depreciation study effective January 1, 2023. The study was also provided to the Alabama PSC, and the new depreciation rates will be reflected in Alabama Power's future rate filings. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Southern Power

Effective January 1, 2022, Southern Power revised the depreciable lives of its wind generating facilities from up to 30 years to up to 35 years. This revision resulted in an immaterial decrease in depreciation for the three and nine months ended September 30, 2022.

(B) REGULATORY MATTERS

See Note 2 to the financial statements in Item 8 of the Form 10-K for additional information relating to regulatory matters.

The recovery balances for certain retail regulatory clauses of the traditional electric operating companies and Southern Company Gas at September 30, 2022 and December 31, 2021 were as follows:

Regulatory Clause			Balance Sheet Line Item			September 30, 2022			December 31, 2021
						(in millions)
Alabama Power
Rate CNP Compliance			Other regulatory liabilities, deferred			$	4		$	—
			Other regulatory assets, deferred			—			16
Rate CNP PPA			Other regulatory assets, deferred			125			84
Retail Energy Cost Recovery(*)			Other regulatory assets, current			93			—
			Other regulatory assets, deferred			413			126
Georgia Power
Fuel Cost Recovery			Deferred under recovered fuel clause revenues			$	1,697		$	410
Mississippi Power
Fuel Cost Recovery			Other customer accounts receivable			$	13		$	4
Ad Valorem Tax			Other regulatory assets, current			12			12
			Other regulatory assets, deferred			22			37
Southern Company Gas
Natural Gas Cost Recovery			Natural gas cost under recovery			$	390		$	266
			Other regulatory assets, deferred			—			207

(*)In accordance with an Alabama PSC order issued on February 1, 2022, Alabama Power applied $126 million of its 2021 Rate RSE refund to reduce the Rate ECR under recovered balance.

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(UNAUDITED)

Alabama Power

Certificates of Convenience and Necessity

On July 12, 2022, the Alabama PSC approved a certificate of convenience and necessity (CCN) authorizing Alabama Power to complete the acquisition of the Calhoun Generating Station, which was approved by the FERC on March 25, 2022. The transaction closed on September 30, 2022 and, on October 3, 2022, Alabama Power filed Rate CNP New Plant with the Alabama PSC to recover the related costs. The filing reflected an increase in annual revenues of $34 million, or 0.6%, effective with the billing month of November 2022. Alabama Power expects to recover all approved costs associated with the acquisition through existing rate mechanisms as outlined in Note 2 to the financial statements in Item 8 of the Form 10-K. See Note (K) under "Alabama Power" for additional information.

With the completion of the Calhoun Generating Station acquisition, Alabama Power expects to retire Plant Barry Unit 5 as early as 2023. In September 2022, Alabama Power reclassified approximately $600 million for Plant Barry Unit 5 from plant in service, net of depreciation to other utility plant, net and will continue to depreciate the asset according to the original depreciation rates. At retirement, Alabama Power will reclassify the remaining net investment costs of the unit to a regulatory asset to be recovered over the unit's remaining useful life, as established prior to the decision to retire, through Rate CNP Compliance. See Note 2 to the financial statements under "Alabama Power – Environmental Accounting Order" in Item 8 of the Form 10-K for additional information.

In its 2020 order authorizing the CCN for Alabama Power's construction of Plant Barry Unit 8, the Alabama PSC authorized recovery of estimated actual in-service costs of $652 million. At September 30, 2022, project expenditures associated with Plant Barry Unit 8 included in CWIP totaled approximately $484 million and the unit is expected to be placed in service in November 2023. The ultimate outcome of this matter cannot be determined at this time.

Rate ECR

On July 12, 2022, the Alabama PSC approved an adjustment to Rate ECR from 1.960 cents per KWH to 2.557 cents per KWH, or approximately $310 million annually, effective with August 2022 billings. The approved increase in the Rate ECR factor has no significant effect on Alabama Power's net income, but does increase operating cash flows related to fuel cost recovery. The rate will adjust to 5.910 cents per KWH in January 2025 absent a further order from the Alabama PSC.

Rate NDR

On July 12, 2022, the Alabama PSC approved modifications to Rate NDR, which include an adjustment to the charges to establish and maintain the reserve and an adjustment to the recovery period for any existing deferred storm-related operations and maintenance costs and future reserve deficits from 24 months to 48 months. As modified, the maximum total Rate NDR charge to recover a deficit is limited to $5.00 per month per non-residential customer account and $2.50 per month per residential customer account.

Beginning with August 2022 billings, the reserve establishment charge was suspended and the reserve maintenance charge was activated as a result of the NDR balance exceeding $75 million. Alabama Power expects to collect $6 million in the second half of 2022 and approximately $12 million annually beginning in 2023 under Rate NDR unless the NDR balance falls below $50 million. At September 30, 2022, Alabama Power's NDR balance was $103 million. Alabama Power continues to have the authority to accrue additional amounts to the NDR as circumstances warrant.

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(UNAUDITED)

Reliability Reserve Accounting Order

On July 12, 2022, the Alabama PSC approved an accounting order authorizing Alabama Power to create a reliability reserve separate from the NDR and transition the previous Rate NDR authority related to reliability expenditures to the reliability reserve. Alabama Power may make accruals to the reliability reserve if the NDR balance exceeds $35 million.

Renewable Generation Certificate

Through the issuance of a Renewable Generation Certificate (RGC), Alabama Power is authorized by the Alabama PSC to procure up to 500 MWs of renewable capacity and energy by September 16, 2027 and to market the related energy and environmental attributes to customers and other third parties. In April 2022, one of the existing solar projects which was expected to be served through a PPA commencing in first quarter 2024 was terminated, resulting in the restoration of 80 MWs of capacity under the RGC. On October 4, 2022, the Alabama PSC approved two new solar PPAs totaling 160 MWs. Alabama Power has procured solar capacity totaling approximately 330 MWs under the RGC. The ultimate outcome of this matter cannot be determined at this time.

Georgia Power

Rate Plans

2022 Base Rate Case

On June 24, 2022, Georgia Power filed a base rate case (Georgia Power 2022 Base Rate Case) with the Georgia PSC. The filing, as modified on August 22, 2022, proposes a three-year alternate rate plan with requested rate increases totaling $889 million, $107 million, and $45 million effective January 1, 2023, January 1, 2024, and January 1, 2025, respectively. These increases are based on a proposed retail ROE of 11.00% using the currently approved equity ratio of 56% and reflect levelized revenue requirements during the three-year period, with the exception of incremental compliance costs related to CCR AROs, Demand-Side Management (DSM) programs, and related adjustments to the Municipal Franchise Fee tariff.

Georgia Power has requested recovery of the proposed increases through its existing base rate tariffs as follows:

Tariff			2023						2024						2025
			(in millions)
Traditional base			$	762					$	—					$	—
ECCR
Traditional			5						—						—
CCR ARO(a)			64						78						47
DSM(a)			37						27						(2)
Municipal Franchise Fee			21						2						1
Total(b)			$	889					$	107					$	45

(a)As determined by the Georgia PSC through annual compliance filings.

(b)Totals may not add due to rounding.

Georgia Power's filing primarily reflects requests to (i) recover the costs of recent and future capital investments in the electric grid including the transmission and distribution systems and the continuation of its grid investment plan, all designed to support customer long-term reliability and resiliency needs, (ii) recover the cost of coal-fired generation units proposed for retirement, or made unavailable, as requested in the 2022 IRP, as Georgia Power continues the transition of the generation fleet to more economical and cleaner resources, (iii) make the necessary investments and recover costs to comply with federal and state environmental regulations, including costs

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(UNAUDITED)

associated with the CCR AROs related to ash pond and landfill closures and post-closure care, and (iv) reduce operating costs despite significant inflationary pressures. In addition, the filing includes the following provisions:

•Continuation of an allowed retail ROE range of 9.50% to 12.00%.

•Continuation of the process whereby 80% of any earnings above the top of the allowed ROE range are shared with Georgia Power's customers and the remaining 20% are retained by Georgia Power.

•Continuation of the option to file an Interim Cost Recovery tariff in the event earnings are projected to fall below the bottom of the allowed ROE range during the three-year term of the plan.

Georgia Power expects the Georgia PSC to render a final decision in this matter on December 20, 2022. The ultimate outcome of this matter cannot be determined at this time.

2019 ARP

In 2020, the Georgia PSC denied a motion for reconsideration filed by Sierra Club regarding the Georgia PSC's decision in the 2019 ARP allowing Georgia Power to recover compliance costs for CCR AROs. The Superior Court of Fulton County subsequently affirmed the Georgia PSC's decision and, in October 2021, the Georgia Court of Appeals affirmed the Superior Court of Fulton County's order. In December 2021, Sierra Club filed a petition for writ of certiorari to the Georgia Supreme Court, which was denied on July 14, 2022. This matter is now concluded. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information regarding Georgia Power's AROs.

Integrated Resource Plans

In response to supply chain challenges in the solar industry, the Georgia PSC approved Georgia Power's request to amend 970 MWs of utility-scale solar PPAs that were authorized by the Georgia PSC in Georgia Power's 2019 IRP. The amendments extended the required commercial operation dates for the PPAs from 2023 to 2024.

On July 21, 2022, the Georgia PSC approved the 2022 IRP, as modified by a stipulated agreement among Georgia Power, the staff of the Georgia PSC, and certain intervenors and as further modified by the Georgia PSC. In the 2022 IRP decision, the Georgia PSC approved the following requests:

•Decertification and retirement of Plant Wansley Units 1 and 2 (926 MWs based on 53.5% ownership), which occurred on August 31, 2022, and reclassification to regulatory asset accounts of the remaining net book values and any remaining unusable materials and supplies inventories upon retirement. The regulatory asset accounts for the remaining net book values of the units ($299 million and $277 million for Unit 1 and Unit 2, respectively, at September 30, 2022) are being amortized at a rate equal to the unit depreciation rates authorized in the 2019 ARP through December 31, 2022. In the Georgia Power 2022 Base Rate Case, Georgia Power requested recovery of the remaining regulatory asset balances for the net book values of the units through 2030 and requested that the timing of recovery of the regulatory asset account for the unusable materials and supplies inventories be determined in a future base rate case.

•Decertification and retirement of Plant Scherer Unit 3 (614 MWs based on 75% ownership) by December 31, 2028 and reclassification to regulatory asset accounts of the remaining net book value (approximately $608 million at September 30, 2022) and any remaining unusable materials and supplies inventory to regulatory asset accounts upon retirement. The timing of recovery for these regulatory assets is expected to be determined in a future base rate case.

•Decertification and retirement of Plant Gaston Units 1 through 4 (500 MWs based on 50% ownership through SEGCO) by December 31, 2028. See Note 7 to the financial statements under "SEGCO" in Item 8 of the Form 10-K for additional information.

•Georgia Power's environmental compliance strategy, including approval of Georgia Power's plans to address CCR at its ash ponds and landfills. Recovery of the related costs is expected to be determined in future base rate cases. The Georgia PSC's approval included a change in the method of closure for one ash

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(UNAUDITED)

pond. Georgia Power is currently evaluating the related impact on its cost estimates and AROs; however, it is not expected to be material.

•Installation of environmental controls at Plants Bowen and Scherer for compliance with rules related to effluent limitations guidelines.

•Initiation of a license renewal application with the NRC for Plant Hatch.

•Investments related to the continued hydro operations of Plants Sinclair and Burton.

•Provisional authorization for development of a 265-MW battery energy storage facility with expected commercial operation in 2026.

•Issuance of requests for proposals (RFP) for 2,300 MWs of renewable resources, an additional 500 MWs of energy storage, and up to 140 MWs of biomass generation.

•Related transmission projects necessary to support the generation facilities plan.

•Certification of six PPAs (including five affiliate PPAs with Southern Power that are subject to approval by the FERC) with capacities of 1,567 MWs beginning in 2024, 380 MWs beginning in 2025, and 228 MWs beginning in 2028, procured through RFPs authorized in the 2019 IRP. See Note (F) under "Georgia Power Lease Modification" for additional information.

The Georgia PSC deferred a decision on the requested decertification and retirement of Plant Bowen Units 1 and 2 (1,400 MWs) to the 2025 IRP and rejected Georgia Power's request to certify approximately 88 MWs of wholesale capacity to be placed in retail rate base between January 1, 2024 and January 1, 2025. Georgia Power may offer such capacity in the wholesale market or to the retail jurisdiction in a future regulatory proceeding.

On August 26, 2022, Restore Chattooga Gorge Coalition (RCG) filed a petition in the Superior Court of Fulton County, Georgia against Georgia Power and the Georgia PSC. The petition challenges Georgia Power's plan to expend $115 million to modernize Plant Tugalo, as approved in the 2019 IRP, and seeks judicial review of the Georgia PSC's order in the 2022 IRP proceeding with respect to the denial of RCG's challenge to the modernization plan.

The ultimate outcome of these matters cannot be determined at this time.

Nuclear Construction

In 2009, the Georgia PSC certified construction of Plant Vogtle Units 3 and 4, in which Georgia Power holds a 45.7% ownership interest. In 2012, the NRC issued the related combined construction and operating licenses, which allowed full construction of the two AP1000 nuclear units (with electric generating capacity of approximately 1,100 MWs each) and related facilities to begin. Until March 2017, construction on Plant Vogtle Units 3 and 4 continued under the Vogtle 3 and 4 Agreement, which was a substantially fixed price agreement.

In connection with the EPC Contractor's bankruptcy filing in March 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, entered into several transitional arrangements to allow construction to continue. In July 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, entered into the Vogtle Services Agreement, whereby Westinghouse provides facility design and engineering services, procurement and technical support, and staff augmentation on a time and materials cost basis. The Vogtle Services Agreement provides that it will continue until the start-up and testing of Plant Vogtle Units 3 and 4 are complete and electricity is generated and sold from both units. The Vogtle Services Agreement is terminable by the Vogtle Owners upon 30 days' written notice.

In October 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, executed the Bechtel Agreement, under which Bechtel is reimbursed for actual costs plus a base fee and an at-risk fee, subject to adjustment based on Bechtel's performance against cost and schedule targets. Each Vogtle Owner is severally (not jointly) liable for its proportionate share, based on its ownership interest, of all amounts owed to Bechtel under the Bechtel Agreement. The Vogtle Owners may terminate the Bechtel Agreement at any time for their convenience, provided that the Vogtle Owners will be required to pay amounts related to work performed prior to the termination (including the applicable portion of the base fee), certain termination-related costs, and, at certain stages of the

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(UNAUDITED)

work, the applicable portion of the at-risk fee. Bechtel may terminate the Bechtel Agreement under certain circumstances, including certain Vogtle Owner suspensions of work, certain breaches of the Bechtel Agreement by the Vogtle Owners, Vogtle Owner insolvency, and certain other events.

See Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for information on the Amended and Restated Loan Guarantee Agreement, including applicable covenants, events of default, and mandatory prepayment events.

Cost and Schedule

Georgia Power's approximate proportionate share of the remaining estimated capital cost to complete Plant Vogtle Units 3 and 4, including contingency, through the end of the first quarter 2023 and the fourth quarter 2023, respectively, is as follows:

			(in millions)
Base project capital cost forecast(a)(b)			$	10,334
Construction contingency estimate			49
Total project capital cost forecast(a)(b)			10,383
Net investment at September 30, 2022(b)			(9,280)
Remaining estimate to complete			$	1,103

(a)Includes approximately $590 million of costs that are not shared with the other Vogtle Owners and approximately $353 million of incremental costs under the cost-sharing and tender provisions of the joint ownership agreements described below. Excludes financing costs expected to be capitalized through AFUDC of approximately $385 million, of which $275 million had been accrued through September 30, 2022.

(b)Net of $1.7 billion received from Toshiba under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds.

Georgia Power estimates that its financing costs for construction of Plant Vogtle Units 3 and 4 will total approximately $3.4 billion, of which $3.1 billion had been incurred through September 30, 2022.

As part of its ongoing processes, Southern Nuclear continues to evaluate cost and schedule forecasts on a regular basis to incorporate current information available, particularly in the areas of engineering support, commodity installation, system turnovers and related test results, and workforce statistics. Southern Nuclear establishes aggressive target values for monthly construction production and system turnover activities, which are reflected in the site work plans.

Since March 2020, the number of active COVID-19 cases at the site has fluctuated consistent with the surrounding area and impacted productivity levels and pace of activity completion, with the site experiencing peaks in the number of active cases in January 2021, August 2021, and January 2022. Georgia Power estimates the productivity impacts of the COVID-19 pandemic have consumed approximately three to four months of schedule margin previously embedded in the site work plan for Unit 3 and Unit 4. As of September 30, 2022, Georgia Power's proportionate share of the estimated incremental cost associated with COVID-19 mitigation actions and impacts on construction productivity is estimated to be between $160 million and $200 million and is included in the total project capital cost forecast. The continuing effects of the COVID-19 pandemic could further disrupt or delay construction and testing activities at Plant Vogtle Units 3 and 4.

On July 29, 2022, Southern Nuclear announced that all Unit 3 ITAACs had been submitted to the NRC. On August 3, 2022, the NRC published its 103(g) finding that the acceptance criteria in the combined license for Unit 3 had been met, which allowed nuclear fuel to be loaded and allows start-up testing to begin. Fuel load for Unit 3 was completed on October 17, 2022, and the unit is projected to be placed in service by the end of the first quarter 2023. Unit 4 is projected to be placed in service by the end of the fourth quarter 2023.

During the first nine months of 2022, established construction contingency totaling $170 million was assigned to the base capital cost forecast for costs primarily associated with construction productivity, the pace of system turnovers, additional craft and support resources, and procurement for Units 3 and 4. Georgia Power also increased its total

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(UNAUDITED)

project capital cost forecast by adding $36 million and $32 million to replenish construction contingency in the second quarter 2022 and the third quarter 2022, respectively.

After considering the significant level of uncertainty that exists regarding the future recoverability of these costs since the ultimate outcome of these matters is subject to the outcome of future assessments by management, as well as Georgia PSC decisions in future regulatory proceedings, Georgia Power recorded pre-tax charges to income in the second quarter 2022 and the third quarter 2022 of $36 million ($27 million after tax) and $32 million ($24 million after tax), respectively, for the increases in the total project capital cost forecast. Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery during the prudence review following the Unit 4 fuel load pursuant to the twenty-fourth VCM stipulation described below.

The projected schedule for Unit 3 primarily depends on the pace of system and area transitions to operations, including the completion of closure documentation necessary to support start-up testing, and the progression of start-up, final component, and pre-operational testing, which may be impacted by equipment or other operational failures. The projected schedule for Unit 4 primarily depends on Unit 3 progress through start-up and testing; overall construction productivity and production levels improving, particularly in electrical installation, including terminations; and appropriate levels of craft laborers, particularly electricians, being added and maintained. As Unit 4 progresses through construction and continues to transition into testing, ongoing and potential future challenges include the pace and quality of electrical, mechanical, and instrumentation and controls commodities installation; availability of craft and supervisory resources, including the temporary diversion of such resources to support Unit 3; the pace of work package closures and system turnovers; and the timeframe and duration of hot functional and other testing. Ongoing or future challenges for both units also include management of contractors and vendors; subcontractor performance; supervision of craft labor and related productivity; ability to attract and retain craft labor; and/or related cost escalation. New challenges also may arise, particularly as Units 3 and 4 move into initial testing and start-up, which may result in required engineering changes or remediation related to plant systems, structures, or components (some of which are based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale). These challenges may result in further schedule delays and/or cost increases.

There have been technical and procedural challenges to the construction and licensing of Plant Vogtle Units 3 and 4 at the federal and state level and additional challenges may arise. Processes are in place that are designed to ensure compliance with the requirements specified in the Westinghouse Design Control Document and the combined construction and operating licenses, including inspections by Southern Nuclear and the NRC that occur throughout construction. On March 25, 2022, the NRC completed a follow-up inspection related to the November 2021 final significance report on its special inspection to review the root cause of additional construction remediation work identified in 2021 and Southern Nuclear's corresponding corrective action plans. The NRC closed the two white findings identified in November 2021 and returned Vogtle Unit 3 to the NRC's baseline inspection program.

With the receipt of the NRC's 103(g) finding, Unit 3 is now under the NRC's operating reactor oversight process and must meet applicable technical and operational requirements contained within Unit 3's operating license. Various design and other licensing-based compliance matters, including the timely submittal by Southern Nuclear of the ITAAC documentation and the related reviews and approvals by the NRC necessary to support NRC authorization to load fuel for Unit 4, may arise, which may result in additional license amendment requests or require other resolution. If any license amendment requests or other licensing-based compliance issues, including inspections and ITAACs for Unit 4, are not resolved in a timely manner, there may be delays in the project schedule that could result in increased costs.

The ultimate outcome of these matters cannot be determined at this time. However, any extension of the in-service date beyond the first quarter 2023 for Unit 3 or the fourth quarter 2023 for Unit 4, including the current level of cost sharing described below, is estimated to result in additional base capital costs for Georgia Power of up to $15 million per month for Unit 3 and $35 million per month for Unit 4, as well as the related AFUDC and any additional related construction, support resources, or testing costs. While Georgia Power is not precluded from seeking retail recovery of any future capital cost forecast increase other than the amounts related to the cost-sharing

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and tender provisions of the joint ownership agreements described below, management will ultimately determine whether or not to seek recovery. Any further changes to the capital cost forecast that are not expected to be recoverable through regulated rates will be required to be charged to income and such charges could be material.

Joint Owner Contracts

In November 2017, the Vogtle Owners entered into an amendment to their joint ownership agreements for Plant Vogtle Units 3 and 4 to provide for, among other conditions, additional Vogtle Owner approval requirements. Effective in August 2018, the Vogtle Owners further amended the joint ownership agreements to clarify and provide procedures for certain provisions of the joint ownership agreements related to adverse events that require the vote of the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 to continue construction (as amended, and together with the November 2017 amendment, the Vogtle Joint Ownership Agreements). The Vogtle Joint Ownership Agreements also confirm that the Vogtle Owners' sole recourse against Georgia Power or Southern Nuclear for any action or inaction in connection with their performance as agent for the Vogtle Owners is limited to removal of Georgia Power and/or Southern Nuclear as agent, except in cases of willful misconduct.

Amendments to the Vogtle Joint Ownership Agreements

In connection with a September 2018 vote by the Vogtle Owners to continue construction, Georgia Power entered into (i) a binding term sheet (Vogtle Owner Term Sheet) with the other Vogtle Owners and MEAG Power's wholly-owned subsidiaries MEAG Power SPVJ, LLC (MEAG SPVJ), MEAG Power SPVM, LLC (MEAG SPVM), and MEAG Power SPVP, LLC (MEAG SPVP) to take certain actions which partially mitigate potential financial exposure for the other Vogtle Owners, including additional amendments to the Vogtle Joint Ownership Agreements and the purchase of PTCs from the other Vogtle Owners at pre-established prices, and (ii) a term sheet (MEAG Term Sheet) with MEAG Power and MEAG SPVJ to provide up to $300 million of funding with respect to MEAG SPVJ's ownership interest in Plant Vogtle Units 3 and 4 under certain circumstances. In January 2019, Georgia Power, MEAG Power, and MEAG SPVJ entered into an agreement to implement the provisions of the MEAG Term Sheet. In February 2019, Georgia Power, the other Vogtle Owners, and MEAG Power's wholly-owned subsidiaries MEAG SPVJ, MEAG SPVM, and MEAG SPVP entered into certain amendments to the Vogtle Joint Ownership Agreements to implement the provisions of the Vogtle Owner Term Sheet (Global Amendments).

Pursuant to the Global Amendments: (i) each Vogtle Owner must pay its proportionate share of qualifying construction costs for Plant Vogtle Units 3 and 4 based on its ownership percentage up to the estimated cost at completion (EAC) for Plant Vogtle Units 3 and 4 which formed the basis of Georgia Power's forecast of $8.4 billion in the nineteenth VCM plus $800 million; (ii) Georgia Power will be responsible for 55.7% of actual qualifying construction costs between $800 million and $1.6 billion over the EAC in the nineteenth VCM (resulting in $80 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 44.3% of such costs pro rata in accordance with their respective ownership interests; and (iii) Georgia Power will be responsible for 65.7% of qualifying construction costs between $1.6 billion and $2.1 billion over the EAC in the nineteenth VCM (resulting in a further $100 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 34.3% of such costs pro rata in accordance with their respective ownership interests. The Global Amendments provide that if the EAC is revised and exceeds the EAC in the nineteenth VCM by more than $2.1 billion, each of the other Vogtle Owners will have a one-time option at the time the project budget cost forecast is so revised to tender a portion of its ownership interest to Georgia Power in exchange for Georgia Power's agreement to pay 100% of such Vogtle Owner's remaining share of total construction costs in excess of the EAC in the nineteenth VCM plus $2.1 billion.

For purposes of the foregoing provisions, qualifying construction costs will not include costs (i) resulting from force majeure events, including epidemics and quarantines, governmental actions or inactions (or significant delays associated with issuance of such actions) that affect the licensing, completion, start-up, operations, or financing of Plant Vogtle Units 3 and 4, administrative proceedings or litigation regarding ITAAC or other regulatory challenges to commencement of operation of Plant Vogtle Units 3 and 4, and changes in laws or regulations governing Plant Vogtle Units 3 and 4, (ii) legal fees and legal expenses incurred due to litigation with contractors or subcontractors

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that are not subsidiaries or affiliates of Southern Company, and (iii) additional costs caused by requests from the Vogtle Owners other than Georgia Power, except for the exercise of a right to vote granted under the Vogtle Joint Ownership Agreements, that increase costs by $100,000 or more.

In addition, pursuant to the Global Amendments, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 must vote to continue construction if certain adverse events (Project Adverse Events) occur, including, among other events: (i) the bankruptcy of Toshiba; (ii) the termination or rejection in bankruptcy of certain agreements, including the Vogtle Services Agreement, the Bechtel Agreement, or the agency agreement with Southern Nuclear; (iii) Georgia Power's public announcement of its intention not to submit for rate recovery any portion of its investment in Plant Vogtle Units 3 and 4 or the Georgia PSC determines that any of Georgia Power's costs relating to the construction of Plant Vogtle Units 3 and 4 will not be recovered in retail rates, excluding any additional amounts paid by Georgia Power on behalf of the other Vogtle Owners pursuant to the Global Amendments described above and the first 6% of costs during any six-month VCM reporting period that are disallowed by the Georgia PSC for recovery, or for which Georgia Power elects not to seek cost recovery, through retail rates; and (iv) an incremental extension of one year or more from the seventeenth VCM report estimated in-service dates of November 2021 and November 2022 for Units 3 and 4, respectively. The schedule extension announced in February 2022 triggered the requirement for a vote to continue construction. Effective February 25, 2022, all of the Vogtle Owners had voted to continue construction.

Georgia Power and the other Vogtle Owners do not agree on either the starting dollar amount for the determination of cost increases subject to the cost-sharing and tender provisions of the Global Amendments or the extent to which COVID-19-related costs impact those provisions. Based on the definition in the Global Amendments, Georgia Power believes the starting dollar amount is $18.38 billion and the current project capital cost forecast exceeds the cost-sharing provision threshold, but not the tender provision threshold. The other Vogtle Owners have notified Georgia Power that they believe the current capital cost expenditures have already exceeded the cost-sharing thresholds and the current project capital cost forecast triggers the tender provisions under the Global Amendments. In October 2021, Georgia Power and the other Vogtle Owners entered into an agreement, which was modified on June 3, 2022, to clarify the process for the tender provisions of the Global Amendments to provide for a decision between 120 and 194 days after the tender option is triggered, which the other Vogtle Owners assert occurred on February 14, 2022. On June 17, 2022 and July 26, 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options.

On June 18, 2022, OPC and MEAG Power each filed a separate lawsuit against Georgia Power in the Superior Court of Fulton County, Georgia seeking a declaratory judgment that the starting dollar amount is $17.1 billion and that the cost-sharing and tender provisions have been triggered. The lawsuits also assert other claims, including breach of contract allegations, and seek, among other remedies, damages and injunctive relief requiring Georgia Power to track and allocate construction costs consistent with MEAG Power's and OPC's interpretations of the Global Amendments. On July 25, 2022 and July 28, 2022, Georgia Power filed its answers in the lawsuits filed by MEAG Power and OPC, respectively, and included counterclaims seeking a declaratory judgment that the starting dollar amount is $18.38 billion and that costs related to force majeure events are excluded prior to calculating the cost-sharing and tender provisions and when calculating Georgia Power's related financial obligations. On September 26, 2022, Dalton filed complaints in each of these lawsuits. On September 29, 2022, Georgia Power and MEAG Power reached an agreement to resolve their dispute regarding the proper interpretation of the cost-sharing and tender provisions of the Global Amendments. Under the terms of the agreement, among other items, (i) MEAG Power will not exercise its tender option and will retain its full ownership interest in Plant Vogtle Units 3 and 4; (ii) Georgia Power will pay a portion of MEAG Power's costs of construction for Plant Vogtle Units 3 and 4 as such costs are incurred and with no further adjustment for force majeure costs, which payments will total approximately $79 million based on the current project capital cost forecast; and (iii) Georgia Power will pay 20% of MEAG Power's costs of construction with respect to any amounts over the current project capital cost forecast, with no further adjustment for force majeure costs. In addition, MEAG Power agreed to vote to continue construction upon occurrence of a Project Adverse Event unless the commercial operation date of either of Plant Vogtle Unit 3 or Unit 4 is not projected to occur by December 31, 2025. On October 4, 2022, MEAG Power and Georgia Power filed a

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notice of settlement and voluntary dismissal of their pending litigation, including Georgia Power's counterclaim, and, on October 6, 2022, Dalton dismissed its related complaint.

Georgia Power recorded pre-tax charges (credits) to income in the fourth quarter 2021, the second quarter 2022, and the third quarter 2022 of approximately $440 million ($328 million after tax), $16 million ($12 million after tax), and $(102) million ($(76) million after tax), respectively, associated with the cost-sharing and tender provisions of the Global Amendments, including the settlement with MEAG Power, which are included in the total project capital cost forecast and will not be recovered from retail customers. The settlement with MEAG Power does not resolve the separate pending litigation with OPC, including Dalton's associated complaint, described above. Georgia Power may be required to record further pre-tax charges to income of up to approximately $300 million associated with the cost-sharing and tender provisions of the Global Amendments for OPC and Dalton based on the current project capital cost forecast.

Georgia Power's ownership interest in Plant Vogtle Units 3 and 4 continues to be 45.7%; however, it could increase if OPC or Dalton effectively exercises the option to tender a portion of their ownership interest to Georgia Power and require Georgia Power to pay 100% of the remaining share of the costs necessary to complete Plant Vogtle Units 3 and 4. Georgia Power's incremental ownership interest would be calculated and conveyed to Georgia Power after Plant Vogtle Units 3 and 4 are placed in service.

The ultimate outcome of these matters cannot be determined at this time.

Regulatory Matters

In 2009, the Georgia PSC voted to certify construction of Plant Vogtle Units 3 and 4 with a certified capital cost of $4.418 billion. In addition, in 2009 the Georgia PSC approved inclusion of the Plant Vogtle Units 3 and 4 related CWIP accounts in rate base, and the State of Georgia enacted the Georgia Nuclear Energy Financing Act, which allows Georgia Power to recover financing costs for Plant Vogtle Units 3 and 4. Financing costs are recovered on all applicable certified costs through annual adjustments to the NCCR tariff up to the certified capital cost of $4.418 billion. At September 30, 2022, Georgia Power had recovered approximately $2.8 billion of financing costs. Financing costs related to capital costs above $4.418 billion are being recognized through AFUDC and are expected to be recovered through retail rates over the life of Plant Vogtle Units 3 and 4; however, Georgia Power is not recording AFUDC related to any capital costs in excess of the total deemed reasonable by the Georgia PSC (currently $7.3 billion) and not requested for rate recovery. In November 2021, the Georgia PSC approved Georgia Power's request to decrease the NCCR tariff by $78 million annually, effective January 1, 2022.

Georgia Power is required to file semi-annual VCM reports with the Georgia PSC by February 28 and August 31 of each year. In 2013, in connection with the eighth VCM report, the Georgia PSC approved a stipulation between Georgia Power and the staff of the Georgia PSC to waive the requirement to amend the Plant Vogtle Units 3 and 4 certificate in accordance with the 2009 certification order until the completion of Plant Vogtle Unit 3, or earlier if deemed appropriate by the Georgia PSC and Georgia Power.

