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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 oTRANSITION 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) 864-1211333-98553
    
    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 þ No
o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
 Large
    
    
    
    
    
    
    
    
    
    SmallerAccelerated
    
    Accelerated
    
    Non-accelerated
    
    ReportingRegistrant
    
    Filer
    
    Filer
    
    Filer
    
    CompanyThe Southern Company
    
    
    XAlabama Power Company
    
    
    
    
    
    
    
    
    
    
    XGeorgia Power Company
    
    
    
    
    
    
    
    
    
    
    XGulf Power Company
    
    
    
    
    
    
    
    
    
    
    XMississippi 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 o No þ
 Description of
    
    Shares OutstandingRegistrant
    
    Common Stock
    
    at June 30, 2008The Southern Company
    
    Par Value $5 Per Share
    
    
    770,187,296Alabama Power Company
    
    Par Value $40 Per Share
    
    
    21,725,000Georgia Power Company
    
    Without Par Value
    
    
    9,261,500Gulf Power Company
    
    Without Par Value
    
    
    1,792,717Mississippi Power Company
    
    Without Par Value
    
    
    1,121,000Southern Power Company
    
    Par Value $0.01 Per Share
    
    
    1,000
  2




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INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2008
 PageNumberDEFINITIONS
    
    
    5CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
    
    
    7PART 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
    
    
    9Condensed Consolidated Statements of Cash Flows
    
    
    10Condensed Consolidated Balance Sheets
    
    
    11Condensed Consolidated Statements of Comprehensive Income
    
    
    13Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Alabama Power CompanyCondensed Statements of Income
    
    
    35Condensed Statements of Comprehensive Income
    
    
    35Condensed Statements of Cash Flows
    
    
    36Condensed Balance Sheets
    
    
    37Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    39Georgia Power CompanyCondensed Statements of Income
    
    
    54Condensed Statements of Comprehensive Income
    
    
    54Condensed Statements of Cash Flows
    
    
    55Condensed Balance Sheets
    
    
    56Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    58Gulf Power CompanyCondensed Statements of Income
    
    
    73Condensed Statements of Comprehensive Income
    
    
    73Condensed Statements of Cash Flows
    
    
    74Condensed Balance Sheets
    
    
    75Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    77Mississippi Power CompanyCondensed Statements of Income
    
    
    92Condensed Statements of Comprehensive Income
    
    
    92Condensed Statements of Cash Flows
    
    
    93Condensed Balance Sheets
    
    
    94Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    96Southern Power Company and Subsidiary CompaniesCondensed Consolidated Statements of Income
    
    
    112Condensed Consolidated Statements of Comprehensive Income
    
    
    112Condensed Consolidated Statements of Cash Flows
    
    
    113Condensed Consolidated Balance Sheets
    
    
    114Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    116Notes to the Condensed Financial Statements
    
    
    126Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4.
    
    Controls and Procedures
    
    
    33Item 4T.
    
    Controls and Procedures
    
    
    33
 3




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INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2008
 PageNumberPART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    147Item 1A.
    
    Risk Factors
    
    
    147Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    InapplicableItem 3.
    
    Defaults Upon Senior Securities
    
    InapplicableItem 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    147Item 5.
    
    Other Information
    
    InapplicableItem 6.
    
    Exhibits
    
    
    150Signatures
    
    
    153
  4




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DEFINITIONS
 Term
    
    Meaning2007 Retail Rate Plan
    
    Georgia Powers retail rate plan for the years 2008 through 2010Alabama Power
    
    Alabama Power CompanyClean Air Act
    
    Clean Air Act Amendments of 1990Dalton Utilities
    
    The City of Dalton, Georgia, an incorporated municipality in the
State of Georgia acting by and through its Board of Water, Light
and Sinking Fund CommissionersDOE
    
    U.S. Department of EnergyDuke Energy
    
    Duke Energy CorporationECO Plan
    
    Environmental Compliance Overview PlanEPA
    
    U.S. Environmental Protection AgencyFASB
    
    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,
and Southern Power for the year ended December 31, 2007Georgia Power
    
    Georgia Power CompanyGulf Power
    
    Gulf Power CompanyIGCC
    
    Integrated coal gasification combined cycleIIC
    
    Intercompany Interchange ContractIRC
    
    Internal Revenue Code of 1986, as amendedIRS
    
    Internal Revenue ServiceKWH
    
    Kilowatt-hourLIBOR
    
    London Interbank Offered RateMEAG Power
    
    Municipal Electric Authority of GeorgiaMirant
    
    Mirant CorporationMississippi Power
    
    Mississippi Power CompanyMW
    
    MegawattNRC
    
    Nuclear Regulatory CommissionNSR
    
    New Source ReviewOPC
    
    Oglethorpe Power CorporationPEP
    
    Performance Evaluation PlanPower Pool
    
    The operating arrangement whereby the integrated generating
resources of the traditional operating companies and Southern
Power are subject to joint commitment and dispatch in order to
serve their combined load obligationsPPA
    
    Power Purchase AgreementPSC
    
    Public Service CommissionRate CNP
    
    Alabama Powers certified new plant rate mechanismRate ECR
    
    Alabama Powers energy cost recovery rate mechanismRate NDR
    
    Alabama Powers natural disaster recovery rate mechanismRate RSE
    
    Alabama Powers rate stabilization and equilization rate mechanismregistrants
    
    Southern Company, Alabama Power, Georgia Power, Gulf Power,
Mississippi Power, and Southern PowerSCS
    
    Southern Company Services, Inc.SEC
    
    Securities and Exchange CommissionSFAS No. 157
    
    FASB Statement No. 157, Fair Value Measurement
 5




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DEFINITIONS
 Term
    
    MeaningSouthern Company
    
    The Southern CompanySouthern Company system
    
    Southern Company, the traditional operating companies, Southern
Power, and other subsidiariesSouthern Nuclear
    
    Southern Nuclear Operating Company, Inc.Southern Power
    
    Southern Power CompanyStone & Webster
    
    Stone & Webster, Inc.traditional operating companies
    
    Alabama Power, Georgia Power, Gulf Power, and Mississippi PowerWestinghouse
    
    Westinghouse Electric Company LLCwholesale revenues
    
    revenues generated from sales for resale
 6




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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, environmental laws including
regulation of water quality and emissions of sulfur, nitrogen, mercury, carbon, soot, or
particulate matter and other substances, and also changes in 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, including those relating to weather, the general
economy, population and business growth (and declines), and the effects of energy conservation
measures;
    
    available sources and costs of fuels;
    
    effects of inflation;
    
    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 actions relating to fuel and storm restoration cost recovery;
    
    regulatory approvals related to the potential Plant Vogtle expansion, including Georgia PSC
and NRC approvals;
    
    the performance of projects undertaken by the non-utility businesses and the success of
efforts to invest in and develop new opportunities;
    
    internal restructuring or other restructuring options that may be pursued;
    
    potential business strategies, including acquisitions or dispositions of assets or
businesses, which cannot be assured to be completed or beneficial to Southern Company or its
subsidiaries;
    
    the ability of counterparties of Southern Company and its subsidiaries to make payments as
and when due and to perform as required;
    
    the ability to obtain new short- and long-term contracts with 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, droughts,
pandemic health events such as an avian influenza, 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 (including the Form 10-K)
filed by the registrants from time to time with the SEC.
 Each registrant expressly disclaims any obligation to update any forward-looking statements.
 7




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THE
SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 8




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Operating Revenues:Retail revenues
    
    $
    3,449,878
    
    
    $
    3,105,056
    
    
    $
    6,455,492
    
    
    $
    5,848,867Wholesale revenues
    
    
    591,802
    
    
    
    486,877
    
    
    
    1,105,464
    
    
    
    967,576Other electric revenues
    
    
    141,162
    
    
    
    129,583
    
    
    
    271,352
    
    
    
    250,877Other revenues
    
    
    32,345
    
    
    
    50,412
    
    
    
    65,789
    
    
    
    113,277Total operating revenues
    
    
    4,215,187
    
    
    
    3,771,928
    
    
    
    7,898,097
    
    
    
    7,180,597Operating Expenses:Fuel
    
    
    1,622,074
    
    
    
    1,457,506
    
    
    
    3,074,017
    
    
    
    2,774,025Purchased power
    
    
    197,260
    
    
    
    100,136
    
    
    
    290,164
    
    
    
    164,209Other operations
    
    
    619,369
    
    
    
    586,377
    
    
    
    1,209,795
    
    
    
    1,151,749Maintenance
    
    
    295,629
    
    
    
    289,039
    
    
    
    602,020
    
    
    
    571,034Depreciation and amortization
    
    
    358,745
    
    
    
    310,286
    
    
    
    702,630
    
    
    
    616,630Taxes other than income taxes
    
    
    198,042
    
    
    
    184,527
    
    
    
    387,314
    
    
    
    367,566Total operating expenses
    
    
    3,291,119
    
    
    
    2,927,871
    
    
    
    6,265,940
    
    
    
    5,645,213Operating Income
    
    
    924,068
    
    
    
    844,057
    
    
    
    1,632,157
    
    
    
    1,535,384Other Income and (Expense):Allowance for equity funds used during construction
    
    
    35,486
    
    
    
    23,597
    
    
    
    76,071
    
    
    
    43,771Interest income
    
    
    1,188
    
    
    
    9,660
    
    
    
    10,993
    
    
    
    20,215Equity in income (losses) of unconsolidated subsidiaries
    
    
    1,097
    
    
    
    (13,567
    )
    
    
    1,425
    
    
    
    (20,302
    )Leveraged lease income (losses)
    
    
    (70,879
    )
    
    
    9,707
    
    
    
    (59,954
    )
    
    
    19,569Interest expense, net of amounts capitalized
    
    
    (228,947
    )
    
    
    (222,576
    )
    
    
    (446,056
    )
    
    
    (440,426
    )Preferred and preference dividends of subsidiaries
    
    
    (16,195
    )
    
    
    (10,129
    )
    
    
    (32,390
    )
    
    
    (20,258
    )Other income (expense), net
    
    
    (4,484
    )
    
    
    (6,015
    )
    
    
    (3,570
    )
    
    
    (8,946
    )Total other income and (expense)
    
    
    (282,734
    )
    
