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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
 FORM 10-Q
 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the quarterly period ended March 31, 2006
 OR
 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ___to___
 Commission
    
    Registrant, State of Incorporation,
    
    I.R.S. EmployerFile Number
    
    Address and Telephone Number
    
    Identification No.1-3526
    
    The Southern Company
    
    58-0690070(A Delaware Corporation)30 Ivan Allen Jr. Boulevard, N.W.Atlanta, Georgia 30308(404) 506-50001-3164
    
    Alabama Power Company
    
    63-0004250(An Alabama Corporation)600 North 18th StreetBirmingham, Alabama 35291(205) 257-10001-6468
    
    Georgia Power Company
    
    58-0257110(A Georgia Corporation)241 Ralph McGill Boulevard, N.E.Atlanta, Georgia 30308(404) 506-65260-2429
    
    Gulf Power Company
    
    59-0276810(A Florida Corporation)One Energy PlacePensacola, Florida 32520(850) 444-6111001-11229
    
    Mississippi Power Company
    
    64-0205820(A Mississippi Corporation)2992 West BeachGulfport, Mississippi 39501(228) 864-12111-5072
    
    Savannah Electric and Power Company
    
    58-0418070(A Georgia Corporation)600 East Bay StreetSavannah, Georgia 31401(912) 644-7171333-98553
    
    Southern Power Company
    
    58-2598670(A Delaware Corporation)30 Ivan Allen Jr. Boulevard, N.W.Atlanta, Georgia 30308(404) 506-5000




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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 X No___
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):
 LargeAccelerated
    
    
    Accelerated
    
    
    Non-acceleratedRegistrant
    
    Filer
    
    
    Filer
    
    
    FilerThe Southern Company
    
    
    XAlabama Power Company
    
    
    
    
    
    
    
    
    
    
    XGeorgia Power Company
    
    
    
    
    
    
    
    
    
    
    XGulf Power Company
    
    
    
    
    
    
    
    
    
    
    XMississippi Power Company
    
    
    
    
    
    
    
    
    
    
    XSavannah Electric and
Power Company
    
    
    
    
    
    
    
    
    
    
    XSouthern Power Company
    
    
    
    
    
    
    
    
    
    
    X
 Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.) Yes___  No X
 Description of
    
    Shares OutstandingRegistrant
    
    Common Stock
    
    at March 31, 2006The Southern Company
    
    Par Value $5 Per Share
    
    
    742,048,440Alabama Power Company
    
    Par Value $40 Per Share
    
    
    9,250,000Georgia Power Company
    
    Without Par Value
    
    
    7,761,500Gulf Power Company
    
    Without Par Value
    
    
    992,717Mississippi Power Company
    
    Without Par Value
    
    
    1,121,000Savannah Electric and
Power Company
    
    Par Value $5 Per Share
    
    
    10,844,635Southern Power Company
    
    Par Value $0.01 Per Share
    
    
    1,000
  2




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INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2006
 PageNumberDEFINITIONS
    
    
    5CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
    
    
    6PART I  FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsThe Southern Company and Subsidiary CompaniesCondensed Consolidated Statements of Income
    
    
    8Condensed Consolidated Statements of Cash Flows
    
    
    9Condensed Consolidated Balance Sheets
    
    
    10Condensed Consolidated Statements of Comprehensive Income
    
    
    12Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Alabama Power CompanyCondensed Statements of Income
    
    
    29Condensed Statements of Comprehensive Income
    
    
    29Condensed Statements of Cash Flows
    
    
    30Condensed Balance Sheets
    
    
    31Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    33Georgia Power CompanyCondensed Statements of Income
    
    
    44Condensed Statements of Comprehensive Income
    
    
    44Condensed Statements of Cash Flows
    
    
    45Condensed Balance Sheets
    
    
    46Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    48Gulf Power CompanyCondensed Statements of Income
    
    
    59Condensed Statements of Comprehensive Income
    
    
    59Condensed Statements of Cash Flows
    
    
    60Condensed Balance Sheets
    
    
    61Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    63Mississippi Power CompanyCondensed Statements of Income
    
    
    72Condensed Statements of Comprehensive Income
    
    
    72Condensed Statements of Cash Flows
    
    
    73Condensed Balance Sheets
    
    
    74Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    76Savannah Electric and Power CompanyCondensed Statements of Income
    
    
    86Condensed Statements of Comprehensive Income
    
    
    86Condensed Statements of Cash Flows
    
    
    87Condensed Balance Sheets
    
    
    88Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    90Southern Power CompanyCondensed
Consolidated Statements of Income
    
    
    101Condensed
Consolidated Statements of Comprehensive Income
    
    
    101Condensed
Consolidated Statements of Cash Flows
    
    
    102Condensed
Consolidated Balance Sheets
    
    
    103Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    105Notes to the Condensed Financial Statements
    
    
    112Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27
 3




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INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2006
 PageNumberPART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    125Item 1A. Risk Factors
    
    
    125Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    125Item 3. Defaults Upon Senior Securities
    
    InapplicableItem 4. Submission of Matters to a Vote of Security Holders
    
    InapplicableItem 5. Other Information
    
    InapplicableItem 6. Exhibits
    
    
    126Signatures
    
    
    131
  4




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DEFINITIONS TERM
    
    MEANINGAlabama Power
    
    Alabama Power CompanyAFUDC
    
    Allowance for funds used during constructionBMA
    
    Bond Market AssociationClean Air Act
    
    Clean Air Act Amendments of 1990DOE
    
    U.S. Department of EnergyECO Plan
    
    Environmental Compliance Overview PlanEPA
    
    U.S. Environmental Protection AgencyERISA
    
    Employee Retirement Income Security Act of 1974, as amendedFASB
    
    Financial Accounting Standards BoardFERC
    
    Federal Energy Regulatory CommissionForm 10-K
    
    Combined Annual Report on Form 10-K of Southern Company,
Alabama Power, Georgia Power, Gulf Power, Mississippi Power,
Savannah Electric, and Southern Power for the year ended
December 31, 2005 and, with respect to Southern Company,
Amendment No. 1 and Amendment No. 2 theretoGeorgia Power
    
    Georgia Power CompanyGulf Power
    
    Gulf Power CompanyIIC
    
    Intercompany Interchange ContractIRC
    
    Internal Revenue Code of 1986, as amendedIRS
    
    Internal Revenue ServiceKWH
    
    Kilowatt-hourLIBOR
    
    London Interbank Offered RateMirant
    
    Mirant CorporationMississippi Power
    
    Mississippi Power CompanyMoodys
    
    Moodys Investors Service, IncMW
    
    MegawattNRC
    
    Nuclear Regulatory CommissionNSR
    
    New Source ReviewPEP
    
    Performance Evaluation PlanPPA
    
    Power Purchase AgreementPSC
    
    Public Service Commissionretail operating companies
    
    Alabama Power, Georgia Power, Gulf Power, Mississippi
Power, and Savannah ElectricS&P
    
    Standard and Poors, a division of The McGraw-Hill
Companies, Inc.Savannah Electric
    
    Savannah Electric and Power CompanySCS
    
    Southern Company Services, Inc.SEC
    
    Securities and Exchange CommissionSouthern Company
    
    The Southern CompanySouthern Company system
    
    Southern Company, the retail operating companies, Southern
Power, and other subsidiariesSouthern Power
    
    Southern Power CompanySuper Southeast
    
    Southern Companys traditional service territory, Alabama,
Florida, Georgia, and Mississippi, plus the surrounding
states of Kentucky, Louisiana, North Carolina, South
Carolina, Tennessee, and Virginia
 5




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
  
    
    the impact of recent and future federal and state regulatory change, including legislative and
regulatory initiatives regarding deregulation and restructuring of the electric utility industry, implementation of
the Energy Policy Act of 2005, and also changes in environmental, tax, 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;
    
    current and future litigation, regulatory investigations, proceedings, or inquiries, including the pending
EPA civil actions against certain Southern Company subsidiaries, FERC matters, IRS audits, and Mirant matters;
    
    the effects, extent, and timing of the entry of additional competition in the markets in which Southern
Companys subsidiaries operate;
    
    variations in demand for electricity and gas, including those relating to weather, the general economy and
population, and business growth (and declines);
    
    available sources and costs of fuels;
    
    ability to control costs;
    
    investment performance of Southern Companys employee benefit plans;
    
    advances in technology;
    
    state and federal rate regulations and the impact of pending and future rate cases and negotiations,
including rate cases relating to fuel cost recovery;
    
    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;
    
    the ability to obtain new short- and long-term contracts with neighboring utilities;
    
    the direct or indirect effect on Southern Companys business resulting from terrorist incidents and the
threat of terrorist incidents;
    
    interest rate fluctuations and financial market conditions and the results of financing efforts, including
Southern Companys and its subsidiaries credit ratings;
    
    the ability of Southern Company and its subsidiaries to obtain additional generating capacity at
competitive prices;
    
    catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, or other similar
occurrences;
    
    the direct or indirect effects on Southern Companys business resulting from incidents similar to the
August 2003 power outage in the Northeast;
    
    the effect of accounting pronouncements issued periodically by standard setting bodies; and
    
    other factors discussed elsewhere herein and in other reports filed by the registrants from time to time
with the SEC.
 Each registrant expressly disclaims any obligation to update any forward-looking statements.
 6




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THE SOUTHERN COMPANY
AND SUBSIDIARY COMPANIES
 7




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Revenues:Retail revenues
    
    $
    2,471,413
    
    
    $
    2,268,809Sales for resale
    
    
    414,869
    
    
    
    347,125Other electric revenues
    
    
    110,990
    
    
    
    101,095Other revenues
    
    
    65,988
    
    
    
    70,001Total operating revenues
    
    
    3,063,260
    
    
    
    2,787,030Operating Expenses:Fuel
    
    
    1,048,545
    
    
    
    864,621Purchased power
    
    
    104,411
    
    
    
    98,216Other operations
    
    
    562,452
    
    
    
    516,428Maintenance
    
    
    283,630
    
    
    
    294,092Depreciation and amortization
    
    
    298,926
    
    
    
    291,110Taxes other than income taxes
    
    
    175,003
    
    
    
    162,884Total operating expenses
    
    
    2,472,967
    
    
    
    2,227,351Operating Income
    
    
    590,293
    
    
    
    559,679Other Income and (Expense):Allowance for equity funds used during construction
    
    
    11,527
    
    
    
    16,859Interest income
    
    
    6,672
    
    
    
    5,272Equity in losses of unconsolidated subsidiaries
    
    
    (32,575
    )
    
    
    (23,104
    )Leveraged lease income
    
    
    18,103
    
    
    
    18,248Interest expense, net of amounts capitalized
    
    
    (176,375
    )
    
    
    (138,987
    )Interest expense to affiliate trusts
    
    
    (30,629
    )
    
    
    (31,930
    )Preferred and preference dividends of subsidiaries
    
    
    (9,015
    )
    
    
    (7,402
    )Other income (expense), net
    
    
    (10,865
    )
    
    
    (5,207
    )Total other income and (expense)
    
    
    (223,157
    )
    
    
    (166,251
    )Earnings From Continuing Operations Before Income Taxes
    
    
    367,136
    
    
    
    393,428Income taxes
    
    
    107,022
    
    
    
    75,887Earnings From Continuing Operations
    
    
    260,114
    
    
    
    317,541Earnings from discontinued operations, net of income taxes
of $942 and $3,435 for 2006 and 2005, respectively
    
    
    1,493
    
    
    
    5,419Consolidated Net Income
    
    $
    261,607
    
    
    $
    322,960Common Stock Data:Earnings per share from continuing operations-Basic
    
    $
    0.35
    
    
    $
    0.43Diluted
    
    $
    0.35
    
    
    $
    0.42Earnings per share including discontinued operations-Basic
    
    $
    0.35
    
    
    $
    0.43Diluted
    
    $
    0.35
    
    
    $
    0.43Average number of basic shares of common
stock outstanding (in thousands)
    
    
    742,195
    
    
    
    744,025Average number of diluted shares of common
stock outstanding (in thousands)
    
    
    747,039
    
    
    
    748,672Cash dividends paid per share of common stock
    
    $
    0.3725
    
    
    $
    0.3575
  8




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Activities:Consolidated net income
    
    $
    261,607
    
    
    $
    322,960Adjustments to reconcile consolidated net income
to net cash provided from operating activities Depreciation and amortization
    
    
    351,946
    
    
    
    343,071Deferred income taxes and investment tax credits
    
    
    (39,650
    )
    
    
    111,385Allowance for equity funds used during construction
    
    
    (11,527
    )
    
    
    (16,859
    )Equity in losses of unconsolidated subsidiaries
    
    
    32,575
    
    
    
    23,104Leveraged lease income
    
    
    (18,103
    )
    
    
    (18,248
    )Pension, postretirement, and other employee benefits
    
    
    18,448
    
    
    
    13,793Stock option expense
    
    
    19,104
    
    
    
    Tax benefit of stock options
    
    
    826
    
    
    
    15,049Hedge settlements
    
    
    18,006
    
    
    
    (18,357
    )Storm damage accounting order
    
    
    
    
    
    
    45,000Other, net
    
    
    (3,434
    )
    
    
    (16,106
    )Changes in certain current assets and liabilities Receivables
    
    
    236,127
    
    
    
    (16,952
    )Fossil fuel stock
    
    
    (78,471
    )
    
    
    (35,716
    )Materials and supplies
    
    
    (11,089
    )
    
    
    (5,120
    )Other current assets
    
    
    (41,642
    )
    
    
    5,260Accounts payable
    
    
    (310,962
    )
    
    
    (88,579
    )Accrued taxes
    
    
    (9,425
    )
    
    
    (231,334
    )Accrued compensation
    
    
    (337,600
    )
    
    
    (275,701
    )Other current liabilities
    
    
    (18,331
    )
    
    
    14,458Net cash provided from operating activities
    
    
    58,405
    
    
    
    171,108Investing Activities:Property additions
    
    
    (546,261
    )
    
    
    (458,842
    )Nuclear decommissioning trust fund purchases
    
    
    (172,551
    )
    
    
    (176,854
    )Nuclear decommissioning trust fund sales
    
    
    165,671
    
    
    
    168,155Proceeds from property sales
    
    
    150,521
    
    
    
    9,463Investment in unconsolidated subsidiaries
    
    
    (37,748
    )
    
    
    (23,913
    )Cost of removal net of salvage
    
    
    (31,230
    )
    
    
    (16,040
    )Other
    
    
    (33,312
    )
    
    
    (48,729
    )Net cash used for investing activities
    
    
    (504,910
    )
    
    
    (546,760
    )Financing Activities:Increase in notes payable, net
    
    
    433,101
    
    
    
    363,710Proceeds Long-term debt
    
    
    800,000
    
    
    
    500,000Common stock
    
    
    13,875
    
    
    
    56,031Gross excess tax benefit of stock options
    
    
    1,960
    
    
    
    Redemptions Long-term debt
    
    
    (322,839
    )
    
    
    (252,421
    )Long-term debt to affiliate trusts
    
    
    (67,457
    )
    
    
    Preferred and preference stock
    
    
    (14,569
    )
    
    
    Common stock repurchased
    
    
    (117
    )
    
    
    Payment of common stock dividends
    
    
    (276,442
    )
    
    
    (265,958
    )Other
    
    
    (22,332
    )
    
    
    (12,370
    )Net cash provided from financing activities
    
    
    545,180
    
    
    
    388,992Net Change in Cash and Cash Equivalents
    
    
    98,675
    
    
    
    13,340Cash and Cash Equivalents at Beginning of Period
    
    
    202,111
    
    
    
    368,449Cash and Cash Equivalents at End of Period
    
    $
    300,786
    
    
    $
    381,789Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $4,942 and $6,708 capitalized for 2006 and 2005, respectively)
    
    $
    198,762
    
    
    $
    170,760Income taxes (net of refunds)
    
    $
    919
    
    
    $
    31,855
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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 
  At March 31,
    
    
    At December 31,Assets
    
    2006
    
    
    2005(in thousands)Current Assets:Cash and cash equivalents
    
    $
    300,786
    
    
    $
    202,111Receivables Customer accounts receivable
    
    
    800,744
    
    
    
    868,665Unbilled revenues
    
    
    268,100
    
    
    
    303,782Under recovered regulatory clause revenues
    
    
    783,010
    
    
    
    754,522Other accounts and notes receivable
    
    
    308,463
    
    
    
    409,685Accumulated provision for uncollectible accounts
    
    
    (35,515
    )
    
    
    (37,510
    )Fossil fuel stock, at average cost
    
    
    493,709
    
    
    
    402,579Vacation pay
    
    
    117,073
    
    
    
    116,699Materials and supplies, at average cost
    
    
    664,225
    
    
    
    665,754Assets from risk management activities
    
    
    78,956
    
    
    
    124,607Prepaid expenses
    
    
    191,986
    
    
    
    131,324Other
    
    
    240,479
    
    
    
    262,659Total current assets
    
    
    4,212,016
    
    
    
    4,204,877Property, Plant, and Equipment:In service
    
    
    43,956,095
    
    
    
    43,578,501Less accumulated depreciation
    
    
    15,987,807
    
    
    
    15,727,30027,968,288
    
    
    
    27,851,201Nuclear fuel, at amortized cost
    
    
    269,916
    
    
    
    261,997Construction work in progress
    
    
    1,403,760
    
    
    
    1,367,255Total property, plant, and equipment
    
    
    29,641,964
    
    
    
    29,480,453Other Property and Investments:Nuclear decommissioning trusts, at fair value
    
    
    995,776
    
    
    
    953,554Leveraged leases
    
    
    1,088,984
    
    
    
    1,082,100Other
    
    
    324,213
    
    
    
    337,236Total other property and investments
    
    
    2,408,973
    
    
    
    2,372,890Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    931,078
    
    
    
    936,729Prepaid pension costs
    
    
    1,023,360
    
    
    
    1,021,797Unamortized debt issuance expense
    
    
    172,019
    
    
    
    161,583Unamortized loss on reacquired debt
    
    
    303,909
    
    
    
    309,409Deferred under recovered regulatory clause revenues
    
    
    438,740
    
    
    
    530,668Other regulatory assets
    
    
    518,232
    
    
    
    519,005Other
    
    
    327,113
    
    
    
    339,294Total deferred charges and other assets
    
    
    3,714,451
    
    
    
    3,818,485Total Assets
    
    $
    39,977,404
    
    
    $
    39,876,705
  10




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 At March 31,
    
    
    At December 31,Liabilities and Stockholders' Equity
    
    2006
    
    
    2005(in thousands)Current Liabilities:Securities due within one year
    
    $
    893,632
    
    
    $
    900,699Notes payable
    
    
    1,690,530
    
    
    
    1,257,428Accounts payable
    
    
    845,142
    
    
    
    1,229,253Customer deposits
    
    
    230,485
    
    
    
    219,781Accrued taxes Income taxes
    
    
    224,070
    
    
    
    103,925Other
    
    
    185,124
    
    
    
    318,978Accrued interest
    
    
    195,558
    
    
    
    204,292Accrued vacation pay
    
    
    143,007
    
    
    
    143,816Accrued compensation
    
    
    121,125
    
    
    
    458,573Other
    
    
    409,433
    
    
    
    403,606Total current liabilities
    
    
    4,938,106
    
    
    
    5,240,351Long-term Debt
    
    
    11,340,843
    
    
    
    10,957,903Long-term Debt Payable to Affiliated Trusts
    
    
    1,893,187
    
    
    
    1,888,469Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    5,712,443
    
    
    
    5,735,502Deferred credits related to income taxes
    
    
    305,960
    
    
    
    311,083Accumulated deferred investment tax credits
    
    
    521,148
    
    
    
    527,172Employee benefit obligations
    
    
    955,677
    
    
    
    929,908Asset retirement obligations
    
    
    1,132,367
    
    
    
    1,117,280Other cost of removal obligations
    
    
    1,278,907
    
    
    
    1,295,215Other regulatory liabilities
    
    
    307,013
    
    
    
    323,180Other
    
    
    272,412
    
    
    
    265,838Total deferred credits and other liabilities
    
    
    10,485,927
    
    
    