In 2016, the Georgia PSC voted to approve a settlement agreement (Vogtle Cost Settlement Agreement) resolving certain prudency matters in connection with the fifteenth VCM report. In December 2017, the Georgia PSC voted to approve (and issued its related order on January 11, 2018) Georgia Power's seventeenth VCM report and modified the Vogtle Cost Settlement Agreement. The Vogtle Cost Settlement Agreement, as modified by the January 11, 2018 order, resolved the following regulatory matters related to Plant Vogtle Units 3 and 4: (i) none of the $3.3 billion of costs incurred through December 31, 2015 and reflected in the fourteenth VCM report should be disallowed from rate base on the basis of imprudence; (ii) the Contractor Settlement Agreement was reasonable and prudent and none of the $0.3 billion paid pursuant to the Contractor Settlement Agreement should be disallowed from rate base on the basis of imprudence; (iii) (a) capital costs incurred up to $5.68 billion would be presumed to be reasonable and prudent with the burden of proof on any party challenging such costs, (b) Georgia Power would have the burden to show that any capital costs above $5.68 billion were prudent, and (c) a revised capital cost forecast of $7.3 billion (after reflecting the impact of payments received under the Guarantee Settlement Agreement and related customer refunds) was found reasonable; (iv) construction of Plant Vogtle Units 3 and 4 should be

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completed, with Southern Nuclear serving as project manager and Bechtel as primary contractor; (v) approved and deemed reasonable Georgia Power's revised schedule placing Plant Vogtle Units 3 and 4 in service in November 2021 and November 2022, respectively; (vi) confirmed that the revised cost forecast does not represent a cost cap and that a prudence proceeding on cost recovery will occur following Unit 4 fuel load, consistent with applicable Georgia law; (vii) reduced the ROE used to calculate the NCCR tariff (a) from 10.95% (the ROE rate setting point authorized by the Georgia PSC in the 2013 alternate rate plan) to 10.00% effective January 1, 2016, (b) from 10.00% to 8.30%, effective January 1, 2020, and (c) from 8.30% to 5.30%, effective January 1, 2021 (provided that the ROE in no case will be less than Georgia Power's average cost of long-term debt); (viii) reduced the ROE used for AFUDC equity for Plant Vogtle Units 3 and 4 from 10.00% to Georgia Power's average cost of long-term debt, effective January 1, 2018; and (ix) agreed that effective the first month after Unit 3 reaches commercial operation, retail base rates would be adjusted to include the costs related to Unit 3 and common facilities deemed prudent in the Vogtle Cost Settlement Agreement (see Note 2 to the financial statements under "Georgia Power – Plant Vogtle Unit 3 and Common Facilities Rate Proceeding" in Item 8 of the Form 10-K for additional information). The January 11, 2018 order also stated that if Plant Vogtle Units 3 and 4 are not commercially operational by June 1, 2021 and June 1, 2022, respectively, the ROE used to calculate the NCCR tariff will be further reduced by 10 basis points each month (but not lower than Georgia Power's average cost of long-term debt) until the respective Unit is commercially operational. The ROE reductions negatively impacted earnings by approximately $270 million in 2021 and are estimated to have negative earnings impacts of approximately $300 million and $250 million in 2022 and 2023, respectively. In its January 11, 2018 order, the Georgia PSC also stated if other conditions change and assumptions upon which Georgia Power's seventeenth VCM report are based do not materialize, the Georgia PSC reserved the right to reconsider the decision to continue construction.

In the August 2021 order approving the twenty-fourth VCM report, the Georgia PSC approved a stipulation addressing the following matters: (i) beginning with its twenty-fifth VCM report, Georgia Power will continue to report to the Georgia PSC all costs incurred during the period for review and will request for approval costs up to the $7.3 billion determined to be reasonable in the Georgia PSC's seventeenth VCM order and (ii) Georgia Power will not seek rate recovery of the $0.7 billion increase to the base capital cost forecast included in the nineteenth VCM report and charged to income by Georgia Power in the second quarter 2018. In addition, the stipulation confirms Georgia Power may request verification and approval of costs above $7.3 billion for inclusion in rate base at a later time, but no earlier than the prudence review contemplated by the seventeenth VCM order described previously.

The Georgia PSC has approved 25 VCM reports covering periods through June 30, 2021. These reports reflect total construction capital costs incurred of $7.9 billion (net of $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds), of which the Georgia PSC has verified and approved $7.3 billion as described above. The Georgia PSC also has reviewed the twenty-sixth VCM report, which reflects $584 million of additional construction capital costs incurred through December 31, 2021. Georgia Power filed its twenty-seventh VCM report with the Georgia PSC on August 31, 2022, which reflects the revised capital cost forecast as of June 30, 2022 of $10.5 billion and $522 million of construction capital costs incurred from January 1, 2022 through June 30, 2022.

The ultimate outcome of these matters cannot be determined at this time.

Mississippi Power

Performance Evaluation Plan

On June 7, 2022, the Mississippi PSC approved Mississippi Power's annual retail PEP filing for 2022, resulting in an annual increase in revenues of approximately $18 million, or 1.9%, primarily due to increases in rate base, operations and maintenance expenses, and depreciation and amortization. The rate increase became effective with the first billing cycle of April 2022 in accordance with the PEP rate schedule.

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Ad Valorem Tax Adjustment

On June 7, 2022, the Mississippi PSC approved Mississippi Power's annual ad valorem tax adjustment filing for 2022, resulting in an annual increase in revenues of $5 million, effective with the first billing cycle of July 2022.

Municipal and Rural Associations Tariff

On August 26, 2022, the FERC accepted an amended shared service agreement (SSA) between Mississippi Power and Cooperative Energy, effective July 1, 2022, under which Cooperative Energy will continue to decrease its use of Mississippi Power's generation services under the MRA tariff up to 2.5% annually through 2035. At September 30, 2022, Mississippi Power is serving approximately 400 MWs of Cooperative Energy's annual demand. Beginning in 2036, Cooperative Energy will provide 100% of its electricity requirements at the MRA delivery points under the tariff. Neither party has the option to cancel the amended SSA.

On July 15, 2022, Mississippi Power filed a request with the FERC for a $23 million increase in annual wholesale base revenues under the MRA tariff and requested an effective date of July 15, 2022. Cooperative Energy has filed a complaint with the FERC challenging the new rates. On September 13, 2022, the FERC issued an order accepting Mississippi Power's request effective September 14, 2022, subject to refund, and establishing hearing and settlement judge procedures. The ultimate outcome of this matter cannot be determined at this time.

Southern Company Gas

Infrastructure Replacement Programs and Capital Projects

Capital expenditures incurred under specific infrastructure replacement programs and capital projects during the first nine months of 2022 were as follows:

Utility			Program			Nine Months Ended September 30, 2022
						(in millions)
Nicor Gas			Investing in Illinois			$	311
Virginia Natural Gas			SAVE			52
Atlanta Gas Light			System Reinforcement Rider			51
Chattanooga Gas			Pipeline Replacement Program			2
Total						$	416

Rate Proceedings

Atlanta Gas Light

On July 1, 2022, Atlanta Gas Light filed its annual GRAM update with the Georgia PSC. The filing requests an annual base rate increase of $53 million based on the projected 12-month period beginning January 1, 2023. Resolution of the GRAM filing is expected by December 28, 2022, with the new rates effective January 1, 2023. The ultimate outcome of this matter cannot be determined at this time.

Virginia Natural Gas

On August 1, 2022, Virginia Natural Gas filed a general base rate case with the Virginia Commission seeking an increase in annual base rate revenues of $69 million, including $15 million related to the recovery of investments under the SAVE program, primarily to recover investments and increased costs associated with infrastructure, technology, and workforce development. The requested increase is based on a projected 12-month period beginning January 1, 2023, a ROE of 10.35%, and an equity ratio of 53.2%. Rate adjustments are expected to be effective January 1, 2023, subject to refund. The Virginia Commission is expected to rule on the requested increase in the third quarter 2023. The ultimate outcome of this matter cannot be determined at this time.

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(C) CONTINGENCIES

See Note 3 to the financial statements in Item 8 of the Form 10-K for information relating to various lawsuits and other contingencies.

General Litigation Matters

The Registrants are involved in various matters being litigated and regulatory matters. The ultimate outcome of such pending or potential litigation or regulatory matters against each Registrant and any subsidiaries cannot be determined at this time; however, for current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on such Registrant's financial statements.

The Registrants believe the pending legal challenges discussed below have no merit; however, the ultimate outcome of these matters cannot be determined at this time.

Southern Company

In February 2017, Jean Vineyard and Judy Mesirov each filed a shareholder derivative lawsuit in the U.S. District Court for the Northern District of Georgia. Each of these lawsuits named as defendants Southern Company, certain of its directors, certain of its current and former officers, and certain former Mississippi Power officers. In 2017, these two shareholder derivative lawsuits were consolidated in the U.S. District Court for the Northern District of Georgia. The complaints alleged that the defendants caused Southern Company to make false or misleading statements regarding the Kemper County energy facility cost and schedule. Further, the complaints alleged that the defendants were unjustly enriched and caused the waste of corporate assets and also alleged that the individual defendants violated their fiduciary duties.

In May 2017, Helen E. Piper Survivor's Trust filed a shareholder derivative lawsuit in the Superior Court of Gwinnett County, Georgia that named as defendants Southern Company, certain of its directors, certain of its current and former officers, and certain former Mississippi Power officers. The complaint alleged that the individual defendants, among other things, breached their fiduciary duties in connection with schedule delays and cost overruns associated with the construction of the Kemper County energy facility. The complaint further alleged that the individual defendants authorized or failed to correct false and misleading statements regarding the Kemper County energy facility schedule and cost and failed to implement necessary internal controls to prevent harm to Southern Company. In August 2019, the court granted a motion filed by the plaintiff in July 2019 to substitute a new named plaintiff, Martin J. Kobuck, in place of Helen E. Piper Survivor's Trust.

The plaintiffs in each of these cases sought to recover, on behalf of Southern Company, unspecified actual damages and, on each plaintiff's own behalf, attorneys' fees and costs in bringing the lawsuit. The plaintiffs also sought certain changes to Southern Company's corporate governance and internal processes. On January 21, 2022, the plaintiffs in the federal court action filed a motion for preliminary approval of settlement, together with an executed stipulation of settlement, which applied to both actions. On June 9, 2022, the U.S. District Court for the Northern District of Georgia granted final approval of the settlement and, on June 16, 2022, the Superior Court of Gwinnett County, Georgia entered an order awarding attorneys' fees and expenses related to the Martin J. Kobuck lawsuit. The settlement consisted of an aggregate payment by Southern Company's insurers of approximately $4.5 million for attorneys' fees and expenses, as well as adoption of various corporate governance reforms by Southern Company. These matters are now concluded.

Alabama Power

On September 26, 2022, Mobile Baykeeper, through its counsel Southern Environmental Law Center, filed a citizen suit in the U.S. District Court for the Southern District of Alabama alleging that Alabama Power's plan to close the Plant Barry ash pond utilizing a closure-in-place methodology violates the Resource Conservation and Recovery Act (RCRA) and regulations governing CCR. Among other relief requested, Mobile Baykeeper seeks a declaratory judgment that the RCRA and regulations governing CCR are being violated, preliminary and injunctive relief to

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prevent implementation of Alabama Power's closure plan and the development of a closure plan that satisfies regulations governing CCR requirements. See Note 6 to the financial statements in Item 8 of the Form 10-K for a discussion of Alabama Power's ARO liabilities related to facilities that are subject to the CCR Rule and the related state rule. The ultimate outcome of this matter cannot be determined at this time.

Georgia Power

In 2011, plaintiffs filed a putative class action against Georgia Power in the Superior Court of Fulton County, Georgia alleging that Georgia Power's collection in rates of amounts for municipal franchise fees (which fees are paid to municipalities) exceeded the amounts allowed in orders of the Georgia PSC and alleging certain state law claims. This case has been ruled upon and appealed numerous times over the last several years. In 2019, the Georgia PSC issued an order that found Georgia Power has appropriately implemented the municipal franchise fee schedule. In March 2021, the Superior Court of Fulton County granted class certification and Georgia Power's motion for summary judgment and the plaintiffs filed a notice of appeal. In April 2021, Georgia Power filed a notice of cross appeal on the issue of class certification. In December 2021, the Georgia Court of Appeals affirmed the Superior Court's ruling that granted summary judgment to Georgia Power and dismissed Georgia Power's cross appeal on the issue of class certification as moot. Also in December 2021, the plaintiffs filed a petition for writ of certiorari to the Georgia Supreme Court. The amount of any possible losses cannot be estimated at this time because, among other factors, it is unknown whether any losses would be subject to recovery from any municipalities.

In July 2020, a group of individual plaintiffs filed a complaint in the Superior Court of Fulton County, Georgia against Georgia Power alleging that releases from Plant Scherer have impacted groundwater, surface water, and air, resulting in alleged personal injuries and property damage. The plaintiffs seek an unspecified amount of monetary damages including punitive damages, a medical monitoring fund, and injunctive relief. Georgia Power has filed multiple motions to dismiss the complaint. In October 2021, three additional complaints were filed in the Superior Court of Monroe County, Georgia against Georgia Power alleging that releases from Plant Scherer have impacted groundwater and air, resulting in alleged personal injuries and property damage. The plaintiffs seek an unspecified amount of monetary damages including punitive damages. In November 2021, Georgia Power filed a notice to remove the three cases pending in the Superior Court of Monroe County, Georgia to the U.S. District Court for the Middle District of Georgia. On February 7, 2022, four additional complaints were filed in the Superior Court of Monroe County, Georgia against Georgia Power seeking damages for alleged personal injuries or property damage. On March 9, 2022, Georgia Power filed a notice to remove the four cases pending in the Superior Court of Monroe County, Georgia to the U.S. District Court for the Middle District of Georgia. The amount of any possible losses from these matters cannot be estimated at this time.

Mississippi Power

In 2018, Ray C. Turnage and 10 other individual plaintiffs filed a putative class action complaint against Mississippi Power and the three then-serving members of the Mississippi PSC in the U.S. District Court for the Southern District of Mississippi, which was amended in March 2019 to include four additional plaintiffs. Mississippi Power received Mississippi PSC approval in 2013 to charge a mirror CWIP rate premised upon including in its rate base pre-construction and construction costs for the Kemper IGCC prior to placing the Kemper IGCC into service. The Mississippi Supreme Court reversed that approval and ordered Mississippi Power to refund the amounts paid by customers under the previously-approved mirror CWIP rate. The plaintiffs allege that the initial approval process, and the amount approved, were improper and make claims for gross negligence, reckless conduct, and intentional wrongdoing. They also allege that Mississippi Power underpaid customers by up to $23.5 million in the refund process by applying an incorrect interest rate. The plaintiffs seek to recover, on behalf of themselves and their putative class, actual damages, punitive damages, pre-judgment interest, post-judgment interest, attorney's fees, and costs. The district court dismissed the amended complaint; however, in March 2020, the plaintiffs filed a motion seeking to name the new members of the Mississippi PSC, the Mississippi Development Authority, and Southern Company as additional defendants and add a cause of action against all defendants based on a dormant commerce clause theory under the U.S. Constitution. In July 2020, the plaintiffs filed a motion for leave to file a third amended complaint, which included the same federal claims as the proposed second amended complaint, as well as several

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additional state law claims based on the allegation that Mississippi Power failed to disclose the annual percentage rate of interest applicable to refunds. In November 2020, the district court denied each of the plaintiffs' pending motions and entered final judgment in favor of Mississippi Power. In January 2021, the district court denied further motions by the plaintiffs to vacate the judgment and to file a revised second amended complaint. In February 2021, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Fifth Circuit. On March 21, 2022, the U.S. Court of Appeals for the Fifth Circuit issued an opinion affirming the dismissal of the claims against the Mississippi PSC defendants but reversing the dismissal of the claims against Mississippi Power. On May 31, 2022, the U.S. Court of Appeals for the Fifth Circuit denied a petition by Mississippi Power for a rehearing en banc and remanded the case to the U.S. District Court for the Southern District of Mississippi for further proceedings. On June 17, 2022, Mississippi Power filed with the trial court a motion to dismiss the complaint. An adverse outcome in this proceeding could have a material impact on Mississippi Power's financial statements.

Environmental Remediation

The Southern Company system must comply with environmental laws and regulations governing the handling and disposal of waste and releases of hazardous substances. Under these various laws and regulations, the Southern Company system could incur substantial costs to clean up affected sites. The traditional electric operating companies and the natural gas distribution utilities in Illinois and Georgia have each received authority from their respective state PSCs or other applicable state regulatory agencies to recover approved environmental remediation costs through regulatory mechanisms. These regulatory mechanisms are adjusted annually or as necessary within limits approved by the state PSCs or other applicable state regulatory agencies.

Georgia Power's environmental remediation liability was $16 million and $17 million at September 30, 2022 and December 31, 2021, respectively. Georgia Power has been designated or identified as a potentially responsible party at sites governed by the Georgia Hazardous Site Response Act and/or by the federal Comprehensive Environmental Response, Compensation, and Liability Act, and assessment and potential cleanup of such sites is expected.

Southern Company Gas' environmental remediation liability was $270 million and $249 million at September 30, 2022 and December 31, 2021, respectively, based on the estimated cost of environmental investigation and remediation associated with known former manufactured gas plant operating sites.

The ultimate outcome of these matters cannot be determined at this time; however, as a result of the regulatory treatment for environmental remediation expenses described above, the final disposition of these matters is not expected to have a material impact on the financial statements of the applicable Registrants.

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Other Matters

Mississippi Power

In conjunction with Southern Company's 2019 sale of Gulf Power, NextEra Energy, Inc. held back $75 million of the purchase price pending Mississippi Power and Gulf Power negotiating a mutually acceptable revised operating agreement for Plant Daniel. On July 12, 2022, the co-owners executed a revised operating agreement and Southern Company subsequently received the remaining $75 million of the purchase price. The revised operating agreement contains dispatch procedures for the two jointly-owned coal units at Plant Daniel such that Mississippi Power will designate one of the two units as primary and the other as secondary in lieu of each company separately owning 100% of a single generating unit. Mississippi Power has the option to purchase its co-owner's ownership interest for $1 on January 15, 2024, provided that Mississippi Power exercises the option no later than 120 days prior to that date. The revised operating agreement is not expected to have a material impact on Mississippi Power's financial statements. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information regarding the sale of Gulf Power.

On August 31, 2022, the Mississippi Department of Revenue (Mississippi DOR) completed an audit of sales and use taxes paid by Mississippi Power from 2016 to 2019 and entered a final assessment, indicating a total amount due of $28 million, including associated penalties and interest. Mississippi Power does not agree with the audit findings and expects to exercise its rights to an administrative appeal with the Mississippi DOR by October 30, 2022. Excluding amounts associated with the gasifier and other abandoned Kemper IGCC assets, Mississippi Power's sales and use taxes are generally authorized for rate recovery; however, the ultimate outcome of this matter cannot be determined at this time.

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(D) REVENUE FROM CONTRACTS WITH CUSTOMERS AND LEASE INCOME

Revenue from Contracts with Customers

The Registrants generate revenues from a variety of sources, some of which are not accounted for as revenue from contracts with customers, such as leases, derivatives, and certain cost recovery mechanisms. See Note 1 to the financial statements under "Revenues" in Item 8 of the Form 10-K for additional information on the revenue policies of the Registrants. See "Lease Income" herein and Note (J) for additional information on revenue accounted for under lease and derivative accounting guidance, respectively.

The following table disaggregates revenue from contracts with customers for the three and nine months ended September 30, 2022 and 2021:

			Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas
			(in millions)
Three Months Ended September 30, 2022
Operating revenues
Retail electric revenues
Residential			$	2,104		$	799		$	1,212		$	93		$	—		$	—
Commercial			1,637			499			1,051			87			—			—
Industrial			1,183			452			642			89			—			—
Other			27			3			22			2			—			—
Total retail electric revenues			4,951			1,753			2,927			271			—			—
Natural gas distribution revenues
Residential			331			—			—			—			—			331
Commercial			93			—			—			—			—			93
Transportation			259			—			—			—			—			259
Industrial			12			—			—			—			—			12
Other			49			—			—			—			—			49
Total natural gas distribution revenues			744			—			—			—			—			744
Wholesale electric revenues
PPA energy revenues			812			187			40			4			591			—
PPA capacity revenues			175			56			12			1			107			—
Non-PPA revenues			58			67			4			242			303			—
Total wholesale electric revenues			1,045			310			56			247			1,001			—
Other natural gas revenues
Gas marketing services			84			—			—			—			—			84
Other natural gas revenues			15			—			—			—			—			15
Total natural gas revenues			99			—			—			—			—			99
Other revenues			277			65			110			13			9			—
Total revenue from contracts with customers			7,116			2,128			3,093			531			1,010			843
Other revenue sources(a)			1,262			316			796			(21)			170			14
Total operating revenues			$	8,378		$	2,444		$	3,889		$	510		$	1,180		$	857

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			Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas
			(in millions)
Nine Months Ended September 30, 2022
Operating revenues
Retail electric revenues
Residential			$	5,282		$	2,049		$	2,995		$	238		$	—		$	—
Commercial			4,202			1,285			2,688			229			—			—
Industrial			2,914			1,143			1,529			242			—			—
Other			79			10			62			7			—			—
Total retail electric revenues			12,477			4,487			7,274			716			—			—
Natural gas distribution revenues
Residential			1,821			—			—			—			—			1,821
Commercial			493			—			—			—			—			493
Transportation			872			—			—			—			—			872
Industrial			60			—			—			—			—			60
Other			244			—			—			—			—			244
Total natural gas distribution revenues			3,490			—			—			—			—			3,490
Wholesale electric revenues
PPA energy revenues			1,739			354			112			11			1,285			—
PPA capacity revenues			443			135			35			4			273			—
Non-PPA revenues			182			166			19			511			572			—
Total wholesale electric revenues			2,364			655			166			526			2,130			—
Other natural gas revenues
Gas marketing services			417			—			—			—			—			417
Other natural gas revenues			41			—			—			—			—			41
Total natural gas revenues			458			—			—			—			—			458
Other revenues			810			173			327			34			27			—
Total revenue from contracts with customers			19,599			5,315			7,767			1,276			2,157			3,948
Other revenue sources(a)			2,633			708			1,451			3			461			50
Total operating revenues			$	22,232		$	6,023		$	9,218		$	1,279		$	2,618		$	3,998

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			Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas
			(in millions)
Three Months Ended September 30, 2021
Operating revenues
Retail electric revenues
Residential			$	1,974		$	750		$	1,138		$	86		$	—		$	—
Commercial			1,432			471			882			79			—			—
Industrial			902			394			428			80			—			—
Other			24			4			18			2			—			—
Total retail electric revenues			4,332			1,619			2,466			247			—			—
Natural gas distribution revenues
Residential			218			—			—			—			—			218
Commercial			55			—			—			—			—			55
Transportation			239			—			—			—			—			239
Industrial			6			—			—			—			—			6
Other			31			—			—			—			—			31
Total natural gas distribution revenues			549			—			—			—			—			549
Wholesale electric revenues
PPA energy revenues			359			61			41			2			261			—
PPA capacity revenues			125			14			14			1			97			—
Non-PPA revenues			63			54			3			120			134			—
Total wholesale electric revenues			547			129			58			123			492			—
Other natural gas revenues
Gas marketing services			45			—			—			—			—			45
Other natural gas revenues			11			—			—			—			—			11
Total natural gas revenues			56			—			—			—			—			56
Other revenues			248			53			112			8			9			—
Total revenue from contracts with customers			5,732			1,801			2,636			378			501			605
Other revenue sources(a)			506			103			220			—			178			18
Total operating revenues			$	6,238		$	1,904		$	2,856		$	378		$	679		$	623

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			Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas
			(in millions)
Nine Months Ended September 30, 2021
Operating revenues
Retail electric revenues
Residential			$	4,910		$	1,931		$	2,765		$	214		$	—		$	—
Commercial			3,727			1,229			2,293			205			—			—
Industrial			2,299			1,048			1,034			217			—			—
Other			70			13			51			6			—			—
Total retail electric revenues			11,006			4,221			6,143			642			—			—
Natural gas distribution revenues
Residential			1,143			—			—			—			—			1,143
Commercial			298			—			—			—			—			298
Transportation			775			—			—			—			—			775
Industrial			29			—			—			—			—			29
Other			187			—			—			—			—			187
Total natural gas distribution revenues			2,432			—			—			—			—			2,432
Wholesale electric revenues
PPA energy revenues			782			143			71			9			575			—
PPA capacity revenues			375			86			41			4			247			—
Non-PPA revenues			181			108			14			283			273			—
Total wholesale electric revenues			1,338			337			126			296			1,095			—
Other natural gas revenues
Wholesale gas services			2,168			—			—			—			—			2,168
Gas marketing services			303			—			—			—			—			303
Other natural gas revenues			27			—			—			—			—			27
Total natural gas revenues			2,498			—			—			—			—			2,498
Other revenues			792			150			362			22			18			—
Total revenue from contracts with customers			18,066			4,708			6,631			960			1,113			4,930
Other revenue sources(a)			2,979			311			419			28			497			1,763
Other adjustments(b)			(3,699)			—			—			—			—			(3,699)
Total operating revenues			$	17,346		$	5,019		$	7,050		$	988		$	1,610		$	2,994

(a)Other revenue sources relate to revenues from customers accounted for as derivatives and leases, alternative revenue programs at Southern Company Gas, and cost recovery mechanisms and revenues that meet other scope exceptions for revenues from contracts with customers at the traditional electric operating companies.

(b)Other adjustments relate to the cost of Southern Company Gas' energy and risk management activities. Wholesale gas services revenues are presented net of the related costs of those activities on the statement of income. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K and Note (L) under "Southern Company Gas" for information on the sale of Sequent and components of wholesale gas services' operating revenues, respectively.

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Contract Balances

The following table reflects the closing balances of receivables, contract assets, and contract liabilities related to revenues from contracts with customers at September 30, 2022 and December 31, 2021:

			Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas
			(in millions)
Accounts Receivable
At September 30, 2022			$	2,760		$	800		$	1,035		$	98		$	264		$	433
At December 31, 2021			2,504			589			736			73			149			753
Contract Assets
At September 30, 2022			$	178		$	5		$	114		$	—		$	—		$	—
At December 31, 2021			117			2			63			—			1			—
Contract Liabilities
At September 30, 2022			$	56		$	5		$	6		$	7		$	2		$	—
At December 31, 2021			57			4			14			—			1			—

At September 30, 2022 and December 31, 2021, Georgia Power had contract assets primarily related to retail customer fixed bill programs, where the payment is contingent upon Georgia Power's continued performance and the customer's continued participation in the program over a one-year contract term, and unregulated service agreements, where payment is contingent on project completion. Contract liabilities for Georgia Power relate to cash collections recognized in advance of revenue for unregulated service agreements. Southern Company's unregulated distributed generation business had $59 million and $50 million of contract assets and $37 million and $39 million of contract liabilities at September 30, 2022 and December 31, 2021, respectively, for outstanding performance obligations.

Revenues recognized in the three and nine months ended September 30, 2022, which were included in contract liabilities at December 31, 2021, were $13 million and $32 million, respectively, for Southern Company and immaterial for the other Registrants.

Remaining Performance Obligations

The Subsidiary Registrants have long-term contracts with customers in which revenues are recognized as performance obligations are satisfied over the contract term. For the traditional electric operating companies and Southern Power, these contracts primarily relate to PPAs whereby electricity and generation capacity are provided to a customer. The revenue recognized for the delivery of electricity is variable; however, certain PPAs include a fixed payment for fixed generation capacity over the term of the contract. For Southern Company Gas, these contracts involve energy infrastructure enhancement and upgrade projects for certain governmental customers. Southern Company's unregulated distributed generation business also has partially satisfied performance obligations related to certain fixed price contracts. Revenues from contracts with customers related to these performance obligations remaining at September 30, 2022 are expected to be recognized as follows:

			2022 (remaining)			2023			2024			2025			2026			Thereafter
			(in millions)
Southern Company			$	243		$	619		$	434		$	322		$	307		$	2,340
Alabama Power			8			24			7			5			—			—
Georgia Power			20			70			34			22			11			21
Southern Power			80			341			344			294			299			2,334
Southern Company Gas			12			29			29			—			—			—

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Revenue expected to be recognized for performance obligations remaining at September 30, 2022 was immaterial for Mississippi Power.

Lease Income

Lease income for the three and nine months ended September 30, 2022 and 2021 is as follows:

			Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas
			(in millions)
For the Three Months Ended September 30, 2022
Lease income - interest income on sales-type leases			$	7		$	—		$	—		$	4		$	3		$	—
Lease income - operating leases			50			19			8			1			21			9
Variable lease income			139			—			—			—			145			—
Total lease income			$	196		$	19		$	8		$	5		$	169		$	9
For the Nine Months Ended September 30, 2022
Lease income - interest income on sales-type leases			$	19		$	—		$	—		$	11		$	8		$	—
Lease income - operating leases			149			58			24			1			64			27
Variable lease income			355			1			—			—			372			—
Total lease income			$	523		$	59		$	24		$	12		$	444		$	27
For the Three Months Ended September 30, 2021
Lease income - interest income on sales-type leases			$	4		$	—		$	—		$	4		$	—		$	—
Lease income - operating leases			56			21			11			—			21			9
Variable lease income			143			—			—			—			151			—
Total lease income			$	203		$	21		$	11		$	4		$	172		$	9
For the Nine Months Ended September 30, 2021
Lease income - interest income on sales-type leases			$	11		$	—		$	—		$	10		$	—		$	—
Lease income - operating leases			168			62			31			1			64			26
Variable lease income			355			—			—			—			379			—
Total lease income			$	534		$	62		$	31		$	11		$	443		$	26

Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Lease income for Alabama Power and Southern Power is included in wholesale revenues.

(E) CONSOLIDATED ENTITIES AND EQUITY METHOD INVESTMENTS

See Note 7 to the financial statements in Item 8 of the Form 10-K for additional information.

Southern Power

Variable Interest Entities

Southern Power has certain subsidiaries that are determined to be VIEs. Southern Power is considered the primary beneficiary of these VIEs because it controls the most significant activities of the VIEs, including operating and maintaining the respective assets, and has the obligation to absorb expected losses of these VIEs to the extent of its equity interests.

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SP Solar and SP Wind

At September 30, 2022 and December 31, 2021, SP Solar had total assets of $6.0 billion and $6.1 billion, respectively, total liabilities of $0.4 billion, and noncontrolling interests of $1.1 billion. Cash distributions from SP Solar are allocated 67% to Southern Power and 33% to Global Atlantic in accordance with their partnership interest percentage. Under the terms of the limited partnership agreement, distributions without limited partner consent are limited to available cash and SP Solar is obligated to distribute all such available cash to its partners each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves.

At September 30, 2022 and December 31, 2021, SP Wind had total assets of $2.3 billion, total liabilities of $191 million and $130 million, respectively, and noncontrolling interests of $40 million and $41 million, respectively. Under the terms of the limited liability agreement, distributions without Class A member consent are limited to available cash and SP Wind is obligated to distribute all such available cash to its members each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves. Cash distributions from SP Wind are generally allocated 60% to Southern Power and 40% to the three financial investors in accordance with the limited liability agreement.

Southern Power consolidates both SP Solar and SP Wind, as the primary beneficiary, since it controls the most significant activities of each entity, including operating and maintaining their assets. Certain transfers and sales of the assets in the VIEs are subject to partner consent and the liabilities are non-recourse to the general credit of Southern Power. Liabilities consist of customary working capital items and do not include any long-term debt.

Other Variable Interest Entities

Southern Power has other consolidated VIEs that relate to certain subsidiaries that have either sold noncontrolling interests to tax equity investors or acquired less than a 100% interest from facility developers. These entities are considered VIEs because the arrangements are structured similar to a limited partnership and the noncontrolling members do not have substantive kick-out rights.

At September 30, 2022 and December 31, 2021, the other VIEs had total assets of $1.9 billion, total liabilities of $0.2 billion and $0.3 billion, respectively, and noncontrolling interests of $0.8 billion and $0.9 billion, respectively. Under the terms of the partnership agreements, distributions of all available cash are required each month or quarter and additional distributions require partner consent.

Equity Method Investments

At September 30, 2022 and December 31, 2021, Southern Power had equity method investments in wind and battery energy storage projects totaling $49 million and $86 million, respectively. Earnings (loss) from these investments were immaterial for all periods presented. During the nine months ended September 30, 2022, Southern Power sold equity method investments in wind projects and received proceeds totaling $38 million. The gains associated with the sales were immaterial.

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Southern Company Gas

Equity Method Investments

The carrying amounts of Southern Company Gas' equity method investments at September 30, 2022 and December 31, 2021 and related earnings (loss) from those investments for the three and nine months ended September 30, 2022 and 2021 were as follows:

Investment Balance			September 30, 2022			December 31, 2021
			(in millions)
SNG			$	1,091		$	1,129
Other(*)			34			44
Total			$	1,125		$	1,173

(*)Balance at September 30, 2022 reflects an $11 million distribution received in 2022 from PennEast Pipeline.

			Three Months Ended September 30,									Nine Months Ended September 30,
Earnings (Loss) from Equity Method Investments			2022			2021						2022			2021
			(in millions)
SNG			$	34		$	27					$	104		$	93
PennEast Pipeline(*)			—			(2)						—			(81)
Other			—			—						1			2
Total			$	34		$	25					$	105		$	14

(*)Primarily reflects pre-tax impairment charges. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

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(F) FINANCING AND LEASES

Bank Credit Arrangements

See Note 8 to the financial statements under "Bank Credit Arrangements" in Item 8 of the Form 10-K for additional information.

At September 30, 2022, committed credit arrangements with banks were as follows:

						Expires
Company						2023			2024			2025			2026						Total						Unused																								Expires within One Year
						(in millions)
Southern Company parent						$	—		$	—		$	—		$	2,000					$	2,000					$	1,998																							$	—
Alabama Power						—			550			—			700						1,250						1,250																								—
Georgia Power						—			—			—			1,750						1,750						1,726																								—
Mississippi Power						—			150			125			—						275						275																								—
Southern Power(a)						—			—			—			600						600						569																								—
Southern Company Gas(b)						250			—			—			1,500						1,750						1,748																								250
SEGCO						30			—			—			—						30						30																								30
Southern Company						$	280		$	700		$	125		$	6,550					$	7,655					$	7,596																							$	280

(a)Does not include Southern Power Company's two $75 million continuing letter of credit facilities for standby letters of credit, expiring in 2023 and 2025, respectively, of which $11 million and $5 million, respectively, was unused at September 30, 2022. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.

(b)Southern Company Gas, as the parent entity, guarantees the obligations of Southern Company Gas Capital, which is the borrower of $800 million of the credit arrangement expiring in 2026. Southern Company Gas' committed credit arrangement expiring in 2026 also includes $700 million for which Nicor Gas is the borrower and which is restricted for working capital needs of Nicor Gas. Pursuant to the multi-year credit arrangement expiring in 2026, the allocations between Southern Company Gas Capital and Nicor Gas may be adjusted. Nicor Gas is also the borrower of a new $250 million credit arrangement expiring in 2023.

