GEORGIA POWER CO 10-Q

so-20230930 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, 2023 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 Table of Contents Index to Financial Statements 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 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 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, 2023 The Southern Company Par Value $5 Per Share 1,090,619,349 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. 2 Table of Contents Index to Financial Statements 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 160 Item 4. Controls and Procedures 160 PART II—OTHER INFORMATION Item 1. Legal Proceedings 161 Item 1A. Risk Factors 161 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 161 Item 6. Exhibits 161 Signatures 164 3 Table of Contents Index to Financial Statements DEFINITIONS Term Meaning 2022 ARP Alternate Rate Plan approved by the Georgia PSC in 2022 for Georgia Power for the years 2023 through 2025 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 ASU Accounting Standards Update 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 Cooperative Energy Electric generation and transmission cooperative in Mississippi 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 ECO Plan Mississippi Power's environmental compliance overview plan ELG Effluent limitations guidelines 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 FASB Financial Accounting Standards Board FCC Federal Communications Commission FERC Federal Energy Regulatory Commission FFB Federal Financing Bank First Solar First Solar Electric, LLC 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, 2022, as applicable GAAP U.S. generally accepted accounting principles 4 Table of Contents Index to Financial Statements DEFINITIONS (continued) Term Meaning Georgia Power Georgia Power Company GHG Greenhouse gas 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 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 Illinois Commission Illinois Commerce Commission 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 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. 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 OCI Other comprehensive income OPC Oglethorpe Power Corporation (an electric membership corporation) 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, Rate CNP PPA, and Rate CNP Depreciation Rate ECR Alabama Power's Rate Energy Cost Recovery 5 Table of Contents Index to Financial Statements DEFINITIONS (continued) Term Meaning Rate RSE Alabama Power's Rate Stabilization and Equalization 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 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 Linc Southern Communications Services, Inc., a wholly-owned subsidiary of Southern Company, doing business as Southern Linc 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 SRR Mississippi Power's System Restoration Rider, a tariff for retail property damage cost recovery and reserve 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 6 Table of Contents Index to Financial Statements DEFINITIONS (continued) Term Meaning Vogtle Owners Georgia Power, OPC, MEAG Power, and Dalton 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 7 Table of Contents Index to Financial Statements 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 regulated rates, the strategic goals for the business, customer and sales growth, economic conditions, including inflation, cost recovery and other rate actions, 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, 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 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, public and policymaker support for such projects, and operational interruptions to natural gas distribution and transmission activities; • transmission constraints; • 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 Unit 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), due to current and/or future challenges which include, but are not limited to, changes in labor costs, availability, and productivity; challenges with the 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; the impacts of inflation; 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; challenges with start-up activities, including major equipment failure, or system integration; and/or operational performance; continued challenges related to the COVID-19 pandemic or future pandemic health events; continued public and policymaker support for projects; environmental and geological conditions; delays or increased costs to interconnect facilities to transmission grids; and increased financing costs as a result of changes in market interest rates or as a result of project delays; • the ability to overcome or mitigate the current challenges, or challenges yet to be identified, at Plant Vogtle Unit 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 past and ongoing construction projects, such as Plant Vogtle Units 3 and 4, 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 Unit 4 not to proceed with construction; • 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; 8 Table of Contents Index to Financial Statements CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION (continued) • 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 cyber and physical attacks; • global and U.S. economic conditions, including impacts from recession, inflation, 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 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 potential effects of COVID-19, including, but not limited to, those described in Item 1A "Risk Factors" of the Form 10-K; • 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. 9 Table of Contents Index to Financial Statements 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 and 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 38 Condensed Consolidated Statements of Comprehensive Income 38 Condensed Consolidated Statements of Cash Flows 39 Condensed Consolidated Balance Sheets 40 Condensed Consolidated Statements of Stockholder's Equity 42 Combined Notes to the Condensed Financial Statements 43 10 Table of Contents Index to Financial Statements 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, 2023 2022 2023 2022 (in millions) (in millions) Operating Revenues: Retail electric revenues $ 5,139 $ 5,961 $ 12,597 $ 14,363 Wholesale electric revenues 727 1,197 1,930 2,798 Other electric revenues 203 185 602 554 Natural gas revenues (includes alternative revenue programs of $ — , $( 1 ), $ 11 , and $ — , respectively) 689 857 3,417 3,998 Other revenues 222 178 662 519 Total operating revenues 6,980 8,378 19,208 22,232 Operating Expenses: Fuel 1,367 2,423 3,376 5,249 Purchased power 207 645 680 1,285 Cost of natural gas 102 294 1,199 1,840 Cost of other sales 126 92 381 275 Other operations and maintenance 1,424 1,527 4,352 4,568 Depreciation and amortization 1,143 922 3,365 2,728 Taxes other than income taxes 341 352 1,076 1,073 Estimated loss on Plant Vogtle Units 3 and 4 160 ( 70 ) 160 ( 18 ) Total operating expenses 4,870 6,185 14,589 17,000 Operating Income 2,110 2,193 4,619 5,232 Other Income and (Expense): Allowance for equity funds used during construction 66 59 200 163 Earnings from equity method investments 32 28 110 109 Interest expense, net of amounts capitalized ( 620 ) ( 511 ) ( 1,812 ) ( 1,461 ) Other income (expense), net 141 132 428 414 Total other income and (expense) ( 381 ) ( 292 ) ( 1,074 ) ( 775 ) Earnings Before Income Taxes 1,729 1,901 3,545 4,457 Income taxes 297 414 492 891 Consolidated Net Income 1,432 1,487 3,053 3,566 Dividends on preferred stock of subsidiaries — 3 — 10 Net income (loss) attributable to noncontrolling interests 10 12 ( 68 ) ( 55 ) Consolidated Net Income Attributable to Southern Company $ 1,422 $ 1,472 $ 3,121 $ 3,611 Common Stock Data: Earnings per share - Basic $ 1.30 $ 1.36 $ 2.86 $ 3.38 Diluted $ 1.29 $ 1.35 $ 2.84 $ 3.36 Average number of shares of common stock outstanding (in millions) Basic 1,092 1,082 1,092 1,070 Diluted 1,099 1,088 1,098 1,076 The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements. 11 Table of Contents Index to Financial Statements 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, 2023 2022 2023 2022 (in millions) (in millions) Consolidated Net Income $ 1,432 $ 1,487 $ 3,053 $ 3,566 Other comprehensive income: Qualifying hedges: Changes in fair value, net of tax of $ 3 , $ 2 , $( 11 ), and $( 5 ), respectively 2 — ( 34 ) ( 27 ) Reclassification adjustment for amounts included in net income, net of tax of $ 12 , $ 8 , $ 25 , and $ 32 , respectively 36 26 70 100 Pension and other postretirement benefit plans: Reclassification adjustment for amounts included in net income, net of tax of $ — , $ 1 , $ — , and $ 3 , respectively — 2 1 8 Total other comprehensive income 38 28 37 81 Comprehensive Income 1,470 1,515 3,090 3,647 Dividends on preferred stock of subsidiaries — 3 — 10 Comprehensive income (loss) attributable to noncontrolling interests 10 12 ( 68 ) ( 55 ) Consolidated Comprehensive Income Attributable to Southern Company $ 1,460 $ 1,500 $ 3,158 $ 3,692 The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements. 12 Table of Contents Index to Financial Statements THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended September 30, 2023 2022 (in millions) Operating Activities: Consolidated net income $ 3,053 $ 3,566 Adjustments to reconcile consolidated net income to net cash provided from operating activities — Depreciation and amortization, total 3,699 3,084 Deferred income taxes ( 52 ) 608 Utilization of federal investment tax credits 195 266 Allowance for equity funds used during construction ( 200 ) ( 163 ) Pension, postretirement, and other employee benefits ( 397 ) ( 322 ) Settlement of asset retirement obligations ( 444 ) ( 314 ) Stock based compensation expense 119 116 Estimated loss on Plant Vogtle Units 3 and 4 160 ( 18 ) Storm damage accruals 41 160 Natural gas cost under recovery – long-term — 207 Retail fuel cost under recovery – long-term ( 157 ) ( 1,701 ) Other, net ( 67 ) ( 119 ) Changes in certain current assets and liabilities — -Receivables 524 ( 316 ) -Retail fuel cost under recovery 513 ( 104 ) -Fossil fuel for generation ( 254 ) ( 76 ) -Materials and supplies ( 271 ) ( 138 ) -Natural gas cost under recovery 108 ( 124 ) -Other current assets ( 32 ) ( 310 ) -Accounts payable ( 1,031 ) 805 -Accrued taxes 376 167 -Accrued compensation ( 197 ) ( 123 ) -Customer refunds ( 177 ) ( 52 ) -Natural gas cost over recovery 165 — -Other current liabilities 66 ( 82 ) Net cash provided from operating activities 5,740 5,017 Investing Activities: Property additions ( 6,561 ) ( 5,502 ) Nuclear decommissioning trust fund purchases ( 885 ) ( 858 ) Nuclear decommissioning trust fund sales 879 854 Proceeds from dispositions 165 120 Cost of removal, net of salvage ( 421 ) ( 518 ) Change in construction payables, net 241 15 Other investing activities ( 139 ) ( 63 ) Net cash used for investing activities ( 6,721 ) ( 5,952 ) Financing Activities: Decrease in notes payable, net ( 298 ) ( 349 ) Proceeds — Long-term debt 7,812 3,800 Short-term borrowings 250 1,200 Common stock 26 1,803 Redemptions and repurchases — Long-term debt ( 3,567 ) ( 1,932 ) Short-term borrowings ( 850 ) ( 900 ) Capital contributions from noncontrolling interests 21 73 Distributions to noncontrolling interests ( 148 ) ( 175 ) Payment of common stock dividends ( 2,271 ) ( 2,166 ) Other financing activities ( 141 ) ( 235 ) Net cash provided from financing activities 834 1,119 Net Change in Cash, Cash Equivalents, and Restricted Cash ( 147 ) 184 Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 2,037 1,829 Cash, Cash Equivalents, and Restricted Cash at End of Period $ 1,890 $ 2,013 Supplemental Cash Flow Information: Cash paid during the period for — Interest (net of $ 97 and $ 74 capitalized for 2023 and 2022, respectively) $ 1,694 $ 1,425 Income taxes, net 11 160 Noncash transactions — Accrued property additions at end of period 1,224 872 Right-of-use assets obtained under operating leases 76 27 Right-of-use assets obtained under finance leases 3 114 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. 13 Table of Contents Index to Financial Statements THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) Assets At September 30, 2023 At December 31, 2022 (in millions) Current Assets: Cash and cash equivalents $ 1,676 $ 1,917 Receivables — Customer accounts 2,230 2,128 Unbilled revenues 547 1,012 Under recovered fuel clause revenues 757 10 Other accounts and notes 553 637 Accumulated provision for uncollectible accounts ( 78 ) ( 71 ) Materials and supplies 1,913 1,664 Fossil fuel for generation 829 575 Natural gas for sale 406 438 Prepaid expenses 321 347 Assets from risk management activities, net of collateral 36 115 Regulatory assets – asset retirement obligations 358 332 Other regulatory assets 996 968 Other current assets 544 344 Total current assets 11,088 10,416 Property, Plant, and Equipment: In service 125,573 117,529 Less: Accumulated depreciation 37,199 35,297 Plant in service, net of depreciation 88,374 82,232 Other utility plant, net 522 599 Nuclear fuel, at amortized cost 862 843 Construction work in progress 8,496 10,896 Total property, plant, and equipment 98,254 94,570 Other Property and Investments: Goodwill 5,161 5,161 Nuclear decommissioning trusts, at fair value 2,207 2,145 Equity investments in unconsolidated subsidiaries 1,376 1,443 Other intangible assets, net of amortization of $ 367 and $ 340 , respectively 377 406 Miscellaneous property and investments 651 602 Total other property and investments 9,772 9,757 Deferred Charges and Other Assets: Operating lease right-of-use assets, net of amortization 1,467 1,531 Deferred charges related to income taxes 889 866 Prepaid pension costs 2,574 2,290 Unamortized loss on reacquired debt 224 238 Deferred under recovered fuel clause revenues 1,279 2,056 Regulatory assets – asset retirement obligations, deferred 5,629 5,764 Other regulatory assets, deferred 5,666 5,918 Other deferred charges and assets 1,479 1,485 Total deferred charges and other assets 19,207 20,148 Total Assets $ 138,321 $ 134,891 The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements. 14 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, 2023 At December 31, 2022 (in millions) Current Liabilities: Securities due within one year $ 3,076 $ 4,285 Notes payable 1,726 2,609 Accounts payable 2,942 3,525 Customer deposits 511 502 Accrued taxes — Accrued income taxes 177 60 Other accrued taxes 862 764 Accrued interest 573 614 Accrued compensation 936 1,127 Asset retirement obligations 727 694 Liabilities from risk management activities, net of collateral 232 178 Operating lease obligations 181 197 Natural gas cost over recovery 165 — Other regulatory liabilities 163 382 Other current liabilities 943 787 Total current liabilities 13,214 15,724 Long-term Debt 56,003 50,656 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 10,774 10,036 Deferred credits related to income taxes 4,813 5,235 Accumulated deferred ITCs 2,071 2,133 Employee benefit obligations 1,184 1,238 Operating lease obligations, deferred 1,320 1,388 Asset retirement obligations, deferred 9,872 10,146 Other cost of removal obligations 1,940 1,903 Other regulatory liabilities, deferred 660 733 Other deferred credits and liabilities 1,166 1,167 Total deferred credits and other liabilities 33,800 33,979 Total Liabilities 103,017 100,359 Total Stockholders' Equity (See accompanying statements) 35,304 34,532 Total Liabilities and Stockholders' Equity $ 138,321 $ 134,891 The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements. 15 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 16 Table of Contents Index to Financial Statements 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, 2022 1,090 ( 1 ) $ 5,417 $ 13,673 $ ( 53 ) $ 11,538 $ ( 167 ) $ 4,124 $ 34,532 Consolidated net income (loss) — — — — — 862 — ( 63 ) 799 Other comprehensive income (loss) — — — — — — ( 44 ) — ( 44 ) Stock issued 2 — 4 11 — — — — 15 Stock-based compensation — — — 29 — — — — 29 Cash dividends of $ 0.68 per share — — — — — ( 742 ) — — ( 742 ) Capital contributions from noncontrolling interests — — — — — — — 21 21 Distributions to noncontrolling interests — — — — — — — ( 48 ) ( 48 ) Other — — — 2 ( 2 ) — — — — Balance at March 31, 2023 1,092 ( 1 ) 5,421 13,715 ( 55 ) 11,658 ( 211 ) 4,034 34,562 Consolidated net income (loss) — — — — — 838 — ( 15 ) 823 Other comprehensive income — — — — — — 43 — 43 Stock issued — — 1 6 — — — — 7 Stock-based compensation — — — 19 — — — — 19 Cash dividends of $ 0.70 per share — — — — — ( 764 ) — — ( 764 ) Distributions to noncontrolling interests — — — — — — — ( 42 ) ( 42 ) Other — — — 2 ( 1 ) — — ( 1 ) — Balance at June 30, 2023 1,092 ( 1 ) 5,422 13,742 ( 56 ) 11,732 ( 168 ) 3,976 34,648 Consolidated net income — — — — — 1,422 — 10 1,432 Other comprehensive income — — — — — — 38 — 38 Stock issued — — — 4 — — — — 4 Stock-based compensation — — — 7 — — — — 7 Cash dividends of $ 0.70 per share — — — — — ( 765 ) — — ( 765 ) Distributions to noncontrolling interests — — — — — — — ( 59 ) ( 59 ) Other — — — ( 2 ) ( 1 ) 2 — — ( 1 ) Balance at September 30, 2023 1,092 ( 1 ) $ 5,422 $ 13,751 $ ( 57 ) $ 12,391 $ ( 130 ) $ 3,927 $ 35,304 The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements. 17 Table of Contents Index to Financial Statements ALABAMA POWER COMPANY CONDENSED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) (in millions) Operating Revenues: Retail revenues $ 1,860 $ 2,008 $ 4,708 $ 5,015 Wholesale revenues, non-affiliates 106 250 358 522 Wholesale revenues, affiliates 14 70 43 170 Other revenues 103 116 311 316 Total operating revenues 2,083 2,444 5,420 6,023 Operating Expenses: Fuel 402 666 1,013 1,399 Purchased power, non-affiliates 42 185 197 347 Purchased power, affiliates 80 113 193 260 Other operations and maintenance 411 418 1,275 1,270 Depreciation and amortization 351 220 1,045 652 Taxes other than income taxes 110 106 333 309 Total operating expenses 1,396 1,708 4,056 4,237 Operating Income 687 736 1,364 1,786 Other Income and (Expense): Allowance for equity funds used during construction 23 18 65 51 Interest expense, net of amounts capitalized ( 104 ) ( 98 ) ( 311 ) ( 278 ) Other income (expense), net 38 38 117 101 Total other income and (expense) ( 43 ) ( 42 ) ( 129 ) ( 126 ) Earnings Before Income Taxes 644 694 1,235 1,660 Income taxes 79 166 103 394 Net Income 565 528 1,132 1,266 Dividends on Preferred Stock — 3 — 10 Net Income After Dividends on Preferred Stock $ 565 $ 525 $ 1,132 $ 1,256 CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) (in millions) Net Income $ 565 $ 528 $ 1,132 $ 1,266 Other comprehensive income: Qualifying hedges: Changes in fair value, net of tax of $ — , $ — , $ — , and $ — , respectively — 1 1 ( 1 ) Reclassification adjustment for amounts included in net income, net of tax of $ — , $ — , $ — , and $ 1 , respectively 1 1 1 3 Total other comprehensive income 1 2 2 2 Comprehensive Income $ 566 $ 530 $ 1,134 $ 1,268 The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements. 18 Table of Contents Index to Financial Statements ALABAMA POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended September 30, 2023 2022 (in millions) Operating Activities: Net income $ 1,132 $ 1,266 Adjustments to reconcile net income to net cash provided from operating activities — Depreciation and amortization, total 1,158 817 Deferred income taxes ( 210 ) 210 Pension, postretirement, and other employee benefits ( 148 ) ( 85 ) Settlement of asset retirement obligations ( 188 ) ( 139 ) Retail fuel cost under recovery – long-term — ( 413 ) Other, net ( 21 ) ( 98 ) Changes in certain current assets and liabilities — -Receivables ( 108 ) ( 296 ) -Fossil fuel stock ( 113 ) ( 40 ) -Retail fuel cost under recovery 334 ( 93 ) -Other current assets ( 124 ) ( 75 ) -Accounts payable ( 358 ) ( 22 ) -Accrued taxes 271 110 -Other current liabilities ( 103 ) ( 70 ) Net cash provided from operating activities 1,522 1,072 Investing Activities: Property additions ( 1,377 ) ( 1,483 ) Nuclear decommissioning trust fund purchases ( 226 ) ( 273 ) Nuclear decommissioning trust fund sales 226 273 Cost of removal, net of salvage ( 128 ) ( 163 ) Change in construction payables ( 68 ) 36 Other investing activities 27 ( 31 ) Net cash used for investing activities ( 1,546 ) ( 1,641 ) Financing Activities: Proceeds — Senior notes 200 1,700 Revenue bonds 326 — Other long-term debt 28 — Redemptions — Senior notes — ( 550 ) Capital contributions from parent company 380 660 Payment of common stock dividends ( 856 ) ( 762 ) Other financing activities ( 12 ) ( 81 ) Net cash provided from financing activities 66 967 Net Change in Cash, Cash Equivalents, and Restricted Cash 42 398 Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 687 1,060 Cash, Cash Equivalents, and Restricted Cash at End of Period $ 729 $ 1,458 Supplemental Cash Flow Information: Cash paid during the period for — Interest (net of $ 21 and $ 14 capitalized for 2023 and 2022, respectively) $ 329 $ 278 Income taxes, net 152 178 Noncash transactions — Accrued property additions at end of period 114 186 Right-of-use assets obtained under operating leases 28 7 Right-of-use assets obtained under finance leases 3 2 The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements. 19 Table of Contents Index to Financial Statements ALABAMA POWER COMPANY CONDENSED BALANCE SHEETS (UNAUDITED) Assets At September 30, 2023 At December 31, 2022 (in millions) Current Assets: Cash and cash equivalents $ 621 $ 687 Receivables — Customer accounts 624 431 Unbilled revenues 162 174 Affiliated 113 101 Other accounts and notes 114 153 Accumulated provision for uncollectible accounts ( 16 ) ( 14 ) Fossil fuel stock 342 229 Materials and supplies 624 557 Prepaid expenses 72 65 Other regulatory assets 549 474 Other current assets 171 67 Total current assets 3,376 2,924 Property, Plant, and Equipment: In service 34,313 33,472 Less: Accumulated provision for depreciation 11,042 10,470 Plant in service, net of depreciation 23,271 23,002 Other utility plant, net 522 599 Nuclear fuel, at amortized cost 240 239 Construction work in progress 1,759 1,526 Total property, plant, and equipment 25,792 25,366 Other Property and Investments: Nuclear decommissioning trusts, at fair value 1,165 1,127 Equity investments in unconsolidated subsidiaries 53 57 Miscellaneous property and investments 156 124 Total other property and investments 1,374 1,308 Deferred Charges and Other Assets: Operating lease right-of-use assets, net of amortization 88 71 Deferred charges related to income taxes 263 250 Prepaid pension and other postretirement benefit costs 735 657 Regulatory assets – asset retirement obligations 1,881 1,845 Other regulatory assets, deferred 1,706 2,107 Other deferred charges and assets 455 442 Total deferred charges and other assets 5,128 5,372 Total Assets $ 35,670 $ 34,970 The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements. 20 Table of Contents Index to Financial Statements ALABAMA POWER COMPANY CONDENSED BALANCE SHEETS (UNAUDITED) Liabilities and Stockholder's Equity At September 30, 2023 At December 31, 2022 (in millions) Current Liabilities: Securities due within one year $ 522 $ 301 Accounts payable — Affiliated 305 443 Other 377 641 Customer deposits 105 106 Accrued taxes 305 57 Accrued interest 84 120 Accrued compensation 193 229 Asset retirement obligations 342 330 Other regulatory liabilities 28 96 Other current liabilities 158 91 Total current liabilities 2,419 2,414 Long-term Debt 10,661 10,329 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 4,082 3,981 Deferred credits related to income taxes 1,626 1,925 Accumulated deferred ITCs 76 81 Employee benefit obligations 146 145 Operating lease obligations 81 67 Asset retirement obligations, deferred 3,859 3,957 Other regulatory liabilities, deferred 284 315 Other deferred credits and liabilities 85 69 Total deferred credits and other liabilities 10,239 10,540 Total Liabilities 23,319 23,283 Common Stockholder's Equity (See accompanying statements) 12,351 11,687 Total Liabilities and Stockholder's Equity $ 35,670 $ 34,970 The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements. 21 Table of Contents Index to Financial Statements 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, 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 Balance at December 31, 2022 31 $ 1,222 $ 6,710 $ 3,764 $ ( 9 ) $ 11,687 Net income after dividends on preferred stock — — — 255 — 255 Capital contributions from parent company — — 330 — — 330 Cash dividends on common stock — — — ( 285 ) — ( 285 ) Balance at March 31, 2023 31 1,222 7,040 3,734 ( 9 ) 11,987 Net income after dividends on preferred stock — — — 312 — 312 Capital contributions from parent company — — 29 — — 29 Cash dividends on common stock — — — ( 286 ) — ( 286 ) Balance at June 30, 2023 31 1,222 7,069 3,760 ( 9 ) 12,042 Net income after dividends on preferred stock — — — 565 — 565 Capital contributions from parent company — — 28 — — 28 Other comprehensive income — — — — 1 1 Cash dividends on common stock — — — ( 285 ) — ( 285 ) Balance at September 30, 2023 31 $ 1,222 $ 7,097 $ 4,040 $ ( 8 ) $ 12,351 The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements. 22 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, 2023 2022 2023 2022 (in millions) (in millions) Operating Revenues: Retail revenues $ 2,996 $ 3,703 $ 7,142 $ 8,629 Wholesale revenues 69 56 147 186 Other revenues 172 130 516 403 Total operating revenues 3,237 3,889 7,805 9,218 Operating Expenses: Fuel 576 841 1,392 1,887 Purchased power, non-affiliates 131 304 397 700 Purchased power, affiliates 221 571 579 1,100 Other operations and maintenance 512 595 1,505 1,686 Depreciation and amortization 429 359 1,248 1,066 Taxes other than income taxes 144 155 406 420 Estimated loss on Plant Vogtle Units 3 and 4 160 ( 70 ) 160 ( 18 ) Total operating expenses 2,173 2,755 5,687 6,841 Operating Income 1,064 1,134 2,118 2,377 Other Income and (Expense): Allowance for equity funds used during construction 37 37 121 102 Interest expense, net of amounts capitalized ( 166 ) ( 123 ) ( 472 ) ( 347 ) Other income (expense), net 45 36 125 140 Total other income and (expense) ( 84 ) ( 50 ) ( 226 ) ( 105 ) Earnings Before Income Taxes 980 1,084 1,892 2,272 Income taxes 200 226 345 421 Net Income $ 780 $ 858 $ 1,547 $ 1,851 CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) (in millions) Net Income $ 780 $ 858 $ 1,547 $ 1,851 Other comprehensive income: Qualifying hedges: Changes in fair value, net of tax of $ — , $ — , $( 1 ), and $ 8 , respectively — — ( 1 ) 23 Reclassification adjustment for amounts included in net income, net of tax of $ — , $ — , $ 1 , and $ 1 , respectively 1 1 3 4 Total other comprehensive income 1 1 2 27 Comprehensive Income $ 781 $ 859 $ 1,549 $ 1,878 The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 23 Table of Contents Index to Financial Statements GEORGIA POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended September 30, 2023 2022 (in millions) Operating Activities: Net income $ 1,547 $ 1,851 Adjustments to reconcile net income to net cash provided from operating activities — Depreciation and amortization, total 1,411 1,211 Deferred income taxes 102 266 Allowance for equity funds used during construction ( 121 ) ( 102 ) Pension, postretirement, and other employee benefits ( 207 ) ( 178 ) Settlement of asset retirement obligations ( 228 ) ( 149 ) Storm damage accruals 24 160 Retail fuel cost under recovery – long-term ( 157 ) ( 1,287 ) Estimated loss on Plant Vogtle Units 3 and 4 160 ( 18 ) Other, net ( 12 ) ( 22 ) Changes in certain current assets and liabilities — -Receivables ( 311 ) ( 321 ) -Retail fuel cost under recovery 204 — -Fossil fuel stock ( 138 ) ( 23 ) -Materials and supplies ( 135 ) ( 67 ) -Contract assets ( 57 ) ( 51 ) -Other current assets 16 ( 72 ) -Accounts payable ( 142 ) 211 -Accrued taxes 118 151 -Customer refunds ( 121 ) 1 -Other current liabilities 16 ( 79 ) Net cash provided from operating activities 1,969 1,482 Investing Activities: Property additions ( 3,501 ) ( 2,556 ) Nuclear decommissioning trust fund purchases ( 659 ) ( 585 ) Nuclear decommissioning trust fund sales 654 581 Cost of removal, net of salvage ( 191 ) ( 250 ) Change in construction payables, net of joint owner portion 338 148 Proceeds from dispositions 59 56 Other investing activities ( 76 ) ( 47 ) Net cash used for investing activities ( 3,376 ) ( 2,653 ) Financing Activities: Increase in notes payable, net 50 415 Proceeds — Senior notes 1,750 1,500 Short-term borrowings 250 650 Revenue bonds 229 — Redemptions and repurchases — Senior notes ( 800 ) ( 400 ) Short-term borrowings ( 650 ) ( 250 ) FFB loan ( 64 ) ( 66 ) Revenue bonds — ( 53 ) Other long-term debt — ( 125 ) Capital contributions from parent company 1,837 813 Payment of common stock dividends ( 1,392 ) ( 1,268 ) Other financing activities ( 27 ) ( 45 ) Net cash provided from financing activities 1,183 1,171 Net Change in Cash, Cash Equivalents, and Restricted Cash ( 224 ) — Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 480 33 Cash, Cash Equivalents, and Restricted Cash at End of Period $ 256 $ 33 Supplemental Cash Flow Information: Cash paid during the period for — Interest (net of $ 63 and $ 52 capitalized for 2023 and 2022, respectively) $ 439 $ 332 Income taxes, net 74 151 Noncash transactions — Accrued property additions at end of period 942 609 Right-of-use assets obtained under operating leases 17 7 Right-of-use assets obtained under finance leases 18 112 The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 24 Table of Contents Index to Financial Statements GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS (UNAUDITED) Assets At September 30, 2023 At December 31, 2022 (in millions) Current Assets: Cash and cash equivalents $ 173 $ 364 Receivables — Customer accounts, net 1,056 735 Unbilled revenues 250 309 Under recovered fuel clause revenues 730 — Joint owner accounts 157 128 Affiliated 75 53 Other accounts and notes 70 62 Fossil fuel stock 429 291 Materials and supplies 856 729 Regulatory assets – asset retirement obligations 183 158 Other regulatory assets 379 324 Other current assets 266 246 Total current assets 4,624 3,399 Property, Plant, and Equipment: In service 48,083 41,879 Less: Accumulated provision for depreciation 13,771 13,115 Plant in service, net of depreciation 34,312 28,764 Nuclear fuel, at amortized cost 622 604 Construction work in progress 5,055 8,103 Total property, plant, and equipment 39,989 37,471 Other Property and Investments: Nuclear decommissioning trusts, at fair value 1,042 1,018 Equity investments in unconsolidated subsidiaries 47 51 Miscellaneous property and investments 131 107 Total other property and investments 1,220 1,176 Deferred Charges and Other Assets: Operating lease right-of-use assets, net of amortization 914 1,007 Deferred charges related to income taxes 595 583 Prepaid pension costs 839 738 Deferred under recovered fuel clause revenues 1,279 2,056 Regulatory assets – asset retirement obligations, deferred 3,508 3,671 Other regulatory assets, deferred 2,685 2,522 Other deferred charges and assets 496 540 Total deferred charges and other assets 10,316 11,117 Total Assets $ 56,149 $ 53,163 The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 25 Table of Contents Index to Financial Statements GEORGIA POWER COMPANY CONDENSED BALANCE SHEETS (UNAUDITED) Liabilities and Stockholder's Equity At September 30, 2023 At December 31, 2022 (in millions) Current Liabilities: Securities due within one year $ 503 $ 901 Notes payable 1,250 1,600 Accounts payable — Affiliated 770 928 Other 1,632 1,076 Customer deposits 251 252 Accrued taxes 620 508 Accrued interest 178 157 Accrued compensation 205 254 Operating lease obligations 134 151 Asset retirement obligations 328 295 Other regulatory liabilities 22 170 Other current liabilities 421 286 Total current liabilities 6,314 6,578 Long-term Debt 15,522 14,009 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 3,914 3,707 Deferred credits related to income taxes 2,171 2,244 Accumulated deferred ITCs 311 319 Employee benefit obligations 291 318 Operating lease obligations, deferred 744 851 Asset retirement obligations, deferred 5,567 5,739 Other deferred credits and liabilities 458 540 Total deferred credits and other liabilities 13,456 13,718 Total Liabilities 35,292 34,305 Common Stockholder's Equity (See accompanying statements) 20,857 18,858 Total Liabilities and Stockholder's Equity $ 56,149 $ 53,163 The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 26 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, 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 Balance at December 31, 2022 9 $ 398 $ 15,626 $ 2,846 $ ( 12 ) $ 18,858 Net income — — — 296 — 296 Capital contributions from parent company — — 752 — — 752 Cash dividends on common stock — — — ( 464 ) — ( 464 ) Other — — — 1 — 1 Balance at March 31, 2023 9 398 16,378 2,679 ( 12 ) 19,443 Net income — — — 471 — 471 Capital contributions from parent company — — 33 — — 33 Other comprehensive income — — — — 1 1 Cash dividends on common stock — — — ( 464 ) — ( 464 ) Balance at June 30, 2023 9 398 16,411 2,686 ( 11 ) 19,484 Net income — — — 780 — 780 Capital contributions from parent company — — 1,056 — — 1,056 Other comprehensive income — — — — 1 1 Cash dividends on common stock — — — ( 464 ) — ( 464 ) Balance at September 30, 2023 9 $ 398 $ 17,467 $ 3,002 $ ( 10 ) $ 20,857 The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements. 