    
    (209,323
    )
    
    
    (453,481
    )
    
    
    (406,377
    )Earnings Before Income Taxes
    
    
    641,334
    
    
    
    634,734
    
    
    
    1,178,676
    
    
    
    1,129,007Income taxes
    
    
    224,952
    
    
    
    205,581
    
    
    
    403,090
    
    
    
    361,165Consolidated Net Income
    
    $
    416,382
    
    
    $
    429,153
    
    
    $
    775,586
    
    
    $
    767,842Common Stock Data:Earnings per
share Basic
    
    $
    0.54
    
    
    $
    0.57
    
    
    $
    1.01
    
    
    $
    1.02Diluted
    
    $
    0.54
    
    
    $
    0.56
    
    
    $
    1.00
    
    
    $
    1.01Average number of shares of common stock outstanding
(in thousands)Basic
    
    
    769,122
    
    
    
    755,137
    
    
    
    767,636
    
    
    
    752,698Diluted
    
    
    773,140
    
    
    
    759,846
    
    
    
    771,727
    
    
    
    757,596Cash dividends paid per share of common stock
    
    $
    0.4200
    
    
    $
    0.4025
    
    
    $
    0.8225
    
    
    $
    0.7900
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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  For the Six MonthsEnded June 30,2008
    
    
    2007(in thousands)Operating Activities:Consolidated net income
    
    $
    775,586
    
    
    $
    767,842Adjustments to reconcile consolidated net income
to net cash provided from operating activities Depreciation and amortization
    
    
    831,791
    
    
    
    732,511Deferred income taxes and investment tax credits
    
    
    (79,033
    )
    
    
    85,007Deferred revenues
    
    
    57,768
    
    
    
    (6,193
    )Allowance for equity funds used during construction
    
    
    (76,071
    )
    
    
    (43,771
    )Equity in income (losses) of unconsolidated subsidiaries
    
    
    (1,425
    )
    
    
    20,302Leveraged lease income (losses)
    
    
    59,954
    
    
    
    (19,569
    )Pension, postretirement, and other employee benefits
    
    
    24,596
    
    
    
    21,510Stock option expense
    
    
    15,734
    
    
    
    23,454Derivative fair value adjustments
    
    
    6,652
    
    
    
    (958
    )Hedge settlements
    
    
    17,289
    
    
    
    7,866Hurricane Katrina grant proceeds-property reserve
    
    
    
    
    
    
    60,000Other, net
    
    
    (11,504
    )
    
    
    (6,875
    )Changes in certain current assets and liabilities Receivables
    
    
    (317,403
    )
    
    
    (122,018
    )Fossil fuel stock
    
    
    (121,823
    )
    
    
    (113,570
    )Materials and supplies
    
    
    (28,609
    )
    
    
    (36,002
    )Other current assets
    
    
    (54,536
    )
    
    
    (69,985
    )Hurricane Katrina grant proceeds
    
    
    
    
    
    
    14,345Accounts payable
    
    
    161,703
    
    
    
    (31,681
    )Accrued taxes
    
    
    181,105
    
    
    
    (82,875
    )Accrued compensation
    
    
    (185,500
    )
    
    
    (251,073
    )Other current liabilities
    
    
    121,336
    
    
    
    26,103Net cash provided from operating activities
    
    
    1,377,610
    
    
    
    974,370Investing Activities:Property additions
    
    
    (1,983,177
    )
    
    
    (1,568,357
    )Investment in restricted cash from pollution control bonds
    
    
    (161
    )
    
    
    (96,049
    )Distribution of restricted cash from pollution control bonds
    
    
    32,908
    
    
    
    Nuclear decommissioning trust fund purchases
    
    
    (405,999
    )
    
    
    (322,509
    )Nuclear decommissioning trust fund sales
    
    
    399,119
    
    
    
    315,629Proceeds from property sales
    
    
    5,495
    
    
    
    28,602Investment in unconsolidated subsidiaries
    
    
    (2,780
    )
    
    
    (25,185
    )Cost of removal, net of salvage
    
    
    (40,757
    )
    
    
    (40,957
    )Hurricane Katrina capital grant proceeds
    
    
    7,314
    
    
    
    10,869Other
    
    
    (35,907
    )
    
    
    15,877Net cash used for investing activities
    
    
    (2,023,945
    )
    
    
    (1,682,080
    )Financing Activities:Decrease in notes payable, net
    
    
    (151,513
    )
    
    
    (445,605
    )Proceeds Long-term debt
    
    
    1,684,935
    
    
    
    2,531,500Common stock
    
    
    235,454
    
    
    
    311,485Redemptions Long-term debt
    
    
    (361,263
    )
    
    
    (1,084,078
    )Preferred stock
    
    
    (125,000
    )
    
    
    Payment of common stock dividends
    
    
    (630,594
    )
    
    
    (593,991
    )Other
    
    
    (12,267
    )
    
    
    (9,610
    )Net cash provided from financing activities
    
    
    639,752
    
    
    
    709,701Net Change in Cash and Cash Equivalents
    
    
    (6,583
    )
    
    
    1,991Cash and Cash Equivalents at Beginning of Period
    
    
    200,550
    
    
    
    166,846Cash and Cash Equivalents at End of Period
    
    $
    193,967
    
    
    $
    168,837Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $39,434 and $26,926 capitalized for 2008 and 2007, respectively)
    
    $
    389,466
    
    
    $
    391,105Income taxes (net of refunds)
    
    $
    280,902
    
    
    $
    266,273
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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  At June 30,
    
    
    At December 31,Assets
    
    2008
    
    
    2007(in thousands)Current Assets:Cash and cash equivalents
    
    $
    193,967
    
    
    $
    200,550Restricted cash
    
    
    41,406
    
    
    
    68,013Receivables Customer accounts receivable
    
    
    1,199,505
    
    
    
    999,264Unbilled revenues
    
    
    426,817
    
    
    
    294,487Under recovered regulatory clause revenues
    
    
    519,002
    
    
    
    715,744Other accounts and notes receivable
    
    
    379,994
    
    
    
    347,573Accumulated provision for uncollectible accounts
    
    
    (23,384
    )
    
    
    (22,142
    )Fossil fuel stock, at average cost
    
    
    836,265
    
    
    
    709,823Materials and supplies, at average cost
    
    
    746,435
    
    
    
    725,001Vacation pay
    
    
    134,285
    
    
    
    134,806Assets from risk management activities
    
    
    312,156
    
    
    
    83,043Prepaid expenses
    
    
    297,999
    
    
    
    147,903Other
    
    
    304,169
    
    
    
    328,167Total current assets
    
    
    5,368,616
    
    
    
    4,732,232Property, Plant, and Equipment:In service
    
    
    49,537,608
    
    
    
    47,175,717Less accumulated depreciation
    
    
    17,887,372
    
    
    
    17,412,65831,650,236
    
    
    
    29,763,059Nuclear fuel, at amortized cost
    
    
    459,377
    
    
    
    336,129Construction work in progress
    
    
    2,452,957
    
    
    
    3,227,605Total property, plant, and equipment
    
    
    34,562,570
    
    
    
    33,326,793Other Property and Investments:Nuclear decommissioning trusts, at fair value
    
    
    1,054,152
    
    
    
    1,131,798Leveraged leases
    
    
    923,451
    
    
    
    984,441Other
    
    
    212,127
    
    
    
    237,400Total other property and investments
    
    
    2,189,730
    
    
    
    2,353,639Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    944,201
    
    
    
    910,402Prepaid pension costs
    
    
    2,415,092
    
    
    
    2,368,798Unamortized debt issuance expense
    
    
    200,756
    
    
    
    190,700Unamortized loss on reacquired debt
    
    
    278,203
    
    
    
    288,973Deferred under recovered regulatory clause revenues
    
    
    525,926
    
    
    
    388,945Other regulatory assets
    
    
    861,530
    
    
    
    769,226Other
    
    
    511,631
    
    
    
    459,172Total deferred charges and other assets
    
    
    5,737,339
    
    
    
    5,376,216Total Assets
    
    $
    47,858,255
    
    
    $
    45,788,880
  11




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 At June 30,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2008
    
    
    2007(in thousands)Current Liabilities:Securities due within one year
    
    $
    947,837
    
    
    $
    1,177,889Notes payable
    
    
    1,119,944
    
    
    
    1,271,457Accounts payable
    
    
    1,396,380
    
    
    
    1,213,766Customer deposits
    
    
    290,234
    
    
    
    273,800Accrued taxes Income taxes
    
    
    33,907
    
    
    
    52,237Unrecognized tax benefits
    
    
    279,819
    
    
    
    164,599Other
    
    
    302,274
    
    
    
    329,895Accrued interest
    
    
    243,888
    
    
    
    217,883Accrued vacation pay
    
    
    168,920
    
    
    
    170,574Accrued compensation
    
    
    228,592
    
    
    
    407,543Other regulatory liabilities
    
    
    345,929
    
    
    
    34,352Other
    
    
    348,224
    
    
    
    316,665Total current liabilities
    
    
    5,705,948
    
    
    
    5,630,660Long-term Debt
    
    
    15,582,929
    
    
    
    14,143,114Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    5,884,614
    
    
    
    5,838,674Deferred credits related to income taxes
    
    
    265,527
    
    
    
    272,181Accumulated deferred investment tax credits
    
    
    467,388
    
    
    
    479,302Employee benefit obligations
    
    
    1,524,918
    
    
    
    1,492,472Asset retirement obligations
    
    
    1,147,394
    
    
    
    1,200,094Other cost of removal obligations
    
    
    1,326,393
    
    
    
    1,307,732Other regulatory liabilities
    
    
    1,737,912
    
    
    
    1,613,004Other
    
    
    362,896
    
    
    
    346,371Total deferred credits and other liabilities
    
    
    12,717,042
    
    
    
    12,549,830Total Liabilities
    
    
    34,005,919
    
    
    
    32,323,604Preferred and Preference Stock of Subsidiaries
    
    
    1,081,863
    
    
    
    1,080,248Common Stockholders Equity:Common stock, par value $5 per share Authorized  1 billion sharesIssued  June 30, 2008: 770,617,262 Shares; December 31, 2007: 763,502,427 SharesTreasury  June 30, 2008: 429,966 Shares; December 31, 2007: 398,746 SharesPar value
    