    10,505,178Total Liabilities
    
    
    28,658,063
    
    
    
    28,591,901Preferred and Preference Stock of Subsidiaries
    
    
    595,616
    
    
    
    595,626Common Stockholders Equity:Common stock, par value $5 per share Authorized  1 billion sharesIssued  March 31, 2006: 751,859,492 Shares;
 December 31, 2005: 751,810,927 SharesTreasury  March 31, 2006: 9,811,052 Shares;
 December 31, 2005: 10,362,970 SharesPar value
    
    
    3,759,297
    
    
    
    3,759,055Paid-in capital
    
    
    1,101,043
    
    
    
    1,084,799Treasury, at cost
    
    
    (340,309
    )
    
    
    (358,892
    )Retained earnings
    
    
    6,317,298
    
    
    
    6,332,023Accumulated other comprehensive loss
    
    
    (113,604
    )
    
    
    (127,807
    )Total Common Stockholders Equity
    
    
    10,723,725
    
    
    
    10,689,178Total Liabilities and Stockholders Equity
    
    $
    39,977,404
    
    
    $
    39,876,705
  11




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Consolidated Net Income
    
    $
    261,607
    
    
    $
    322,960Other comprehensive income (loss)  continuing operations:Change in fair value of marketable securities, net of tax of
$1,609 and $(1,729), respectively
    
    
    2,521
    
    
    
    (3,326
    )Changes in fair value of qualifying hedges, net of tax of
$7,130 and $935, respectively
    
    
    11,392
    
    
    
    1,435Reclassification adjustment for amounts included in net income,
net of tax of $241 and $1,318, respectively
    
    
    290
    
    
    
    2,054Total other comprehensive income  continuing
operations
    
    
    14,203
    
    
    
    163Other comprehensive income  discontinued operations:Changes in fair value of qualifying hedges, net of tax of $1,090
    
    
    
    
    
    
    1,728Reclassification adjustment for amounts included in net income,
net of tax of $692
    
    
    
    
    
    
    1,097Total other comprehensive income  discontinued operations
    
    
    
    
    
    
    2,825COMPREHENSIVE INCOME
    
    $
    275,810
    
    
    $
    325,948
  12




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 
 
  OVERVIEW
    RESULTS OF OPERATIONS
 Earnings
   Increase (Decrease)First Quarter(in thousands)
    
    
    %Retail revenues
    
    $
    202,604
    
    
    
    8.9Sales for resale
    
    
    67,744
    
    
    
    19.5Other electric revenues
    
    
    9,895
    
    
    
    9.8Fuel expense
    
    
    183,924
    
    
    
    21.3Purchased power expense
    
    
    6,195
    
    
    
    6.3Other operations expense
    
    
    46,024
    
    
    
    8.9Maintenance expense
    
    
    (10,462
    )
    
    
    (3.6
    )Taxes other than income taxes
    
    
    12,119
    
    
    
    7.4Allowance for equity funds used during
construction
    
    
    (5,332
    )
    
    
    (31.6
    )Equity in losses of unconsolidated subsidiaries
    
    
    9,471
    
    
    
    41.0Interest expense, net of amounts capitalized
    
    
    37,388
    
    
    
    26.9Other income (expense), net
    
    
    (5,658
    )
    
    
    (108.7
    )Income taxes
    
    
    31,135
    
    
    
    41.0
 13




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Retail revenues.
  First Quarter(in millions)
    
    
    % changeRetail  prior year
    
    $
    2,269Change in Base rates
    
    
    14
    
    
    
    0.6Sales growth
    
    
    28
    
    
    
    1.2Weather
    
    
    (6
    )
    
    
    (0.3
    )Fuel cost recovery
    
    
    146
    
    
    
    6.5Other cost recovery
    
    
    20
    
    
    
    0.9Retail  current year
    
    $
    2,471
    
    
    
    8.9
    %
 Sales for resale
 Other electric revenues.
 Fuel and purchased power expense
 Other operations expense.
 14




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Maintenance expense.
 Taxes other than income taxes.
 Allowance for equity funds used during construction
 Equity in losses of unconsolidated subsidiaries.
 Interest expense, net of amounts capitalized.
 Other income (expense), net.
 15




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Income taxes.
 FUTURE EARNINGS POTENTIAL
  Environmental Matters
  New Source Review Litigation
  16




---



##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  New Source Review Reform Rules
  Plant Wansley Environmental Litigation
  FERC and State PSC Matters
 Market-Based Rate Authority
 
  17




---



##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
   Intercompany Interchange Contract
 .
 Retail Fuel Cost Recovery
   18




---



##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
    Storm Damage Cost Recovery
   19




---



##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  Mirant Matters
  Mirant Securities Litigation
 Form 10-K
 Southern Company Employee Savings Plan Litigation
  20




---



##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Income Tax Matters
 Leveraged Lease Transactions
  Synthetic Fuel Tax Credits
  Other Matters
   21




---



##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
   ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  New Accounting Standards
  22




---



##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 FINANCIAL CONDITION AND LIQUIDITY
 Overview
     Capital Requirements and Contractual Obligations
  Sources of Capital
   23




---



##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  Off-Balance Sheet Financing Arrangements
  Credit Rating Risk
  Market Price Risk
   24




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  First Quarter2006ChangesFair Value(in millions)Contracts beginning of period
    
    $
    100.5Contracts realized or settled
    
    
    (16.0
    )New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    (119.5
    )Contracts at March 31, 2006
    
    $
    (35.0
    )
 
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered into during the period. Source of March 31, 2006Valuation PricesTotal
    
    
    MaturityFair Value
    
    
    Year 1
    
    
    1-3 Years(in millions)Actively quoted
    
    $
    (35.1
    )
    
    $
    (59.2
    )
    
    $
    24.1External sources
    
    
    0.1
    
    
    
    0.1
    
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2006
    
    $
    (35.0
    )
    
    $
    (59.1
    )
    
    $
    24.1
  Amounts(in millions)Regulatory assets, net
    
    $
    (35.3
    )Accumulated other comprehensive loss
    
    
    (0.1
    )Net income
    
    
    0.4Total fair value loss
    
    $
    (35.0
    )
   Financing Activities
  25




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
    26




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##### Table of Contents



PART I
 
 Item 3. Quantitative And Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
    Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Southern Power
  Savannah Electric
  27




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##### Table of Contents



ALABAMA POWER COMPANY
 28




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##### Table of Contents



ALABAMA POWER COMPANY
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Revenues:Retail revenues
    
    $
    802,209
    
    
    $
    709,086Sales for resale Non-affiliates
    
    
    146,354
    
    
    
    114,414Affiliates
    
    
    79,315
    
    
    
    107,286Other revenues
    
    
    44,829
    
    
    
    38,950Total operating revenues
    
    
    1,072,707
    
    
    
    969,736Operating Expenses:Fuel
    
    
    341,767
    
    
    
    299,820Purchased power Non-affiliates
    
    
    22,086
    
    
    
    23,866Affiliates
    
    
    56,665
    
    
    
    48,298Other operations
    
    
    169,013
    
    
    
    146,290Maintenance
    
    
    109,500
    
    
    
    123,554Depreciation and amortization
    
    
    109,862
    
    
    
    108,491Taxes other than income taxes
    
    
    65,657
    
    
    
    62,549Total operating expenses
    
    
    874,550
    
    
    
    812,868Operating Income
    
    
    198,157
    
    
    
    156,868Other Income and (Expense):Allowance for equity funds used during construction
    
    
    5,529
    
    
    
    5,654Interest income
    
    
    4,174
    
    
    
    3,568Interest expense, net of amounts capitalized
    
    
    (53,219
    )
    
    
    (46,307
    )Interest expense to affiliate trusts
    
    
    (4,059
    )
    
    
    (4,059
    )Other income (expense), net
    
    
    (9,005
    )
    
    
    (2,805
    )Total other income and (expense)
    
    
    (56,580
    )
    
    
    (43,949
    )Earnings Before Income Taxes
    
    
    141,577
    
    
    
    112,919Income taxes
    
    
    53,363
    
    
    
    13,445Net Income
    
    
    88,214
    
    
    
    99,474Dividends on Preferred Stock
    
    
    6,072
    
    
    
    6,072Net Income After Dividends on Preferred Stock
    
    $
    82,142
    
    
    $
    93,402
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Net Income After Dividends on Preferred Stock
    
    $
    82,142
    
    
    $
    93,402Other comprehensive income (loss):Changes in fair value of qualifying hedges, net of tax
of $1,473 and $(713), respectively
    
    
    2,423
    
    
    
    (1,172
    )Reclassification adjustment for amounts included in net income,
net of tax of $(1,006) and $66, respectively
    
    
    (1,654
    )
    
    
    108COMPREHENSIVE INCOME
    
    $
    82,911
    
    
    $
    92,338
  29




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##### Table of Contents



ALABAMA POWER COMPANY
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Activities:Net income
    
    $
    88,214
    
    
    $
    99,474Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    129,238
    
    
    
    127,300Deferred income taxes and investment tax credits, net
    
    
    (43,904
    )
    
    
    64Deferred revenues
    
    
    (559
    )
    
    
    (3,555
    )Allowance for equity funds used during construction
    
    
    (5,529
    )
    
    
    (5,654
    )Pension, postretirement, and other employee benefits
    
    
    (292
    )
    
    
    (3,431
    )Stock option expense
    
    
    3,583
    
    
    
    Tax benefit of stock options
    
    
    111
    
    
    
    5,302Hedge settlements
    
    
    18,006
    
    
    
    (19,942
    )Storm damage accounting order
    
    
    
    
    
    
    45,000Other, net
    
    
    1,271
    
    
    
    42Changes in certain current assets and liabilities Receivables
    
    
    111,212
    
    
    
    44,163Fossil fuel stock
    
    
    (32,192
    )
    
    
    (26,299
    )Materials and supplies
    
    
    7,161
    
    
    
    (9,039
    )Other current assets
    
    
    (21,978
    )
    
    
    (11,661
    )Accounts payable
    
    
    (152,217
    )
    
    
    (102,808
    )Accrued taxes
    
    
    103,107
    
    
    
    (27,128
    )Accrued compensation
    
    
    (66,139
    )
    
    
    (45,701
    )Other current liabilities
    
    
    25,325
    
    
    
    36,423Net cash provided from operating activities
    
    
    164,418
    
    
    
    102,550Investing Activities:Property additions
    
    
    (228,402
    )
    
    
    (192,128
    )Nuclear decommissioning trust fund purchases
    
    
    (72,384
    )
    
    
    (62,487
    )Nuclear decommissioning trust fund sales
    
    
    72,384
    
    
    
    62,487Cost of removal net of salvage
    
    
    (11,839
    )
    
    
    (8,824
    )Other
    
    
    (5,292
    )
    
    
    (2,203
    )Net cash used for investing activities
    
    
    (245,533
    )
    
    
    (203,155
    )Financing Activities:Decrease in notes payable, net
    
    
    (315,278
    )
    
    
    Proceeds Senior notes
    
    
    800,000
    
    
    
    250,000Gross excess tax benefit of stock options
    
    
    217
    
    
    
    Redemptions Senior notes
    
    
    (170,000
    )
    
    
    Payment of preferred stock dividends
    
    
    (6,070
    )
    
    
    (4,742
    )Payment of common stock dividends
    
    
    (110,150
    )
    
    
    (102,475
    )Other
    
    
    (16,505
    )
    
    
    (2,345
    )Net cash provided from financing activities
    
    
    182,214
    
    
    
    140,438Net Change in Cash and Cash Equivalents
    
    
    101,099
    
    
    
    39,833Cash and Cash Equivalents at Beginning of Period
    
    
    22,472
    
    
    
    79,711Cash and Cash Equivalents at End of Period
    
    $
    123,571
    
    
    $
    119,544Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $2,423 and $2,078 capitalized for 2006 and 2005, respectively)
    
    $
    35,993
    
    
    $
    26,375Income taxes (net of refunds)
    
    $
    (10,989
    )
    
    $
    23,154
  30




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##### Table of Contents



ALABAMA POWER COMPANY
 At March 31,
    
    
    At December 31,Assets
    
    2006
    
    
    2005(in thousands)Current Assets:Cash and cash equivalents
    
    $
    123,571
    
    
    $
    22,472Receivables Customer accounts receivable
    
    
    273,322
    
    
    
    275,702Unbilled revenues
    
    
    82,730
    
    
    
    95,039Under recovered regulatory clause revenues
    
    
    115,486
    
    
    
    132,139Other accounts and notes receivable
    
    
    43,230
    
    
    
    50,008Affiliated companies
    
    
    59,130
    
    
    
    77,304Accumulated provision for uncollectible accounts
    
    
    (8,157
    )
    
    
    (7,560
    )Fossil fuel stock, at average cost
    
    
    147,271
    
    
    
    102,420Vacation pay
    
    
    44,985
    
    
    
    44,893Materials and supplies, at average cost
    
    
    224,597
    
    
    
    244,417Prepaid expenses
    
    
    86,184
    
    
    
    58,845Other regulatory assets
    
    
    72,858
    
    
    
    43,621Other
    
    
    22,459
    
    
    
    54,885Total current assets
    
    
    1,287,666
    
    
    
    1,194,185Property, Plant, and Equipment:In service
    
    
    15,451,825
    
    
    
    15,300,346Less accumulated provision for depreciation
    
    
    5,416,578
    
    
    
    5,313,73110,035,247
    
    
    
    9,986,615Nuclear fuel, at amortized cost
    
    
    126,078
    
    
    
    127,199Construction work in progress
    
    
    523,939
    
    
    
    469,018Total property, plant, and equipment
    
    
    10,685,264
    
    
    
    10,582,832Other Property and Investments:Equity investments in unconsolidated subsidiaries
    
    
    47,111
    
    
    
    46,913Nuclear decommissioning trusts, at fair value
    
    
    478,961
    
    
    
    466,963Other
    
    
    40,482
    
    
    
    41,457Total other property and investments
    
    
    566,554
    
    
    
    555,333Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    384,994
    
    
    
    388,634Prepaid pension costs
    
    
    521,211
    
    
    
    515,281Deferred under recovered regulatory clause revenues
    
    
    131,426
    
    
    
    186,864Other regulatory assets
    
    
    112,124
    
    
    
    122,378Other
    
    
    149,062
    
    
    
    144,400Total deferred charges and other assets
    
    
    1,298,817
    
    
    
    1,357,557Total Assets
    
    $
    13,838,301
    
    
    $
    13,689,907
  31




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##### Table of Contents



ALABAMA POWER COMPANY
 At March 31,
    
    
    At December 31,Liabilities and Stockholder's Equity
    
    2006
    
    
    2005(in thousands)Current Liabilities:Securities due within one year
    
    $
    376,645
    
    
    $
    546,645Notes payable
    
    
    
    
    
    
    315,278Accounts payable Affiliated
    
    
    115,344
    
    
    
    190,744Other
    
    
    187,122
    
    
    
    266,174Customer deposits
    
    
    58,877
    
    
    
    56,709Accrued taxes Income taxes
    
    
    120,713
    
    
    
    63,844Other
    
    
    50,462
    
    
    
    31,692Accrued interest
    
    
    61,753
    
    
    
    46,018Accrued vacation pay
    
    
    37,646
    
    
    
    37,646Accrued compensation
    
    
    26,645
    
    
    
    92,784Other
    
    
    87,709
    
    
    
    72,991Total current liabilities
    
    
    1,122,916
    
    
    
    1,720,525Long-term Debt
    
    
    4,356,731
    
    
    
    3,560,186Long-term Debt Payable to Affiliated Trusts
    
    
    309,279
    
    
    
    309,279Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    2,052,072
    
    
    
    2,070,746Deferred credits related to income taxes
    
    
    100,744
    
    
    
    101,678Accumulated deferred investment tax credits
    
    
    194,584
    
    
    
    196,585Employee benefit obligations
    
    
    216,383
    
    
    
    208,663Asset retirement obligations
    
    
    453,459
    
    
    
    446,268Other cost of removal obligations
    
    
    580,758
    
    
    
    600,104Other regulatory liabilities
    
    
    193,669
    
    
    
    194,135Other
    
    
    23,260
    
    
    
    23,966Total deferred credits and other liabilities
    
    
    3,814,929
    
    
    
    3,842,145Total Liabilities
    
    
    9,603,855
    
    
    
    9,432,135Preferred Stock
    
    
    465,046
    
    
    
    465,046Common Stockholders Equity:Common stock, par value $40 per share Authorized - 15,000,000 sharesOutstanding - 9,250,000 shares
    
    
    370,000
    
    
    
    370,000Paid-in capital
    
    
    1,998,967
    
    
    
    1,995,056Retained earnings
    
    
    1,411,138
    
    
    
    1,439,144Accumulated other comprehensive loss
    
    
    (10,705
    )
    
    
    (11,474
    )Total common stockholders equity
    
    
    3,769,400
    
    
    
    3,792,726Total Liabilities and Stockholders Equity
    
    $
    13,838,301
    
    
    $
    13,689,907
  32




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##### Table of Contents



ALABAMA POWER COMPANY
 
 
  OVERVIEW
   RESULTS OF OPERATIONS
 Earnings
   Increase (Decrease)First Quarter(in thousands)
    
    
    %Retail revenues
    
    $
    93,123
    
    
    
    13.1Sales for resale-non-affiliates
    
    
    31,940
    
    
    
    27.9Sales for resale-affiliates
    
    
    (27,971
    )
    
    
    (26.1
    )Other revenues
    
    
    5,879
    
    
    
    15.1Fuel expense
    
    
    41,947
    
    
    
    14.0Purchased power-non-affiliates
    
    
    (1,780
    )
    
    
    (7.5
    )Purchased power-affiliates
    
    
    8,367
    
    
    
    17.3Other operations expense
    
    
    22,723
    
    
    
    15.5Maintenance expense
    
    
    (14,054
    )
    
    
    (11.4
    )Interest expense, net of amounts capitalized
    
    
    6,912
    
    
    
    14.9Other income (expense), net
    
    
    6,200
    
    
    
    221.0Income taxes
    
    
    39,918
    
    
    
    296.9
 33




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##### Table of Contents



ALABAMA POWER COMPANY
 Retail revenues
  First Quarter2006(in millions)
    
    % changeRetail  prior year
    
    $
    709Change in Base rates
    
    
    9
    
    
    
    1.3Sales growth
    
    
    23
    
    
    
    3.3Weather
    
    
    (1
    )
    
    
    (0.1
    )Energy cost recovery
    
    
    51
    
    
    
    7.1Other cost recovery
    
    
    11
    
    
    
    1.5Retail  current year
    
    $
    802
    
    
    
    13.1
    %
 Sales for resale  non-affiliates
 Sales for resale  affiliates.
 34




---



##### Table of Contents



ALABAMA POWER COMPANY
 Other revenues.
 Fuel expense, purchased power  non-affiliates, and purchased power  affiliates.
    Other operations expense.
 Maintenance expense.
 35




---



##### Table of Contents



ALABAMA POWER COMPANY
  Interest expense, net of amounts capitalized.
 Other income (expense), net.
 Income taxes.
 FUTURE EARNINGS POTENTIAL
  Environmental Matters
  36




---



##### Table of Contents



ALABAMA POWER COMPANY
 New Source Review Litigation
  New Source Review Reform Rules
  FERC and Alabama PSC Matters
 Market-Based Rate Authority
 
 37




---



##### Table of Contents



ALABAMA POWER COMPANY
    Intercompany Interchange Contract
 .
 Retail Fuel Cost Recovery
  38




---



##### Table of Contents



ALABAMA POWER COMPANY
  Other Matters
   ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
 
 New Accounting Standards
  39




---



##### Table of Contents



ALABAMA POWER COMPANY
 FINANCIAL CONDITION AND LIQUIDITY
 Overview
  Capital Requirements and Contractual Obligations
  Sources of Capital
   40




---



##### Table of Contents



ALABAMA POWER COMPANY
 Credit Rating Risk
  Market Price Risk
    First Quarter2006ChangesFair Value(in thousands)Contracts beginning of period
    
    $
    28,978Contracts realized or settled
    
    
    (5,917
    )New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    (45,509
    )Contracts at March 31, 2006
    