As reflected in the table above, in March 2022, Mississippi Power amended and restated its $125 million revolving credit arrangement, which among other things, extended the maturity date from 2023 to 2025 and allows for borrowing based on term SOFR.

Subject to applicable market conditions, Southern Company and its subsidiaries expect to renew or replace their bank credit arrangements as needed, prior to expiration. In connection therewith, Southern Company and its subsidiaries may extend the maturity dates and/or increase or decrease the lending commitments thereunder.

These bank credit arrangements, as well as the term loan arrangements of the Registrants, Nicor Gas, and SEGCO, contain covenants that limit debt levels and contain cross-acceleration or, in the case of Southern Power, cross-default provisions to other indebtedness (including guarantee obligations) that are restricted only to the indebtedness of the individual company. Such cross-default provisions to other indebtedness would trigger an event of default if Southern Power defaulted on indebtedness or guarantee obligations over a specified threshold. Such cross-acceleration provisions to other indebtedness would trigger an event of default if the applicable borrower defaulted on indebtedness, the payment of which was then accelerated. At September 30, 2022, the Registrants, Nicor Gas, and SEGCO were in compliance with all such covenants. None of the bank credit arrangements contain material adverse change clauses at the time of borrowings.

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(UNAUDITED)

A portion of the unused credit with banks is allocated to provide liquidity support to the revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants, Nicor Gas, and SEGCO. The amount of variable rate revenue bonds of the traditional electric operating companies outstanding requiring liquidity support at September 30, 2022 was approximately $1.4 billion (comprised of approximately $789 million at Alabama Power, $619 million at Georgia Power, and $34 million at Mississippi Power). In addition, at September 30, 2022, Georgia Power had approximately $288 million of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.

Equity Units

In May 2022, Southern Company remarketed $862.5 million aggregate principal amount of its Series 2019A Remarketable Junior Subordinated Notes due August 1, 2024 (2019A RSNs) and $862.5 million aggregate principal amount of its Series 2019B Remarketable Junior Subordinated Notes due August 1, 2027 (2019B RSNs), pursuant to the terms of its 2019 Series A Equity Units (Equity Units). In connection with the remarketing, the interest rates on the 2019A RSNs and the 2019B RSNs were reset to 4.475% and 5.113%, respectively, payable on a semi-annual basis, and Southern Company ceased to have the ability to redeem these securities prior to maturity or to defer interest payments. Southern Company did not receive any proceeds from the remarketing, which were used to purchase a portfolio of treasury securities maturing on July 28, 2022. On August 1, 2022, the proceeds from this portfolio were used to settle the purchase contracts entered into as part of the Equity Units and Southern Company issued approximately 25.2 million shares of common stock and received proceeds of $1.725 billion. At September 30, 2022 and December 31, 2021, the 2019A RSNs and the 2019B RSNs are included in long-term debt on Southern Company's consolidated balance sheets.

Earnings per Share

For Southern Company, the only differences in computing basic and diluted earnings per share are attributable to awards outstanding under stock-based compensation plans and the Equity Units until they were settled in August 2022. Earnings per share dilution resulting from stock-based compensation plans and the Equity Units issuance is determined using the treasury stock method. See Note 8 to the financial statements under "Equity Units" in Item 8 of the Form 10-K and "Equity Units" herein for information on the Equity Units and Note 12 to the financial statements in Item 8 of the Form 10-K for information on stock-based compensation plans. Shares used to compute diluted earnings per share were as follows:

			Three Months Ended September 30,						Nine Months Ended September 30,
			2022			2021			2022			2021
			(in millions)
As reported shares			1,082			1,061			1,070			1,060
Effect of stock-based compensation			6			7			6			7
Diluted shares			1,088			1,068			1,076			1,067

For all periods presented, an immaterial number of stock-based compensation awards was not included in the diluted earnings per share calculation because the awards were anti-dilutive.

Southern Company Leveraged Lease

See Note 9 to the financial statements in Item 8 of the Form 10-K for information on a leveraged lease agreement related to energy generation. On June 30, 2022, the Southern Holdings subsidiary operating the generating plant for the lessee provided notice to the lessee to terminate the related operating and maintenance agreement effective June 30, 2023. The parties to the lease agreement are currently negotiating a potential restructuring, which could result in rescission of the termination notice. The ultimate outcome of this matter cannot be determined at this time but is not expected to have a material impact on Southern Company's financial statements.

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(UNAUDITED)

Georgia Power Lease Modification

See Note 9 to the financial statements in Item 8 of the Form 10-K for information on Georgia Power's leases. In July 2022, Georgia Power recognized a lease modification related to an existing non-affiliate PPA which converted from an operating lease to a finance lease upon its approval in the 2022 IRP. As a result, Georgia Power removed from its balance sheet operating lease right-of-use assets, net of amortization of $17 million and lease obligations of $18 million maturing through 2024 and recorded finance lease right-of-use assets of $112 million and lease obligations of $113 million maturing through 2039.

(G) INCOME TAXES

See Note 10 to the financial statements in Item 8 of the Form 10-K for additional tax information.

Current and Deferred Income Taxes

Tax Credit and Net Operating Loss Carryforwards

Southern Company had federal ITC and PTC carryforwards (primarily related to Southern Power) totaling $1.0 billion at September 30, 2022 compared to $1.2 billion at December 31, 2021.

The federal PTC and ITC carryforwards begin expiring in 2032, but are expected to be fully utilized by 2025. The utilization of each Registrant's estimated tax credit and state net operating loss carryforwards and related valuation allowances could be impacted by numerous factors, including the acquisition of additional renewable projects, the purchase of rights to additional PTCs of Plant Vogtle Units 3 and 4 pursuant to certain joint ownership agreements, an increase in Georgia Power's ownership interest percentage in Plant Vogtle Units 3 and 4, changes in taxable income projections, and potential income tax rate changes. See Note (B) and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information on Plant Vogtle Units 3 and 4.

Effective Tax Rate

Southern Company's effective tax rate is typically lower than the statutory rate due to employee stock plans' dividend deduction, non-taxable AFUDC equity at the traditional electric operating companies, flowback of excess deferred income taxes at the regulated utilities, and federal income tax benefits from ITCs and PTCs primarily at Southern Power.

Details of significant changes in the effective tax rate for the applicable Registrants are provided herein.

Southern Company

Southern Company's effective tax rate was 20.0% for the nine months ended September 30, 2022 compared to 17.5% for the corresponding period in 2021. The effective tax rate increase was primarily due to higher pre-tax earnings and an adjustment related to a prior year state tax credit carryforward at Georgia Power in 2022, partially offset by additional tax expense in 2021 as a result of the sale of Sequent. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Georgia Power

Georgia Power's effective tax rate was 18.5% for the nine months ended September 30, 2022 compared to 7.3% for the corresponding period in 2021. The effective tax rate increase was primarily due to higher pre-tax earnings and an adjustment related to a prior year state tax credit carryforward in 2022.

Mississippi Power

Mississippi Power's effective tax rate was 20.1% for the nine months ended September 30, 2022 compared to 14.3% for the corresponding period in 2021. The effective tax rate increase was primarily due to a decrease in the flowback of excess deferred income taxes in 2022.

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(UNAUDITED)

Southern Power

Southern Power's effective tax rate was 18.8% for the nine months ended September 30, 2022 compared to a tax benefit rate of (1.6)% for the corresponding period in 2021. The effective tax rate increase was primarily due to higher pre-tax earnings in 2022 and a change in state apportionment methodology resulting from tax legislation enacted by the State of Alabama in the first quarter 2021, partially offset by higher wind PTCs in 2022.

Southern Company Gas

Southern Company Gas' effective tax rate was 23.7% for the nine months ended September 30, 2022 compared to 36.6% for the corresponding period in 2021. The effective tax rate decrease was primarily due to additional tax expense in 2021 as a result of the sale of Sequent. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Unrecognized Tax Benefits

Southern Company's and Southern Company Gas' unrecognized tax positions balances at September 30, 2022 were $79 million and $32 million, respectively, compared to $47 million for Southern Company at December 31, 2021. The increases from prior periods are related to the amendment of certain 2018 state tax filing positions related to Southern Company Gas dispositions. If accepted by the states, these positions would decrease Southern Company's and Southern Company Gas' annual effective tax rates. The ultimate outcome of these unrecognized tax benefits is dependent on acceptance by each state and is not expected to be resolved in the next 12 months.

(H) RETIREMENT BENEFITS

The Southern Company system has a qualified defined benefit, trusteed, pension plan covering substantially all employees, with the exception of employees at PowerSecure. The qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2022. The Southern Company system also provides certain non-qualified defined benefits for a select group of management and highly compensated employees, which are funded on a cash basis. In addition, the Southern Company system provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The traditional electric operating companies fund other postretirement trusts to the extent required by their respective regulatory commissions. Southern Company Gas has a separate unfunded supplemental retirement health care plan that provides medical care and life insurance benefits to employees of discontinued businesses.

During 2022, the qualified pension plan achieved the predetermined funding threshold whereby the asset allocation was adjusted to invest a larger portion of the portfolio in fixed rate debt securities.

See Note 11 to the financial statements in Item 8 of the Form 10-K for additional information.

On each Registrant's condensed statements of income, the service cost component of net periodic benefit costs is included in other operations and maintenance expenses and all other components of net periodic benefit costs are included in other income (expense), net. Components of the net periodic benefit costs for the three and nine months ended September 30, 2022 and 2021 are presented in the following tables.

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(UNAUDITED)

			Southern Company						Alabama Power						Georgia Power						Mississippi Power						Southern Power						Southern Company Gas
			(in millions)
Three Months Ended September 30, 2022
Pension Plans
Service cost			$	103					$	25					$	26					$	5					$	2					$	9
Interest cost			102						24						31						5						2						7
Expected return on plan assets			(316)						(77)						(99)						(15)						(4)						(22)
Amortization:
Prior service costs			—						—						—						—						—						(1)
Regulatory asset			—						—						—						—						—						3
Net loss			60						16						18						2						1						2
Net periodic pension cost (income)			$	(51)					$	(12)					$	(24)					$	(3)					$	1					$	(2)
Postretirement Benefits
Service cost			$	6					$	2					$	2					$	1					$	1					$	—
Interest cost			10						3						4						—						—						1
Expected return on plan assets			(20)						(9)						(8)						—						—						(2)
Amortization:
Prior service costs			(1)						—						—						—						—						—
Regulatory asset			—						—						—						—						—						2
Net (gain)/loss			1						—						—						—						—						(1)
Net periodic postretirement benefit cost (income)			$	(4)					$	(4)					$	(2)					$	1					$	1					$	—
Nine Months Ended September 30, 2022
Pension Plans
Service cost			$	309					$	74					$	78					$	13					$	7					$	26
Interest cost			306						72						92						14						5						21
Expected return on plan assets			(949)						(229)						(298)						(44)						(12)						(68)
Amortization:
Prior service costs			—						—						1						—						—						(2)
Regulatory asset			—						—						—						—						—						11
Net loss			180						47						55						9						2						5
Net periodic pension cost (income)			$	(154)					$	(36)					$	(72)					$	(8)					$	2					$	(7)
Postretirement Benefits
Service cost			$	17					$	5					$	5					$	1					$	1					$	1
Interest cost			31						8						11						1						—						4
Expected return on plan assets			(60)						(25)						(21)						(1)						—						(6)
Amortization:
Prior service costs			(1)						—						—						—						—						—
Regulatory asset			—						—						—						—						—						5
Net (gain)/loss			1						—						1						—						—						(2)
Net periodic postretirement benefit cost (income)			$	(12)					$	(12)					$	(4)					$	1					$	1					$	2

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(UNAUDITED)

			Southern Company						Alabama Power						Georgia Power						Mississippi Power						Southern Power						Southern Company Gas
			(in millions)
Three Months Ended September 30, 2021
Pension Plans
Service cost			$	109					$	26					$	28					$	4					$	2					$	10
Interest cost			87						20						26						4						2						6
Expected return on plan assets			(298)						(72)						(94)						(14)						(4)						(21)
Amortization:
Prior service costs			—						—						—						—						—						(1)
Regulatory asset			—						—						—						—						—						3
Net loss			78						21						25						4						1						3
Net periodic pension cost (income)			$	(24)					$	(5)					$	(15)					$	(2)					$	1					$	—
Postretirement Benefits
Service cost			$	6					$	2					$	2					$	1					$	1					$	—
Interest cost			9						2						3						—						—						1
Expected return on plan assets			(19)						(8)						(7)						(1)						—						(2)
Amortization:
Regulatory asset			—						—						—						—						—						2
Net (gain)/loss			1						—						1						—						—						(1)
Net periodic postretirement benefit cost (income)			$	(3)					$	(4)					$	(1)					$	—					$	1					$	—
Nine Months Ended September 30, 2021
Pension Plans
Service cost			$	326					$	77					$	84					$	13					$	7					$	28
Interest cost			260						61						78						12						4						18
Expected return on plan assets			(893)						(215)						(282)						(41)						(11)						(64)
Amortization:
Prior service costs			—						—						1						—						—						(2)
Regulatory asset			—						—						—						—						—						11
Net loss			235						62						75						11						3						9
Net periodic pension cost (income)			$	(72)					$	(15)					$	(44)					$	(5)					$	3					$	—
Postretirement Benefits
Service cost			$	18					$	5					$	5					$	1					$	1					$	1
Interest cost			26						6						9						1						—						3
Expected return on plan assets			(57)						(22)						(20)						(2)						—						(6)
Amortization:
Prior service costs			(1)						—						—						—						—						—
Regulatory asset			—						—						—						—						—						5
Net (gain)/loss			3						—						2						—						—						(2)
Net periodic postretirement benefit cost (income)			$	(11)					$	(11)					$	(4)					$	—					$	1					$	1

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(UNAUDITED)

(I) FAIR VALUE MEASUREMENTS

At September 30, 2022, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:

			Fair Value Measurements Using:
At September 30, 2022			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Net Asset Value as a Practical Expedient (NAV)						Total
			(in millions)
Southern Company
Assets:
Energy-related derivatives(a)			$	49					$	454					$	—					$	—					$	503
Investments in trusts:(b)(c)
Domestic equity			610						161						—						—						771
Foreign equity			111						129						—						—						240
U.S. Treasury and government agency securities			—						265						—						—						265
Municipal bonds			—						52						—						—						52
Pooled funds – fixed income			—						7						—						—						7
Corporate bonds			—						438						—						—						438
Mortgage and asset backed securities			—						87						—						—						87
Private equity			—						—						—						156						156
Cash and cash equivalents			4						—						—						—						4
Other			17						13						—						—						30
Cash equivalents			1,402						18						—						—						1,420
Other investments			9						26						—						—						35
Total			$	2,202					$	1,650					$	—					$	156					$	4,008
Liabilities:
Energy-related derivatives(a)			$	20					$	141					$	—					$	—					$	161
Interest rate derivatives			—						311						—						—						311
Foreign currency derivatives			—						323						—						—						323
Contingent consideration			—						—						14						—						14
Other			—						13						—						—						13
Total			$	20					$	788					$	14					$	—					$	822

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(UNAUDITED)

			Fair Value Measurements Using:
At September 30, 2022			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Net Asset Value as a Practical Expedient (NAV)						Total
			(in millions)
Alabama Power
Assets:
Energy-related derivatives			$	—					$	147					$	—					$	—					$	147
Nuclear decommissioning trusts:(b)
Domestic equity			370						152						—						—						522
Foreign equity			111						—						—						—						111
U.S. Treasury and government agency securities			—						15						—						—						15
Municipal bonds			—						2						—						—						2
Corporate bonds			—						230						—						—						230
Mortgage and asset backed securities			—						20						—						—						20
Private equity			—						—						—						156						156
Other			10						—						—						—						10
Cash equivalents			1,225						18						—						—						1,243
Other investments			—						26						—						—						26
Total			$	1,716					$	610					$	—					$	156					$	2,482
Liabilities:
Energy-related derivatives			$	—					$	35					$	—					$	—					$	35
Georgia Power
Assets:
Energy-related derivatives			$	—					$	145					$	—					$	—					$	145
Nuclear decommissioning trusts:(b)(c)
Domestic equity			240						1						—						—						241
Foreign equity			—						128						—						—						128
U.S. Treasury and government agency securities			—						250						—						—						250
Municipal bonds			—						50						—						—						50
Corporate bonds			—						208						—						—						208
Mortgage and asset backed securities			—						67						—						—						67
Other			7						13						—						—						20
Total			$	247					$	862					$	—					$	—					$	1,109
Liabilities:
Energy-related derivatives			$	—					$	51					$	—					$	—					$	51

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(UNAUDITED)

			Fair Value Measurements Using:
At September 30, 2022			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Net Asset Value as a Practical Expedient (NAV)						Total
			(in millions)
Mississippi Power
Assets:
Energy-related derivatives			$	—					$	133					$	—					$	—					$	133
Cash equivalents			30						—						—						—						30
Total			$	30					$	133					$	—					$	—					$	163
Liabilities:
Energy-related derivatives			$	—					$	24					$	—					$	—					$	24
Southern Power
Assets:
Energy-related derivatives			$	—					$	7					$	—					$	—					$	7
Liabilities:
Energy-related derivatives			$	—					$	13					$	—					$	—					$	13
Foreign currency derivatives			—						80						—						—						80
Contingent consideration			—						—						14						—						14
Other			—						13						—						—						13
Total			$	—					$	106					$	14					$	—					$	120
Southern Company Gas
Assets:
Energy-related derivatives(a)			$	49					$	22					$	—					$	—					$	71
Non-qualified deferred compensation trusts:
Domestic equity			—						8						—						—						8
Foreign equity			—						1						—						—						1
Pooled funds – fixed income			—						7						—						—						7
Cash equivalents			4						—						—						—						4
Total			$	53					$	38					$	—					$	—					$	91
Liabilities:
Energy-related derivatives(a)			$	20					$	17					$	—					$	—					$	37
Interest rate derivatives			—						87						—						—						87
Total			$	20					$	104					$	—					$	—					$	124

(a)Excludes cash collateral of $15 million.

(b)Excludes receivables related to investment income, pending investment sales, payables related to pending investment purchases, and currencies. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.

(c)Includes investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. At September 30, 2022, approximately $46 million of the fair market value of Georgia Power's nuclear decommissioning trust funds' securities were on loan to creditors under the funds' managers' securities lending program. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.

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(UNAUDITED)

Southern Company, Alabama Power, and Georgia Power continue to elect the option to fair value investment securities held in the nuclear decommissioning trust funds. The fair value of the funds, including reinvested interest and dividends and excluding the funds' expenses, increased (decreased) by the amounts shown in the table below for the three and nine months ended September 30, 2022 and 2021. The changes were recorded as a change to the regulatory assets and liabilities related to AROs for Georgia Power and Alabama Power, respectively.

Fair value increases (decreases)			Three Months Ended September 30, 2022			Three Months Ended September 30, 2021			Nine Months Ended September 30, 2022			Nine Months Ended September 30, 2021
			(in millions)
Southern Company			$	(106)		$	9		$	(486)		$	173
Alabama Power			(53)			15			(245)			133
Georgia Power			(53)			(6)			(241)			40

Valuation Methodologies

The energy-related derivatives primarily consist of exchange-traded and over-the-counter financial products for natural gas and physical power products, including, from time to time, basis swaps. These are standard products used within the energy industry and are valued using the market approach. The inputs used are mainly from observable market sources, such as forward natural gas prices, power prices, implied volatility, and overnight index swap interest rates. Interest rate derivatives are also standard over-the-counter products that are valued using observable market data and assumptions commonly used by market participants. The fair value of interest rate derivatives reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and occasionally, implied volatility of interest rate options. The fair value of cross-currency swaps reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future foreign currency exchange rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and discount rates. The interest rate derivatives and cross-currency swaps are categorized as Level 2 under Fair Value Measurements as these inputs are based on observable data and valuations of similar instruments. See Note (J) for additional information on how these derivatives are used.

For fair value measurements of the investments within the nuclear decommissioning trusts and the non-qualified deferred compensation trusts, external pricing vendors are designated for each asset class with each security specifically assigned a primary pricing source. For investments held within commingled funds, fair value is determined at the end of each business day through the net asset value, which is established by obtaining the underlying securities' individual prices from the primary pricing source. A market price secured from the primary source vendor is then evaluated by management in its valuation of the assets within the trusts. As a general approach, fixed income market pricing vendors gather market data (including indices and market research reports) and integrate relative credit information, observed market movements, and sector news into proprietary pricing models, pricing systems, and mathematical tools. Dealer quotes and other market information, including live trading levels and pricing analysts' judgments, are also obtained when available.

The NRC requires licensees of commissioned nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. See Note 6 to the financial statements under "Nuclear Decommissioning" in Item 8 of the Form 10-K for additional information.

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(UNAUDITED)

Southern Power has contingent payment obligations related to certain acquisitions whereby it is primarily obligated to make generation-based payments to the seller, which commenced at the commercial operation of the respective facility and continue through 2026. The obligations are categorized as Level 3 under Fair Value Measurements as the fair value is determined using significant unobservable inputs for the forecasted facility generation in MW-hours, as well as other inputs such as a fixed dollar amount per MW-hour, and a discount rate. The fair value of contingent consideration reflects the net present value of expected payments and any periodic change arising from forecasted generation is expected to be immaterial.

Southern Power also has payment obligations through 2040 whereby it must reimburse the transmission owners for interconnection facilities and network upgrades constructed to support connection of a Southern Power generating facility to the transmission system. The obligations are categorized as Level 2 under Fair Value Measurements as the fair value is determined using observable inputs for the contracted amounts and reimbursement period, as well as a discount rate. The fair value of the obligations reflects the net present value of expected payments.

"Other investments" include investments traded in the open market that have maturities greater than 90 days, which are categorized as Level 2 under Fair Value Measurements and are comprised of corporate bonds, bank certificates of deposit, treasury bonds, and/or agency bonds.

At September 30, 2022, the fair value measurements of private equity investments held in Alabama Power's nuclear decommissioning trusts that are calculated at net asset value per share (or its equivalent) as a practical expedient totaled $156 million and unfunded commitments related to the private equity investments totaled $84 million. Private equity investments include high-quality private equity funds across several market sectors and funds that invest in real estate assets. Private equity funds do not have redemption rights. Distributions from these funds will be received as the underlying investments in the funds are liquidated.

At September 30, 2022, other financial instruments for which the carrying amount did not equal fair value were as follows:

			Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas(*)
			(in billions)
Long-term debt, including securities due within one year:
Carrying amount			$	53.4		$	10.8		$	14.5		$	1.5		$	2.9		$	7.4
Fair value			46.4			9.3			12.6			1.2			2.7			6.3

(*)The long-term debt of Southern Company Gas is recorded at amortized cost, including the fair value adjustments at the effective date of the 2016 merger with Southern Company. Southern Company Gas amortizes the fair value adjustments over the remaining lives of the respective bonds, the latest being through 2043.

The fair values are determined using Level 2 measurements and are based on quoted market prices for the same or similar issues or on the current rates available to the Registrants.

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(J) DERIVATIVES

The Registrants are exposed to market risks, including commodity price risk, interest rate risk, weather risk, and occasionally foreign currency exchange rate risk. To manage the volatility attributable to these exposures, each company nets its exposures, where possible, to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to each company's policies in areas such as counterparty exposure and risk management practices. Prior to the sale of Sequent on July 1, 2021, Southern Company Gas' wholesale gas operations used various contracts in its commercial activities that generally met the definition of derivatives. For the traditional electric operating companies, Southern Power, and Southern Company Gas' other businesses, each company's policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress testing, and sensitivity analysis. Derivative instruments are recognized at fair value in the balance sheets as either assets or liabilities and are presented on a net basis. See Note (I) for additional fair value information. In the statements of cash flows, any cash impacts of settled energy-related and interest rate derivatives are recorded as operating activities. Any cash impacts of settled foreign currency derivatives are classified as operating or financing activities to correspond with the classification of the hedged interest or principal, respectively. See Note 1 to the financial statements under "Financial Instruments" in Item 8 of the Form 10-K for additional information. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information regarding the sale of Sequent.

Energy-Related Derivatives

The Subsidiary Registrants enter into energy-related derivatives to hedge exposures to electricity, natural gas, and other fuel price changes. However, due to cost-based rate regulations and other various cost recovery mechanisms, the traditional electric operating companies and the natural gas distribution utilities have limited exposure to market volatility in energy-related commodity prices. Each of the traditional electric operating companies and certain of the natural gas distribution utilities of Southern Company Gas manage fuel-hedging programs, implemented per the guidelines of their respective state PSCs or other applicable state regulatory agencies, through the use of financial derivative contracts, which are expected to continue to mitigate price volatility. The traditional electric operating companies (with respect to wholesale generating capacity) and Southern Power have limited exposure to market volatility in energy-related commodity prices because their long-term sales contracts shift substantially all fuel cost responsibility to the purchaser. However, the traditional electric operating companies and Southern Power may be exposed to market volatility in energy-related commodity prices to the extent any uncontracted capacity is used to sell electricity. Southern Company Gas retains exposure to price changes that can, in a volatile energy market, be material and can adversely affect its results of operations.

Southern Company Gas also enters into weather derivative contracts as economic hedges in the event of warmer-than-normal weather. Exchange-traded options are carried at fair value, with changes reflected in operating revenues. Non-exchange-traded options are accounted for using the intrinsic value method. Changes in the intrinsic value for non-exchange-traded contracts are reflected in operating revenues.

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Energy-related derivative contracts are accounted for under one of three methods:

•Regulatory Hedges – Energy-related derivative contracts designated as regulatory hedges relate primarily to the traditional electric operating companies' and the natural gas distribution utilities' fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through an approved cost recovery mechanism.

•Cash Flow Hedges – Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in accumulated OCI before being recognized in the statements of income in the same period and in the same income statement line item as the earnings effect of the hedged transactions.

•Not Designated – Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.

Some energy-related derivative contracts require physical delivery as opposed to financial settlement, and this type of derivative is both common and prevalent within the electric and natural gas industries. When an energy-related derivative contract is settled physically, any cumulative unrealized gain or loss is reversed and the contract price is recognized in the respective line item representing the actual price of the underlying goods being delivered.

At September 30, 2022, the net volume of energy-related derivative contracts for natural gas positions, together with the longest hedge date over which the respective entity is hedging its exposure to the variability in future cash flows for forecasted transactions and the longest non-hedge date for derivatives not designated as hedges, were as follows:

			Net Purchased mmBtu						Longest Hedge Date						Longest Non-Hedge Date
			(in millions)
Southern Company(*)			399						2030						2025
Alabama Power			105						2026						—
Georgia Power			116						2025						—
Mississippi Power			82						2027						—
Southern Power			11						2030						2023
Southern Company Gas(*)			85						2025						2025

(*)Southern Company Gas' derivative instruments include both long and short natural gas positions. A long position is a contract to purchase natural gas and a short position is a contract to sell natural gas. Southern Company Gas' volume represents the net of long natural gas positions of 95.7 million mmBtu and short natural gas positions of 10.6 million mmBtu at September 30, 2022, which is also included in Southern Company's total volume.

In addition to the volumes discussed above, the traditional electric operating companies and Southern Power enter into physical natural gas supply contracts that provide the option to sell back excess natural gas due to operational constraints. The maximum expected volume of natural gas subject to such a feature is 15 million mmBtu for Southern Company, which includes 4 million mmBtu for Alabama Power, 5 million mmBtu for Georgia Power, 2 million mmBtu for Mississippi Power, and 4 million mmBtu for Southern Power.

For cash flow hedges of energy-related derivatives, the estimated pre-tax gains (losses) expected to be reclassified from accumulated OCI to earnings for the 12-month period ending September 30, 2023 are $17 million for Southern Company, $26 million for Southern Company Gas, and immaterial for the other Registrants.

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Interest Rate Derivatives

Southern Company and certain subsidiaries may enter into interest rate derivatives to hedge exposure to changes in interest rates. Derivatives related to existing variable rate securities or forecasted transactions are accounted for as cash flow hedges where the derivatives' fair value gains or losses are recorded in OCI and are reclassified into earnings at the same time and presented on the same income statement line item as the earnings effect of the hedged transactions. Derivatives related to existing fixed rate securities are accounted for as fair value hedges, where the derivatives' fair value gains or losses and hedged items' fair value gains or losses are both recorded directly to earnings on the same income statement line item. Fair value gains or losses on derivatives that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.

At September 30, 2022, the following interest rate derivatives were outstanding:

			Notional Amount						Interest Rate Received			Weighted Average Interest Rate Paid			Hedge Maturity Date						Fair Value Gain (Loss) at September 30, 2022
			(in millions)																		(in millions)
Cash Flow Hedges of Existing Debt
Southern Company parent			$	175					—			4.25%			September 2025						$	—
Southern Company parent			175						—			3.83%			August 2032						—
Fair Value Hedges of Existing Debt
Southern Company parent			400						1.75%			1-month LIBOR + 0.68%			March 2028						(57)
Southern Company parent			1,000						3.70%			1-month LIBOR + 2.36%			April 2030						(167)
Southern Company Gas			500						1.75%			1-month LIBOR + 0.38%			January 2031						(87)
Southern Company			$	2,250																	$	(311)

For cash flow hedges of interest rate derivatives, the estimated pre-tax gains (losses) expected to be reclassified from accumulated OCI to interest expense for the 12-month period ending September 30, 2023 are $(17) million for Southern Company and immaterial for the other Registrants. Deferred gains and losses related to interest rate derivatives are expected to be amortized into earnings through 2052 for Southern Company, Alabama Power, and Georgia Power, 2028 for Mississippi Power, and 2046 for Southern Company Gas.

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Foreign Currency Derivatives

Southern Company and certain subsidiaries, including Southern Power, may enter into foreign currency derivatives to hedge exposure to changes in foreign currency exchange rates, such as that arising from the issuance of debt denominated in a currency other than U.S. dollars. Derivatives related to forecasted transactions are accounted for as cash flow hedges where the derivatives' fair value gains or losses are recorded in OCI and are reclassified into earnings at the same time and on the same income statement line as the earnings effect of the hedged transactions, including foreign currency gains or losses arising from changes in the U.S. currency exchange rates. Derivatives related to existing fixed rate securities are accounted for as fair value hedges, where the derivatives' fair value gains or losses and hedged items' fair value gains or losses are both recorded directly to earnings on the same income statement line item, including foreign currency gains or losses arising from changes in the U.S. currency exchange rates. Southern Company has elected to exclude the cross-currency basis spread from the assessment of effectiveness in the fair value hedges of its foreign currency risk and record any difference between the change in the fair value of the excluded components and the amounts recognized in earnings as a component of OCI.

At September 30, 2022, the following foreign currency derivatives were outstanding:

			Pay Notional			Pay Rate			Receive Notional			Receive Rate			Hedge Maturity Date			Fair Value Gain (Loss) at September 30, 2022
			(in millions)						(in millions)									(in millions)
Cash Flow Hedges of Existing Debt
Southern Power			$	564		3.78%			€	500		1.85%			June 2026			$	(80)
Fair Value Hedges of Existing Debt
Southern Company parent			1,476			3.39%			1,250			1.88%			September 2027			(243)
Southern Company			$	2,040					€	1,750								$	(323)

For cash flow hedges of foreign currency derivatives, the estimated pre-tax losses expected to be reclassified from accumulated OCI to earnings for the 12-month period ending September 30, 2023 are $12 million for Southern Power.

Derivative Financial Statement Presentation and Amounts

The Registrants enter into derivative contracts that may contain certain provisions that permit intra-contract netting of derivative receivables and payables for routine billing and offsets related to events of default and settlements. Southern Company and certain subsidiaries also utilize master netting agreements to mitigate exposure to counterparty credit risk. These agreements may contain provisions that permit netting across product lines and against cash collateral. The fair value amounts of derivative assets and liabilities on the balance sheets are presented net to the extent that there are netting arrangements or similar agreements with the counterparties.