    
    3,853,038
    
    
    
    3,817,453Paid-in capital
    
    
    1,678,470
    
    
    
    1,454,288Treasury, at cost
    
    
    (12,207
    )
    
    
    (11,143
    )Retained earnings
    
    
    7,295,431
    
    
    
    7,154,596Accumulated other comprehensive loss
    
    
    (44,259
    )
    
    
    (30,166
    )Total Common Stockholders Equity
    
    
    12,770,473
    
    
    
    12,385,028Total Liabilities and Stockholders Equity
    
    $
    47,858,255
    
    
    $
    45,788,880
  12




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Consolidated Net Income
    
    $
    416,382
    
    
    $
    429,153
    
    
    $
    775,586
    
    
    $
    767,842Other comprehensive income (loss):Qualifying hedges:Changes in fair value, net of tax of $2,571, $14,996, $(11,417),
and $13,429, respectively
    
    
    4,337
    
    
    
    23,839
    
    
    
    (17,914
    )
    
    
    21,371Reclassification adjustment for amounts included in net income,
net of tax of $2,371, $1,420, $4,149, and $2,679, respectively
    
    
    3,734
    
    
    
    2,197
    
    
    
    6,509
    
    
    
    4,401Marketable securities:Change in fair value, net of tax of $(319), $1,086, $(2,456),
and $1,904, respectively
    
    
    (925
    )
    
    
    1,320
    
    
    
    (4,026
    )
    
    
    2,627Reclassification adjustment for amounts included in net income,
net of tax of $-, $(361), $-, and $(361), respectively
    
    
    
    
    
    
    (573
    )
    
    
    
    
    
    
    (573
    )Pension and other post retirement benefit plans:Benefit plan net gain (loss), net of tax of $-, $(1,510),$-,
and $(1,510), respectively
    
    
    
    
    
    
    (2,424
    )
    
    
    
    
    
    
    (2,424
    )Reclassification adjustment for amounts included in net income,
net of tax of $277, $280, $536, and $527, respectively
    
    
    471
    
    
    
    404
    
    
    
    882
    
    
    
    842Total other comprehensive income (loss)
    
    
    7,617
    
    
    
    24,763
    
    
    
    (14,549
    )
    
    
    26,244COMPREHENSIVE INCOME
    
    $
    423,999
    
    
    $
    453,916
    
    
    $
    761,037
    
    
    $
    794,086
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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 
 
 
 OVERVIEW
   RESULTS OF OPERATIONS
 Net Income
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(12.8)
    
    (3.0)
    
    $7.8
    
    1.0
   Retail Revenues
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$344.8
    
    11.1
    
    $606.6
    
    10.4
  14




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
   Second Quarter
    
    
    Year-to-Date2008
    
    
    2008(in millions)
    
    
    (% change)
    
    
    (in millions)
    
    
    (% change)Retail  prior year
    
    $
    3,105.1
    
    
    
    
    
    
    $
    5,848.9Estimated change in Rates and pricing
    
    
    213.5
    
    
    
    6.9
    
    
    
    348.3
    
    
    
    6.0Sales growth
    
    
    0.9
    
    
    
    0.0
    
    
    
    23.4
    
    
    
    0.4Weather
    
    
    (14.5
    )
    
    
    (0.5
    )
    
    
    (13.3
    )
    
    
    (0.2
    )Fuel and other cost recovery
    
    
    144.9
    
    
    
    4.7
    
    
    
    248.2
    
    
    
    4.2Retail  current year
    
    $
    3,449.9
    
    
    
    11.1
    %
    
    $
    6,455.5
    
    
    
    10.4
    %
     Wholesale Revenues
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$104.9
    
    21.6
    
    $137.9
    
    14.3
  15




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  Other Electric Revenues
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$11.6
    
    8.9
    
    $20.5
    
    8.2
   Other Revenues
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(18.1)
    
    (35.8)
    
    $(47.5)
    
    (41.9)
   Fuel and Purchased Power Expenses
 Second Quarter 2008
    
    
    Year-to-Date 2008vs.
    
    
    vs.Second Quarter 2007
    
    
    Year-to-Date 2007(change in millions)
    
    
    (% change)
    
    
    (change in millions)
    
    
    (% change)Fuel
    
    $
    164.6
    
    
    
    11.3
    
    
    $
    300.0
    
    
    
    10.8Purchased power
    
    
    97.1
    
    
    
    97.0
    
    
    
    126.0
    
    
    
    76.7Total fuel and purchased power expenses
    
    $
    261.7
    
    
    
    
    
    
    $
    426.0
 16




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
     Second Quarter
    
    
    Second Quarter
    
    
    Percent
    
    
    Year-to-Date
    
    
    Year-to-Date
    
    
    PercentAverage Cost
    
    2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change(cents per net KWH)
    
    (cents per net KWH)Fuel
    
    
    3.29
    
    
    
    2.88
    
    
    
    14.2
    
    
    
    3.18
    
    
    
    2.84
    
    
    
    12.0Purchased power
    
    
    8.82
    
    
    
    7.80
    
    
    
    13.1
    
    
    
    7.47
    
    
    
    6.51
    
    
    
    14.8
  Other Operations and Maintenance Expenses
 Second Quarter 2008
    
    
    Year-to-Date 2008vs.
    
    
    vs.Second Quarter 2007
    
    
    Year-to-Date 2007(change in millions)
    
    
    (% change)
    
    
    (change in millions)
    
    
    (% change)Other operations
    
    $
    33.0
    
    
    
    5.6
    
    
    $
    58.0
    
    
    
    5.0Maintenance
    
    
    6.6
    
    
    
    2.3
    
    
    
    31.0
    
    
    
    5.4Total other operations and maintenance
    
    $
    39.6
    
    
    
    
    
    
    $
    89.0
  17




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  Depreciation and Amortization
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$48.4
    
    15.6
    
    $86.0
    
    13.9
    Taxes Other Than Income Taxes
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$13.5
    
    7.3
    
    $19.7
    
    5.4
    18




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Allowance for Equity Funds Used During Construction
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$11.9
    
    50.4
    
    $32.3
    
    73.8
    Interest Income
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(8.5)
    
    (87.7)
    
    $(9.2)
    
    (45.6)
    Equity in Income (Losses) of Unconsolidated Subsidiaries
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$14.7
    
    108.1
    
    $21.7
    
    107.0
    19




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Leveraged Lease Income (Losses)
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(80.6)
    
    (830.2)
    
    $(79.6)
    
    (406.4)
    Preferred and Preference Dividends of Subsidiaries
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$6.1
    
    59.9
    
    $12.1
    
    59.9
    Income Taxes
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$19.4
    
    9.4
    
    $41.9
    
    11.6
   20




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  FUTURE EARNINGS POTENTIAL
 
 Environmental Matters
  New Source Review Actions
  21




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Clean Air Interstate Rule
  Eight-Hour Ozone Regulations
  Carbon Dioxide Litigation
  Global Climate Issues
  22




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  FERC and State PSC Matters
 Retail Fuel Cost Recovery
    Mississippi Base Load Construction Legislation
  23




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Income Tax Matters
 Leveraged Lease Transactions
   Bonus Depreciation
  Construction Projects
 Integrated Coal Gasification Combined Cycle
  24




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
    Nuclear
     25




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
      Other Matters
   26




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  New Accounting Standards
 Business Combinations
   FINANCIAL CONDITION AND LIQUIDITY
 Overview
   27




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
   Capital Requirements and Contractual Obligations
  Sources of Capital
  28




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  Off-Balance Sheet Financing Arrangements
  Credit Rating Risk
   Market Price Risk
   29




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
   Second Quarter
    Year-to-Date2008
    2008Changes
    ChangesFair Value(in millions)Contracts outstanding at the beginning of the period, assets
(liabilities), net
    
    $
    162.1
    
    
    $
    4.4Contracts realized or settled
    
    
    (57.0
    )
    
    
    (47.6
    )Current period changes(a)
    
    
    208.1
    
    
    
    356.4Contracts outstanding at the end of the period, assets (liabilities), net
    
    $
    313.2
    
    
    $
    313.2
    Amounts(in millions)Regulatory liabilities, net
    
    $
    343.6Accumulated other comprehensive income
    
    
    (23.9
    )Net income
    
    
    (6.5
    )Total fair value gain/(loss)
    
    $
    313.2
  30




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  June 30, 2008Fair Value MeasurementsTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in millions)Level 1
    
    $
    
    
    
    $
    
    
    
    $
    Level 2
    
    
    313.2
    
    
    
    224.5
    
    
    
    88.7Level 3
    
    
    
    
    
    
    
    
    
    
    Fair value of contracts outstanding at end of period
    
    $
    313.2
    
    
    $
    224.5
    
    
    $
    88.7
   Financing Activities
    31




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
   32




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##### Table of Contents



PART I
 
 Item 3. Quantitative And Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
     
 Item 4T. Controls and Procedures.
     33




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ALABAMA POWER COMPANY
 34




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##### Table of Contents



ALABAMA POWER COMPANY
 For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Operating Revenues:Retail revenues
    
    $
    1,147,786
    
    
    $
    1,093,970
    
    
    $
    2,182,040
    
    
    $
    2,049,743Wholesale
revenues Non-affiliates
    
    
    169,971
    
    
    
    156,061
    
    
    
    340,011
    
    
    
    311,183Affiliates
    
    
    96,421
    
    
    
    39,032
    
    
    
    180,113
    
    
    
    81,226Other revenues
    
    
    55,635
    
    
    
    47,029
    
    
    
    104,328
    
    
    
    91,142Total operating revenues
    
    
    1,469,813
    
    
    
    1,336,092
    
    
    
    2,806,492
    
    
    
    2,533,294Operating Expenses:Fuel
    
    
    523,348
    
    
    
    460,909
    
    
    
    976,497
    
    
    
    846,981Purchased
power Non-affiliates
    
    
    38,450
    
    
    
    18,070
    
    
    
    49,669
    
    
    
    22,708Affiliates
    
    
    75,789
    
    
    
    76,493
    
    
    
    164,496
    
    
    
    149,207Other operations
    
    
    198,012
    
    
    
    183,741
    
    
    