    $
    (22,448
    )
 (a)
    
    Current period changes also include the changes in fair value of new contracts
entered into during the period, if any.
 Source of March 31, 2006Valuation PricesTotal
    
    
    MaturityFair Value
    
    
    Year 1
    
    
    1-3 Years(in thousands)Actively quoted
    
    $
    (22,441
    )
    
    $
    (29,477
    )
    
    $
    7,036External sources
    
    
    (7
    )
    
    
    (7
    )
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2006
    
    $
    (22,448
    )
    
    $
    (29,484
    )
    
    $
    7,036
 41




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##### Table of Contents



ALABAMA POWER COMPANY
  Amounts(in thousands)Regulatory assets, net
    
    $
    (22,448
    )Accumulated other comprehensive
income
    
    
    Net income
    
    
    Total fair value loss
    
    $
    (22,448
    )
  
 Financing Activities
       42




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GEORGIA POWER COMPANY
 43




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##### Table of Contents



GEORGIA POWER COMPANY
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Revenues:Retail revenues
    
    $
    1,266,956
    
    
    $
    1,185,236Sales for resale Non-affiliates
    
    
    133,364
    
    
    
    112,852Affiliates
    
    
    34,942
    
    
    
    25,631Other revenues
    
    
    52,187
    
    
    
    46,711Total operating revenues
    
    
    1,487,449
    
    
    
    1,370,430Operating Expenses:Fuel
    
    
    434,774
    
    
    
    309,266Purchased power Non-affiliates
    
    
    56,555
    
    
    
    52,974Affiliates
    
    
    190,519
    
    
    
    220,004Other operations
    
    
    218,720
    
    
    
    202,079Maintenance
    
    
    119,300
    
    
    
    116,650Depreciation and amortization
    
    
    117,857
    
    
    
    123,100Taxes other than income taxes
    
    
    67,145
    
    
    
    60,759Total operating expenses
    
    
    1,204,870
    
    
    
    1,084,832Operating Income
    
    
    282,579
    
    
    
    285,598Other Income and (Expense):Allowance for equity funds used during construction
    
    
    5,785
    
    
    
    9,257Interest income
    
    
    316
    
    
    
    471Interest expense, net of amounts capitalized
    
    
    (60,207
    )
    
    
    (50,420
    )Interest expense to affiliate trusts
    
    
    (14,878
    )
    
    
    (14,878
    )Other income (expense), net
    
    
    (994
    )
    
    
    (2,842
    )Total other income and (expense)
    
    
    (69,978
    )
    
    
    (58,412
    )Earnings Before Income Taxes
    
    
    212,601
    
    
    
    227,186Income taxes
    
    
    79,944
    
    
    
    84,654Net Income
    
    
    132,657
    
    
    
    142,532Dividends on Preferred Stock
    
    
    1,010
    
    
    
    168Net Income After Dividends on Preferred Stock
    
    $
    131,647
    
    
    $
    142,364
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Net Income After Dividends on Preferred Stock
    
    $
    131,647
    
    
    $
    142,364Other comprehensive income (loss):Change in fair value of marketable securities, net of tax
of $(97) and $75, respectively
    
    
    (155
    )
    
    
    118Changes in fair value of qualifying hedges, net of tax
of $5,215 and $1,370, respectively
    
    
    8,267
    
    
    
    2,172Reclassification adjustment for amounts included in net income,
net of tax of $110 and $176, respectively
    
    
    175
    
    
    
    280COMPREHENSIVE INCOME
    
    $
    139,934
    
    
    $
    144,934
  44




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##### Table of Contents



GEORGIA POWER COMPANY
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Activities:Net income
    
    $
    132,657
    
    
    $
    142,532Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    138,694
    
    
    
    142,765Deferred income taxes and investment tax credits
    
    
    145
    
    
    
    59,414Deferred expenses  affiliates
    
    
    19,937
    
    
    
    19,974Allowance for equity funds used during construction
    
    
    (5,785
    )
    
    
    (9,257
    )Pension, postretirement, and other employee benefits
    
    
    (540
    )
    
    
    3,755Stock option expense
    
    
    3,708
    
    
    
    Tax benefit of stock options
    
    
    193
    
    
    
    4,907Other, net
    
    
    1,263
    
    
    
    (16,984
    )Changes in certain current assets and liabilities Receivables
    
    
    126,023
    
    
    
    (82,023
    )Fossil fuel stock
    
    
    (47,256
    )
    
    
    (5,334
    )Materials and supplies
    
    
    (19,347
    )
    
    
    1,430Prepaid income taxes
    
    
    61,519
    
    
    
    17,892Other current assets
    
    
    (19,810
    )
    
    
    (11,064
    )Accounts payable
    
    
    (220,939
    )
    
    
    (106,494
    )Accrued taxes
    
    
    (80,585
    )
    
    
    (65,104
    )Accrued compensation
    
    
    (107,191
    )
    
    
    (86,041
    )Other current liabilities
    
    
    3,057
    
    
    
    3,880Net cash provided from (used for) operating activities
    
    
    (14,257
    )
    
    
    14,248Investing Activities:Property additions
    
    
    (206,588
    )
    
    
    (188,272
    )Nuclear decommissioning trust fund purchases
    
    
    (100,167
    )
    
    
    (114,367
    )Nuclear decommissioning trust fund sales
    
    
    93,287
    
    
    
    105,668Cost of removal net of salvage
    
    
    (5,699
    )
    
    
    (4,696
    )Change in construction payables, net of joint owner portion
    
    
    (22,325
    )
    
    
    (34,441
    )Other
    
    
    447
    
    
    
    6,188Net cash used for investing activities
    
    
    (241,045
    )
    
    
    (229,920
    )Financing Activities:Increase in notes payable, net
    
    
    341,043
    
    
    
    339,693Proceeds Senior notes
    
    
    
    
    
    
    250,000Capital contributions from parent company
    
    
    231,000
    
    
    
    Gross excess tax benefit of stock options
    
    
    443
    
    
    
    Redemptions Senior notes
    
    
    (150,000
    )
    
    
    (250,000
    )Preferred stock
    
    
    (14,569
    )
    
    
    Payment of preferred stock dividends
    
    
    (12
    )
    
    
    (48
    )Payment of common stock dividends
    
    
    (150,625
    )
    
    
    (139,025
    )Other
    
    
    196
    
    
    
    (9,725
    )Net cash provided from financing activities
    
    
    257,476
    
    
    
    190,895Net Change in Cash and Cash Equivalents
    
    
    2,174
    
    
    
    (24,777
    )Cash and Cash Equivalents at Beginning of Period
    
    
    10,636
    
    
    
    33,497Cash and Cash Equivalents at End of Period
    
    $
    12,810
    
    
    $
    8,720Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $2,419 and $3,709 capitalized for 2006 and 2005, respectively)
    
    $
    79,020
    
    
    $
    58,350Income taxes (net of refunds)
    
    $
    (21,801
    )
    
    $
    (492
    )
  45




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##### Table of Contents



GEORGIA POWER COMPANY
 
  At March 31,
    
    
    At December 31,Assets
    
    2006
    
    
    2005(in thousands)Current Assets:Cash and cash equivalents
    
    $
    12,810
    
    
    $
    10,636Receivables Customer accounts receivable
    
    
    363,099
    
    
    
    418,154Unbilled revenues
    
    
    126,905
    
    
    
    141,875Under recovered regulatory clause revenues
    
    
    519,833
    
    
    
    454,683Other accounts and notes receivable
    
    
    70,757
    
    
    
    110,397Affiliated companies
    
    
    23,144
    
    
    
    84,597Accumulated provision for uncollectible accounts
    
    
    (8,091
    )
    
    
    (8,647
    )Fossil fuel stock, at average cost
    
    
    228,995
    
    
    
    181,739Vacation pay
    
    
    59,472
    
    
    
    59,190Materials and supplies, at average cost
    
    
    343,297
    
    
    
    323,908Prepaid expenses
    
    
    18,130
    
    
    
    70,825Other
    
    
    99,952
    
    
    
    50,248Total current assets
    
    
    1,858,303
    
    
    
    1,897,605Property, Plant, and Equipment:In service
    
    
    19,789,730
    
    
    
    19,603,249Less accumulated provision for depreciation
    
    
    7,683,394
    
    
    
    7,575,92612,106,336
    
    
    
    12,027,323Nuclear fuel, at amortized cost
    
    
    143,838
    
    
    
    134,798Construction work in progress
    
    
    558,808
    
    
    
    563,155Total property, plant, and equipment
    
    
    12,808,982
    
    
    
    12,725,276Other Property and Investments:Equity investments in unconsolidated subsidiaries
    
    
    68,136
    
    
    
    68,188Nuclear decommissioning trusts, at fair value
    
    
    516,815
    
    
    
    486,591Other
    
    
    71,244
    
    
    
    71,468Total other property and investments
    
    
    656,195
    
    
    
    626,247Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    499,155
    
    
    
    500,882Prepaid pension costs
    
    
    481,967
    
    
    
    476,458Deferred under recovered regulatory clause revenues
    
    
    264,460
    
    
    
    295,116Other regulatory assets
    
    
    317,701
    
    
    
    330,483Other
    
    
    173,811
    
    
    
    195,716Total deferred charges and other assets
    
    
    1,737,094
    
    
    
    1,798,655Total Assets
    
    $
    17,060,574
    
    
    $
    17,047,783
  46




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##### Table of Contents



GEORGIA POWER COMPANY
 At March 31,
    
    
    At December 31,Liabilities and Stockholder's Equity
    
    2006
    
    
    2005(in thousands)Current Liabilities:Securities due within one year
    
    $
    2,765
    
    
    $
    167,317Notes payable
    
    
    608,785
    
    
    
    267,743Accounts payable Affiliated
    
    
    116,788
    
    
    
    285,019Other
    
    
    275,700
    
    
    
    360,455Customer deposits
    
    
    136,427
    
    
    
    129,293Accrued taxes Income taxes
    
    
    208,958
    
    
    
    150,896Other
    
    
    84,731
    
    
    
    204,778Accrued interest
    
    
    81,020
    
    
    
    88,885Accrued vacation pay
    
    
    45,692
    
    
    
    45,602Accrued compensation
    
    
    30,479
    
    
    
    137,303Other
    
    
    160,113
    
    
    
    120,312Total current liabilities
    
    
    1,751,458
    
    
    
    1,957,603Long-term Debt
    
    
    4,178,567
    
    
    
    4,179,218Long-term Debt Payable to Affiliated Trusts
    
    
    969,073
    
    
    
    969,073Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    2,719,487
    
    
    
    2,730,303Deferred credits related to income taxes
    
    
    155,977
    
    
    
    158,759Accumulated deferred investment tax credits
    
    
    284,653
    
    
    
    287,726Employee benefit obligations
    
    
    368,446
    
    
    
    358,137Asset retirement obligations
    
    
    637,173
    
    
    
    627,465Other cost of removal obligations
    
    
    403,775
    
    
    
    404,614Other regulatory liabilities
    
    
    87,029
    
    
    
    97,015Other
    
    
    65,748
    
    
    
    63,335Total deferred credits and other liabilities
    
    
    4,722,288
    
    
    
    4,727,354Total Liabilities
    
    
    11,621,386
    
    
    
    11,833,248Common Stockholders Equity:Common stock, without par valueAuthorized - 15,000,000 sharesOutstanding - 7,761,500 shares
    
    
    344,250
    
    
    
    344,250Paid-in capital
    
    
    2,878,356
    
    
    
    2,643,012Retained earnings
    
    
    2,242,720
    
    
    
    2,261,698Accumulated other comprehensive loss
    
    
    (26,138
    )
    
    
    (34,425
    )Total common stockholders equity
    
    
    5,439,188
    
    
    
    5,214,535Total Liabilities and Stockholders Equity
    
    $
    17,060,574
    
    
    $
    17,047,783
  47




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##### Table of Contents



GEORGIA POWER COMPANY
 
 
  OVERVIEW
    RESULTS OF OPERATIONS
 Earnings
   Increase (Decrease)First Quarter(in thousands)
    
    
    %Retail revenues
    
    $
    81,720
    
    
    
    6.9Sales for resale  non-affiliates
    
    
    20,512
    
    
    
    18.2Sales for resale  affiliates
    
    
    9,311
    
    
    
    36.3Other revenues
    
    
    5,476
    
    
    
    11.7Fuel expense
    
    
    125,508
    
    
    
    40.6Purchased power expense  non-affiliates
    
    
    3,581
    
    
    
    6.8Purchased power expense  affiliates
    
    
    (29,485
    )
    
    
    (13.4
    )Other operations expense
    
    
    16,641
    
    
    
    8.2Taxes other than income taxes
    
    
    6,386
    
    
    
    10.5Allowance for equity funds used during construction
    
    
    (3,472
    )
    
    
    (37.5
    )Interest expense, net of amounts capitalized
    
    
    9,787
    
    
    
    19.4
 48




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##### Table of Contents



GEORGIA POWER COMPANY
 Retail revenues.
  First Quarter2006(in millions)
    
    
    % changeRetail  prior year
    
    $
    1,185Change in Base rates
    
    
    
    
    
    
    Sales growth
    
    
    11
    
    
    
    0.9Weather
    
    
    (5
    )
    
    
    (0.4
    )Fuel cost recovery
    
    
    76
    
    
    
    6.4Retail  current year
    
    $
    1,267
    
    
    
    6.9
 Sales for resale  non-affiliates.
 Sales for resale  affiliates.
 Other revenues
 Fuel expense and purchased power expense
  49




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##### Table of Contents



GEORGIA POWER COMPANY
   Other operations expense.
 Taxes other than income taxes.
 Allowance for equity funds used during construction.
 Interest expense, net of amounts capitalized
 FUTURE EARNINGS POTENTIAL
  50




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##### Table of Contents



GEORGIA POWER COMPANY
 Environmental Matters
  New Source Review Reform Rules
  Plant Wansley Environmental Litigation
  FERC and Georgia PSC Matters
 Market-Based Rate Authority
 51




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##### Table of Contents



GEORGIA POWER COMPANY
    Intercompany Interchange Contract
 .
 Retail Fuel Cost Recovery
   52




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##### Table of Contents



GEORGIA POWER COMPANY
   Nuclear
  Other Matters
    53




---



##### Table of Contents



GEORGIA POWER COMPANY
   ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
 
 New Accounting Standards
  FINANCIAL CONDITION AND LIQUIDITY
 Overview
  54




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##### Table of Contents



GEORGIA POWER COMPANY
 Capital Requirements and Contractual Obligations
 
 Sources of Capital
   Credit Rating Risk
  55




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##### Table of Contents



GEORGIA POWER COMPANY
 Market Price Risk
    First Quarter 2006ChangesFair Value(in millions)Contracts beginning of period
    
    $
    26.6Contracts realized or settled
    
    
    (5.3)New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    (41.5)Contracts at March 31, 2006
    
    $
    (20.2)
 
 (a)
    
    Current period changes also include the changes in fair value of new contracts
entered into during the period. Source of March 31, 2006Valuation PricesTotal
    
    
    MaturityFair Value
    
    
    Year 1
    
    
    1-3 Years(in millions)Actively quoted
    
    $
    (20.2
    )
    
    $
    (27.5
    )
    
    $
    7.3External sources
    
    
    
    
    
    
    
    
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2006
    
    $
    (20.2
    )
    
    $
    (27.5
    )
    
    $
    7.3
  56




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##### Table of Contents



GEORGIA POWER COMPANY
 Amounts(in millions)Regulatory assets, net
    
    $
    (20.2
    )Accumulated other comprehensive income
    
    
    Net income
    
    
    Total fair value loss
    
    $
    (20.2
    )
   Financing
Activities
   57




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##### Table of Contents



GULF POWER COMPANY
 58




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##### Table of Contents



GULF POWER COMPANY
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Revenues:Retail revenues
    
    $
    179,317
    
    
    $
    162,282Sales for resale Non-affiliates
    
    
    20,838
    
    
    
    19,712Affiliates
    
    
    52,608
    
    
    
    32,600Other revenues
    
    
    10,279
    
    
    
    10,003Total operating revenues
    
    
    263,042
    
    
    
    224,597Operating Expenses:Fuel
    
    
    121,241
    
    
    
    92,630Purchased power Non-affiliates
    
    
    4,796
    
    
    
    5,108Affiliates
    
    
    6,990
    
    
    
    6,012Other operations
    
    
    43,490
    
    
    
    33,769Maintenance
    
    
    14,572
    
    
    
    17,599Depreciation and amortization
    
    
    21,985
    
    
    
    20,749Taxes other than income taxes
    
    
    18,889
    
    
    
    17,501Total operating expenses
    
    
    231,963
    
    
    
    193,368Operating Income
    
    
    31,079
    
    
    
    31,229Other Income and (Expense):Interest income
    
    
    781
    
    
    
    255Interest expense, net of amounts capitalized
    
    
    (9,272
    )
    
    
    (8,260
    )Interest expense to affiliate trusts
    
    
    (1,148
    )
    
    
    (1,148
    )Other income (expense), net
    
    
    (550
    )
    
    
    192Total other income and (expense)
    
    
    (10,189
    )
    
    
    (8,961
    )Earnings Before Income Taxes
    
    
    20,890
    
    
    
    22,268Income taxes
    
    
    7,663
    
    
    
    7,568Net Income
    
    
    13,227
    
    
    
    14,700Dividends on Preferred and Preference Stock
    
    
    825
    
    
    
    54Net Income After Dividends on Preferred and Preference Stock
    
    $
    12,402
    
    
    $
    14,646
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Net Income After Dividends on Preferred and Preference Stock
    
    $
    12,402
    
    
    $
    14,646Other comprehensive income (loss):Reclassification adjustment for amounts included in net income,
net of tax of $31 and $31, respectively
    
    
    50
    
    
    
    51COMPREHENSIVE INCOME
    
    $
    12,452
    
    
    $
    14,697
  59




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GULF POWER COMPANY
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Activities:Net income
    
    $
    13,227
    
    
    $
    14,700Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    23,488
    
    
    
    22,209Deferred income taxes
    
    
    (6,462
    )
    
    
    (2,230
    )Pension, postretirement, and other employee benefits
    
    
    1,358
    
    
    
    1,219Stock option expense
    
    
    599
    
    
    
    Tax benefit of stock options
    
    
    48
    
    
    
    534Other, net
    
    
    3,222
    
    
    
    (3,950
    )Changes in certain current assets and liabilities Receivables
    
    
    26,332
    
    
    
    28,839Fossil fuel stock
    
    
    (7,852
    )
    
    
    (11,650
    )Materials and supplies
    
    
    (153
    )
    
    
    464Prepaid income taxes
    
    
    295
    
    
    
    732Property damage cost recovery
    
    
    5,116
    
    
    
    Other current assets
    
    
    556
    
    
    
    4,898Accounts payable
    
    
    (3,142
    )
    
    
    (8,853
    )Accrued taxes
    
    
    10,280
    
    
    
    (150
    )Accrued compensation
    
    
    (15,594
    )
    
    
    (11,504
    )Other current liabilities
    
    
    5,889
    
    
    
    5,878Net cash provided from operating activities
    
    
    57,207
    
    
    
    41,136Investing Activities:Property additions
    
    
    (38,277
    )
    
    
    (37,238
    )Cost of removal net of salvage
    
    
    (945
    )
    
    
    (1,731
    )Construction payables
    
    
    (3,747
    )
    
    
    (12,236
    )Other
    
    
    (19
    )
    
    
    (10
    )Net cash used for investing activities
    
    
    (42,988
    )
    
    
    (51,215
    )Financing Activities:Decrease in notes payable, net
    
    
    (8,184
    )
    
    
    Proceeds Capital contributions from parent company
    
    
    21,000
    
    
    
    Gross excess tax benefit of stock options
    
    
    125
    
    
    
    Payment of preferred and preference stock dividends
    
    
    (825
    )
    
    
    (54
    )Payment of common stock dividends
    
    
    (17,575
    )
    
    
    (17,100
    )Other
    
    
    (602
    )
    
    
    (171
    )Net cash used for financing activities
    
    
    (6,061
    )
    