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The fair value of energy-related derivatives, interest rate derivatives, and foreign currency derivatives was reflected in the balance sheets as follows:

			At September 30, 2022						At December 31, 2021
Derivative Category and Balance Sheet Location			Assets			Liabilities			Assets			Liabilities
			(in millions)						(in millions)
Southern Company
Energy-related derivatives designated as hedging instruments for regulatory purposes
Assets from risk management activities/Other current liabilities			$	299		$	70		$	129		$	30
Other deferred charges and assets/Other deferred credits and liabilities			150			59			72			6
Total derivatives designated as hedging instruments for regulatory purposes			449			129			201			36
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Assets from risk management activities/Other current liabilities			27			13			7			5
Other deferred charges and assets/Other deferred credits and liabilities			7			1			1			—
Interest rate derivatives:
Assets from risk management activities/Other current liabilities			—			44			19			—
Other deferred charges and assets/Other deferred credits and liabilities			—			266			—			29
Foreign currency derivatives:
Assets from risk management activities/Other current liabilities			—			37			—			39
Other deferred charges and assets/Other deferred credits and liabilities			—			285			—			40
Total derivatives designated as hedging instruments in cash flow and fair value hedges			34			646			27			113
Energy-related derivatives not designated as hedging instruments
Assets from risk management activities/Other current liabilities			19			18			9			4
Other deferred charges and assets/Other deferred credits and liabilities			2			1			1			—
Total derivatives not designated as hedging instruments			21			19			10			4
Gross amounts recognized			504			794			238			153
Gross amounts offset(a)			(113)			(128)			(25)			(28)
Net amounts recognized in the Balance Sheets(b)			$	391		$	666		$	213		$	125

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			At September 30, 2022						At December 31, 2021
Derivative Category and Balance Sheet Location			Assets			Liabilities			Assets			Liabilities
			(in millions)						(in millions)
Alabama Power
Energy-related derivatives designated as hedging instruments for regulatory purposes
Other current assets/Other current liabilities			$	90		$	12		$	30		$	9
Other deferred charges and assets/Other deferred credits and liabilities			57			23			25			2
Total derivatives designated as hedging instruments for regulatory purposes			147			35			55			11
Gross amounts offset			(31)			(31)			(5)			(5)
Net amounts recognized in the Balance Sheets			$	116		$	4		$	50		$	6
Georgia Power
Energy-related derivatives designated as hedging instruments for regulatory purposes
Assets from risk management activities/Other current liabilities			$	107		$	28		$	54		$	6
Other deferred charges and assets/Other deferred credits and liabilities			38			23			21			2
Total derivatives designated as hedging instruments for regulatory purposes			145			51			75			8
Energy-related derivatives not designated as hedging instruments
Other current assets/Other current liabilities			1			—			—			—
Gross amounts recognized			146			51			75			8
Gross amounts offset			(41)			(41)			(8)			(8)
Net amounts recognized in the Balance Sheets			$	105		$	10		$	67		$	—
Mississippi Power
Energy-related derivatives designated as hedging instruments for regulatory purposes
Assets from risk management activities/Other current liabilities			$	78		$	12		$	30		$	3
Other deferred charges and assets/Other deferred credits and liabilities			55			12			26			2
Total derivatives designated as hedging instruments for regulatory purposes			133			24			56			5
Gross amounts offset			(20)			(20)			(4)			(4)
Net amounts recognized in the Balance Sheets			$	113		$	4		$	52		$	1

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			At September 30, 2022						At December 31, 2021
Derivative Category and Balance Sheet Location			Assets			Liabilities			Assets			Liabilities
			(in millions)						(in millions)
Southern Power
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities			$	—		$	10		$	2		$	—
Other deferred charges and assets/Other deferred credits and liabilities			5			1			1			—
Foreign currency derivatives:
Other current assets/Other current liabilities			—			12			—			16
Other deferred charges and assets/Other deferred credits and liabilities			—			68			—			—
Total derivatives designated as hedging instruments in cash flow and fair value hedges			5			91			3			16
Energy-related derivatives not designated as hedging instruments
Other current assets/Other current liabilities			2			2			1			—
Gross amounts recognized			7			93			4			16
Gross amounts offset			(3)			(3)			—			—
Net amounts recognized in the Balance Sheets			$	4		$	90		$	4		$	16
Southern Company Gas
Energy-related derivatives designated as hedging instruments for regulatory purposes
Other current assets/Other current liabilities			$	24		$	17		$	15		$	12
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities			26			3			5			5
Other deferred charges and assets/Other deferred credits and liabilities			3			—			—			—
Interest rate derivatives:
Other current assets/Other current liabilities			—			13			6			—
Other deferred charges and assets/Other deferred credits and liabilities			—			74			—			6
Total derivatives designated as hedging instruments in cash flow and fair value hedges			29			90			11			11
Energy-related derivatives not designated as hedging instruments
Other current assets/Other current liabilities			16			16			8			4
Other deferred charges and assets/Other deferred credits and liabilities			2			1			1			—
Total derivatives not designated as hedging instruments			18			17			9			4
Gross amounts recognized			71			124			35			27
Gross amounts offset(a)			(18)			(33)			(8)			(11)
Net amounts recognized in the Balance Sheets(b)			$	53		$	91		$	27		$	16

(a)Gross amounts offset includes cash collateral held on deposit in broker margin accounts of $15 million and $3 million at September 30, 2022 and December 31, 2021, respectively.

(b)Net amounts of derivative instruments outstanding exclude immaterial premium and intrinsic value associated with weather derivatives for all periods presented.

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Energy-related derivatives not designated as hedging instruments were immaterial for Alabama Power and Mississippi Power at September 30, 2022. There were no such instruments for the traditional electric operating companies at December 31, 2021.

At September 30, 2022 and December 31, 2021, the pre-tax effects of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred were as follows:

Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet
Derivative Category and Balance Sheet Location			Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Company Gas
			(in millions)
At September 30, 2022:
Energy-related derivatives:
Other regulatory assets, current			$	(17)		$	(2)		$	(8)		$	(3)		$	(4)
Other regulatory assets, deferred			(6)			(2)			(3)			(1)			—
Other regulatory liabilities, current			246			80			87			69			10
Other regulatory liabilities, deferred			98			36			18			44			—
Total energy-related derivative gains (losses)			$	321		$	112		$	94		$	109		$	6
At December 31, 2021:
Energy-related derivatives:
Other regulatory assets, current			$	(17)		$	(6)		$	—		$	—		$	(11)
Other regulatory liabilities, current			107			28			48			27			4
Other regulatory liabilities, deferred			65			22			19			24			—
Total energy-related derivative gains (losses)			$	155		$	44		$	67		$	51		$	(7)

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For the three and nine months ended September 30, 2022 and 2021, the pre-tax effects of cash flow and fair value hedge accounting on accumulated OCI were as follows:

Gain (Loss) Recognized in OCI on Derivative			For the Three Months Ended September 30,						For the Nine Months Ended September 30,
			2022			2021			2022			2021
			(in millions)						(in millions)
Southern Company
Cash flow hedges:
Energy-related derivatives			$	11		$	38		$	51		$	59
Interest rate derivatives			6			5			36			7
Foreign currency derivatives			(35)			(36)			(137)			(79)
Fair value hedges(*):
Foreign currency derivatives			20			(4)			18			(4)
Total			$	2		$	3		$	(32)		$	(17)
Georgia Power
Interest rate derivatives			$	—		$	—		$	31		$	—
Southern Power
Cash flow hedges:
Energy-related derivatives			$	(11)		$	8		$	(4)		$	16
Foreign currency derivatives			(35)			(36)			(137)			(79)
Total			$	(46)		$	(28)		$	(141)		$	(63)
Southern Company Gas
Cash flow hedges:
Energy-related derivatives			$	22		$	30		$	55		$	43
Interest rate derivatives			5			—			—			—
Total			$	27		$	30		$	55		$	43

(*)Represents amounts excluded from the assessment of effectiveness for which the difference between changes in fair value and periodic amortization is recorded in OCI.

For the three and nine months ended September 30, 2022 and 2021, the pre-tax effects of interest rate derivatives designated as cash flow hedging instruments on accumulated OCI were immaterial for the other Registrants.

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For the three and nine months ended September 30, 2022 and 2021, the pre-tax effects of cash flow and fair value hedge accounting on income were as follows:

Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships			For the Three Months Ended September 30,						For the Nine Months Ended September 30,
			2022			2021			2022			2021
			(in millions)						(in millions)
Southern Company
Total cost of natural gas			$	294		$	129		$	1,840		$	943
Gain (loss) on energy-related cash flow hedges(a)			9			2			28			—
Total depreciation and amortization			922			896			2,728			2,658
Gain (loss) on energy-related cash flow hedges(a)			(1)			3			5			6
Total interest expense, net of amounts capitalized			(511)			(451)			(1,461)			(1,352)
Gain (loss) on interest rate cash flow hedges(a)			(7)			(7)			(19)			(20)
Gain (loss) on foreign currency cash flow hedges(a)			(3)			(6)			(16)			(18)
Gain (loss) on interest rate fair value hedges(b)			(102)			(4)			(300)			(16)
Total other income (expense), net			132			131			414			290
Gain (loss) on foreign currency cash flow hedges(a)(c)			(32)			(34)			(129)			(76)
Gain (loss) on foreign currency fair value hedges			(59)			(32)			(180)			(32)
Amount excluded from effectiveness testing recognized in earnings			(21)			4			(17)			4
Southern Power
Total depreciation and amortization			$	133		$	132		$	384		$	383
Gain (loss) on energy-related cash flow hedges(a)			(1)			3			5			6
Total interest expense, net of amounts capitalized			(32)			(36)			(105)			(111)
Gain (loss) on foreign currency cash flow hedges(a)			(3)			(6)			(16)			(18)
Total other income (expense), net			3			2			5			10
Gain (loss) on foreign currency cash flow hedges(a)(c)			(32)			(34)			(129)			(76)
Southern Company Gas
Total cost of natural gas			$	294		$	129		$	1,840		$	943
Gain (loss) on energy-related cash flow hedges(a)			9			2			28			—
Total interest expense, net of amounts capitalized			(65)			(57)			(187)			(175)
Gain (loss) on interest rate cash flow hedges(a)			(2)			(1)			(3)			(2)
Gain (loss) on interest rate fair value hedges(b)			(30)			—			(87)			2

(a)Reclassified from accumulated OCI into earnings.

(b)For fair value hedges, changes in the fair value of the derivative contracts are generally equal to changes in the fair value of the underlying debt and have no material impact on income.

(c)The reclassification from accumulated OCI into other income (expense), net completely offsets currency gains and losses arising from changes in the U.S. currency exchange rates used to record the euro-denominated notes.

For the three and nine months ended September 30, 2022 and 2021, the pre-tax effects of cash flow hedge accounting on income for interest rate derivatives were immaterial for Alabama Power, Georgia Power, and Mississippi Power.

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At September 30, 2022 and December 31, 2021, the following amounts were recorded on the balance sheets related to cumulative basis adjustments for fair value hedges:

			Carrying Amount of the Hedged Item									Cumulative Amount of Fair Value Hedging Adjustment included in Carrying Amount of the Hedged Item
Balance Sheet Location of Hedged Items			At September 30, 2022			At December 31, 2021						At September 30, 2022			At December 31, 2021
			(in millions)									(in millions)
Southern Company
Long-term debt			$	(2,788)		$	(3,280)					$	306		$	9
Southern Company Gas
Long-term debt			$	(411)		$	(493)					$	86		$	2

For the three and nine months ended September 30, 2022 and 2021, the pre-tax effects of energy-related derivatives not designated as hedging instruments on the statements of income of Southern Company and Southern Company Gas were as follows:

						Gain (Loss)
						Three Months Ended September 30,									Nine Months Ended September 30,
Derivatives in Non-Designated Hedging Relationships			Statements of Income Location			2022			2021						2022			2021
						(in millions)									(in millions)
Energy-related derivatives:			Natural gas revenues(*)			$	3		$	(2)					$	(10)		$	(122)
			Cost of natural gas			(2)			20						(7)			36
Total derivatives in non-designated hedging relationships						$	1		$	18					$	(17)		$	(86)

(*)Excludes immaterial gains (losses) recorded in natural gas revenues associated with weather derivatives for all periods presented.

For the three and nine months ended September 30, 2022 and 2021, the pre-tax effects of energy-related derivatives not designated as hedging instruments were immaterial for the other Registrants.

Contingent Features

The Registrants do not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain derivatives that could require collateral, but not accelerated payment, in the event of various credit rating changes of certain Southern Company subsidiaries. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. At September 30, 2022, the Registrants had no collateral posted with derivative counterparties to satisfy these arrangements.

For Southern Company and Southern Power, the fair value of interest rate derivative liabilities with contingent features and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, were $156 million and $38 million, respectively at September 30, 2022. For the traditional electric operating companies and Southern Power, energy-related derivative liabilities with contingent features and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, were immaterial at September 30, 2022. The maximum potential collateral requirements arising from the credit-risk-related contingent features for the traditional electric operating companies and Southern Power include certain agreements that could require collateral in the event that one or more Southern Company power pool participants has a credit rating change to below investment grade. Following the sale of Gulf Power to NextEra Energy, Inc., Gulf Power continued participating in the Southern Company power pool through July 13, 2022.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Alabama Power and Southern Power maintain accounts with certain regional transmission organizations to facilitate financial derivative transactions and they may be required to post collateral based on the value of the positions in these accounts and the associated margin requirements. At September 30, 2022, cash collateral posted in these accounts was immaterial. Southern Company Gas maintains accounts with brokers or the clearing houses of certain exchanges to facilitate financial derivative transactions. Based on the value of the positions in these accounts and the associated margin requirements, Southern Company Gas may be required to deposit cash into these accounts. At September 30, 2022, cash collateral held on deposit in broker margin accounts was $15 million.

The Registrants are exposed to losses related to financial instruments in the event of counterparties' nonperformance. The Registrants only enter into agreements and material transactions with counterparties that have investment grade credit ratings by Moody's and S&P or with counterparties who have posted collateral to cover potential credit exposure. The Registrants have also established risk management policies and controls to determine and monitor the creditworthiness of counterparties in order to mitigate their exposure to counterparty credit risk.

Southern Company Gas uses established credit policies to determine and monitor the creditworthiness of counterparties, including requirements to post collateral or other credit security, as well as the quality of pledged collateral. Collateral or credit security is most often in the form of cash or letters of credit from an investment-grade financial institution, but may also include cash or U.S. government securities held by a trustee. Prior to entering a physical transaction, Southern Company Gas assigns its counterparties an internal credit rating and credit limit based on the counterparties' Moody's, S&P, and Fitch ratings, commercially available credit reports, and audited financial statements. Southern Company Gas may require counterparties to pledge additional collateral when deemed necessary.

Southern Company Gas utilizes netting agreements whenever possible to mitigate exposure to counterparty credit risk. Netting agreements enable Southern Company Gas to net certain assets and liabilities by counterparty across product lines and against cash collateral, provided the netting and cash collateral agreements include such provisions. While the amounts due from, or owed to, counterparties are settled net, they are recorded on a gross basis on the balance sheet as energy marketing receivables and energy marketing payables.

The Registrants do not anticipate a material adverse effect on their respective financial statements as a result of counterparty nonperformance.

(K) ACQUISITIONS AND DISPOSITIONS

See Note 15 to the financial statements in Item 8 of the Form 10-K for additional information.

Alabama Power

On September 30, 2022, Alabama Power completed its acquisition of the Calhoun Generating Station, which was accounted for as an asset acquisition. The total purchase price was $179 million, of which $171 million was related to net assets recorded within property, plant, and equipment on the balance sheet and the remainder primarily related to fossil fuel stock and materials and supplies. See Note (B) and Note 15 to the financial statements in Item 8 of the Form 10-K under "Alabama Power" for additional information.

Southern Power

Construction Projects

During the nine months ended September 30, 2022, Southern Power completed construction of and placed in service the remaining 40 MWs of the Tranquillity battery energy storage facility and the remaining 15 MWs of the Garland battery energy storage facility.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Project Facility

Resource

Approximate Nameplate Capacity (MW)

Location

COD

PPA Contract Period

Projects Completed During the Nine Months Ended September 30, 2022

Garland Solar Storage(a)

Battery energy storage system

88

Kern County, CA

September 2021 through February 2022(b)

20 years

Tranquillity Solar Storage(a)

Battery energy storage system

72

Fresno County, CA

November 2021 through March 2022(c)

20 years

(a)Southern Power consolidates each project's operating results in its financial statements and the tax equity partner and two other partners each own a noncontrolling interest.

(b)The facility has a total capacity of 88 MWs, of which 73 MWs were placed in service in 2021 and 15 MWs were placed in service in February 2022.

(c)The facility has a total capacity of 72 MWs, of which 32 MWs were placed in service in 2021 and 40 MWs were placed in service in March 2022.

Southern Company Gas

Sale of Natural Gas Storage Facilities

On September 7, 2022, certain affiliates of Southern Company Gas entered into agreements to sell two natural gas storage facilities located in California and Texas for an aggregate purchase price of $186 million, plus working capital and certain other adjustments. Completion of the sales is subject to material closing conditions, including, among others, release of a Southern Company Gas parent guarantee, approval from the California Public Utility Commission without a material burdensome condition, and the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The parent guarantee release was executed on October 20, 2022, which resolved a material closing condition. As a result, Southern Company Gas expects to record pre-tax impairment charges totaling approximately $125 million ($95 million after tax) in the fourth quarter 2022. The sale of the Texas facility is expected to be completed later in the fourth quarter 2022, and the sale of the California facility is expected to be completed during 2023; however, the ultimate outcome of these matters cannot be determined at this time.

Sale of Pivotal LNG

On May 20, 2022, Southern Company Gas received the final $5 million contingent payment from Dominion Modular LNG Holdings, Inc. in connection with its 2020 sale of Pivotal LNG, Inc.

(L) SEGMENT AND RELATED INFORMATION

Southern Company

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. The traditional electric operating companies are vertically integrated utilities providing electric service in three Southeastern states. Southern Power develops, constructs, acquires, owns, and manages power generation assets, including renewable energy and battery energy storage projects, and sells electricity at market-based rates in the wholesale market. Southern Company Gas distributes natural gas through its natural gas distribution utilities and is involved in several other complementary businesses including gas pipeline investments and gas marketing services. Prior to the sale of Sequent on July 1, 2021, Southern Company Gas' other businesses also included wholesale gas services.

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(UNAUDITED)

Southern Company's reportable business 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 sale of natural gas and other complementary products and services by Southern Company Gas. Revenues from sales by Southern Power to the traditional electric operating companies were $336 million and $673 million for the three and nine months ended September 30, 2022, respectively, and $167 million and $361 million for the three and nine months ended September 30, 2021, respectively. Revenues from sales of natural gas from Southern Company Gas to the traditional electric operating companies were immaterial for all periods presented. Revenues from sales of natural gas from Southern Company Gas (prior to its sale of Sequent) to Southern Power were $18 million for the nine months ended September 30, 2021. The "All Other" column includes the Southern Company parent entity, which does not allocate operating expenses to business segments. Also, this category includes segments below the quantitative threshold for separate disclosure. These segments include providing distributed energy and resilience solutions and deploying microgrids for commercial, industrial, governmental, and utility customers, as well as investments in telecommunications and, for the three and nine months ended September 30, 2021, leveraged lease projects. All other inter-segment revenues are not material.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Financial data for business segments and products and services for the three and nine months ended September 30, 2022 and 2021 was as follows:

			Electric Utilities
			Traditional Electric Operating Companies			Southern Power			Eliminations			Total			Southern Company Gas			All Other			Eliminations			Consolidated
			(in millions)
Three Months Ended September 30, 2022
Operating revenues			$	6,938		$	1,180		$	(691)		$	7,427		$	857		$	135		$	(41)		$	8,378
Segment net income (loss)(a)(b)			1,445			95			—			1,540			83			(152)			1			1,472
Nine Months Ended September 30, 2022
Operating revenues			$	16,716		$	2,618		$	(1,391)		$	17,943		$	3,998		$	418		$	(127)		$	22,232
Segment net income (loss)(a)(b)			3,256			265			—			3,521			516			(415)			(11)			3,611
At September 30, 2022
Goodwill			$	—		$	2		$	—		$	2		$	5,015		$	263		$	—		$	5,280
Total assets			95,659			13,283			(748)			108,194			24,097			2,372			(658)			134,005
Three Months Ended September 30, 2021
Operating revenues			$	5,018		$	679		$	(170)		$	5,527		$	623		$	124		$	(36)		$	6,238
Segment net income (loss)(a)(b)(c)			1,085			78			—			1,163			56			(121)			3			1,101
Nine Months Ended September 30, 2021
Operating revenues			$	12,813		$	1,610		$	(372)		$	14,051		$	2,994		$	412		$	(111)		$	17,346
Segment net income (loss)(a)(b)(c)(d)(e)			2,352			211			—			2,563			389			(338)			(6)			2,608
At December 31, 2021
Goodwill			$	—		$	2		$	—		$	2		$	5,015		$	263		$	—		$	5,280
Total assets			89,051			13,390			(667)			101,774			23,560			2,975			(775)			127,534

(a)Attributable to Southern Company.

(b)For the traditional electric operating companies, includes pre-tax charges (credits) to income at Georgia Power for the estimated probable loss associated with the construction of Plant Vogtle Units 3 and 4 of $(70) million ($(52) million after tax) and $(18) million ($(13) million after tax) for the three and nine months ended September 30, 2022, respectively, and $264 million ($197 million after tax) and $772 million ($576 million after tax) for the three and nine months ended September 30, 2021, respectively. See Note (B) and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information.

(c)For Southern Company Gas, includes a pre-tax gain of $121 million ($93 million after tax) related to its sale of Sequent, as well as the resulting $85 million of additional tax expense as a result of the sale. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

(d)For Southern Power, includes gains on wind turbine equipment contributed to various equity method investments totaling approximately $37 million pre-tax ($28 million after tax). See Note 15 to the financial statements under "Southern Power – Development Projects" in Item 8 of the Form 10-K for additional information.

(e)For Southern Company Gas, includes pre-tax impairment charges totaling $84 million ($67 million after tax) related to its equity method investment in the PennEast Pipeline project. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Products and Services

			Electric Utilities' Revenues
			Retail			Wholesale			Other			Total
			(in millions)
Three Months Ended September 30, 2022			$	5,961		$	1,197		$	269		$	7,427
Three Months Ended September 30, 2021			4,551			731			245			5,527
Nine Months Ended September 30, 2022			$	14,363		$	2,798		$	782		$	17,943
Nine Months Ended September 30, 2021			11,492			1,822			737			14,051

			Southern Company Gas' Revenues
			Gas Distribution Operations			Wholesale Gas Services(*)			Gas Marketing Services			Other			Total
			(in millions)
Three Months Ended September 30, 2022			$	748		$	—		$	85		$	24		$	857
Three Months Ended September 30, 2021			553			—			52			18			623
Nine Months Ended September 30, 2022			$	3,513		$	—		$	420		$	65		$	3,998
Nine Months Ended September 30, 2021			2,451			188			311			44			2,994

(*)Prior to the sale of Sequent, the revenues for wholesale gas services were netted with costs associated with its energy and risk management activities. See "Southern Company Gas" herein and Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Southern Company Gas

Southern Company Gas manages its business through three reportable segments – gas distribution operations, gas pipeline investments, and gas marketing services. Prior to the sale of Sequent on July 1, 2021, Southern Company Gas' reportable segments also included wholesale gas services. The non-reportable segments are combined and presented as all other. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information on the sale of Sequent.

Gas distribution operations is the largest component of Southern Company Gas' business and includes natural gas local distribution utilities that construct, manage, and maintain intrastate natural gas pipelines and gas distribution facilities in four states.

Gas pipeline investments consists of joint ventures in natural gas pipeline investments including a 50% interest in SNG and a 50% joint ownership interest in the Dalton Pipeline. These natural gas pipelines enable the provision of diverse sources of natural gas supplies to the customers of Southern Company Gas. Gas pipeline investments also includes a 20% ownership interest in the PennEast Pipeline project, which was cancelled in September 2021. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Through July 1, 2021, wholesale gas services provided natural gas asset management and/or related logistics services for each of Southern Company Gas' utilities except Nicor Gas as well as for non-affiliated companies. Additionally, wholesale gas services engaged in natural gas storage and gas pipeline arbitrage and related activities.

Gas marketing services provides natural gas marketing to end-use customers primarily in Georgia and Illinois through SouthStar.

The all other column includes segments and subsidiaries that fall below the quantitative threshold for separate disclosure, including storage and fuels operations. See Note (K) under "Southern Company Gas" for information regarding agreements by certain affiliates of Southern Company Gas to sell two natural gas storage facilities.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Business segment financial data for the three and nine months ended September 30, 2022 and 2021 was as follows:

			Gas Distribution Operations			Gas Pipeline Investments			Wholesale Gas Services(a)			Gas Marketing Services			Total			All Other			Eliminations			Consolidated
			(in millions)
Three Months Ended September 30, 2022
Operating revenues			$	751		$	8		$	—		$	85		$	844		$	16		$	(3)		$	857
Segment net income (loss)			59			24			—			(2)			81			2			—			83
Nine Months Ended September 30, 2022
Operating revenues			$	3,533		$	24		$	—		$	420		$	3,977		$	43		$	(22)		$	3,998
Segment net income (loss)			365			76			—			65			506			10			—			516
Total assets at September 30, 2022			21,605			1,425			—			1,595			24,625			9,100			(9,628)			24,097
Three Months Ended September 30, 2021
Operating revenues			$	556		$	8		$	—		$	52		$	616		$	11		$	(4)		$	623
Segment net income (loss)(b)(c)			45			10			94			(2)			147			(91)			—			56
Nine Months Ended September 30, 2021
Operating revenues			$	2,466		$	24		$	188		$	311		$	2,989		$	29		$	(24)		$	2,994
Segment net income (loss)(b)(c)(d)			308			3			108			60			479			(90)			—			389
Total assets at December 31, 2021			20,917			1,467			31			1,556			23,971			12,114			(12,525)			23,560

(a)As a result of the sale of Sequent, wholesale gas services is no longer a reportable segment for the three and nine months ended September 30, 2022. Prior to the sale of Sequent, the revenues for wholesale gas services were netted with costs associated with its energy and risk management activities. A reconciliation of operating revenues and intercompany revenues is shown in the following table.

			Third Party Gross Revenues			Intercompany Revenues			Total Gross Revenues			Less Gross Gas Costs			Operating Revenues
			(in millions)
Nine Months Ended September 30, 2021			$	3,881		$	90		$	3,971		$	3,783		$	188

(b)For wholesale gas services, includes a pre-tax gain of $121 million ($93 million after tax) related to the sale of Sequent. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

(c)For the "All Other" column, includes $85 million of additional tax expense as a result of the sale. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

(d)For gas pipeline investments, includes pre-tax impairment charges totaling $84 million ($67 million after tax) related to the equity method investment in the PennEast Pipeline project. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

			Page
Combined Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview			101
Results of Operations			105
Southern Company			105
Alabama Power			114
Georgia Power			119
Mississippi Power			125
Southern Power			129
Southern Company Gas			133
Future Earnings Potential			141
Accounting Policies			145
Financial Condition and Liquidity			146

The following Management's Discussion and Analysis of Financial Condition and Results of Operations is a combined presentation; however, information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf and each Registrant makes no representation as to information related to the other Registrants.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

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 sale of natural gas and other complementary products and services by Southern Company Gas. Southern Company Gas' reportable segments are gas distribution operations, gas pipeline investments, and gas marketing services. Prior to the sale of Sequent on July 1, 2021, Southern Company Gas' reportable segments also included wholesale gas 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 and the sale of Sequent, see BUSINESS – "The Southern Company System" in Item 1 of the Form 10-K and Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K, respectively.

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. For Southern Power, these 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

Alabama Power

On July 12, 2022, the Alabama PSC approved the following items:

•Alabama Power's petition for a certificate of convenience and necessity authorizing Alabama Power to complete the acquisition of the Calhoun Generating Station. The transaction closed on September 30, 2022 and, on October 3, 2022, Alabama Power filed Rate CNP New Plant with the Alabama PSC to recover the related costs. The filing reflected an increase in annual revenues of $34 million, or 0.6%, effective with the billing month of November 2022.

•An increase to Rate ECR effective with August 2022 billings, which is expected to result in an increase of approximately $310 million annually. The approved increase in the Rate ECR factor has no significant effect on Alabama Power's net income, but does increase operating cash flows related to fuel cost recovery.

•Modifications to Rate NDR.

•An accounting order authorizing Alabama Power to create a reliability reserve separate from the NDR and transition the previous Rate NDR authority related to reliability expenditures to the reliability reserve. Alabama Power may make accruals to the reliability reserve if the NDR balance exceeds $35 million.

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

On September 23, 2022, the FERC authorized Alabama Power to use updated depreciation rates from its 2021 depreciation study effective January 1, 2023. The study was also provided to the Alabama PSC, and the new depreciation rates will be reflected in Alabama Power's future rate filings. See FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Alabama Power" herein for additional information.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Georgia Power

Plant Vogtle Units 3 and 4 Construction and Start-Up Status

Construction continues on Plant Vogtle Units 3 and 4 (with electric generating capacity of approximately 1,100 MWs each), in which Georgia Power currently holds a 45.7% ownership interest. Georgia Power's share of the total project capital cost forecast to complete Plant Vogtle Units 3 and 4, including contingency, through the end of the first quarter 2023 and the fourth quarter 2023, respectively, is $10.4 billion.

On July 29, 2022, Southern Nuclear announced that all Unit 3 ITAACs had been submitted to the NRC. On August 3, 2022, the NRC published its 103(g) finding that the acceptance criteria in the combined license for Unit 3 had been met, which allowed nuclear fuel to be loaded and allows start-up testing to begin. Fuel load for Unit 3 was completed on October 17, 2022, and the unit is projected to be placed in service by the end of the first quarter 2023. The projected schedule for Unit 3 primarily depends on the pace of system and area transitions to operations, including the completion of closure documentation necessary to support start-up testing, and the progression of start-up, final component, and pre-operational testing, which may be impacted by equipment or other operational failures. Unit 4 is projected to be placed in service by the end of the fourth quarter 2023. The projected schedule for Unit 4 primarily depends on Unit 3 progress through start-up and testing; overall construction productivity and production levels improving, particularly in electrical installation, including terminations; and appropriate levels of craft laborers, particularly electricians, being added and maintained. Any further delays could result in later in-service dates and cost increases.

During the first nine months of 2022, established construction contingency totaling $170 million was assigned to the base capital cost forecast for costs primarily associated with construction productivity, the pace of system turnovers, additional craft and support resources, and procurement for Units 3 and 4. Georgia Power also increased its total project capital cost forecast by adding $36 million and $32 million to replenish construction contingency in the second quarter 2022 and the third quarter 2022, respectively. After considering the significant level of uncertainty that exists regarding the future recoverability of these costs since the ultimate outcome of these matters is subject to the outcome of future assessments by management, as well as Georgia PSC decisions in future regulatory proceedings, Georgia Power recorded pre-tax charges to income in the second quarter 2022 and the third quarter 2022 of $36 million ($27 million after tax) and $32 million ($24 million after tax), respectively, for the increases in the total project capital cost forecast. Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery during the prudence review following the Unit 4 fuel load pursuant to the twenty-fourth VCM stipulation described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Regulatory Matters" herein.

Georgia Power and the other Vogtle Owners do not agree on the starting dollar amount for the determination of cost increases subject to the cost-sharing and tender provisions of the Global Amendments (as defined in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Joint Owner Contracts" herein). The other Vogtle Owners have notified Georgia Power that they believe the current capital cost expenditures have already exceeded the cost-sharing thresholds and the current project capital cost forecast triggers the tender provisions under the Global Amendments.

On June 17, 2022 and July 26, 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options. On June 18, 2022, OPC and MEAG Power each filed a separate lawsuit against Georgia Power in the Superior Court of Fulton County, Georgia seeking a declaratory judgment that the starting dollar amount is $17.1 billion and that the cost-sharing and tender provisions have been triggered. On July 25, 2022 and July 28, 2022, Georgia Power filed its answers in the lawsuits filed by MEAG Power and OPC, respectively, and included counterclaims seeking a declaratory judgment that the starting dollar amount is $18.38 billion and that costs related to force majeure events are excluded prior to calculating the cost-sharing and tender provisions and when calculating Georgia Power's related financial obligations. On September 26, 2022, Dalton filed complaints in each of these lawsuits.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

On September 29, 2022, Georgia Power and MEAG Power reached an agreement to resolve their dispute regarding the proper interpretation of the cost-sharing and tender provisions of the Global Amendments. Under the terms of the agreement, among other items, (i) MEAG Power will not exercise its tender option and will retain its full ownership interest in Plant Vogtle Units 3 and 4; (ii) Georgia Power will pay a portion of MEAG Power's costs of construction for Plant Vogtle Units 3 and 4 as such costs are incurred and with no further adjustment for force majeure costs, which payments will total approximately $79 million based on the current project capital cost forecast; and (iii) Georgia Power will pay 20% of MEAG Power's costs of construction with respect to any amounts over the current project capital cost forecast, with no further adjustment for force majeure costs. On October 4, 2022, MEAG Power and Georgia Power filed a notice of settlement and voluntary dismissal of the pending litigation described above, including Georgia Power's counterclaim, and, on October 6, 2022, Dalton dismissed its related complaint. Georgia Power recorded pre-tax charges (credits) to income in the fourth quarter 2021, the second quarter 2022, and the third quarter 2022 of approximately $440 million ($328 million after tax), $16 million ($12 million after tax), and $(102) million ($(76) million after tax), respectively, associated with the cost-sharing and tender provisions of the Global Amendments, including the settlement with MEAG Power, which are included in the total project capital cost forecast. The settlement with MEAG Power does not resolve the separate pending litigation with OPC, including Dalton's associated complaint. Georgia Power may be required to record further pre-tax charges to income of up to approximately $300 million associated with the cost-sharing and tender provisions of the Global Amendments for OPC and Dalton based on the current project capital cost forecast.

The ultimate impact of these matters on the construction schedule and project capital cost forecast for Plant Vogtle Units 3 and 4 cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information.

2022 Base Rate Case

On June 24, 2022, Georgia Power filed a base rate case (Georgia Power 2022 Base Rate Case) with the Georgia PSC. The filing, as modified on August 22, 2022, proposes a three-year alternate rate plan with requested rate increases totaling $889 million, $107 million, and $45 million effective January 1, 2023, January 1, 2024, and January 1, 2025, respectively. Georgia Power expects the Georgia PSC to render a final decision in this matter on December 20, 2022. The ultimate outcome of this matter cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Georgia Power – Rate Plans – 2022 Base Rate Case" herein for additional information.

Integrated Resource Plan

On July 21, 2022, the Georgia PSC approved Georgia Power's triennial IRP (2022 IRP), as modified by a stipulated agreement among Georgia Power, the staff of the Georgia PSC, and certain intervenors and as further modified by the Georgia PSC. In the 2022 IRP decision, the Georgia PSC approved several requests, including the following:

•Decertification and retirement of Plant Wansley Units 1 and 2 (926 MWs based on 53.5% ownership), which occurred on August 31, 2022, and Plant Scherer Unit 3 (614 MWs based on 75% ownership) by December 31, 2028, as well as the reclassification to regulatory asset accounts of the remaining net book values of these units and any remaining unusable materials and supplies inventories upon retirement.

•Decertification and retirement of Plant Gaston Units 1 through 4 (500 MWs based on 50% ownership through SEGCO) by December 31, 2028. See Note 7 to the financial statements under "SEGCO" in Item 8 of the Form 10-K for additional information.

•Georgia Power's environmental compliance strategy, including approval of Georgia Power's plans to address CCR at its ash ponds and landfills.

The Georgia PSC deferred a decision on the requested decertification and retirement of Plant Bowen Units 1 and 2 (1,400 MWs) to the 2025 IRP.