27 Table of Contents Index to Financial Statements MISSISSIPPI POWER COMPANY CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) (in millions) Operating Revenues: Retail revenues $ 284 $ 250 $ 747 $ 718 Wholesale revenues, non-affiliates 77 60 201 191 Wholesale revenues, affiliates 65 187 158 336 Other revenues 10 13 31 34 Total operating revenues 436 510 1,137 1,279 Operating Expenses: Fuel and purchased power 169 262 416 601 Other operations and maintenance 84 86 258 252 Depreciation and amortization 48 45 139 135 Taxes other than income taxes 32 32 92 93 Total operating expenses 333 425 905 1,081 Operating Income 103 85 232 198 Other Income and (Expense): Interest expense, net of amounts capitalized ( 19 ) ( 15 ) ( 53 ) ( 42 ) Other income (expense), net 9 9 29 32 Total other income and (expense) ( 10 ) ( 6 ) ( 24 ) ( 10 ) Earnings Before Income Taxes 93 79 208 188 Income taxes 18 17 35 38 Net Income and Comprehensive Income $ 75 $ 62 $ 173 $ 150 The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements. 28 Table of Contents Index to Financial Statements MISSISSIPPI POWER COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended September 30, 2023 2022 (in millions) Operating Activities: Net income $ 173 $ 150 Adjustments to reconcile net income to net cash provided from operating activities — Depreciation and amortization, total 171 164 Deferred income taxes ( 10 ) ( 4 ) Pension, postretirement, and other employee benefits ( 15 ) ( 12 ) Settlement of asset retirement obligations ( 12 ) ( 15 ) Other, net 12 36 Changes in certain current assets and liabilities — -Receivables 55 ( 49 ) -Retail fuel cost under recovery ( 24 ) ( 9 ) -Other current assets 14 ( 17 ) -Accounts payable ( 83 ) 41 -Accrued taxes ( 16 ) ( 3 ) -Accrued compensation ( 5 ) ( 5 ) -Other current liabilities — 2 Net cash provided from operating activities 260 279 Investing Activities: Property additions ( 231 ) ( 165 ) Cost of removal, net of salvage ( 21 ) ( 20 ) Construction payables ( 5 ) ( 9 ) Payments pursuant to LTSAs ( 21 ) ( 23 ) Other investing activities ( 2 ) ( 2 ) Net cash used for investing activities ( 280 ) ( 219 ) Financing Activities: Increase in notes payable, net 20 — Proceeds — Senior notes 100 — Capital contributions from parent company 8 55 Payment of common stock dividends ( 139 ) ( 128 ) Other financing activities ( 1 ) 1 Net cash used for financing activities ( 12 ) ( 72 ) Net Change in Cash, Cash Equivalents, and Restricted Cash ( 32 ) ( 12 ) Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 59 61 Cash, Cash Equivalents, and Restricted Cash at End of Period $ 27 $ 49 Supplemental Cash Flow Information: Cash paid during the period for — Interest $ 53 $ 49 Income taxes, net 33 18 Noncash transactions — Accrued property additions at end of period 20 16 Right-of-use assets obtained under operating leases 1 — The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements. 29 Table of Contents Index to Financial Statements MISSISSIPPI POWER COMPANY CONDENSED BALANCE SHEETS (UNAUDITED) Assets At September 30, 2023 At December 31, 2022 (in millions) Current Assets: Cash and cash equivalents $ 27 $ 59 Receivables — Customer accounts, net 78 47 Unbilled revenues 41 47 Affiliated 38 82 Other accounts and notes 22 35 Fossil fuel stock 37 44 Materials and supplies 85 80 Other regulatory assets 54 72 Other current assets 10 38 Total current assets 392 504 Property, Plant, and Equipment: In service 5,473 5,254 Less: Accumulated provision for depreciation 1,763 1,689 Plant in service, net of depreciation 3,710 3,565 Construction work in progress 183 208 Total property, plant, and equipment 3,893 3,773 Other Property and Investments 160 167 Deferred Charges and Other Assets: Deferred charges related to income taxes 29 30 Prepaid pension costs 123 109 Regulatory assets – asset retirement obligations 241 239 Other regulatory assets, deferred 246 249 Accumulated deferred income taxes 95 107 Other deferred charges and assets 79 94 Total deferred charges and other assets 813 828 Total Assets $ 5,258 $ 5,272 The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements. 30 Table of Contents Index to Financial Statements MISSISSIPPI POWER COMPANY CONDENSED BALANCE SHEETS (UNAUDITED) Liabilities and Stockholder's Equity At September 30, 2023 At December 31, 2022 (in millions) Current Liabilities: Securities due within one year $ 201 $ 1 Notes payable 20 — Accounts payable — Affiliated 79 121 Other 61 106 Accrued taxes 108 124 Accrued compensation 32 37 Asset retirement obligations 26 37 Other regulatory liabilities 30 43 Other current liabilities 74 85 Total current liabilities 631 554 Long-term Debt 1,443 1,544 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 466 466 Deferred credits related to income taxes 229 253 Employee benefit obligations 67 69 Asset retirement obligations, deferred 145 142 Other cost of removal obligations 192 196 Other regulatory liabilities, deferred 81 96 Other deferred credits and liabilities 30 21 Total deferred credits and other liabilities 1,210 1,243 Total Liabilities 3,284 3,341 Common Stockholder's Equity (See accompanying statements) 1,974 1,931 Total Liabilities and Stockholder's Equity $ 5,258 $ 5,272 The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements. 31 Table of Contents Index to Financial Statements 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) Total (in millions) 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 Balance at December 31, 2022 1 $ 38 $ 4,652 $ ( 2,759 ) $ 1,931 Net income — — — 58 58 Cash dividends on common stock — — — ( 46 ) ( 46 ) Balance at March 31, 2023 1 38 4,652 ( 2,747 ) 1,943 Net income — — — 40 40 Capital contributions from parent company — — 12 — 12 Cash dividends on common stock — — — ( 47 ) ( 47 ) Balance at June 30, 2023 1 38 4,664 ( 2,754 ) 1,948 Net income — — — 75 75 Return of capital to parent company — — ( 3 ) — ( 3 ) Cash dividends on common stock — — — ( 46 ) ( 46 ) Balance at September 30, 2023 1 $ 38 $ 4,661 $ ( 2,725 ) $ 1,974 The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements. 32 Table of Contents Index to Financial Statements 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, 2023 2022 2023 2022 (in millions) (in millions) Operating Revenues: Wholesale revenues, non-affiliates $ 479 $ 835 $ 1,234 $ 1,918 Wholesale revenues, affiliates 156 336 406 673 Other revenues 18 9 46 27 Total operating revenues 653 1,180 1,686 2,618 Operating Expenses: Fuel 196 605 526 1,274 Purchased power 33 144 87 233 Other operations and maintenance 104 113 327 332 Depreciation and amortization 130 133 380 384 Taxes other than income taxes 13 13 38 38 Gain on dispositions, net — — ( 20 ) ( 2 ) Total operating expenses 476 1,008 1,338 2,259 Operating Income 177 172 348 359 Other Income and (Expense): Interest expense, net of amounts capitalized ( 32 ) ( 32 ) ( 98 ) ( 105 ) Other income (expense), net 4 3 8 5 Total other income and (expense) ( 28 ) ( 29 ) ( 90 ) ( 100 ) Earnings Before Income Taxes 149 143 258 259 Income taxes 39 36 38 49 Net Income 110 107 220 210 Net income (loss) attributable to noncontrolling interests 10 12 ( 68 ) ( 55 ) Net Income Attributable to Southern Power $ 100 $ 95 $ 288 $ 265 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) (in millions) Net Income $ 110 $ 107 $ 220 $ 210 Other comprehensive income (loss): Qualifying hedges: Changes in fair value, net of tax of $( 2 ), $( 11 ), $( 3 ), and $( 35 ), respectively ( 13 ) ( 35 ) ( 17 ) ( 106 ) Reclassification adjustment for amounts included in net income, net of tax of $ 4 , $ 9 , $ 6 , and $ 35 , respectively 17 28 24 106 Pension and other postretirement benefit plans: Reclassification adjustment for amounts included in net income, net of tax of $ — , $ — , $ — , and $ — , respectively — — — 1 Total other comprehensive income (loss) 4 ( 7 ) 7 1 Comprehensive Income 114 100 227 211 Comprehensive income (loss) attributable to noncontrolling interests 10 12 ( 68 ) ( 55 ) Comprehensive Income Attributable to Southern Power $ 104 $ 88 $ 295 $ 266 The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements. 33 Table of Contents Index to Financial Statements SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended September 30, 2023 2022 (in millions) Operating Activities: Net income $ 220 $ 210 Adjustments to reconcile net income to net cash provided from operating activities — Depreciation and amortization, total 395 404 Deferred income taxes 1 21 Utilization of federal investment tax credits 179 218 Amortization of investment tax credits ( 44 ) ( 44 ) Gain on dispositions, net ( 20 ) ( 2 ) Other, net 4 1 Changes in certain current assets and liabilities — -Receivables 100 ( 124 ) -Prepaid income taxes 31 22 -Other current assets ( 14 ) ( 15 ) -Accounts payable ( 70 ) 95 -Accrued taxes 9 55 -Other current liabilities 8 ( 14 ) Net cash provided from operating activities 799 827 Investing Activities: Acquisitions, net of cash acquired ( 181 ) — Property additions ( 40 ) ( 64 ) Proceeds from dispositions 59 48 Change in construction payables ( 18 ) ( 60 ) Payments pursuant to LTSAs ( 49 ) ( 52 ) Other investing activities 5 — Net cash used for investing activities ( 224 ) ( 128 ) Financing Activities: Increase (decrease) in notes payable, net 136 ( 5 ) Redemptions — Senior notes ( 290 ) ( 677 ) Capital contributions from parent company 16 330 Capital contributions from noncontrolling interests 21 73 Distributions to noncontrolling interests ( 148 ) ( 175 ) Payment of common stock dividends ( 189 ) ( 148 ) Other financing activities 3 ( 1 ) Net cash used for financing activities ( 451 ) ( 603 ) Net Change in Cash, Cash Equivalents, and Restricted Cash 124 96 Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 133 135 Cash, Cash Equivalents, and Restricted Cash at End of Period $ 257 $ 231 Supplemental Cash Flow Information: Cash paid (received) during the period for — Interest (net of $ 1 and $ — capitalized for 2023 and 2022, respectively) $ 103 $ 120 Income taxes, net ( 124 ) ( 202 ) Noncash transactions — Accrued property additions at end of period 23 30 Right-of-use assets obtained under operating leases 7 — 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. 34 Table of Contents Index to Financial Statements SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) Assets At September 30, 2023 At December 31, 2022 (in millions) Current Assets: Cash and cash equivalents $ 236 $ 131 Receivables — Customer accounts, net 164 226 Affiliated 60 51 Other 44 70 Materials and supplies 84 88 Prepaid income taxes 130 5 Other current assets 71 50 Total current assets 789 621 Property, Plant, and Equipment: In service 14,678 14,658 Less: Accumulated provision for depreciation 4,001 3,661 Plant in service, net of depreciation 10,677 10,997 Construction work in progress 224 41 Total property, plant, and equipment 10,901 11,038 Other Property and Investments: Intangible assets, net of amortization of $ 143 and $ 129 , respectively 248 263 Equity investments in unconsolidated subsidiaries — 49 Net investment in sales-type leases 150 154 Total other property and investments 398 466 Deferred Charges and Other Assets: Operating lease right-of-use assets, net of amortization 490 489 Prepaid LTSAs 225 193 Other deferred charges and assets 287 274 Total deferred charges and other assets 1,002 956 Total Assets $ 13,090 $ 13,081 The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements. 35 Table of Contents Index to Financial Statements SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) Liabilities and Stockholders' Equity At September 30, 2023 At December 31, 2022 (in millions) Current Liabilities: Securities due within one year $ — $ 290 Notes payable 359 225 Accounts payable — Affiliated 80 139 Other 43 67 Accrued taxes 33 24 Accrued interest 22 28 Other current liabilities 117 111 Total current liabilities 654 884 Long-term Debt 2,687 2,689 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 619 279 Accumulated deferred ITCs 1,512 1,556 Operating lease obligations 516 514 Other deferred credits and liabilities 259 243 Total deferred credits and other liabilities 2,906 2,592 Total Liabilities 6,247 6,165 Total Stockholders' Equity (See accompanying statements) 6,843 6,916 Total Liabilities and Stockholders' Equity $ 13,090 $ 13,081 The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements. 36 Table of Contents Index to Financial Statements 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 Balance at December 31, 2022 $ 1,069 $ 1,741 $ ( 18 ) $ 2,792 $ 4,124 $ 6,916 Net income (loss) — 102 — 102 ( 63 ) 39 Other comprehensive income (loss) — — ( 7 ) ( 7 ) — ( 7 ) Cash dividends on common stock — ( 63 ) — ( 63 ) — ( 63 ) Capital contributions from noncontrolling interests — — — — 21 21 Distributions to noncontrolling interests — — — — ( 48 ) ( 48 ) Balance at March 31, 2023 1,069 1,780 ( 25 ) 2,824 4,034 6,858 Net income (loss) — 85 — 85 ( 15 ) 70 Capital contributions from parent company 14 — — 14 — 14 Other comprehensive income — — 10 10 — 10 Cash dividends on common stock — ( 63 ) — ( 63 ) — ( 63 ) Distributions to noncontrolling interests — — — — ( 42 ) ( 42 ) Other — — 1 1 ( 1 ) — Balance at June 30, 2023 1,083 1,802 ( 14 ) 2,871 3,976 6,847 Net income — 100 — 100 10 110 Capital contributions from parent company 3 — — 3 — 3 Other comprehensive income — — 4 4 — 4 Cash dividends on common stock — ( 63 ) — ( 63 ) — ( 63 ) Distributions to noncontrolling interests — — — — ( 59 ) ( 59 ) Other 1 — — 1 — 1 Balance at September 30, 2023 $ 1,087 $ 1,839 $ ( 10 ) $ 2,916 $ 3,927 $ 6,843 The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements. 37 Table of Contents Index to Financial Statements 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, 2023 2022 2023 2022 (in millions) (in millions) Operating Revenues: Natural gas revenues (includes revenue taxes of $ 11 , $ 15 , $ 103 , and $ 118 , respectively) $ 689 $ 857 $ 3,417 $ 3,998 Total operating revenues 689 857 3,417 3,998 Operating Expenses: Cost of natural gas 102 294 1,199 1,840 Other operations and maintenance 264 252 879 824 Depreciation and amortization 145 140 429 414 Taxes other than income taxes 42 45 203 208 Total operating expenses 553 731 2,710 3,286 Operating Income 136 126 707 712 Other Income and (Expense): Earnings from equity method investments 32 34 104 105 Interest expense, net of amounts capitalized ( 77 ) ( 65 ) ( 226 ) ( 187 ) Other income (expense), net 19 15 50 47 Total other income and (expense) ( 26 ) ( 16 ) ( 72 ) ( 35 ) Earnings Before Income Taxes 110 110 635 677 Income taxes 28 27 160 161 Net Income $ 82 $ 83 $ 475 $ 516 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) (in millions) Net Income $ 82 $ 83 $ 475 $ 516 Other comprehensive income: Qualifying hedges: Changes in fair value, net of tax of $( 2 ), $ 8 , $( 11 ), and $ 16 , respectively ( 6 ) 19 ( 30 ) 39 Reclassification adjustment for amounts included in net income, net of tax of $ 7 , $( 2 ), $ 15 , and $( 7 ), respectively 16 ( 5 ) 37 ( 17 ) Total other comprehensive income 10 14 7 22 Comprehensive Income $ 92 $ 97 $ 482 $ 538 The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements. 38 Table of Contents Index to Financial Statements SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended September 30, 2023 2022 (in millions) Operating Activities: Net income $ 475 $ 516 Adjustments to reconcile net income to net cash provided from operating activities — Depreciation and amortization, total 429 414 Deferred income taxes 75 109 Natural gas cost under recovery – long-term — 207 Other, net ( 15 ) ( 12 ) Changes in certain current assets and liabilities — -Receivables 776 301 -Natural gas for sale, net of temporary LIFO liquidation 31 ( 136 ) -Prepaid income taxes 12 ( 77 ) -Natural gas cost under recovery 108 ( 124 ) -Other current assets ( 32 ) 7 -Accounts payable ( 346 ) 342 -Natural gas cost over recovery 165 — -Other current liabilities ( 34 ) ( 15 ) Net cash provided from operating activities 1,644 1,532 Investing Activities: Property additions ( 1,151 ) ( 1,063 ) Cost of removal, net of salvage ( 82 ) ( 84 ) Change in construction payables, net ( 38 ) ( 103 ) Other investing activities 45 11 Net cash used for investing activities ( 1,226 ) ( 1,239 ) Financing Activities: Decrease in notes payable, net ( 493 ) ( 749 ) Proceeds — Senior notes 500 500 First mortgage bonds 125 100 Short-term borrowings — 50 Other long-term debt 29 — Redemptions — Short-term borrowings ( 200 ) ( 150 ) Medium-term notes — ( 46 ) Capital contributions from parent company 377 357 Payment of common stock dividends ( 439 ) ( 389 ) Other financing activities ( 1 ) 14 Net cash used for financing activities ( 102 ) ( 313 ) Net Change in Cash, Cash Equivalents, and Restricted Cash 316 ( 20 ) Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 83 48 Cash, Cash Equivalents, and Restricted Cash at End of Period $ 399 $ 28 Supplemental Cash Flow Information: Cash paid during the period for — Interest (net of $ 12 and $ 7 capitalized for 2023 and 2022, respectively) $ 214 $ 186 Income taxes, net 70 193 Noncash transactions — Accrued property additions at end of period 139 10 Right-of-use assets obtained under operating leases 3 — The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements. 39 Table of Contents Index to Financial Statements SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) Assets At September 30, 2023 At December 31, 2022 (in millions) Current Assets: Cash and cash equivalents $ 397 $ 81 Receivables — Customer accounts 242 616 Unbilled revenues 74 453 Other accounts and notes 52 76 Accumulated provision for uncollectible accounts ( 53 ) ( 50 ) Natural gas for sale 406 438 Prepaid expenses 92 93 Natural gas cost under recovery — 108 Other regulatory assets 144 119 Other current assets 108 104 Total current assets 1,462 2,038 Property, Plant, and Equipment: In service 20,459 19,723 Less: Accumulated depreciation 5,454 5,276 Plant in service, net of depreciation 15,005 14,447 Construction work in progress 1,158 909 Total property, plant, and equipment 16,163 15,356 Other Property and Investments: Goodwill 5,015 5,015 Equity investments in unconsolidated subsidiaries 1,243 1,276 Other intangible assets, net of amortization of $ 163 and $ 156 , respectively 19 26 Miscellaneous property and investments 24 28 Total other property and investments 6,301 6,345 Deferred Charges and Other Assets: Operating lease right-of-use assets, net of amortization 47 57 Prepaid pension costs 205 183 Other regulatory assets, deferred 483 497 Other deferred charges and assets 162 145 Total deferred charges and other assets 897 882 Total Assets $ 24,823 $ 24,621 The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements. 40 Table of Contents Index to Financial Statements SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) Liabilities and Stockholder's Equity At September 30, 2023 At December 31, 2022 (in millions) Current Liabilities: Securities due within one year $ 400 $ 400 Notes payable 75 768 Accounts payable — Affiliated 62 104 Other 374 701 Customer deposits 133 125 Accrued taxes 75 77 Accrued interest 79 67 Accrued compensation 85 105 Natural gas cost over recovery 165 — Other regulatory liabilities 44 36 Other current liabilities 146 187 Total current liabilities 1,638 2,570 Long-term Debt 7,657 7,042 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 1,629 1,560 Deferred credits related to income taxes 766 788 Employee benefit obligations 108 120 Operating lease obligations 40 51 Other cost of removal obligations 1,748 1,707 Accrued environmental remediation 202 207 Other deferred credits and liabilities 202 179 Total deferred credits and other liabilities 4,695 4,612 Total Liabilities 13,990 14,224 Common Stockholder's Equity (See accompanying statements) 10,833 10,397 Total Liabilities and Stockholder's Equity $ 24,823 $ 24,621 The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements. 41 Table of Contents Index to Financial Statements 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, 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 Balance at December 31, 2022 $ 10,445 $ ( 79 ) $ 31 $ 10,397 Net income — 309 — 309 Capital contributions from parent company 203 — — 203 Other comprehensive income (loss) — — ( 10 ) ( 10 ) Cash dividends on common stock — ( 146 ) — ( 146 ) Other 1 ( 1 ) — — Balance at March 31, 2023 10,649 83 21 10,753 Net income — 85 — 85 Capital contributions from parent company 40 — — 40 Other comprehensive income — — 7 7 Cash dividends on common stock — ( 147 ) — ( 147 ) Balance at June 30, 2023 10,689 21 28 10,738 Net income — 82 — 82 Capital contributions from parent company 149 — — 149 Other comprehensive income — — 10 10 Cash dividends on common stock — ( 146 ) — ( 146 ) Balance at September 30, 2023 $ 10,838 $ ( 43 ) $ 38 $ 10,833 The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements. 42 Table of Contents Index to Financial Statements 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 44 B Regulatory Matters 49 C Contingencies 60 D Revenue from Contracts with Customers and Lease Income 65 E Consolidated Entities and Equity Method Investments 71 F Financing and Leases 73 G Income Taxes 76 H Retirement Benefits 77 I Fair Value Measurements 80 J Derivatives 84 K A cquisitions an d Dispositions 96 L Segment and Related Information 96 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 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 43 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (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, 2022 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, 2023 and 2022. 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. Recently Adopted Accounting Standards In March 2020 and December 2022, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 , respectively, providing temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of LIBOR through December 31, 2024. See Note 1 to the financial statements under "Recently Adopted Accounting Standards" in Item 8 of the Form 10-K for additional information on the temporary guidance. Certain provisions in PPAs at Southern Power include references to LIBOR. Contract amendments have been executed to change to a SOFR-based interest rate. Southern Power adopted and applied the practical expedients guidance to these PPAs. Additionally, the Registrants referenced LIBOR for certain debt and hedging arrangements. As of July 1, 2023, all of the debt and hedging arrangements of the Registrants have transitioned to a SOFR-based interest rate based on the terms of the agreements. There were no material impacts from the transition to SOFR and no impacts to any existing accounting conclusions. See Note (J) under "Interest Rate Derivatives" for additional information. Goodwill and Other Intangible Assets Goodwill at September 30, 2023 and December 31, 2022 was as follows: Goodwill (in millions) Southern Company $ 5,161 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 goodwill impairment indicators arise. 44 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Other intangible assets were as follows: At September 30, 2023 At December 31, 2022 Gross Carrying Amount Accumulated Amortization Other Intangible Assets, Net Gross Carrying Amount Accumulated Amortization Other Intangible Assets, Net (in millions) (in millions) Southern Company Subject to amortization: Customer relationships $ 211 $ ( 169 ) $ 42 $ 212 $ ( 162 ) $ 50 Trade names 63 ( 50 ) 13 64 ( 44 ) 20 PPA fair value adjustments 390 ( 143 ) 247 390 ( 129 ) 261 Other 5 ( 5 ) — 5 ( 5 ) — Total subject to amortization $ 669 $ ( 367 ) $ 302 $ 671 $ ( 340 ) $ 331 Not subject to amortization: FCC licenses 75 — 75 75 — 75 Total other intangible assets $ 744 $ ( 367 ) $ 377 $ 746 $ ( 340 ) $ 406 Southern Power (*) PPA fair value adjustments $ 390 $ ( 143 ) $ 247 $ 390 $ ( 129 ) $ 261 Southern Company Gas (*) Gas marketing services Customer relationships $ 156 $ ( 143 ) $ 13 $ 156 $ ( 139 ) $ 17 Trade names 26 ( 20 ) 6 26 ( 17 ) 9 Total other intangible assets $ 182 $ ( 163 ) $ 19 $ 182 $ ( 156 ) $ 26 (*) All subject to amortization. Amortization associated with other intangible assets was as follows: Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 (in millions) Southern Company (a) $ 10 $ 27 $ 11 $ 30 Southern Power (b) 5 14 5 15 Southern Company Gas 3 7 4 9 (a) Includes $ 5 million, $ 14 million, $ 5 million, and $ 15 million for the three and nine months ended September 30, 2023 and 2022, respectively, recorded as a reduction to operating revenues. (b) Recorded as a reduction to operating revenues. 45 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 Alabama Power Georgia Power Southern Power Southern Company Gas (in millions) At September 30, 2023 Cash and cash equivalents $ 1,676 $ 621 $ 173 $ 236 $ 397 Restricted cash (a) : Other current assets 176 108 48 18 2 Other deferred charges and assets 38 — 35 3 — Total cash, cash equivalents, and restricted cash (b) $ 1,890 $ 729 $ 256 $ 257 $ 399 At December 31, 2022 Cash and cash equivalents $ 1,917 $ 687 $ 364 $ 131 $ 81 Restricted cash (a) : Other current assets 62 — 60 — 2 Other deferred charges and assets 58 — 56 3 — Total cash, cash equivalents, and restricted cash (b) $ 2,037 $ 687 $ 480 $ 133 $ 83 (a) For Alabama Power, balance at September 30, 2023 reflects proceeds from the issuance of solid waste disposal facility revenue bonds in 2023. For Georgia Power, reflects proceeds from the issuance of solid waste disposal facility revenue bonds in 2022. For Southern Power, reflects $ 18 million at September 30, 2023 resulting from an arbitration interim award held to fund future replacement costs and $ 3 million at both September 30, 2023 and December 31, 2022 held to fund estimated construction completion costs at the Deuel Harvest wind facility. See Note (C) under "General Litigation Matters – Southern Power" for additional information. 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' inventory decrement at September 30, 2023 is expected to be restored prior to year-end. 46 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Storm Damage Reserves See Note 1 to the financial statements in Item 8 of the Form 10-K under "Storm Damage and Reliability Reserves" for additional information. Storm damage reserve activity for the traditional electric operating companies during the nine months ended September 30, 2023 was as follows: Southern Company (*) Alabama Power Georgia Power (*) Mississippi Power (in millions) Balance at December 31, 2022 $ 216 $ 97 $ 83 $ 36 Accrual 42 9 24 9 Weather-related damages ( 242 ) ( 35 ) ( 204 ) ( 3 ) Balance at September 30, 2023 $ 16 $ 71 $ ( 97 ) $ 42 (*) See Note (B) under "Georgia Power – Storm Damage Recovery" for additional information. Asset Retirement Obligations See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information. Following initial criticality on March 6, 2023, Georgia Power recorded AROs of approximately $ 90 million related to Plant Vogtle Unit 3. See Note (B) under "Georgia Power – Nuclear Construction" for additional information on Plant Vogtle Units 3 and 4. In September 2023, Georgia Power recorded a net decrease of approximately $ 175 million to its AROs related to the CCR Rule and the related state rule resulting from changes in estimates, including lower future inflation rates and the timing of closure activities. In June 2023, Alabama Power completed an updated decommissioning cost site study for Plant Farley. The estimated cost of decommissioning based on the study resulted in a decrease in Alabama Power's ARO liability of approximately $ 15 million. See "Nuclear Decommissioning" herein for additional information. Nuclear Decommissioning See Note 6 to the financial statements in Item 8 of the Form 10-K under "Nuclear Decommissioning" for additional information. Site study cost is the estimate to decommission a specific facility as of the site study year. The decommissioning cost estimates are based on removal of the plant from service and prompt dismantlement. The actual decommissioning costs may vary from these estimates because of changes in the assumed date of decommissioning, changes in NRC requirements, or changes in the assumptions used in making these estimates. 47 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) The estimated costs of decommissioning Plant Farley based on Alabama Power's June 2023 site study are as follows: Plant Farley Decommissioning periods: Beginning year 2037 Completion year 2087 (in millions) Site study costs: Radiated structures $ 1,402 Spent fuel management 513 Non-radiated structures 133 Total site study costs $ 2,048 For ratemaking purposes, Alabama Power's decommissioning costs are based on the site study. Significant assumptions used to determine these costs for ratemaking were an estimated inflation rate of 4.5 % and an estimated trust earnings rate of 7.0 %. Amounts previously contributed to the external trust funds are currently projected to be adequate to meet the updated decommissioning obligations. Alabama Power's site-specific estimates of decommissioning costs for Plant Farley are updated every five years . The next site study for Alabama Power is expected to be completed in 2028. Projections of funds are reviewed with the Alabama PSC to ensure that, over time, the deposits and earnings of the funds in the external trust will provide adequate funding to cover the site-specific costs. If necessary, Alabama Power would seek the Alabama PSC's approval to address any changes in a manner consistent with NRC and other applicable requirements. Income Taxes In the third quarter 2023, Georgia Power started generating advanced nuclear PTCs for Plant Vogtle Unit 3 beginning on the in-service date of July 31, 2023. PTCs are recognized as an income tax benefit based on KWH production. In addition, pursuant to the Global Amendments to the Vogtle Joint Ownership Agreements (as defined in Note (B) under "Georgia Power – Nuclear Construction – Joint Owner Contracts"), Georgia Power is purchasing advanced nuclear PTCs for Plant Vogtle Unit 3 from certain other Vogtle Owners. The gain recognized on the purchase of the joint owner PTCs is recognized as an income tax benefit. See Note 1 to the financial statements under "Income Taxes" in Item 8 of the Form 10-K for additional information regarding accounting policies related to income taxes. See Note (B) under "Georgia Power – Nuclear Construction" for additional information regarding Plant Vogtle Units 3 and 4. Also see Note (G) under "Current and Deferred Income Taxes" for additional information. 