    382,562
    
    
    
    355,144Maintenance
    
    
    108,531
    
    
    
    97,092
    
    
    
    233,531
    
    
    
    215,854Depreciation and amortization
    
    
    130,630
    
    
    
    117,168
    
    
    
    255,267
    
    
    
    233,111Taxes other than income taxes
    
    
    75,614
    
    
    
    71,531
    
    
    
    151,385
    
    
    
    144,249Total operating expenses
    
    
    1,150,374
    
    
    
    1,025,004
    
    
    
    2,213,407
    
    
    
    1,967,254Operating Income
    
    
    319,439
    
    
    
    311,088
    
    
    
    593,085
    
    
    
    566,040Other Income and (Expense):Allowance for equity funds used during construction
    
    
    9,235
    
    
    
    8,376
    
    
    
    20,539
    
    
    
    14,962Interest income
    
    
    4,258
    
    
    
    3,613
    
    
    
    8,900
    
    
    
    8,007Interest expense, net of amounts capitalized
    
    
    (69,646
    )
    
    
    (69,576
    )
    
    
    (138,621
    )
    
    
    (136,766
    )Other income (expense), net
    
    
    (6,707
    )
    
    
    (3,966
    )
    
    
    (13,930
    )
    
    
    (6,890
    )Total other income and (expense)
    
    
    (62,860
    )
    
    
    (61,553
    )
    
    
    (123,112
    )
    
    
    (120,687
    )Earnings Before Income Taxes
    
    
    256,579
    
    
    
    249,535
    
    
    
    469,973
    
    
    
    445,353Income taxes
    
    
    93,798
    
    
    
    94,182
    
    
    
    167,226
    
    
    
    166,884Net Income
    
    
    162,781
    
    
    
    155,353
    
    
    
    302,747
    
    
    
    278,469Dividends on Preferred and Preference Stock
    
    
    9,866
    
    
    
    8,181
    
    
    
    19,732
    
    
    
    16,363Net Income After Dividends on Preferred and
Preference Stock
    
    $
    152,915
    
    
    $
    147,172
    
    
    $
    283,015
    
    
    $
    262,106
 
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Net Income After Dividends on Preferred and Preference Stock
    
    $
    152,915
    
    
    $
    147,172
    
    
    $
    283,015
    
    
    $
    262,106Other comprehensive income (loss):Qualifying hedges:Changes in fair value, net of tax of $1,172, $1,290, $(1,039), and
$1,188, respectively
    
    
    1,927
    
    
    
    2,121
    
    
    
    (1,710
    )
    
    
    1,953Reclassification adjustment for amounts included in net income,
net of tax of $443, $73, $628, and $132, respectively
    
    
    728
    
    
    
    122
    
    
    
    1,033
    
    
    
    218Total other comprehensive income (loss)
    
    
    2,655
    
    
    
    2,243
    
    
    
    (677
    )
    
    
    2,171COMPREHENSIVE INCOME
    
    $
    155,570
    
    
    $
    149,415
    
    
    $
    282,338
    
    
    $
    264,277
  35




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ALABAMA POWER COMPANY
 For the Six MonthsEnded June 30,2008
    
    
    2007(in thousands)Operating Activities:Net income
    
    $
    302,747
    
    
    $
    278,469Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    297,792
    
    
    
    271,770Deferred income taxes and investment tax credits,
net
    
    
    20,648
    
    
    
    30,076Allowance for equity funds used during construction
    
    
    (20,539
    )
    
    
    (14,962
    )Pension, postretirement, and other employee benefits
    
    
    (12,958
    )
    
    
    (6,895
    )Stock option expense
    
    
    2,520
    
    
    
    4,152Tax benefit of stock options
    
    
    460
    
    
    
    968Other, net
    
    
    14,499
    
    
    
    (3,407
    )Changes in certain current assets and liabilities Receivables
    
    
    34,056
    
    
    
    (74,311
    )Fossil fuel stock
    
    
    (21,879
    )
    
    
    (22,418
    )Materials and supplies
    
    
    (6,887
    )
    
    
    (13,846
    )Other current assets
    
    
    (42,632
    )
    
    
    (19,117
    )Accounts payable
    
    
    (68,407
    )
    
    
    (72,137
    )Accrued taxes
    
    
    64,490
    
    
    
    38,526Accrued compensation
    
    
    (47,094
    )
    
    
    (46,154
    )Other current liabilities
    
    
    26,481
    
    
    
    10,473Net cash provided from operating activities
    
    
    543,297
    
    
    
    361,187Investing Activities:Property additions
    
    
    (714,878
    )
    
    
    (555,333
    )Investment in restricted cash from pollution control bonds
    
    
    (161
    )
    
    
    (96,049
    )Distribution of restricted cash from pollution control bonds
    
    
    19,687
    
    
    
    Nuclear decommissioning trust fund purchases
    
    
    (180,522
    )
    
    
    (138,263
    )Nuclear decommissioning trust fund sales
    
    
    180,522
    
    
    
    138,263Cost of removal, net of salvage
    
    
    (18,157
    )
    
    
    (21,986
    )Other
    
    
    (11,489
    )
    
    
    (192
    )Net cash used for investing activities
    
    
    (724,998
    )
    
    
    (673,560
    )Financing Activities:Increase (decrease) in notes payable, net
    
    
    24,980
    
    
    
    (92,703
    )Proceeds Senior notes
    
    
    600,000
    
    
    
    450,000Common stock issued to parent
    
    
    150,000
    
    
    
    140,000Capital contributions
    
    
    12,178
    
    
    
    Gross excess tax benefit of stock options
    
    
    858
    
    
    
    2,160Pollution control bonds
    
    
    
    
    
    
    246,500Redemptions Senior notes
    
    
    (250,000
    )
    
    
    (168,500
    )Preferred stock
    
    
    (125,000
    )
    
    
    Payment of preferred and preference stock dividends
    
    
    (21,142
    )
    
    
    (14,698
    )Payment of common stock dividends
    
    
    (245,650
    )
    
    
    (232,500
    )Other
    
    
    (5,523
    )
    
    
    (11,843
    )Net cash provided from financing activities
    
    
    140,701
    
    
    
    318,416Net Change in Cash and Cash Equivalents
    
    
    (41,000
    )
    
    
    6,043Cash and Cash Equivalents at Beginning of Period
    
    
    73,616
    
    
    
    15,539Cash and Cash Equivalents at End of Period
    
    $
    32,616
    
    
    $
    21,582Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $9,322 and $7,590 capitalized for 2008
and 2007, respectively)
    
    $
    126,502
    
    
    $
    115,898Income taxes (net of refunds)
    
    $
    124,050
    
    
    $
    135,066
  36




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ALABAMA POWER COMPANY
 At June 30,
    
    
    At December 31,Assets
    
    2008
    
    
    2007(in thousands)Current Assets:Cash and cash equivalents
    
    $
    32,616
    
    
    $
    73,616Restricted cash
    
    
    206
    
    
    
    19,732Receivables Customer accounts receivable
    
    
    391,505
    
    
    
    357,355Unbilled revenues
    
    
    127,604
    
    
    
    95,278Under recovered regulatory clause revenues
    
    
    15,210
    
    
    
    232,226Other accounts and notes receivable
    
    
    40,567
    
    
    
    42,745Affiliated companies
    
    
    58,851
    
    
    
    61,250Accumulated provision for uncollectible accounts
    
    
    (8,637
    )
    
    
    (7,988
    )Fossil fuel stock, at average cost
    
    
    208,003
    
    
    
    182,963Materials and supplies, at average cost
    
    
    294,539
    
    
    
    287,994Vacation pay
    
    
    50,499
    
    
    
    50,266Assets from risk management activities
    
    
    78,985
    
    
    
    2,790Prepaid expenses
    
    
    163,672
    
    
    
    72,952Other
    
    
    3,712
    
    
    
    16,820Total current assets
    
    
    1,457,332
    
    
    
    1,487,999Property, Plant, and Equipment:In service
    
    
    17,357,396
    
    
    
    16,669,142Less accumulated provision for depreciation
    
    
    6,113,163
    
    
    
    5,950,37311,244,233
    
    
    
    10,718,769Nuclear fuel, at amortized cost
    
    
    202,831
    
    
    
    137,146Construction work in progress
    
    
    734,741
    
    
    
    928,182Total property, plant, and equipment
    
    
    12,181,805
    
    
    
    11,784,097Other Property and Investments:Equity investments in unconsolidated subsidiaries
    
    
    52,089
    
    
    
    48,664Nuclear decommissioning trusts, at fair value
    
    
    504,336
    
    
    
    542,846Other
    
    
    31,801
    
    
    
    31,146Total other property and investments
    
    
    588,226
    
    
    
    622,656Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    355,410
    
    
    
    347,193Prepaid pension costs
    
    
    1,022,953
    
    
    
    989,085Deferred under recovered regulatory clause revenues
    
    
    205,347
    
    
    
    81,650Other regulatory assets
    
    
    219,079
    
    
    
    224,792Other
    
    
    234,105
    
    
    
    209,153Total deferred charges and other assets
    
    
    2,036,894
    
    
    
    1,851,873Total Assets
    
    $
    16,264,257
    
    
    $
    15,746,625
  37




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ALABAMA POWER COMPANY
 At June 30,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2008
    
    
    2007(in thousands)Current Liabilities:Securities due within one year
    
    $
    160,156
    
    
    $
    535,152Notes payable
    
    
    24,980
    
    
    
    Accounts payable Affiliated
    
    
    236,691
    
    
    
    193,518Other
    
    
    207,244
    
    
    
    308,177Customer deposits
    
    
    72,393
    
    
    
    67,722Accrued taxes Income taxes
    
    
    2,740
    
    
    
    45,958Other
    
    
    71,623
    
    
    
    29,198Accrued interest
    
    
    57,934
    
    
    
    55,263Accrued vacation pay
    
    
    42,138
    
    
    
    42,138Accrued compensation
    
    
    47,078
    
    
    
    92,385Other regulatory liabilities
    
    
    97,676
    
    
    
    2,269Other
    
    
    58,135
    
    
    
    53,062Total current liabilities
    
    
    1,078,788
    
    
    
    1,424,842Long-term Debt
    
    
    5,351,090
    
    
    