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

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Mississippi Power

On June 7, 2022, the Mississippi PSC approved Mississippi Power's annual retail PEP filing for 2022, resulting in an annual increase in revenues of approximately $18 million, or 1.9%. The rate increase became effective with the first billing cycle of April 2022 in accordance with the PEP rate schedule.

On August 26, 2022, the FERC accepted an amended shared service agreement (SSA) between Mississippi Power and Cooperative Energy, effective July 1, 2022, under which Cooperative Energy will continue to decrease its use of Mississippi Power's generation services under the MRA tariff up to 2.5% annually through 2035. At September 30, 2022, Mississippi Power is serving approximately 400 MWs of Cooperative Energy's annual demand. Beginning in 2036, Cooperative Energy will provide 100% of its electricity requirements at the MRA delivery points under the tariff. Neither party has the option to cancel the amended SSA. Mississippi Power expects to remarket this capacity, including the potential development of future arrangements with Cooperative Energy.

On July 15, 2022, Mississippi Power filed a request with the FERC for a $23 million increase in annual wholesale base revenues under the MRA tariff and requested an effective date of July 15, 2022. Cooperative Energy has filed a complaint with FERC challenging the new rates. On September 13, 2022, the FERC issued an order accepting Mississippi Power's request effective September 14, 2022, subject to refund, and establishing hearing and settlement judge procedures. The ultimate outcome of this matter cannot be determined at this time.

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

Southern Power

During the nine months ended September 30, 2022, Southern Power completed construction of and placed in service the remaining 40 MWs of the Tranquillity battery energy storage facility and the remaining 15 MWs of the Garland battery energy storage facility. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

At September 30, 2022, 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 95% through 2026 and 92% through 2031, with an average remaining contract duration of approximately 13 years.

Southern Company Gas

On July 1, 2022, Atlanta Gas Light filed its annual GRAM update with the Georgia PSC. The filing requests an annual base rate increase of $53 million based on the projected 12-month period beginning January 1, 2023. Resolution of the GRAM filing is expected by December 28, 2022, with the new rates effective January 1, 2023.

On August 1, 2022, Virginia Natural Gas filed a general base rate case with the Virginia Commission seeking an increase in annual base rate revenues of $69 million, including $15 million related to the recovery of investments under the SAVE program, primarily to recover investments and increased costs associated with infrastructure, technology, and workforce development. The requested increase is based on a projected 12-month period beginning January 1, 2023, a ROE of 10.35%, and an equity ratio of 53.2%. Rate adjustments are expected to be effective January 1, 2023, subject to refund. The Virginia Commission is expected to rule on the requested increase in the third quarter 2023.

On September 7, 2022, certain affiliates of Southern Company Gas entered into agreements to sell two natural gas storage facilities located in California and Texas for an aggregate purchase price of $186 million, plus working capital and certain other adjustments. On October 20, 2022, the release of a Southern Company Gas parent guarantee was executed, which resolved a material closing condition. As a result, Southern Company Gas expects to record pre-tax impairment charges totaling approximately $125 million ($95 million after tax) in the fourth quarter

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2022. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.

The ultimate outcome of these matters cannot be determined at this time.

RESULTS OF OPERATIONS

Southern Company

Net Income

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$371						33.7						$1,003						38.5

Consolidated net income attributable to Southern Company was $1.5 billion ($1.36 per share) in the third quarter 2022 compared to $1.1 billion ($1.04 per share) for the corresponding period in 2021. Consolidated net income attributable to Southern Company was $3.6 billion ($3.38 per share) for year-to-date 2022 compared to $2.6 billion ($2.46 per share) for the corresponding period in 2021. The increases were primarily due to decreases of $249 million and $589 million in the third quarter and year-to-date 2022, respectively, in after-tax charges related to the construction of Plant Vogtle Units 3 and 4, increases in retail electric revenues associated with rates and pricing, warmer weather, and sales growth, and increases in natural gas revenues from base rate increases and continued infrastructure replacement, partially offset by higher non-fuel operations and maintenance costs. The increase for year-to-date 2022 also reflects after-tax charges totaling $67 million in 2021 related to the PennEast Pipeline project at Southern Company Gas.

See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information regarding Plant Vogtle Units 3 and 4 and Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information on the PennEast Pipeline project.

Retail Electric Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$1,410						31.0						$2,871						25.0

In the third quarter 2022, retail electric revenues were $6.0 billion compared to $4.6 billion for the corresponding period in 2021. For year-to-date 2022, retail electric revenues were $14.4 billion compared to $11.5 billion for the corresponding period in 2021.

Details of the changes in retail electric revenues were as follows:

			Third Quarter 2022												Year-To-Date 2022
			(in millions)						(% change)						(in millions)						(% change)
Retail electric – prior year			$	4,551											$	11,492
Estimated change resulting from –
Rates and pricing			165						3.6		%				458						4.0		%
Sales growth			73						1.6						158						1.4
Weather			26						0.6						188						1.6
Fuel and other cost recovery			1,146						25.2						2,067						18.0
Retail electric – current year			$	5,961					31.0		%				$	14,363					25.0		%

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Revenues associated with changes in rates and pricing increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. The increases were primarily due to higher contributions from commercial and industrial customers with variable demand-driven pricing, base tariff increases in accordance with Georgia Power's 2019 ARP, and pricing effects associated with customer usage. See Note 2 to the financial statements under "Georgia Power – Rate Plans" in Item 8 of the Form 10-K for additional information.

Revenues attributable to changes in sales increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. Weather-adjusted residential KWH sales increased 1.3% and 0.4% in the third quarter and year-to-date 2022, respectively, and weather-adjusted commercial KWH sales increased 2.0% in both the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021 primarily due to customer growth. In addition, commercial customer usage increased in the third quarter and year-to-date 2022 and residential customer usage decreased for year-to-date 2022 when compared to the corresponding periods in 2021 as customers return to pre-pandemic levels of activity outside the home. Industrial KWH sales increased 2.2% and 2.6% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to increases in the pipeline and paper sectors, partially offset by a decrease in the chemicals sector.

Fuel and other cost recovery revenues increased $1.1 billion and $2.1 billion in the third quarter and year-to-date 2022, respectively, compared to the corresponding periods in 2021 primarily due to higher fuel and purchased power costs and an increase in the volume of KWHs generated. Electric rates for the traditional electric operating companies include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the energy component of PPA costs, and do not affect net income. The traditional electric operating companies each have one or more regulatory mechanisms to recover other costs such as environmental and other compliance costs, storm damage, new plants, and PPA capacity costs. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein for additional information.

Wholesale Electric Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$466						63.7						$976						53.6

In the third quarter 2022, wholesale electric revenues were $1.2 billion compared to $731 million for the corresponding period in 2021. For year-to-date 2022, wholesale electric revenues were $2.8 billion compared to $1.8 billion for the corresponding period in 2021. The increases were primarily due to increases of $437 million and $930 million in the third quarter and year-to-date 2022, respectively, in energy revenues as a result of fuel and purchased power price increases when compared to the corresponding periods in 2021, an increase in the volume of KWHs sold primarily associated with natural gas PPAs at Southern Power, and increased opportunity sales at Alabama Power due to warmer weather.

Wholesale electric revenues consist of revenues from PPAs and short-term opportunity sales. Wholesale electric revenues from PPAs (other than solar and wind PPAs) have both capacity and energy components. Capacity revenues generally represent the greatest contribution to net income and are designed to provide recovery of fixed costs plus a return on investment. Energy revenues will vary depending on fuel prices, the market prices of wholesale energy compared to 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 have a significant impact on net income. Energy sales from solar and wind PPAs do not have a capacity charge and customers either purchase the energy output of a dedicated renewable facility through an energy charge or through a fixed price related to the energy. As a result, the ability to recover fixed and variable operations and maintenance expenses is dependent upon the level of energy generated from these facilities, which can be impacted by weather conditions, equipment performance, transmission constraints, and other factors. Wholesale electric revenues at Mississippi Power include FERC-regulated municipal and rural association sales

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AND RESULTS OF OPERATIONS (Continued)

under cost-based tariffs as well as market-based sales. Short-term opportunity sales are made at market-based rates that generally provide a margin above the Southern Company system's variable cost to produce the energy.

Other Electric Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$6						3.4						$29						5.5

In the third quarter 2022, other electric revenues were $185 million compared to $179 million for the corresponding period in 2021. The increase was primarily due to increases of $14 million in transmission revenues primarily associated with open access transmission tariff sales and $7 million in cogeneration steam revenues associated with higher natural gas prices at Alabama Power, partially offset by a $14 million increase in realized losses associated with price stability products for retail customers on variable demand-driven pricing tariffs at Georgia Power.

For year-to-date 2022, other electric revenues were $554 million compared to $525 million for the corresponding period in 2021. The increase was primarily due to increases of $41 million in transmission revenues primarily associated with open access transmission tariff sales, $15 million in cogeneration steam revenues associated with higher natural gas prices at Alabama Power, and $13 million in outdoor lighting sales at Georgia Power, partially offset by a decrease of $26 million resulting from the termination of a transmission service contract and an increase of $21 million in realized losses associated with price stability products for retail customers on variable demand-driven pricing tariffs, both at Georgia Power.

Natural Gas Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$234						37.6						$1,004						33.5

In the third quarter 2022, natural gas revenues were $857 million compared to $623 million for the corresponding period in 2021. For year-to-date 2022, natural gas revenues were $4.0 billion compared to $3.0 billion for the corresponding period in 2021.

Details of the changes in natural gas revenues were as follows:

			Third Quarter 2022												Year-To-Date 2022
			(in millions)						(% change)						(in millions)						(% change)
Natural gas revenues – prior year			$	623											$	2,994
Estimated change resulting from –
Infrastructure replacement programs and base rate changes			54						8.7		%				186						6.2		%
Gas costs and other cost recovery			172						27.6						955						31.9
Gas marketing services			1						0.2						14						0.5
Wholesale gas services			—						—						(187)						(6.2)
Other			7						1.1						36						1.1
Natural gas revenues – current year			$	857					37.6		%				$	3,998					33.5		%

Revenues from infrastructure replacement programs and base rate changes at the natural gas distribution utilities increased in the third quarter and year-to-date 2022 compared to the corresponding periods in 2021 primarily due to rate increases at Nicor Gas, Atlanta Gas Light, and Chattanooga Gas and continued investment in infrastructure replacement. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K for additional information.

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Revenues associated with gas costs and other cost recovery increased in the third quarter and year-to-date 2022 compared to the corresponding periods in 2021 primarily due to higher natural gas cost recovery. Natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities.

Revenues from gas marketing services increased for year-to-date 2022 compared to the corresponding period in 2021 due to higher commodity prices and higher sales to commercial customers.

The changes in year-to-date 2022 revenues related to Southern Company Gas' wholesale gas services were due to the sale of Sequent on July 1, 2021. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Other Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$24						15.6						$6						1.2

In the third quarter 2022, other revenues were $178 million compared to $154 million for the corresponding period in 2021. The increase was primarily due to a $15 million increase in unregulated sales at the traditional electric operating companies primarily associated with power delivery construction and maintenance projects, energy conservation projects, and lighting. Also contributing to the increase was a $9 million increase primarily related to distributed infrastructure projects at PowerSecure.

For year-to-date 2022, other revenues were $519 million compared to $513 million for the corresponding period in 2021. The increase was primarily due to increases of $10 million in unregulated sales associated with power delivery construction and maintenance projects at Mississippi Power, $9 million in unregulated energy conservation projects at Georgia Power, $8 million in unregulated lighting sales at Alabama Power, and $5 million primarily related to distribution infrastructure projects at PowerSecure, partially offset by a $28 million decrease associated with the timing of revenue recognition for a large, ongoing power delivery construction and maintenance contract at Georgia Power.

Fuel and Purchased Power Expenses

			Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
			(change in millions)						(% change)						(change in millions)						(% change)
Fuel			$	1,189					96.4						$	2,319					79.1
Purchased power			357						124.0						573						80.5
Total fuel and purchased power expenses			$	1,546											$	2,892

In the third quarter 2022, total fuel and purchased power expenses were $3.1 billion compared to $1.5 billion for the corresponding period in 2021. The increase was primarily the result of a $1.2 billion increase in the average cost of fuel and purchased power and a $310 million increase in the volume of KWHs generated and purchased.

For year-to-date 2022, total fuel and purchased power expenses were $6.5 billion compared to $3.6 billion for the corresponding period in 2021. The increase was primarily the result of a $2.4 billion increase in the average cost of fuel and purchased power and a $523 million increase in the volume of KWHs generated and purchased.

Fuel and purchased power energy transactions at the traditional electric operating companies are generally offset by fuel revenues and do not have a significant impact on net income. See Note 2 to the financial statements in Item 8 of the Form 10-K for additional information. Fuel expenses incurred under Southern Power's PPAs are generally the responsibility of the counterparties and do not significantly impact net income.

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Details of the Southern Company system's generation and purchased power were as follows:

			Third Quarter 2022			Third Quarter 2021			Year-To-Date 2022			Year-To-Date 2021
Total generation (in billions of KWHs)(a)			50			50			141			136
Total purchased power (in billions of KWHs)			9			5			20			13
Sources of generation (percent)(a) —
Gas			54			48			50			47
Coal			21			26			22			24
Nuclear			16			16			16			17
Hydro			2			3			4			4
Wind, Solar, and Other			7			7			8			8
Cost of fuel, generated (in cents per net KWH)—
Gas(a)			6.75			3.38			5.42			2.87
Coal			4.12			2.82			3.58			2.84
Nuclear			0.71			0.78			0.72			0.76
Average cost of fuel, generated (in cents per net KWH)(a)			5.05			2.75			4.07			2.45
Average cost of purchased power (in cents per net KWH)(b)			8.94			6.45			7.84			5.77

(a)Excludes Central Alabama Generating Station KWHs and associated cost of fuel through July 12, 2022 as its fuel was previously provided by the purchaser under a power sales agreement. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

(b)Average cost of purchased power includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider.

Fuel

In the third quarter 2022, fuel expense was $2.4 billion compared to $1.2 billion for the corresponding period in 2021. The increase was primarily due to a 99.7% increase in the average cost of natural gas per KWH generated, a 52.7% decrease in the volume of KWHs generated by hydro, a 46.1% increase in the average cost of coal per KWH generated, and a 13.0% increase in the volume of KWHs generated by natural gas, partially offset by a 19.0% decrease in the volume of KWHs generated by coal.

For year-to-date 2022, fuel expense was $5.2 billion compared to $2.9 billion for the corresponding period in 2021. The increase was primarily due to an 88.9% increase in the average cost of natural gas per KWH generated, a 26.1% increase in the average cost of coal per KWH generated, a 9.6% increase in the volume of KWHs generated by natural gas, and an 8.7% decrease in the volume of KWHs generated by hydro, partially offset by a 4.1% decrease in the volume of KWHs generated by coal.

Purchased Power

In the third quarter 2022, purchased power expense was $645 million compared to $288 million for the corresponding period in 2021. The increase was primarily due to a 38.6% increase in the average cost per KWH purchased primarily due to higher natural gas and coal prices and an 87.2% increase in the volume of KWHs purchased.

For year-to-date 2022, purchased power expense was $1.3 billion compared to $712 million for the corresponding period in 2021. The increase was primarily due to a 35.9% increase in the average cost per KWH purchased primarily due to higher natural gas and coal prices and a 50.9% increase in the volume of KWHs purchased.

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Energy purchases will vary depending on demand for energy within the Southern Company system's electric service territory, the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, and the availability of the Southern Company system's generation.

Cost of Natural Gas

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$165

N/M

$897

95.1

Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities. Cost of natural gas at the natural gas distribution utilities represented 78% and 87% of the total cost of natural gas in the third quarter and year-to-date 2022, respectively.

In the third quarter 2022, cost of natural gas was $294 million compared to $129 million for the corresponding period in 2021. For year-to-date 2022, cost of natural gas was $1.8 billion compared to $943 million for the corresponding period in 2021. The increases reflect higher gas cost recovery as a result of increases of 104% and 113% in natural gas prices in the third quarter and year-to-date 2022, respectively, compared to the corresponding periods in 2021.

Cost of Other Sales

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$21						29.6						$20						7.8

In the third quarter 2022, cost of other sales was $92 million compared to $71 million for the corresponding period in 2021. The increase was primarily related to distributed infrastructure projects at PowerSecure.

For year-to-date 2022, cost of other sales was $275 million compared to $255 million for the corresponding period in 2021. The increase was primarily due to increases of $32 million related to distributed infrastructure projects at PowerSecure, $9 million related to unregulated power delivery construction and maintenance projects at Mississippi Power, and $9 million primarily associated with unregulated merchandising and energy services expenses at Alabama Power, partially offset by a decrease of $32 million associated with unregulated power delivery construction and maintenance projects at Georgia Power.

Other Operations and Maintenance Expenses

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$101						7.0						$364						8.6

In the third quarter 2022, other operations and maintenance expenses were $1.5 billion compared to $1.4 billion for the corresponding period in 2021. The increase was primarily due to increases of $49 million in transmission and distribution expenses primarily related to line maintenance, $18 million in customer accounts, customer service, and sales expenses primarily related to bad debt expenses, payment convenience fees, and labor, $12 million in compensation and benefit expenses, and $10 million in generation expenses primarily related to scheduled outage and maintenance costs.

For year-to-date 2022, other operations and maintenance expenses were $4.6 billion compared to $4.3 billion for the corresponding period in 2021. Excluding $53 million of expenses related to Sequent in 2021, other operations and

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maintenance expenses increased $417 million. The increase was primarily due to increases of $135 million in transmission and distribution expenses primarily related to line maintenance, $90 million in generation expenses primarily related to scheduled outage and maintenance costs, $38 million in compensation and benefit expenses, $30 million in expenses at Southern Company Gas passed through directly to customers primarily related to bad debt, and $21 million in customer accounts, customer service, and sales expenses primarily related to bad debt expenses, payment convenience fees, and labor.

Depreciation and Amortization

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$26						2.9						$70						2.6

In the third quarter 2022, depreciation and amortization was $922 million compared to $896 million for the corresponding period in 2021. For year-to-date 2022, depreciation and amortization was $2.73 billion compared to $2.66 billion for the corresponding period in 2021. The increases were primarily due to additional plant in service, including continued infrastructure investments at the natural gas distribution utilities.

Taxes Other Than Income Taxes

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$40						12.8						$104						10.7

In the third quarter 2022, taxes other than income taxes were $352 million compared to $312 million for the corresponding period in 2021. For year-to-date 2022, taxes other than income taxes were $1.1 billion compared to $969 million for the corresponding period in 2021. The increases primarily reflect an increase in municipal franchise fees at Georgia Power and an increase in revenue tax expenses at Southern Company Gas.

Estimated Loss on Plant Vogtle Units 3 and 4

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$(334)

N/M

$(790)

N/M

Georgia Power recorded pre-tax charges (credits) to income for the estimated probable loss on Plant Vogtle Units 3 and 4 totaling $(70) million and $264 million in the third quarter 2022 and 2021, respectively, and $(18) million and $772 million for year-to-date 2022 and 2021, respectively. The charges (credits) reflect revisions to the total project capital cost forecast to complete construction and start-up of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information.

Gain on Dispositions, Net

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$(105)						(84.0)						$(126)						(70.4)

In the third quarter 2022, gain on dispositions, net was $20 million compared to $125 million for the corresponding period in 2021. For year-to-date 2022, gain on dispositions, net was $53 million compared to $179 million for the corresponding period in 2021. The decreases primarily reflect a $121 million gain at Southern Company Gas related to the sale of Sequent in the third quarter 2021, partially offset by a $14 million gain recorded in the third quarter

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2022 as a result of the early termination of the transition services agreement related to the 2019 sale of Gulf Power. The year-to-date 2022 decrease also reflects a $39 million gain at Southern Power primarily from contributions of wind turbine equipment to various equity method investments in 2021, partially offset by a $17 million gain from sales of integrated transmission system assets at Georgia Power in 2022. See Note 15 to the financial statements under "Southern Power – Development Projects" and "Southern Company Gas – Sale of Sequent" in Item 8 of the Form 10-K for additional information.

Allowance for Equity Funds Used During Construction

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$10						20.4						$23						16.4

In the third quarter 2022, allowance for equity funds used during construction was $59 million compared to $49 million for the corresponding period in 2021. For year-to-date 2022, allowance for equity funds used during construction was $163 million compared to $140 million for the corresponding period in 2021. The increases were primarily associated with an increase in capital expenditures related to Plant Barry Unit 8 construction at Alabama Power and transmission and distribution projects related to grid modernization at Georgia Power.

Earnings from Equity Method Investments

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$(2)

(6.7)

$74

N/M

For year-to-date 2022, earnings from equity method investments were $109 million compared to $35 million for the corresponding period in 2021. The increase was primarily due to pre-tax impairment charges in 2021 totaling $84 million related to the PennEast Pipeline project at Southern Company Gas, partially offset by a $16 million decrease at Southern Holdings primarily due to a decrease in investment income. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements herein under "Southern Company Gas" for additional information.

Interest Expense, Net of Amounts Capitalized

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$60						13.3						$109						8.1

In the third quarter 2022, interest expense, net of amounts capitalized was $511 million compared to $451 million for the corresponding period in 2021. The increase was primarily due to increases of approximately $28 million due to higher average outstanding borrowings and $28 million due to higher interest rates.

For year-to-date 2022, interest expense, net of amounts capitalized was $1.5 billion compared to $1.4 billion for the corresponding period in 2021. The increase was primarily due to higher average outstanding borrowings.

See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

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Other Income (Expense), Net

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$1						0.8						$124						42.8

For year-to-date 2022, other income (expense), net was $414 million compared to $290 million for the corresponding period in 2021. The increase was primarily due to charitable contributions of $101 million at Southern Company Gas during the first and second quarters of 2021 and a $44 million increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.

Income Taxes

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$42						11.3						$341						62.0

In the third quarter 2022, income taxes were $414 million compared to $372 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $891 million compared to $550 million for the corresponding period in 2021. The increases were primarily due to higher pre-tax earnings, partially offset by $113 million of additional tax expense in 2021 resulting from Southern Company Gas' sale of Sequent in the third quarter 2021. The year-to-date 2022 increase was also due to an adjustment in the second quarter 2022 related to a prior year state tax credit carryforward at Georgia Power. See Note (G) to the Condensed Financial Statements herein for additional information.

Net Income (Loss) Attributable to Noncontrolling Interests

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$7

N/M

$(28)

N/M

Substantially all noncontrolling interests relate to renewable projects at Southern Power. In the third quarter 2022, net income attributable to noncontrolling interests was $12 million compared to $5 million for the corresponding period in 2021. The increase was primarily due to lower HLBV loss allocations to Southern Power's tax equity partners, including loss allocation impacts associated with the Garland battery energy storage facility being placed in service in the third quarter 2021, and higher income allocations to Southern Power's equity partners.

For year-to-date 2022, net loss attributable to noncontrolling interests was $55 million compared to $27 million for the corresponding period in 2021. The increased loss was primarily due to higher HLBV loss allocations to Southern Power's tax equity partners, partially offset by loss allocation impacts associated with the Garland battery energy storage facility being placed in service in the third quarter 2021 and higher income allocations to Southern Power's equity partners.

See Notes 9 and 15 to the financial statements under "Lessor" and "Southern Power," respectively, in Item 8 of the Form 10-K for additional information.

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Alabama Power

Net Income

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$26						5.2						$67						5.6

Alabama Power's net income after dividends on preferred stock in the third quarter 2022 was $525 million compared to $499 million for the corresponding period in 2021. Alabama Power's net income after dividends on preferred stock for year-to-date 2022 was $1.26 billion compared to $1.19 billion for the corresponding period in 2021. These increases were primarily due to an increase in retail revenues associated with warmer weather in Alabama Power's service territory in 2022 compared to the corresponding periods in 2021 and sales growth, partially offset by higher non-fuel operations and maintenance costs.

Retail Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$357						21.6						$658						15.1

In the third quarter 2022, retail revenues were $2.01 billion compared to $1.65 billion for the corresponding period in 2021. For year-to-date 2022, retail revenues were $5.02 billion compared to $4.36 billion for the corresponding period in 2021.

Details of the changes in retail revenues were as follows:

			Third Quarter 2022												Year-To-Date 2022
			(in millions)						(% change)						(in millions)						(% change)
Retail – prior year			$	1,651											$	4,357
Estimated change resulting from –
Rates and pricing			3						0.2		%				7						0.2		%
Sales growth			20						1.2						53						1.2
Weather			25						1.5						88						2.0
Fuel and other cost recovery			309						18.7						510						11.7
Retail – current year			$	2,008					21.6		%				$	5,015					15.1		%

Revenues attributable to changes in sales increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. Weather-adjusted residential KWH sales decreased 0.4% and 0.3% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to decreased customer usage. Weather-adjusted commercial KWH sales decreased 0.7% in the third quarter 2022 when compared to the corresponding period in 2021 primarily due to decreased customer usage. Weather-adjusted commercial KWH sales were flat for year-to-date 2022 when compared to the corresponding period in 2021. Industrial KWH sales increased 2.9% and 2.3% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to increases in the forest product and pipeline sectors, partially offset by decreases in the chemicals sector.

Fuel and other cost recovery revenues increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021 primarily due to increases in the volume of KWHs generated and the average cost of fuel.

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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

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$143

N/M

$237

83.2

In the third quarter 2022, wholesale revenues from sales to non-affiliates were $250 million compared to $107 million for the corresponding period in 2021. For year-to-date 2022, wholesale revenues from sales to non-affiliates were $522 million compared to $285 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of 75.9% and 41.8%, respectively, in the price of energy due to higher natural gas prices, as well as increases of 32.3% and 29.3%, respectively, in KWH sales as a result of increased opportunity sales due to warmer weather in the third quarter and year-to-date 2022 compared to the corresponding periods in 2021.

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

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$17						32.1						$61						56.0

In the third quarter 2022, wholesale revenues from sales to affiliates were $70 million compared to $53 million for the corresponding period in 2021. The increase was primarily due to a 142.2% increase in the price of energy due to higher natural gas prices, partially offset by a 45.7% decrease in KWH sales due to the availability of lower cost Southern Company system resources compared to Alabama Power's generation.

For year-to-date 2022, wholesale revenues from sales to affiliates were $170 million compared to $109 million for the corresponding period in 2021. The increase was primarily due to an 84.7% increase in the price of energy due to higher natural gas prices, partially offset by a 15.3% decrease in KWH sales due to the availability of lower cost Southern Company system resources compared to Alabama Power's generation.

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. 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.

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Other Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$23						24.7						$48						17.9

In the third quarter 2022, other revenues were $116 million compared to $93 million for the corresponding period in 2021. For year-to-date 2022, other revenues were $316 million compared to $268 million for the corresponding period in 2021. The third quarter and year-to-date 2022 increases were primarily due to increases of $7 million and $15 million, respectively, in cogeneration steam revenue associated with higher natural gas prices, $6 million and $13 million, respectively, in transmission revenues primarily due to open access transmission tariff sales, and $3 million and $8 million, respectively, in unregulated lighting sales. The year-to-date 2022 increase also included a $5 million increase in energy services revenue.

Fuel and Purchased Power Expenses

			Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
			(change in millions)						(% change)						(change in millions)						(% change)
Fuel			$	293					78.6						$	472					50.9
Purchased power – non-affiliates			109						143.4						174						100.6
Purchased power – affiliates			68						151.1						146						128.1
Total fuel and purchased power expenses			$	470											$	792

In the third quarter 2022, total fuel and purchased power expenses were $964 million compared to $494 million for the corresponding period in 2021. The increase was primarily due to a $257 million increase in the cost of fuel and purchased power and a $213 million increase related to the volume of KWHs generated and purchased.

For year-to-date 2022, total fuel and purchased power expenses were $2.01 billion compared to $1.21 billion for the corresponding period in 2021. The increase was primarily due to a $518 million increase in the cost of fuel and purchased power and a $274 million increase related to the volume of KWHs generated and purchased.

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.

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AND RESULTS OF OPERATIONS (Continued)

Details of Alabama Power's generation and purchased power were as follows:

			Third Quarter 2022						Third Quarter 2021						Year-To-Date 2022						Year-To-Date 2021
Total generation (in billions of KWHs)(a)			16						16						45						45
Total purchased power (in billions of KWHs)			4						2						9						5
Sources of generation (percent)(a) —
Coal			47						50						45						47
Nuclear			22						24						24						25
Gas			28						18						23						19
Hydro			3						8						8						9
Cost of fuel, generated (in cents per net KWH) —
Coal			3.89						2.85						3.40						2.78
Nuclear			0.67						0.73						0.67						0.71
Gas(a)			6.55						3.03						5.20						2.68
Average cost of fuel, generated (in cents per net KWH)(a)			3.91						2.33						3.13						2.20
Average cost of purchased power (in cents per net KWH)(b)			8.55						7.96						8.33						6.70

(a)Excludes Central Alabama Generating Station KWHs and associated cost of fuel through July 12, 2022 as its fuel was previously provided by the purchaser under a power sales agreement. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

(b)Average cost of purchased power includes fuel, energy, and transmission purchased by Alabama Power for tolling agreements where power is generated by the provider.

Fuel

In the third quarter 2022, fuel expense was $666 million compared to $373 million for the corresponding period in 2021. The increase was primarily due to a 116.2% increase in the average cost of natural gas per KWH generated, which excludes tolling agreements, a 36.5% increase in the average cost of coal per KWH generated, a 56.8% decrease in the volume of KWHs generated by hydro facilities as a result of less rainfall in the third quarter 2022 compared to the corresponding period in 2021, and a 46.9% increase in the volume of KWHs generated by natural gas.

For year-to-date 2022, fuel expense was $1.4 billion compared to $0.9 billion for the corresponding period in 2021. The increase was primarily due to a 94.0% increase in the average cost of natural gas per KWH generated, which excludes tolling agreements, a 22.3% increase in the average cost of coal per KWH generated, an 18.3% increase in the volume of KWHs generated by natural gas, and an 8.5% decrease in the volume of KWHs generated by hydro facilities as a result of less rainfall for year-to-date 2022 compared to the corresponding period in 2021.

Purchased Power – Non-Affiliates

In the third quarter 2022, purchased power expense from non-affiliates was $185 million compared to $76 million for the corresponding period in 2021. The increase was primarily due to a 193.7% increase in the volume of KWHs purchased as a result of warmer weather in the third quarter 2022 compared to the corresponding period in 2021, partially offset by an 11.2% decrease in the average cost per KWH purchased due to fixed capacity costs allocated across a higher level of generation.

For year-to-date 2022, purchased power expense from non-affiliates was $347 million compared to $173 million for the corresponding period in 2021. The increase was primarily due to a 100.5% increase in the volume of KWHs purchased as a result of warmer weather for year-to-date 2022 compared to the corresponding period in 2021, as well as an 8.2% increase in the average cost per KWH purchased due to higher natural gas and coal prices.

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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.

Purchased Power – Affiliates

In the third quarter 2022, purchased power expense from affiliates was $113 million compared to $45 million for the corresponding period in 2021. The increase was primarily due to an 84.5% increase in the average cost per KWH purchased due to higher natural gas and coal prices and a 36.4% increase in the volume of KWHs purchased as a result of warmer weather in the third quarter 2022 compared to the corresponding period in 2021.

For year-to-date 2022, purchased power expense from affiliates was $260 million compared to $114 million for the corresponding period in 2021. The increase was primarily due to a 71.0% increase in the average cost per KWH purchased due to higher natural gas and coal prices and a 33.6% increase in the volume of KWHs purchased as a result of warmer weather for year-to-date 2022 compared to the corresponding period in 2021.

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.

Other Operations and Maintenance Expenses

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$17						4.2						$95						8.1

In the third quarter 2022, other operations and maintenance expenses were $418 million compared to $401 million for the corresponding period in 2021. For year-to-date 2022, other operations and maintenance expenses were $1.27 billion compared to $1.18 billion for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of $18 million and $41 million, respectively, in transmission and distribution expenses primarily associated with line maintenance and $6 million and $12 million, respectively, in customer accounts, customer service, and sales expenses primarily associated with labor and bad debt expense. The increase for the third quarter 2022 was partially offset by a $15 million decrease in generation expenses primarily associated with scheduled outages and maintenance. The year-to-date 2022 increase also included a $24 million increase in generation expenses primarily associated with scheduled outages and maintenance and Rate CNP Compliance-related expenses. See Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance" in Item 8 of the Form 10-K for additional information.

Allowance for Equity Funds Used During Construction

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$4						28.6						$13						34.2

For year-to-date 2022, allowance for equity funds used during construction was $51 million compared to $38 million for the corresponding period in 2021. The increase for year-to-date 2022 was primarily due to an increase in capital expenditures related to Plant Barry Unit 8 construction.

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Interest Expense, Net of Amounts Capitalized

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$14						16.7						$26						10.3

In the third quarter 2022, interest expense, net of amounts capitalized was $98 million compared to $84 million for the corresponding period in 2021. For year-to-date 2022, interest expense, net of amounts capitalized was $278 million compared to $252 million for the corresponding period in 2021. The increases were primarily due to higher average outstanding borrowings. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

Income Taxes

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$14						9.2						$28						7.7

In the third quarter 2022, income taxes were $166 million compared to $152 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $394 million compared to $366 million for the corresponding period in 2021. The increases were primarily due to higher pre-tax earnings.

Georgia Power

Net Income

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$322						60.1						$821						79.7

Georgia Power's net income in the third quarter 2022 was $858 million compared to $536 million for the corresponding period in 2021. For year-to-date 2022 net income was $1.85 billion compared to $1.03 billion for the corresponding period in 2021. The increases were primarily due to decreases of $249 million and $589 million in the third quarter and year-to-date 2022, respectively, in after-tax charges related to the construction of Plant Vogtle Units 3 and 4 and increases in retail revenues associated with rates and pricing and sales growth, partially offset by higher non-fuel operations and maintenance costs. The increase for year-to-date 2022 was also due to warmer weather in Georgia Power's service territory compared to the corresponding period in 2021.