48 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) (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, 2023 and December 31, 2022 were as follows: Regulatory Clause Balance Sheet Line Item September 30, 2023 December 31, 2022 (in millions) Alabama Power Rate CNP Compliance Other regulatory liabilities, deferred $ 3 $ — Other regulatory assets, current — 47 Rate CNP PPA Other regulatory assets, current 17 18 Other regulatory assets, deferred 90 102 Retail Energy Cost Recovery Other regulatory assets, current 208 102 Other regulatory assets, deferred 80 520 Georgia Power Fuel Cost Recovery (*) Receivables – under recovered fuel clause revenues $ 730 $ — Deferred under recovered fuel clause revenues 1,279 2,056 Mississippi Power Fuel Cost Recovery Receivables – customer accounts, net $ 25 $ 1 Ad Valorem Tax Other regulatory assets, current 3 12 Other regulatory assets, deferred 11 19 Southern Company Gas Natural Gas Cost Recovery Natural gas cost under recovery $ — $ 108 Natural gas cost over recovery 165 — (*) See "Georgia Power – Fuel Cost Recovery" herein for additional information. Alabama Power Certificates of Convenience and Necessity In 2020, the Alabama PSC approved a certificate of convenience and necessity authorizing Alabama Power's construction of Plant Barry Unit 8 and the recovery of estimated in-service costs of $ 652 million. At September 30, 2023, project expenditures associated with Plant Barry Unit 8 totaled approximately $ 583 million, of which $ 578 million and $ 5 million was included in CWIP and property, plant, and equipment in service, respectively. On November 1, 2023, the unit was placed in service. The ultimate outcome of this matter cannot be determined at this time. Excess Accumulated Deferred Income Tax Accounting Order On October 3, 2023, the Alabama PSC issued an order modifying its December 2022 order and authorizing Alabama Power to (i) flow back in 2023 approximately $ 24 million of certain federal excess accumulated deferred income taxes resulting from the Tax Cuts and Jobs Act of 2017 and (ii) make available any remaining balance of excess accumulated deferred income taxes at the end of 2023 for the benefit of customers in 2024 and/or 2025. The ultimate outcome of this matter cannot be determined at this time. 49 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Rate CNP New Plant On March 24, 2023, Alabama Power filed Rate CNP New Plant with the Alabama PSC to recover costs associated with the acquisition of the Central Alabama Generating Station. The filing reflected an annual increase in retail revenues of $ 78 million effective with June 2023 billings. Through May 2023, Alabama Power recovered substantially all costs associated with the Central Alabama Generating Station through Rate RSE, offset by revenues from a power sales agreement. On May 24, 2023, the Central Alabama Generating Station was placed into retail service. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information. Renewable Generation Certificate Through the issuance of a Renewable Generation Certificate (RGC), Alabama Power is authorized by the Alabama PSC to procure renewable capacity and energy and to market the related energy and environmental attributes to customers and other third parties. On April 4, 2023, the Alabama PSC approved two new solar PPAs totaling 160 MWs. Upon approval of these PPAs, Alabama Power had procured solar capacity totaling approximately 490 MWs under the RGC's original 500 -MW limit. On June 14, 2023, the Alabama PSC issued an order approving modifications to Alabama Power's RGC. The modifications authorized Alabama Power to procure an additional 2,400 MWs of renewable capacity and energy by June 14, 2029 and to market the related energy and environmental attributes to customers and other third parties. The modifications also increased the size of allowable renewable projects from 80 MWs to 200 MWs and increased the annual approval limit from 160 MWs to 400 MWs. Reliability Reserve Accounting Order On July 11, 2023, the Alabama PSC issued an order authorizing Alabama Power to expand the existing authority of its reliability reserve to include certain production-related expenses that are intended to maintain reliability in between scheduled generating unit maintenance outages. On August 18, 2023, Alabama Power notified the Alabama PSC of its intent to use a portion of its $ 166 million reliability reserve balance during 2023. The ultimate outcome of this matter cannot be determined at this time. Georgia Power Rate Plans In accordance with the terms of the 2022 ARP, on October 2, 2023, Georgia Power filed the following tariff adjustments to become effective January 1, 2024 pending approval by the Georgia PSC: • increase traditional base tariffs by approximately $ 275 million; • decrease the Environmental Compliance Cost Recovery tariff by approximately $ 99 million; • increase the Demand-Side Management tariffs by approximately $ 10 million; and • increase the Municipal Franchise Fee tariffs by approximately $ 5 million. The ultimate outcome of this matter cannot be determined at this time. Plant Vogtle Unit 3 and Common Facilities Rate Proceeding In compliance with a Georgia PSC order approved in November 2021, Georgia Power increased annual retail base rates by $ 318 million effective August 1, 2023 based on the in-service date of July 31, 2023 for Plant Vogtle Unit 3. See "Plant Vogtle Units 3 and 4 Prudency Proceeding" and "Nuclear Construction" herein for additional information on Plant Vogtle Units 3 and 4. 50 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Plant Vogtle Units 3 and 4 Prudency Proceeding On August 30, 2023, as provided for in the December 2017 Georgia PSC approval of the seventeenth VCM report, Georgia Power filed with the Georgia PSC an application to adjust rates to include reasonable and prudent Plant Vogtle Units 3 and 4 costs (Application). The Application provides the necessary support to justify the reasonableness, prudence, and recovery of $ 8.826 billion in total construction and capital costs, $ 1.07 billion in associated retail rate base items, and the operating costs related to the full operation and output of Plant Vogtle Units 3 and 4. Through the VCM process, the Georgia PSC has verified and approved all expenditures up to the revised approved construction and capital cost of $ 7.3 billion and has reviewed, but not verified and approved, all expenditures through December 31, 2022 above that amount. Also on August 30, 2023, the staff of the Georgia PSC filed a stipulated agreement (Prudency Stipulation) among Georgia Power, the staff of the Georgia PSC, and certain intervenors. The Prudency Stipulation is intended to resolve all issues for determination by the Georgia PSC regarding the reasonableness, prudence, and cost recovery for the remaining costs not already in retail base rates, after considering many of the issues raised by the staff of the Georgia PSC and intervenors in prior VCM proceedings, including the extended construction time, required rework, scheduling of activities, and challenges with testing and productivity. If the Prudency Stipulation is approved, Georgia Power will recover $ 7.562 billion in total construction and capital costs and associated retail rate base items of $ 1.02 billion, which includes AFUDC financing costs above $ 4.418 billion (the Georgia PSC-certified amount) up to $ 7.562 billion. The Prudency Stipulation also provides for the recovery of projected operations and maintenance expenses, depreciation expense, nuclear decommissioning accruals, and property taxes, net of projected production tax credits. After considering construction and capital costs already in retail base rates of $ 2.1 billion and $ 362 million of associated retail rate base items (approved by the Georgia PSC in November 2021), and upon achieving commercial operation of Unit 4, Georgia Power will include in retail rate base the remaining $ 5.462 billion of construction and capital costs as well as $ 656 million of associated retail rate base items. Under the terms of the Prudency Stipulation, when the rate adjustment occurs, Georgia Power's NCCR tariff will cease to be collected and financing costs will be included in Georgia Power's general revenue requirements. Additionally, if commercial operation for Unit 4 is not achieved by March 31, 2024, Georgia Power's ROE used to determine the NCCR tariff and calculate AFUDC will be reduced to zero, which would result in an estimated negative impact to earnings of approximately $ 12 million per month until commercial operation for Unit 4 is achieved. The Prudency Stipulation also provides that as of each Unit's respective first refueling outage, if the respective Unit's performance has materially deviated from expected performance, the Georgia PSC may order Georgia Power to credit customers for operations and maintenance expenses or disallow costs associated with the repair or replacement of any system, structure, or component found to have caused the material deviation in performance if proven to be the result of imprudent engineering, construction, procurement, testing, or start-up. If the Prudency Stipulation is approved by the Georgia PSC, annual retail base revenues will increase approximately $ 729 million and the average retail base rates will be adjusted by approximately 5 % (net of the elimination of the NCCR tariff described above) effective the first day of the month after Unit 4 achieves commercial operation. Georgia Power expects the Georgia PSC to render a final decision on these matters on December 19, 2023. The ultimate outcome of these matters cannot be determined at this time. See "Plant Vogtle Unit 3 and Common Facilities Rate Proceeding" and "Nuclear Construction" herein for additional information on Plant Vogtle Units 3 and 4. Fuel Cost Recovery On May 16, 2023, the Georgia PSC approved a stipulation agreement between Georgia Power and the staff of the Georgia PSC to increase annual fuel billings by 54 %, or approximately $ 1.1 billion, effective June 1, 2023. The increase includes a three-year recovery period for $ 2.2 billion of Georgia Power's under recovered fuel balance at May 31, 2023. Under the approved stipulation agreement, Georgia Power is allowed to adjust its fuel cost recovery rates under an interim fuel rider prior to the next fuel case, subject to a maximum 40 % cumulative change, if its 51 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) under or over recovered fuel balance accumulated since May 31, 2023 exceeds $ 200 million. Georgia Power is scheduled to file its next fuel case no later than February 28, 2026. Changes in fuel rates have no significant effect on Southern Company's or Georgia Power's net income but do impact the related operating cash flows. Integrated Resource Plans In August 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 (a hydro facility), 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. On October 23, 2023, the court granted Georgia Power's and the Georgia PSC's motions to dismiss the RCG petition. RCG has until November 22, 2023 to file a notice of appeal. On October 27, 2023, Georgia Power filed an updated IRP (2023 IRP Update) with the Georgia PSC, which sets forth a plan to support the recent increase in the state of Georgia's projected energy needs since the 2022 IRP. In the 2023 IRP Update, Georgia Power requested the following: • Authority to develop, own, and operate up to 1,400 MWs from three simple cycle combustion turbines at Plant Yates. • Approval to pursue potential acquisition of an additional ownership interest in an existing generation asset within the Southern Company system's retail electric service territory. • Certification of an affiliate PPA with Mississippi Power for 750 MWs starting January 2024 through December 2028. • Certification of a non-affiliate PPA for 230 MWs starting the month after conclusion of the 2023 IRP Update proceeding continuing through December 2028. • Authority to develop, own, and operate up to 1,000 MWs of battery energy storage facilities collocated with existing and new Georgia Power-owned solar facilities. • Approval of transmission projects necessary to support the generation resources requested in the 2023 IRP Update. The schedule for the Georgia PSC to consider the 2023 IRP Update has not been determined. Georgia Power has requested that the Georgia PSC evaluate the 2023 IRP Update by the end of April 2024. The ultimate outcome of these matters cannot be determined at this time. Storm Damage Recovery Georgia Power is recovering $ 31 million annually under the 2022 ARP for incremental operating and maintenance costs of damage from major storms to its transmission and distribution facilities. During August 2023, Hurricane Idalia caused significant damage to Georgia Power's transmission and distribution facilities. The incremental restoration costs related to this hurricane deferred in the regulatory asset for storm damage totaled approximately $ 110 million. At September 30, 2023, Georgia Power's regulatory asset balance related to storm damage was $ 97 million. The rate of storm damage cost recovery is expected to be adjusted in future regulatory proceedings as necessary. As a result of this regulatory treatment, costs related to storms are not expected to have a material impact on Southern Company's or Georgia Power's net income but do impact the related operating cash flows. 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. 52 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 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 July 2023 and March 2024, respectively, is as follows: (in millions) Base project capital cost forecast (a)(b) $ 10,736 Construction contingency estimate 17 Total project capital cost forecast (a)(b) 10,753 Net investment at September 30, 2023 (b) ( 10,495 ) Remaining estimate to complete $ 258 (a) Includes approximately $ 610 million of costs that are not shared with the other Vogtle Owners, including $ 33 million of construction monitoring costs approved for recovery by the Georgia PSC in its nineteenth VCM order, and approximately $ 567 million of incremental costs under the cost-sharing provisions of the joint ownership agreements described below. Excludes financing costs expected to be capitalized through AFUDC of approximately $ 420 million, of which $ 385 million had been accrued through September 30, 2023. (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 $ 3.5 billion, of which $ 3.4 billion had been incurred through September 30, 2023. Georgia Power placed Unit 3 in service on July 31, 2023. See "Plant Vogtle Unit 3 and Common Facilities Rate Proceeding" herein for additional information. As part of its ongoing processes, Southern Nuclear continues to evaluate cost and schedule forecasts for Unit 4 on a regular basis to incorporate current information available, particularly in the areas of start-up testing and related test results, engineering support, system turnovers, and workforce statistics. Southern Nuclear establishes aggressive target values for monthly testing and system turnover activities, which are reflected in the site work plan for Unit 4. 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 53 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 plans. As of September 30, 2023, 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 approximately $ 200 million and is included in the total project capital cost forecast. During the first nine months of 2023, established construction contingency totaling $ 43 million was assigned to the base capital cost forecast for costs primarily associated with the Unit 3 schedule extension and completion of start-up and pre-operational testing, including continued need of support resources for Unit 3 testing, as well as additional craft and support resources and subcontract work for Unit 4. Hot functional testing for Unit 4 was completed on May 1, 2023. On July 20, 2023, Southern Nuclear announced that all Unit 4 ITAACs had been submitted to the NRC, and, on July 28, 2023, the NRC published its 103(g) finding that the accepted criteria in the combined license for Unit 4 had been met, which allowed nuclear fuel to be loaded and start-up testing to begin. Fuel load for Unit 4 was completed on August 19, 2023. On October 6, 2023, Georgia Power announced that during the start-up and pre-operational testing for Plant Vogtle Unit 4, Southern Nuclear identified a motor fault in one of four reactor coolant pumps (RCPs) and has started the process to replace this RCP with an on-site spare RCP from inventory. Considering this remediation and the remaining pre-operational testing, Unit 4 is projected to be placed in service during the first quarter 2024. With Unit 3's four RCPs operating as designed, Southern Nuclear believes that the motor fault on this single Unit 4 RCP is an isolated event. However, any findings related to the root cause of the motor fault on the single Unit 4 RCP could require engineering changes or remediation related to the other seven Unit 3 and Unit 4 RCPs. The projected schedule for Unit 4 significantly depends on the pace and success of replacing the RCP, which involves removing and re-installing commodities around the RCP. As Unit 4 completes the RCP replacement, including any associated repairs to other RCPs, and transitions further into testing, ongoing and potential future challenges include the management of contractors and vendors, subcontractor performance, the availability of materials and parts, and/or related cost escalation; the pace of remaining work package closures; the availability of craft, supervisory, and technical support resources; and the timeframe and duration of final component and pre-operational testing. New challenges also may continue to arise as Unit 4 moves further into 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. With the receipt of the NRC's 103(g) findings for Units 3 and 4 in August 2022 and July 2023, respectively, the site is subject to the NRC's operating reactor oversight process and must meet applicable technical and operational requirements contained in its operating license. Various design and other licensing-based compliance matters may result in additional license amendment requests or require other resolution. If any license amendment requests or other licensing-based compliance issues are not resolved in a timely manner, there may be delays in the Unit 4 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 March 2024 for Unit 4, including the joint owner cost sharing impacts described below, is estimated to result in additional base capital costs for Georgia Power of up to $ 25 million per month, as well as the related AFUDC and any additional related construction, support resources, or testing costs. Pursuant to Georgia Power's Application and the Prudency Stipulation (as discussed under "Plant Vogtle Units 3 and 4 Prudency Proceeding" herein), any further changes to the capital cost forecast are not expected to be recoverable through regulated rates and will be required to be charged to income. Such charges could be material. 54 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 paid 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, of which Georgia Power's share is $ 8.4 billion (VCM 19 Forecast Amount), plus $ 800 million; (ii) Georgia Power was responsible for 55.7 % of actual qualifying construction costs between $ 800 million and $ 1.6 billion over the VCM 19 Forecast Amount (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 was responsible for 65.7 % of qualifying construction costs between $ 1.6 billion and $ 2.1 billion over the VCM 19 Forecast Amount (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 was revised and exceeded the VCM 19 Forecast Amount by more than $ 2.1 billion, each of the other Vogtle Owners had a one-time option at the time the project budget cost forecast was 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 VCM 19 Forecast Amount plus $ 2.1 billion. 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- 55 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 and all the Vogtle Owners voted to continue construction. The filing of the Application with the Georgia PSC, which included Georgia Power's public announcement of its intention not to submit for rate recovery an amount that is greater than the first 6 % of costs during any six-month VCM reporting period, triggered the requirement for a vote to continue construction and all the Vogtle Owners voted to continue construction. See "Plant Vogtle Units 3 and 4 Prudency Proceeding" herein for additional information on Georgia Power's prudency application filing. Georgia Power and the other Vogtle Owners did 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. The other Vogtle Owners notified Georgia Power that they believed the project capital cost forecast approved by the Vogtle Owners in February 2022 triggered the tender provisions. In June 2022 and July 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options. Georgia Power did not accept these purported tender exercises. In June 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 had 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. In July 2022, Georgia Power filed its answers in the lawsuits filed by MEAG Power and OPC 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. In September 2022, Dalton filed complaints in each of these lawsuits. Also in September 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 reimburse 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 $ 92 million based on the current project capital cost forecast; and (iii) Georgia Power will reimburse 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. In October 2022, MEAG Power and Georgia Power filed a notice of settlement and voluntary dismissal of their pending litigation, including Georgia Power's counterclaim, and Dalton dismissed its related complaint. On October 5, 2023 and October 17, 2023, Georgia Power reached agreements with OPC and Dalton, respectively, to resolve its respective dispute with each of OPC and Dalton regarding the proper interpretation of the cost-sharing and tender provisions of the joint ownership agreements relating to the Global Amendments. Under the terms of the agreements with OPC and Dalton, among other items, (i) each of OPC and Dalton retracted its exercise of the tender option and will retain its full ownership interest in Plant Vogtle Units 3 and 4, (ii) Georgia Power made payments immediately after execution of the agreements of $ 308 million and $ 17 million to OPC and Dalton, respectively, representing payment for a portion of each of OPC's and Dalton's costs of construction for Plant Vogtle Units 3 and 4 previously incurred, (iii) Georgia Power will pay a portion of each of OPC's and Dalton's further 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 be in an aggregate amount of approximately $ 105 million and $ 6 million for OPC and Dalton, respectively, based on the current project capital cost forecast, and (iv) Georgia Power will pay 66 % of each of OPC's and Dalton's costs of construction with respect to any amounts above the current project capital cost forecast, with no further adjustment for force majeure costs. On October 23, 2023, OPC, Dalton, and 56 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Georgia Power filed a stipulation of dismissal with prejudice of their litigation described above, including Georgia Power's counterclaims. Georgia Power recorded pre-tax charges to income through the fourth quarter 2022 of $ 407 million ($ 304 million after tax) associated with the cost-sharing provisions of the Global Amendments, including the settlement with MEAG Power. Based on the current project capital cost forecast and the settlements with OPC and Dalton described above, Georgia Power recorded a pre-tax charge to income of approximately $ 160 million ($ 120 million after tax) in the third quarter 2023. These charges are included in the total project capital cost forecast and will not be recovered from retail customers. 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, 2023, Georgia Power had recovered approximately $ 3.0 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 December 2022, the Georgia PSC approved Georgia Power's filing to increase the NCCR tariff by $ 36 million annually, effective January 1, 2023. On November 1, 2023, Georgia Power filed a request to continue the current NCCR tariff for 2024, pending Georgia PSC approval. See "Plant Vogtle Units 3 and 4 Prudency Proceeding" herein for additional information on the NCCR tariff following commercial operation of Unit 4. 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 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 at that time) to 10.00 % effective January 1, 2016, (b) from 10.00 % to 8.30 %, 57 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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. On July 31, 2023, Georgia Power notified the Georgia PSC that Unit 3 had reached commercial operation, and, effective August 1, 2023, Georgia Power adjusted retail base rates for Unit 3 and the common facilities shared between Units 3 and 4 (see "Plant Vogtle Unit 3 and Common Facilities Rate Proceeding" herein for additional information). On August 19, 2023, fuel load for Unit 4 was completed, and, on August 30, 2023, Georgia Power filed an application to adjust rates to include reasonable and prudent Plant Vogtle Units 3 and 4 costs (see "Plant Vogtle Units 3 and 4 Prudency Proceeding" herein 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 $ 300 million in 2022 and are estimated to have negative earnings impacts of approximately $ 290 million in 2023 and $ 60 million in 2024. 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. See "Plant Vogtle Units 3 and 4 Prudency Proceeding" herein for additional information on impacts to the NCCR tariff if commercial operation for Unit 4 is not achieved by March 31, 2024. 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 August 2021 stipulation confirmed that 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. See "Plant Vogtle Units 3 and 4 Prudency Proceeding" herein for additional information on Georgia Power's request for verification and approval of costs above $ 7.3 billion for inclusion in rate base. The Georgia PSC 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 three additional VCM reports, which reflected $ 1.6 billion of additional construction capital costs incurred through December 31, 2022. Georgia Power filed its twenty-ninth VCM report with the Georgia PSC on August 30, 2023, which reflects the revised capital cost forecast as of June 30, 2023 of $ 10.6 billion and $ 390 million of construction capital costs incurred from January 1, 2023 through June 30, 2023. The ultimate outcome of these matters cannot be determined at this time. Mississippi Power Performance Evaluation Plan On June 13, 2023, the Mississippi PSC approved Mississippi Power's annual retail PEP filing for 2023 indicating no change in retail rates. 58 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Ad Valorem Tax Adjustment On May 2, 2023, the Mississippi PSC approved Mississippi Power's annual ad valorem tax adjustment filing for 2 023, resulting in a $ 7 million annual decrease in revenues effective with the first billing cycle of June 2023. Mississippi Power's operating revenues are adjusted for differences in actual recoverable ad valorem taxes and amounts billed in accordance with the currently approved cost recovery rate. Accordingly, changes in the billing factor should have no significant effect on Mississippi Power's revenues or net income but will affect operating cash flows. Environmental Compliance Overview Plan On April 4, 2023, the Mississip pi PSC approved Mississippi Power's annual ECO Plan filing for 2023, resulting in a $ 3 million annual increase in revenues effective with the first billing cycle of May 2023. System Restoration Rider On April 4, 2023 , th e Mississippi PSC approved Mississippi Power ' s annual SRR filing, which indicated no change in retail rates. Missi ssippi Power's minimum annual SRR accrual was increased from $ 8 million to $ 12 million. Municipal and Rural Associations Tariff On October 27, 2023, the FERC approved a settlement agreement filed by Mississippi Power and Cooperative Energy on July 31, 2023 related to Mississippi Power's July 2022 request for a $ 23 million increase in annual wholesale base revenues under the MRA tariff. The settlement agreement provides for a $ 16 million increase in annual wholesale base revenues, effective September 14, 2022, and a refund to customers of approximately $ 6 million primarily related to the difference between the approved rates and interim rates. Integrated Resource Plans In October 2023, Mississippi Power signed an affiliate PPA with Georgia Power for 750 MWs of capacity and energy starting January 2024 through December 2028. In order to fulfill this agreement and serve the interests of customers, Mississippi Power will need to delay the anticipated retirement of certain electric generating units, as identified in its 2021 IRP. Mississippi Power is expected to file its next IRP in April 2024 in accordance with the rules and orders of the Mississippi PSC. 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 2023 were as follows: Utility Program Nine Months Ended September 30, 2023 (in millions) Nicor Gas Investing in Illinois $ 320 Virginia Natural Gas SAVE 56 Atlanta Gas Light System Reinforcement Rider 84 Chattanooga Gas Pipeline Replacement Program 7 Total $ 467 59 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Nicor Gas On June 15, 2023, the Illinois Commission concluded its review of the Qualifying Infrastructure Plant (QIP) capital investments by Nicor Gas for calendar year 2019 under the QIP Rider, also referred to as Investing in Illinois, program. The Illinois Commission disallowed $ 32 million of the $ 415 million of capital investments commissioned in 2019, together with the related return on investment. Nicor Gas recorded a pre-tax charge to income in the second quarter 2023 of $ 38 million ($ 28 million after tax) associated with the disallowance of capital investments. The disallowance is reflected on the statement of income as an $ 8 million reduction to revenues and a $ 30 million increase in operating expenses. On August 3, 2023, the Illinois Commission denied a rehearing request filed by Nicor Gas. On August 24, 2023, Nicor Gas filed a notice of appeal with the Illinois Appellate Court. Nicor Gas defends these investments in infrastructure as prudently incurred. The Illinois Commission has not yet conducted its review for calendar years 2020 through 2022 or the nine months ended September 30, 2023. Any further disallowance by the Illinois Commission could be material. The ultimate outcome of these matters cannot be determined at this time. Rate Proceedings Atlanta Gas Light On July 14, 2023, 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, 2024. Resolution of the GRAM filing is expected by December 31, 2023, with new rates effective January 1, 2024. The ultimate outcome of this matter cannot be determined at this time. Virginia Natural Gas On August 28, 2023, the Virginia Commission approved a stipulation agreement related to Virginia Natural Gas' August 2022 general base rate case filing. The approved agreement provides for a $ 48 million increase in annual base rate revenues, including the recovery of investments under the SAVE program, an ROE of 9.70 %, and an equity ratio of 49.06 %. Interim rates became effective January 1, 2023, subject to refund, based on Virginia Natural Gas' original requested increase of approximately $ 69 million. Refunds to customers related to the difference between the approved rates effective September 1, 2023 and the interim rates will be completed later in the fourth quarter 2023. (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. 