    
    (17,325
    )Net Change in Cash and Cash Equivalents
    
    
    8,158
    
    
    
    (27,404
    )Cash and Cash Equivalents at Beginning of Period
    
    
    3,847
    
    
    
    64,829Cash and Cash Equivalents at End of Period
    
    $
    12,005
    
    
    $
    37,425Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $7 and $317 capitalized for 2006 and 2005, respectively)
    
    $
    9,261
    
    
    $
    28,562Income taxes (net of refunds)
    
    $
    2,935
    
    
    $
    6,720
  60




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##### Table of Contents



GULF POWER COMPANY
 
  At March 31,
    
    
    At December 31,Assets
    
    2006
    
    
    2005(in thousands)Current Assets:Cash and cash equivalents
    
    $
    12,005
    
    
    $
    3,847Receivables Customer accounts receivable
    
    
    46,710
    
    
    
    51,567Unbilled revenues
    
    
    32,695
    
    
    
    39,951Under recovered regulatory clause revenues
    
    
    26,284
    
    
    
    33,205Other accounts and notes receivable
    
    
    12,690
    
    
    
    10,533Affiliated companies
    
    
    14,508
    
    
    
    24,001Accumulated provision for uncollectible accounts
    
    
    (1,013
    )
    
    
    (1,134
    )Fossil fuel stock, at average cost
    
    
    52,592
    
    
    
    44,740Materials and supplies, at average cost
    
    
    33,129
    
    
    
    32,976Property damage cost recovery
    
    
    29,213
    
    
    
    28,744Other regulatory assets
    
    
    17,124
    
    
    
    9,895Other
    
    
    12,338
    
    
    
    19,636Total current assets
    
    
    288,275
    
    
    
    297,961Property, Plant, and Equipment:In service
    
    
    2,521,058
    
    
    
    2,502,057Less accumulated provision for depreciation
    
    
    879,112
    
    
    
    865,9891,641,946
    
    
    
    1,636,068Construction work in progress
    
    
    32,794
    
    
    
    28,177Total property, plant, and equipment
    
    
    1,674,740
    
    
    
    1,664,245Other Property and Investments
    
    
    6,755
    
    
    
    6,736Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    17,158
    
    
    
    17,379Prepaid pension costs
    
    
    46,401
    
    
    
    46,374Other regulatory assets
    
    
    114,892
    
    
    
    123,258Other
    
    
    21,000
    
    
    
    19,844Total deferred charges and other assets
    
    
    199,451
    
    
    
    206,855Total Assets
    
    $
    2,169,221
    
    
    $
    2,175,797
  61




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GULF POWER COMPANY
 At March 31,
    
    
    At December 31,Liabilities and Stockholder's Equity
    
    2006
    
    
    2005(in thousands)Current Liabilities:Securities due within one year
    
    $
    37,075
    
    
    $
    37,075Notes payable
    
    
    81,280
    
    
    
    89,465Accounts payable Affiliated
    
    
    30,268
    
    
    
    36,717Other
    
    
    36,203
    
    
    
    44,139Customer deposits
    
    
    19,692
    
    
    
    18,834Accrued taxes Income taxes
    
    
    20,463
    
    
    
    12,823Other
    
    
    11,356
    
    
    
    11,689Accrued interest
    
    
    8,516
    
    
    
    7,713Accrued compensation
    
    
    4,527
    
    
    
    20,336Other regulatory liabilities
    
    
    11,669
    
    
    
    15,671Other
    
    
    32,852
    
    
    
    21,844Total current liabilities
    
    
    293,901
    
    
    
    316,306Long-term
Debt
    
    
    544,489
    
    
    
    544,388Long-term Debt Payable to Affiliated Trusts
    
    
    72,166
    
    
    
    72,166Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    253,448
    
    
    
    256,490Accumulated deferred investment tax credits
    
    
    16,103
    
    
    
    16,569Employee benefit obligations
    
    
    57,620
    
    
    
    56,235Other cost of removal obligations
    
    
    156,485
    
    
    
    153,665Other regulatory liabilities
    
    
    24,652
    
    
    
    26,795Other
    
    
    77,474
    
    
    
    76,948Total deferred credits and other liabilities
    
    
    585,782
    
    
    
    586,702Total Liabilities
    
    
    1,496,338
    
    
    
    1,519,562Preference Stock
    
    
    53,891
    
    
    
    53,891Common Stockholders Equity:Common stock, without par valueAuthorized - 20,000,000 sharesOutstanding - 992,717 shares
    
    
    38,060
    
    
    
    38,060Paid-in capital
    
    
    422,586
    
    
    
    400,815Retained earnings
    
    
    161,106
    
    
    
    166,279Accumulated other comprehensive loss
    
    
    (2,760
    )
    
    
    (2,810
    )Total common stockholders equity
    
    
    618,992
    
    
    
    602,344Total Liabilities and Stockholders Equity
    
    $
    2,169,221
    
    
    $
    2,175,797
  62




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##### Table of Contents



GULF POWER COMPANY
 
 
  OVERVIEW
    RESULTS OF OPERATIONS
 Earnings
   Increase (Decrease)First Quarter(in thousands)
    
    
    %Retail revenues
    
    $
    17,035
    
    
    
    10.5Sales for resale  non-affiliates
    
    
    1,126
    
    
    
    5.7Sales for resale  affiliates
    
    
    20,008
    
    
    
    61.4Fuel expense
    
    
    28,611
    
    
    
    30.9Other operations expense
    
    
    9,721
    
    
    
    28.8Maintenance expense
    
    
    (3,027
    )
    
    
    (17.2
    )Interest expense, net of amounts capitalized
    
    
    1,012
    
    
    
    12.3
 63




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##### Table of Contents



GULF POWER COMPANY
 Retail revenues.
  First Quarter 2006(in thousands)
    
    
    %Retail  prior year
    
    $
    162,282Change in
Sales growth
    
    
    (1,066
    )
    
    
    (0.7
    )Weather
    
    
    152
    
    
    
    0.1Fuel cost recovery
    
    
    8,210
    
    
    
    5.1Other cost recovery
    
    
    9,739
    
    
    
    6.0Retail  current year
    
    $
    179,317
    
    
    
    10.5
    %
 Sales for resale  non-affiliates
 Sales for resale  affiliates
 Fuel expense
 Other operations expense
 64




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##### Table of Contents



GULF POWER COMPANY
 Maintenance expense
 Interest expense, net of amounts capitalized
 FUTURE EARNINGS POTENTIAL
  Environmental Matters
  New Source Review Reform Rules
  FERC and Florida PSC Matters
 Market-Based Rate Authority
  65
    Table of Contents   GULF POWER COMPANY
    Intercompany Interchange Contract
 .
 66




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##### Table of Contents



GULF POWER COMPANY
 Storm Damage Cost Recovery
  Fuel Cost Recovery
  Other Matters
   ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  67




---



##### Table of Contents



GULF POWER COMPANY
  New Accounting Standards
  FINANCIAL CONDITION AND LIQUIDITY
 Overview
  Capital Requirements and Contractual Obligations
 
 Sources of Capital
 
 68




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##### Table of Contents



GULF POWER COMPANY
  Credit Rating Risk
  Market Price Risk
   69




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##### Table of Contents



GULF POWER COMPANY
  First Quarter2006ChangesFair Value(in thousands)Contracts beginning of period
    
    $
    11,526Contracts realized or settled
    
    
    (2,911
    )New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    (11,876
    )Contracts at March 31, 2006
    
    $
    (3,261
    )
 
 (a)
    
    Current period changes also include the changes in fair value of new contracts
entered into during the period. Source of March 31, 2006Valuation PricesTotal
    
    
    MaturityFair Value
    
    
    Year 1
    
    
    1-3 Years(in thousands)Actively quoted
    
    $
    (3,260
    )
    
    $
    (5,959
    )
    
    $
    2,699External sources
    
    
    (1
    )
    
    
    (1
    )
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2006
    
    $
    (3,261
    )
    
    $
    (5,960
    )
    
    $
    2,699
  Amounts(in thousands)Regulatory assets, net
    
    $
    (3,261
    )Accumulated other comprehensive income
    
    
    Net income
    
    
    Total fair value loss
    
    $
    (3,261
    )
   Financing Activities
  70




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MISSISSIPPI POWER COMPANY
 71




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Revenues:Retail revenues
    
    $
    131,364
    
    
    $
    131,794Sales for resale Non-affiliates
    
    
    61,322
    
    
    
    59,586Affiliates
    
    
    11,772
    
    
    
    18,932Other revenues
    
    
    4,483
    
    
    
    4,904Total operating revenues
    
    
    208,941
    
    
    
    215,216Operating Expenses:Fuel
    
    
    78,263
    
    
    
    91,039Purchased power Non-affiliates
    
    
    4,702
    
    
    
    5,419Affiliates
    
    
    19,036
    
    
    
    9,604Other operations
    
    
    37,277
    
    
    
    39,510Maintenance
    
    
    14,415
    
    
    
    15,538Depreciation and amortization
    
    
    12,320
    
    
    
    8,057Taxes other than income taxes
    
    
    14,200
    
    
    
    14,145Total operating expenses
    
    
    180,213
    
    
    
    183,312Operating Income
    
    
    28,728
    
    
    
    31,904Other Income and (Expense):Interest income
    
    
    49
    
    
    
    35Interest expense
    
    
    (4,291
    )
    
    
    (3,526
    )Interest expense to affiliate trusts
    
    
    (649
    )
    
    
    (649
    )Other income (expense), net
    
    
    943
    
    
    
    429Total other income and (expense)
    
    
    (3,948
    )
    
    
    (3,711
    )Earnings Before Income Taxes
    
    
    24,780
    
    
    
    28,193Income taxes
    
    
    9,065
    
    
    
    10,813Net Income
    
    
    15,715
    
    
    
    17,380Dividends on Preferred Stock
    
    
    433
    
    
    
    433Net Income After Dividends on Preferred Stock
    
    $
    15,282
    
    
    $
    16,947
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Net Income After Dividends on Preferred Stock
    
    $
    15,282
    
    
    $
    16,947Other comprehensive income (loss):Changes in fair value of qualifying hedges, net of tax
of $140 and $(172), respectively
    
    
    225
    
    
    
    (277
    )COMPREHENSIVE INCOME
    
    $
    15,507
    
    
    $
    16,670
  72




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Activities:Net income
    
    $
    15,715
    
    
    $
    17,380Adjustments to reconcile net income
to net cash provided from operating activities Depreciation
and amortization
    
    
    16,680
    
    
    
    15,467Deferred income taxes and investment tax credits, net
    
    
    10,943
    
    
    
    6,956Plant Daniel capacity
    
    
    (3,252
    )
    
    
    (6,281
    )Pension, postretirement, and other employee benefits
    
    
    1,506
    
    
    
    1,473Stock option expense
    
    
    743
    
    
    
    Tax benefit of stock options
    
    
    25
    
    
    
    1,067Other, net
    
    
    (8,790
    )
    
    
    66Changes in
certain current assets and liabilities Receivables
    
    
    54,402
    
    
    
    22,285Fossil fuel stock
    
    
    12,561
    
    
    
    (3,553
    )Materials and supplies
    
    
    460
    
    
    
    (132
    )Other current assets
    
    
    (3,764
    )
    
    
    (1,378
    )Hurricane Katrina accounts payable
    
    
    (36,088
    )
    
    
    Other accounts payable
    
    
    (51,267
    )
    
    
    (4,327
    )Accrued taxes
    
    
    (31,003
    )
    
    
    (20,795
    )Accrued compensation
    
    
    (18,661
    )
    
    
    (15,302
    )Over recovered regulatory clause revenues
    
    
    (10,797
    )
    
    
    (3,373
    )Other current liabilities
    
    
    (6,681
    )
    
    
    (2,328
    )Net cash provided from (used for) operating activities
    
    
    (57,268
    )
    
    
    7,225Investing Activities:Property additions
    
    
    (52,798
    )
    
    
    (14,197
    )Cost of removal net of salvage
    
    
    (12,229
    )
    
    
    265Other
    
    
    (10,149
    )
    
    
    (320
    )Net cash used for investing activities
    
    
    (75,176
    )
    
    
    (14,252
    )Financing Activities:Increase in notes payable, net
    
    
    140,974
    
    
    
    19,940Proceeds  Gross excess tax benefit of stock options
    
    
    9
    
    
    
    Payment of preferred stock dividends
    
    
    (433
    )
    
    
    (434
    )Payment of common stock dividends
    
    
    (16,300
    )
    
    
    (15,500
    )Net cash provided from financing activities
    
    
    124,250
    
    
    
    4,006Net Change in Cash and Cash Equivalents
    
    
    (8,194
    )
    
    
    (3,021
    )Cash and Cash Equivalents at Beginning of Period
    
    
    14,301
    
    
    
    6,945Cash and Cash Equivalents at End of Period
    
    $
    6,107
    
    
    $
    3,924Supplemental Cash Flow Information:Cash paid
during the period for Interest
    
    $
    7,073
    
    
    $
    2,765Income taxes (net of refunds)
    
    $
    5,824
    
    
    $
    (11,281
    )
  73




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 
  At March 31,
    
    
    At December 31,Assets
    
    2006
    
    
    2005(in thousands)Current Assets:Cash and cash equivalents
    
    $
    6,107
    
    
    $
    14,301Receivables Customer accounts receivable
    
    
    33,767
    
    
    
    36,747Unbilled revenues
    
    
    19,955
    
    
    
    20,267Under recovered regulatory clause revenues
    
    
    83,339
    
    
    
    105,505Other accounts and notes receivable
    
    
    1,921
    
    
    
    21,507Insurance receivable
    
    
    49,790
    
    
    
    60,163Affiliated companies
    
    
    14,783
    
    
    
    19,595Accumulated provision for uncollectible accounts
    
    
    (1,174
    )
    
    
    (2,321
    )Fossil fuel stock, at average cost
    
    
    37,883
    
    
    
    50,444Materials and supplies, at average cost
    
    
    28,218
    
    
    
    28,678Prepaid income taxes
    
    
    50,182
    
    
    
    42,278Other regulatory assets
    
    
    28,230
    
    
    
    23,042Other
    
    
    15,517
    
    
    
    25,160Total current assets
    
    
    368,518
    
    
    
    445,366Property, Plant, and Equipment:In service
    
    
    2,000,636
    
    
    
    1,987,294Less accumulated provision for depreciation
    
    
    812,330
    
    
    
    803,7541,188,306
    
    
    
    1,183,540Construction work in progress
    
    
    52,951
    
    
    
    52,225Total property, plant, and equipment
    
    
    1,241,257
    
    
    
    1,235,765Other Property and Investments
    
    
    6,250
    
    
    
    6,821Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    9,707
    
    
    
    9,863Prepaid pension costs
    
    
    16,742
    
    
    
    17,264Deferred property damage
    
    
    234,531
    
    
    
    209,324Other
    
    
    59,870
    
    
    
    56,866Total deferred charges and other assets
    
    
    320,850
    
    
    
    293,317Total Assets
    
    $
    1,936,875
    
    
    $
    1,981,269
  74




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 At March 31,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2006
    
    
    2005(in thousands)Current Liabilities:Notes payable
    
    $
    343,098
    
    
    $
    202,124Accounts payable Affiliated
    
    
    28,782
    
    
    
    122,899Other
    
    
    61,712
    
    
    
    89,598Customer deposits
    
    
    7,576
    
    
    
    7,298Accrued taxes Income taxes
    
    
    15,038
    
    
    
    17,736Other
    
    
    16,677
    
    
    
    48,296Accrued interest
    
    
    3,173
    
    
    
    3,408Accrued compensation
    
    
    5,926
    
    
    
    24,587Over recovered regulatory clause revenues
    
    
    15,390
    
    
    
    26,188Plant Daniel capacity
    
    
    11,171
    
    
    
    13,008Other
    
    
    33,585
    
    
    
    40,334Total current liabilities
    
    
    542,128
    
    
    
    595,476Long-term Debt
    
    
    242,549
    
    
    
    242,548Long-term Debt Payable to Affiliated Trusts
    
    
    36,082
    
    
    
    36,082Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    281,079
    
    
    
    266,629Deferred credits related to income taxes
    
    
    18,493
    
    
    
    19,003Accumulated deferred investment tax credits
    
    
    17,168
    
    
    
    17,465Employee benefit obligations
    
    
    59,301
    
    
    
    58,318Other cost of removal obligations
    
    
    81,703
    
    
    
    81,284Other regulatory liabilities
    
    
    9,931
    
    
    
    13,755Other
    
    
    54,516
    
    
    
    56,769Total deferred credits and other liabilities
    
    
    522,191
    
    
    
    513,223Total Liabilities
    
    
    1,342,950
    
    
    
    1,387,329Preferred Stock
    
    
    32,780
    
    
    
    32,780Common Stockholders Equity:Common stock, without par value Authorized  1,130,000 sharesOutstanding  1,121,000 shares
    
    
    37,691
    
    
    
    37,691Paid-in capital
    
    
    300,313
    
    
    
    299,536Retained earnings
    
    
    226,684
    
    
    
    227,701Accumulated other comprehensive loss
    
    
    (3,543
    )
    
    
    (3,768
    )Total common stockholders equity
    
    
    561,145
    
    
    
    561,160Total Liabilities and Stockholders Equity
    
    $
    1,936,875
    
    
    $
    1,981,269
  75




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 
 
  OVERVIEW
   RESULTS OF OPERATIONS
 Earnings
   Increase (Decrease)First Quarter(in thousands)
    
    
    %Retail revenues
    
    $
    (430
    )
    
    
    (0.3
    )Sales for resale  non-affiliates
    
    
    1,736
    
    
    
    2.9Sales for resale  affiliates
    
    
    (7,160
    )
    
    
    (37.8
    )Fuel expense
    
    
    (12,776
    )
    
    
    (14.0
    )Purchased power expense  non-affiliates
    
    
    (717
    )
    
    
    (13.2
    )Purchased power expense  affiliates
    
    
    9,432
    
    
    
    98.2Other operations expense
    
    
    (2,233
    )
    
    
    (5.7
    )Maintenance expense
    
    
    (1,123
    )
    
    
    (7.2
    )Depreciation and amortization
    
    
    4,263
    
    
    
    52.9Interest expense
    
    
    765
    
    
    
    21.7Other income (expense), net
    
    
    514
    
    
    
    119.8Income taxes
    
    
    (1,748
    )
    
    
    (16.2
    )
 76




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Retail revenues.
  First Quarter2006(in thousands)
    
    % changeRetail  prior year
    
    $
    131,794Change in Base rates
    
    
    1,710
    
    
    
    1.3Sales growth and weather
    
    
    (5,575
    )
    
    
    (4.3
    )Fuel cost recovery
    
    
    3,612
    
    
    
    2.8Other cost recovery
    
    
    (177
    )
    
    
    (0.1
    )Retail  current year
    
    $
    131,364
    
    
    
    (0.3
    )%
 Sales for resale non-affiliates and Purchased power expense  non-affiliates.
 Sales for resale affiliates and Purchased power expense affiliates
 Fuel expense.
 Other operations expense.
 Maintenance expense.
 77




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##### Table of Contents



MISSISSIPPI POWER COMPANY
  Depreciation and amortization.
 Interest expense.
 Other income (expense), net.
 Income taxes.
 FUTURE EARNINGS POTENTIAL
  Environmental Matters
  New Source Review Reform Rules
  78




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##### Table of Contents



MISSISSIPPI POWER COMPANY
  FERC and Mississippi PSC Matters
 Market-Based Rate Authority
 
   Intercompany Interchange Contract
  79




---



##### Table of Contents



MISSISSIPPI POWER COMPANY
 .
 Storm Damage Cost Recovery
   Retail Regulatory Matters
   80




---



##### Table of Contents



MISSISSIPPI POWER COMPANY
  Fuel Cost Recovery
  Other Matters
   ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  New Accounting Standards
  81




---



##### Table of Contents



MISSISSIPPI POWER COMPANY
  FINANCIAL CONDITION AND LIQUIDITY
 Overview
  Capital Requirements and Contractual Obligations
  Sources of Capital
   82