See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information regarding Plant Vogtle Units 3 and 4.

Retail Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$1,051						39.6						$2,164						33.5

In the third quarter 2022, retail revenues were $3.70 billion compared to $2.65 billion for the corresponding period in 2021. For year-to-date 2022, retail revenues were $8.63 billion compared to $6.47 billion for the corresponding period in 2021.

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Details of the changes in retail revenues were as follows:

			Third Quarter 2022												Year-To-Date 2022
			(in millions)						(% change)						(in millions)						(% change)
Retail – prior year			$	2,652											$	6,465
Estimated change resulting from –
Rates and pricing			157						5.9		%				442						6.8		%
Sales growth			54						2.0						101						1.6
Weather			(1)						—						89						1.4
Fuel cost recovery			841						31.7						1,532						23.7
Retail – current year			$	3,703					39.6		%				$	8,629					33.5		%

Revenues associated with changes in rates and pricing increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. The increases were primarily due to higher contributions from commercial and industrial customers with variable demand-driven pricing, base tariff increases in accordance with the 2019 ARP, and pricing effects associated with customer usage. See Note 2 to the financial statements under "Georgia Power – Rate Plans" in Item 8 of the Form 10-K for additional information.

Revenues attributable to changes in sales increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. Weather-adjusted residential KWH sales increased 2.7% and 1.0% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to customer growth. The increase for the third quarter 2022 also reflects increased customer usage. Weather-adjusted commercial KWH sales increased 3.2% and 2.9% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to impacts on customer usage from increased activity outside the home as customers return to pre-pandemic levels of activity, as well as customer growth. Weather-adjusted industrial KWH sales increased 1.8% and 2.8% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to increases in the pipeline, electronic, and paper sectors, partially offset by decreases in the chemicals and textiles sectors.

Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021 due to higher fuel and purchased power costs. Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses and do not affect net income. See Note 2 to the financial statements under "Georgia Power – Fuel Cost Recovery" in Item 8 of the Form 10-K for additional information.

Wholesale Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$(7)						(11.1)						$43						30.1

In the third quarter 2022, wholesale revenues were $56 million compared to $63 million for the corresponding period in 2021. The decrease was primarily due to a $22 million decrease in KWH sales associated with lower market demand and a $3 million decrease in capacity revenues due to the expiration of a non-affiliate PPA in 2021, largely offset by an increase of $20 million related to the average cost of fuel primarily due to higher natural gas and coal prices.

For year-to-date 2022, wholesale revenues were $186 million compared to $143 million for the corresponding period in 2021. The increase was primarily due to an increase of $60 million related to the average cost of fuel primarily due to higher natural gas and coal prices, partially offset by a $10 million decrease in KWH sales

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AND RESULTS OF OPERATIONS (Continued)

associated with lower market demand and an $8 million decrease in capacity revenues due to the expiration of a non-affiliate PPA in 2021.

Wholesale revenues from sales to non-affiliates consist of PPAs and short-term opportunity sales. Wholesale revenues from PPAs have both capacity and energy components. Wholesale capacity revenues from PPAs are recognized in amounts billable under the contract terms and provide for recovery of fixed costs and a return on investment. Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Georgia 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 have a significant impact on net income. Short-term opportunity sales are made at market-based rates that generally provide a margin above Georgia Power's variable cost of energy.

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. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost.

Other Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$(11)						(7.8)						$(39)						(8.8)

In the third quarter 2022, other revenues were $130 million compared to $141 million for the corresponding period in 2021. For year-to-date 2022, other revenues were $403 million compared to $442 million for the corresponding period in 2021. The decreases for the third quarter and year-to-date 2022 were primarily due to increases of $14 million and $21 million, respectively, in realized losses associated with price stability products for retail customers on variable demand-driven pricing tariffs, decreases of $9 million and $12 million, respectively, from retail solar programs as a result of higher avoided cost credits to customers, and $6 million and $26 million, respectively, resulting from the termination of a transmission service contract. These reductions were partially offset by increases of $8 million and $22 million, respectively, associated with unregulated outdoor lighting sales and energy conservation projects and $6 million and $16 million, respectively, in open access transmission tariff sales. Also contributing to the decrease for year-to-date 2022 was a decrease of $28 million associated with the timing of revenue recognition for a large, ongoing power delivery construction and maintenance contract.

Fuel and Purchased Power Expenses

			Third Quarter 2022 vs. Third Quarter 2021												Year-to-Date 2022 vs. Year-to-Date 2021
			(change in millions)						(% change)						(change in millions)						(% change)
Fuel			$	409					94.7						$	799					73.4
Purchased power – non-affiliates			131						75.7						239						51.8
Purchased power – affiliates			283						98.3						527						92.0
Total fuel and purchased power expenses			$	823											$	1,565

In the third quarter 2022, total fuel and purchased power expenses were $1.7 billion compared to $0.9 billion for the corresponding period in 2021. For year-to-date 2022, total fuel and purchased power expenses were $3.7 billion compared to $2.1 billion for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of $0.8 billion and $1.4 billion, respectively, related to the average cost of fuel

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AND RESULTS OF OPERATIONS (Continued)

and purchased power and net increases of $30 million and $158 million, respectively, related to the volume of KWHs generated and purchased.

Fuel and purchased power energy transactions do not have a significant impact on earnings since these fuel expenses are generally offset by fuel revenues through Georgia Power's fuel cost recovery mechanism. See Note 2 to the financial statements under "Georgia Power – Fuel Cost Recovery" in Item 8 of the Form 10-K for additional information.

Details of Georgia Power's generation and purchased power were as follows:

			Third Quarter 2022						Third Quarter 2021						Year-To-Date 2022						Year-To-Date 2021
Total generation (in billions of KWHs)			15						16						45						46
Total purchased power (in billions of KWHs)			11						10						27						23
Sources of generation (percent) —
Gas			53						45						48						46
Nuclear			28						24						26						26
Coal			16						28						22						24
Hydro and other			3						3						4						4
Cost of fuel, generated (in cents per net KWH) —
Gas			6.10						3.28						4.99						2.84
Coal			4.73						2.73						3.84						2.89
Nuclear			0.75						0.83						0.76						0.80
Average cost of fuel, generated (in cents per net KWH)			4.32						2.51						3.56						2.30
Average cost of purchased power (in cents per net KWH)(*)			10.14						5.24						8.00						4.80

(*)Average cost of purchased power includes fuel purchased by Georgia Power for tolling agreements where power is generated by the provider.

Fuel

In the third quarter 2022, fuel expense was $841 million compared to $432 million for the corresponding period in 2021. The increase was primarily due to increases of 86.0% and 73.3% in the average cost per KWH generated by natural gas and coal, respectively, and an 11.1% increase in the volume of KWHs generated by natural gas, partially offset by a 44.2% decrease in the volume of KWHs generated by coal.

For year-to-date 2022, fuel expense was $1.89 billion compared to $1.09 billion for the corresponding period in 2021. The increase was primarily due to increases of 75.7% and 32.9% in the average cost per KWH generated by natural gas and coal, respectively, partially offset by a 9.1% decrease in the volume of KWHs generated by coal.

Purchased Power – Non-Affiliates

In the third quarter 2022, purchased power expense from non-affiliates was $304 million compared to $173 million for the corresponding period in 2021. For year-to-date 2022, purchased power expense from non-affiliates was $700 million compared to $461 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of 50.5% and 39.4%, respectively, in the volume of KWHs purchased primarily due to less available Georgia Power-owned coal generation and increases of 53.1% and 31.6%, respectively, in the average cost per KWH purchased primarily due to higher natural gas and coal prices.

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.

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Purchased Power – Affiliates

In the third quarter 2022, purchased power expense from affiliates was $571 million compared to $288 million for the corresponding period in 2021. For year-to-date 2022, purchased power expense from affiliates was $1.1 billion compared to $573 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of 120.3% and 93.3%, respectively, in the average cost per KWH purchased primarily due to higher natural gas and coal prices.

Energy purchases from affiliates will vary depending on the demand 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, all as approved by the FERC.

Other Operations and Maintenance Expenses

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$51						9.4						$128						8.2

In the third quarter 2022, other operations and maintenance expenses were $595 million compared to $544 million for the corresponding period in 2021. The increase was primarily due to increases of $35 million in distribution expenses primarily associated with line maintenance, $10 million in generation expenses primarily related to non-outage maintenance costs, and $9 million in certain compensation and benefit expenses, partially offset by a decrease of $6 million related to unregulated power delivery construction and maintenance projects.

For year-to-date 2022, other operations and maintenance expenses were $1.69 billion compared to $1.56 billion for the corresponding period in 2021. The increase was primarily due to increases of $80 million in distribution expenses primarily associated with line maintenance, $37 million in generation expenses primarily related to non-outage maintenance costs, $20 million in certain compensation and benefit expenses, $11 million in legal and regulatory expenses, and $8 million in amortization of cloud software, partially offset by a net decrease of $19 million related to unregulated products and services and $17 million in gains from sales of integrated transmission system assets.

Depreciation and Amortization

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$14						4.1						$41						4.0

In the third quarter 2022, depreciation and amortization was $359 million compared to $345 million for the corresponding period in 2021. For year-to-date 2022, depreciation and amortization was $1.07 billion compared to $1.03 billion for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to additional plant in service and increases of $3 million and $9 million, respectively, in amortization of regulatory assets related to CCR AROs under the terms of the 2019 ARP. See Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Rate Plans – 2019 ARP" for additional information on recovery of CCR AROs.

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AND RESULTS OF OPERATIONS (Continued)

Taxes Other Than Income Taxes

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$25						19.2						$55						15.1

In the third quarter 2022, taxes other than income taxes were $155 million compared to $130 million for the corresponding period in 2021. For year-to-date 2022, taxes other than income taxes were $420 million compared to $365 million for the corresponding period in 2021. The increases were primarily due to increases in municipal franchise fees resulting from higher retail revenues.

Estimated Loss on Plant Vogtle Units 3 and 4

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$(334)

N/M

$(790)

N/M

Georgia Power recorded pre-tax charges (credits) to income for the estimated probable loss on Plant Vogtle Units 3 and 4 totaling $(70) million and $264 million in the third quarter 2022 and 2021, respectively, and $(18) million and $772 million for year-to-date 2022 and 2021, respectively. The charges (credits) reflect revisions to the total project capital cost forecast to complete construction and start-up of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information.

Interest Expense, Net of Amounts Capitalized

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$17						16.0						$32						10.2

In the third quarter 2022, interest expense, net of amounts capitalized was $123 million compared to $106 million for the corresponding period in 2021. For year-to-date 2022, interest expense, net of amounts capitalized was $347 million compared to $315 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily associated with increases of approximately $11 million and $23 million, respectively, related to higher average outstanding borrowings and $10 million and $12 million, respectively, related to higher interest rates. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

Other Income (Expense), Net

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$(6)						(14.3)						$16						12.9

For year-to-date 2022, other income (expense), net was $140 million compared to $124 million for the corresponding period in 2021. The increase was primarily due to an increase of $11 million in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information on retirement benefits.

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AND RESULTS OF OPERATIONS (Continued)

Income Taxes

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$113

100.0

$340

N/M

In the third quarter 2022, income taxes were $226 million compared to $113 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $421 million compared to $81 million for the corresponding period in 2021. The increases were primarily due to higher pre-tax earnings largely resulting from lower charges associated with the construction of Plant Vogtle Units 3 and 4. The year-to-date increase also reflects an adjustment in the second quarter 2022 related to a prior year state tax credit carryforward. See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" and Note (G) to the Condensed Financial Statements herein for additional information.

Mississippi Power

Net Income

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$12						24.0						$17						12.8

Mississippi Power's net income in the third quarter 2022 was $62 million compared to $50 million for the corresponding period in 2021. For year-to-date 2022, net income was $150 million compared to $133 million for the corresponding period in 2021. The increases were primarily due to an increase in revenues, partially offset by an increase in income taxes. The year-to-date 2022 increase was also partially offset by higher non-fuel operations and maintenance costs.

Retail Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$2						0.8						$48						7.2

In the third quarter 2022, retail revenues were $250 million compared to $248 million for the corresponding period in 2021. For year-to-date 2022, retail revenues were $718 million compared to $670 million for the corresponding period in 2021.

Details of the changes in retail revenues were as follows:

			Third Quarter 2022												Year-To-Date 2022
			(in millions)						(% change)						(in millions)						(% change)
Retail – prior year			$	248											$	670
Estimated change resulting from –
Rates and pricing			4						1.6		%				9						1.3		%
Sales growth (decline)			—						—						3						0.5
Weather			3						1.2						10						1.5
Fuel and other cost recovery			(5)						(2.0)						26						3.9
Retail – current year			$	250					0.8		%				$	718					7.2		%

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AND RESULTS OF OPERATIONS (Continued)

Revenues associated with changes in rates and pricing increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021 primarily due to new PEP rates that became effective for the first billing cycle of April 2022, partially offset by a decrease in revenues associated with a tolling arrangement. See Note (B) to the Condensed Financial Statements under "Mississippi Power – Performance Evaluation Plan" herein for additional information.

Revenues attributable to changes in sales decreased in the third quarter 2022 when compared to the corresponding period in 2021. Revenues attributable to changes in sales increased for year-to-date 2022 when compared to the corresponding period in 2021. Weather-adjusted residential KWH sales decreased 3.3% and 1.2% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 due to a decrease in customer usage resulting from increased activity outside the home as customers return to pre-pandemic levels of activity. Weather-adjusted commercial KWH sales increased 0.3% and 1.3% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 due to customer growth. Industrial KWH sales increased 1.9% and 1.8% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to increases in the petroleum, pipeline, and transportation sectors.

Fuel and other cost recovery revenues decreased in the third quarter 2022 when compared to the corresponding period in 2021 primarily as a result of lower recoverable fuel costs. Fuel and other cost recovery revenues increased for year-to-date 2022 when compared to the corresponding period in 2021 primarily as a result of higher recoverable fuel costs. Recoverable fuel costs include fuel and purchased power expenses reduced by the fuel portion of wholesale revenues from energy sold to customers outside Mississippi Power's service territory. Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the energy component of purchased power costs, and do not affect net income. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Mississippi Power" for additional information.

Wholesale Revenues – Non-Affiliates

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$—						—						$13						7.3

For year-to-date 2022, wholesale revenues from sales to non-affiliates were $191 million compared to $178 million for the corresponding period in 2021. The increase was primarily due to higher fuel costs and an increase in base revenue from MRA customers primarily due to increased demand as a result of weather impacts in 2022.

Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Mississippi 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 have a significant impact on net income. In addition, Mississippi Power provides service under long-term contracts with rural electric cooperative associations and municipalities located in southeastern Mississippi under cost-based electric tariffs which are subject to regulation by the FERC. See Note 2 to the financial statements under "Mississippi Power" in Item 8 of the Form 10-K for additional information. See Note (B) to the Condensed Financial Statements under "Mississippi Power – Municipal and Rural Associations Tariff" herein for additional information.

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AND RESULTS OF OPERATIONS (Continued)

Wholesale Revenues – Affiliates

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$125

N/M

$216

N/M

In the third quarter 2022, wholesale revenues from sales to affiliates were $187 million compared to $62 million for the corresponding period in 2021. For year-to-date 2022, wholesale revenues from sales to affiliates were $336 million compared to $120 million for the corresponding period in 2021. The increases were primarily due to increases of $111 million and $197 million, respectively, associated with higher fuel prices, primarily for natural gas, and $14 million and $19 million, respectively, associated with higher KWH sales due to lower cost available Mississippi Power resources as compared to the available affiliate company generation.

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. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost.

Other Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$5						62.5						$14						70.0

In the third quarter 2022, other revenues were $13 million compared to $8 million for the corresponding period in 2021. For year-to-date 2022, other revenues were $34 million compared to $20 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of $5 million and $10 million, respectively, in unregulated sales associated with power delivery construction and maintenance projects.

Fuel and Purchased Power Expenses

			Third Quarter 2022 vs. Third Quarter 2021												Year-to-Date 2022 vs. Year-to-Date 2021
			(change in millions)						(% change)						(change in millions)						(% change)
Fuel			$	103					74.2						$	235					71.1
Purchased power			14						250.0						15						70.6
Total fuel and purchased power expenses			$	117											$	250

In the third quarter 2022, total fuel and purchased power expenses were $262 million compared to $145 million for the corresponding period in 2021. The increase was due to a $106 million increase related to the average cost of fuel and purchased power and an $11 million increase related to the volume of KWHs generated and purchased.

For year-to-date 2022, total fuel and purchased power expenses were $601 million compared to $351 million for the corresponding period in 2021. The increase was primarily due to a $233 million increase related to the average cost of fuel and purchased power and a $17 million increase related to the volume of KWHs generated.

Fuel and purchased power energy transactions do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Mississippi Power's fuel cost recovery clause.

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AND RESULTS OF OPERATIONS (Continued)

Details of Mississippi Power's generation and purchased power were as follows:

			Third Quarter 2022						Third Quarter 2021						Year-To-Date 2022						Year-To-Date 2021
Total generation (in millions of KWHs)			5,093						4,878						13,650						13,016
Total purchased power (in millions of KWHs)			241						124						527						562
Sources of generation (percent) –
Gas			89						93						89						91
Coal			11						7						11						9
Cost of fuel, generated (in cents per net KWH) –
Gas			5.10						2.99						4.43						2.66
Coal			4.50						3.16						4.12						3.13
Average cost of fuel, generated (in cents per net KWH)			5.02						3.00						4.40						2.70
Average cost of purchased power (in cents per net KWH)			8.15						4.51						6.83						3.78

Fuel

In the third quarter 2022, fuel expense was $242 million compared to $139 million for the corresponding period in 2021. The increase was due to a 70.6% increase in the average cost of natural gas per KWH generated, a 42.4% increase in the average cost of coal per KWHs generated, and a 61.3% increase in the volume of KWHs generated by coal.

For year-to-date 2022, fuel expense was $565 million compared to $330 million for the corresponding period in 2021. The increase was due to a 66.5% increase in the average cost of natural gas per KWH generated, a 31.6% increase in the average cost of coal per KWHs generated, a 30.2% increase in the volume of KWHs generated by coal, and a 2.4% increase in the volume of KWHs generated by natural gas.

Purchased Power

In the third quarter 2022, purchased power expense was $20 million compared to $6 million for the corresponding period in 2021. The increase was due to a 93.6% increase in the volume of KWHs purchased and an 80.7% increase in the average cost per KWH purchased.

For year-to-date 2022, purchased power expense was $36 million compared to $21 million for the corresponding period in 2021. The increase was primarily due to an 80.6% increase in the average cost per KWH purchased, partially offset by a 6.3% decrease in the volume of KWHs purchased.

Energy purchases 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. These purchases are made in accordance with the IIC or other contractual agreements, as approved by the FERC.

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AND RESULTS OF OPERATIONS (Continued)

Other Operations and Maintenance Expenses

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$1						1.2						$22						9.6

For year-to-date 2022, other operations and maintenance expenses were $252 million compared to $230 million for the corresponding period in 2021. The increase was primarily due to increases of $9 million related to unregulated power delivery construction and maintenance projects, $6 million associated with storm reserve accruals, $4 million in transmission and distribution line maintenance, and $4 million in sales and use taxes associated with the Kemper County energy facility. See Note 2 to the financial statements under "Mississippi Power – System Restoration Rider" in Item 8 of the Form 10-K and Note (C) to the Condensed Financial Statements under "Other Matters – Mississippi Power" herein for additional information.

Income Taxes

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$7						70.0						$16						72.7

In the third quarter 2022, income taxes were $17 million compared to $10 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $38 million compared to $22 million for the corresponding period in 2021. The third quarter and year-to-date 2022 increases primarily relate to a reduction of $3 million and $8 million, respectively, in the flowback of excess deferred income taxes associated with new PEP rates that became effective in April 2022, as well as increases of $4 million and $8 million, respectively, due to higher pre-tax earnings. See Note (G) to the Condensed Financial Statements herein for additional information.

Southern Power

Net Income Attributable to Southern Power

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$17						21.8						$54						25.6

Net income attributable to Southern Power in the third quarter 2022 was $95 million compared to $78 million for the corresponding period in 2021. Net income attributable to Southern Power for year-to-date 2022 was $265 million compared to $211 million for the corresponding period in 2021. The increases were primarily due to higher revenues driven by higher market prices of energy, partially offset by higher other operations and maintenance expenses. Also contributing to the year-to-date 2022 increase were higher revenues from new natural gas PPAs and higher income associated with tax equity partnerships. The year-to-date 2022 increase was partially offset by gains from contributions of wind turbine equipment to various equity method investments in the first quarter 2021 and a tax benefit due to a change in state apportionment methodology resulting from tax legislation enacted by the State of Alabama in the first quarter 2021.

See Note 15 to the financial statements under "Southern Power – Development Projects" in Item 8 of the Form 10-K for additional information.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Operating Revenues

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$501						73.8						$1,008						62.6

Total operating revenues include PPA capacity revenues, which are derived primarily from long-term contracts involving natural gas facilities, and PPA energy revenues from Southern Power's generation facilities. To the extent Southern Power has capacity not contracted under a PPA, it may sell power into an accessible wholesale market, or, to the extent those generation assets are part of the FERC-approved IIC, it may sell power into the Southern Company power pool.

Natural Gas Capacity and Energy Revenue

Capacity revenues generally represent the greatest contribution to operating income and are designed to provide recovery of fixed costs plus a return on investment.

Energy is generally sold at variable cost or is indexed to published natural gas indices. Energy revenues will vary depending on the energy demand of Southern Power's customers and their generation capacity, as well as the market prices of wholesale energy compared to the cost of Southern Power's energy. Energy revenues also include fees for support services, fuel storage, and unit start charges. Increases and decreases in energy revenues under PPAs that are driven by fuel or purchased power prices are accompanied by an increase or decrease in fuel and purchased power costs and do not have a significant impact on net income.

Solar and Wind Energy Revenue

Southern Power's energy sales from solar and wind generating facilities are predominantly through long-term PPAs that do not have capacity revenue. Customers either purchase the energy output of a dedicated renewable facility through an energy charge or pay a fixed price related to the energy generated from the respective facility and sold to the grid. As a result, Southern Power's ability to recover fixed and variable operations and maintenance expenses is dependent upon the level of energy generated from these facilities, which can be impacted by weather conditions, equipment performance, transmission constraints, and other factors.

See FUTURE EARNINGS POTENTIAL – "Southern Power's Power Sales Agreements" in Item 7 of the Form 10-K for additional information regarding Southern Power's PPAs.

Operating Revenues Details

Details of Southern Power's operating revenues were as follows:

			Third Quarter 2022						Third Quarter 2021						Year-To-Date 2022						Year-To-Date 2021
			(in millions)
PPA capacity revenues			$	131					$	118					$	344					$	311
PPA energy revenues			736						413						1,657						954
Total PPA revenues			867						531						2,001						1,265
Non-PPA revenues			304						139						590						327
Other revenues			9						9						27						18
Total operating revenues			$	1,180					$	679					$	2,618					$	1,610

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

In the third quarter 2022, total operating revenues were $1.2 billion, reflecting a $501 million, or 74%, increase from the corresponding period in 2021. The increase in operating revenues was primarily due to the following:

•PPA capacity revenues increased $13 million, or 11%, primarily due to increased capacity sales under existing natural gas PPAs.

•PPA energy revenues increased $323 million, or 78%, primarily due to a $333 million increase in sales under existing natural gas PPAs resulting from a $287 million increase in the price of fuel and purchased power and a $45 million increase in the volume of KWHs sold.

•Non-PPA revenues increased $165 million, or 119%, due to a $172 million increase in the market price of energy, partially offset by a $7 million decrease in the volume of KWHs sold through short-term sales.

For year-to-date 2022, total operating revenues were $2.6 billion, reflecting a $1.0 billion, or 63%, increase from the corresponding period in 2021. The increase in operating revenues was primarily due to the following:

•PPA capacity revenues increased $33 million, or 11%, primarily due to new natural gas PPAs and increased capacity sales under existing natural gas PPAs, partially offset by the contractual expiration of natural gas PPAs.

•PPA energy revenues increased $703 million, or 74%, primarily due to a $540 million increase in sales under existing natural gas PPAs resulting from a $442 million increase in the price of fuel and purchased power and a $98 million increase in the volume of KWHs sold. Also contributing to the increase was a $186 million increase in sales associated with new natural gas PPAs, partially offset by a $17 million decrease due to the contractual expiration of natural gas PPAs.

•Non-PPA revenues increased $263 million, or 80%, due to a $299 million increase in the market price of energy, partially offset by a $35 million decrease in the volume of KWHs sold through short-term sales.

Fuel and Purchased Power Expenses

Details of Southern Power's generation and purchased power were as follows:

			Third Quarter 2022			Third Quarter 2021						Year-To-Date 2022			Year-To-Date 2021
			(in billions of KWHs)
Generation			12.8			12.1						36.7			31.8
Purchased power			1.2			0.8						2.3			2.0
Total generation and purchased power			14.0			12.9						39.0			33.8
Total generation and purchased power (excluding solar, wind, fuel cells, and tolling agreements)			8.8			7.7						23.2			20.2

Southern Power's PPAs for natural gas generation generally provide that the purchasers are responsible for either procuring the fuel (tolling agreements) or reimbursing Southern Power for substantially all of the cost of fuel relating to the energy delivered under such PPAs. Consequently, changes in such fuel costs are generally accompanied by a corresponding change in related fuel revenues and do not have a significant impact on net income. Southern Power is responsible for the cost of fuel for generating units that are not covered under PPAs. Power from these generating units is sold into the wholesale market or into the Southern Company power pool for capacity owned directly by Southern Power.

Purchased power expenses will vary depending on demand, availability, and the cost of generating resources throughout the Southern Company system and other contract resources. Load requirements are submitted to the Southern Company power pool on an hourly basis and are fulfilled with the lowest cost alternative, whether that is generation owned by Southern Power, an affiliate company, or external parties. Such purchased power costs are generally recovered through PPA revenues.

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Details of Southern Power's fuel and purchased power expenses were as follows:

			Third Quarter 2022 vs. Third Quarter 2021												Year-to-Date 2022 vs. Year-to-Date 2021
			(change in millions)						(% change)						(change in millions)						(% change)
Fuel			$	346					133.6						$	734					135.9
Purchased power			103						251.2						147						170.9
Total fuel and purchased power expenses			$	449											$	881

In the third quarter 2022, total fuel and purchased power expenses increased $449 million, or 150%, compared to the corresponding period in 2021. Fuel expense increased $346 million due to a $323 million increase associated with the average cost of fuel and a $23 million increase associated with the volume of KWHs generated. Purchased power expense increased $103 million due to a $79 million increase associated with the average cost of purchased power and a $24 million increase associated with the volume of KWHs purchased.

For year-to-date 2022, total fuel and purchased power expenses increased $881 million, or 141%, compared to the corresponding period in 2021. Fuel expense increased $734 million due to a $651 million increase associated with the average cost of fuel and an $83 million increase associated with the volume of KWHs generated. Purchased power expense increased $147 million due to a $134 million increase associated with the average cost of purchased power and a $13 million increase associated with the volume of KWHs purchased.

Other Operations and Maintenance Expenses

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$19						20.1						$23						7.4

In the third quarter 2022, other operations and maintenance expenses were $113 million compared to $94 million for the corresponding period in 2021. For year-to-date 2022, other operations and maintenance expenses were $331 million compared to $308 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of $11 million and $13 million, respectively, related to the timing of non-outage generation maintenance expenses. Also contributing to the year-to-date 2022 increase was an increase of $11 million in transmission expenses to serve new natural gas PPAs, partially offset by $6 million related to the allocation in 2021 of uncollected settlements by the Energy Reliability Council of Texas market as a result of Winter Storm Uri.

Loss on Sales-Type Lease

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$(15)						(100.0)						$(14)						(93.4)

In the third quarter 2021, a $15 million loss on sales-type lease was recorded upon commencement of the Garland battery energy storage facility PPA, $10 million of which was allocated through noncontrolling interests to Southern Power's partners in the project. See Notes 9 and 15 to the financial statements under "Lessor" and "Southern Power," respectively, in Item 8 of the Form 10-K for additional information.

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Gain on Dispositions, Net

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$—

N/M

$(37)

(94.9)

For year-to-date 2022, gain on dispositions, net was $2 million compared to $39 million for the corresponding period in 2021. The decrease primarily resulted from gains associated with contributions of wind turbine equipment to various equity method investments in the first quarter 2021. See Note 15 to the financial statements under "Southern Power – Development Projects" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements under "Southern Power" herein for additional information.

Income Taxes (Benefit)

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$27

N/M

$52

N/M

In the third quarter 2022, income tax expense was $36 million compared to $9 million for the corresponding period in 2021. The change was primarily due to higher pre-tax earnings, partially offset by higher wind PTCs.

For year-to-date 2022, income tax expense was $49 million compared to a benefit of $3 million for the corresponding period in 2021. The change was primarily due to higher pre-tax earnings for year-to-date 2022 and a change in state apportionment methodology resulting from tax legislation enacted by the State of Alabama in the first quarter 2021, partially offset by higher wind PTCs for year-to-date 2022.

Net Income (Loss) Attributable to Noncontrolling Interests

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$7

N/M

$(28)

N/M

In the third quarter 2022, net income attributable to noncontrolling interests was $12 million compared to $5 million for the corresponding period in 2021. The increase was primarily due to lower HLBV loss allocations to tax equity partners, including loss allocation impacts associated with the Garland battery energy storage facility being placed in service in the third quarter 2021, and higher income allocations to equity partners.

For year-to-date 2022, net loss attributable to noncontrolling interests was $55 million compared to $27 million for the corresponding period in 2021. The increased loss was primarily due to higher HLBV loss allocations to tax equity partners, partially offset by loss allocation impacts associated with the Garland battery energy storage facility being placed in service in the third quarter 2021 and higher income allocations to equity partners.

See Notes 9 and 15 to the financial statements under "Lessor" and "Southern Power," respectively, in Item 8 of the Form 10-K for additional information.

Southern Company Gas

Operating Metrics

Southern Company Gas continues to focus on several operating metrics, including Heating Degree Days, customer count, and volumes of natural gas sold.

Southern Company Gas measures weather and the effect on its business using Heating Degree Days. Generally, increased Heating Degree Days result in higher demand for natural gas on Southern Company Gas' distribution system. Southern Company Gas has various regulatory mechanisms, such as weather and revenue normalization and straight-fixed-variable rate design, which limit its exposure to weather changes within typical ranges in each of its

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utility's respective service territory. Southern Company Gas also utilizes weather hedges to limit the negative income impacts in the event of warmer-than-normal weather.

The number of customers served by gas distribution operations and gas marketing services can be impacted by natural gas prices, economic conditions, and competition from alternative fuels. Gas distribution operations and gas marketing services' customers are primarily located in Georgia and Illinois.

Southern Company Gas' natural gas volume metrics for gas distribution operations and gas marketing services illustrate the effects of weather and customer demand for natural gas.

Seasonality of Results

During the Heating Season, natural gas usage and operating revenues are generally higher as more customers are connected to the gas distribution systems and natural gas usage is higher in periods of colder weather. Southern Company Gas' base operating expenses, excluding cost of natural gas, bad debt expense, and certain incentive compensation costs, are incurred relatively evenly throughout the year. Seasonality also affects the comparison of certain balance sheet items across quarters, including receivables, unbilled revenues, natural gas for sale, and notes payable. However, these items are comparable when reviewing Southern Company Gas' annual results. Thus, Southern Company Gas' operating results for the interim periods presented are not necessarily indicative of annual results and can vary significantly from quarter to quarter.

Net Income

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$27						48.2						$127						32.6

In the third quarter 2022, net income was $83 million compared to $56 million for the corresponding period in 2021. Net income increased $14 million at gas distribution operations primarily due to base rate increases and continued investment in infrastructure replacement and $14 million at gas pipeline investments primarily as a result of higher earnings at SNG and lower income taxes related to the PennEast Pipeline project. The third quarter 2021 results also included a $93 million after-tax gain and $85 million of additional tax expense as a result of the July 1, 2021 sale of Sequent.

For year-to-date 2022, net income was $516 million compared to $389 million for the corresponding period in 2021. Net income increased $73 million at gas pipeline investments primarily as a result of a 2021 impairment charge related to the PennEast Pipeline project and $57 million at gas distribution operations primarily due to base rate increases and continued investment in infrastructure replacement. The year-to-date 2021 results also included $108 million of net income from Sequent, including the $93 million after-tax gain, and $85 million of additional tax expense as a result of the July 1, 2021 sale of Sequent.

See Notes 2, 7, and 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Natural Gas Revenues, including Alternative Revenue Programs

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$234						37.6						$1,004						33.5

In the third quarter 2022, natural gas revenues, including alternative revenue programs, were $857 million compared to $623 million for the corresponding period in 2021. For year-to-date 2022, natural gas revenues, including alternative revenue programs, were $4.0 billion compared to $3.0 billion for the corresponding period in 2021.

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Details of the changes in natural gas revenues, including alternative revenue programs, were as follows:

			Third Quarter 2022												Year-To-Date 2022
			(in millions)						(% change)						(in millions)						(% change)
Natural gas revenues – prior year			$	623											$	2,994
Estimated change resulting from –
Infrastructure replacement programs and base rate changes			54						8.7		%				186						6.2		%
Gas costs and other cost recovery			172						27.6						955						31.9
Gas marketing services			1						0.2						14						0.5
Wholesale gas services			—						—						(187)						(6.2)
Other			7						1.1						36						1.1
Natural gas revenues – current year			$	857					37.6		%				$	3,998					33.5		%

Revenues from infrastructure replacement programs and base rate changes increased in the third quarter and year-to-date 2022 compared to the corresponding periods in 2021 primarily due to rate increases at Nicor Gas, Atlanta Gas Light, and Chattanooga Gas and continued investment in infrastructure replacement. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K for additional information.