60 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Southern Company and Mississippi Power In 2010, the DOE, through a cooperative agreement with SCS, agreed to fund $ 270 million of the Kemper County energy facility through the grants awarded to the project by the DOE under the Clean Coal Power Initiative Round 2. In 2016, additional DOE grants in the amount of $ 137 million were awarded to the Kemper County energy facility. In 2018, Mississippi Power filed with the DOE its request for property closeout certification under the contract related to the $ 387 million of total grants received. In 2020, Mississippi Power and Southern Company executed an agreement with the DOE completing Mississippi Power's request, which enabled Mississippi Power to proceed with full dismantlement of the abandoned gasifier-related assets and site restoration activities. In connection with the DOE closeout discussions, in 2019, the Civil Division of the Department of Justice informed Southern Company and Mississippi Power of a civil investigation related to the DOE grants. On August 4, 2023, the U.S. District Court for the Northern District of Georgia unsealed a civil action in which defendants Southern Company, SCS, and Mississippi Power are alleged to have violated certain provisions of the False Claims Act by fraudulently inducing the DOE to disburse funds pursuant to the grants. The federal government declined to intervene in the action. On October 30, 2023, the plaintiff, a former SCS employee, filed an amended complaint, again alleging certain violations of the False Claims Act. The plaintiff seeks to recover all damages incurred personally and on behalf of the government caused by the defendants' alleged violations, as well as treble damages and attorneys' fees, among other relief. The ultimate outcome of this matter cannot be determined at this time; however, an adverse outcome could have a material impact on Southern Company's and Mississippi Power's financial statements. Alabama Power In September 2022, Mobile Baykeeper 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 prevent implementation of Alabama Power's closure plan and the development of a closure plan that satisfies regulations governing CCR requirements. On December 19, 2022, Alabama Power filed a motion to dismiss the case. On September 30, 2023, the magistrate judge issued a report and recommendation to deny Alabama Power's motion to dismiss, to which Alabama Power has filed objections. On January 31, 2023, the EPA issued a Notice of Potential Violations associated with Alabama Power's plan to close the Plant Barry ash pond. Ala bama Power has affirmed to the EPA its position that it is in compliance with CCR requirements. The ultimate outcome of these matters cannot be determined at this time but could have a material impact on Alabama Power's ARO estimates and cash flows. See Note 6 to the financial statements in Item 8 of the Form 10-K for a discussion of Alabama Power's ARO liabilities. Georgia Power Municipal Franchise Fees 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 61 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) issue of class certification as moot. Also in December 2021, the plaintiffs filed a petition for writ of certiorari to the Georgia Supreme Court, which was denied on January 27, 2023. On February 6, 2023, the plaintiffs filed a motion for reconsideration with the Georgia Supreme Court, which was denied on February 16, 2023. This matter is now concluded. Plant Scherer In July 2020, a group of individual plaintiffs filed a complaint, which was amended in December 2022, in the Superior Court of Fulton County, Georgia against Georgia Power alleging that the construction and operation of Plant Scherer has impacted groundwater 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. In December 2022, the Superior Court of Fulton County, Georgia granted Georgia Power's motion to transfer the case to the Superior Court of Monroe County, Georgia. On May 9, 2023, the Superior Court of Monroe County, Georgia denied Georgia Power's motion to dismiss the case for lack of subject matter jurisdiction. On July 27, 2023, the Superior Court of Monroe County, Georgia denied the remaining motions to dismiss certain claims and plaintiffs that Georgia Power filed at the outset of the case. In October 2021, February 2022, and January 2023, a total of eight 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 sought an unspecified amount of monetary damages including punitive damages. After Georgia Power removed these cases to the U.S. District Court for the Middle District of Georgia, the plaintiffs voluntarily dismissed their complaints without prejudice in November 2022 and January 2023. On May 12, 2023, the plaintiffs in the cases originally filed in October 2021, February 2022, and January 2023 refiled their eight complaints in the Superior Court of Monroe County, Georgia. Also on May 12, 2023, a new complaint was filed in the Superior Court of Monroe County, Georgia against Georgia Power alleging that the construction and operation of Plant Scherer have impacted groundwater and air, resulting in alleged personal injuries. The plaintiff seeks an unspecified amount of monetary damages, including punitive damages. On May 18, 2023, Georgia Power removed all of these cases to the U.S. District Court for the Middle District of Georgia. The plaintiffs are requesting the court remand the cases back to the Superior Court of Monroe County, Georgia. The amount of possible loss, if any, 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 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 62 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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. In March 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. In May 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. In June 2022, Mississippi Power filed with the trial court a motion to dismiss the complaint with prejudice, which was granted on March 15, 2023. On March 28, 2023, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Fifth Circuit. An adverse outcome in this proceeding could have a material impact on Mississippi Power's financial statements. Southern Power In July 2021, Southern Power and certain of its subsidiaries filed an arbitration demand with the American Arbitration Association against First Solar for defective design of actuators on trackers and inverters installed by First Solar under the engineering, procurement, and construction agreements associated with five solar projects owned by Southern Power and partners and managed by Southern Power. In February 2023, arbitration hearings concluded. In July 2023, an interim award of approximately $ 36 million was entered in favor of Southern Power and was subsequently received in September 2023. The interim award included $ 18 million representing recovery of losses associated with replacement costs, penalty payments, and lost revenues previously incurred. This recovery is reflected in Southern Power's third quarter and year-to-date 2023 statements of income as an $ 11 million reduction to other operations and maintenance expense and a $ 7 million increase in other revenues, with $ 6 million allocated through noncontrolling interests to Southern Power's partners. The remaining $ 18 million in award proceeds received in excess of the losses incurred is recognized on the balance sheet at September 30, 2023 as restricted cash and a liability to fund future replacement costs. The parties are awaiting issuance of a final award. The ultimate outcome of this matter cannot be determined at this time. 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 $ 14 million and $ 15 million at September 30, 2023 and December 31, 2022, 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 $ 234 million and $ 256 million at September 30, 2023 and December 31, 2022, 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. 63 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Other Matters Traditional Electric Operating Companies In April 2019, Bellsouth Telecommunications d/b/a AT&T Alabama (AT&T) filed a complaint against Alabama Power with the FCC alleging that the pole rental rate AT&T is required to pay pursuant to the parties' joint use agreement is unjust and unreasonable under federal law. The complaint sought a new rate and approximately $ 87 million in refunds of alleged overpayments for the preceding six years . In August 2019, the FCC stayed the case in favor of arbitration, which AT&T has not pursued. The ultimate outcome of this matter cannot be determined at this time, but an adverse outcome could have a material impact on the financial statements of Southern Company and Alabama Power. Georgia Power and Mississippi Power have joint use agreements with other AT&T affiliates. Mississippi Power In August 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. In October 2022, Mississippi Power filed an administrative appeal with the Mississippi DOR contesting the assessment. On October 2, 2023, Mississippi Power and the Mississippi DOR reached a settlement agreement on an assessment of approximately $ 11 million including associated penalties and interest, $ 7 million of which was previously paid by Mississippi Power. On October 5, 2023, Mississippi Power made a final $ 4 million payment and considers this matter closed. Pursuant to an accounting order approved by the Mississippi PSC in December 2022, Mississippi Power deferred $ 3 million of the agreed upon assessment related to taxes and associated interest to a regulatory asset for disposition in a future rate proceeding. 64 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) (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, 2023 and 2022: Southern Company Alabama Power Georgia Power Mississippi Power Southern Power Southern Company Gas (in millions) Three Months Ended September 30, 2023 Operating revenues Retail electric revenues Residential $ 2,543 $ 969 $ 1,473 $ 101 $ — $ — Commercial 1,845 599 1,151 95 — — Industrial 1,116 498 528 90 — — Other 30 3 25 2 — — Total retail electric revenues 5,534 2,069 3,177 288 — — Natural gas distribution revenues Residential 217 — — — — 217 Commercial 56 — — — — 56 Transportation 275 — — — — 275 Industrial 4 — — — — 4 Other 60 — — — — 60 Total natural gas distribution revenues 612 — — — — 612 Wholesale electric revenues PPA energy revenues 317 66 31 2 226 — PPA capacity revenues 151 26 13 3 110 — Non-PPA revenues 101 15 21 137 126 — Total wholesale electric revenues 569 107 65 142 462 — Other natural gas revenues Gas marketing services 54 — — — — 54 Other natural gas revenues 8 — — — — 8 Total natural gas revenues 62 — — — — 62 Other revenues 330 54 146 10 18 — Total revenue from contracts with customers 7,107 2,230 3,388 440 480 674 Other revenue sources (*) ( 127 ) ( 147 ) ( 151 ) ( 4 ) 173 15 Total operating revenues $ 6,980 $ 2,083 $ 3,237 $ 436 $ 653 $ 689 65 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Southern Company Alabama Power Georgia Power Mississippi Power Southern Power Southern Company Gas (in millions) Nine Months Ended September 30, 2023 Operating revenues Retail electric revenues Residential $ 5,717 $ 2,277 $ 3,202 $ 238 $ — $ — Commercial 4,464 1,493 2,733 238 — — Industrial 2,770 1,324 1,195 251 — — Other 84 10 68 6 — — Total retail electric revenues 13,035 5,104 7,198 733 — — Natural gas distribution revenues Residential 1,443 — — — — 1,443 Commercial 370 — — — — 370 Transportation 878 — — — — 878 Industrial 33 — — — — 33 Other 228 — — — — 228 Total natural gas distribution revenues 2,952 — — — — 2,952 Wholesale electric revenues PPA energy revenues 853 196 66 8 601 — PPA capacity revenues 490 130 38 36 289 — Non-PPA revenues 199 49 30 315 312 — Total wholesale electric revenues 1,542 375 134 359 1,202 — Other natural gas revenues Gas marketing services 358 — — — — 358 Other natural gas revenues 28 — — — — 28 Total natural gas revenues 386 — — — — 386 Other revenues 971 159 422 31 46 — Total revenue from contracts with customers 18,886 5,638 7,754 1,123 1,248 3,338 Other revenue sources (*) 322 ( 218 ) 51 14 438 79 Total operating revenues $ 19,208 $ 5,420 $ 7,805 $ 1,137 $ 1,686 $ 3,417 66 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 (*) 1,262 316 796 ( 21 ) 170 14 Total operating revenues $ 8,378 $ 2,444 $ 3,889 $ 510 $ 1,180 $ 857 67 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 (*) 2,633 708 1,451 3 461 50 Total operating revenues $ 22,232 $ 6,023 $ 9,218 $ 1,279 $ 2,618 $ 3,998 (*) 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 (including those related to fuel costs) that meet other scope exceptions for revenues from contracts with customers at the traditional electric operating companies. 68 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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, 2023 and December 31, 2022: Southern Company Alabama Power Georgia Power Mississippi Power Southern Power Southern Company Gas (in millions) Accounts Receivable At September 30, 2023 $ 2,680 $ 858 $ 1,175 $ 106 $ 138 $ 331 At December 31, 2022 3,123 696 922 92 237 1,107 Contract Assets At September 30, 2023 $ 267 $ 6 $ 146 $ — $ — $ 41 At December 31, 2022 156 2 89 — — — Contract Liabilities At September 30, 2023 $ 62 $ — $ 8 $ 2 $ 8 $ — At December 31, 2022 45 4 9 — 1 — Contract assets for Georgia Power primarily relate 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 primarily relate to cash collections recognized in advance of revenue for unregulated service agreements. At September 30, 2023, Southern Company Gas' contract assets relate to work performed on an energy efficiency enhancement and upgrade contract with the U.S. General Services Administration. Southern Company Gas receives cash advances from a third-party financial institution to fund work performed, of which approximately $ 51 million had been received at September 30, 2023. These advances have been accounted for as long-term debt on the balance sheets. See Note 1 to the financial statements under "Affiliate Transactions" in Item 8 of the Form 10-K for additional information regarding the construction contract. At September 30, 2023 and December 31, 2022, Southern Company's unregulated distributed generation business had contract assets of $ 75 million and $ 65 million, respectively, and contract liabilities of $ 47 million and $ 32 million, respectively, for outstanding performance obligations. Revenues recognized in the three and nine months ended September 30, 2023, which were included in contract liabilities at December 31, 2022, were immaterial for the applicable Registrants. Contract liabilities are primarily classified as current on the balance sheets as the corresponding revenues are generally expected to be recognized within one year. Remaining Performance Obligations The Subsidiary Registrants may enter into long-term contracts with customers in which revenues are recognized as performance obligations are satisfied over the contract term. For Alabama Power, Georgia Power, 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 primarily relate to the U.S. General Services Administration contract described above. Southern Company's unregulated distributed generation business also has partially satisfied performance obligations related to certain 69 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) fixed price contracts. Revenues from contracts with customers related to these performance obligations remaining at September 30, 2023 are expected to be recognized as follows: 2023 (remaining) 2024 2025 2026 2027 Thereafter (in millions) Southern Company $ 166 $ 599 $ 359 $ 318 $ 319 $ 2,245 Alabama Power 10 24 8 — — — Georgia Power 23 66 34 14 14 23 Southern Power 84 356 302 303 310 2,233 Southern Company Gas 4 29 — — — — Lease Income Lease income for the three and nine months ended September 30, 2023 and 2022 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, 2023 Lease income - interest income on sales-type leases $ 6 $ — $ — $ 4 $ 2 $ — Lease income - operating leases 36 3 7 — 21 9 Variable lease income 134 — — — 144 — Total lease income $ 176 $ 3 $ 7 $ 4 $ 167 $ 9 For the Nine Months Ended September 30, 2023 Lease income - interest income on sales-type leases $ 18 $ — $ — $ 11 $ 7 $ — Lease income - operating leases 129 32 22 2 64 27 Variable lease income 327 1 — — 351 — Total lease income $ 474 $ 33 $ 22 $ 13 $ 422 $ 27 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 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. 70 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) (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 Company At September 30, 2023 and December 31, 2022, Southern Holdings had equity method investments totaling $ 126 million and $ 112 million, respectively, primarily related to investments in venture capital funds focused on energy and utility investments. Earnings from these investments were immaterial for all periods presented. 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. SP Solar and SP Wind At September 30, 2023 and December 31, 2022, SP Solar had total assets of $ 5.8 billion and $ 5.9 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 the limited partner 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, 2023 and December 31, 2022, SP Wind had total assets of $ 2.2 billion, total liabilities of $ 184 million and $ 169 million, respectively, and noncontrolling interests of $ 38 million and $ 39 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, 2023 and December 31, 2022, the other VIEs had total assets of $ 1.7 billion and $ 1.8 billion, respectively, total liabilities of $ 0.2 billion, and noncontrolling interests of $ 0.8 billion. Under the terms of the partnership agreements, distributions of all available cash are required each month or quarter and additional distributions require partner consent. 71 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Equity Method Investments At December 31, 2022, Southern Power had equity method investments in wind and battery energy storage projects totaling $ 49 million. During the first quarter 2023, Southern Power sold its remaining equity method investments in the projects and received proceeds of $ 50 million. Earnings (loss) from these investments, including the gains associated with the sales, were immaterial for all periods presented. Southern Company Gas Equity Method Investments The carrying amounts of Southern Company Gas' equity method investments at September 30, 2023 and December 31, 2022 and related earnings from those investments for the three and nine months ended September 30, 2023 and 2022 were as follows: Investment Balance September 30, 2023 December 31, 2022 (in millions) SNG $ 1,210 $ 1,243 Other 33 33 Total $ 1,243 $ 1,276 Three Months Ended September 30, Nine Months Ended September 30, Earnings from Equity Method Investments 2023 2022 2023 2022 (in millions) SNG $ 32 $ 34 $ 104 $ 104 Other — — — 1 Total $ 32 $ 34 $ 104 $ 105 72 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) (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, 2023, committed credit arrangements with banks were as follows: Expires Company 2024 2025 2026 2028 Total Unused Expires within One Year (in millions) Southern Company parent (a) $ 150 $ — $ — $ 1,850 $ 2,000 $ 1,998 $ 150 Alabama Power — — 650 700 1,350 1,350 — Georgia Power — — — 1,750 1,750 1,726 — Mississippi Power — 125 150 — 275 275 — Southern Power (a)(b) — — — 600 600 589 — Southern Company Gas (c) 100 — — 1,500 1,600 1,598 100 SEGCO 30 — — — 30 30 30 Southern Company $ 280 $ 125 $ 800 $ 6,400 $ 7,605 $ 7,566 $ 280 (a) Arrangement expiring in 2028 represents a $ 2.45 billion combined arrangement for Southern Company and Southern Power as borrowers. Pursuant to the combined facility, the allocations between Southern Company and Southern Power may be adjusted. (b) Does not include Southern Power Company's $ 75 million and $ 100 million continuing letter of credit facilities for standby letters of credit, expiring in 2025 and 2026, respectively, of which $ 9 million and $ 16 million, respectively, was unused at September 30, 2023. In March 2023, Southern Power amended the $ 100 million letter of credit facility, which, among other things, extended the expiration date from 2025 to 2026 and increased the amount from $ 75 million. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities. (c) 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 2028. Southern Company Gas' committed credit arrangement expiring in 2028 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 2028, the allocations between Southern Company Gas Capital and Nicor Gas may be adjusted. Nicor Gas is also the borrower under a $ 100 million credit arrangement expiring in 2024. As reflected in the table above, in May 2023, Southern Company and Southern Power combined and extended their multi-year credit arrangements previously maturing in 2026, resulting in a single aggregate $ 2.45 billion facility (currently allocated $ 1.85 billion for Southern Company and $ 600 million for Southern Power) maturing in 2028. Pursuant to the combined facility, the allocations between Southern Company and Southern Power may be adjusted. Alabama Power, Georgia Power, and Southern Company Gas Capital, along with Nicor Gas, amended and restated certain of their multi-year credit arrangements, which, among other things, extended the maturity dates from 2026 to 2028. Mississippi Power amended and restated certain of its multi-year credit arrangements aggregating $ 150 million, which, among other things, extended the maturity dates from 2024 to 2026. Nicor Gas also entered into a $ 100 million credit arrangement maturing in 2024 to replace its $ 250 million credit arrangement that expired in 2023. In June 2023, Southern Company also entered into a new $ 150 million credit arrangement maturing in 2024. In August 2023, Alabama Power amended and restated one of its multi-year credit arrangements, which, among other things, extended the maturity date from 2024 to 2026 and increased the borrowing capacity from $ 550 million to $ 650 million. 73 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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 provisions to other indebtedness (including guarantee obligations) that are restricted only to the indebtedness of the individual company. The 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, 2023, 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. A portion of the unused credit with banks is allocated to provide liquidity support to certain revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants, Nicor Gas, and SEGCO. At September 30, 2023, outstanding variable rate demand revenue bonds of the traditional electric operating companies with allocated liquidity support totaled approximately $ 1.7 billion (comprised of approximately $ 818 million at Alabama Power, $ 819 million at Georgia Power, and $ 69 million at Mississippi Power). In addition, at September 30, 2023, Alabama Power and Georgia Power had approximately $ 120 million and $ 325 million, respectively, of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months. The variable rate demand revenue bonds and fixed rate revenue bonds required to be remarketed within the next 12 months are classified as long-term debt on the balance sheets as a result of available long-term committed credit. Convertible Senior Notes In February 2023, Southern Company issued $ 1.5 billion aggregate principal amount of Series 2023A 3.875 % Convertible Senior Notes due December 15, 2025 (Series 2023A Convertible Senior Notes). In March 2023, Southern Company issued an additional $ 225 million aggregate principal amount of the Series 2023A Convertible Senior Notes upon the exercise by the initial purchasers of their over-allotment option. Interest on the Series 2023A Convertible Senior Notes is payable semiannually, which began on June 15, 2023. The Series 2023A Convertible Senior Notes will mature on December 15, 2025, unless earlier converted or repurchased, but are not redeemable at the option of Southern Company. The Series 2023A Convertible Senior Notes are direct, unsecured, and unsubordinated obligations of Southern Company, ranking equally with all of Southern Company's other unsecured and unsubordinated indebtedness from time to time outstanding, and are effectively subordinated to all secured indebtedness of Southern Company. Holders may convert their Series 2023A Convertible Senior Notes at their option prior to the close of business on the business day preceding September 15, 2025, but only under the following circumstances: • during any calendar quarter (and only during such calendar quarter), if the last reported sale price of Southern Company's common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day as determined by Southern Company; • during the five business day period after any 10 consecutive trading day period (Measurement Period) in which the trading price per $1,000 principal amount of Series 2023A Convertible Senior Notes for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; or • upon the occurrence of certain corporate events specified in the indenture governing the Series 2023A Convertible Senior Notes. 74 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) On or after September 15, 2025, a holder may convert all or any portion of its Series 2023A Convertible Senior Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. Southern Company will settle conversions of the Series 2023A Convertible Senior Notes by paying cash up to the aggregate principal amount of the Series 2023A Convertible Senior Notes to be converted and paying or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at Southern Company's election, in respect of the remainder, if any, of Southern Company's conversion obligation in excess of the aggregate principal amount of the Series 2023A Convertible Senior Notes being converted. The Series 2023A Convertible Senior Notes are initially convertible at a rate of 11.8818 shares of common stock per $1,000 principal amount converted, which is approximately equal to $ 84.16 per share of common stock. The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the indenture governing the Series 2023A Convertible Senior Notes), Southern Company will, in certain circumstances, increase the conversion rate by a number of additional shares of common stock for conversions in connection with the make-whole fundamental change. Upon the occurrence of a fundamental change (as defined in the indenture governing the Series 2023A Convertible Senior Notes), holders of the Series 2023A Convertible Senior Notes may require Southern Company to purchase all or a portion of their Series 2023A Convertible Senior Notes, in principal amounts equal to $1,000 or an integral multiple thereof, for cash at a price equal to 100 % of the principal amount of the Series 2023A Convertible Senior Notes to be purchased plus any accrued and unpaid interest. Earnings per Share For Southern Company, the only difference in computing basic and diluted earnings per share (EPS) is attributable to awards outstanding under stock-based compensation plans and the Series 2023A Convertible Senior Notes. EPS dilution resulting from stock-based compensation plans is determined using the treasury stock method and EPS dilution resulting from the Series 2023A Convertible Senior Notes is determined using the net share settlement method. See Note 12 to the financial statements in Item 8 of the Form 10-K and "Convertible Senior Notes" herein for additional information. Shares used to compute diluted EPS were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) As reported shares 1,092 1,082 1,092 1,070 Effect of stock-based compensation 7 6 6 6 Diluted shares 1,099 1,088 1,098 1,076 For all periods presented, an immaterial number of stock-based compensation awards was excluded from the diluted EPS calculation because the awards were anti-dilutive. For all periods presented, there was no dilution resulting from the Series 2023A Convertible Senior Notes. 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. In June 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. Subsequently, the lessee failed to make the semi-annual lease payment due in December 2022. As a result, the Southern Holdings subsidiary was unable to make its corresponding payment to the holders of the underlying non-recourse debt related to the generation assets. The parties to the lease entered into forbearance agreements which suspended the related contractual rights of the parties while they continued restructuring negotiations, during which 75 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) the termination date for the operating and maintenance agreement was delayed until July 31, 2023. The negotiations were completed on July 14, 2023, resulting in the Southern Holdings subsidiary agreeing to continue operating the plant for the lessee until the lessee's associated power off-take agreement ends in 2032, subject to certain terms and conditions. The restructuring had no material impact on Southern Company's financial statements. Southern Company will continue to monitor the operational performance of the underlying assets and evaluate the ability of the lessee to continue to meet its obligations, including those associated with a future closure or retirement of the generation assets and associated properties, including the dry ash landfill. (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 and $ 1.1 billion at September 30, 2023 and December 31, 2022, respectively. Southern Company's federal PTC and ITC carryforwards begin expiring in 2031, but are expected to be fully utilized by 2028. 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, changes in taxable income projections, transfer of eligible credits, and potential income tax rate changes. In the third quarter 2023, Georgia Power started generating advanced nuclear PTCs for Plant Vogtle Unit 3 beginning on the in-service date of July 31, 2023. In addition, pursuant to the Global Amendments to the Vogtle Joint Ownership Agreements (as defined in Note (B) under "Georgia Power – Nuclear Construction – Joint Owner Contracts"), Georgia Power is purchasing advanced nuclear PTCs for Plant Vogtle Unit 3 from certain other Vogtle Owners. 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 13.9 % for the nine months ended September 30, 2023 compared to 20.0 % for the corresponding period in 2022. The effective tax rate decrease was primarily due to an increase in the flowback of certain excess deferred income taxes at Alabama Power in 2023, lower pre-tax earnings in 2023, and an adjustment related to state tax credit carryforwards and the related valuation allowance at Georgia Power in 2022 and 2023, partially offset by the flowback of certain excess deferred income taxes ending in 2022 at Georgia Power. Alabama Power Alabama Power's effective tax rate was 8.3 % for the nine months ended September 30, 2023 compared to 23.7 % for the corresponding period in 2022. The effective tax rate decrease was primarily due to an increase in the flowback of certain excess deferred income taxes in 2023. See Note 2 to the financial statements under "Alabama Power – Excess Accumulated Deferred Income Tax Accounting Order" in Item 8 of the Form 10-K for additional information. 