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Off-Balance Sheet Financing Arrangements
  Credit Rating Risk
  Market Price Risk
    First Quarter2006ChangesFair Value(in thousands)Contracts beginning of period
    
    $
    27,106Contracts realized or settled
    
    
    (3,030
    )New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    (14,184
    )Contracts at March 31, 2006
    
    $
    9,892
 
 (a)
    
    Current period changes also include the changes in fair value of new contracts
entered into during the period. 83




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Source of March 31, 2006Valuation PricesTotal
    
    
    MaturityFair Value
    
    
    Year 1
    
    
    1-3 Years(in thousands)Actively quoted
    
    $
    9,811
    
    
    $
    4,657
    
    
    $
    5,154External sources
    
    
    81
    
    
    
    81
    
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2006
    
    $
    9,892
    
    
    $
    4,738
    
    
    $
    5,154
  Amounts(in thousands)Regulatory liabilities, net
    
    $
    9,869Accumulated other comprehensive
income
    
    
    23Net income
    
    
    -Total fair value gain
    
    $
    9,892
  Financing Activities
  84




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##### Table of Contents



SAVANNAH ELECTRIC
AND
POWER COMPANY
 85




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##### Table of Contents



SAVANNAH ELECTRIC AND POWER COMPANY
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Revenues:Retail revenues
    
    $
    91,566
    
    
    $
    85,004Sales for resale Non-affiliates
    
    
    1,294
    
    
    
    458Affiliates
    
    
    2,261
    
    
    
    2,061Other revenues
    
    
    1,853
    
    
    
    1,065Total operating revenues
    
    
    96,974
    
    
    
    88,588Operating Expenses:Fuel
    
    
    25,950
    
    
    
    13,122Purchased power Non-affiliates
    
    
    2,242
    
    
    
    1,886Affiliates
    
    
    27,357
    
    
    
    36,279Other operations
    
    
    16,869
    
    
    
    14,324Maintenance
    
    
    9,251
    
    
    
    9,886Depreciation and amortization
    
    
    5,967
    
    
    
    5,348Taxes other than income taxes
    
    
    4,111
    
    
    
    3,799Total operating expenses
    
    
    91,747
    
    
    
    84,644Operating Income
    
    
    5,227
    
    
    
    3,944Other Income and (Expense):Interest income
    
    
    9
    
    
    
    17Interest expense, net of amounts capitalized
    
    
    (4,170
    )
    
    
    (3,223
    )Other income (expense), net
    
    
    (142
    )
    
    
    1,106Total other income and (expense)
    
    
    (4,303
    )
    
    
    (2,100
    )Earnings Before Income Taxes
    
    
    924
    
    
    
    1,844Income taxes
    
    
    (44
    )
    
    
    149Net Income
    
    
    968
    
    
    
    1,695Dividends on Preferred Stock
    
    
    675
    
    
    
    675Net Income After Dividends on Preferred Stock
    
    $
    293
    
    
    $
    1,020
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Net Income After Dividends on Preferred Stock
    
    $
    293
    
    
    $
    1,020Other comprehensive income (loss):Changes in fair value of qualifying hedges, net of tax
of $381 and $450, respectively
    
    
    599
    
    
    
    713Reclassification adjustment for amounts included in net income,
net of tax of $3 and $3, respectively
    
    
    4
    
    
    
    4COMPREHENSIVE INCOME
    
    $
    896
    
    
    $
    1,737
  86




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SAVANNAH ELECTRIC AND POWER COMPANY
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Activities:Net income
    
    $
    968
    
    
    $
    1,695Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    6,474
    
    
    
    5,804Deferred income taxes and investment tax credits, net
    
    
    1,778
    
    
    
    6,606Allowance for equity funds used during construction
    
    
    (196
    )
    
    
    (1,194
    )Pension, postretirement, and other employee benefits
    
    
    1,387
    
    
    
    1,379Stock option expense
    
    
    289
    
    
    
    Tax benefit of stock options
    
    
    10
    
    
    
    574Other, net
    
    
    (112
    )
    
    
    3,283Changes in certain current assets and liabilities Receivables
    
    
    5,013
    
    
    
    (6,154
    )Fossil fuel stock
    
    
    (3,438
    )
    
    
    (1,587
    )Materials and supplies
    
    
    1,107
    
    
    
    981Other current assets
    
    
    1,339
    
    
    
    (7,365
    )Accounts payable
    
    
    (13,924
    )
    
    
    (2,850
    )Accrued taxes
    
    
    1,297
    
    
    
    (2,476
    )Accrued compensation
    
    
    (4,242
    )
    
    
    (3,537
    )Other current liabilities
    
    
    1,964
    
    
    
    2,041Net cash used for operating activities
    
    
    (286
    )
    
    
    (2,800
    )Investing Activities:Property additions
    
    
    (9,381
    )
    
    
    (14,179
    )Other
    
    
    (2,205
    )
    
    
    (1,438
    )Net cash used for investing activities
    
    
    (11,586
    )
    
    
    (15,617
    )Financing Activities:Increase (decrease) in notes payable, net
    
    
    (7,190
    )
    
    
    19,546Proceeds Capital contributions from parent company
    
    
    30,000
    
    
    
    Gross excess tax benefit of stock options
    
    
    22
    
    
    
    Payment of preferred stock dividends
    
    
    (1,350
    )
    
    
    (675
    )Payment of common stock dividends
    
    
    (6,875
    )
    
    
    (6,675
    )Other
    
    
    (47
    )
    
    
    (6
    )Net cash provided from financing activities
    
    
    14,560
    
    
    
    12,190Net Change in Cash and Cash Equivalents
    
    
    2,688
    
    
    
    (6,227
    )Cash and Cash Equivalents at Beginning of Period
    
    
    502
    
    
    
    8,862Cash and Cash Equivalents at End of Period
    
    $
    3,190
    
    
    $
    2,635Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $93 and $595 capitalized for 2006 and 2005, respectively)
    
    $
    2,591
    
    
    $
    1,338Income taxes (net of refunds)
    
    $
    (3,985
    )
    
    $
    (384
    )
  87




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SAVANNAH ELECTRIC AND POWER COMPANY
 
  At March 31,
    
    
    At December 31,Assets
    
    2006
    
    
    2005(in thousands)Current Assets:Cash and cash equivalents
    
    $
    3,190
    
    
    $
    502Receivables Customer accounts receivable
    
    
    26,262
    
    
    
    29,116Unbilled revenues
    
    
    5,814
    
    
    
    6,651Under recovered regulatory clause revenues
    
    
    38,068
    
    
    
    28,990Other accounts and notes receivable
    
    
    1,194
    
    
    
    2,055Affiliated companies
    
    
    1,744
    
    
    
    5,449Accumulated provision for uncollectible accounts
    
    
    (701
    )
    
    
    (916
    )Fossil fuel stock, at average cost
    
    
    19,454
    
    
    
    16,015Materials and supplies, at average cost
    
    
    10,669
    
    
    
    11,776Prepaid income taxes
    
    
    17,046
    
    
    
    22,629Assets from risk management activities
    
    
    4,973
    
    
    
    8,045Other
    
    
    6,545
    
    
    
    2,824Total current assets
    
    
    134,258
    
    
    
    133,136Property, Plant, and Equipment:In service
    
    
    1,041,581
    
    
    
    1,033,256Less accumulated provision for depreciation
    
    
    401,836
    
    
    
    396,987639,745
    
    
    
    636,269Construction work in progress
    
    
    21,793
    
    
    
    21,315Total property, plant, and equipment
    
    
    661,538
    
    
    
    657,584Other Property and Investments
    
    
    4,297
    
    
    
    4,279Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    11,406
    
    
    
    11,455Cash surrender value of life insurance for
deferred compensation plans
    
    
    27,347
    
    
    
    27,030Deferred under recovered regulatory clause revenues
    
    
    42,854
    
    
    
    48,689Other regulatory assets
    
    
    19,808
    
    
    
    20,191Other
    
    
    9,413
    
    
    
    10,437Total deferred charges and other assets
    
    
    110,828
    
    
    
    117,802Total Assets
    
    $
    910,921
    
    
    $
    912,801
  88




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##### Table of Contents



SAVANNAH ELECTRIC AND POWER COMPANY
 At March 31,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2006
    
    
    2005(in thousands)Current Liabilities:Securities due within one year
    
    $
    20,992
    
    
    $
    21,003Notes payable
    
    
    51,580
    
    
    
    58,771Accounts payable Affiliated
    
    
    16,981
    
    
    
    29,840Other
    
    
    16,424
    
    
    
    19,355Customer deposits
    
    
    7,245
    
    
    
    7,068Accrued taxes other than income taxes
    
    
    3,207
    
    
    
    1,909Accrued interest
    
    
    4,514
    
    
    
    3,223Accrued compensation
    
    
    1,710
    
    
    
    5,952Other
    
    
    13,268
    
    
    
    15,020Total current liabilities
    
    
    135,921
    
    
    
    162,141Long-term Debt
    
    
    216,791
    
    
    
    217,033Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    118,303
    
    
    
    119,424Deferred credits related to income taxes
    
    
    7,760
    
    
    
    7,978Accumulated deferred investment tax credits
    
    
    7,132
    
    
    
    7,298Employee benefit obligations
    
    
    56,660
    
    
    
    54,661Other cost of removal obligations
    
    
    40,637
    
    
    
    40,575Other regulatory liabilities
    
    
    11,692
    
    
    
    12,107Other
    
    
    10,237
    
    
    
    10,127Total deferred credits and other liabilities
    
    
    252,421
    
    
    
    252,170Total Liabilities
    
    
    605,133
    
    
    
    631,344Preferred Stock
    
    
    43,899
    
    
    
    43,909Common Stockholders Equity:Common stock, par value $5 per share Authorized - 16,000,000 sharesOutstanding - 10,844,635 shares
    
    
    54,223
    
    
    
    54,223Paid-in capital
    
    
    104,848
    
    
    
    74,527Retained earnings
    
    
    104,356
    
    
    
    110,939Accumulated other comprehensive loss
    
    
    (1,538
    )
    
    
    (2,141
    )Total common stockholders equity
    
    
    261,889
    
    
    
    237,548Total Liabilities and Stockholders Equity
    
    $
    910,921
    
    
    $
    912,801
  89




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##### Table of Contents



SAVANNAH ELECTRIC AND POWER COMPANY
  OVERVIEW
    RESULTS OF OPERATIONS
 Earnings
  90




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##### Table of Contents



SAVANNAH ELECTRIC AND POWER COMPANY
  Increase (Decrease)First Quarter(in thousands)
    
    
    %Retail revenues
    
    $
    6,562
    
    
    
    7.7Sales for resale  non-affiliates
    
    
    836
    
    
    
    182.5Sales for resale  affiliates
    
    
    200
    
    
    
    9.7Other revenues
    
    
    788
    
    
    
    74.0Fuel expense
    
    
    12,828
    
    
    
    97.8Purchased power expense  non-affiliates
    
    
    356
    
    
    
    18.9Purchased power expense  affiliates
    
    
    (8,922
    )
    
    
    (24.6
    )Other operations expense
    
    
    2,545
    
    
    
    17.8Maintenance expense
    
    
    (635
    )
    
    
    (6.4
    )Depreciation and amortization expense
    
    
    619
    
    
    
    11.6Taxes other than income taxes
    
    
    312
    
    
    
    8.2Interest expense, net of amounts capitalized
    
    
    947
    
    
    
    29.4Other income (expense), net
    
    
    (1,248
    )
    
    
    (112.8
    )
 Retail revenues
  First Quarter2006(in thousands)
    
    
    
    % changeRetail  prior year
    
    $
    85,004Change in Base rates
    
    
    2,480
    
    
    
    2.9Sales growth
    
    
    20
    
    
    
    Weather
    
    
    (20
    )
    
    
    Fuel cost recovery
    
    
    4,082
    
    
    
    4.8Retail  current year
    
    $
    91,566
    
    
    
    7.7
    %
 Sales for resale-non-affiliates.
 Sales for resale  affiliates.
 91




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##### Table of Contents



SAVANNAH ELECTRIC AND POWER COMPANY
  Other revenues.
 Fuel expense, purchased power expense  non-affiliates, and purchased power expense  affiliates.
   Other operations expense.
 Maintenance expense.
 Depreciation and amortization expense.
 92




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##### Table of Contents



SAVANNAH ELECTRIC AND POWER COMPANY
  Taxes other than income taxes
 Interest expense, net of amounts capitalized.
 Other income (expense), net.
 FUTURE EARNINGS POTENTIAL
  Environmental Matters
  New Source Review Reform Rules
  93




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##### Table of Contents



SAVANNAH ELECTRIC AND POWER COMPANY
 FERC and Georgia PSC Matters
 Market-Based Rate Authority
 
   Intercompany Interchange Contract
 94
    Table of Contents   SAVANNAH ELECTRIC AND POWER COMPANY
 .
 Retail Fuel Cost Recovery
    Other Matters
  95




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##### Table of Contents



SAVANNAH ELECTRIC AND POWER COMPANY
  ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  New Accounting Standards
  FINANCIAL CONDITION AND LIQUIDITY
 Overview
  Capital Requirements and Contractual Obligations
  96




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##### Table of Contents



SAVANNAH ELECTRIC AND POWER COMPANY
 Sources of Capital
   Credit Rating Risk
  Market Price Risk
   97




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##### Table of Contents



SAVANNAH ELECTRIC AND POWER COMPANY
  First Quarter2006ChangesFair Value(in thousands)Contracts beginning of period
    
    $
    8,748Contracts realized or settled
    
    
    (1,438
    )New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    (6,457
    )Contracts at March 31, 2006
    
    $
    853
 (a)
    
    Current period changes also include the changes in fair value of new contracts
entered into during the period.
 Source of March 31, 2006Valuation PricesMaturityTotalFair Value
    
    
    Year 1
    
    
    1-3 Years(in thousands)Actively quoted
    
    $
    853
    
    
    $
    (1,034
    )
    
    $
    1,887External sources
    
    
    
    
    
    
    
    
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2006
    
    $
    853
    
    
    $
    (1,034
    )
    
    $
    1,887
  Amounts(in thousands)Regulatory liabilities, net
    
    $
    853Accumulated other comprehensive income
    
    
    Net income
    
    
    Total fair value gain
    
    $
    853
  98




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##### Table of Contents



SAVANNAH ELECTRIC AND POWER COMPANY
 
 Financing Activities
   99




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##### Table of Contents



SOUTHERN POWER COMPANY
 100




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##### Table of Contents



SOUTHERN
POWER COMPANY
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Revenues:Sales for resale Non-affiliates
    
    $
    51,697
    
    
    $
    40,104Affiliates
    
    
    87,323
    
    
    
    112,337Other revenues
    
    
    809
    
    
    
    380Total operating revenues
    
    
    139,829
    
    
    
    152,821Operating Expenses:Fuel
    
    
    14,259
    
    
    
    34,544Purchased power Non-affiliates
    
    
    13,971
    
    
    
    8,862Affiliates
    
    
    19,407
    
    
    
    20,954Other operations
    
    
    17,507
    
    
    
    12,719Maintenance
    
    
    5,885
    
    
    
    3,259Depreciation and amortization
    
    
    14,707
    
    
    
    12,783Taxes other than income taxes
    
    
    3,661
    
    
    
    2,955Total operating expenses
    
    
    89,397
    
    
    
    96,076Operating Income
    
    
    50,432
    
    
    
    56,745Other Income and (Expense):Interest expense, net of amounts capitalized
    
    
    (20,342
    )
    
    
    (19,244
    )Other income (expense), net
    
    
    2,403
    
    
    
    92Total other income and (expense)
    
    
    (17,939
    )
    
    
    (19,152
    )Earnings Before Income Taxes
    
    
    32,493
    
    
    
    37,593Income taxes
    
    
    12,593
    
    
    
    14,520Net Income
    
    $
    19,900
    
    
    $
    23,073
 
  For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Net Income
    
    $
    19,900
    
    
    $
    23,073Other comprehensive income (loss):Changes in fair value of qualifying hedges, net of tax
of $(79)
    
    
    (122
    )
    
    
    Reclassification adjustment for amounts included in net income,
net of tax of $1,112 and $1,041, respectively
    
    
    1,732
    
    
    
    1,612COMPREHENSIVE INCOME
    
    $
    21,510
    
    
    $
    24,685
  101




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##### Table of Contents



SOUTHERN POWER COMPANY
 For the Three MonthsEnded March 31,2006
    
    
    2005(in thousands)Operating Activities:Net income
    
    $
    19,900
    
    
    $
    23,073Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    18,070
    
    
    
    16,448Deferred income taxes and investment tax credits, net
    
    
    17,251
    
    
    
    15,598Deferred revenues
    
    
    (26,672
    )
    
    
    (26,194
    )Tax benefit of stock options
    
    
    
    
    
    
    188Other, net
    
    
    3,480
    
    
    
    (538
    )Changes in certain current assets and liabilities Receivables
    
    
    38,672
    
    
    
    964Fossil fuel stock
    
    
    (293
    )
    
    
    593Materials and supplies
    
    
    (356
    )
    
    
    (232
    )Other current assets
    
    
    (8,517
    )
    
    
    (3,894
    )Accounts payable
    
    
    (46,701
    )
    
    
    (6,148
    )Accrued taxes
    
    
    2,899
    
    
    
    3,014Accrued interest
    
    
    (15,365
    )
    
    
    (15,598
    )Net cash provided from operating activities
    
    
    2,368
    
    
    
    7,274Investing Activities:Property additions
    
    
    (1,175
    )
    
    
    (2,075
    )Other
    
    
    2
    
    
    
    (2,413
    )Net cash used for investing activities
    
    
    (1,173
    )
    
    
    (4,488
    )Financing Activities:Increase in notes payable, net
    
    
    231
    
    
    
    Payment of common stock dividends
    
    
    (19,425
    )
    
    
    Net cash used for financing activities
    
    
    (19,194
    )
    
    
    Net Change in Cash and Cash Equivalents
    
    
    (17,999
    )
    
    
    2,786Cash and Cash Equivalents at Beginning of Period
    
    
    27,631
    
    
    
    25,241Cash and Cash Equivalents at End of Period
    
    $
    9,632
    
    
    $
    28,027Supplemental Cash Flow Information:Cash paid during the period for 
Interest (net of $0 and $0 capitalized for 2006 and 2005, respectively)
    
    $
    32,260
    
    
    $
    31,073 Income taxes (net of refunds)
    
    $
    4,227
    
    
    $
    3,593
  102




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##### Table of Contents



SOUTHERN
POWER COMPANY
 
  At March 31,
    
    
    At December 31,Assets
    
    2006
    
    
    2005(in thousands)Current Assets:Cash and cash equivalents
    
    $
    9,632
    
    
    $
    27,631Receivables Customer accounts receivable
    
    
    20,400
    
    
    
    20,953Other accounts receivable
    
    
    71
    
    
    
    93Affiliated companies
    
    
    38,161
    
    
    
    60,505Fossil fuel stock, at average cost
    
    
    7,514
    
    
    
    7,221Materials and supplies, at average cost
    
    
    15,984
    
    
    
    15,628Prepaid service agreement  current
    
    
    19,829
    
    
    
    6,178Other prepaid expenses
    
    
    9,072
    
    
    
    4,610Other
    
    
    2,415
    
    
    
    251Total current assets
    
    
    123,078
    
    
    
    143,070Property, Plant, and Equipment:In service
    
    
    2,030,150
    
    
    
    2,030,996Less accumulated provision for depreciation
    
    
    171,817
    
    
    
    161,3581,858,333
    
    
    
    1,869,638Construction work in progress
    
    
    203,254
    
    
    
    218,812Total property, plant, and equipment
    
    
    2,061,587
    
    
    
    2,088,450Deferred Charges and Other Assets:Prepaid long-term service agreements
    
    
    31,659
    
    
    
    46,447OtherAffiliated
    
    
    5,770
    
    
    
    4,496Other
    
    
    19,062
    
    
    
    20,513Total deferred charges and other assets
    
    
    56,491
    
    
    