    4,750,196Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    2,184,220
    
    
    
    2,065,264Deferred credits related to income taxes
    
    
    91,869
    
    
    
    93,709Accumulated deferred investment tax credits
    
    
    176,600
    
    
    
    180,578Employee benefit obligations
    
    
    357,051
    
    
    
    349,974Asset retirement obligations
    
    
    447,280
    
    
    
    505,794Other cost of removal obligations
    
    
    622,866
    
    
    
    613,616Other regulatory liabilities
    
    
    629,172
    
    
    
    637,040Other
    
    
    28,601
    
    
    
    31,417Total deferred credits and other liabilities
    
    
    4,537,659
    
    
    
    4,477,392Total Liabilities
    
    
    10,967,537
    
    
    
    10,652,430Preferred and Preference Stock
    
    
    685,127
    
    
    
    683,512Common Stockholders Equity:Common stock, par value $40 per share Authorized
- 40,000,000 sharesOutstanding
- June 30, 2008: 21,725,000 shares
    
    
    869,000
    
    
    
    719,000- December 31, 2007: 17,975,000 sharesPaid-in capital
    
    
    2,081,189
    
    
    
    2,065,298Retained earnings
    
    
    1,666,528
    
    
    
    1,630,832Accumulated other comprehensive loss
    
    
    (5,124
    )
    
    
    (4,447
    )Total common stockholders equity
    
    
    4,611,593
    
    
    
    4,410,683Total Liabilities and Stockholders Equity
    
    $
    16,264,257
    
    
    $
    15,746,625
  38




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##### Table of Contents



ALABAMA POWER COMPANY
 
 OVERVIEW
   RESULTS OF OPERATIONS
 Net Income
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$5.7
    
    3.9
    
    $20.9
    
    8.0
  39




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##### Table of Contents



ALABAMA POWER COMPANY
 Retail Revenues
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$53.8
    
    4.9
    
    $132.3
    
    6.5
   Second Quarter
    
    Year-to-Date2008
    
    2008(in millions)
    
    (% change)
    
    (in millions)
    
    (% change)Retail  prior year
    
    $
    1,094.0
    
    
    
    
    
    
    $
    2,049.7Estimated change in Rates and pricing
    
    
    62.9
    
    
    
    5.7
    
    
    
    111.4
    
    
    
    5.5Sales growth
    
    
    9.8
    
    
    
    0.9
    
    
    
    29.3
    
    
    
    1.4Weather
    
    
    (14.0
    )
    
    
    (1.3
    )
    
    
    (21.5
    )
    
    
    (1.0
    )Fuel and other cost recovery
    
    
    (4.9
    )
    
    
    (0.4
    )
    
    
    13.1
    
    
    
    0.6Retail  current year
    
    $
    1,147.8
    
    
    
    4.9
    %
    
    $
    2,182.0
    
    
    
    6.5
    %
    40




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##### Table of Contents



ALABAMA POWER COMPANY
  Wholesale Revenues  Non-Affiliates
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$13.9
    
    8.9
    
    $28.8
    
    9.3
    Wholesale Revenues  Affiliates
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$57.4
    
    147.0
    
    $98.9
    
    121.7
    41




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##### Table of Contents



ALABAMA POWER COMPANY
 Other Revenues
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$8.6
    
    18.3
    
    $13.2
    
    14.5
    Fuel and Purchased Power Expenses
 Second Quarter 2008
    
    
    Year-to-Date 2008vs.
    
    
    vs.Second Quarter 2007
    
    
    Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)Fuel
    
    $
    62.4
    
    
    
    13.5
    
    
    $
    129.5
    
    
    
    15.3Purchase
power  non-affiliates
    
    
    20.4
    
    
    
    112.8
    
    
    
    27.0
    
    
    
    118.7Purchased
power  affiliates
    
    
    (0.7
    )
    
    
    (0.9
    )
    
    
    15.3
    
    
    
    10.2Total fuel and purchased power expenses
    
    $
    82.1
    
    
    
    
    
    
    $
    171.8
    42




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##### Table of Contents



ALABAMA POWER COMPANY
  Second Quarter
    
    Second Quarter
    
    Percent
    
    Year-to-Date
    
    Year-to-Date
    
    PercentAverage Cost
    
    2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    Change(cents per net KWH)
    
    
    
    
    
    (cents per net KWH)Fuel
    
    
    2.72
    
    
    
    2.41
    
    
    
    12.9
    
    
    
    2.66
    
    
    
    2.36
    
    
    
    12.7Purchased power
    
    
    8.61
    
    
    
    6.14
    
    
    
    40.2
    
    
    
    6.97
    
    
    
    5.36
    
    
    
    30.0
    Non-Affiliates
    Affiliates
   43




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##### Table of Contents



ALABAMA POWER COMPANY
  Other Operations and Maintenance Expenses
 Second Quarter 2008
    
    
    Year-to-Date 2008vs.
    
    
    vs.Second Quarter 2007
    
    
    Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)Other operations
    
    $
    14.3
    
    
    
    7.8
    
    
    $
    27.4
    
    
    
    7.7Maintenance
    
    
    11.4
    
    
    
    11.8
    
    
    
    17.7
    
    
    
    8.2Total other operations and maintenance
    
    $
    25.7
    
    
    
    
    
    
    $
    45.1
   Depreciation and Amortization
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$13.4
    
    11.5
    
    $22.2
    
    9.5
  Taxes Other Than Income Taxes
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$4.1
    
    5.7

    

    $7.2

    

    4.9
  44




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##### Table of Contents



ALABAMA POWER COMPANY
  Allowance for Equity Funds Used During Construction
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$0.9
    
    10.3
    
    $5.5
    
    37.3
  Other Income (Expense), Net
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(2.7)
    

    (69.1)

    

    $(7.0)

    

    (102.2)
   FUTURE EARNINGS POTENTIAL
  Environmental Matters
  45




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##### Table of Contents



ALABAMA POWER COMPANY
  New Source Review Actions
  Clean Air Interstate Rule
  Eight-Hour Ozone Regulations
  Carbon Dioxide Litigation
  46




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##### Table of Contents



ALABAMA POWER COMPANY
  FERC and Alabama PSC Matters
 Retail Fuel Cost Recovery
  Natural Disaster Cost Recovery
  Income Tax Matters
 Bonus Depreciation
  Other Matters
  47




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##### Table of Contents



ALABAMA POWER COMPANY
   ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  FINANCIAL CONDITION AND LIQUIDITY
 Overview
   48




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##### Table of Contents



ALABAMA POWER COMPANY
 Capital Requirements and Contractual Obligations
  Sources of Capital
   Credit Rating Risk
   49




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##### Table of Contents



ALABAMA POWER COMPANY
  Market Price Risk
    Second Quarter
    
    
    Year-to-Date2008
    
    
    2008Changes
    
    
    ChangesFair Value(in millions)Contracts outstanding at the beginning of the period, assets
(liabilities), net
    
    $
    55.9
    
    
    $
    (0.4
    )Contracts realized or settled
    
    
    (18.1
    )
    
    
    (13.5
    )Current period changes(a)
    
    
    67.1
    
    
    
    118.8Contracts outstanding at the end of the period, assets (liabilities), net
    
    $
    104.9
    
    
    $
    104.9
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered into during the period, if any.
   Amounts(in millions)Regulatory liabilities, net
    
    $
    104.9Accumulated other comprehensive income
    
    
    Net income
    
    
    Total fair value gain/(loss)
    
    $
    104.9
 50




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##### Table of Contents



ALABAMA POWER COMPANY
   June 30, 2008Fair Value MeasurementsTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in millions)Level 1
    
    $
    
    
    
    $
    
    
    
    $
    Level 2
    
    
    104.9
    
    
    
    76.2
    
    
    
    28.7Level 3
    
    
    
    
    
    
    
    
    
    
    Fair value of contracts
outstanding at end of period
    
    $
    104.9
    
    
    $
    76.2
    
    
    $
    28.7
   Financing Activities
     51




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##### Table of Contents



ALABAMA POWER COMPANY
      52




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##### Table of Contents



GEORGIA POWER COMPANY
 53




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##### Table of Contents



GEORGIA POWER COMPANY
 For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Operating Revenues:Retail revenues
    
    $
    1,830,753
    
    
    $
    1,585,563
    
    
    $
    3,405,760
    
    
    $
    2,997,892Wholesale revenues Non-affiliates
    
    
    142,276
    
    
    
    135,055
    
    
    
    294,968
    
    
    
    278,822Affiliates
    
    
    72,164
    
    
    
    58,826
    
    
    
    146,074
    
    
    
    100,614Other revenues
    
    
    65,969
    
    
    
    64,705
    
    
    
    129,207
    
    
    
    123,991Total operating revenues
    
    
    2,111,162
    
    
    
    1,844,149
    
    
    
    3,976,009
    
    
    
    3,501,319Operating Expenses:Fuel
    
    
    683,299
    
    
    
    650,830
    
    
    
    1,321,222
    
    
    
    1,244,724Purchased power Non-affiliates
    
    
    107,723
    
    
    
    67,670
    
    
    
    165,754
    
    
    
    113,763Affiliates
    
    
    247,842
    
    
    
    179,655
    
    
    
    500,777
    
    
    
    364,197Other operations
    
    
    266,024
    
    
    
    249,538
    
    
    
    507,116
    
    
    
    480,286Maintenance
    
    
    125,757
    
    
    
    136,816
    
    
    
    253,480
    
    
    
    261,258Depreciation and amortization
    
    
    159,204
    
    
    
    127,262
    
    
    
    309,812
    
    
    
    253,411Taxes other than income taxes
    
    
    79,485
    
    
    
    71,610
    
    
    
    150,771
    
    
    
    143,951Total operating expenses
    
    
    1,669,334
    
    
    
    1,483,381
    
    
    
    3,208,932
    
    
    
    2,861,590Operating Income
    
    
    441,828
    
    
    
    360,768
    
    
    
    767,077
    
    
    
    639,729Other Income and (Expense):Allowance for equity funds used during construction
    
    
    23,981
    
    
    
    14,687
    
    
    
    51,738
    
    
    
    27,866Interest income
    
    
    1,050
    
    
    
    632
    
    
    
    1,837
    
    
    