76 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Georgia Power Georgia Power's effective tax rate was 18.2 % for the nine months ended September 30, 2023 compared to 18.5 % for the corresponding period in 2022. The effective tax rate decrease was primarily due to an adjustment related to state tax credit carryforwards in 2022, a decrease in a valuation allowance on certain state tax credit carryforwards in 2023, and lower pre-tax earnings in 2023, largely offset by the flowback of certain excess deferred income taxes ending in 2022. Mississippi Power Mississippi Power's effective tax rate was 16.9 % for the nine months ended September 30, 2023 compared to 20.1 % for the corresponding period in 2022. The effective tax rate decrease was primarily due to an increase in the flowback of certain excess deferred income taxes in 2023. Southern Power Southern Power's effective tax rate was 14.8 % for the nine months ended September 30, 2023 compared to 18.8 % for the corresponding period in 2022. The effective tax rate decrease was primarily due to changes in state apportionment methodology resulting from tax legislation enacted by the State of Tennessee in May 2023. Unrecognized Tax Benefits Southern Company's and Georgia Power's unrecognized tax positions balances at September 30, 2023 were $ 167 million and $ 86 million, respectively, compared to $ 80 million for Southern Company at December 31, 2022. The increases from prior periods are primarily related to the amendment of certain 2019 through 2021 state tax filing positions related to tax credit utilization. If effective settlement of the positions is favorable, these positions would decrease Southern Company's and Georgia Power's effective tax rates. The ultimate outcome of this unrecognized tax benefit, of which a portion is expected to be resolved within the next 12 months, is dependent on acceptance by the state or expiration of related statute of limitations. Subsequent to September 30, 2023, a statute of limitations expired related to a 2019 state tax filing position to exclude certain gains from 2019 dispositions from taxation in a certain unitary state. This $ 44 million tax position and related interest will be recognized in the fourth quarter 2023 and will decrease Southern Company's annual effective tax rate. (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, 2023. 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. 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, 2023 and 2022 are presented in the following tables. 77 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Southern Company Alabama Power Georgia Power Mississippi Power Southern Power Southern Company Gas (in millions) Three Months Ended September 30, 2023 Pension Plans Service cost $ 69 $ 16 $ 17 $ 2 $ 2 $ 6 Interest cost 156 37 48 7 2 11 Expected return on plan assets ( 307 ) ( 75 ) ( 97 ) ( 13 ) ( 4 ) ( 22 ) Amortization: Prior service costs — — — — — ( 1 ) Regulatory asset — — — — — 4 Net (gain) loss 8 2 4 1 — ( 1 ) Net periodic pension income $ ( 74 ) $ ( 20 ) $ ( 28 ) $ ( 3 ) $ — $ ( 3 ) Postretirement Benefits Service cost $ 4 $ 1 $ 1 $ — $ — $ — Interest cost 18 5 6 1 — 2 Expected return on plan assets ( 21 ) ( 9 ) ( 7 ) ( 1 ) — ( 2 ) Amortization: Prior service costs — — 1 — — — Regulatory asset — — — — — 2 Net gain ( 4 ) ( 1 ) ( 1 ) — — ( 1 ) Net periodic postretirement benefit cost (income) $ ( 3 ) $ ( 4 ) $ — $ — $ — $ 1 Nine Months Ended September 30, 2023 Pension Plans Service cost $ 207 $ 48 $ 51 $ 8 $ 5 $ 18 Interest cost 469 109 143 21 6 32 Expected return on plan assets ( 922 ) ( 223 ) ( 289 ) ( 41 ) ( 12 ) ( 65 ) Amortization: Prior service costs — — 1 — — ( 2 ) Regulatory asset — — — — — 11 Net (gain) loss 24 7 10 1 — ( 3 ) Net periodic pension income $ ( 222 ) $ ( 59 ) $ ( 84 ) $ ( 11 ) $ ( 1 ) $ ( 9 ) Postretirement Benefits Service cost $ 11 $ 3 $ 3 $ — $ — $ 1 Interest cost 53 13 19 2 — 6 Expected return on plan assets ( 62 ) ( 26 ) ( 22 ) ( 1 ) — ( 5 ) Amortization: Prior service costs 1 — 1 — — — Regulatory asset — — — — — 5 Net gain ( 10 ) ( 2 ) ( 3 ) — — ( 3 ) Net periodic postretirement benefit cost (income) $ ( 7 ) $ ( 12 ) $ ( 2 ) $ 1 $ — $ 4 78 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (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 79 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) (I) FAIR VALUE MEASUREMENTS At September 30, 2023, 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, 2023 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) $ 7 $ 73 $ — $ — $ 80 Investments in trusts: (b) Domestic equity 692 196 — — 888 Foreign equity 131 154 — — 285 U.S. Treasury and government agency securities — 337 — — 337 Municipal bonds — 42 — — 42 Pooled funds – fixed income — 6 — — 6 Corporate bonds — 368 — — 368 Mortgage and asset backed securities — 85 — — 85 Private equity — — — 169 169 Cash and cash equivalents 3 — — — 3 Other 33 3 — 8 44 Cash equivalents and restricted cash 919 11 — — 930 Other investments 9 34 8 — 51 Total $ 1,794 $ 1,309 $ 8 $ 177 $ 3,288 Liabilities: Energy-related derivatives (a) $ 34 $ 217 $ — $ — $ 251 Interest rate derivatives — 351 — — 351 Foreign currency derivatives — 192 — — 192 Contingent consideration 5 — 19 — 24 Other — 13 — — 13 Total $ 39 $ 773 $ 19 $ — $ 831 80 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Fair Value Measurements Using: At September 30, 2023 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 $ — $ 26 $ — $ — $ 26 Nuclear decommissioning trusts: (b) Domestic equity 404 188 — — 592 Foreign equity 131 — — — 131 U.S. Treasury and government agency securities — 20 — — 20 Municipal bonds — 1 — — 1 Corporate bonds — 215 — — 215 Mortgage and asset backed securities — 22 — — 22 Private equity — — — 169 169 Other 10 — — 8 18 Cash equivalents and restricted cash 489 11 — — 500 Other investments — 34 — — 34 Total $ 1,034 $ 517 $ — $ 177 $ 1,728 Liabilities: Energy-related derivatives $ — $ 75 $ — $ — $ 75 Georgia Power Assets: Energy-related derivatives $ — $ 14 $ — $ — $ 14 Nuclear decommissioning trusts: (b) Domestic equity 288 1 — — 289 Foreign equity — 153 — — 153 U.S. Treasury and government agency securities — 317 — — 317 Municipal bonds — 41 — — 41 Corporate bonds — 153 — — 153 Mortgage and asset backed securities — 63 — — 63 Other 23 3 — — 26 Total $ 311 $ 745 $ — $ — $ 1,056 Liabilities: Energy-related derivatives $ — $ 83 $ — $ — $ 83 81 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Fair Value Measurements Using: At September 30, 2023 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 $ — $ 24 $ — $ — $ 24 Cash equivalents 3 — — — 3 Total $ 3 $ 24 $ — $ — $ 27 Liabilities: Energy-related derivatives $ — $ 44 $ — $ — $ 44 Southern Power Assets: Energy-related derivatives $ — $ 5 $ — $ — $ 5 Cash equivalents 23 — — — 23 Total $ 23 $ 5 $ — $ — $ 28 Liabilities: Energy-related derivatives $ — $ 6 $ — $ — $ 6 Foreign currency derivatives — 42 — — 42 Contingent consideration 5 — 19 — 24 Other — 13 — — 13 Total $ 5 $ 61 $ 19 $ — $ 85 Southern Company Gas Assets: Energy-related derivatives (a) $ 7 $ 4 $ — $ — $ 11 Non-qualified deferred compensation trusts: Domestic equity — 7 — — 7 Foreign equity — 1 — — 1 Pooled funds – fixed income — 6 — — 6 Cash equivalents 3 — — — 3 Cash equivalents 294 — — — 294 Total $ 304 $ 18 $ — $ — $ 322 Liabilities: Energy-related derivatives (a) $ 34 $ 9 $ — $ — $ 43 Interest rate derivatives — 99 — — 99 Total $ 34 $ 108 $ — $ — $ 142 (a) Excludes cash collateral of $ 49 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. 82 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (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, 2023 and 2022. The changes were recorded as a change to the regulatory assets and liabilities related to AROs for Georgia Power and Alabama Power, respectively. Three Months Ended Nine Months Ended Fair value increases (decreases) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 (in millions) Southern Company $ ( 4 ) $ ( 106 ) $ 211 $ ( 486 ) Alabama Power ( 36 ) ( 53 ) 54 ( 245 ) Georgia Power 32 ( 53 ) 157 ( 241 ) 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. 83 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Southern Power has contingent payment obligations related to two of its acquisitions whereby it is primarily obligated to make generation-based payments to the seller, commencing at the commercial operation of each facility and continuing through 2026 and 2035, respectively. The obligations are primarily categorized as Level 3 under Fair Value Measurements as the fair value is determined using significant unobservable inputs for the forecasted facility's 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" primarily includes 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, 2023, the fair value measurements of private market 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 $ 177 million and unfunded commitments related to the private market investments totaled $ 72 million. Private market investments include high-quality private equity funds across several market sectors, funds that invest in real estate assets, and a private credit fund. Private market 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, 2023, 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 $ 58.8 $ 11.2 $ 15.8 $ 1.6 $ 2.7 $ 8.1 Fair value 50.8 9.4 13.4 1.3 2.4 6.5 (*) The carrying amount of Southern Company Gas' long-term debt includes fair value adjustments from 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. (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. 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 84 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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. 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. 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. 85 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) At September 30, 2023, 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 (*) 422 2030 2028 Alabama Power 109 2026 — Georgia Power 104 2026 — Mississippi Power 80 2027 — Southern Power 8 2030 2024 Southern Company Gas (*) 121 2027 2028 (*) 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 135.5 million mmBtu long natural gas positions and 14.2 million mmBtu short natural gas positions at September 30, 2023, 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 14 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 3 million mmBtu for Southern Power. For cash flow hedges of energy-related derivatives, the estimated pre-tax losses expected to be reclassified from accumulated OCI to earnings for the 12-month period ending September 30, 2024 are $ 30 million for Southern Company, $ 25 million for Southern Company Gas, and immaterial for Southern Power. 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. 86 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) At September 30, 2023, the following interest rate derivatives were outstanding: Notional Amount Weighted Average Interest Rate Paid Interest Rate Received Hedge Maturity Date Fair Value Gain (Loss) at September 30, 2023 (in millions) (in millions) Fair Value Hedges of Existing Debt Southern Company parent $ 400 1-month SOFR + 0.80 % 1.75 % March 2028 $ ( 56 ) Southern Company parent 1,000 1-month SOFR + 2.48 % 3.70 % April 2030 ( 196 ) Southern Company Gas 500 1-month SOFR + 0.49 % 1.75 % January 2031 ( 99 ) Southern Company $ 1,900 $ ( 351 ) For cash flow hedges of interest rate derivatives, the estimated pre-tax losses expected to be reclassified from accumulated OCI to interest expense for the 12-month period ending September 30, 2024 are $ 19 million for Southern Company and immaterial for the traditional electric operating companies and Southern Company Gas. 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. 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, 2023, 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, 2023 (in millions) (in millions) (in millions) Cash Flow Hedges of Existing Debt Southern Power $ 564 3.78 % € 500 1.85 % June 2026 $ ( 42 ) Fair Value Hedges of Existing Debt Southern Company parent 1,476 3.39 % 1,250 1.88 % September 2027 ( 150 ) Southern Company $ 2,040 € 1,750 $ ( 192 ) 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, 2024 are $ 10 million for Southern Power. 87 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) 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. 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, 2023 At December 31, 2022 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/Liabilities from risk management activities $ 34 $ 134 $ 123 $ 121 Other deferred charges and assets/Other deferred credits and liabilities 36 77 52 44 Total derivatives designated as hedging instruments for regulatory purposes 70 211 175 165 Derivatives designated as hedging instruments in cash flow and fair value hedges Energy-related derivatives: Assets from risk management activities/Liabilities from risk management activities — 28 3 27 Other deferred charges and assets/Other deferred credits and liabilities 4 2 6 4 Interest rate derivatives: Assets from risk management activities/Liabilities from risk management activities — 80 12 62 Other deferred charges and assets/Other deferred credits and liabilities — 271 — 240 Foreign currency derivatives: Assets from risk management activities/Liabilities from risk management activities — 35 — 34 Other deferred charges and assets/Other deferred credits and liabilities — 157 — 182 Total derivatives designated as hedging instruments in cash flow and fair value hedges 4 573 21 549 Energy-related derivatives not designated as hedging instruments Assets from risk management activities/Liabilities from risk management activities 5 8 13 13 Other deferred charges and assets/Other deferred credits and liabilities 1 2 2 1 Total derivatives not designated as hedging instruments 6 10 15 14 Gross amounts recognized 80 794 211 728 Gross amounts offset (a) ( 37 ) ( 86 ) ( 70 ) ( 111 ) Net amounts recognized in the Balance Sheets (b) $ 43 $ 708 $ 141 $ 617 88 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) At September 30, 2023 At December 31, 2022 Derivative Category and Balance Sheet Location Assets Liabilities Assets Liabilities (in millions) (in millions) Alabama Power (c) Energy-related derivatives designated as hedging instruments for regulatory purposes Other current assets/Other current liabilities $ 15 $ 46 $ 42 $ 21 Other deferred charges and assets/Other deferred credits and liabilities 11 29 20 18 Total derivatives designated as hedging instruments for regulatory purposes 26 75 62 39 Gross amounts offset ( 17 ) ( 17 ) ( 24 ) ( 24 ) Net amounts recognized in the Balance Sheets $ 9 $ 58 $ 38 $ 15 Georgia Power Energy-related derivatives designated as hedging instruments for regulatory purposes Other current assets/Other current liabilities $ 4 $ 57 $ 36 $ 43 Other deferred charges and assets/Other deferred credits and liabilities 10 26 6 18 Total derivatives designated as hedging instruments for regulatory purposes 14 83 42 61 Energy-related derivatives not designated as hedging instruments Other current assets/Other current liabilities — — — 1 Gross amounts recognized 14 83 42 62 Gross amounts offset ( 11 ) ( 11 ) ( 21 ) ( 21 ) Net amounts recognized in the Balance Sheets $ 3 $ 72 $ 21 $ 41 Mississippi Power (c) Energy-related derivatives designated as hedging instruments for regulatory purposes Other current assets/Other current liabilities $ 9 $ 22 $ 33 $ 24 Other deferred charges and assets/Other deferred credits and liabilities 15 22 26 8 Total derivatives designated as hedging instruments for regulatory purposes 24 44 59 32 Gross amounts offset ( 17 ) ( 17 ) ( 17 ) ( 17 ) Net amounts recognized in the Balance Sheets $ 7 $ 27 $ 42 $ 15 89 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) At September 30, 2023 At December 31, 2022 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 $ — $ 5 $ — $ 12 Other deferred charges and assets/Other deferred credits and liabilities 4 — 5 — Foreign currency derivatives: Other current assets/Other current liabilities — 11 — 11 Other deferred charges and assets/Other deferred credits and liabilities — 31 — 36 Total derivatives designated as hedging instruments in cash flow and fair value hedges 4 47 5 59 Energy-related derivatives not designated as hedging instruments Other current assets/Other current liabilities 1 1 2 — Other deferred charges and assets/Other deferred credits and liabilities — — 1 — Total derivatives not designated as hedging instruments 1 1 3 — Gross amounts recognized 5 48 8 59 Gross amounts offset ( 1 ) ( 1 ) — — Net amounts recognized in the Balance Sheets $ 4 $ 47 $ 8 $ 59 Southern Company Gas Energy-related derivatives designated as hedging instruments for regulatory purposes Other current assets/Other current liabilities $ 6 $ 9 $ 12 $ 33 Derivatives designated as hedging instruments in cash flow and fair value hedges Energy-related derivatives: Other current assets/Other current liabilities — 23 3 15 Other deferred charges and assets/Other deferred credits and liabilities — 2 1 4 Interest rate derivatives: Other current assets/Other current liabilities — 21 — 14 Other deferred charges and assets/Other deferred credits and liabilities — 78 — 72 Total derivatives designated as hedging instruments in cash flow and fair value hedges — 124 4 105 Energy-related derivatives not designated as hedging instruments Other current assets/Other current liabilities 4 7 11 12 Other deferred charges and assets/Other deferred credits and liabilities 1 2 1 1 Total derivatives not designated as hedging instruments 5 9 12 13 Gross amounts recognized 11 142 28 151 Gross amounts offset (a) 9 ( 40 ) — ( 41 ) Net amounts recognized in the Balance Sheets (b) $ 20 $ 102 $ 28 $ 110 90 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) (a) Gross amounts offset includes cash collateral held on deposit in broker margin accounts of $ 49 million and $ 41 million at September 30, 2023 and December 31, 2022, respectively. (b) Net amounts of derivative instruments outstanding exclude immaterial premium and intrinsic value associated with weather derivatives for both periods presented. (c) Energy-related derivatives not designated as hedging instruments were immaterial for Alabama Power and Mississippi Power at December 31, 2022. There were no such instruments for Alabama Power and Mississippi Power at September 30, 2023. At September 30, 2023 and December 31, 2022, 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, 2023: Energy-related derivatives: Other regulatory assets, current $ ( 113 ) $ ( 39 ) $ ( 54 ) $ ( 16 ) $ ( 4 ) Other regulatory assets, deferred ( 48 ) ( 19 ) ( 18 ) ( 11 ) — Other regulatory liabilities, current 23 8 1 4 10 Other regulatory liabilities, deferred 6 1 2 3 — Total energy-related derivative gains (losses) $ ( 132 ) $ ( 49 ) $ ( 69 ) $ ( 20 ) $ 6 At December 31, 2022: Energy-related derivatives: Other regulatory assets, current $ ( 71 ) $ ( 8 ) $ ( 26 ) $ ( 13 ) $ ( 24 ) Other regulatory assets, deferred ( 23 ) ( 7 ) ( 14 ) ( 2 ) — Other regulatory liabilities, current 72 29 19 22 2 Other regulatory liabilities, deferred 31 9 2 20 — Total energy-related derivative gains (losses) $ 9 $ 23 $ ( 19 ) $ 27 $ ( 22 ) 91 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) For the three and nine months ended September 30, 2023 and 2022, the pre-tax effects of cash flow and fair value hedge accounting on accumulated OCI for the applicable Registrants were as follows: Gain (Loss) Recognized in OCI on Derivatives For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) (in millions) Southern Company Cash flow hedges: Energy-related derivatives $ ( 4 ) $ 11 $ ( 55 ) $ 51 Interest rate derivatives ( 3 ) 6 ( 12 ) 36 Foreign currency derivatives ( 15 ) ( 35 ) ( 6 ) ( 137 ) Fair value hedges (*) : Foreign currency derivatives 27 20 28 18 Total $ 5 $ 2 $ ( 45 ) $ ( 32 ) Georgia Power Cash flow hedges: Interest rate derivatives $ — $ — $ ( 3 ) $ 31 Southern Power Cash flow hedges: Energy-related derivatives $ — $ ( 11 ) $ ( 14 ) $ ( 4 ) Foreign currency derivatives ( 15 ) ( 35 ) ( 6 ) ( 137 ) Total $ ( 15 ) $ ( 46 ) $ ( 20 ) $ ( 141 ) Southern Company Gas Cash flow hedges: Energy-related derivatives $ ( 4 ) $ 22 $ ( 41 ) $ 55 Interest rate derivatives ( 4 ) 5 — — Total $ ( 8 ) $ 27 $ ( 41 ) $ 55 (*) 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, the pre-tax effects of interest rate derivatives designated as cash flow hedging instruments on accumulated OCI were immaterial for Alabama Power and there were no such effects in 2023. 92 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) For the three and nine months ended September 30, 2023 and 2022, 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, 2023 2022 2023 2022 (in millions) (in millions) Southern Company Total cost of natural gas $ 102 $ 294 $ 1,199 $ 1,840 Gain (loss) on energy-related cash flow hedges (a) ( 4 ) 9 ( 32 ) 28 Total other operations and maintenance 1,424 1,527 4,352 4,568 Gain (loss) on energy-related cash flow hedges (a) ( 1 ) — ( 2 ) — Total depreciation and amortization 1,143 922 3,365 2,728 Gain (loss) on energy-related cash flow hedges (a) ( 5 ) ( 1 ) ( 18 ) 5 Total interest expense, net of amounts capitalized ( 620 ) ( 511 ) ( 1,812 ) ( 1,461 ) Gain (loss) on interest rate cash flow hedges (a) ( 22 ) ( 7 ) ( 31 ) ( 19 ) Gain (loss) on foreign currency cash flow hedges (a) ( 3 ) ( 3 ) ( 8 ) ( 16 ) Gain (loss) on interest rate fair value hedges (b) ( 47 ) ( 102 ) ( 50 ) ( 300 ) Total other income (expense), net 141 132 428 414 Gain (loss) on foreign currency cash flow hedges (a)(c) ( 14 ) ( 32 ) ( 4 ) ( 129 ) Gain (loss) on foreign currency fair value hedges ( 7 ) ( 59 ) 19 ( 180 ) Amount excluded from effectiveness testing recognized in earnings ( 27 ) ( 21 ) ( 28 ) ( 17 ) Southern Power Total depreciation and amortization $ 130 $ 133 $ 380 $ 384 Gain (loss) on energy-related cash flow hedges (a) ( 5 ) ( 1 ) ( 18 ) 5 Total interest expense, net of amounts capitalized ( 32 ) ( 32 ) ( 98 ) ( 105 ) Gain (loss) on foreign currency cash flow hedges (a) ( 3 ) ( 3 ) ( 8 ) ( 16 ) Total other income (expense), net 4 3 8 5 Gain (loss) on foreign currency cash flow hedges (a)(c) ( 14 ) ( 32 ) ( 4 ) ( 129 ) Southern Company Gas Total cost of natural gas $ 102 $ 294 $ 1,199 $ 1,840 Gain (loss) on energy-related cash flow hedges (a) ( 4 ) 9 ( 32 ) 28 Total other operations and maintenance 264 252 879 824 Gain (loss) on energy-related cash flow hedges (a) ( 1 ) — ( 2 ) — Total interest expense, net of amounts capitalized ( 77 ) ( 65 ) ( 226 ) ( 187 ) Gain (loss) on interest rate cash flow hedges (a) ( 18 ) ( 2 ) ( 18 ) ( 3 ) Gain (loss) on interest rate fair value hedges (b) ( 11 ) ( 30 ) ( 14 ) ( 87 ) (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. The pre-tax effects of cash flow and fair value hedge accounting on income for interest rate derivatives were immaterial for the traditional electric operating companies for all periods presented. 93 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) At September 30, 2023 and December 31, 2022, 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, 2023 At December 31, 2022 At September 30, 2023 At December 31, 2022 (in millions) (in millions) Southern Company Long-term debt $ ( 2,873 ) $ ( 2,927 ) $ 328 $ 282 Southern Company Gas Long-term debt $ ( 402 ) $ ( 415 ) $ 95 $ 81 For the three and nine months ended September 30, 2023 and 2022, 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 2023 2022 2023 2022 (in millions) (in millions) Energy-related derivatives: Natural gas revenues (*) $ — $ 3 $ — $ ( 10 ) Cost of natural gas 7 ( 2 ) 36 ( 7 ) Total derivatives in non-designated hedging relationships $ 7 $ 1 $ 36 $ ( 17 ) (*) Excludes $ 14 million of gains for the nine months ended September 30, 2023, and immaterial amounts for all other periods presented, recorded in natural gas revenues associated with weather derivatives. For the three and nine months ended September 30, 2023 and 2022, 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, 2023, the Registrants had no collateral posted with derivative counterparties to satisfy these arrangements. For Southern Company, the fair value of foreign currency derivative liabilities and 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, was $ 78 million at September 30, 2023. For Southern Power, the fair value of foreign currency 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, was $ 20 million at September 30, 2023. 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, 2023. 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 94 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) require collateral in the event that one or more Southern Company power pool participants has a credit rating change to below investment grade. 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, 2023, cash collateral posted in these accounts was $ 18 million for Southern Power and immaterial for Alabama Power. 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, 2023, cash collateral held on deposit in broker margin accounts was $ 49 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. 95 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) (K) ACQUISITIONS AND DISPOSITIONS See Note 15 to the financial statements in Item 8 of the Form 10-K for additional information. Southern Power Asset Acquisitions Southern Power's asset acquisitions during the nine months ended September 30, 2023 are detailed in the following table: Project Facility Resource Seller Approximate Nameplate Capacity ( MW ) Location Southern Power Ownership Percentage Expected COD PPA Contract Period Millers Branch (*) Solar EDF Renewables, Inc. 200 Haskell County, TX 100 % Fourth quarter 2025 20 years South Cheyenne Solar Hanwha Q Cells USA Corp. 150 Laramie County, WY 100 % First quarter 2024 20 years (*) The project includes an option to expand capacity up to an additional 300 MWs. The aggregate purchase price for the two projects was $ 193 million, which is primarily recorded within construction work in progress on the balance sheet. Southern Company Gas On September 22, 2023, Southern Company Gas completed the sale of its California natural gas storage facility, resulting in an immaterial loss. (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. 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 $ 156 million and $ 406 million for the three and nine months ended September 30, 2023, respectively, and $ 336 million and $ 673 million for the three and nine months ended September 30, 2022, respectively. Revenues from sales of natural gas from Southern Company Gas to the traditional electric operating companies and Southern Power were immaterial for all periods presented. 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. All other inter-segment revenues are not material. 96 Table of Contents Index to Financial Statements 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, 2023 and 2022 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, 2023 Operating revenues $ 5,674 $ 653 $ ( 160 ) $ 6,167 $ 689 $ 154 $ ( 30 ) $ 6,980 Segment net income (loss) (a)(b)(c) 1,419 100 — 1,519 82 ( 179 ) — 1,422 Nine Months Ended September 30, 2023 Operating revenues $ 14,145 $ 1,686 $ ( 417 ) $ 15,414 $ 3,417 $ 499 $ ( 122 ) $ 19,208 Segment net income (loss) (a)(b)(c)(d) 2,852 288 — 3,140 475 ( 490 ) ( 4 ) 3,121 At September 30, 2023 Goodwill $ — $ 2 $ — $ 2 $ 5,015 $ 144 $ — $ 5,161 Total assets 99,464 13,090 ( 568 ) 111,986 24,823 2,370 ( 858 ) 138,321 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 December 31, 2022 Goodwill $ — $ 2 $ — $ 2 $ 5,015 $ 144 $ — $ 5,161 Total assets 95,861 13,081 ( 659 ) 108,283 24,621 2,665 ( 678 ) 134,891 (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 $ 160 million ($ 120 million after tax) for the three and nine months ended September 30, 2023 and $( 70 ) million ($( 52 ) million after tax) and $( 18 ) million ($( 13 ) million after tax) for the three and nine months ended September 30, 2022, 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 Power, includes an $ 18 million pre-tax loss recovery ($ 9 million after tax and partnership allocations) for the three and nine months ended September 30, 2023 related to an arbitration interim award and a $ 16 million pre-tax gain ($ 12 million after tax) on the sale of spare parts for the nine months ended September 30, 2023. See Note (C) under "General Litigation Matters – Southern Power" for additional information. (d) For Southern Company Gas, includes a pre-tax charge of approximately $ 38 million ($ 28 million after tax) associated with the disallowance of certain capital expenditures at Nicor Gas. See Note (B) under "Southern Company Gas" for additional information. 97 Table of Contents Index to Financial Statements 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, 2023 $ 5,139 $ 727 $ 301 $ 6,167 Three Months Ended September 30, 2022 5,961 1,197 269 7,427 Nine Months Ended September 30, 2023 $ 12,597 $ 1,930 $ 887 $ 15,414 Nine Months Ended September 30, 2022 14,363 2,798 782 17,943 Southern Company Gas' Revenues Gas Distribution Operations Gas Marketing Services Other Total (in millions) Three Months Ended September 30, 2023 $ 617 $ 56 $ 16 $ 689 Three Months Ended September 30, 2022 748 85 24 857 Nine Months Ended September 30, 2023 $ 2,989 $ 376 $ 52 $ 3,417 Nine Months Ended September 30, 2022 3,513 420 65 3,998 98 Table of Contents Index to Financial Statements NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Southern Company Gas Southern Company Gas manages its business through three reportable segments – gas distribution operations, gas pipeline investments, and gas marketing services. The non-reportable segments are combined and presented as all other. 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. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information. 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. The all other column included a natural gas storage facility in Texas through its sale in November 2022 and a natural gas storage facility in California through its sale in September 2023. See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) under "Southern Company Gas" for additional information. Business segment financial data for the three months ended September 30, 2023 and 2022 was as follows: Gas Distribution Operations Gas Pipeline Investments Gas Marketing Services Total All Other Eliminations Consolidated (in millions) Three Months Ended September 30, 2023 Operating revenues $ 619 $ 8 $ 56 $ 683 $ 8 $ ( 2 ) $ 689 Segment net income (loss) 70 24 2 96 ( 14 ) — 82 Nine Months Ended September 30, 2023 Operating revenues $ 3,002 $ 24 $ 376 $ 3,402 $ 30 $ ( 15 ) $ 3,417 Segment net income (*) 352 73 59 484 ( 9 ) — 475 Total assets at September 30, 2023 22,625 1,542 1,519 25,686 9,795 ( 10,658 ) 24,823 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 365 76 65 506 10 — 516 Total assets at December 31, 2022 22,040 1,577 1,616 25,233 8,943 ( 9,555 ) 24,621 (*) For gas distribution operations, includes a pre-tax charge of approximately $ 38 million ($ 28 million after tax) associated with the disallowance of certain capital expenditures at Nicor Gas. See Note (B) under "Southern Company Gas" for additional information. 99 Table of Contents Index to Financial Statements 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 106 Southern Company 106 Alabama Power 115 Georgia Power 121 Mississippi Power 127 Southern Power 132 Southern Company Gas 136 Future Earnings Potential 142 Accounting Policies 147 Financial Condition and Liquidity 148 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. 100 Table of Contents Index to Financial Statements 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. See Note (L) to the Condensed Financial Statements herein for additional information on segment reporting. Alabama Power, Georgia Power, and Mississippi Power each operate with one reportable business segment, since substantially all of their business is providing electric service to customers. Southern Power also operates its business with one reportable business segment, the sale of electricity in the competitive wholesale market. For additional information on the Registrants' primary business activities, see BUSINESS – "The Southern Company System" in Item 1 of the Form 10-K. The Registrants continue to focus on several key performance indicators. For the traditional electric operating companies and Southern Company Gas, these indicators include, but are not limited to, customer satisfaction, plant availability, electric and natural gas system reliability, and execution of major construction projects. 