    71,456Total Assets
    
    $
    2,241,156
    
    
    $
    2,302,976
  103




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##### Table of Contents



SOUTHERN POWER COMPANY
 At March 31,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2006
    
    
    2005(in thousands)Current Liabilities:Securities due within one year
    
    $
    200
    
    
    $
    200Notes payable
    
    
    110,923
    
    
    
    110,692Accounts payable Affiliated
    
    
    21,687
    
    
    
    65,262Other
    
    
    4,513
    
    
    
    7,651Accrued taxes Income taxes
    
    
    
    
    
    
    3,477Other
    
    
    5,424
    
    
    
    2,524Accrued interest
    
    
    13,796
    
    
    
    29,161Other
    
    
    214
    
    
    
    71Total current liabilities
    
    
    156,757
    
    
    
    219,038Long-term Debt
    
    
    1,099,569
    
    
    
    1,099,520Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    87,896
    
    
    
    68,535Deferred capacity revenues  Affiliated
    
    
    12,869
    
    
    
    37,534Other Affiliated
    
    
    9,458
    
    
    
    10,792Other
    
    
    6,178
    
    
    
    1,214Total deferred credits and other liabilities
    
    
    116,401
    
    
    
    118,075Total Liabilities
    
    
    1,372,727
    
    
    
    1,436,633Common Stockholders Equity:Common stock, par value $.01 per share Authorized - 1,000,000 sharesOutstanding - 1,000 shares
    
    
    
    
    
    
    Paid-in capital
    
    
    746,244
    
    
    
    746,243Retained earnings
    
    
    165,000
    
    
    
    164,525Accumulated other comprehensive loss
    
    
    (42,815
    )
    
    
    (44,425
    )Total common stockholders equity
    
    
    868,429
    
    
    
    866,343Total Liabilities and Stockholders Equity
    
    $
    2,241,156
    
    
    $
    2,302,976
  104




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##### Table of Contents



SOUTHERN POWER COMPANY
 
 
  OVERVIEW
 -
  RESULTS OF OPERATIONS
 Earnings
   Increase (Decrease)First Quarter(in thousands)
    
    
    %Sales for resale  non-affiliates
    
    $
    11,593
    
    
    
    28.9Sales for resale  affiliates
    
    
    (25,014
    )
    
    
    (22.3
    )Fuel expense
    
    
    (20,285
    )
    
    
    (58.7
    )Purchased power expense  non-affiliates
    
    
    5,109
    
    
    
    57.7Purchased power expense  affiliates
    
    
    (1,547
    )
    
    
    (7.4
    )Other operations expense
    
    
    4,788
    
    
    
    37.6Maintenance expense
    
    
    2,626
    
    
    
    80.6Depreciation and amortization expense
    
    
    1,924
    
    
    
    15.1Interest
expense, net of amounts capitalized
    
    
    (1,098
    )
    
    
    (5.7
    )Other income (expense), net
    
    
    2,311
    
    
    
    N/MN/M  Not meaningful
 Sales for resale affiliates and non-affiliates
 105




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SOUTHERN POWER COMPANY
  Fuel expense
 Purchased power expense affiliates and non-affiliates
 Other operations expense.
 Maintenance expense.
 Depreciation and amortization expense.
 Interest expense, net of amounts capitalized.
 Other income (expense), net.
 FUTURE EARNINGS POTENTIAL
  106




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SOUTHERN POWER COMPANY
 FERC Matters
 Market-Based Rate Authority
 
   Intercompany Interchange Contract
  107




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##### Table of Contents



SOUTHERN POWER COMPANY
 .
 Other Matters
     ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
 
 108




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##### Table of Contents



SOUTHERN POWER COMPANY
 FINANCIAL CONDITION AND LIQUIDITY
 Overview
 
 Capital Requirements and Contractual Obligations
  Sources of Capital
    Credit Rating Risk
  109




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##### Table of Contents



SOUTHERN POWER COMPANY
 Market Price Risk
     First Quarter 2006 ChangesFair Value(in thousands)Contracts beginning of year
    
    $
    223Contracts realized or settled
    
    
    56New contracts at inception
    
    
    Current period changes (a)
    
    
    1,961Contracts at March 31, 2006
    
    $
    2,240
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered into
during the period.
  Total
    
    
    MaturityFair Value
    
    
    Year 1
    
    
    1-3 Years(in thousands)Actively quoted
    
    $
    2,241
    
    
    $
    2,203
    
    
    $
    38External sources
    
    
    (1
    )
    
    
    (1
    )
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts end of quarter
    
    $
    2,240
    
    
    $
    2,202
    
    
    $
    38
  110




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##### Table of Contents



SOUTHERN POWER COMPANY
  Amounts(in thousands)Net Income
    
    $
    2,379Accumulated other comprehensive income
    
    
    (139
    )Total fair value gain
    
    $
    2,240
  111




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
GULF POWER COMPANY
MISSISSIPPI POWER COMPANY
SAVANNAH ELECTRIC AND POWER COMPANY
SOUTHERN POWER COMPANY
 
 Registrant
    
    Applicable NotesSouthern Company
    
    A, B, C, D, E, F, G, H, I, J, KAlabama Power
    
    A, B, C, D, F, G, JGeorgia Power
    
    A, B, C, D, F, G, HGulf Power
    
    A, B, C, D, F, GMississippi Power
    
    A, B, C, D, F, G, ISavannah Electric
    
    A, B, C, D, F, G, H, JSouthern Power
    
    A, B, F
 112




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
GULF POWER COMPANY
MISSISSIPPI POWER COMPANY
SAVANNAH ELECTRIC AND POWER COMPANY
SOUTHERN POWER COMPANY
 NOTES TO THE CONDENSED FINANCIAL STATEMENTS:
 (A)
    
    The condensed quarterly financial statements of the registrants included herein have
been prepared by each registrant, without audit, pursuant to the rules and regulations of
the SEC. The condensed balance sheets as of December 31, 2005 have been derived from the
audited financial statements. In the opinion of each registrants management, the
information regarding such registrant furnished herein reflects all adjustments necessary
to present fairly the results of operations for the periods ended March 31, 2006 and 2005.
Certain information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the United States
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. Disclosure which would substantially duplicate the
disclosure 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 omitted from this Quarterly Report on
Form 10-Q. Therefore, these condensed financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Form 10-K. Certain
prior period amounts have been reclassified to conform to current period presentation. Due
to seasonal variations in the demand for energy, operating results for the periods
presented do not necessarily indicate operating results for the entire year.(B)
    
    See Note 3 to the financial statements of Southern Company and the retail operating
companies and Note 2 to the financial statements of Southern Power in Item 8 of the Form
10-K for information relating to various lawsuits and other contingencies.NEW SOURCE REVIEW ACTIONSNew Source Review LitigationSee MANAGEMENTS DISCUSSION AND ANALYSIS  FUTURE EARNINGS POTENTIAL  Environmental Matters
  New Source Review Actions of Southern Company and
Alabama Power in Item 7 and Note 3 to the financial
statements of Southern Company and Alabama Power under Environmental Matters  New Source Review Actions in
Item 8 of the Form 10-K for additional information regarding a civil action brought by the EPA
alleging that Alabama Power had violated the NSR provisions of the Clean Air Act and related
state laws with respect to certain of its coal-fired generating facilities. On April 24,
2006, as a result of court-ordered mediation, the EPA filed, with the U.S. District Court for
the Northern District of Alabama, statements designed to result in a judgment being entered in
favor of Alabama Power on the claims related to Plants Barry, Gaston, Gorgas, and Greene
County. In turn, Alabama Power agreed to the filing with the district court of a proposed
consent decree that, upon such courts approval, would require Alabama Power to pay $100,000
to resolve the EPAs claim for a civil penalty related to alleged violations at Plant Miller.
The proposed consent decree also formalizes specific emissions reductions to be accomplished
by Alabama Power. These reductions are consistent with other Clean Air Act programs that
require emissions reductions. Alabama Power further agreed to donate $4.9 million of sulfur
dioxide emission allowances to a nonprofit charitable organization. As a result, Alabama
Power recognized $5 million in other income (expense), net related to the proposed consent
decree. The final resolution of these claims is dependent on further court action and subject
to possible appeals, and therefore, cannot be determined at this time.
 113




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 New Source Review Reform RulesOn October 20, 2005, the EPA published a proposed rule clarifying the test for determining
when an emissions increase is subject to the NSR requirements. On March 17, 2006, the U.S.
Court of Appeals for the District of Columbia Circuit vacated the EPAs proposed rule which
sought to clarify the scope of the existing Routine Maintenance, Repair, and Replacement
Exclusion. Because this rule was not yet in effect, the courts ruling is not anticipated
to have any impact on Southern Company or its subsidiaries.PLANT WANSLEY ENVIRONMENTAL LITIGATIONOn March 30, 2006, the U.S. Court of Appeals for the Eleventh Circuit ruled in favor of
Georgia Power on its appeal and reversed the district courts order regarding certain
alleged opacity violations at Plant Wansley. The court of appeals remanded the case to the
U.S. District Court for the Northern District of Georgia for further proceedings consistent
with its decision. The ultimate outcome of this matter cannot now be determined. See Note
3 to the financial statements of Southern Company and Georgia Power under Environmental
Matters  Plant Wansley Environmental Litigation in Item 8 of the Form 10-K for additional
information.MIRANT MATTERSMirant was an energy company with businesses that included independent power projects and
energy trading and risk management companies in the U.S. and selected other countries. It
was a wholly-owned subsidiary of Southern Company until its initial public offering in
October 2000. In April 2001, Southern Company completed a spin-off to its shareholders of
its remaining ownership, and Mirant became an independent corporate entity. In July 2003,
Mirant filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code. See Note
3 to the financial statements of Southern Company under Mirant Matters  Mirant
Bankruptcy in Item 8 of the Form 10-K for information regarding Southern Companys
contingent liabilities associated with Mirant, including guarantees of contractual
commitments, litigation, and joint and several liabilities in connection with the
consolidated federal income tax return.Mirant Securities LitigationSee Note 3 to the financial statements of Southern Company under Mirant Matters  Mirant
Securities Litigation in Item 8 of the Form 10-K for information regarding a class action
lawsuit that several Mirant shareholders (plaintiffs) originally filed against Mirant and
certain Mirant officers in May 2002. In November 2002, Southern Company, certain former and
current senior officers of Southern Company, and 12 underwriters of Mirants initial public
offering were added as defendants. On March 24, 2006, the plaintiffs filed a Motion for
Reconsideration requesting that the court vacate that portion of its July 14, 2003 order
dismissing the plaintiffs claims based upon Mirants alleged improper energy trading and
marketing activities involving the California energy market. Southern Company and the other
defendants have opposed the plaintiffs motion. The plaintiffs have also stated that they
intend to request that the court grant leave for them to amend the complaint to add
allegations based upon claims asserted against Southern Company in the Mirant bankruptcy
litigation. See Note 3 to the financial statements of Southern Company under Mirant Matters
  Mirant Bankruptcy Litigation in Item 8 of the Form 10-K for additional information. The
ultimate outcome of these matters cannot be determined at this time.Southern Company Employee Savings Plan LitigationSee Note 3 to the financial statements of Southern Company under Mirant Matters  Southern
Company Employee Savings Plan Litigation in Item 8 of the Form 10-K for information related
to the class action complaint filed under ERISA on behalf of a purported class of participants in or
beneficiaries of The Southern Company Employee Savings Plan at any time since April 2, 2001
and whose plan accounts
 114




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 included investments in Mirant common stock. In April 2006, the U.S. District Court for the
Northern District of Georgia granted summary judgment in favor of Southern Company and all
individually named defendants in the case. The plaintiff has
filed an appeal of the ruling.
The final outcome of this matter cannot be determined at this time.FERC MATTERSSee Note 3 to the financial statements of Southern Company, Alabama Power, Georgia Power,
Gulf Power, Mississippi Power, and Savannah Electric under FERC
Matters  Market-Based Rate Authority and
Note 2 to the financial statements of Southern Power under FERC Matters  Market-Based Rate
Authority in Item 8 of the Form 10-K for information on the FERCs April 2004 order
adopting a new interim analysis for measuring generation market power and a proceeding
initiated by the FERC in December 2004 to assess Southern Companys generation dominance
within its retail service territory. Each of the retail operating companies and Southern
Power has authorization from the FERC to sell power to non-affiliates at market-based
prices. Through SCS, as agent, the retail operating companies and Southern Power also have
FERC authority to make short-term opportunity sales at market rates. Specific FERC approval
must be obtained with respect to a market-based contract with an affiliate. On February 15,
2005, Southern Company submitted additional information related to generation dominance in
its retail service territory. A hearing before an administrative law judge scheduled for
March 2006 has been held in abeyance to allow the parties to explore settlement. Any new
market-based rate transactions in Southern Companys retail service territory entered into
after February 27, 2005 will be subject to refund to the level of the default cost-based
rates, pending the outcome of the proceeding. The impact of all such sales through March
31, 2006 is not expected to exceed $19 million for the Southern Company system. The refund
period covers 15 months. In the event that the FERCs default mitigation measures for
entities that are found to have market power are ultimately applied, the retail operating
companies and Southern Power may be required to charge cost-based rates for certain
wholesale sales in the Southern Company retail service territory, which may be lower than
negotiated market-based rates. The final outcome of this matter will depend on the form in
which the final methodology for assessing generation market power and mitigation rules may
be ultimately adopted and cannot be determined at this time.In addition, in May 2005, the FERC initiated an investigation to determine whether
Southern Company satisfies the other three parts of the FERCs market-based rate analysis:
transmission market power, barriers to entry, and affiliate abuse or reciprocal dealing.
The FERC established a new 15-month refund period related to this expanded investigation.
Any new market-based rate transactions involving any Southern Company subsidiary will be
subject to refund to the extent the FERC orders lower rates as a result of this new
investigation, with the refund period beginning July 19, 2005. The impact of all such sales
through March 31, 2006 is not expected to exceed $36.8 million, of which $14.8 million
relates to sales inside the retail service territory discussed above. The FERC also
directed that this expanded proceeding be held in abeyance pending the outcome of the
proceeding on the IIC discussed below.Southern Company and its subsidiaries believe that there is no meritorious basis for
this proceeding and are vigorously defending themselves in this matter. However, the final
outcome of this matter, including any remedies to be applied in the event of an adverse
ruling in this proceeding, cannot now be determined.Also in May 2005, the FERC initiated a new proceeding to examine (1) the provisions of
the IIC among Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah
Electric, Southern Power, and SCS, as agent, under the terms of which the power pool of
Southern Company is operated, and, in particular, the propriety of the continued inclusion
of Southern Power as a party to the IIC, (2) whether any parties to the IIC have violated the FERCs standards of conduct applicable to
utility companies that are transmission providers, and (3) whether Southern Companys code
of conduct
 115




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 defining Southern Power as a system company rather than a marketing affiliate is just
and reasonable. In connection with the formation of Southern Power, the FERC authorized
Southern Powers inclusion in the IIC in 2000. The FERC also previously approved Southern
Companys code of conduct. The FERC order directs that the administrative law judge who
presided over a proceeding involving approval of PPAs between Southern Power and Georgia
Power and Savannah Electric be assigned to preside over the hearing in this proceeding and
that the testimony and exhibits presented in that proceeding be preserved to the extent
appropriate. Effective July 19, 2005, revenues from transactions under the IIC involving
any Southern Company subsidiaries will be subject to refund to the extent the FERC orders
any changes to the IIC. On April 11, 2006, Southern Company, Calpine Corporation, Coral
Energy, and Dalton Utilities filed a settlement offer that would resolve the proceeding.
The offer is pending before the FERC and does not require any refunds. However, because the
offer is pending, the final outcome of this matter cannot now be determined.See Note 3 to
the financial statements of Southern Company, Alabama Power, Georgia
Power, Gulf Power, Mississippi Power, and Savannah Electric under
FERC Matters  Intercompany Interchange Contract and
Note 2 to the financial statements of Southern Power under FERC Matters  Intercompany Interchange
Contract in Item 8 of the Form 10-K for additional information.INCOME TAX MATTERSSee Note 3 to the financial statements of Southern Company under Income Tax Matters in
Item 8 of the Form 10-K. The IRS challenged Southern Companys deductions related to three
international lease transactions (so-called SILO or sale-in-lease-out transactions), in
connection with its audit of Southern Companys 2000 and 2001 tax returns. If the IRS is
ultimately successful in disallowing the tax deductions related to these transactions
beginning with the 2000 tax year, Southern Company could be subject to additional interest
charges of up to $39 million. The IRS had initially proposed a penalty of approximately $16
million, which has now been withdrawn. Additionally, although the payment of the tax
liability, exclusive of interest and any penalties, would not affect Southern Companys
results of operations under current accounting standards, it could have a material impact on
cash flow. See Note 1 to the financial statements of Southern Company under Leveraged
Leases in Item 8 of the Form 10-K for additional details of the deferred taxes related to
these transactions. Furthermore, the FASB has recently proposed changes to the accounting
for both leveraged leases and uncertain tax positions that may be effective beginning in
2007. If approved as proposed, these changes could require Southern Company to reflect the
tax deductions that the IRS is challenging as currently payable on the balance sheet and to
change the timing of income recognized under the leases, including a cumulative effect upon
adoption of the change. For the lease-in-lease-out (LILO) transaction settled with the IRS
in February 2005, Southern Company estimates such cumulative effect would reduce Southern
Companys net income by approximately $16 million. The impact of these proposed changes
related to the SILO transactions would be dependent on the outcome of pending litigation,
but could be significant, and potentially material, to Southern Companys net income.
Southern Company believes these transactions are valid leases for U.S. tax purposes, the
related deductions are allowable, and the assessment of a penalty is inappropriate.
Southern Company is continuing to pursue resolution of these matters with the IRS; however,
the ultimate outcome of these matters cannot now be determined.SOUTHERN COMPANY GAS SALEOn January 4, 2006 Southern Company completed the sale of substantially all the assets of
Southern Company Gas, its competitive retail natural gas marketing subsidiary, including
natural gas inventory, accounts receivable, and customer list, to Gas South, LLC, an affiliate
of Cobb Electric Membership Corporation.  Southern Company Gas sale of such assets was pursuant
to a Purchase and Sale Agreement dated November 18, 2005 between Southern Company Gas and Gas
South.  The gross proceeds from the sale were approximately $131 million.  This sale had no
material impact on Southern Companys net income for the quarter ending March 31, 2006.  As a
result of the sale, Southern Companys financial statements and related information reflect
Southern Company Gas as discontinued operations.
 116




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 GEORGIA POWER FAIR LABOR STANDARDS ACT LITIGATIONOn February 23, 2006, approximately 170 current and former employees of Georgia Power filed a
collective action against Georgia Power in the U.S. District Court for the Northern District of
Georgia, alleging that Georgia Power violated the Fair Labor Standards Act by failing to properly
compensate certain employees (primarily linemen and crew leaders whose work is governed by a
union collective bargaining agreement) while the employees were subject to being called back into
work under on-call work rules and regulations.  The plaintiffs are seeking overtime compensation
for on-call time for the three-year period prior to the filing of the action, liquidated damages
in an amount equal to unpaid overtime compensation they say they have been denied, declaratory
and injunctive relief, and attorneys fees and expenses of litigation.  Georgia Power believes
that it has complied with the provisions of the Fair Labor Standards Act and it intends to
vigorously defend this action.  The ultimate outcome of this matter cannot now be determined;
however, an adverse outcome could result in the payment of substantial damages.(C)
    