    1,107Interest expense, net of amounts capitalized
    
    
    (83,728
    )
    
    
    (87,080
    )
    
    
    (170,065
    )
    
    
    (172,545
    )Other income (expense), net
    
    
    1,372
    
    
    
    301
    
    
    
    (1,922
    )
    
    
    (3,915
    )Total other income and (expense)
    
    
    (57,325
    )
    
    
    (71,460
    )
    
    
    (118,412
    )
    
    
    (147,487
    )Earnings Before Income Taxes
    
    
    384,503
    
    
    
    289,308
    
    
    
    648,665
    
    
    
    492,242Income taxes
    
    
    132,279
    
    
    
    100,204
    
    
    
    216,080
    
    
    
    171,184Net Income
    
    
    252,224
    
    
    
    189,104
    
    
    
    432,585
    
    
    
    321,058Dividends on Preferred and Preference Stock
    
    
    4,346
    
    
    
    689
    
    
    
    8,691
    
    
    
    1,378Net Income After Dividends on Preferred and Preference Stock
    
    $
    247,878
    
    
    $
    188,415
    
    
    $
    423,894
    
    
    $
    319,680
 
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Net Income After Dividends on Preferred and Preference Stock
    
    $
    247,878
    
    
    $
    188,415
    
    
    $
    423,894
    
    
    $
    319,680Other comprehensive income (loss):Qualifying hedges:Changes in fair value, net of tax of $6,027, $10,812,
$(16), and
$9,730, respectively
    
    
    9,556
    
    
    
    17,140
    
    
    
    (24
    )
    
    
    15,426Reclassification adjustment for amounts included in
net income,
net of tax of $489, $31, $695, and $2, respectively
    
    
    774
    
    
    
    50
    
    
    
    1,101
    
    
    
    4Marketable securities:Change in fair value, net of tax of $-, $(6), $-, and
$36, respectively
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    58Total other comprehensive income (loss)
    
    
    10,330
    
    
    
    17,183
    
    
    
    1,077
    
    
    
    15,488COMPREHENSIVE INCOME
    
    $
    258,208
    
    
    $
    205,598
    
    
    $
    424,971
    
    
    $
    335,168
  54




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##### Table of Contents



GEORGIA POWER COMPANY
 For the Six MonthsEnded June 30,2008
    
    
    2007(in thousands)Operating Activities:Net income
    
    $
    432,585
    
    
    $
    321,058Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    367,910
    
    
    
    302,523Deferred income taxes and investment tax credits
    
    
    29,175
    
    
    
    12,347Deferred revenues
    
    
    60,898
    
    
    
    (479
    )Deferred expenses  affiliates
    
    
    21,571
    
    
    
    21,933Allowance for equity funds used during construction
    
    
    (51,738
    )
    
    
    (27,866
    )Pension, postretirement, and other employee benefits
    
    
    6,304
    
    
    
    6,035Hedge settlements
    
    
    (20,486
    )
    
    
    4,836Other, net
    
    
    (20,337
    )
    
    
    8,336Changes in certain current assets and liabilities Receivables
    
    
    (193,372
    )
    
    
    (46,080
    )Fossil fuel stock
    
    
    (40,214
    )
    
    
    (51,433
    )Prepaid income taxes
    
    
    4,303
    
    
    
    (46,479
    )Other current assets
    
    
    (14,873
    )
    
    
    (9,680
    )Accounts payable
    
    
    102,384
    
    
    
    814Accrued taxes
    
    
    (12,300
    )
    
    
    (60,944
    )Accrued compensation
    
    
    (49,119
    )
    
    
    (88,796
    )Other current liabilities
    
    
    54,940
    
    
    
    35,025Net cash provided from operating activities
    
    
    677,631
    
    
    
    381,150Investing Activities:Property additions
    
    
    (992,317
    )
    
    
    (753,046
    )Distribution of restricted cash from pollution control bonds
    
    
    13,221
    
    
    
    Nuclear decommissioning trust fund purchases
    
    
    (225,477
    )
    
    
    (184,246
    )Nuclear decommissioning trust fund sales
    
    
    218,597
    
    
    
    177,366Cost of removal, net of salvage
    
    
    (15,957
    )
    
    
    (18,042
    )Change in construction payables, net of joint owner portion
    
    
    7,200
    
    
    
    20,517Other
    
    
    (16,754
    )
    
    
    (6,059
    )Net cash used for investing activities
    
    
    (1,011,487
    )
    
    
    (763,510
    )Financing Activities:Increase (decrease) in notes payable, net
    
    
    (347,612
    )
    
    
    79,495Proceeds Senior notes
    
    
    500,000
    
    
    
    850,000Pollution control bonds
    
    
    94,935
    
    
    
    Capital contributions from parent company
    
    
    251,262
    
    
    
    269,949Other long-term debt
    
    
    300,000
    
    
    
    Redemptions Capital leases
    
    
    (759
    )
    
    
    (1,957
    )Senior notes
    
    
    (45,812
    )
    
    
    Pollution control bonds
    
    
    (41,935
    )
    
    
    Other long-term debt
    
    
    
    
    
    
    (453,608
    )Payment of preferred and preference stock dividends
    
    
    (8,309
    )
    
    
    (1,550
    )Payment of common stock dividends
    
    
    (360,600
    )
    
    
    (344,950
    )Other
    
    
    (7,671
    )
    
    
    (4,664
    )Net cash provided from financing activities
    
    
    333,499
    
    
    
    392,715Net Change in Cash and Cash Equivalents
    
    
    (357
    )
    
    
    10,355Cash and Cash Equivalents at Beginning of Period
    
    
    15,392
    
    
    
    16,850Cash and Cash Equivalents at End of Period
    
    $
    15,035
    
    
    $
    27,205Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $21,619 and $11,386 capitalized
for 2008 and 2007, respectively)
    
    $
    154,225
    
    
    $
    157,693Income taxes (net of refunds)
    
    $
    130,091
    
    
    $
    158,849
  55




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GEORGIA POWER COMPANY
 At June 30,
    
    
    At December 31,Assets
    
    2008
    
    
    2007(in thousands)Current Assets:Cash and cash equivalents
    
    $
    15,035
    
    
    $
    15,392Restricted cash
    
    
    41,198
    
    
    
    48,279Receivables Customer accounts receivable
    
    
    608,671
    
    
    
    491,389Unbilled revenues
    
    
    215,656
    
    
    
    137,046Under recovered regulatory clause revenues
    
    
    404,855
    
    
    
    384,538Other accounts and notes receivable
    
    
    75,819
    
    
    
    147,498Affiliated companies
    
    
    53,397
    
    
    
    21,699Accumulated provision for uncollectible accounts
    
    
    (8,269
    )
    
    
    (7,636
    )Fossil fuel stock, at average cost
    
    
    433,436
    
    
    
    393,222Materials and supplies, at average cost
    
    
    349,013
    
    
    
    337,652Vacation pay
    
    
    68,639
    
    
    
    69,394Assets from risk management activities
    
    
    127,737
    
    
    
    4,262Prepaid income taxes
    
    
    46,799
    
    
    
    51,101Other
    
    
    67,989
    
    
    
    50,907Total current assets
    
    
    2,499,975
    
    
    
    2,144,743Property, Plant, and Equipment:In service
    
    
    23,280,746
    
    
    
    22,011,215Less accumulated provision for depreciation
    
    
    8,924,909
    
    
    
    8,696,66814,355,837
    
    
    
    13,314,547Nuclear fuel, at amortized cost
    
    
    256,546
    
    
    
    198,983Construction work in progress
    
    
    1,415,177
    
    
    
    1,797,642Total property, plant, and equipment
    
    
    16,027,560
    
    
    
    15,311,172Other Property and Investments:Equity investments in unconsolidated subsidiaries
    
    
    58,188
    
    
    
    53,813Nuclear decommissioning trusts, at fair value
    
    
    549,815
    
    
    
    588,952Other
    
    
    42,847
    
    
    
    47,914Total other property and investments
    
    
    650,850
    
    
    
    690,679Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    555,156
    
    
    
    532,539Prepaid pension costs
    
    
    1,055,718
    
    
    
    1,026,985Deferred under recovered regulatory clause revenues
    
    
    311,479
    
    
    
    307,294Other regulatory assets
    
    
    628,903
    
    
    
    541,014Other
    
    
    275,780
    
    
    
    268,335Total deferred charges and other assets
    
    
    2,827,036
    
    
    
    2,676,167Total Assets
    
    $
    22,005,421
    
    
    $
    20,822,761
  56




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##### Table of Contents



GEORGIA POWER COMPANY
 At June 30,
    
    
    At December 31,Liabilities and Stockholder's Equity
    
    2008
    
    
    2007(in thousands)Current Liabilities:Securities due within one year
    
    $
    303,353
    
    
    $
    198,576Notes payable
    
    
    367,979
    
    
    
    715,591Accounts payable Affiliated
    
    
    331,132
    
    
    
    236,332Other
    
    
    486,433
    
    
    
    463,945Customer deposits
    
    
    181,155
    
    
    
    171,553Accrued taxes Income taxes
    
    
    104,110
    
    
    
    68,782Other
    
    
    157,797
    
    
    
    219,585Accrued interest
    
    
    79,734
    
    
    
    74,674Accrued vacation pay
    
    
    55,064
    
    
    
    56,303Accrued compensation
    
    
    70,617
    
    
    
    114,974Other regulatory liabilities
    
    
    160,171
    
    
    
    14,601Other
    
    
    88,161
    
    
    
    88,624Total current liabilities
    
    
    2,385,706
    
    
    
    2,423,540Long-term Debt
    
    
    6,638,738
    
    
    
    5,937,792Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    2,895,715
    
    
    
    2,850,655Deferred credits related to income taxes
    
    
    144,338
    
    
    
    146,886Accumulated deferred investment tax credits
    
    
    262,672
    
    
    
    269,125Employee benefit obligations
    
    
    704,191
    
    
    
    678,826Asset retirement obligations
    
    
    667,049
    
    
    
    663,503Other cost of removal obligations
    
    
    416,457
    
    
    
    414,745Other regulatory liabilities
    
    
    690,687
    
    
    
    577,642Other
    
    
    177,113
    
    
    