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 March 24, 2023, Alabama Power filed Rate CNP New Plant with the Alabama PSC to recover costs associated with the acquisition of the Central Alabama Generating Station. The filing reflected an annual increase in retail revenues of $78 million effective with June 2023 billings. Through May 2023, Alabama Power recovered substantially all costs associated with the Central Alabama Generating Station through Rate RSE, offset by revenues from a power sales agreement. On May 24, 2023, the Central Alabama Generating Station was placed into retail service. On June 14, 2023, the Alabama PSC issued an order approving modifications to Alabama Power's Renewable Generation Certificate. The modifications authorized Alabama Power to procure an additional 2,400 MWs of renewable capacity and energy by June 14, 2029 and to market the related energy and environmental attributes to customers and other third parties. The modifications also increased the size of allowable renewable projects from 80 MWs to 200 MWs and increased the annual approval limit from 160 MWs to 400 MWs. On July 11, 2023, the Alabama PSC issued an order authorizing Alabama Power to expand the existing authority of its reliability reserve to include certain production-related expenses that are intended to maintain reliability in periods between scheduled generating unit outages. On August 18, 2023, Alabama Power notified the Alabama PSC of its intent to use a portion of its $166 million reliability reserve balance during 2023. The ultimate outcome of this matter cannot be determined at this time. On October 3, 2023, the Alabama PSC issued an order modifying its December 2022 order and authorizing Alabama Power to (i) flow back in 2023 approximately $24 million of certain federal excess accumulated deferred income taxes resulting from the Tax Cuts and Jobs Act of 2017 and (ii) make available any remaining balance of excess accumulated deferred income taxes at the end of 2023 for the benefit of customers in 2024 and/or 2025. The ultimate outcome of this matter cannot be determined at this time. 101 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) On November 1, 2023, Alabama Power placed Plant Barry Unit 8 in service. At September 30, 2023, project expenditures associated with Plant Barry Unit 8 totaled approximately $583 million. See Note (B) to the Condensed Financial Statements under "Alabama Power" herein for additional information. Georgia Power Plant Vogtle Units 3 and 4 Construction and Start-Up Status Georgia Power placed Plant Vogtle Unit 3 in service on July 31, 2023 and continues construction on Plant Vogtle Unit 4 (each with electric generating capacity of approximately 1,100 MWs), in which it 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 July 2023 and March 2024, respectively, is $10.8 billion. Hot functional testing for Unit 4 was completed on May 1, 2023. On July 20, 2023, Southern Nuclear announced that all Unit 4 ITAACs had been submitted to the NRC, and, on July 28, 2023, the NRC published its 103(g) finding that the accepted criteria in the combined license for Unit 4 had been met, which allowed nuclear fuel to be loaded and start-up testing to begin. Fuel load for Unit 4 was completed on August 19, 2023. On October 6, 2023, Georgia Power announced that during the start-up and pre-operational testing for Plant Vogtle Unit 4, Southern Nuclear identified a motor fault in one of four reactor coolant pumps (RCPs) and has started the process to replace this RCP with an on-site spare RCP from inventory. Considering this remediation and the remaining pre-operational testing, Unit 4 is projected to be placed in service during the first quarter 2024. The projected schedule for Unit 4 significantly depends on the pace and success of replacing the RCP, which involves removing and re-installing commodities around the RCP. In addition, any findings related to the root cause of the motor fault on the single Unit 4 RCP could require engineering changes or remediation related to the other seven Unit 3 and Unit 4 RCPs. Any further delays could result in a later in-service date and cost increases. During the first nine months of 2023, established construction contingency totaling $43 million was assigned to the base capital cost forecast for costs primarily associated with the Unit 3 schedule extension and completion of start-up and pre-operational testing, including continued need of support resources for Unit 3 testing, as well as additional craft and support resources and subcontract work for Unit 4. Georgia Power and the other Vogtle Owners did 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 notified Georgia Power that they believed the project capital cost forecast approved by the Vogtle Owners in February 2022 triggered the tender provisions. In June 2022 and July 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options. Georgia Power did not accept these purported tender exercises. In June 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 had been triggered. In July 2022, Georgia Power filed its answers in the lawsuits filed by MEAG Power and OPC 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. In September 2022, Dalton filed complaints in each of these lawsuits. Also in September 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 reimburse 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 $92 million based on the current project capital cost forecast; and (iii) Georgia Power will reimburse 20% of MEAG Power's costs of construction with respect to any 102 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) amounts over the current project capital cost forecast, with no further adjustment for force majeure costs. In October 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 Dalton dismissed its related complaint. On October 5, 2023 and October 17, 2023, Georgia Power reached agreements with OPC and Dalton, respectively, to resolve its respective dispute with each of OPC and Dalton regarding the proper interpretation of the cost-sharing and tender provisions of the joint ownership agreements relating to the Global Amendments. Under the terms of the agreements with OPC and Dalton, among other items, (i) each of OPC and Dalton retracted its exercise of the tender option and will retain its full ownership interest in Plant Vogtle Units 3 and 4, (ii) Georgia Power made payments immediately after execution of the agreements of $308 million and $17 million to OPC and Dalton, respectively, representing payment for a portion of each of OPC's and Dalton's costs of construction for Plant Vogtle Units 3 and 4 previously incurred, (iii) Georgia Power will pay a portion of each of OPC's and Dalton's further 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 be in an aggregate amount of approximately $105 million and $6 million for OPC and Dalton, respectively, based on the current project capital cost forecast, and (iv) Georgia Power will pay 66% of each of OPC's and Dalton's costs of construction with respect to any amounts above the current project capital cost forecast, with no further adjustment for force majeure costs. On October 23, 2023, OPC, Dalton, and Georgia Power filed a stipulation of dismissal with prejudice of their litigation described above, including Georgia Power's counterclaims. Georgia Power recorded pre-tax charges to income through the fourth quarter 2022 of $407 million ($304 million after tax) associated with the cost-sharing provisions of the Global Amendments, including the settlement with MEAG Power. Based on the current project capital cost forecast and the settlements with OPC and Dalton described above, Georgia Power recorded a pre-tax charge to income of approximately $160 million ($120 million after tax) in the third quarter 2023. These charges are included in the total project capital cost forecast and will not be recovered from retail customers. The ultimate impact of these matters on the construction schedule and project capital cost forecast and related cost recovery 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. Plant Vogtle Unit 3 and Common Facilities Rate Proceeding In compliance with a Georgia PSC order approved in November 2021, Georgia Power increased annual retail base rates by $318 million effective August 1, 2023 based on the in-service date of July 31, 2023 for Plant Vogtle Unit 3. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on Plant Vogtle Units 3 and 4. Plant Vogtle Units 3 and 4 Prudency Proceeding On August 30, 2023, as provided for in the December 2017 Georgia PSC approval of the seventeenth VCM report, Georgia Power filed with the Georgia PSC an application to adjust rates to include reasonable and prudent Plant Vogtle Units 3 and 4 costs (Application). The Application provides the necessary support to justify the reasonableness, prudence, and recovery of $8.826 billion in total construction and capital costs, $1.07 billion in associated retail rate base items, and the operating costs related to the full operation and output of Plant Vogtle Units 3 and 4. Also on August 30, 2023, the staff of the Georgia PSC filed a stipulated agreement (Prudency Stipulation) among Georgia Power, the staff of the Georgia PSC, and certain intervenors. If the Prudency Stipulation is approved, Georgia Power will recover $7.562 billion in total construction and capital costs and associated retail rate base items of $1.02 billion, which includes AFUDC financing costs above $4.418 billion (the Georgia PSC-certified amount) up to $7.562 billion. The Prudency Stipulation also provides for the recovery of projected operations and maintenance expenses, depreciation expense, nuclear decommissioning accruals, and property taxes, net of projected production tax credits. 103 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) After considering construction and capital costs already in retail base rates of $2.1 billion and $362 million of associated retail rate base items (approved by the Georgia PSC in November 2021), and upon achieving commercial operation of Unit 4, Georgia Power will include in retail rate base the remaining $5.462 billion of construction and capital costs as well as $656 million of associated retail rate base items. If the Prudency Stipulation is approved by the Georgia PSC, annual retail base revenues will increase approximately $729 million and the average retail base rates will be adjusted by approximately 5% effective the first day of the month after Unit 4 achieves commercial operation. Georgia Power expects the Georgia PSC to render a final decision on these matters on December 19, 2023. The ultimate outcome of these matters cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Georgia Power – Plant Vogtle Units 3 and 4 Prudency Proceeding" herein for additional information. Rate Plans In accordance with the terms of the 2022 ARP, on October 2, 2023, Georgia Power filed tariff adjustments to become effective January 1, 2024 that would result in a net increase in rates of $191 million pending approval by the Georgia PSC. 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" herein for additional information. Fuel Cost Recovery On May 16, 2023, the Georgia PSC approved a stipulation agreement between Georgia Power and the staff of the Georgia PSC to increase annual fuel billings by 54%, or approximately $1.1 billion, effective June 1, 2023. The increase reflects a three-year recovery period for $2.2 billion of Georgia Power's under recovered fuel balance at May 31, 2023. Changes in fuel rates have no significant effect on Southern Company's or Georgia Power's net income but do impact the related operating cash flows. See Note (B) to the Condensed Financial Statements under "Georgia Power – Fuel Cost Recovery" herein for additional information. Integrated Resource Plan On October 27, 2023, Georgia Power filed an updated IRP (2023 IRP Update) with the Georgia PSC, which sets forth a plan to support the recent increase in the state of Georgia's projected energy needs since the 2022 IRP. The schedule for the Georgia PSC to consider the 2023 IRP Update has not been determined. Georgia Power has requested that the Georgia PSC evaluate the 2023 IRP Update by the end of April 2024. The ultimate outcome of this matter cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Georgia Power – Integrated Resource Plans" herein for additional information. Mississippi Power On October 27, 2023, the FERC approved a settlement agreement filed by Mississippi Power and Cooperative Energy on July 31, 2023 related to Mississippi Power's July 2022 request for a $23 million increase in annual wholesale base revenues under the MRA tariff. The settlement agreement provides for a $16 million increase in annual wholesale base revenues, effective September 14, 2022, and a refund to customers of approximately $6 million primarily related to the difference between the approved rates and interim rates. 104 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Southern Power On September 20, 2023, Southern Power acquired 100% of the membership interests in the 200-MW Millers Branch solar project located in Haskell County, Texas from EDF Renewables Development, Inc. and is continuing development and construction. The facility's output is contracted under a 20-year PPA and commercial operation is expected to occur in the fourth quarter 2025. The project includes an option to expand capacity up to an additional 300 MWs. On September 22, 2023, Southern Power acquired 100% of the membership interests in the 150-MW South Cheyenne solar project located in Laramie County, Wyoming from Hanwha Q Cells USA Corp. and is continuing construction. The facility's output is contracted under a 20-year PPA and commercial operation is expected to occur in the first quarter 2024. The ultimate outcome of these matters cannot be determined at this time. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information. At September 30, 2023, 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 97% through 2027 and 91% through 2032, with an average remaining contract duration of approximately 13 years. Southern Company Gas On July 14, 2023, 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, 2024. Resolution of the GRAM filing is expected by December 31, 2023, with new rates effective January 1, 2024. On August 28, 2023, the Virginia Commission approved a stipulation agreement related to Virginia Natural Gas' August 2022 general base rate case filing. The approved agreement provides for a $48 million increase in annual base rate revenues, including the recovery of investments under the SAVE program, an ROE of 9.70%, and an equity ratio of 49.06%. Interim rates became effective January 1, 2023, subject to refund, based on Virginia Natural Gas' original requested increase of approximately $69 million. Refunds to customers related to the difference between the approved rates effective September 1, 2023 and the interim rates will be completed later in the fourth quarter 2023. On June 15, 2023, the Illinois Commission concluded its review of the Qualifying Infrastructure Plant (QIP) capital investments by Nicor Gas for calendar year 2019 under the QIP Rider, also referred to as Investing in Illinois, program. The Illinois Commission disallowed $32 million of the $415 million of capital investments commissioned in 2019, together with the related return on investment. Nicor Gas recorded a pre-tax charge to income in the second quarter 2023 of $38 million ($28 million after tax) associated with the disallowance of capital investments. The disallowance is reflected on the statement of income as an $8 million reduction to revenues and a $30 million increase in operating expenses. On August 3, 2023, the Illinois Commission denied a rehearing request filed by Nicor Gas. On August 24, 2023, Nicor Gas filed a notice of appeal with the Illinois Appellate Court. Nicor Gas defends these investments in infrastructure as prudently incurred. The Illinois Commission has not yet conducted its review for calendar years 2020 through 2022 or the nine months ended September 30, 2023. Any further disallowance by the Illinois Commission could be material. The ultimate outcome of these matters cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information. 105 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS Southern Company Net Income Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(50) (3.4) $(490) (13.6) Consolidated net income attributable to Southern Company in the third quarter 2023 was $1.4 billion ($1.30 per share) compared to $1.5 billion ($1.36 per share) for the corresponding period in 2022. The decrease was primarily due to an increase of $172 million in after-tax charges related to the construction of Plant Vogtle Units 3 and 4, higher depreciation and amortization, and higher interest expense, partially offset by an increase in retail electric revenues associated with warmer weather and rates and pricing, lower non-fuel operations and maintenance costs, a decrease in income tax expense, and an increase in other revenues. Consolidated net income attributable to Southern Company for year-to-date 2023 was $3.1 billion ($2.86 per share) compared to $3.6 billion ($3.38 per share) for the corresponding period in 2022. The decrease was primarily due to an increase of $133 million in after-tax charges related to the construction of Plant Vogtle Units 3 and 4, higher depreciation and amortization, higher interest expense, and a decrease in retail electric revenues associated with milder weather in the first and second quarters of 2023 compared to the corresponding periods in 2022, partially offset by lower non-fuel operations and maintenance costs, an increase in other revenues, an increase in natural gas revenues from rate increases and continued infrastructure replacement, and a decrease in income tax expense. 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" for additional information. Retail Electric Revenues In the third quarter 2023, retail electric revenues were $5.1 billion compared to $6.0 billion for the corresponding period in 2022. For year-to-date 2023, retail electric revenues were $12.6 billion compared to $14.4 billion for the corresponding period in 2022. Details of the changes in retail electric revenues were as follows: Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) Rates and pricing $ 76 1.3 % $ 63 0.4 % Sales decline (28) (0.5) (48) (0.3) Weather 132 2.2 (194) (1.4) Fuel and other cost recovery (1,002) (16.8) (1,587) (11.0) Retail electric revenues $ (822) (13.8) % $ (1,766) (12.3) % Revenues associated with changes in rates and pricing increased in the third quarter and year-to-date 2023 when compared to the corresponding periods in 2022 primarily due to base tariff increases in accordance with Georgia Power's 2022 ARP and an increase in Rate CNP Compliance revenues at Alabama Power, partially offset by lower contributions from commercial and industrial customers with variable demand-driven pricing and a decrease in the revenues recognized under the NCCR tariff, both at Georgia Power. In addition, in the third quarter and year-to-date 2023, revenues associated with Rate CNP Depreciation increased $94 million and $234 million, respectively, and were fully offset by customer bill credits related to the flowback of excess accumulated deferred income taxes at Alabama Power. See Note 2 to the financial statements under "Alabama Power" and "Georgia Power" in Item 8 of the Form 10-K for additional information. 106 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Revenues attributable to changes in sales decreased in the third quarter and year-to-date 2023 when compared to the corresponding periods in 2022. Weather-adjusted residential KWH sales decreased 1.8% and 0.4% in the third quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 primarily due to decreased customer usage, partially offset by customer growth. Weather-adjusted commercial KWH sales increased 1.3% in both the third quarter and year-to-date 2023 when compared to the corresponding periods in 2022 primarily due to increased customer usage and customer growth. Industrial KWH sales decreased 2.3% and 2.1% in the third quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 primarily due to a decrease in the chemicals and forest products sectors. Also contributing to the year-to-date 2023 industrial KWH sales decrease was a decrease in the textiles sector. Fuel and other cost recovery revenues decreased $1.0 billion and $1.6 billion in the third quarter and year-to-date 2023, respectively, compared to the corresponding periods in 2022 primarily due to lower fuel and purchased power costs. 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 expe nses, includi ng 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 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(470) (39.3) $(868) (31.0) In the third quarter 2023, wholesale electric revenues were $0.7 billion compared to $1.2 billion for the corresponding period in 2022. The decrease was primarily due to a decrease of $452 million in energy revenues as a result of fuel and purchased power price decreases when compared to the corresponding period in 2022 and a net decrease in the volume of KWHs sold primarily associated with natural gas PPAs at Southern Power. In addition, a decrease in capacity revenues of $18 million primarily resulted from power sales agreements that ended in May 2023 at Alabama Power, partially offset by an increase related to new capacity contracts at Georgia Power. For year-to-date 2023, wholesale electric revenues were $1.9 billion compared to $2.8 billion for the corresponding period in 2022. The decrease was primarily due to a decrease of $892 million in energy revenues as a result of fuel and purchased power price decreases when compared to the corresponding period in 2022 and a net decrease in the volume of KWHs sold primarily associated with natural gas PPAs at Southern Power. The decrease in energy revenues was partially offset by an increase in capacity revenues of $24 million primarily resulting from a net increase in capacity sales from natural gas PPAs at Southern Power and an increase related to new capacity contracts at Georgia Power. 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. 107 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Wholesale electric revenues at Mississippi Power include FERC-regulated municipal and rural association sales 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 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $18 9.7 $48 8.7 In the third quarter 2023, other electric revenues were $203 million compared to $185 million for the corresponding period in 2022. The increase was primarily due to increases of $10 million resulting from receipts of liquidated damages associated with generation facility production guarantees and an arbitration interim award at Southern Power, $10 million in retail solar program fees at Georgia Power, and $9 million in transmission revenues primarily associated with open access transmission tariff sales, partially offset by a decrease of $11 million in cogeneration steam revenue primarily associated with lower natural gas prices at Alabama Power. For year-to-date 2023, other electric revenues were $602 million compared to $554 million for the corresponding period in 2022. The increase was primarily due to increases of $19 million resulting from receipts of liquidated damages associated with generation facility production guarantees and an arbitration interim award at Southern Power, $18 million in transmission revenues primarily associated with open access transmission tariff sales, $18 million in realized gains associated with price stability products for retail customers on variable demand-driven pricing tariffs at Georgia Power, and $18 million in outdoor lighting sales at Georgia Power, partially offset by a decrease of $23 million in cogeneration steam revenue primarily associated with lower natural gas prices at Alabama Power. See Note (C) to the Condensed Financial Statements under "General Litigation Matters – Southern Power" herein for additional information. Natural Gas Revenues In the third quarter 2023, natural gas revenues were $0.7 billion compared to $0.9 billion for the corresponding period in 2022. For year-to-date 2023, natural gas revenues were $3.4 billion compared to $4.0 billion for the corresponding period in 2022. Details of the changes in natural gas revenues were as follows: Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) Infrastructure replacement programs and rate changes $ 9 1.1 % $ 97 2.4 % Gas costs and other cost recovery (181) (21.1) (645) (16.1) Gas marketing services (22) (2.6) (44) (1.1) Other 26 3.0 11 0.3 Natural gas revenues $ (168) (19.6) % $ (581) (14.5) % Revenues from infrastructure replacement programs and rate changes at the natural gas distribution utilities increased in the third quarter and year-to-date 2023 compared to the corresponding periods in 2022 primarily due to rate increases at the natural gas distribution utilities and continued investment in infrastructure replacement. The year-to-date 2023 increase was partially offset by a regulatory disallowance at Nicor Gas. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" herein for additional information. 108 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Revenues from gas costs and other cost recovery decreased in the third quarter and year-to-date 2023 compared to the corresponding periods in 2022 primarily due to lower natural gas cost recovery associated with lower natural gas prices, the timing of natural gas purchases, and the recovery of those costs from 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. Revenues from gas marketing services decreased in the third quarter and year-to-date 2023 compared to the corresponding periods in 2022 primarily due to lower natural gas prices and lower variable price spreads. Other Revenues Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $44 24.7 $143 27.6 In the third quarter 2023, other revenues were $222 million compared to $178 million for the corresponding period in 2022. For year-to-date 2023, other revenues were $662 million compared to $519 million for the corresponding period in 2022. The increases in the third quarter and year-to-date 2023 were primarily due to increases of $9 million and $41 million, respectively, in power delivery construction and maintenance projects at Georgia Power, $12 million and $40 million, respectively, related to distributed infrastructure projects at PowerSecure, $9 million and $26 million, respectively, primarily related to sales associated with commercial customers at Southern Linc, $4 million and $20 million, respectively, in unregulated sales of products and services at Alabama Power, and $11 million and $16 million, respectively, associated with energy conservation projects at Georgia Power. Fuel and Purchased Power Expenses Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) Fuel $ (1,056) (43.6) $ (1,873) (35.7) Purchased power (438) (67.9) (605) (47.1) Total fuel and purchased power expenses $ (1,494) $ (2,478) In the third quarter 2023, total fuel and purchased power expenses were $1.6 billion compared to $3.1 billion for the corresponding period in 2022. The decrease was due to a $1.2 billion decrease in the average cost of fuel and purchased power and a $262 million net decrease in the volume of KWHs generated and purchased. For year-to-date 2023, total fuel and purchased power expenses were $4.1 billion compared to $6.5 billion for the corresponding period in 2022. The decrease was due to a $2.1 billion decrease in the average cost of fuel and purchased power and a $349 million net decrease 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. 109 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Details of the Southern Company system's generation and purchased power were as follows: Third Quarter 2023 Third Quarter 2022 Year-To-Date 2023 Year-To-Date 2022 Total generation (in billions of KWHs) (a)(b) 53 50 141 141 Total purchased power (in billions of KWHs) 5 9 14 20 Sources of generation (percent) (a) — Gas 54 54 54 50 Coal 21 21 18 22 Nuclear (b) 16 16 17 16 Hydro 2 2 3 4 Wind, Solar, and Other 7 7 8 8 Cost of fuel, generated (in cents per net KWH) — Gas (a) 2.80 6.75 2.78 5.42 Coal 4.52 4.12 4.40 3.58 Nuclear (b) 0.79 0.71 0.74 0.72 Average cost of fuel, generated (in cents per net KWH) (a)(b) 2.84 5.05 2.71 4.07 Average cost of purchased power (in cents per net KWH) (c) 4.80 8.94 5.08 7.84 (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) Excludes KWHs generated from test period energy at Plant Vogtle Unit 3 prior to its in-service date. The related fuel costs are charged to CWIP in accordance with FERC guidance. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on Plant Vogtle Units 3 and 4. (c) 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 2023, fuel expense was $1.4 billion compared to $2.4 billion for the corresponding period in 2022. The decrease was primarily due to a 58.5% decrease in the average cost of natural gas per KWH generated, partially offset by a 10.0% increase in the volume of KWHs generated by nuclear, a 9.7% increase in the average cost of coal per KWH generated, a 6.4% increase in the volume of KWHs generated by coal, and a 6.0% increase in the volume of KWHs generated by natural gas. For year-to-date 2023, fuel expense was $3.4 billion compared to $5.2 billion for the corresponding period in 2022. The decrease was primarily due to a 48.7% decrease in the average cost of natural gas per KWH generated and a 20.4% decrease in the volume of KWHs generated by coal, partially offset by a 22.9% increase in the average cost of coal per KWH generated, an 11.0% decrease in the volume of KWHs generated by hydro, and a 9.0% increase in the volume of KWHs generated by natural gas. Purchased Power In the third quarter 2023, purchased power expense was $207 million compared to $645 million for the corresponding period in 2022. For year-to-date 2023, purchased power expense was $0.7 billion compared to $1.3 billion for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 were primarily due to decreases of 46.3% and 35.2%, respectively, in the average cost per KWH purchased primarily due to a decrease in natural gas prices and decreases of 48.1% and 29.0%, respectively, in the volume of KWHs purchased. 