    See Note 1 to the financial statements of Southern Company and the retail operating
companies under Stock Options and Note 8 to the financial statements of Southern Company
and the retail operating companies under Stock Option Plan in Item 8 of the Form 10-K
for information regarding non-qualified employee stock options provided by Southern
Company. Southern Company and the retail operating companies have not
modified any of their
stock option plans or outstanding stock options, nor have they changed the underlying
valuation assumptions used in valuing the stock options. Employee stock options vest
proportionately over a three-year service period, which the companies recognize on a
straight-line basis. Prior to January 1, 2006, Southern Company accounted for options
granted in accordance with Accounting Principles Board Opinion No. 25; thus, no
compensation expense was recognized because the exercise price of all options granted equaled the fair market value
on the date of the grant.Effective January 1, 2006, Southern Company and the retail operating companies adopted the
fair value recognition provisions of FASB Statement No. 123(R), using the modified
prospective method. Under that method, compensation cost recognized in the three-month
period ended March 31, 2006 is recognized as the requisite service is rendered and includes:
(a) compensation cost for the portion of share-based awards granted prior to and that are
outstanding as at January 1, 2006, for which the requisite service has not been rendered,
based on the grant-date fair value of those awards as calculated in accordance with the
original provisions of Statement No. 123, and (b) compensation cost for all share-based
awards granted subsequent to January 1, 2006, based on the grant-date fair value estimated
in accordance with the provisions of Statement No. 123(R). Results for prior periods have
not been restated.For Southern Company and each of the retail operating companies, the adoption of Statement
No. 123(R) has resulted in a reduction in earnings from continuing operations before income
taxes, net income, and operating cash flows as follows (in millions):
 Three-months
ended March 31, 2006
    
    Earnings Before
    
    
    
    
    
    
    Operating CashIncome Taxes
    
    
    Net Income
    
    
    Flows 1Alabama Power
    
    $
    3.6
    
    
    $
    2.2
    
    
    $
    0.2Georgia Power
    
    
    3.7
    
    
    
    2.3
    
    
    
    0.4Gulf Power
    
    
    0.6
    
    
    
    0.4
    
    
    
    0.1Mississippi Power
    
    
    0.7
    
    
    
    0.5
    
    
    
    Savannah Electric
    
    
    0.3
    
    
    
    0.2
    
    
    
    Southern Company
    
    $
    19.1
    
    
    $
    11.8
    
    
    $
    2.0
 
 1
    
    Financing cash flows have increased by the stated amount for Southern Company and each retail operating company, respectively. 117




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 Basic and diluted earnings per share from continuing operations for the three-month period
ended March 31, 2006 would have been $0.37 and $0.36, respectively, if Southern Company had
not adopted Statement No. 123(R), compared to reported basic and diluted earnings per share
of $0.35 and $0.35, respectively.For the periods prior to the adoption of Statement No. 123(R), the pro forma impact of
fair-value accounting for options granted on earnings from continuing operations, and basic
and diluted earnings per share is as follows:
 Three-months
ended March 31, 2005
    
    
    
    
    
    OptionsImpactAs Reported
    
    
    After Tax
    
    
    Pro FormaNet income after dividends
on preferred and preference
stock (in millions):Alabama Power
    
    $
    93.4
    
    
    $
    2.2
    
    
    $
    91.2Georgia Power
    
    
    142.4
    
    
    
    2.4
    
    
    
    140.0Gulf Power
    
    
    14.6
    
    
    
    0.4
    
    
    
    14.2Mississippi Power
    
    
    16.9
    
    
    
    0.5
    
    
    
    16.4Savannah Electric
    
    
    1.0
    
    
    
    0.3
    
    
    
    0.7Southern Company
    
    $
    317.5
    
    
    $
    12.0
    
    
    $
    305.5Earnings per share (Dollars):Basic
    
    $
    0.43
    
    
    
    
    
    
    $
    0.41Diluted
    
    $
    0.42
    
    
    
    
    
    
    $
    0.41
 The estimated fair values of stock options granted in 2006 and 2005 were derived using the
Black-Scholes stock option pricing model. Expected volatility is based on historical
volatility of Southern Companys stock over a period equal to the expected term. Southern
Company uses historical exercise data to estimate the expected term that represents the
period of time that options granted to employees are expected to be outstanding. The
risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant that
covers the expected term of the stock options. The following table shows the assumptions
used in the pricing model and the weighted average grant-date fair value of stock options
granted:
 Period ended March 31
    
    2006
    
    
    2005Expected volatility
    
    
    16.9
    %
    
    
    17.9
    %Expected term (in years)
    
    
    5.0
    
    
    
    5.0Interest rate
    
    
    4.6
    %
    
    
    3.9
    %Dividend yield
    
    
    4.4
    %
    
    
    4.4
    %Weighted average grant-date fair value
    
    $
    4.15
    
    
    $
    3.90
 Southern Company and each of the retail operating companies activity under the stock option
plan as of March 31, 2006, and changes during the quarter then ended, is summarized below:
 Shares Subject to
    
    Southern
    
    
    Alabama
    
    
    Georgia
    
    
    Gulf
    
    
    Mississippi
    
    
    SavannahOption
    
    Company
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    ElectricOutstanding at
December 31, 2005
    
    
    31,347,355
    
    
    
    5,227,985
    
    
    
    6,705,891
    
    
    
    1,099,549
    
    
    
    1,444,438
    
    
    
    517,984Granted
    
    
    6,618,159
    
    
    
    1,145,964
    
    
    
    1,335,947
    
    
    
    240,162
    
    
    
    253,256
    
    
    
    88,816Exercised
    
    
    (600,789
    )
    
    
    (95,921
    )
    
    
    (122,310
    )
    
    
    (32,344
    )
    
    
    (2,458
    )
    
    
    (6,340
    )Canceled
    
    
    (111,106
    )
    
    
    (2,566
    )
    
    
    (1,428
    )
    
    
    
    
    
    
    
    
    
    
    Outstanding at
March 31, 2006
    
    
    37,253,619
    
    
    
    6,275,462
    
    
    
    7,918,100
    
    
    
    1,307,367
    
    
    
    1,695,236
    
    
    
    600,460Exercisable at
March 31, 2006
    
    
    24,103,880
    
    
    
    3,977,722
    
    
    
    5,265,070
    
    
    
    829,763
    
    
    
    1,178,146
    
    
    
    392,147
 118




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 The number of stock options vested and expected to vest at March 31, 2006 is not
significantly different from the number of stock options outstanding as detailed above.
 Weighted-Average Exercise
    
    Southern
    
    
    Alabama
    
    
    Georgia
    
    
    Gulf
    
    
    Mississippi
    
    
    SavannahPrice
    
    Company
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    ElectricOutstanding at December 31, 2005
    
    $
    27.13
    
    
    $
    27.09
    
    
    $
    26.82
    
    
    $
    27.07
    
    
    $
    26.86
    
    
    $
    27.53Granted
    
    
    33.81
    
    
    
    33.81
    
    
    
    33.81
    
    
    
    33.81
    
    
    
    33.81
    
    
    
    33.81Exercised
    
    
    22.77
    
    
    
    23.92
    
    
    
    22.79
    
    
    
    21.76
    
    
    
    20.81
    
    
    
    22.36Canceled
    
    
    31.12
    
    
    
    25.28
    
    
    
    31.37
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at March 31, 2006
    
    $
    28.38
    
    
    $
    28.37
    
    
    $
    28.06
    
    
    $
    28.44
    
    
    $
    27.91
    
    
    $
    28.52Exercisable at March 31, 2006
    
    $
    26.00
    
    
    $
    25.85
    
    
    $
    25.71
    
    
    $
    25.97
    
    
    $
    25.81
    
    
    $
    26.35
 At March 31, 2006
    
    Southern
    
    
    Alabama
    
    
    Georgia
    
    
    Gulf
    
    
    Mississippi
    
    
    Savannah(in millions unless stated)
    
    Company
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    ElectricWeighted-Average
Remaining Contractual Term
 Outstanding (in years)
    
    
    7.1
    
    
    
    7.4
    
    
    
    7.1
    
    
    
    7.3
    
    
    
    6.7
    
    
    
    6.4Weighted-Average
Remaining Contractual Term
 Exercisable (in years)
    
    
    5.9
    
    
    
    6.3
    
    
    
    6.0
    
    
    
    6.2
    
    
    
    5.6
    
    
    
    5.7Aggregate Intrinsic
Value  Outstanding
    
    $
    210.4
    
    
    $
    35.5
    
    
    $
    47.2
    
    
    $
    7.3
    
    
    $
    10.4
    
    
    $
    3.3Aggregate Intrinsic
Value  Exercisable
    
    $
    193.4
    
    
    $
    32.5
    
    
    $
    43.8
    
    
    $
    6.7
    
    
    $
    9.7
    
    
    $
    3.0Three-month periodThe total intrinsic
value of options exercised
during 2006
    
    $
    7.1
    
    
    $
    0.8
    
    
    $
    1.6
    
    
    $
    0.4
    
    
    
    
    
    
    $
    0.1The total intrinsic
value of options exercised
during 2005
    
    $
    40.8
    
    
    $
    6.9
    
    
    $
    6.8
    
    
    $
    0.7
    
    
    $
    1.9
    
    
    $
    0.8
 Southern Companys total pre-tax compensation cost related to non-vested awards not yet
recognized is expected to be approximately $18 million over the remaining three-year service
period.Southern Company has a policy of issuing shares to satisfy share option exercises. This has
been satisfied by the issuance of new common shares; however, during January 2006 Southern
Company started reissuing treasury shares that it had previously repurchased. Cash received
from issuances related to option exercise under the share-based payment arrangements for the
three-month periods ended March 31, 2006 and 2005 was $13.6 million, and $55.2 million,
respectively.(D)
    
    See Note 1 to the financial statements of Southern Company, Alabama Power, Georgia
Power, Gulf Power, Mississippi Power, and Savannah Electric under Asset Retirement
Obligations and Other Costs of Removal in Item 8 of the Form 10-K. The following table
reflects the details of the asset retirement obligations included in the Condensed Balance
Sheets (in millions).
 Balance at
    
    
    Liabilities
    
    
    Liabilities
    
    
    
    
    
    
    Cash Flow
    
    
    Balance at12/31/05
    
    
    Incurred
    
    
    Settled
    
    
    Accretion
    
    
    Revisions
    
    
    3/31/06Alabama Power
    
    $
    446.3
    
    
    $
    
    
    
    $
    (0.1
    )
    
    $
    7.3
    
    
    $
    
    
    
    $
    453.5Georgia Power
    
    
    627.5
    
    
    
    
    
    
    
    (0.2
    )
    
    
    9.9
    
    
    
    
    
    
    
    637.2Gulf Power
    
    
    15.3
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    15.5Mississippi Power
    
    
    15.4
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    (0.2
    )
    
    
    15.5Savannah Electric
    
    
    7.5
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    7.6Southern Company
    
    $
    1,117.3
    
    
    $
    
    
    
    $
    (0.3
    )
    
    $
    17.9
    
    
    $
    (0.2
    )
    
    $
    1,134.7
 119




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 (E)
    
    For Southern Company, the only difference in computing basic and diluted earnings per
share is attributable to exercised options and outstanding options under the stock option
plan. See Note 8 to the financial statements of Southern Company in Item 8 of the Form
10-K for further information on the stock option plan. The effect of the stock options was
determined using the treasury stock method. Shares used to compute diluted earnings per
share are as follows (in thousands):
 Three Months Ended
    
    
    Three Months EndedMarch 31, 2006
    
    
    March 31, 2005As reported shares
    
    
    742,195
    
    
    
    744,025Effect of options
    
    
    4,844
    
    
    
    4,647Diluted shares
    
    
    747,039
    
    
    
    748,672
 (F)
    
    See Note 6 to the financial statements of Southern Company, Alabama Power, Georgia
Power, Gulf Power, Mississippi Power, Savannah Electric, and Note 5 to the financial
statements of Southern Power under Financial Instruments in Item 8 of the Form 10-K. At
March 31, 2006, the fair value gains/(losses) of derivative energy contracts was reflected
in the financial statements as follows (in millions):
 Southern
    
    
    Alabama
    
    
    Georgia
    
    
    Gulf
    
    
    Mississippi
    
    
    Savannah
    
    
    SouthernCompany
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    Electric
    
    
    PowerRegulatory
(assets)/liabilities, net
    
    $
    (35.3
    )
    
    $
    (22.5
    )
    
    $
    (20.2
    )
    
    $
    (3.3
    )
    
    $
    9.9
    
    
    $
    0.9
    
    
    $
    Accumulated other
comprehensive income (loss)
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Net income (loss)
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.3Total fair value gain/(loss)
    
    $
    (35.0
    )
    
    $
    (22.5
    )
    
    $
    (20.2
    )
    
    $
    (3.3
    )
    
    $
    9.9
    
    
    $
    0.9
    
    
    $
    2.2
 For the three months ended March 31, 2006, the unrealized gain recognized in income for
derivative energy contracts that are not hedges was $2.2 million for Southern Power and was
immaterial for the other registrants, and for the three months ended March 31, 2005, the
amounts were immaterial for all registrants.The amounts expected to be reclassified from other comprehensive income to fuel expense for
the twelve-month period ending March 31, 2006 were immaterial for each registrant.
Additionally, no material ineffectiveness has been recorded in net income for the three
months ended March 31, 2006 and 2005.At March 31, 2006, Southern Company had $2.6 billion notional amount of interest rate
derivatives outstanding with net fair value gains of $25.9 million as follows:Fair Value Hedges
 Fair Value GainHedge
    
    (Loss)Notional
    
    Fixed Rate
    
    Variable
    
    Maturity
    
    March 31, 2006Amount
    
    Received
    
    Rate Paid
    
    Date
    
    (in millions)Southern Company
    
    $400 million
    
    5.30%
    
    6-month LIBOR(in arrears)less 0.103%
    
    February 2007
    
    $
    0.3
 120




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 Cash Flow Hedges
 Fair ValueWeighted Average
    
    Hedge
    
    Gain (Loss)Notional
    
    Variable Rate
    
    Fixed Rate
    
    Maturity
    
    March 31, 2006Amount
    
    Received
    
    Paid
    
    Date
    
    (in millions)Alabama Power
    
    $536 million
    
    BMA Index
    
    2.01%
    
    January 2007
    
    $
    7.2Alabama Power
    
    $195 million
    
    3-month LIBOR
    
    1.89%
    
    April 2006
    
    
    1.3Georgia Power*
    
    $300 million
    
    3-month LIBOR
    
    5.75%
    
    July 2037
    
    
    7.3Georgia Power**
    
    $400 million
    
    Floating
    
    3.203.85%
    
    December 2007
    
    
    1.3Georgia Power
    
    $225 million
    
    3-month LIBOR
    
    5.29%
    
    March 2017
    
    
    2.1Georgia Power
    
    $150 million
    
    3-month LIBOR
    
    5.30%
    
    December 2016
    
    
    1.3Georgia Power
    
    $300 million
    
    1-month LIBOR
    
    2.68%
    
    June 2007
    
    
    3.2Savannah Electric
    
    $14 million
    
    BMA Index
    
    2.50%
    
    December 2007
    
    
    0.3Savannah Electric
    
    $30 million
    
    3-month LIBOR
    
    4.69%
    
    May 2016
    
    
    1.6
 
 *
    
    Interest rate collar (showing rate cap percentage)**
    
    Series of interest rate collars with variable rate based on one-month LIBOR (showing
range of rate cap percentage) For the next twelve month period ending March 31, 2007, the following table reflects
the estimated pre-tax gains/(losses) that will be reclassified from Accumulated Other
Comprehensive Income to Interest Expense.
 (in millions)Alabama Power
    
    $
    8.8Georgia Power
    
    
    1.5Gulf Power
    
    
    (0.3
    )Savannah Electric
    
    
    0.3Southern Power
    
    
    (12.1
    )Southern Company
    
    $
    (1.8
    )
 (G)
    
    See Note 2 to the financial statements of Southern Company, Alabama Power, Georgia
Power, Gulf Power, Mississippi Power, and Savannah Electric in Item 8 of the Form 10-K.
Components of the pension plans and postretirement plans net periodic costs for the
three-month periods ending March 31, 2006 and 2005 are as follows (in millions):
 Southern
    
    
    Alabama
    
    
    Georgia
    
    
    Gulf
    
    
    Mississippi
    
    
    SavannahPENSION PLANS
    
    Company
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    ElectricThree Months Ended
March 31, 2006Service cost
    
    $
    38
    
    
    $
    9
    
    
    $
    12
    
    
    $
    2
    
    
    $
    2
    
    
    $
    1Interest cost
    
    
    75
    
    
    
    19
    
    
    
    28
    
    
    
    3
    
    
    
    3
    
    
    
    2Expected return on plan assets
    
    
    (114
    )
    
    
    (35
    )
    
    
    (45
    )
    
    
    (5
    )
    
    
    (4
    )
    
    
    (1
    )Recognized net (gain)/loss
    
    
    4
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Net amortization
    
    
    7
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Net cost (income)
    
    $
    10
    
    
    $
    (4
    )
    
    $
    (2
    )
    
    $
    
    
    
    $
    1
    
    
    $
    2
 121




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 Three Months Ended
March 31, 2005Service cost
    
    $
    36
    
    
    $
    8
    
    
    $
    11
    
    
    $
    2
    
    
    $
    2
    
    
    $
    1Interest cost
    
    
    72
    
    
    
    19
    
    
    
    27
    
    
    
    3
    
    
    
    3
    
    
    
    1Expected return on plan assets
    
    
    (116
    )
    
    
    (35
    )
    
    
    (46
    )
    
    
    (5
    )
    
    
    (5
    )
    
    
    (1
    )Recognized net (gain)/loss
    
    
    3
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Net amortization
    
    
    5
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Net cost (income)
    
    $
    
    
    
    $
    (5
    )
    
    $
    (5
    )
    
    $
    
    
    
    $
    
    
    
    $
    1
 POSTRETIREMENT PLANS
    
    Southern
    
    
    Alabama
    
    
    Georgia
    
    
    Gulf
    
    
    Mississippi
    
    
    SavannahCompany
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    Power
    
    
    ElectricThree Months Ended
March 31, 2006Service cost
    
    $
    7
    
    
    $
    2
    
    
    $
    3
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    25
    
    
    
    6
    
    
    
    10
    
    
    
    1
    
    
    
    1
    
    
    
    1Expected return on plan assets
    
    
    (12
    )
    
    
    (4
    )
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    Net amortization
    
    
    11
    
    
    
    3
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Net cost (income)
    
    $
    31
    
    
    $
    7
    
    
    $
    12
    
    
    $
    1
    
    
    $
    1
    
    
    $
    1Three Months Ended
March 31, 2005Service cost
    
    $
    7
    
    
    $
    2
    
    
    $
    3
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    24
    
    
    
    7
    
    
    
    10
    
    
    
    1
    
    
    
    1
    
    
    
    1Expected return on plan assets
    
    
    (11
    )
    
    
    (4
    )
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    Net amortization
    
    
    9
    
    
    
    2
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Net cost (income)
    
    $
    29
    
    
    $
    7
    
    
    $
    12
    
    
    $
    1
    
    
    $
    1
    
    
    $
    1
 (H)
    
    See Note 3 to the financial statements of Georgia Power and Savannah Electric under
Merger and Fuel Cost Recovery, respectively, in Item 8 of the Form 10-K for information
on the proposed merger of Savannah Electric into Georgia Power and its impact on retail
fuel cost recovery. As of the end of March 2006, Savannah Electric had an under recovered
fuel balance of $81 million, and Georgia Power had an under recovered fuel balance of about
$784 million, including approximately $392 million related to fuel used since June 2005.
In March 2006, Georgia Power and Savannah Electric filed a combined request with the
Georgia PSC to change the fuel cost recovery rate.The case seeks approval of a fuel cost recovery rate based upon future fuel cost
projections for the combined Georgia Power and Savannah Electric generating fleet as well
as the under recovered balances existing at June 30, 2006. The new fuel cost recovery
rate would be billed beginning in July 2006 to all Georgia Power customers, including the
existing Savannah Electric customers, pending completion of the merger. Under recovered
amounts as of the date of the merger will be paid by the appropriate customer groups.
The proposed fuel rates are based on an amortization period of 35 months for Georgia
Power customers and 41 months for former Savannah Electric territory customers.Fuel cost recovery revenues as recorded on the financial statements are adjusted for
differences in actual recoverable costs and amounts billed in current regulated rates.
Accordingly, any increase in the billing factor will have no significant effect on Georgia
Powers revenues or net income, but will increase cash flow.(I)
    