    158,670Total deferred credits and other liabilities
    
    
    5,958,222
    
    
    
    5,760,052Total Liabilities
    
    
    14,982,666
    
    
    
    14,121,384Preferred and Preference Stock
    
    
    265,957
    
    
    
    265,957Common Stockholders Equity:Common
stock, without par value Authorized
- 20,000,000 sharesOutstanding
- 9,261,500 shares
    
    
    398,473
    
    
    
    398,473Paid-in capital
    
    
    3,631,784
    
    
    
    3,374,777Retained earnings
    
    
    2,739,357
    
    
    
    2,676,063Accumulated other comprehensive loss
    
    
    (12,816
    )
    
    
    (13,893
    )Total common stockholders equity
    
    
    6,756,798
    
    
    
    6,435,420Total Liabilities and Stockholders Equity
    
    $
    22,005,421
    
    
    $
    20,822,761
  57




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##### Table of Contents



GEORGIA POWER COMPANY
 
 OVERVIEW
   RESULTS OF OPERATIONS
 Net Income
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$59.5
    
    31.6
    
    $104.2
    
    32.6
  58




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##### Table of Contents



GEORGIA POWER COMPANY
 Retail Revenues
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$245.2
    
    15.5
    
    $407.9
    
    13.6
   Second Quarter
    
    Year-to-Date2008
    
    2008(in millions)
    
    (% change)
    
    (in millions)
    
    (% change)Retail  prior year
    
    $
    1,585.6
    
    
    
    
    
    
    $
    2,997.9Estimated
change in Rates and pricing
    
    
    146.2
    
    
    
    9.2
    
    
    
    227.0
    
    
    
    7.6Sales growth
    
    
    (5.2
    )
    
    
    (0.3
    )
    
    
    (5.8
    )
    
    
    (0.2
    )Weather
    
    
    (5.8
    )
    
    
    (0.3
    )
    
    
    2.2
    
    
    
    0.1Fuel and other cost recovery
    
    
    110.0
    
    
    
    6.9
    
    
    
    184.5
    
    
    
    6.1Retail  current year
    
    $
    1,830.8
    
    
    
    15.5
    %
    
    $
    3,405.8
    
    
    
    13.6
    %
     59




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##### Table of Contents



GEORGIA POWER COMPANY
 Wholesale
Revenues  Non-Affiliates
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$7.2
    
    5.3
    
    $16.2
    
    5.8
   Wholesale Revenues  Affiliates
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$13.4
    
    22.7
    
    $45.5
    
    45.2
   Fuel and Purchased Power Expenses
 Second Quarter 2008
    
    Year-to-Date 2008vs.
    
    vs.Second Quarter 2007
    
    Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)Fuel
    
    $
    32.5
    
    
    
    5.0
    
    
    $
    76.5
    
    
    
    6.1Purchased power  non-affiliates
    
    
    40.1
    
    
    
    59.2
    
    
    
    52.0
    
    
    
    45.7Purchased power  affiliates
    
    
    68.1
    
    
    
    38.0
    
    
    
    136.6
    
    
    
    37.5Total fuel and purchased power expenses
    
    $
    140.7
    
    
    
    
    
    
    $
    265.1
 60




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##### Table of Contents



GEORGIA POWER COMPANY
     Second Quarter
    
    Second Quarter
    
    Percent
    
    Year-to-Date
    
    Year-to-Date
    
    PercentAverage Cost
    
    2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    Change(cents per net KWH)
    
    
    
    
    
    (cents per net KWH)Fuel
    
    
    3.03
    
    
    
    2.67
    
    
    
    13.5
    
    
    
    2.94
    
    
    
    2.65
    
    
    
    10.9Purchased power
    
    
    8.90
    
    
    
    7.38
    
    
    
    20.6
    
    
    
    8.07
    
    
    
    6.99
    
    
    
    15.5
  Non-affiliates
   61




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##### Table of Contents



GEORGIA POWER COMPANY
 Affiliates
   Other Operations and Maintenance Expenses
 Second Quarter 2008
    
    Year-to-Date 2008vs.
    
    vs.Second Quarter 2007
    
    Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)Other operations
    
    $
    16.5
    
    
    
    6.6
    
    
    $
    26.8
    
    
    
    5.6Maintenance
    
    
    (11.1
    )
    
    
    (8.1
    )
    
    
    (7.8
    )
    
    
    (3.0
    )Total other operations and maintenance
    
    $
    5.4
    
    
    
    
    
    
    $
    19.0
   Depreciation and Amortization
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$31.9
    
    25.1
    
    $56.4
    
    22.3
  62




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##### Table of Contents



GEORGIA POWER COMPANY
 Taxes Other Than Income Taxes
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$7.9
    
    11.0
    
    $6.8
    
    4.7
  Allowance for Equity Funds Used During Construction
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$9.3
    
    63.3
    
    $23.8
    
    85.7
  Income Taxes
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$32.1
    
    32.0
    
    $44.9
    
    26.2
  Dividends on Preferred and Preference Stock
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$3.6
    
    N/M
    
    $7.3
    
    N/M
   63




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##### Table of Contents



GEORGIA POWER COMPANY
 FUTURE EARNINGS POTENTIAL
  Environmental Matters
  New Source Review Actions
  Clean Air Interstate Rule
  64




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##### Table of Contents



GEORGIA POWER COMPANY
  Eight-Hour Ozone Regulations
  Carbon Dioxide Litigation
  FERC and Georgia PSC Matters
 Retail Fuel Cost Recovery
  65




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##### Table of Contents



GEORGIA POWER COMPANY
 Nuclear
 Nuclear Projects
         66




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##### Table of Contents



GEORGIA POWER COMPANY
  Income Tax Matters
 Bonus Depreciation
  Other Matters
   ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  67




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##### Table of Contents



GEORGIA POWER COMPANY
 FINANCIAL CONDITION AND LIQUIDITY
 Overview
   Capital Requirements and Contractual Obligations
 
 Sources of Capital
   68




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##### Table of Contents



GEORGIA POWER COMPANY
  Credit Rating Risk
   Market Price Risk
   69




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##### Table of Contents



GEORGIA POWER COMPANY
  Second Quarter
    
    Year-to-Date2008
    
    2008Changes
    
    ChangesFair Value(in millions)Contracts outstanding at the beginning of the period, assets
(liabilities), net
    
    $
    83.6
    
    
    $
    (0.4
    )Contracts realized or settled
    
    
    (27.3
    )
    
    
    (21.4
    )Current period changes(a)
    
    
    112.2
    
    
    
    190.3Contracts outstanding at the end of the period, assets (liabilities), net
    
    $
    168.5
    
    
    $
    168.5
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered into
during the period, if any.
   Amounts(in millions)Regulatory liabilities, net
    
    $
    168.5Accumulated other comprehensive income
    
    
    Net income
    
    
    Total fair value gain/(loss)
    
    $
    168.5
   June 30, 2008Fair Value MeasurementsTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in millions)Level 1
    
    $
    
    
    
    $
    
    
    
    $
    Level 2
    
    
    168.5
    
    
    
    120.7
    
    
    
    47.8Level 3
    
    
    
    
    
    
    
    
    
    
    Fair value of
contracts outstanding
at end of period
    
    $
    168.5
    
    
    $
    120.7
    
    
    $
    47.8
 70




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##### Table of Contents



GEORGIA POWER COMPANY
   Financing Activities
      71




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##### Table of Contents



GULF POWER COMPANY
 72




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##### Table of Contents



GULF POWER COMPANY
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Operating Revenues:Retail revenues
    
    $
    284,218
    
    
    $
    243,379
    
    
    $
    512,182
    
    
    $
    462,963Wholesale revenues Non-affiliates
    
    
    25,052
    
    
    
    21,004
    
    
    
    50,708
    
    
    
    44,404Affiliates
    
    
    26,524
    
    
    
    20,813
    
    
    
    69,464
    
    
    
    60,893Other revenues
    
    
    14,073
    
    
    
    13,198
    
    
    
    29,048
    
    
    
    26,367Total operating revenues
    
    
    349,867
    
    
    
    298,394
    
    
    
    661,402
    
    
    
    594,627Operating Expenses:Fuel
    
    
    165,999
    
    
    
    133,049
    
    
    
    316,126
    
    
    
    279,523Purchased
power Non-affiliates
    
    
    6,086
    
    
    
    1,955
    
    
    
    9,212
    
    
    
    3,343Affiliates
    
    
    16,685
    
    
    
    10,469
    
    
    
    25,428
    
    
    
    17,510Other operations
    
    
    47,023
    
    
    
    46,963
    
    
    
    94,879
    
    
    
    93,013Maintenance
    
    
    18,751
    
    
    
    19,455
    
    
    
    37,326
    
    
    
    32,657Depreciation and amortization
    
    
    22,206
    
    
    
    21,203
    
    
    
    43,910
    
    
    
    42,300Taxes other than income taxes
    
    
    20,803
    
    
    
    20,283
    
    
    
    41,499
    
    
    
    40,489Total operating expenses
    
    
    297,553
    
    
    
    253,377
    
    
    
    568,380
    
    
    
    508,835Operating Income
    
    
    52,314
    
    
    
    45,017
    
    
    
    93,022
    
    
    
    85,792Other Income and (Expense):Allowance for equity funds used during construction
    
    
    2,040
    
    
    
    485
    
    
    
    3,523
    
    
    
    864Interest income
    
    
    709
    
    
    
    1,289
    
    
    
    1,418
    
    
    
    2,897Interest expense, net of amounts capitalized
    
    
    (10,679
    )
    
    
    (11,377
    )
    
    
    (21,675
    )
    
    
    (22,530
    )Other income (expense), net
    
    
    (343
    )
    
    
    (325
    )
    
    
    (1,009
    )
    
    
    (875
    )Total other income and (expense)
    
    
    (8,273
    )
    
    
    (9,928
    )
    
    
    (17,743
    )
    
    
    (19,644
    )Earnings Before Income Taxes
    
    
    44,041
    
    
    
    35,089
    
    
    
    75,279
    
    
    
    66,148Income taxes
    
    
    15,499
    
    
    
    12,989
    
    
    
    25,656
    
    
    
    24,360Net Income
    
    
    28,542
    
    
    
    22,100
    
    
    