110 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(192) (65.3) $(641) (34.8) 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 76% and 84% of the total cost of natural gas in the third quarter and year-to-date 2023, respectively. In the third quarter 2023, cost of natural gas was $102 million compared to $294 million for the corresponding period in 2022. For year-to-date 2023, cost of natural gas was $1.2 billion compared to $1.8 billion for the corresponding period in 2022. The decreases reflect lower gas cost recovery as a result of decreases of 69% and 60% in natural gas prices in the third quarter and year-to-date 2023, respectively, compared to the corresponding periods in 2022. Cost of Other Sales Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $34 37.0 $106 38.5 In the third quarter 2023, cost of other sales was $126 million compared to $92 million for the corresponding period in 2022. The increase was primarily due to increases of $12 million from unregulated power delivery construction and maintenance projects at Georgia Power, $7 million at Southern Linc primarily related to sales associated with commercial customers, $6 million related to distributed infrastructure projects at PowerSecure, and $5 million related to energy service contracts at Southern Company Gas. For year-to-date 2023, cost of other sales was $381 million compared to $275 million for the corresponding period in 2022. The increase was primarily due to increases of $35 million from unregulated power delivery construction and maintenance projects at Georgia Power, $23 million at Southern Linc primarily related to sales associated with commercial customers, $21 million related to distributed infrastructure projects at PowerSecure, $20 million related to energy service contracts at Southern Company Gas, and $10 million in expenses related to unregulated products and services at Alabama Power. Other Operations and Maintenance Expenses Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(103) (6.7) $(216) (4.7) In the third quarter 2023, other operations and maintenance expenses were $1.4 billion compared to $1.5 billion for the corresponding period in 2022. The decrease was primarily due to decreases of $88 million in transmission and distribution expenses primarily related to line maintenance, $45 million in storm damage recovery as authorized in Georgia Power's 2022 ARP, $22 million in technology infrastructure and application production costs, and $14 million in generation non-outage maintenance expenses and planned outages, partially offset by a $23 million 111 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) increase in generation environmental projects primarily at Georgia Power and a $14 million gain recorded in the third quarter 2022 as a result of the early termination of the transition services agreement related to the 2019 sale of Gulf Power. For year-to-date 2023, other operations and maintenance expenses were $4.4 billion compared to $4.6 billion for the corresponding period in 2022. The decrease was primarily due to decreases of $147 million in transmission and distribution expenses primarily related to line maintenance, $136 million in storm damage recovery as authorized in Georgia Power's 2022 ARP, $91 million in generation non-outage maintenance expenses and planned outages, and $32 million in expenses passed through to customers primarily related to bad debt and energy efficiency programs at Southern Company Gas, partially offset by a $47 million increase in technology infrastructure and application production costs, a $43 million increase in generation environmental projects primarily at Georgia Power, $30 million related to a regulatory disallowance at Nicor Gas, a $25 million decrease in nuclear property insurance refunds at Georgia Power and Alabama Power, a $16 million increase in employee compensation and benefits, and a $14 million gain recorded in the third quarter 2022 as a result of the early termination of the transition services agreement related to the 2019 sale of Gulf Power. See Note (B) to the Condensed Financial Statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" herein for additional information on the regulatory disallowance at Nicor Gas and Note 2 to the financial statements under "Georgia Power – Storm Damage Recovery" in Item 8 of the Form 10-K for additional information. Depreciation and Amortization Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $221 24.0 $637 23.4 In the third quarter 2023, depreciation and amortization was $1.1 billion compared to $0.9 billion for the corresponding period in 2022. For year-to-date 2023, depreciation and amortization was $3.4 billion compared to $2.7 billion for the corresponding period in 2022. The increases in the third quarter and year-to-date 2023 were primarily due to increases of $181 million and $544 million, respectively, resulting from higher depreciation rates at Alabama Power and Georgia Power and increases of $28 million and $74 million, respectively, from additional plant in service. 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. Taxes Other Than Income Taxes Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(11) (3.1) $3 0.3 In the third quarter 2023, taxes other than income taxes were $341 million compared to $352 million for the corresponding period in 2022. The decrease was primarily due to decreases of $15 million in municipal franchise fees resulting from lower retail revenues at Georgia Power, partially offset by an increase of $4 million in property taxes primarily at Georgia Power resulting from an increase in the assessed value of property. For year-to-date 2023, taxes other than income taxes were $1.08 billion compared to $1.07 billion for the corresponding period in 2022. The increase was primarily due to increases of $26 million in property taxes primarily at Georgia Power resulting from an increase in the assessed value of property, $18 million in utility license taxes at Alabama Power, and $8 million in payroll taxes primarily at Southern Company Gas, largely offset by decreases of $33 million in municipal franchise fees resulting from lower retail revenues at Georgia Power and $15 million in revenue tax expenses at Southern Company Gas. 112 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Estimated Loss on Plant Vogtle Units 3 and 4 Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $230 N/M $178 N/M Georgia Power recorded pre-tax charges (credits) to income for the estimated probable loss on Plant Vogtle Units 3 and 4 totaling $160 million and $(70) million in the third quarter 2023 and 2022, respectively, and $160 million and $(18) million for year-to-date 2023 and 2022, respectively. The charges (credits) reflected 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. Allowance for Equity Funds Used During Construction Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $7 11.9 $37 22.7 In the third quarter 2023, allowance for equity funds used during construction was $66 million compared to $59 million for the corresponding period in 2022. For year-to-date 2023, allowance for equity funds used during construction was $200 million compared to $163 million for the corresponding period in 2022. The increases were primarily associated with an increase in capital expenditures related to Plant Barry Unit 8 construction, as well as an increase in capital expenditures related to hydro production, both at Alabama Power. Also contributing to the increase for year-to-date 2023 was an increase in capital expenditures subject to AFUDC at Georgia Power. 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 "Alabama Power – Certificates of Convenience and Necessity" for additional information. Interest Expense, Net of Amounts Capitalized Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $109 21.3 $351 24.0 In the third quarter 2023, interest expense, net of amounts capitalized was $620 million compared to $511 million for the corresponding period in 2022. For year-to-date 2023, interest expense, net of amounts capitalized was $1.8 billion compared to $1.5 billion for the corresponding period in 2022. The increases in the third quarter and year-to-date 2023 primarily reflect approximately $63 million and $222 million, respectively, related to higher interest rates and $48 million and $134 million, respectively, related to higher average outstanding borrowings. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings. 113 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Other Income (Expense), Net Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $9 6.8 $14 3.4 For year-to-date 2023, other income (expense), net was $428 million compared to $414 million for the corresponding period in 2022. The increase was primarily due to a $29 million increase in interest income, a $13 million decrease in non-operating benefit-related expenses at Alabama Power, an $8 million gain on investments at Southern Holdings, and a $6 million decrease in non-operating marketing expenses at Georgia Power, partially offset by decreases of $30 million in non-service cost-related retirement benefits income and $13 million in customer charges related to contributions in aid of construction at Georgia Power. See Note (H) to the Condensed Financial Statements herein for additional information. Income Taxes Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(117) (28.3) $(399) (44.8) In the third quarter 2023, income taxes were $297 million compared to $414 million for the corresponding period in 2022. For year-to-date 2023, income taxes were $492 million compared to $891 million for the corresponding period in 2022. The decreases were primarily due to lower pre-tax earnings, an increase in the flowback of certain excess deferred income taxes at Alabama Power, and a decrease in a valuation allowance on certain state tax credit carryforwards at Georgia Power in 2023, partially offset by a decrease in the flowback of certain excess deferred income taxes at Georgia Power that ended in 2022. Also contributing to the year-to-date 2023 decrease was 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 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(2) (16.7) $(13) (23.6) Substantially all noncontrolling interests relate to renewable projects at Southern Power. In the third quarter 2023, net income attributable to noncontrolling interests was $10 million compared to $12 million for the corresponding period in 2022. The decrease was primarily due to $7 million in higher HLBV loss allocations to Southern Power's wind tax equity partners, largely offset by an allocation of $6 million to Southern Power's equity partners related to an arbitration interim award. For year-to-date 2023, net loss attributable to noncontrolling interests was $68 million compared to $55 million for the corresponding period in 2022. The increase was primarily due to $16 million in higher HLBV loss allocations to Southern Power's wind tax equity partners and $12 million in lower income allocations to Southern Power's equity partners, partially offset by $15 million in lower loss allocations to Southern Power's battery energy storage partners. See Note (C) to the Condensed Financial Statements under "General Litigation Matters – Southern Power" herein for additional information. 114 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Alabama Power Net Income Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $40 7.6 $(124) (9.9) Alabama Power's net income after dividends on preferred stock in the third quarter 2023 was $565 million compared to $525 million for the corresponding period in 2022. The increase was primarily due to a decrease in income tax expense and an increase in retail revenues associated with Rate CNP Compliance and warmer weather in Alabama Power's service territory in the third quarter 2023 compared to the corresponding period in 2022. These increases to income were partially offset by an increase in depreciation and amortization associated with a change in depreciation rates effective January 2023. Alabama Power's net income after dividends on preferred stock for year-to-date 2023 was $1.13 billion compared to $1.26 billion for the corresponding period in 2022. The decrease was primarily due to an increase in depreciation rates effective January 2023, a decrease in retail revenues associated with milder weather in Alabama Power's service territory in the first and second quarters of 2023 compared to the corresponding periods in 2022, and an increase in capacity-related expenses. These decreases to income were partially offset by a decrease in income tax expense and an increase in Rate CNP Compliance revenues. See Note 2 to the financial statements in Item 8 of the Form 10-K under "Alabama Power" for additional information. Retail Revenues In the third quarter 2023, retail revenues were $1.86 billion compared to $2.01 billion for the corresponding period in 2022. For year-to-date 2023, retail revenues were $4.71 billion compared to $5.02 billion for the corresponding period in 2022. Details of the changes in retail revenues were as follows: Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) Rates and pricing $ 62 3.1 % $ 178 3.5 % Sales decline (2) (0.1) (36) (0.7) Weather 35 1.7 (84) (1.7) Fuel and other cost recovery (243) (12.1) (365) (7.3) Retail revenues $ (148) (7.4) % $ (307) (6.2) % Revenues associated with changes in rates and pricing increased in the third quarter and year-to-date 2023 when compared to the corresponding periods in 2022 primarily due to an increase in Rate CNP Compliance revenues. In addition, in the third quarter and year-to-date 2023, revenues associated with Rate CNP Depreciation increased $94 million and $234 million, respectively, and were fully offset by customer bill credits related to the flowback of excess accumulated deferred income taxes. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information. Revenues attributable to changes in sales decreased in the third quarter and year-to-date 2023 when compared to the corresponding periods in 2022. Weather-adjusted residential KWH sales decreased 0.8% in the third quarter 2023 compared to the corresponding period in 2022 primarily due to decreased customer usage and remained flat for year-to-date 2023 when compared to the corresponding period in 2022. Weather-adjusted commercial KWH sales increased 1.1% and 0.8% in the third quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 primarily due to increases in customer usage and customer growth. Industrial KWH sales decreased 4.8% and 3.9% in the third quarter and year-to-date 2023, respectively, primarily due to decreases in 115 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) the chemicals and forest products sectors. Also contributing to the industrial KWH sales decrease in the third quarter 2023 was a decrease in the primary metals sector. Fuel and other cost recovery revenues decreased in the third quarter and year-to-date 2023 when compared to the corresponding periods in 2022 primarily as a result of lower fuel and purchased power costs. Electric rates include provisions to recognize the recovery of fuel costs, purchased power costs, PPAs certificated by the Alabama PSC, and costs associated with the NDR. Under these provisions, fuel and other cost recovery revenues generally equal fuel and other cost recovery expenses and do not affect net income. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information. Wholesale Revenues – Non-Affiliates Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(144) (57.6) $(164) (31.4) In the third quarter 2023, wholesale revenues from sales to non-affiliates were $106 million compared to $250 million for the corresponding period in 2022. The decrease was primarily due to a 47.0% decrease in the volume of KWHs sold as a result of power sales agreements that ended in May 2023 and a 19.8% decrease in the price of energy primarily as a result of lower natural gas prices in the third quarter 2023 compared to the corresponding period in 2022. For year-to-date 2023, wholesale revenues from sales to non-affiliates were $358 million compared to $522 million for the corresponding period in 2022. The decrease was primarily due to a 20.4% decrease in the price of energy primarily as a result of lower natural gas prices and a 13.8% decrease in the volume of KWHs sold due to lower customer demand as a result of milder weather in 2023 compared to the corresponding period 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 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 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(56) (80.0) $(127) (74.7) In the third quarter 2023, wholesale revenues from sales to affiliates were $14 million compared to $70 million for the corresponding period in 2022. For year-to-date 2023, wholesale revenues from sales to affiliates were $43 million compared to $170 million for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 were primarily due to decreases of 60.6% and 45.6%, respectively, in the price of energy due to lower natural gas prices and 51.2% and 53.5%, respectively, in the volume of KWH sales due to lower customer demand as a result of milder weather in 2023 compared to the corresponding periods in 2022. Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. Energy revenues related to these transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost and energy purchases are generally offset by energy revenues through Alabama Power's energy cost recovery clause. 116 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Other Revenues Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(13) (11.2) $(5) (1.6) In the third quarter 2023, other revenues were $103 million compared to $116 million for the corresponding period in 2022. For year-to-date 2023, other revenues were $311 million compared to $316 million for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 were primarily due to decreases of $11 million and $23 million, respectively, in cogeneration steam revenue primarily associated with lower natural gas prices. The decrease for year-to-date 2023 was largely offset by a $20 million increase in unregulated sales of products and services. Fuel and Purchased Power Expenses Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) Fuel $ (264) (39.6) $ (386) (27.6) Purchased power – non-affiliates (143) (77.3) (150) (43.2) Purchased power – affiliates (33) (29.2) (67) (25.8) Total fuel and purchased power expenses $ (440) $ (603) In the third quarter 2023, total fuel and purchased power expenses were $524 million compared to $964 million for the corresponding period in 2022. For year-to-date 2023, total fuel and purchased power expenses were $1.40 billion compared to $2.01 billion for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 were due to decreases of $301 million and $540 million, respectively, in the average cost of fuel and purchased power and decreases of $139 million and $63 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 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. 117 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Details of Alabama Power's generation and purchased power were as follows: Third Quarter 2023 Third Quarter 2022 Year-To-Date 2023 Year-To-Date 2022 Total generation (in billions of KWHs) (a) 15 16 43 45 Total purchased power (in billions of KWHs) 3 4 8 9 Sources of generation (percent) (a) — Coal 40 47 35 45 Gas 31 28 30 23 Nuclear 26 22 27 24 Hydro 3 3 8 8 Cost of fuel, generated (in cents per net KWH) — Coal 3.57 3.89 3.48 3.40 Gas (a) 3.07 6.55 3.05 5.20 Nuclear 0.68 0.67 0.68 0.67 Average cost of fuel, generated (in cents per net KWH) (a) 2.64 3.91 2.51 3.13 Average cost of purchased power (in cents per net KWH) (b) 4.57 8.55 4.97 8.33 (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 2023, fuel expense was $402 million compared to $666 million for the corresponding period in 2022. The decrease was primarily due to a 53.1% decrease in the average cost of natural gas per KWH generated, which excludes tolling agreements, and an 18.9% decrease in the volume of KWHs generated by coal. For year-to-date 2023, fuel expense was $1.01 billion compared to $1.40 billion for the corresponding period in 2022. The decrease was primarily due to a 41.3% decrease in the average cost of natural gas per KWH generated, which excludes tolling agreements, and a 25.3% decrease in the volume of KWHs generated by coal, partially offset by a 23.4% increase in the volume of KWHs generated by natural gas and a 10.6% decrease in the volume of KWHs generated by hydro facilities as a result of less rainfall for year-to-date 2023 compared to the corresponding period in 2022. Purchased Power – Non-Affiliates In the third quarter 2023, purchased power expense from non-affiliates was $42 million compared to $185 million for the corresponding period in 2022. For year-to-date 2023, purchased power expense from non-affiliates was $197 million compared to $347 million for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 were primarily due to decreases of 41.0% and 37.6%, respectively, in the average cost per KWH purchased due to lower purchase prices as a result of lower natural gas prices and decreases of 64.2% and 21.8%, respectively, in the volume of KWHs purchased due to a new PPA that began in July 2022 and ended in May 2023. 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 2023, purchased power expense from affiliates was $80 million compared to $113 million for the corresponding period in 2022. For year-to-date 2023, purchased power expense from affiliates was $193 million 118 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) compared to $260 million for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 were primarily due to decreases of 65.8% and 51.3%, respectively, in the average cost per KWH purchased due to lower purchase prices as a result of lower natural gas prices, partially offset by increases of 107.6% and 52.6%, respectively, in the volume of KWHs purchased due to the availability of lower cost gas generation in the Southern Company system. 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 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(7) (1.7) $5 0.4 In the third quarter 2023, other operations and maintenance expenses were $411 million compared to $418 million for the corresponding period in 2022. The decrease was primarily due to decreases of $15 million in transmission and distribution expenses related to line maintenance, $9 million in technology infrastructure and application production costs, and $9 million in certain employee compensation and benefit expenses. The decreases were largely offset by an increase of $26 million in planned outages and generation non-outage maintenance expenses. For year-to-date 2023, other operations and maintenance expenses were $1.28 billion compared to $1.27 billion for the corresponding period in 2022. The increase was primarily due to a $14 million decrease in nuclear property insurance refunds and increases of $19 million in expenses related to unregulated products and services, $9 million in technology infrastructure and application production costs, and $9 million in customer accounts expenses primarily associated with bad debt expense. The increases were largely offset by decreases of $21 million in generation expenses primarily associated with planned outages and generation non-outage maintenance expenses, $15 million in certain employee compensation and benefit expenses, and $10 million in transmission and distribution related to line maintenance. Depreciation and Amortization Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $131 59.5 $393 60.3 In the third quarter 2023, depreciation and amortization was $351 million compared to $220 million for the corresponding period in 2022. For year-to-date 2023, depreciation and amortization was $1.05 billion compared to $652 million for the corresponding period in 2022. The increases were primarily due to an increase in depreciation rates effective in 2023. 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. Taxes Other Than Income Taxes Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $4 3.8 $24 7.8 In the third quarter 2023, taxes other than income taxes were $110 million compared to $106 million for the corresponding period in 2022. For year-to-date 2023, taxes other than income taxes were $333 million compared to $309 million for the corresponding period in 2022. The increases were primarily due to an increase in utility license taxes. 119 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Allowance for Equity Funds Used During Construction Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $5 27.8 $14 27.5 In the third quarter 2023, allowance for equity funds used during construction was $23 million compared to $18 million for the corresponding period in 2022. For year-to-date 2023, allowance for equity funds used during construction was $65 million compared to $51 million for the corresponding period in 2022. The increases were primarily due to an increase in capital expenditures related to Plant Barry Unit 8 construction, as well as an increase in capital expenditures related to hydro production. See Note (B) to the Condensed Financial Statements under "Alabama Power – Certificates of Convenience and Necessity" herein for additional information. Interest Expense, Net of Amounts Capitalized Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $6 6.1 $33 11.9 In the third quarter 2023, interest expense, net of amounts capitalized was $104 million compared to $98 million for the corresponding period in 2022. For year-to-date 2023, interest expense, net of amounts capitalized was $311 million compared to $278 million for the corresponding period in 2022. The increases for the third quarter and year-to-date 2023 were primarily associated with increases of approximately $5 million and $25 million, respectively, related to higher average outstanding borrowings and $4 million and $15 million, respectively, related to higher interest rates. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" herein for additional information on borrowings. Other Income (Expense), Net Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $— — $16 15.8 For year-to-date 2023, other income (expense), net was $117 million compared to $101 million for the corresponding period in 2022. The increase was primarily due to a decrease in non-operating benefit-related expenses and an increase in interest income, partially offset by a decrease in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information. Income Taxes Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(87) (52.4) $(291) (73.9) In the third quarter 2023, income taxes were $79 million compared to $166 million for the corresponding period in 2022. For year-to-date 2023, income taxes were $103 million compared to $394 million for the corresponding period in 2022. The decreases were primarily due to an increase in the flowback of certain excess deferred income taxes and lower pre-tax earnings. See Note 2 to the financial statements under "Alabama Power – Excess Accumulated Deferred Income Tax Accounting Order" in Item 8 of the Form 10-K and Note (G) to the Condensed Financial Statements herein for additional information. 120 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Georgia Power Net Income Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(78) (9.1) $(304) (16.4) Georgia Power's net income in the third quarter 2023 was $780 million compared to $858 million for the corresponding period in 2022. The decrease was primarily due to an increase of $172 million in after-tax charges related to the construction of Plant Vogtle Units 3 and 4, as well as higher interest expense, partially offset by an increase in retail revenues associated with warmer weather in the third quarter 2023 compared to the corresponding period in 2022 and lower non-fuel operations and maintenance costs. Also partially offsetting the net income reductions were the impacts of the 2022 ARP effective January 1, 2023, including increased retail rates, largely offset by higher depreciation and amortization. For year-to-date 2023, net income was $1.55 billion compared to $1.85 billion for the corresponding period in 2022. The decrease was primarily due to a decrease in retail revenues associated with lower contributions from variable demand-driven pricing and milder weather in the first and second quarters of 2023 compared to the corresponding periods in 2022, an increase of $133 million in after-tax charges related to the construction of Plant Vogtle Units 3 and 4, and higher interest expense, partially offset by lower non-fuel operations and maintenance costs. Also partially offsetting the net income reductions were the impacts of the 2022 ARP effective January 1, 2023, including increased retail rates, largely offset by higher depreciation and amortization. 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" for additional information. Retail Revenues In the third quarter 2023, retail revenues were $3.00 billion compared to $3.70 billion for the corresponding period in 2022. For year-to-date 2023, retail revenues were $7.14 billion compared to $8.63 billion for the corresponding period in 2022. Details of the changes in retail revenues were as follows: Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) Rates and pricing $ 17 0.4 % $ (115) (1.3) % Sales decline (31) (0.8) (17) (0.2) Weather 88 2.4 (109) (1.3) Fuel cost recovery (781) (21.1) (1,246) (14.4) Retail revenues $ (707) (19.1) % $ (1,487) (17.2) % Revenues associated with changes in rates and pricing increased in the third quarter 2023 when compared to the corresponding period in 2022 primarily due to base tariff increases in accordance with the 2022 ARP, partially offset by lower contributions from commercial and industrial customers with variable demand-driven pricing and a decrease in revenues recognized under the NCCR tariff. Revenues associated with changes in rates and pricing decreased for year-to-date 2023 when compared to the corresponding period in 2022 primarily due to lower contributions from commercial and industrial customers with variable demand-driven pricing and a decrease in revenues recognized under the NCCR tariff, partially offset by base tariff increases in accordance with the 2022 ARP. See Note 2 to the financial statements under "Georgia Power – Rate Plans" and " – Nuclear Construction" in Item 8 of the Form 10-K for additional information. 121 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Revenues attributable to changes in sales decreased in the third quarter and year-to-date 2023 when compared to the corresponding periods in 2022. Weather-adjusted residential KWH sales decreased 2.6% and 0.7% in the third quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 primarily due to decreased customer usage, partially offset by customer growth. Weather-adjusted commercial KWH sales increased 0.4% and 1.1% in the third quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 primarily due to customer growth. The increase in weather-adjusted commercial KWH sales in the third quarter 2023 was partially offset by decreased customer usage. Weather-adjusted industrial KWH sales decreased 1.3% in the third quarter 2023 when compared to the corresponding period in 2022 primarily due to decreases in the pipeline and chemicals sectors, partially offset by an increase in the paper sector. Weather-adjusted industrial KWH sales decreased 1.0% for year-to-date 2023 when compared to the corresponding period in 2022 primarily due to decreases in the textile and mining sectors, partially offset by increases in the paper and electronics sectors. Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues decreased in the third quarter and year-to-date 2023 when compared to the corresponding periods in 2022 due to lower 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 (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 – Fuel Cost Recovery" for additional information. Wholesale Revenues Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $13 23.2 $(39) (21.0) In the third quarter 2023, wholesale revenues were $69 million compared to $56 million for the corresponding period in 2022. The increase was primarily due to a $22 million increase related to the volume of KWH sales associated with higher market demand and a $17 million increase related to new capacity contracts, partially offset by a $26 million decrease related to the average cost per KWH sold due to lower Southern Company system fuel and purchased power costs. For year-to-date 2023, wholesale revenues were $147 million compared to $186 million for the corresponding period in 2022. The decrease was primarily due to a $41 million decrease related to the average cost per KWH sold due to lower Southern Company system fuel and purchased power costs and a $13 million decrease related to the volume of KWH sales associated with lower market demand, partially offset by a $19 million increase related to new capacity contracts. 