Revenues associated with gas costs and other cost recovery increased in the third quarter and year-to-date 2022 compared to the corresponding periods in 2021 primarily due to higher natural gas cost recovery. See "Cost of Natural Gas" herein for additional information. Revenue impacts from weather and customer growth are described further below.

Revenues from gas marketing services increased for year-to-date 2022 compared to the corresponding period in 2021 due to higher commodity prices and higher sales to commercial customers.

The changes in year-to-date 2022 revenues related to wholesale gas services were due to the sale of Sequent on July 1, 2021. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Southern Company Gas' natural gas distribution utilities have various regulatory mechanisms that limit their exposure to weather changes. Southern Company Gas also uses hedges for the majority of any remaining exposure to warmer-than-normal weather in Illinois for gas distribution operations and in Illinois and Georgia for gas marketing services; therefore, weather typically does not have a significant net income impact. The following table presents Heating Degree Days information for Illinois and Georgia, the primary locations where Southern Company Gas' operations are impacted by weather.

			Third Quarter												2022 vs. normal			2022 vs. 2021						Year-to-Date												2022 vs. normal			2022 vs. 2021
			Normal(*)			2022			2021						colder (warmer)			colder (warmer)						Normal(*)			2022			2021						colder (warmer)			colder (warmer)
			(in thousands)																					(in thousands)
Illinois			42			56			14						33.3		%	300.0		%				3,686			3,683			3,594						(0.1)		%	2.5		%
Georgia			3			—			3						—		%	—		%				1,431			1,361			1,396						(4.9)		%	(2.5)		%

(*)Normal represents the 10-year average from January 1, 2012 through September 30, 2021 for Illinois at Chicago Midway International Airport and for Georgia at Atlanta Hartsfield-Jackson International Airport, based on information obtained from the National Oceanic and Atmospheric Administration, National Climatic Data Center.

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The following table provides the number of customers served by Southern Company Gas at September 30, 2022 and 2021:

			September 30,
			2022						2021						2022 vs. 2021
			(in thousands, except market share %)												(% change)
Gas distribution operations			4,300						4,283						0.4		%
Gas marketing services
Energy customers(*)			598						603						(0.8)		%
Market share of energy customers in Georgia			28.3		%				28.9		%

(*)Gas marketing services' customers are primarily located in Georgia and Illinois.

Southern Company Gas anticipates customer growth and uses a variety of targeted marketing programs to attract new customers and to retain existing customers.

Cost of Natural Gas

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$165

N/M

$897

95.1

Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from gas distribution operations. Cost of natural gas at gas distribution operations represented 78% and 87% of the total cost of natural gas in the third quarter and year-to-date 2022, respectively. See MANAGEMENT'S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – "Southern Company Gas – Cost of Natural Gas" in Item 7 of the Form 10-K and "Natural Gas Revenues, including Alternative Revenue Programs" herein for additional information.

In the third quarter 2022, cost of natural gas was $294 million compared to $129 million for the corresponding period in 2021. For year-to-date 2022, cost of natural gas was $1.8 billion compared to $943 million for the corresponding period in 2021. The increases reflect higher gas cost recovery as a result of increases of 104% and 113% in natural gas prices in the third quarter and year-to-date 2022, respectively, compared to the corresponding periods in 2021.

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The following table details the volumes of natural gas sold during all periods presented.

			Third Quarter						2022 vs. 2021						Year-to-Date						2022 vs. 2021
			2022			2021									2022			2021
Gas distribution operations (mmBtu in millions)
Firm			70			74			(5.4)		%				485			465			4.3		%
Interruptible			22			23			(4.3)						69			73			(5.5)
Total			92			97			(5.2)		%				554			538			3.0		%
Gas marketing services (mmBtu in millions)
Firm:
Georgia			3			3			—		%				24			26			(7.7)		%
Illinois			—			—			—						4			5			(20.0)
Other			2			2			—						8			10			(20.0)
Interruptible large commercial and industrial			3			3			—						11			10			10.0
Total			8			8			—		%				47			51			(7.8)		%

Other Operations and Maintenance Expenses

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$14						5.9						$53						6.8

In the third quarter 2022, other operations and maintenance expenses were $252 million compared to $238 million for the corresponding period in 2021. The increase was primarily due to higher compensation and benefit expenses and higher expenses passed through directly to customers primarily related to bad debt at gas distribution operations.

For year-to-date 2022, other operations and maintenance expenses were $829 million compared to $776 million for the corresponding period in 2021. Excluding $53 million of expenses related to Sequent for year-to-date 2021, other operations and maintenance expenses increased approximately $106 million. The increase was primarily due to increases of $47 million in compensation and benefit expenses, $30 million in expenses passed through directly to customers primarily related to bad debt at gas distribution operations, $18 million in customer accounts expenses, and $15 million in technology-related costs.

Depreciation and Amortization

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$7						5.3						$18						4.5

In the third quarter 2022, depreciation and amortization was $140 million compared to $133 million for the corresponding period in 2021. For year-to-date 2022, depreciation and amortization was $414 million compared to $396 million for the corresponding period in 2021. The increases were primarily due to continued infrastructure investments at the natural gas distribution utilities.

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Taxes Other Than Income Taxes

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$9						25.0						$42						25.3

In the third quarter 2022, taxes other than income taxes were $45 million compared to $36 million for the corresponding period in 2021. For year-to-date 2022, taxes other than income taxes were $208 million compared to $166 million for the corresponding period in 2021. The increases primarily reflect an increase in revenue tax expenses as a result of higher natural gas revenues and an increase in invested capital tax expense at Nicor Gas. Revenue tax expenses are passed through directly to customers and have no impact on net income.

Gain on Dispositions, Net

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$(121)						(100.0)						$(122)						(96.1)

The sale of Sequent in the third quarter 2021 resulted in a gain on dispositions, net of $121 million. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Earnings from Equity Method Investments

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$9

36.0

$91

N/M

In the third quarter 2022, earnings from equity method investments were $34 million compared to $25 million for the corresponding period in 2021. The increase was primarily due to higher earnings at SNG resulting from higher revenues primarily due to increased demand.

For year-to-date 2022, earnings from equity method investments were $105 million compared to $14 million for the corresponding period in 2021. The increase was primarily due to pre-tax impairment charges totaling $84 million in 2021 related to the PennEast Pipeline project and higher earnings at SNG resulting from higher revenues primarily due to increased demand.

See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements herein under "Southern Company Gas" for additional information.

Other Income (Expense), Net

Third Quarter 2022 vs. Third Quarter 2021

Year-To-Date 2022 vs. Year-To-Date 2021

(change in millions)

(% change)

(change in millions)

(% change)

$2

15.4

$113

N/M

For year-to-date 2022, other income (expense), net was $47 million of income compared to $66 million of expense for the corresponding period in 2021. The change was largely due to charitable contributions totaling $101 million during the first and second quarters of 2021 and an increase of $12 million at gas distribution operations primarily related to an increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.

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Income Taxes

Third Quarter 2022 vs. Third Quarter 2021												Year-To-Date 2022 vs. Year-To-Date 2021
(change in millions)						(% change)						(change in millions)						(% change)
$(106)						(79.7)						$(63)						(28.1)

In the third quarter 2022, income taxes were $27 million compared to $133 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $161 million compared to $224 million for the corresponding period in 2021. The decreases were primarily the result of $113 million in additional tax expense in the third quarter 2021 as a result of the sale of Sequent. Partially offsetting the third quarter 2022 decrease was an increase of $9 million in income tax expense at gas distribution operations primarily as a result of higher pre-tax earnings. The year-to-date 2022 decrease was partially offset by increases in income tax expense of $25 million at gas distribution operations primarily as a result of higher pre-tax earnings and $20 million at gas pipeline investments primarily from $18 million of tax benefits resulting from the impairment charge in the second quarter 2021 related to the PennEast Pipeline project. See Notes 7 and 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Segment Information

Operating revenues, operating expenses, and net income (loss) for each segment are provided in the table below. See Note (L) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.

			2022																		2021
			Operating Revenues						Operating Expenses						Net Income (Loss)						Operating Revenues						Operating Expenses						Net Income (Loss)
			(in millions)																		(in millions)
Third Quarter
Gas distribution operations			$	751					$	629					$	59					$	556					$	459					$	45
Gas pipeline investments			8						3						24						8						3						10
Wholesale gas services(*)			—						—						—						—						(120)						94
Gas marketing services			85						87						(2)						52						52						(2)
All other			16						12						2						11						25						(91)
Intercompany eliminations			(3)						—						—						(4)						(4)						—
Consolidated			$	857					$	731					$	83					$	623					$	415					$	56
Year-to-Date
Gas distribution operations			$	3,533					$	2,922					$	365					$	2,466					$	1,936					$	308
Gas pipeline investments			24						8						76						24						9						3
Wholesale gas services(*)			—						—						—						188						(53)						108
Gas marketing services			420						327						65						311						226						60
All other			43						48						10						29						60						(90)
Intercompany eliminations			(22)						(19)						—						(24)						(24)						—
Consolidated			$	3,998					$	3,286					$	516					$	2,994					$	2,154					$	389

(*)As a result of the sale of Sequent, wholesale gas services is no longer a reportable segment for the third quarter and year-to-date 2022. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Gas Distribution Operations

Gas distribution operations is the largest component of Southern Company Gas' business and is subject to regulation and oversight by regulatory agencies in each of the states it serves. These agencies approve natural gas rates designed to provide Southern Company Gas with the opportunity to generate revenues to recover the cost of natural

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gas delivered to its customers and its fixed and variable costs, including depreciation, interest expense, operations and maintenance, taxes, and overhead costs, and to earn a reasonable return on its investments.

With the exception of Atlanta Gas Light, Southern Company Gas' second largest utility that operates in a deregulated natural gas market and has a straight-fixed-variable rate design that minimizes the variability of its revenues based on consumption, the earnings of the natural gas distribution utilities can be affected by customer consumption patterns that are a function of weather conditions, price levels for natural gas, and general economic conditions that may impact customers' ability to pay for natural gas consumed. Southern Company Gas has various regulatory and other mechanisms, such as weather and revenue normalization mechanisms and weather derivative instruments, that limit its exposure to changes in customer consumption, including weather changes within typical ranges in its natural gas distribution utilities' service territories. See Note 2 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

In the third quarter and year-to-date 2022, net income increased $14 million, or 31.1%, and $57 million, or 18.5%, respectively, when compared to the corresponding periods in 2021, as described further below:

•Operating revenues increased $195 million and $1.07 billion, respectively, when compared to the corresponding periods in 2021 primarily due to higher gas cost recovery, rate increases, and continued investment in infrastructure replacement. Gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas.

•Operating expenses increased $170 million and $986 million, respectively, when compared to the corresponding periods in 2021 primarily due to increases of $129 million and $802 million, respectively, in the cost of gas as a result of higher natural gas prices compared to 2021, higher compensation and benefit expenses, and higher depreciation resulting from additional assets placed in service. The increase in operating expenses also includes higher costs passed through directly to customers, primarily related to bad debt expenses and revenue taxes.

•Other income and (expense) increased $3 million and $12 million, respectively, when compared to the corresponding periods in 2021, primarily due to an increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.

•Interest expense, net of amounts capitalized increased $5 million and $11 million, respectively, when compared to the corresponding periods in 2021 primarily due to additional debt issued to finance continued investments. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.

•Income taxes increased $9 million and $25 million, respectively, when compared to the corresponding periods in 2021 primarily due to higher pre-tax earnings.

Gas Pipeline Investments

Gas pipeline investments consists primarily of joint ventures in natural gas pipeline investments including SNG, Dalton Pipeline, and PennEast Pipeline. See Note (E) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.

In the third quarter 2022, net income increased $14 million when compared to the corresponding period in 2021 primarily due to higher earnings at SNG resulting from higher revenues primarily due to increased demand and lower income taxes related to the PennEast Pipeline project.

For year-to-date 2022, net income increased $73 million when compared to the corresponding period in 2021 primarily due to pre-tax impairment charges totaling $84 million ($67 million after tax) in 2021 related to the equity method investment in the PennEast Pipeline project and higher earnings at SNG resulting from higher revenues primarily due to increased demand. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

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Gas Marketing Services

Gas marketing services provides energy-related products and services to natural gas markets and participants in customer choice programs that were approved in various states to increase competition. These programs allow customers to choose their natural gas supplier while the local distribution utility continues to provide distribution and transportation services. Gas marketing services is weather sensitive and uses a variety of hedging strategies, such as weather derivative instruments and other risk management tools, to partially mitigate potential weather impacts.

In the third quarter 2022, net income was flat when compared to the corresponding period in 2021 primarily due to an increase of $35 million in operating expenses primarily due to higher cost of gas, largely offset by a related increase of $33 million in operating revenues.

For year-to-date 2022, net income increased $5 million, or 8.3%, when compared to the corresponding period in 2021 primarily due to a $109 million increase in operating revenues as a result of higher commodity prices and higher sales to commercial customers, partially offset by a $101 million increase in operating expenses primarily due to $95 million in higher cost of natural gas and an increase of $4 million in income taxes as a result of higher pre-tax earnings.

All Other

All other includes natural gas storage businesses, a renewable natural gas business, AGL Services Company, and Southern Company Gas Capital, as well as various corporate operating expenses that are not allocated to the reportable segments and interest income (expense) associated with affiliate financing arrangements. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for information regarding agreements by certain affiliates of Southern Company Gas to sell two natural gas storage facilities.

In the third quarter 2022, net income increased $93 million when compared to the corresponding period in 2021. The change primarily relates to additional tax expense as a result of the sale of Sequent in 2021 and a decrease of $13 million in operating expenses related to lower depreciation in 2022 and transaction costs in 2021 related to the sale of Sequent.

For year-to-date 2022, net income increased $100 million when compared to the corresponding period in 2021. The change primarily relates to additional tax expense as a result of the sale of Sequent in 2021 and an increase in operating revenues of $14 million primarily related to higher demand fees and favorable hedge gains at the natural gas storage businesses, higher sales from the renewable natural gas business, and lower depreciation in 2022.

FUTURE EARNINGS POTENTIAL

Each Registrant's results of operations are not necessarily indicative of its future earnings potential. The level of the Registrants' future earnings depends on numerous factors that affect the opportunities, challenges, and risks of the Registrants' primary businesses of selling electricity and/or distributing natural gas, as described further herein.

For the traditional electric operating companies, these factors include the ability to maintain constructive regulatory environments that allow for the timely recovery of prudently-incurred costs during a time of increasing costs, including those related to projected long-term demand growth, stringent environmental standards, including CCR rules, safety, system reliability and resiliency, fuel, restoration following major storms, and capital expenditures, including constructing new electric generating plants and expanding and improving the transmission and distribution systems; continued customer growth; and the trends of higher inflation and reduced electricity usage per customer, especially in residential and commercial markets. For Georgia Power, completing construction of Plant Vogtle Units 3 and 4 and the related cost recovery proceedings is another major factor.

Earnings in the electricity business will also depend upon maintaining and growing sales, considering, among other things, the adoption and/or penetration rates of increasingly energy-efficient technologies and increasing volumes of electronic commerce transactions, which could contribute to a net reduction in customer usage.

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Global and U.S. economic conditions have been significantly affected by a series of demand and supply shocks that caused a global and national economic recession in 2020. The drivers, speed, and depth of the 2020 economic contraction were unprecedented and continue to reduce energy demand across the Southern Company system's service territory, primarily in the commercial class. Retail electric revenues attributable to changes in sales increased in the first nine months of 2022 when compared to the corresponding period in 2021 primarily due to the normalization of economic activity; however, total retail electric sales for the Southern Company system continued to be negatively impacted by the COVID-19 pandemic when compared to pre-pandemic trends. Most prominently, the COVID-19 pandemic has negatively impacted global supply chains and business operations as suppliers continue to experience difficulties keeping up with strong demand for factory goods, which is being driven by low business inventories. In addition, rising inflation in 2021 and 2022 has resulted in increasing costs for many goods and services. As a result of persistently high inflation, interest rates have been on the rise and are expected to continue rising in the near term, which has impacted, and may continue to impact, the Registrants' borrowing costs. Based on these factors, the probability of the U.S. economy falling into a recession has heightened. The impacts of new COVID-19 variants, responses to the COVID-19 pandemic by both customers and governments, ongoing geopolitical threats, such as the escalation of the Russia-Ukraine war, and the potential of future COVID-19-related lockdowns in Asia or elsewhere could further disrupt global supply chains and increase the severity of a possible economic downturn in the Southern Company system's service territory. See RESULTS OF OPERATIONS herein for information on COVID-19-related impacts on energy demand in the Southern Company system's service territory during the first nine months of 2022.

The level of future earnings for Southern Power's competitive wholesale electric business depends on numerous factors including the parameters of the wholesale market and the efficient operation of its wholesale generating assets; Southern Power's ability to execute its growth strategy through the development or acquisition of renewable facilities and other energy projects while containing costs; regulatory matters; customer creditworthiness; total electric generating capacity available in Southern Power's market areas; Southern Power's ability to successfully remarket capacity as current contracts expire; renewable portfolio standards; availability of federal and state ITCs and PTCs, which could be impacted by future tax legislation; transmission constraints; cost of generation from units within the Southern Company power pool; and operational limitations. See "Income Tax Matters" herein for additional information on recent tax legislation expanding the availability of federal ITCs and PTCs.

The level of future earnings for Southern Company Gas' primary business of distributing natural gas and its complementary businesses in the gas pipeline investments and gas marketing services sectors depends on numerous factors. These factors include the natural gas distribution utilities' ability to maintain constructive regulatory environments that allow for the timely recovery of prudently-incurred costs, including those related to projected long-term demand growth, safety, system reliability and resiliency, natural gas, and capital expenditures, including expanding and improving the natural gas distribution systems; the completion and subsequent operation of ongoing infrastructure and other construction projects; customer creditworthiness; and certain policies to limit the use of natural gas, such as the potential across certain parts of the U.S. for state or municipal bans on the use of natural gas. The volatility of natural gas prices has an impact on Southern Company Gas' customer rates, its long-term competitive position against other energy sources, and the ability of Southern Company Gas' gas marketing services business to capture value from locational and seasonal spreads. Additionally, changes in commodity prices, primarily driven by tight gas supplies, geopolitical events, and diminished gas production, subject a portion of Southern Company Gas' operations to earnings variability and have recently resulted in higher natural gas prices. Additional economic factors may contribute to this environment. The demand for natural gas may increase, which may cause natural gas prices to rise and drive higher volatility in the natural gas markets on a longer-term basis. Alternatively, a significant drop in oil and natural gas prices could lead to a consolidation of natural gas producers or reduced levels of natural gas production.

Earnings for both the electricity and natural gas businesses are subject to a variety of other factors. These factors include weather; competition; developing new and maintaining existing energy contracts and associated load requirements with wholesale customers; energy conservation practiced by customers; the use of alternative energy sources by customers; government incentives to reduce overall energy usage; the prices of electricity and natural

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gas; costs and availability of labor and materials in a time of rising costs, impacted by heightened inflation caused by unprecedented shocks to the broader economy, and supply chain disruptions; and the price elasticity of demand. Demand for electricity and natural gas in the Registrants' service territories is primarily driven by the pace of economic growth or decline that may be affected by changes in regional and global economic conditions, which may impact future earnings.

As part of its ongoing effort to adapt to changing market conditions, Southern Company continues to evaluate and consider a wide array of potential business strategies. These strategies may include business combinations, partnerships, and acquisitions involving other utility or non-utility businesses or properties, disposition of, or the sale of interests in, certain assets or businesses, internal restructuring, or some combination thereof. Furthermore, Southern Company may engage in new business ventures that arise from competitive and regulatory changes in the utility industry. Pursuit of any of the above strategies, or any combination thereof, may significantly affect the business operations, risks, and financial condition of Southern Company. In addition, Southern Power and Southern Company Gas regularly consider and evaluate joint development arrangements as well as acquisitions and dispositions of businesses and assets as part of their business strategies. See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein for additional information.

For additional information relating to these issues, see RISK FACTORS in Item 1A and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL in Item 7 of the Form 10-K.

Environmental Matters

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" in Item 7 and Note 3 to the financial statements under "Environmental Remediation" in Item 8 of the Form 10-K, as well as Note (C) to the Condensed Financial Statements under "General Litigation Matters" and "Environmental Remediation" herein, for additional information.

Environmental Laws and Regulations

Air Quality

On August 30, 2022, the EPA found that 15 states, including Alabama and Mississippi, failed to submit regional haze state implementation plans for the second 10-year planning period (2018 through 2028) by July 31, 2021. The finding of failure to submit establishes a two-year deadline for the EPA to promulgate a Federal Implementation Plan (FIP) to address these requirements for each applicable state unless, before the EPA promulgates a FIP, the state submits, and the EPA approves, a state implementation plan that meets the requirements. The ultimate outcome of this matter, including any potential impacts to Alabama Power, Mississippi Power, and Southern Power, cannot be determined at this time.

Global Climate Issues

On June 30, 2022, the U.S. Supreme Court issued an opinion limiting the EPA's authority to regulate greenhouse gas emissions under the Clean Air Act. The Court's review in the case focused on whether the EPA's authority under the Clean Air Act allows the EPA to regulate the electric industry in a manner as broad as the Clean Power Plan (CPP), which was repealed and replaced by the Affordable Clean Energy rule (ACE Rule). The Court held that the generation shifting to lower carbon emitting sources approach in the CPP is not authorized by the Clean Air Act. However, the Court did not decide whether the EPA may adopt measures only applied at the individual electric generating source, which is the basis for the ACE Rule. The EPA has announced its intent to propose a rule for existing power plants pursuant to the Clean Air Act by March 2023. The ultimate impact of the Court's decision cannot be determined at this time.

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Regulatory Matters

See Note 2 to the financial statements in Item 8 of the Form 10-K, OVERVIEW – "Recent Developments" herein, and Note (B) to the Condensed Financial Statements herein for a discussion of regulatory matters related to Alabama Power, Georgia Power, Mississippi Power, and Southern Company Gas, including items that could impact the applicable Registrants' future earnings, cash flows, and/or financial condition.

Alabama Power

On September 23, 2022, the FERC authorized Alabama Power to use updated depreciation rates from its 2021 depreciation study effective January 1, 2023. The study was also provided to the Alabama PSC, and the new depreciation rates will be reflected in Alabama Power's future rate filings. The updated depreciation rates are expected to result in an approximately $500 million increase in annual depreciation expense. See Notes 2 and 5 to the financial statements under "Alabama Power" and "Depreciation and Amortization," respectively, in Item 8 of the Form 10-K for additional information.

Construction Programs

The Subsidiary Registrants are engaged in continuous construction programs to accommodate existing and estimated future loads on their respective systems. The Southern Company system strategy continues to include developing and constructing new electric generating facilities, expanding and improving the electric transmission and electric and natural gas distribution systems, and undertaking projects to comply with environmental laws and regulations.

For the traditional electric operating companies, major generation construction projects are subject to state PSC approval in order to be included in retail rates. The largest construction project currently underway in the Southern Company system is Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information. Also see Note 2 to the financial statements under "Alabama Power – Certificates of Convenience and Necessity" in Item 8 of the Form 10-K for information regarding Alabama Power's construction of Plant Barry Unit 8.

See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein under "Southern Power" for information about costs relating to Southern Power's construction of renewable energy facilities.

Southern Company Gas is engaged in various infrastructure improvement programs designed to update or expand the natural gas distribution systems of the natural gas distribution utilities to improve reliability, reduce emissions, and meet operational flexibility and growth. The natural gas distribution utilities recover their investment and a return associated with these infrastructure programs through their regulated rates. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Southern Company Gas" for additional information on Southern Company Gas' construction program.

See FINANCIAL CONDITION AND LIQUIDITY – "Cash Requirements" herein for additional information regarding the Registrants' capital requirements for their construction programs.

Income Tax Matters

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Income Tax Matters" in Item 7 of the Form 10-K for additional information.

On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law. The IRA extends, expands, and increases ITCs and PTCs for clean energy projects, allows PTCs for solar projects, adds ITCs for stand-alone energy storage projects with an option to elect out of the tax normalization requirement, and allows for the transferability of the tax credits. The IRA extends and increases the tax credits for carbon capture and sequestration projects and adds tax credits for clean hydrogen and nuclear projects. Additional ITC and PTC amounts are available if the projects meet domestic content requirements or are located in low-income or energy communities.

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The IRA also enacted a 15% corporate minimum tax on book income, with some adjustments including adjustments for pension and tax depreciation. The 15% corporate minimum tax on book income can be reduced by energy tax credits.

For solar projects placed in service in 2022 through 2032, the IRA provides for a 30% ITC and an option to claim a PTC instead of an ITC. Starting in 2023 and through 2032, the IRA provides for a 30% ITC for stand-alone energy storage projects. For wind projects placed in service in 2022 through 2032, the IRA provides for a 100% PTC. The PTC rate for 2022 is 2.6 cents per KWH and will be adjusted for inflation annually. The same PTC rate applies for solar projects for which the PTC option has been elected. To realize the full value of ITCs and PTCs, the IRA requires satisfaction of prevailing wage and apprenticeship requirements.

Implementation of the IRA provisions is subject to the issuance of additional guidance by the U.S. Treasury Department, and the ultimate impacts cannot be determined at this time; however, the IRA is not expected to have a material impact on the Registrants' financial statements for the year ending December 31, 2022.

General Litigation and Other Matters

The Registrants are involved in various matters being litigated and/or regulatory and other matters that could affect future earnings, cash flows, and/or financial condition. The ultimate outcome of such pending or potential litigation against each Registrant and any subsidiaries or regulatory and other matters cannot be determined at this time; however, for current proceedings and/or matters not specifically reported herein or in Notes (B) and (C) to the Condensed Financial Statements herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings and/or matters would have a material effect on such Registrant's financial statements. See Notes (B) and (C) to the Condensed Financial Statements for a discussion of various contingencies, including matters being litigated, regulatory matters, and other matters which may affect future earnings potential.

ACCOUNTING POLICIES

See MANAGEMENT'S DISCUSSION AND ANALYSIS – ACCOUNTING POLICIES in Item 7 of the Form 10-K for a complete discussion of the Registrants' critical accounting policies and estimates, as well as recently issued accounting standards.

Application of Critical Accounting Policies and Estimates

The Registrants prepare their financial statements in accordance with GAAP. Significant accounting policies are described in the notes to the financial statements in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on the Registrants' results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements.

Estimated Cost, Schedule, and Rate Recovery for the Construction of Plant Vogtle Units 3 and 4

(Southern Company and Georgia Power)

As of September 30, 2022, Georgia Power revised its total project capital cost forecast to $10.4 billion (net of $1.7 billion received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). This forecast includes construction contingency of $49 million and is based on projected in-service dates at the end of the first quarter 2023 and the fourth quarter 2023 for Units 3 and 4, respectively.

The projected schedule for Unit 3 primarily depends on the pace of system and area transitions to operations, including the completion of closure documentation necessary to support start-up testing, and the progression of start-up, final component, and pre-operational testing, which may be impacted by equipment or other operational failures. The projected schedule for Unit 4 primarily depends on Unit 3 progress through start-up and testing; overall construction productivity and production levels improving, particularly in electrical installation, including terminations; and appropriate levels of craft laborers, particularly electricians, being added and maintained. Any further delays could result in later in-service dates and cost increases.

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During the first nine months of 2022, established construction contingency totaling $170 million was assigned to the base capital cost forecast for costs primarily associated with construction productivity, the pace of system turnovers, additional craft and support resources, and procurement for Units 3 and 4. Georgia Power also increased its total project capital cost forecast and recorded pre-tax charges of $36 million ($27 million after tax) and $32 million ($24 million after tax) to replenish construction contingency in the second quarter 2022 and the third quarter 2022, respectively.

Georgia Power and the other Vogtle Owners do not agree on either the starting dollar amount for the determination of cost increases subject to the cost-sharing and tender provisions of the Global Amendments (as defined in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Joint Owner Contracts" herein) or the extent to which COVID-19-related costs impact those provisions. In October 2021, Georgia Power and the other Vogtle Owners entered into an agreement, which was modified on June 3, 2022, to clarify the process for the tender provisions of the Global Amendments to provide for a decision between 120 and 194 days after the tender option is triggered, which the other Vogtle Owners assert occurred on February 14, 2022. On June 17, 2022 and July 26, 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options. On September 29, 2022, Georgia Power and MEAG Power reached an agreement to resolve their dispute regarding the proper interpretation of the cost-sharing and tender provisions of the Global Amendments. Under the terms of the agreement, among other items, (i) MEAG Power will not exercise its tender option and will retain its full ownership interest in Plant Vogtle Units 3 and 4; (ii) Georgia Power will pay a portion of MEAG Power's costs of construction for Plant Vogtle Units 3 and 4 as such costs are incurred and with no further adjustment for force majeure costs, which payments will total approximately $79 million based on the current project capital cost forecast; and (iii) Georgia Power will pay 20% of MEAG Power's costs of construction with respect to any amounts over the current project capital cost forecast, with no further adjustment for force majeure costs.

Georgia Power recorded additional pre-tax charges (credits) to income in the second quarter 2022 and the third quarter 2022 of approximately $16 million ($12 million after tax) and $(102) million ($(76) million after tax), respectively, associated with the cost-sharing and tender provisions of the Global Amendments, including the settlement with MEAG Power, which are included in the total project capital cost forecast. The settlement with MEAG Power does not resolve the separate pending litigation with OPC, including Dalton's associated complaint, regarding the cost-sharing and tender provisions of the Global Amendments described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Joint Owner Contracts" herein. Georgia Power may be required to record further pre-tax charges to income of up to approximately $300 million associated with these provisions for OPC and Dalton based on the current project capital cost forecast.

The ultimate outcome of these matters cannot be determined at this time. However, any extension of the in-service date beyond the first quarter 2023 for Unit 3 or the fourth quarter 2023 for Unit 4, including the current level of cost sharing described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein, is estimated to result in additional base capital costs for Georgia Power of up to $15 million per month for Unit 3 and $35 million per month for Unit 4, as well as the related AFUDC and any additional related construction, support resources, or testing costs. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Georgia Power – Nuclear Construction" for additional information.

FINANCIAL CONDITION AND LIQUIDITY

Overview

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Overview" in Item 7 of the Form 10-K for additional information. The financial condition of each Registrant remained stable at September 30, 2022. The Registrants intend to continue to monitor their access to short-term and long-term capital markets as well as their bank credit arrangements to meet future capital and liquidity needs. See "Cash Requirements," "Sources of Capital," and "Financing Activities" herein for additional information.

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At the end of the third quarter 2022, the market price of Southern Company's common stock was $68.00 per share (based on the closing price as reported on the NYSE) and the book value was $28.69 per share, representing a market-to-book ratio of 237%, compared to $68.58, $26.30, and 261%, respectively, at the end of 2021. Southern Company's common stock dividend for the third quarter 2022 was $0.68 per share compared to $0.66 per share in the third quarter 2021.

Cash Requirements

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Cash Requirements" in Item 7 of the Form 10-K for a description of the Registrants' significant cash requirements.

The Registrants' significant cash requirements include estimated capital expenditures associated with their construction programs and, for the traditional electric operating companies, operating cash flows related to fuel cost under recovery. The fuel cost under recovery balances are primarily the result of higher than forecasted prices for natural gas and purchased power.

The construction programs are subject to periodic review and revision, and actual construction costs may vary from these estimates because of numerous factors. These factors include: changes in business conditions; changes in load projections; changes in environmental laws and regulations; the outcome of any legal challenges to environmental rules; changes in electric generating plants, including unit retirements and replacements and adding or changing fuel sources at existing electric generating units, to meet regulatory requirements; changes in FERC rules and regulations; state regulatory agency approvals; changes in the expected environmental compliance program; changes in legislation and/or regulation; the cost, availability, and efficiency of construction labor, equipment, and materials; project scope and design changes; abnormal weather; delays in construction due to judicial or regulatory action; storm impacts; and the cost of capital. The continued impacts of the COVID-19 pandemic could also impair the ability to develop, construct, and operate facilities, as discussed further in Item 1A of the Form 10-K. In addition, there can be no assurance that costs related to capital expenditures and AROs will be fully recovered. Additionally, expenditures associated with Southern Power's planned acquisitions may vary due to market opportunities and the execution of its growth strategy. See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein under "Southern Power" for additional information regarding Southern Power's plant acquisitions and construction projects.

The construction program of Georgia Power includes Plant Vogtle Units 3 and 4, which includes components based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale and which may be subject to additional revised cost estimates during construction. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Georgia Power – Nuclear Construction" for information regarding Plant Vogtle Units 3 and 4 and additional factors that may impact construction expenditures.

Long-term debt maturities and the interest payable on long-term debt each represent a significant cash requirement for the Registrants. See "Financing Activities" herein for information on changes in the Registrants' long-term debt balances since December 31, 2021.

Sources of Capital

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" in Item 7 of the Form 10-K for additional information. Southern Company intends to meet its future capital needs through operating cash flows, borrowings from financial institutions, and debt and equity issuances. Equity capital can be provided from any combination of Southern Company's stock plans, private placements, or public offerings. Southern Company does not expect to issue any equity in the capital markets through 2026, but may issue equity through its stock plans during this time.

The Subsidiary Registrants plan to obtain the funds to meet their future capital needs from sources similar to those they used in the past, which were primarily from operating cash flows, external securities issuances, borrowings from financial institutions, and equity contributions from Southern Company. Operating cash flows provide a

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substantial portion of the Registrants' cash needs. During the nine months ended September 30, 2022, Southern Power utilized tax credits, which provided $218 million in operating cash flows. In addition, Southern Power plans to utilize tax equity partnership contributions (as discussed further herein). Georgia Power intends to utilize short-term floating rate bank loans and commercial paper issuances to fund operating cash flows related to fuel cost under recovery. Subsequent to September 30, 2022, Georgia Power borrowed $250 million pursuant to a short-term uncommitted bank credit arrangement and intends to borrow up to an additional $1.2 billion pursuant to a short-term floating rate bank loan in November 2022.