    See Note 1 to the financial statements of Southern Company and Mississippi Power
under Storm Damage Reserves and Provision for Property Damage, respectively, in Item 8
of the Form 10-K for information on how Mississippi Power maintains a reserve for property
damage to cover the cost of damages from major storms to its transmission and distribution
lines and the cost of uninsured damages to its generation facilities and other property.
Hurricane Katrina hit the coast of Florida, Alabama, Mississippi, and Louisiana on August
29, 2005, causing substantial damage. Prior to Hurricane Katrina, Mississippi Power had a
balance of approximately $3 million in its property reserve. In October 2005, the
Mississippi PSC issued an Interim Accounting Order requiring Mississippi Power to
recognize a regulatory asset in an amount equal to the retail portion of the recorded
Hurricane Katrina restoration costs, including both operation and maintenance expenditures
and capital additions. The balance in the regulatory asset account at March 31, 2006 is
$234.5 million, which is net of insurance proceeds of $76.4 million. These costs include
approximately $164.4 million of capital additions and $151.5 million of operation and
maintenance expenditures.
 122




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 In December 2005, Mississippi Power filed with the Mississippi PSC a detailed review of all
Hurricane Katrina restoration costs as required in the Interim Accounting Order.
Mississippi Power is currently working with the Mississippi PSC to establish a method to
recover all such prudently incurred costs, while minimizing the impact on Mississippi
Powers customers. The Department of Defense emergency supplemental appropriations bill,
enacted in December 2005 to address restoration efforts related to hurricanes in the Gulf
of Mexico, provides $11 billion in disaster relief for the States of Mississippi,
Louisiana, and Alabama. In the State of Mississippi, $300 million in grant assistance in
the form of Community Development Block Grants (CDBGs) is expected to be designated for
utilities within the state. Mississippi Power will apply for these CDBGs to offset the cost
of storm recovery. Mississippi Power is also considering securitization of remaining
unrecovered costs as provided for under legislation passed in the State of Mississippi in
the first quarter of 2006.In December 2005, Mississippi Power submitted its annual PEP filing to the Mississippi PSC.
Ordinarily, PEP limits annual rate increases to 4%; however, Mississippi Power requested
that the Mississippi PSC approve a temporary change to allow it to exceed this cap as a
result of the ongoing effects of Hurricane Katrina. Mississippi Power had requested a
5.05%, or $32 million, retail base rate increase to become effective in April 2006.
Hearings were held in March 2006 and the full increase was approved by the Mississippi PSC
on March 13, 2006. See Note 3 to the financial statements of Southern Company and
Mississippi Power under PSC Matters  Mississippi Power and Retail Regulatory Matters
  Performance Evaluation Plan respectively, in Item 8 of the Form 10-K for additional
information.On February 7, 2006, Mississippi Power filed with the Mississippi PSC its annual ECO
Plan evaluation. Mississippi Power requested a 12 cent per 1,000 KWH reduction for
retail customers. The decrease represents a reduction of approximately $1.3 million per
year in annual revenues for Mississippi Power. Hearings were held on April 4, 2006. The
Mississippi PSC unanimously approved the decrease at the hearings and issued an order
confirming approval on April 21, 2006.(J)
    
    See Note 5 to the financial statements of Southern Company, Alabama Power, and Savannah Electric
in Item 8 of the Form 10-K for information on each companys effective income tax rate. In
accordance with an Alabama PSC-approved accounting order to restore the natural disaster reserve,
Alabama Power returned approximately $27.7 million of excess deferred income taxes to its retail
customers in 2005.  The impact of this entry was a significant reduction in the effective income
tax rate for the first quarter of 2005 when compared to the first quarter of 2006 for Alabama
Power and Southern Company.  For additional information on Alabama Powers accounting order,
see Note 3 to the financial statements of Southern Company and Alabama Power under Storm Damage
Recovery and Natural Disaster Cost Recovery, respectively, in Item 8 of the Form 10-K.In connection with construction on the Plant McIntosh combined cycle units, Savannah Electric
 recorded a decrease in its income tax expense of $1.0 million in 2005 related to AFUDC equity,
which is not taxable.  In the first quarter of 2006, Savannah Electric recorded a tax benefit of
$0.04 million. Tax expense decreased due to the accounting for several items that are not
 taxable. The impact of these non-taxable items in the first quarter of 2006 and the AFUDC in
the first quarter of 2005 caused a significant
 123




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 reduction in the effective income tax rate for
both quarters for Savannah Electric.  For additional information on the Plant McIntosh
construction, see Note 3 to the financial statements of Savannah Electric under Plant McIntosh
Construction Project in Item 8 of the Form 10-K.Southern Company recorded reserves associated with a potential phase out of its synthetic fuel
tax credits of $18.6 million for the three months ended March 31, 2006. The impact of these
reserves caused an increase in the effective tax rate in the first quarter of 2006 compared
to the same period in 2005 for Southern Company.(K)
    
    Southern Companys reportable business segment is the sale of electricity in the
Southeast by the five retail operating companies and Southern Power. Net income and total
assets for discontinued operations are included in the Reconciling Eliminations column.
The All Other column includes parent Southern Company, which does not allocate operating
expenses to business segments. Also, this category includes segments below the
quantitative threshold for separate disclosure. These segments include investments in
synthetic fuels and leveraged lease projects, telecommunications, and energy-related
services. Southern Powers revenues from sales to the retail operating companies were $87
million and $112 million for the three months ended March 31, 2006 and for the three months
ended March 31, 2005, respectively. All other intersegment revenues are not material.
Financial data for business segments and products and services are as follows:
 Electric UtilitiesRetailOperating
    
    
    Southern
    
    
    
    
    
    
    
    
    
    
    All
    
    
    ReconcilingCompanies
    
    
    Power
    
    
    Eliminations
    
    
    Total
    
    
    Other
    
    
    Eliminations
    
    
    Consolidated(in millions)Three Months Ended March 31, 2006:Operating revenues
    
    $
    2,964
    
    
    $
    140
    
    
    $
    (107
    )
    
    $
    2,997
    
    
    $
    104
    
    
    $
    (38
    )
    
    $
    3,063Segment net income (loss)
    
    
    239
    
    
    
    20
    
    
    
    
    
    
    
    259
    
    
    
    1
    
    
    
    2
    
    
    
    262Total assets at March 31, 2006
    
    $
    36,492
    
    
    $
    2,241
    
    
    $
    (88
    )
    
    $
    38,645
    
    
    $
    1,789
    
    
    
    (457
    )
    
    $
    39,977Three Months Ended March 31, 2005:Operating revenues
    
    $
    2,697
    
    
    $
    153
    
    
    $
    (133
    )
    
    $
    2,717
    
    
    $
    96
    
    
    $
    (26
    )
    
    $
    2,787Segment net income (loss)
    
    
    266
    
    
    
    23
    
    
    
    
    
    
    
    289
    
    
    
    30
    
    
    
    4
    
    
    
    323Total assets at December 31, 2005
    
    $
    36,335
    
    
    $
    2,303
    
    
    $
    (179
    )
    
    $
    38,459
    
    
    $
    1,751
    
    
    
    (333
    )
    
    $
    39,877
 Products and Services
 Electric Utilities RevenuesPeriod
    
    Retail
    
    
    Wholesale
    
    
    Other
    
    
    Total(in millions)Three Months Ended March 31, 2006
    
    $
    2,471
    
    
    $
    415
    
    
    $
    111
    
    
    $
    2,997Three Months Ended March 31, 2005
    
    
    2,269
    
    
    
    347
    
    
    
    101
    
    
    
    2,717
 124




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##### Table of Contents



PART II   OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
 See the Notes to the Condensed Financial Statements herein for information regarding certain
legal and administrative proceedings in which Southern Company and its reporting subsidiaries are
involved.
 
 Item 1A.
    
    Risk Factors.
 See Item 1A. RISK FACTORS in Part I of the Form 10-K for the year ended December 31, 2005 for
a discussion of the risk factors of the Southern Company and the subsidiary registrants. For the
quarter ended March 31, 2006, there have been no material changes to these risk factors.
 
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 Maximum ApproximateTotal Number of
    
    Dollar Value ofShares Purchased as
    
    Shares that May YetTotal Number of
    
    
    
    Part of Publicly
    
    Be Purchased UnderShares
    
    Average Price
    
    Announced Plans or
    
    the Plans or2006
    
    Purchased (a)
    
    Paid Per Share
    
    Programs
    
    Programs (a)January 1 -
January 31
    
    3,363
    
    $34.82
    
    3,363
    
    N/AFebruary 1 -
February 28
    
    
    
    
    
    
    
    N/AMarch 1 -
March 31
    
    
    
    
    
    
    
    N/ATotal
    
    3,363
    
    $34.82
    
    3,363
    
    N/A
 
 (a)
    
    In fiscal year 2004, Southern Company announced that it planned to engage an
agent in fiscal year 2005 to repurchase shares of its common stock to offset shares
issued in connection with the exercise of stock options under the Southern Omnibus
Incentive Compensation Plan (Omnibus Plan). In May 2005, Southern Company engaged an
agent to (i) begin repurchasing shares of Southern Company common stock to offset the
6,273,876 shares of common stock issued from January 2005 through May 2005 in
connection with the exercise of stock options under the Omnibus Plan and (ii)
repurchase shares of Southern Company common stock on an ongoing basis to offset
additional shares issued in connection with the exercise of stock options under the
Omnibus Plan. As of March 31, 2006, Southern Company has repurchased a total of
10,070,321 shares. In January 2006, Southern Companys program to repurchase shares
of stock to offset issuances under the Southern Companys stock compensation plans was
discontinued. 125




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##### Table of Contents



Item 6. Exhibits.
 (3) Articles of Incorporation and By-Laws
 Alabama Power
 (b)1
    
    -
    
    Amendment to Charter of Alabama Power dated May 1, 2006.
 (4) Instruments Describing Rights of Security Holders, Including Indentures
 Alabama Power
 (b)1
    
    -
    
    Thirty-Fifth Supplemental Indenture to Senior Note
Indenture dated as of March 15, 2006, providing for the
issuance of the Series II Senior Notes. (Designated in
Form 8-K dated March 9, 2006, File No. 1-3164, as
Exhibit 4.2.)
 (10) Material Contracts
 Southern Company
 (a)1
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Deferred Compensation Plan.(a)2
    
    -
    
    First Amendment effective March 1, 2006 to The
Southern Company Supplemental Executive Retirement Plan.(a)3
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Supplemental Benefit Plan.
 Alabama Power
 (b)1
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Deferred Compensation Plan. See
Exhibit 10(a)1 herein.(b)2
    
    -
    
    First Amendment effective March 1, 2006 to The
Southern Company Supplemental Executive Retirement Plan.
See Exhibit 10(a)2 herein.(b)3
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Supplemental Benefit Plan. See Exhibit
10(a)3 herein.
 Georgia Power
 (c)1
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Deferred Compensation Plan. See Exhibit
10(a)1 herein.(c)2
    
    -
    
    First Amendment effective March 1, 2006 to The
Southern Company Supplemental Executive Retirement Plan.
See Exhibit 10(a)2 herein.(c)3
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Supplemental Benefit Plan. See Exhibit 10(a)3 herein.
 126




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##### Table of Contents



Item 6. Exhibits. (continued)
 Gulf Power
 (d)1
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Deferred Compensation Plan. See
Exhibit 10(a)1 herein.(d)2
    
    -
    
    First Amendment effective March 1, 2006 to The
Southern Company Supplemental Executive Retirement
Plan. See Exhibit 10(a)2 herein.(d)3
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Supplemental Benefit Plan. See Exhibit
10(a)3 herein.
 Mississippi Power
 (e)1
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Deferred Compensation Plan. See
Exhibit 10(a)1 herein.(e)2
    
    -
    
    First Amendment effective March 1, 2006 to The
Southern Company Supplemental Executive Retirement
Plan. See Exhibit 10(a)2 herein.(e)3
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Supplemental Benefit Plan. See Exhibit
10(a)3 herein.
 Savannah Electric
 (f)1
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Deferred Compensation Plan. See
Exhibit 10(a)1 herein.(f)2
    
    -
    
    First Amendment effective March 1, 2006 to The
Southern Company Supplemental Executive Retirement
Plan. See Exhibit 10(a)2 herein.(f)3
    
    -
    
    Second Amendment effective March 1, 2006 to The
Southern Company Supplemental Benefit Plan. See Exhibit
10(a)3 herein.
 (24) Power of Attorney and Resolutions
 Southern Company
 (a)1
    
    -
    
    Power of Attorney and resolution. (Designated in the
Form 10-K for the year ended December 31, 2005, File
No. 1-3526 as Exhibit 24(a) and incorporated herein by reference.)
 Alabama Power
 (b)1
    
    -
    
    Power of Attorney and resolution. (Designated in the
Form 10-K for the year ended December 31, 2005, File
No. 1-3164 as Exhibit 24(b) and incorporated herein by reference.)
 Georgia Power
 (c)1
    
    -
    
    Power of Attorney and resolution. (Designated in the
Form 10-K for the year ended December 31, 2005, File
No. 1-6468 as Exhibit 24(c) and incorporated herein by reference.)
 127




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##### Table of Contents



Item 6. Exhibits. (continued)
 Gulf Power
 (d)1
    
    -
    
    Power of Attorney and resolution. (Designated in the
Form 10-K for the year ended December 31, 2005, File No.
0-2429 as Exhibit 24(d) and incorporated herein by reference.)
 Mississippi Power
 (e)1
    
    -
    
    Power of Attorney and resolution. (Designated in the
Form 10-K for the year ended December 31, 2005, File No.
001-11229 as Exhibit 24(e) and incorporated herein by
reference.)
 Savannah Electric
 (f)1
    
    -
    
    Power of Attorney and resolution. (Designated in the
Form 10-K for the year ended December 31, 2005, File No.
1-5072 as Exhibit 24(f) and incorporated herein by reference.)
 Southern Power
 (g)1
    
    -
    
    Power of Attorney and resolution. (Designated in the
Form 10-K for the year ended December 31, 2005, File No.
333-98553 as Exhibit 24(g) and incorporated herein by
reference.)
 (31) Section 302 Certifications
 Southern Company
 (a)1
    
    -
    
    Certificate of Southern Companys Chief Executive
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.(a)2
    
    -
    
    Certificate of Southern Companys Chief Financial
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
 Alabama Power
 (b)1
    
    -
    
    Certificate of Alabama Powers Chief Executive Officer
required by Section 302 of the Sarbanes-Oxley Act of 2002.(b)2
    
    -
    
    Certificate of Alabama Powers Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act of 2002.
 Georgia Power
 (c)1
    
    -
    
    Certificate of Georgia Powers Chief Executive Officer
required by Section 302 of the Sarbanes-Oxley Act of 2002.(c)2
    
    -
    
    Certificate of Georgia Powers Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act of 2002.
 Gulf Power
 (d)1
    
    -
    
    Certificate of Gulf Powers Chief Executive Officer
required by Section 302 of the Sarbanes-Oxley Act of 2002.
 128




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##### Table of Contents



Item 6. Exhibits. (continued)
 (d)2
    
    -
    
    Certificate of Gulf Powers Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act of 2002.
 Mississippi Power
 (e)1
    
    -
    
    Certificate of Mississippi Powers Chief Executive
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.(e)2
    
    -
    
    Certificate of Mississippi Powers Chief Financial
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
 Savannah Electric
 (f)1
    
    -
    
    Certificate of Savannah Electrics Chief Executive
Officer required by Section 302 of the Sarbanes-Oxley Act
of 2002.(f)2
    
    -
    
    Certificate of Savannah Electrics Chief Financial
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
 Southern Power
 (g)1
    
    -
    
    Certificate of Southern Powers Chief Executive Officer
required by Section 302 of the Sarbanes-Oxley Act of 2002.(g)2
    
    -
    
    Certificate of Southern Powers Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act of 2002.
 (32) Section 906 Certifications
 Southern Company
 (a)
    
    -
    
    Certificate of Southern Companys Chief Executive
Officer and Chief Financial Officer required by Section
906 of the Sarbanes-Oxley Act of 2002.
 Alabama Power
 (b)
    
    -
    
    Certificate of Alabama Powers Chief Executive Officer
and Chief Financial Officer required by Section 906 of the
Sarbanes-Oxley Act of 2002.
 Georgia Power
 (c)
    
    -
    
    Certificate of Georgia Powers Chief Executive Officer
and Chief Financial Officer required by Section 906 of the
Sarbanes-Oxley Act of 2002.
 Gulf Power
 (d)
    
    -
    
    Certificate of Gulf Powers Chief Executive Officer and
Chief Financial Officer required by Section 906 of the
Sarbanes-Oxley Act of 2002.
 129




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Item 6. Exhibits. (continued)
 Mississippi Power
 (e)
    
    -
    
    Certificate of Mississippi Powers Chief Executive Officer
and Chief Financial Officer required by Section 906 of the
Sarbanes-Oxley Act of 2002.
 Savannah Electric
 (f)
    
    -
    
    Certificate of Savannah Electrics Chief Executive Officer
and Chief Financial Officer required by Section 906 of the
Sarbanes-Oxley Act of 2002.
 Southern Power
 (g)
    
    -
    
    Certificate of Southern Powers Chief Executive Officer and
Chief Financial Officer required by Section 906 of the
Sarbanes-Oxley Act of 2002.
 130




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THE SOUTHERN COMPANY
 
 SIGNATURES
  THE SOUTHERN COMPANYBy
    
    David M. RatcliffeChairman, President and Chief Executive Officer(Principal Executive Officer)By
    
    Thomas A. FanningExecutive Vice President, Chief Financial Officer and Treasurer(Principal Financial Officer)By
    
    /s/ Wayne Boston(Wayne Boston, Attorney-in-fact)  131




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ALABAMA POWER COMPANY
 SIGNATURES
  ALABAMA POWER COMPANYBy
    
    Charles D. McCraryPresident and Chief Executive Officer(Principal Executive Officer)By
    
    Art P. BeattieExecutive Vice President, Chief Financial Officer and Treasurer(Principal Financial Officer)By
    
    /s/ Wayne Boston(Wayne Boston, Attorney-in-fact)  132




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GEORGIA POWER COMPANY
 SIGNATURES
  GEORGIA POWER COMPANYBy
    
    Michael D. GarrettPresident and Chief Executive Officer(Principal Executive Officer)By
    
    Cliff S. ThrasherExecutive Vice President, Chief Financial Officer and Treasurer(Principal Financial Officer)By
    
    /s/ Wayne Boston(Wayne Boston, Attorney-in-fact)  133




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GULF POWER COMPANY
 SIGNATURES
  GULF POWER COMPANYBy
    
    Susan N. StoryPresident and Chief Executive Officer(Principal Executive Officer)By
    
    Ronnie R. LabratoVice President and Chief Financial Officer(Principal Financial Officer)By
    
    /s/ Wayne Boston(Wayne Boston, Attorney-in-fact)  134




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MISSISSIPPI POWER COMPANY
 SIGNATURES
  MISSISSIPPI POWER COMPANYBy
    
    Anthony J. TopaziPresident and Chief Executive Officer(Principal Executive Officer)By
    
    Frances V. TurnageVice President, Treasurer and Chief Financial Officer(Principal Financial Officer)By
    
    /s/ Wayne Boston(Wayne Boston, Attorney-in-fact)  135




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SAVANNAH ELECTRIC AND POWER COMPANY
 SIGNATURES
  SAVANNAH ELECTRIC AND POWER COMPANYBy
    
    W. Craig BarrsPresident and Chief Executive Officer(Principal Executive Officer)By
    
    Kirby R. WillisVice President, Treasurer, Chief FinancialOfficer and Assistant Corporate Secretary(Principal Financial and Accounting Officer)By
    
    /s/ Wayne Boston(Wayne Boston, Attorney-in-fact)  136




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SOUTHERN POWER COMPANY
 SIGNATURES
  SOUTHERN POWER COMPANYBy
    
    Ronnie L. BatesPresident and Chief Executive Officer(Principal Executive Officer)By
    
    Michael W. SouthernSenior Vice President and Chief Financial Officer(Principal Financial Officer)By
    
    /s/ Wayne Boston(Wayne Boston, Attorney-in-fact)  137