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 122 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) the FERC. Energy revenues related to these transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost. Other Revenues Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $42 32.3 $113 28.0 In the third quarter 2023, other revenues were $172 million compared to $130 million for the corresponding period in 2022. For year-to-date 2023, other revenues were $516 million compared to $403 million for the corresponding period in 2022. The increases for the third quarter and year-to-date 2023 were primarily due to increases of $27 million and $78 million, respectively, in unregulated sales associated with power delivery construction and maintenance, outdoor lighting, and energy conservation projects, net increases of $7 million and $18 million, respectively, in realized gains associated with price stability products for retail customers on variable demand-driven pricing tariffs, and increases of $10 million in retail solar program fees. Also contributing to the increase for year-to-date 2023 was an $11 million increase in open access transmission tariff sales. Fuel and Purchased Power Expenses Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) Fuel $ (265) (31.5) $ (495) (26.2) Purchased power – non-affiliates (173) (56.9) (303) (43.3) Purchased power – affiliates (350) (61.3) (521) (47.4) Total fuel and purchased power expenses $ (788) $ (1,319) In the third quarter 2023, total fuel and purchased power expenses were $0.9 billion compared to $1.7 billion for the corresponding period in 2022. For year-to-date 2023, total fuel and purchased power expenses were $2.4 billion compared to $3.7 billion for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 were due to decreases of $689 million and $1.0 billion, respectively, related to the average cost of fuel and purchased power and net decreases of $99 million and $293 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 (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 – Fuel Cost Recovery" for additional information. 123 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Details of Georgia Power's generation and purchased power were as follows: Third Quarter 2023 Third Quarter 2022 Year-To-Date 2023 Year-To-Date 2022 Total generation (in billions of KWHs) (a) 18 15 46 45 Total purchased power (in billions of KWHs) 9 11 23 27 Sources of generation (percent) — Gas 47 53 51 48 Nuclear (a) 26 28 27 26 Coal 25 16 19 22 Hydro and other 2 3 3 4 Cost of fuel, generated (in cents per net KWH) — Gas 2.99 6.10 3.07 4.99 Nuclear (a) 0.87 0.75 0.79 0.76 Coal 5.69 4.73 5.80 3.84 Average cost of fuel, generated (in cents per net KWH) (a) 3.11 4.32 2.98 3.56 Average cost of purchased power (in cents per net KWH) (b) 4.55 10.14 4.64 8.00 (a) Excludes KWHs generated from test period energy at Plant Vogtle Unit 3 prior to its in-service date. The related fuel costs are charged to CWIP in accordance with FERC guidance. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on Plant Vogtle Units 3 and 4. (b) 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 2023, fuel expense was $576 million compared to $841 million for the corresponding period in 2022. The decrease was primarily due to a decrease of 51.0% in the average cost per KWH generated by natural gas, partially offset by increases of 78.6% in the volume of KWHs generated by coal, 20.3% in the average cost per KWH generated by coal, 16.0% in the average cost per KWH generated by nuclear, 8.8% in the volume of KWHs generated by nuclear, and 3.0% in the volume of KWHs generated by natural gas. For year-to-date 2023, fuel expense was $1.39 billion compared to $1.89 billion for the corresponding period in 2022. The decrease was primarily due to decreases of 38.5% in the average cost per KWH generated by natural gas and 10.2% in the volume of KWHs generated by coal, partially offset by increases of 51.0% in the average cost per KWH generated by coal and 7.0% in the volume of KWHs generated by natural gas. Purchased Power – Non-Affiliates In the third quarter 2023, purchased power expense from non-affiliates was $131 million compared to $304 million for the corresponding period in 2022. For year-to-date 2023, purchased power expense from non-affiliates was $397 million compared to $700 million for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 were primarily due to decreases of 38.1% and 37.8%, respectively, in the volume of KWHs purchased as Georgia Power and other Southern Company system units generally dispatched at a lower cost than available market resources and 45.1% and 24.1%, respectively, in the average cost per KWH purchased primarily due to lower natural gas 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. 124 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Purchased Power – Affiliates In the third quarter 2023, purchased power expense from affiliates was $221 million compared to $571 million for the corresponding period in 2022. For year-to-date 2023, purchased power expense from affiliates was $579 million compared to $1.1 billion for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 reflect decreases of 60.0% and 49.8%, respectively, in the average cost per KWH purchased primarily due to lower natural gas prices. Also contributing to the decrease in the third quarter 2023 was a 5.5% decrease in the volume of KWHs purchased. 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 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(83) (13.9) $(181) (10.7) In the third quarter 2023, other operations and maintenance expenses were $512 million compared to $595 million for the corresponding period in 2022. The decrease was primarily due to decreases of $64 million in transmission and distribution expenses primarily associated with line maintenance, $45 million in storm damage recovery as authorized in the 2022 ARP, and $25 million in generation non-outage maintenance expenses. These decreases were partially offset by increases of $21 million in generation environmental projects and $20 million from unregulated power delivery construction and maintenance and energy conservation projects. For year-to-date 2023, other operations and maintenance expenses were $1.51 billion compared to $1.69 billion for the corresponding period in 2022. The decrease was primarily due to decreases of $136 million in storm damage recovery as authorized in the 2022 ARP, $121 million in transmission and distribution expenses primarily associated with line maintenance, $74 million in generation non-outage maintenance expenses, and $14 million in certain employee compensation and benefit expenses. These decreases were partially offset by increases of $48 million from unregulated power delivery construction and maintenance and energy conservation projects, $41 million in generation environmental projects, and $39 million in technology infrastructure and application production costs, as well as a $12 million decrease in nuclear property insurance refunds. See Note 2 to the financial statements under "Georgia Power – Storm Damage Recovery" in Item 8 of the Form 10-K for additional information. Depreciation and Amortization Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $70 19.5 $182 17.1 In the third quarter 2023, depreciation and amortization was $429 million compared to $359 million for the corresponding period in 2022. For year-to-date 2023, depreciation and amortization was $1.25 billion compared to $1.07 billion for the corresponding period in 2022. The increases for the third quarter and year-to-date 2023 were primarily due to increases of $48 million and $142 million, respectively, resulting from higher depreciation rates as authorized in the 2022 ARP and $21 million and $51 million, respectively, associated with additional plant in service. Partially offsetting the increase for year-to-date 2023 was a decrease of $11 million in amortization of regulatory assets related to the retirement of certain generating units that ended in 2022. See Note 5 to the financial statements under "Depreciation and Amortization" in Item 8 of the Form 10-K for additional information. 125 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Taxes Other Than Income Taxes Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(11) (7.1) $(14) (3.3) In the third quarter 2023, taxes other than income taxes were $144 million compared to $155 million for the corresponding period in 2022. For year-to-date 2023, taxes other than income taxes were $406 million compared to $420 million for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 were due to decreases of $15 million and $33 million, respectively, in municipal franchise fees resulting from lower retail revenues, partially offset by increases of $3 million and $21 million, respectively, in property taxes primarily resulting from an increase in the assessed value of property. Estimated Loss on Plant Vogtle Units 3 and 4 Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $230 N/M $178 N/M Georgia Power recorded pre-tax charges (credits) to income for the estimated probable loss on Plant Vogtle Units 3 and 4 totaling $160 million and $(70) million in the third quarter 2023 and 2022, respectively, and $160 million and $(18) million for year-to-date 2023 and 2022, respectively. The charges (credits) reflected 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. Allowance for Equity Funds Used During Construction Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $— — $19 18.6 For year-to-date 2023, allowance for equity funds used during construction was $121 million compared to $102 million for the corresponding period in 2022. The increase was primarily due to an increase in capital expenditures subject to AFUDC. Interest Expense, Net of Amounts Capitalized Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $43 35.0 $125 36.0 In the third quarter 2023, interest expense, net of amounts capitalized was $166 million compared to $123 million for the corresponding period in 2022. For year-to-date 2023, interest expense, net of amounts capitalized was $472 million compared to $347 million for the corresponding period in 2022. The increases for the third quarter and year-to-date 2023 were primarily associated with increases of approximately $20 million and $64 million, respectively, related to higher average outstanding borrowings and $19 million and $59 million, respectively, related to higher interest rates. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings. 126 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Other Income (Expense), Net Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $9 25.0 $(15) (10.7) In the third quarter 2023, other income (expense), net was $45 million compared to $36 million for the corresponding period in 2022. The increase was primarily due to a $6 million decrease in non-operating marketing expenses. For year-to-date 2023, other income (expense), net was $125 million compared to $140 million for the corresponding period in 2022. The decrease was primarily due to a decrease of $13 million in customer charges related to contributions in aid of construction and a $7 million charge in the second quarter 2023 under a stipulation agreement approved by the Georgia PSC related to Georgia Power's fuel cost recovery case, partially offset by a $6 million decrease in non-operating marketing expenses. See Note (B) to the Condensed Financial Statements herein under "Georgia Power – Fuel Cost Recovery" for additional information. Income Taxes Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(26) (11.5) $(76) (18.1) In the third quarter 2023, income taxes were $200 million compared to $226 million for the corresponding period in 2022. For year-to-date 2023, income taxes were $345 million compared to $421 million for the corresponding period in 2022. The decreases were primarily due to lower pre-tax earnings largely resulting from higher charges associated with the construction of Plant Vogtle Units 3 and 4 and a decrease in a valuation allowance on certain state tax credit carryforwards in 2023, partially offset by the flowback of certain excess deferred income taxes that ended in 2022. Also contributing to the year-to-date 2023 decrease was an adjustment in the second quarter 2022 related to a prior year state tax credit carryforward. See Note (G) to the Condensed Financial Statements herein for additional information. Mississippi Power Net Income Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $13 21.0 $23 15.3 Mississippi Power's net income for the third quarter 2023 was $75 million compared to $62 million for the corresponding period in 2022. The increase was primarily due to an increase in revenues due to warmer weather in the third quarter 2023 when compared to the corresponding period in 2022. Mississippi Power's net income for year-to-date 2023 was $173 million compared to $150 million for the corresponding period in 2022. The increase was primarily due to an increase in affiliate wholesale capacity revenues, partially offset by an increase in interest expense. 127 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Retail Revenues In the third quarter 2023, retail revenues were $284 million compared to $250 million for the corresponding period in 2022. For year-to-date 2023, retail revenues were $747 million compared to $718 million for the corresponding period in 2022. Details of the changes in retail revenues were as follows: Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) Rates and pricing $ (3) (1.2) % $ 2 0.2 % Sales growth 5 2.0 4 0.6 Weather 9 3.6 (1) (0.1) Fuel and other cost recovery 23 9.2 24 3.3 Retail revenues $ 34 13.6 % $ 29 4.0 % Revenues associated with changes in rates and pricing decreased in the third quarter 2023 and increased year-to-date 2023 when compared to the corresponding periods in 2022. The third quarter 2023 decrease was primarily due to lower contributions from commercial and industrial customers with variable demand-driven pricing and the expiration of a PEP surcharge at the end of 2022 that became effective for the first billing cycle of April 2022, partially offset by higher revenues associated with a tolling arrangement accounted for as a sales-type lease. The year-to-date 2023 increase was primarily due to ECO Plan rates that became effective in May 2022 and higher revenues associated with a tolling arrangement accounted for as a sales-type lease, partially offset by the expiration of the PEP surcharge at the end of 2022 that became effective for the first billing cycle of April 2022. See Notes 2 and 9 to the financial statements under "Mississippi Power" and "Lessor," respectively, in Item 8 of the Form 10-K and Note (D) to the Condensed Financial Statements under "Lease Income" herein for additional information. Revenues attributable to changes in sales increased in the third quarter and year-to-date 2023 when compared to the corresponding periods in 2022. Weather-adjusted residential KWH sales increased 0.9% in the third quarter 2023 when compared to the corresponding period in 2022 due to an increase in customer usage . Weather-adjusted residential KWH sales decreased 0.3% year-to-date 2023 when compared to the corresponding period in 2022 due to a decrease in customer usage . Weather-adjusted commercial KWH sales increased 11.8% and 6.4% in the third quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 due to sales growth associated with new commercial contracts . Industrial KWH sales increased 1.1% and 1.3% in the third quarter and year-to-date 2023, respectively, when compared to the corresponding periods in 2022 primarily due to an increase in the non-manufacturing sector, partially offset by a decrease in the chemicals sector. Fuel and other cost recovery revenues increased i n the third quarter and year-to-date 2023 when compared to the corresponding periods in 2022 primarily as a result of higher recoverable fuel costs . Recoverable fuel costs include fuel and purchased power expenses reduced by the fuel and emissions 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 for additional information. Wholesale Revenues – Non-Affiliates Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $17 28.3 $10 5.2 In the third quarter 2023, wholesale revenues from sales to non-affiliates were $77 million compared to $60 million for the corresponding period in 2022. The increase was primarily due to an $11 million increase associated with 128 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) MRA customers and a $6 million increase associated with opportunity sales. The increase from MRA customers was primarily due to higher recoverable fuel costs and an increase in demand as a result of weather impacts. For year-to-date 2023, wholesale revenues from sales to non-affiliates were $201 million compared to $191 million for the corresponding period in 2022. The increase was due to a $6 million increase associated with MRA customers and a $4 million increase associated with opportunity sales. The increase from MRA customers was primarily due to a rate increase under the MRA tariff effective September 2022 and higher recoverable fuel costs, partially offset by a decrease in demand as a result of weather impacts. 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. Wholesale Revenues – Affiliates Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(122) (65.2) $(178) (53.0) In the third quarter 2023, wholesale revenues from sales to affiliates were $65 million compared to $187 million for the corresponding period in 2022. The decrease was primarily due to a $141 million decrease associated with lower natural gas prices, partially offset by a $19 million increase associated with higher KWH sales. For year-to-date 2023, wholesale revenues from sales to affiliates were $158 million compared to $336 million for the corresponding period in 2022. The decrease was primarily due to a $216 million decrease associated with lower natural gas prices, partially offset by a $29 million increase in capacity revenues resulting from an increase in pricing and volume of generation reserves and a $9 million increase associated with higher KWH sales. Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. Energy revenues related to these transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost. Fuel and Purchased Power Expenses Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) Fuel $ (80) (33.1) $ (167) (29.6) Purchased power (13) (65.0) (18) (50.0) Total fuel and purchased power expenses $ (93) $ (185) In the third quarter 2023, total fuel and purchased power expenses were $169 million compared to $262 million for the corresponding period in 2022. For year-to-date 2023, total fuel and purchased power expenses were $416 million compared to $601 million for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 were primarily due to decreases of $122 million and $203 million, respectively, related to the 129 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) average cost of fuel and purchased power, partially offset by net increases of $29 million and $18 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 energy expenses are generally offset by energy revenues through Mississippi Power's fuel cost recovery clause. Details of Mississippi Power's generation and purchased power were as follows: Third Quarter 2023 Third Quarter 2022 Year-To-Date 2023 Year-To-Date 2022 Total generation (in millions of KWHs) 5,783 5,093 14,123 13,650 Total purchased power (in millions of KWHs) 153 241 427 527 Sources of generation (percent) – Gas 87 89 92 89 Coal 13 11 8 11 Cost of fuel, generated (in cents per net KWH) – Gas 2.52 5.10 2.72 4.43 Coal 5.49 4.50 5.64 4.12 Average cost of fuel, generated (in cents per net KWH) 2.92 5.02 2.97 4.40 Average cost of purchased power (in cents per net KWH) 4.61 8.15 4.27 6.83 Fuel In the third quarter 2023, fuel expense was $162 million compared t o $242 million for the corresponding period in 2022. The decrease was due to a 50.6% decrease in the average cost of natural gas per KWH generated, partially offset by a 28.5% increase in the volume of KWHs generated by coal, a 22.0% increase in the average cost of coal per KWH generated, and a 13.5% increase in the volume of KWHs generated by natural gas. For year-to-date 2023, fuel expense was $398 million compared t o $565 million for the corresponding period in 2022. T he decrease was due to a 38.6% decrease in the average cost of natural gas per KWH generated and a 21.7% decrease in the volume of KWHs generated by coal, partially offset by a 36.9% increase in the average cost of coal per KWH generated and a 7.5% increase in the volume of KWHs generated by natural gas. Purchased Power In the third quarter 2023, purchased power expense was $7 million compared to $20 million for the corresponding period in 2022. For year-to-date 2023, purchased power expense was $18 million compared to $36 million for the corresponding period in 2022. The decreases for the third quarter and year-to-date 2023 were due to decreases of 43.4% and 37.5%, respectively, in the average cost per KWH purchased primarily due to lower natural gas prices and decreases of 36.4% and 18.9%, respectively, in the volume of KWHs purchased. Other Operations and Maintenance Expenses Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(2) (2.3) $6 2.4 For year-to-date 2023, other operations and maintenance expenses were $258 million compared to $252 million for the corresponding period in 2022. The increase was primarily due to increases of $5 million in generation expenses and $4 million in storm reserve accruals, partially offset by a decrease of $5 million in sales and use taxes associated with the Kemper County energy facili ty. 130 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) See Notes 2 and 3 to the financial statements under "Mississippi Power – System Restoration Rider" and "Other Matters – Mississippi Power," respectively, in Item 8 of the Form 10-K and Notes (B) and (C) to the Condensed Financial Statements under "Mississippi Power – System Restoration Rider" and "Other Matters – Mississippi Power," respectively, herein for additional information. Interest Expense, Net of Amounts Capitalized Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $4 26.7 $11 26.2 In the third quarter 2023, interest expense, net of amounts capitalized was $19 million compared to $15 million for the corresponding period in 2022. For year-to-date 2023, interest expense, net of amounts capitalized was $53 million compared to $42 million for the corresponding period in 2022. The increases for the third quarter and year-to-date 2023 were associated with increases of approximately $2 million and $8 million, respectively, related to higher interest rates and $2 million and $4 million, respectively, related 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 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $1 5.9 $(3) (7.9) For year-to-date 2023, income taxes were $35 million compared to $38 million for the corresponding period in 2022. The decrease was primarily due to a decrease of $7 million associated with the flowback of certain excess deferred income taxes, largely offset by an increase of $5 million associated with higher pre-tax earnings. See Note (G) to the Condensed Financial Statements herein for additional information. 131 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Southern Power Net Income Attributable to Southern Power Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $5 5.3 $23 8.7 Net income attributable to Southern Power in the third quarter 2023 was $100 million compared to $95 million for the corresponding period in 2022. The increase was primarily due to an arbitration interim award received for losses previously incurred, higher HLBV income associated with tax equity partnerships, and receipts of liquidated damages associated with generation facility production guarantees, partially offset by lower revenues driven by lower market prices of energy. Net income attributable to Southern Power for year-to-date 2023 was $288 million compared to $265 million for the corresponding period in 2022. The increase was primarily due to an arbitration interim award received for losses previously incurred, a gain on the sale of spare parts, higher HLBV income associated with tax equity partnerships, and receipts of liquidated damages and insurance proceeds related to generation facility production and equipment, as well as changes in state apportionment methodology related to tax legislation enacted by the State of Tennessee. These increases were largely offset by lower revenues driven by lower market prices of energy. See Note (C) to the Condensed Financial Statements under "General Litigation Matters – Southern Power" herein for additional information. Operating Revenues Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(527) (44.7) $(932) (35.6) 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 132 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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 2023 Third Quarter 2022 Year-To-Date 2023 Year-To-Date 2022 (in millions) PPA capacity revenues $ 134 $ 131 $ 360 $ 344 PPA energy revenues 370 736 953 1,657 Total PPA revenues 504 867 1,313 2,001 Non-PPA revenues 131 304 327 590 Other revenues 18 9 46 27 Total operating revenues $ 653 $ 1,180 $ 1,686 $ 2,618 In the third quarter 2023, total operating revenues were $653 million, reflecting a $527 million, or 44.7%, decrease from the corresponding period in 2022. The change in operating revenues was primarily due to the following: • PPA energy revenues decreased $366 million, or 49.7%, primarily due to a $378 million decrease in sales under natural gas PPAs resulting from a $304 million decrease in the price of fuel and purchased power and a $75 million decrease in the volume of KWHs sold. • Non-PPA revenues decreased $173 million, or 56.9%, primarily due to a $252 million decrease in the market price of energy, partially offset by a $76 million increase in the volume of KWHs sold through short-term sales. • Other revenues increased $9 million, or 100.0%, primarily due to an arbitration interim award received for losses previously incurred. See Note (C) to the Condensed Financial Statements under "General Litigation Matters – Southern Power" herein for additional information. For year-to-date 2023, total operating revenues were $1.7 billion, reflecting a $932 million, or 35.6%, decrease from the corresponding period in 2022. The change in operating revenues was primarily due to the following: • PPA capacity revenues increased $16 million, or 4.7%, primarily due to a net increase in MW capacity under contract from natural gas PPAs and an increase associated with a change in rates from natural gas PPAs. • PPA energy revenues decreased $704 million, or 42.5%, primarily due to a $706 million decrease in sales under natural gas PPAs resulting from a $577 million decrease in the price of fuel and purchased power and a $129 million decrease in the volume of KWHs sold. • Non-PPA revenues decreased $263 million, or 44.6%, primarily due to a $522 million decrease in the market price of energy, partially offset by a $255 million increase in the volume of KWHs sold through short-term sales. • Other revenues increased $19 million, or 70.4%, primarily due to receipts of liquidated damages associated with generation facility production guarantees, an arbitration interim award received for losses previously incurred, and business interruption insurance proceeds for damaged generation equipment. See Note (C) to the Condensed Financial Statements under "General Litigation Matters – Southern Power" herein for additional information. 133 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Fuel and Purchased Power Expenses Details of Southern Power's generation and purchased power were as follows: Third Quarter 2023 Third Quarter 2022 Year-To-Date 2023 Year-To-Date 2022 (in billions of KWHs) Generation 12.9 12.8 36.9 36.7 Purchased power 0.8 1.2 2.4 2.3 Total generation and purchased power 13.7 14.0 39.3 39.0 Total generation and purchased power (excluding solar, wind, fuel cells, and tolling agreements) 8.5 8.8 24.7 23.2 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. Details of Southern Power's fuel and purchased power expenses were as follows: Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) Fuel $ (409) (67.6) $ (748) (58.7) Purchased power (111) (77.1) (146) (62.7) Total fuel and purchased power expenses $ (520) $ (894) In the third quarter 2023, total fuel and purchased power expenses decreased $520 million, or 69.4%, compared to the corresponding period in 2022. Fuel expense decreased $409 million primarily due to a $421 million decrease associated with the average cost of fuel. Purchased power expense decreased $111 million due to a $61 million decrease associated with the average cost of purchased power and a $50 million decrease associated with the volume of KWHs purchased. For year-to-date 2023, total fuel and purchased power expenses decreased $894 million, or 59.3%, compared to the corresponding period in 2022. Fuel expense decreased $748 million due to an $835 million decrease associated with the average cost of fuel, partially offset by an $87 million increase associated with the volume of KWHs generated. Purchased power expense decreased $146 million primarily due to a $152 million decrease associated with the average cost of purchased power. 134 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Other Operations and Maintenance Expenses Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(9) (8.0) $(5) (1.5) In the third quarter 2023, other operations and maintenance expenses were $104 million compared to $113 million for the corresponding period in 2022. For year-to-date 2023, other operations and maintenance expenses were $327 million compared to $332 million for the corresponding period in 2022. The decreases were primarily due to $11 million from an arbitration interim award received for losses previously incurred. The year-to-date 2023 decrease was largely offset by an increase in generation maintenance expenses. See Note (C) to the Condensed Financial Statements under "General Litigation Matters – Southern Power" herein for additional information. Gain on Dispositions, Net Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $— — $18 N/M For year-to-date 2023, gain on dispositions, net was $20 million compared to $2 million for the corresponding period in 2022. The increase was primarily due to a $16 million gain on the sale of spare parts in 2023. Interest Expense, Net of Amounts Capitalized Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $— — $(7) (6.7) For year-to-date 2023, interest expense, net of amounts capitalized was $98 million compared to $105 million for the corresponding period in 2022. The decrease was primarily due to lower average outstanding borrowings. Income Taxes Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $3 8.3 $(11) (22.4) For year-to-date 2023, income tax expense was $38 million compared to $49 million for the corresponding period in 2022. The decrease was primarily due to a change in state apportionment methodology resulting from tax legislation enacted by the State of Tennessee in the second quarter 2023, partially offset by higher pre-tax earnings. See Note (G) to the Condensed Financial Statements herein for additional information. Net Income (Loss) Attributable to Noncontrolling Interests Third Quarter 2023 vs. Third Quarter 2022 Year-To-Date 2023 vs. Year-To-Date 2022 (change in millions) (% change) (change in millions) (% change) $(2) (16.7) $(13) (23.6) In the third quarter 2023, net income attributable to noncontrolling interests was $10 million compared to $12 million for the corresponding period in 2022. The decrease was primarily due to $7 million in higher HLBV loss allocations to wind tax equity partners, largely offset by an allocation of $6 million to equity partners related to an arbitration interim award received for losses previously incurred. 135 Table of Contents Index to Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) For year-to-date 2023, net loss attributable to noncontrolling interests was $68 million compared to $55 million for the corresponding period in 2022. The increase was primarily due to $16 million in higher HLBV loss allocations to wind tax equity partners and $12 million in lower income allocations to equity partners, partially offset by $15 million in lower loss allocations to battery energy storage partners. See Note (C) to the Condensed Financial Statements under "General Litigation Matters – Southern Power" herein for additiona