The amount, type, and timing of any financings in 2022, as well as in subsequent years, will be contingent on investment opportunities and the Registrants' capital requirements and will depend upon prevailing market conditions, regulatory approvals (for certain of the Subsidiary Registrants), and other factors. See "Cash Requirements" and "Financing Activities" herein for additional information.

Southern Power utilizes tax equity partnerships as one of its financing sources, where the tax partner takes significantly all of the federal tax benefits. These tax equity partnerships are consolidated in Southern Power's financial statements and are accounted for using HLBV methodology to allocate partnership gains and losses. During the nine months ended September 30, 2022, Southern Power obtained tax equity funding for existing tax equity partnerships totaling $51 million. See Note 1 to the financial statements under "General" in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

By regulation, Nicor Gas is restricted, to the extent of its retained earnings balance, in the amount it can dividend or loan to affiliates and is not permitted to make money pool loans to affiliates. At September 30, 2022, the amount of subsidiary retained earnings restricted to dividend totaled $1.4 billion. This restriction did not impact Southern Company Gas' ability to meet its cash obligations, nor does management expect such restriction to materially impact Southern Company Gas' ability to meet its currently anticipated cash obligations.

Certain Registrants' current liabilities frequently exceed their current assets because of long-term debt maturities and the periodic use of short-term debt as a funding source, as well as significant seasonal fluctuations in cash needs. The Registrants generally plan to refinance long-term debt as it matures. The following table shows the amount by which current liabilities exceeded current assets at September 30, 2022 for the applicable Registrants:

At September 30, 2022			Southern Company						Georgia Power			Mississippi Power			Southern Power
			(in millions)
Current liabilities in excess of current assets			$	2,438					$	2,442		$	18		$	325

The Registrants believe the need for working capital can be adequately met by utilizing operating cash flows, as well as commercial paper, lines of credit, and short-term bank notes, as market conditions permit. In addition, under certain circumstances, the Subsidiary Registrants may utilize equity contributions and/or loans from Southern Company.

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Bank Credit Arrangements

At September 30, 2022, the Registrants' unused committed credit arrangements with banks were as follows:

At September 30, 2022			Southern Company parent			Alabama Power			Georgia Power			Mississippi Power			Southern  Power(a)			Southern Company Gas(b)			SEGCO			Southern Company
			(in millions)
Unused committed credit			$	1,998		$	1,250		$	1,726		$	275		$	569		$	1,748		$	30		$	7,596

(a)At September 30, 2022, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $16 million was unused. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.

(b)Includes $798 million and $950 million at Southern Company Gas Capital and Nicor Gas, respectively.

Subject to applicable market conditions, the Registrants, Nicor Gas, and SEGCO expect to renew or replace their bank credit arrangements as needed, prior to expiration. In connection therewith, the Registrants, Nicor Gas, and SEGCO may extend the maturity dates and/or increase or decrease the lending commitments thereunder.

A portion of the unused credit with banks is allocated to provide liquidity support to the revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants, Nicor Gas, and SEGCO. The amount of variable rate revenue bonds of the traditional electric operating companies outstanding requiring liquidity support at September 30, 2022 was approximately $1.4 billion (comprised of approximately $789 million at Alabama Power, $619 million at Georgia Power, and $34 million at Mississippi Power). In addition, at September 30, 2022, Georgia Power had approximately $288 million of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.

See Note 8 to the financial statements in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein under "Bank Credit Arrangements" for additional information.

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Short-term Borrowings

The Registrants, Nicor Gas, and SEGCO make short-term borrowings primarily through commercial paper programs that have the liquidity support of the committed bank credit arrangements described above. Southern Power's subsidiaries are not issuers or obligors under its commercial paper program. Commercial paper and short-term bank term loans are included in notes payable in the balance sheets. Details of the Registrants' short-term borrowings were as follows:

			Short-term Debt at September 30, 2022												Short-term Debt During the Period(*)
			Amount Outstanding						Weighted Average Interest Rate						Average Amount Outstanding						Weighted Average Interest Rate						Maximum Amount Outstanding
			(in millions)												(in millions)												(in millions)
Southern Company			$	1,398					3.5		%				$	1,859					2.5		%				$	2,809
Alabama Power			—						—						—						—						—
Georgia Power			814						3.4						443						2.7						815
Mississippi Power			—						—						3						2.1						23
Southern Power			208						3.6						199						2.5						306
Southern Company Gas:
Southern Company Gas Capital			$	35					3.4		%				$	347					2.5		%				$	547
Nicor Gas			325						3.5						218						2.7						330
Southern Company Gas Total			$	360					3.5		%				$	565					2.6		%

(*)Average and maximum amounts are based upon daily balances during the three-month period ended September 30, 2022.

Analysis of Cash Flows

Net cash flows provided from (used for) operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 are presented in the following table:

Net cash provided from (used for):			Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas
			(in millions)
Nine Months Ended September 30, 2022
Operating activities			$	5,017		$	1,072		$	1,482		$	279		$	827		$	1,532
Investing activities			(5,952)			(1,641)			(2,653)			(219)			(128)			(1,239)
Financing activities			1,119			967			1,171			(72)			(603)			(313)
Nine Months Ended September 30, 2021
Operating activities			$	5,081		$	1,419		$	2,350		$	159		$	750		$	757
Investing activities			(5,850)			(1,335)			(2,572)			(182)			(753)			(966)
Financing activities			1,802			56			505			130			33			222

Fluctuations in cash flows from financing activities vary from year to year based on capital needs and the maturity or redemption of securities.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Southern Company

Net cash provided from operating activities decreased $64 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to decreased fuel cost recovery at the traditional electric operating companies and the timing of customer receivable collections, largely offset by the timing of vendor payments and increased natural gas cost recovery at the natural gas distribution utilities.

The net cash used for investing activities for the nine months ended September 30, 2022 was primarily related to the Subsidiary Registrants' construction programs.

The net cash provided from financing activities for the nine months ended September 30, 2022 was primarily related to net issuances of long-term debt and the issuance of common stock to settle the purchase contracts entered into as part of the 2019 Series A Equity Units (Equity Units) (as discussed in Note (F) to the Condensed Financial Statements under "Equity Units" herein), partially offset by common stock dividend payments.

Alabama Power

Net cash provided from operating activities decreased $347 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to decreased fuel cost recovery, the timing of customer receivable collections, and fossil fuel stock purchases, partially offset by the timing of vendor payments.

The net cash used for investing activities for the nine months ended September 30, 2022 was primarily related to gross property additions, including approximately $182 million related to the construction of Plant Barry Unit 8 and $171 million related to the acquisition of the Calhoun Generating Station. See Notes (B) and (K) to the Condensed Financial Statements under "Alabama Power" herein for additional information.

The net cash provided from financing activities for the nine months ended September 30, 2022 was primarily related to the net issuance of long-term debt and capital contributions from Southern Company, partially offset by common stock dividend payments.

Georgia Power

Net cash provided from operating activities decreased $868 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to decreased fuel cost recovery and the timing of customer receivable collections and fossil fuel stock purchases, partially offset by the timing of vendor payments.

The net cash used for investing activities for the nine months ended September 30, 2022 was primarily related to gross property additions, including a total of approximately $820 million related to the construction of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on construction of Plant Vogtle Units 3 and 4.

The net cash provided from financing activities for the nine months ended September 30, 2022 was primarily related to net issuances of senior notes, a net increase in short-term borrowings, and capital contributions from Southern Company, partially offset by common stock dividend payments.

Mississippi Power

Net cash provided from operating activities increased $120 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to the timing of vendor payments, partially offset by the timing of customer receivable collections.

The net cash used for investing activities for the nine months ended September 30, 2022 was primarily related to gross property additions.

The net cash used for financing activities for the nine months ended September 30, 2022 was primarily related to common stock dividend payments, partially offset by capital contributions from Southern Company.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Southern Power

Net cash provided from operating activities increased $77 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to an increase in wholesale revenues driven by higher market prices of energy and the timing of vendor payments, partially offset by the timing of customer receivable collections.

The net cash used for investing activities for the nine months ended September 30, 2022 was primarily related to construction payments. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

The net cash used for financing activities for the nine months ended September 30, 2022 was primarily related to the repayment of senior notes at maturity, common stock dividend payments, net capital distributions to noncontrolling interests, and a decrease in commercial paper borrowings, partially offset by a capital contribution from Southern Company.

Southern Company Gas

Net cash provided from operating activities increased $775 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to increased natural gas cost recovery and the timing of vendor payments, partially offset by an increase in natural gas for sale as a result of higher prices for natural gas purchases.

The net cash used for investing activities for the nine months ended September 30, 2022 was primarily related to construction of transportation and distribution assets recovered through base rates and infrastructure investment recovered through replacement programs at gas distribution operations.

The net cash used for financing activities for the nine months ended September 30, 2022 was primarily related to common stock dividend payments and net repayments of short-term debt, partially offset by net issuances of long-term debt and capital contributions from Southern Company.

Significant Balance Sheet Changes

Southern Company

Significant balance sheet changes for the nine months ended September 30, 2022 included:

•an increase of $3.2 billion in total stockholders' equity primarily related to net income and the issuance of common stock to settle the purchase contracts entered into as part of the Equity Units (as discussed in Note (F) to the Condensed Financial Statements under "Equity Units" herein), partially offset by common stock dividend payments;

•an increase of $2.4 billion in total property, plant, and equipment primarily related to the Subsidiary Registrants' construction programs, net of the reclassification of $0.6 billion to other regulatory assets and $0.4 billion to regulatory assets associated with AROs upon Georgia Power's retirement of Plant Wansley Units 1 and 2;

•an increase of $1.4 billion in long-term debt (including securities due within one year) related to new issuances;

•an increase of $1.3 billion in deferred under recovered fuel clause revenues due to higher fuel and purchased power costs at Georgia Power;

•an increase of $1.1 billion in accumulated deferred income taxes primarily related to the expected utilization of ITCs in 2022 and the increase in under recovered fuel clause revenues;

•an increase of $0.9 billion in accounts payable primarily related to the timing of vendor payments;

•an increase of $0.7 billion in regulatory assets associated with AROs, net of the reclassification from property, plant, and equipment discussed above, primarily due to a decrease of $0.5 billion in the fair value of the investments held in Alabama Power's and Georgia Power's nuclear decommissioning trusts; and

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

•an increase of $0.6 billion in other deferred credits and liabilities primarily due to changes in the fair value of interest rate and foreign currency derivatives.

See "Financing Activities" herein and Notes (B), (F), (G), (I), and (J) to the Condensed Financial Statements herein for additional information.

Alabama Power

Significant balance sheet changes for the nine months ended September 30, 2022 included:

•an increase of $1.2 billion in common stockholder's equity primarily due to capital contributions from Southern Company, partially offset by dividends paid to Southern Company;

•an increase of $1.1 billion in long-term debt (including securities due within one year) primarily due to net issuances of senior notes;

•an increase of $0.8 billion in total property, plant, and equipment primarily related to the construction of Plant Barry Unit 8, the acquisition of the Calhoun Generating Station, and construction of distribution and transmission facilities;

•an increase of $0.4 billion in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Alabama Power" herein; and

•an increase of $0.4 billion in regulatory assets associated with AROs primarily due to a decrease of $0.3 billion in the fair value of the investments held in Alabama Power's nuclear decommissioning trust.

See "Financing Activities – Alabama Power" herein and Notes (I) and (K) to the Condensed Financial Statements herein for additional information.

Georgia Power

Significant balance sheet changes for the nine months ended September 30, 2022 included:

•an increase of $1.4 billion in common stockholder's equity primarily due to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;

•an increase of $1.3 billion in deferred under recovered fuel clause revenues due to higher fuel and purchased power costs;

•an increase of $1.1 billion in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities, including $956 million for Plant Vogtle Units 3 and 4, net of $0.6 billion reclassified to other regulatory assets and $0.4 billion reclassified to regulatory assets associated with AROs due to the retirement of Plant Wansley Units 1 and 2 as approved in Georgia Power's 2022 IRP;

•an increase of $0.9 billion in long-term debt (including securities due within one year) primarily due to net issuances of senior notes;

•an increase of $0.8 billion in notes payable due to an increase in commercial paper and short-term bank debt;

•an increase of $0.6 billion in accumulated deferred income taxes primarily due to the increase in under recovered fuel clause revenues and the expected reduction in federal and state credit carryforward balances in 2022;

•an increase of $0.3 billion in regulatory assets associated with AROs, net of the reclassification from property, plant, and equipment discussed above, primarily due to a decrease in the fair value of the investments held in Georgia Power's nuclear decommissioning trust;

•an increase of $0.3 billion in other accounts payable due to the timing of vendor payments; and

•an increase of $0.3 billion in customer accounts receivable primarily due to higher customer usage and the timing of collections.

See "Financing Activities – Georgia Power" herein and Note (B) under "Georgia Power – Nuclear Construction" and " – Integrated Resource Plans" and Note (I) to the Condensed Financial Statements herein for additional information.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Mississippi Power

Significant balance sheet changes for the nine months ended September 30, 2022 included:

•an increase of $79 million in common stockholder's equity related to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company and

•an increase of $66 million in total property, plant, and equipment primarily related to the construction of transmission and distribution facilities.

Southern Power

Significant balance sheet changes for the nine months ended September 30, 2022 included:

•a decrease of $756 million in long-term debt (including securities due within one year) primarily due to the redemption of senior notes;

•a decrease of $289 million in total property, plant, and equipment primarily due to continued depreciation of assets;

•an increase of $282 million in common stockholder's equity primarily due to capital contributions from Southern Company and net income, partially offset by dividends paid to Southern Company and distributions to noncontrolling interests; and

•increases of $194 million in accrued taxes and $100 million in accumulated deferred income tax liabilities primarily related to the expected utilization of ITCs in 2022.

See "Financing Activities – Southern Power" herein and Note (G) to the Condensed Financial Statements herein for additional information.

Southern Company Gas

Significant balance sheet changes for the nine months ended September 30, 2022 included:

•a decrease of $849 million in notes payable due to repayments of short-term debt and commercial paper borrowings;

•an increase of $760 million in total property, plant, and equipment primarily related to the construction of transportation and distribution assets and additional infrastructure investment;

•an increase of $522 million in common stockholder's equity related to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;

•an increase of $459 million in long-term debt (including securities due with one year) due to issuances of senior notes and first mortgage bonds, partially offset by the repayment of medium-term notes and adjustments related to fair value hedges;

•a decrease of $313 million in total accounts receivable primarily relating to decreases of $166 million in customer accounts receivable and $156 million in unbilled revenues as a result of seasonality;

•an increase of $231 million in other accounts payable due to seasonality and the timing of vendor payments; and

•a decrease of $221 million in other regulatory assets, deferred primarily due to a $207 million reduction in natural gas cost under recovery.

See "Financing Activities – Southern Company Gas" herein and Note (B) to the Condensed Financial Statements herein for additional information.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Financing Activities

The following table outlines the Registrants' long-term debt financing activities for the first nine months of 2022:

			Issuances												Maturities and Redemptions
Company			Senior Notes						Other Long-Term Debt									Senior Notes			Revenue Bonds			Other Long-Term Debt(a)
			(in millions)
Alabama Power			$	1,700					$	—								$	550		$	—		$	1
Georgia Power			1,500						—									400			53			201
Southern Power			—						—									677			—			—
Southern Company Gas			500						100									—			—			46
Other			—						—									—			—			8
Elimination(b)			—						—									—			—			(4)
Southern Company			$	3,700					$	100								$	1,627		$	53		$	252

(a)Includes reductions in finance lease obligations resulting from cash payments under finance leases and, for Georgia Power, principal amortization payments totaling $66 million for FFB borrowings. See Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for additional information.

(b)Represents reductions in affiliate finance lease obligations at Georgia Power, which are eliminated in Southern Company's consolidated financial statements.

Except as otherwise described herein, the Registrants used the proceeds of debt issuances for their redemptions and maturities shown in the table above, to repay short-term indebtedness, and for general corporate purposes, including working capital. The Subsidiary Registrants also used the proceeds for their construction programs.

In addition to any financings that may be necessary to meet capital requirements and contractual obligations, the Registrants plan to continue, when economically feasible, a program to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit.

Southern Company

During the first nine months of 2022, Southern Company issued approximately 3.5 million shares of common stock primarily through employee equity compensation plans and received proceeds of approximately $78 million.

In May 2022, Southern Company remarketed its Series 2019A and Series 2019B Remarketable Junior Subordinated Notes pursuant to the terms of its 2019 Series A Equity Units (Equity Units). Southern Company did not receive any proceeds from the remarketing, which were used to purchase a portfolio of treasury securities maturing on July 28, 2022. On August 1, 2022, the proceeds from this portfolio were used to settle the purchase contracts entered into as part of the Equity Units and Southern Company issued approximately 25.2 million shares of common stock and received proceeds of $1.725 billion. See Note (F) to the Condensed Financial Statements herein under "Equity Units" for additional information.

In March 2022, Southern Company entered into a $400 million short-term floating rate bank loan bearing interest based on term SOFR, which it repaid in August 2022.

In May 2022, Southern Company borrowed $100 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a mutually agreed upon rate, which it repaid in August 2022.

Subsequent to September 30, 2022, Southern Company issued $500 million aggregate principal amount of Series 2022A 5.15% Senior Notes due October 6, 2025 and $500 million aggregate principal amount of Series 2022B 5.70% Senior Notes due October 15, 2032.

Alabama Power

In February 2022, Alabama Power redeemed all $550 million aggregate principal amount of its Series 2017A 2.45% Senior Notes due March 30, 2022.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

In March 2022, Alabama Power issued $700 million aggregate principal amount of Series 2022A 3.05% Senior Notes due March 15, 2032.

In June 2022, Alabama Power redeemed the following series of preferred stock: 4.20% Preferred Stock, Par Value $100 Per Share, 4.60% Preferred Stock, Par Value $100 Per Share, 4.92% Preferred Stock, Par Value $100 Per Share, 4.52% Preferred Stock, Par Value $100 Per Share, 4.64% Preferred Stock, Par Value $100 Per Share, and 4.72% Preferred Stock, Par Value $100 Per Share. The redemption price per share for each series of preferred stock equaled the redemption price per share provided in Note 8 to the financial statements under "Outstanding Classes of Capital Stock – Alabama Power" in Item 8 of the Form 10-K, plus accrued and unpaid dividends to the redemption date.

In August 2022, Alabama Power issued $550 million aggregate principal amount of Series 2022B 3.75% Senior Notes due September 1, 2027 and $450 million aggregate principal amount of Series 2022C 3.94% Senior Notes due September 1, 2032. An amount equal to the net proceeds of the Series 2022C Senior Notes will be allocated to finance or refinance, in whole or in part, one or more renewable energy projects and/or expenditures and programs related to enabling opportunities for diverse and small businesses/suppliers.

Subsequent to September 30, 2022, Alabama Power redeemed all of its 5.00% Class A Preferred Stock, Par Value $1 Per Share (Stated Capital $25 Per Share) at a redemption price of $25.00 per share plus accrued and unpaid dividends to the redemption date.

Georgia Power

In January 2022, Georgia Power redeemed all $400 million aggregate principal amount of its Series 2012B 2.85% Senior Notes due May 15, 2022.

In February 2022, Georgia Power borrowed $250 million pursuant to a short-term uncommitted bank credit arrangement, which it repaid in May 2022.

In each of March and April 2022, Georgia Power entered into a $200 million short-term floating rate bank loan bearing interest based on term SOFR.

In May 2022, Georgia Power issued $700 million aggregate principal amount of Series 2022A 4.70% Senior Notes due May 15, 2032 and $800 million aggregate principal amount of Series 2022B 5.125% Senior Notes due May 15, 2052. An amount equal to the net proceeds of the Series 2022B Senior Notes will be allocated to finance or refinance, in whole or in part, one or more renewable energy projects and/or expenditures and programs related to enabling opportunities for diverse and small businesses/suppliers.

In May 2022, Georgia Power repaid its $125 million long-term bank loan that was scheduled to mature in June 2022.

In July 2022, Georgia Power repaid at maturity $53 million aggregate principal amount of Development Authority of Floyd County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Hammond Project), First Series 2010.

Subsequent to September 30, 2022, Georgia Power borrowed $250 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a mutually agreed upon rate and payable on demand.

Mississippi Power

In June 2022, Mississippi Power repaid $20 million, which was borrowed in March 2022 under its $125 million revolving credit arrangement.

Southern Power

In June 2022, Southern Power repaid at maturity €600 million (approximately $677 million) aggregate principal amount of Series 2016A 1.00% Senior Notes.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Subsequent to September 30, 2022, Southern Power borrowed $100 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a mutually agreed upon rate and payable on demand.

Southern Company Gas

During the first quarter 2022, Nicor Gas repaid one of its three $100 million short-term floating rate bank loans entered into in March 2021. Nicor Gas also repaid $50 million of one of the other loans and increased the borrowing amount under the other loan to $150 million. In addition, both loans were renewed and amended to extend the maturity dates and change the interest rate provisions so the loans bear interest based on term SOFR.

During the second quarter 2022, Atlanta Gas Light repaid at maturity $46 million aggregate principal amount of medium-term notes with a weighted average interest rate of 8.63%.

In August 2022, Nicor Gas issued in a private placement $100 million aggregate principal amount of 2.21% Series First Mortgage Bonds due August 31, 2032.

In September 2022, Southern Company Gas Capital issued $500 million aggregate principal amount of Series 2022A 5.15% Senior Notes due September 15, 2032, guaranteed by Southern Company Gas.

Credit Rating Risk

At September 30, 2022, the Registrants did not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade.

There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating change of certain Registrants to BBB and/or Baa2 or below. These contracts are primarily for physical electricity and natural gas purchases and sales, fuel purchases, fuel transportation and storage, energy price risk management, transmission, interest rate management, and, for Georgia Power, construction of new generation at Plant Vogtle Units 3 and 4.

The maximum potential collateral requirements under these contracts at September 30, 2022 were as follows:

Credit Ratings			Southern Company(*)			Alabama Power			Georgia Power			Mississippi Power			Southern Power(*)			Southern Company Gas
			(in millions)
At BBB and/or Baa2			$	33		$	1		$	—		$	—		$	32		$	—
At BBB- and/or Baa3			395			2			61			1			333			—
At BB+ and/or Ba1 or below			2,042			409			907			306			1,205			5

(*)Southern Power has PPAs that could require collateral, but not accelerated payment, in the event of a downgrade of Southern Power's credit. The PPAs require credit assurances without stating a specific credit rating. The amount of collateral required would depend upon actual losses resulting from a credit downgrade. Southern Power had $106 million of cash collateral posted related to PPA requirements at September 30, 2022.

The amounts in the previous table for the traditional electric operating companies and Southern Power include certain agreements that could require collateral if either Alabama Power or Georgia Power has a credit rating change to below investment grade. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. Additionally, a credit rating downgrade could impact the ability of the Registrants to access capital markets and would be likely to impact the cost at which they do so.

On February 22, 2022, Fitch downgraded the senior unsecured long-term debt rating of Georgia Power to BBB+ from A- with a stable outlook.

Also on February 22, 2022, Fitch revised the ratings outlook of Southern Company, Alabama Power, Southern Power, Nicor Gas, and SEGCO to negative from stable.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

During the nine months ended September 30, 2022, there were no material changes to Southern Company's, Alabama Power's, Georgia Power's, Mississippi Power's, Southern Power's, or Southern Company Gas' disclosures about market risk. For an in-depth discussion of each Registrant's market risks, see MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Market Price Risk" in Item 7 of the Form 10-K and Note 1 to the financial statements under "Financial Instruments" and Notes 13 and 14 to the financial statements in Item 8 of the Form 10-K, as well as Notes (I) and (J) to the Condensed Financial Statements herein.

Item 4. Controls and Procedures.

(a)Evaluation of disclosure controls and procedures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, Southern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas conducted separate evaluations under the supervision and with the participation of each company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended). Based upon these evaluations, the Chief Executive Officer and the Chief Financial Officer, in each case, concluded that the disclosure controls and procedures are effective.

(b)    Changes in internal controls over financial reporting.

In July 2022, Southern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas implemented a new human resources and payroll application. In August 2022, Southern Company Gas implemented new financial accounting and reporting applications. As a result of these implementations, there were certain changes to processes and procedures, which resulted in changes to Southern Company's, Alabama Power's, Georgia Power's, Mississippi Power's, Southern Power's, and Southern Company Gas' internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended). These changes included automation of certain previously manual controls. These changes in internal controls were not made in response to any identified internal control deficiency.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

See the Notes to the Condensed Financial Statements herein for information regarding certain legal and administrative proceedings in which the Registrants are involved. The Registrants' threshold for disclosing material environmental legal proceedings involving a governmental authority where potential monetary sanctions are involved is $1 million.

Item 1A. Risk Factors.

See RISK FACTORS in Item 1A of the Form 10-K for a discussion of the risk factors of the Registrants. There have been no material changes to these risk factors from those previously disclosed in the Form 10-K.

Item 6. Exhibits.

The exhibits below with an asterisk (*) preceding the exhibit number are filed herewith. The remaining exhibits have previously been filed with the SEC and are incorporated herein by reference. The exhibits marked with a pound sign (#) are management contracts or compensatory plans or arrangements.

(4) Instruments Describing Rights of Security Holders, Including Indentures

Southern Company

(a)1

-

Twenty-Fifth Supplemental Indenture to Senior Note Indenture dated as of October 6, 2022, providing for the issuance of the Series 2022A 5.15% Senior Notes due October 6, 2025. (Designated in Form 8-K dated October 3, 2022, File No. 1-3526, as Exhibit 4.4(a).)

(a)2

-

Twenty-Sixth Supplemental Indenture to Senior Note Indenture dated as of October 6, 2022, providing for the issuance of the Series 2022B 5.70% Senior Notes due October 15, 2032. (Designated in Form 8-K dated October 3, 2022, File No. 1-3526, as Exhibit 4.4(b).)

Alabama Power

(b)1

-

Sixty-Fourth Supplemental Indenture to Senior Note Indenture dated as of August 12, 2022 providing for the issuance of the Series 2022B 3.75% Senior Notes due September 1, 2027. (Designated in Form 8-K dated August 9, 2022, File No. 1-3164, as Exhibit 4.6(a).)

(b)2

-

Sixty-Fifth Supplemental Indenture to Senior Note Indenture dated as of August 12, 2022 providing for the issuance of the Series 2022C 3.94% Senior Notes due September 1, 2032. (Designated in Form 8-K dated August 9, 2022, File No. 1-3164, as Exhibit 4.6(b).)

Southern Company Gas

(f)1

-

Southern Company Gas Capital Corporation's Series 2022A 5.15% Senior Notes due September 30, 2032, Form of Note. (Designated in Form 8-K dated September 6, 2022, File No. 1-14174, as Exhibit 4.1.)

(f)2

-

Southern Company Gas' Guarantee related to the Series 2022A 5.15% Senior Notes due September 30, 2032, Form of Guarantee. (Designated in Form 8-K dated September 6, 2022, File No. 1-14174, as Exhibit 4.3.)

(10) Material Contracts

Southern Company

#

(a)1

-

Amended and Restated Southern Company Change In Control Benefits Protection Plan, effective August 15, 2022. (Designated in Form 8-K dated August 15, 2022, File No. 1-3526, as Exhibit 10.1.)

#

(a)2

-

Southern Company Senior Executive Change in Control Severance Plan, Amended and Restated effective August 15, 2022. (Designated in Form 8-K dated August 15, 2022, File No. 1-3526, as Exhibit 10.2.)

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#

*

(a)3

-

Southern Company Executive Change In Control Severance Plan, Amended and Restated effective August 15, 2022.

#

*

(a)4

-

Deferred Compensation Agreement between Southern Company, SCS, Georgia Power, and Christopher C. Womack, effective December 10, 2008.

Alabama Power

#

(b)1

-

Amended and Restated Southern Company Change In Control Benefits Protection Plan, effective August 15, 2022. See Exhibit 10(a)1 herein.

#

(b)2

-

Southern Company Senior Executive Change in Control Severance Plan, Amended and Restated effective August 15, 2022. See Exhibit 10(a)2 herein.

#

(b)3

-

Southern Company Executive Change In Control Severance Plan, Amended and Restated effective August 15, 2022. See Exhibit 10(a)3 herein.

(24) Power of Attorney and Resolutions

Southern Company

(a)

-

Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2021, File No. 1-3526 as Exhibit 24(a)1.)

Alabama Power

(b)

-

Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2021, File No. 1-3164 as Exhibit 24(b)1.)

Georgia Power

(c)

-

Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2021, File No. 1-6468 as Exhibit 24(c)1.)

Mississippi Power

(d)

-

Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2021, File No. 001-11229 as Exhibit 24(d)1.)

Southern Power

(e)1

-

Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2021, File No. 001-37803 as Exhibit 24(e)1.)

(e)2

-

Power of Attorney of Gary Kerr. (Designated in the Form 10-Q for the quarter ended June 30, 2022, File No. 001-37803 as Exhibit 24(e)2.)

Southern Company Gas

(f)

-

Power of Attorney and resolution. (Designated in the Form 10-K for the year ended December 31, 2021, File No. 1-14174 as Exhibit 24(f)1.)

(31) Section 302 Certifications

Southern Company

*

(a)1

-

Certificate of Southern Company's Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

*

(a)2

-

Certificate of Southern Company's Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

Alabama Power

*

(b)1

-

Certificate of Alabama Power's Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

*

(b)2

-

Certificate of Alabama Power's Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

160

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Georgia Power

*

(c)1

-

Certificate of Georgia Power's Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

*

(c)2

-

Certificate of Georgia Power's Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

Mississippi Power

*

(d)1

-

Certificate of Mississippi Power's Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

*

(d)2

-

Certificate of Mississippi Power's Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

Southern Power

*

(e)1

-

Certificate of Southern Power Company's Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

*

(e)2

-

Certificate of Southern Power Company's Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

Southern Company Gas

*

(f)1

-

Certificate of Southern Company Gas' Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

*

(f)2

-

Certificate of Southern Company Gas' Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.

(32) Section 906 Certifications

Southern Company

*

(a)

-

Certificate of Southern Company's Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.

Alabama Power

*

(b)

-

Certificate of Alabama Power's Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.

Georgia Power

*

(c)

-

Certificate of Georgia Power's Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.

Mississippi Power

*

(d)

-

Certificate of Mississippi Power's Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.

Southern Power

*

(e)

-

Certificate of Southern Power Company's Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.

Southern Company Gas

*

(f)

-

Certificate of Southern Company Gas' Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.

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(101) Interactive Data Files

*

INS

-

XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

*

SCH

-

XBRL Taxonomy Extension Schema Document

*

CAL

-

XBRL Taxonomy Calculation Linkbase Document

*

DEF

-

XBRL Definition Linkbase Document

*

LAB

-

XBRL Taxonomy Label Linkbase Document

*

PRE

-

XBRL Taxonomy Presentation Linkbase Document

(104) Cover Page Interactive Data File

*

Formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.

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THE SOUTHERN COMPANY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.

 

						THE SOUTHERN COMPANY
By						Thomas A. Fanning
						Chairman, President, and Chief Executive Officer
						(Principal Executive Officer)
By						Daniel S. Tucker
						Executive Vice President and Chief Financial Officer
						(Principal Financial Officer)
By						/s/ Melissa K. Caen
						(Melissa K. Caen, Attorney-in-fact)

Date: October 26, 2022

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ALABAMA POWER COMPANY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.

 

						ALABAMA POWER COMPANY
By						Mark A. Crosswhite
						Chairman, President, and Chief Executive Officer
						(Principal Executive Officer)
By						Philip C. Raymond
						Executive Vice President, Chief Financial Officer, and Treasurer
						(Principal Financial Officer)
By						/s/ Melissa K. Caen
						(Melissa K. Caen, Attorney-in-fact)

Date: October 26, 2022

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GEORGIA POWER COMPANY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.

 

						GEORGIA POWER COMPANY
By						Christopher C. Womack
						Chairman, President, and Chief Executive Officer
						(Principal Executive Officer)
By						Aaron P. Abramovitz
						Executive Vice President, Chief Financial Officer, and Treasurer
						(Principal Financial Officer)
By						/s/ Melissa K. Caen
						(Melissa K. Caen, Attorney-in-fact)

Date: October 26, 2022

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MISSISSIPPI POWER COMPANY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.

 

						MISSISSIPPI POWER COMPANY
By						Anthony L. Wilson
						Chairman, President, and Chief Executive Officer
						(Principal Executive Officer)
By						Moses H. Feagin
						Senior Vice President, Chief Financial Officer, and Treasurer
						(Principal Financial Officer)
By						/s/ Melissa K. Caen
						(Melissa K. Caen, Attorney-in-fact)

Date: October 26, 2022

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SOUTHERN POWER COMPANY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.

 

						SOUTHERN POWER COMPANY
By						Christopher Cummiskey
						Chairman and Chief Executive Officer
						(Principal Executive Officer)
By						Gary Kerr
						Senior Vice President, Chief Financial Officer, and Treasurer
						(Principal Financial Officer)
By						/s/ Melissa K. Caen
						(Melissa K. Caen, Attorney-in-fact)

Date: October 26, 2022

167

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SOUTHERN COMPANY GAS

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.

 

						SOUTHERN COMPANY GAS
By						Kimberly S. Greene
						Chairman, President, and Chief Executive Officer
						(Principal Executive Officer)
By						David P. Poroch
						Executive Vice President, Chief Financial Officer, and Treasurer
						(Principal Financial Officer)
By						/s/ Melissa K. Caen
						(Melissa K. Caen, Attorney-in-fact)

Date: October 26, 2022

168