Company: SOJE
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0000092122-25-000084
Chunk: 426

Company: SOUTHERN CO
Filing Date: 2025-10-30
Form: 10-Q
Item: Item 2
Chunk 426
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 costs, and to earn a reasonable return on its investments.

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

In the third quarter 2025, net income decreased $9 million, or 42.9%, when compared to the corresponding period in 2024, as described further below:

•Operating revenues increased $52 million primarily due to higher gas cost recovery and base rate increases. Gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas.

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    Table of Contents                                Index to Financial StatementsMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS (Continued)

•Operating expenses increased $56 million primarily due to a $21 million increase in cost of natural gas as a result of higher gas prices and higher volumes sold compared to 2024, a $15 million increase in depreciation primarily due to additional plant in service related to continued investments at the natural gas distribution utilities, a $7 million increase related to employee compensation and benefit expenses, a $6 million increase related to expenses passed through to customers, and a $5 million increase in legal expenses, partially offset by a decrease of $8 million related to certain deferred expenses.

•Interest expense, net of amounts capitalized increased $14 million primarily due to higher average outstanding borrowings.

•Income taxes decreased $11 million primarily as a result of lower pre-tax earnings and the flowback of excess state deferred income taxes.

For year-to-date 2025, net income increased $14 million, or 3.5%, when compared to the corresponding period in 2024, as described further below:

•Operating revenues increased $294 million primarily due to higher gas cost recovery and base rate increases. Gas costs recovered through natural gas revenues