    49,623
    
    
    
    41,788Dividends on Preference Stock
    
    
    1,550
    
    
    
    825
    
    
    
    3,101
    
    
    
    1,650Net Income After Dividends on Preference Stock
    
    $
    26,992
    
    
    $
    21,275
    
    
    $
    46,522
    
    
    $
    40,138
 
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Net Income After Dividends on Preference Stock
    
    $
    26,992
    
    
    $
    21,275
    
    
    $
    46,522
    
    
    $
    40,138Other comprehensive income (loss):Qualifying hedges:Changes in fair value, net of tax of $404 and $1,978,
$(1,077), and $2,537, respectively
    
    
    643
    
    
    
    3,149
    
    
    
    (1,715
    )
    
    
    4,039Reclassification adjustment for amounts included in net
income, net of tax of $103, $76, $157, and $160, respectively
    
    
    162
    
    
    
    122
    
    
    
    249
    
    
    
    255Total other comprehensive income (loss)
    
    
    805
    
    
    
    3,271
    
    
    
    (1,466
    )
    
    
    4,294COMPREHENSIVE INCOME
    
    $
    27,797
    
    
    $
    24,546
    
    
    $
    45,056
    
    
    $
    44,432
  73




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##### Table of Contents



GULF POWER COMPANY
  For the Six MonthsEnded June 30,2008
    
    
    2007(in thousands)Operating Activities:Net income
    
    $
    49,623
    
    
    $
    41,788Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    46,439
    
    
    
    44,827Deferred income taxes
    
    
    9,215
    
    
    
    (12,021
    )Allowance for equity funds used during construction
    
    
    (3,523
    )
    
    
    (864
    )Pension, postretirement, and other employee benefits
    
    
    554
    
    
    
    463Stock option expense
    
    
    537
    
    
    
    891Tax benefit of stock options
    
    
    109
    
    
    
    199Hedge settlements
    
    
    (5,220
    )
    
    
    3,030Other, net
    
    
    (61
    )
    
    
    (436
    )Changes in
certain current assets and liabilities Receivables
    
    
    (27,073
    )
    
    
    (6,015
    )Fossil fuel stock
    
    
    (26,432
    )
    
    
    (13,473
    )Materials and supplies
    
    
    6,669
    
    
    
    (1,517
    )Prepaid income taxes
    
    
    
    
    
    
    7,078Property damage cost recovery
    
    
    12,463
    
    
    
    11,440Other current assets
    
    
    1,339
    
    
    
    1,085Accounts payable
    
    
    6,419
    
    
    
    (7,460
    )Accrued taxes
    
    
    4,433
    
    
    
    6,470Accrued compensation
    
    
    (6,952
    )
    
    
    (7,990
    )Other current liabilities
    
    
    2,838
    
    
    
    6,149Net cash provided from operating activities
    
    
    71,377
    
    
    
    73,644Investing Activities:Property additions
    
    
    (149,761
    )
    
    
    (93,207
    )Cost of removal, net of salvage
    
    
    (4,519
    )
    
    
    (6,432
    )Construction payables
    
    
    5,753
    
    
    
    (5,993
    )Other
    
    
    (2,883
    )
    
    
    (132
    )Net cash used for investing activities
    
    
    (151,410
    )
    
    
    (105,764
    )Financing Activities:Decrease in notes payable, net
    
    
    (40,801
    )
    
    
    (96,612
    )Proceeds Senior Notes
    
    
    
    
    
    
    85,000Common stock issued to parent
    
    
    
    
    
    
    80,000Gross excess tax benefit of stock options
    
    
    212
    
    
    
    468Capital contributions from parent company
    
    
    73,060
    
    
    
    Other long-term debt
    
    
    110,000
    
    
    
    Redemptions  Senior notes
    
    
    (651
    )
    
    
    Payment of preference stock dividends
    
    
    (2,956
    )
    
    
    (1,650
    )Payment of common stock dividends
    
    
    (40,850
    )
    
    
    (37,050
    )Other
    
    
    (2,141
    )
    
    
    (996
    )Net cash provided from financing activities
    
    
    95,873
    
    
    
    29,160Net Change in Cash and Cash Equivalents
    
    
    15,840
    
    
    
    (2,960
    )Cash and Cash Equivalents at Beginning of Period
    
    
    5,348
    
    
    
    7,526Cash and Cash Equivalents at End of Period
    
    $
    21,188
    
    
    $
    4,566Supplemental Cash Flow Information:Cash paid
during the period for Interest (net of $1,404 and $381 capitalized for 2008 and 2007, respectively)
    
    $
    19,831
    
    
    $
    16,991Income taxes (net of refunds)
    
    $
    17,744
    
    
    $
    27,824
  74




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GULF POWER COMPANY
  At June 30,
    
    
    At December 31,Assets
    
    2008
    
    
    2007(in thousands)Current Assets:Cash and cash equivalents
    
    $
    21,188
    
    
    $
    5,348Receivables Customer accounts receivable
    
    
    68,968
    
    
    
    63,227Unbilled revenues
    
    
    55,314
    
    
    
    39,000Under recovered regulatory clause revenues
    
    
    71,077
    
    
    
    58,435Other accounts and notes receivable
    
    
    6,220
    
    
    
    7,162Affiliated companies
    
    
    7,240
    
    
    
    19,377Accumulated provision for uncollectible accounts
    
    
    (1,277
    )
    
    
    (1,711
    )Fossil fuel stock, at average cost
    
    
    98,901
    
    
    
    71,012Materials and supplies, at average cost
    
    
    39,094
    
    
    
    45,763Property damage cost recovery
    
    
    4,372
    
    
    
    18,585Other regulatory assets
    
    
    8,896
    
    
    
    10,220Other
    
    
    32,126
    
    
    
    14,878Total current assets
    
    
    412,119
    
    
    
    351,296Property, Plant, and Equipment:In service
    
    
    2,745,010
    
    
    
    2,678,952Less accumulated provision for depreciation
    
    
    951,726
    
    
    
    931,9681,793,284
    
    
    
    1,746,984Construction work in progress
    
    
    215,845
    
    
    
    150,870Total property, plant, and equipment
    
    
    2,009,129
    
    
    
    1,897,854Other Property and Investments
    
    
    4,598
    
    
    
    4,563Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    21,067
    
    
    
    17,847Prepaid pension costs
    
    
    108,757
    
    
    
    107,151Other regulatory assets
    
    
    105,570
    
    
    
    97,492Other
    
    
    43,257
    
    
    
    22,784Total deferred charges and other assets
    
    
    278,651
    
    
    
    245,274Total Assets
    
    $
    2,704,497
    
    
    $
    2,498,987
  75




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GULF POWER COMPANY
  At June 30,
    
    
    At December 31,Liabilities and Stockholder's Equity
    
    2008
    
    
    2007(in thousands)Current Liabilities:Notes payable
    
    $
    3,824
    
    
    $
    44,625Accounts payable Affiliated
    
    
    57,387
    
    
    
    39,375Other
    
    
    60,894
    
    
    
    56,823Customer deposits
    
    
    26,609
    
    
    
    24,885Accrued taxes Income taxes
    
    
    35,171
    
    
    
    30,026Other
    
    
    16,800
    
    
    
    10,577Accrued interest
    
    
    7,448
    
    
    
    7,698Accrued compensation
    
    
    8,144
    
    
    
    15,096Other regulatory liabilities
    
    
    32,887
    
    
    
    6,027Other
    
    
    20,931
    
    
    
    32,023Total current liabilities
    
    
    270,095
    
    
    
    267,155Long-term Debt
    
    
    849,634
    
    
    
    740,050Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    244,188
    
    
    
    240,101Accumulated deferred investment tax credits
    
    
    12,121
    
    
    
    12,988Employee benefit obligations
    
    
    76,025
    
    
    
    74,021Other cost of removal obligations
    
    
    175,920
    
    
    
    172,876Other regulatory liabilities
    
    
    89,852
    
    
    
    82,741Other
    
    
    80,525
    
    
    
    79,802Total deferred credits and other liabilities
    
    
    678,631
    
    
    
    662,529Total Liabilities
    
    
    1,798,360
    
    
    
    1,669,734Preference Stock
    
    
    97,998
    
    
    
    97,998Common Stockholders Equity:Common
stock, without par value Authorized
- 20,000,000 sharesOutstanding
- 1,792,717 shares
    
    
    118,060
    
    
    
    118,060Paid-in capital
    
    
    508,899
    
    
    
    435,008Retained earnings
    
    
    186,445
    
    
    
    181,986Accumulated other comprehensive loss
    
    
    (5,265
    )
    
    
    (3,799
    )Total common stockholders equity
    
    
    808,139
    
    
    
    731,255Total Liabilities and Stockholders Equity
    
    $
    2,704,497
    
    
    $
    2,498,987
  76




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GULF POWER COMPANY
 
 
 OVERVIEW
   RESULTS OF OPERATIONS
 Net Income
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$5.7
    
    26.9
    
    $6.4
    
    15.9
   Retail Revenues
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$40.8
    
    16.8
    
    $49.2
    
    10.6
  77




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GULF POWER COMPANY
  Second Quarter
    
    Year-to-Date2008
    
    2008(in millions)
    
    (% change)
    
    (in millions)
    
    (% change)Retail  prior year
    
    $
    243.4
    
    
    
    
    
    
    $
    463.0Estimated change in 
Rates and pricing
    
    
    1.4
    
    
    
    0.6
    
    
    
    2.8
    
    
    
    0.6Sales growth
    
    
    (1.9
    )
    
    
    (0.8
    )
    
    
    0.4
    
    
    
    0.1Weather
    
    
    3.3
    
    
    
    1.4
    
    
    
    4.4
    
    
    
    0.9Fuel and other cost recovery
    
    
    38.0
    
    
    
    15.6
    
    
    
    41.6
    
    
    
    9.0Retail  current year
    
    $
    284.2
    
    
    
    16.8
    %
    
    $
    512.2
    
    
    
    10.6
    %
     78




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##### Table of Contents



GULF POWER COMPANY
 Wholesale Revenues  Non-Affiliates
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$4.0
    
    19.3
    
    $6.3
    
    14.2
   Wholesale Revenues  Affiliates
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$5.7
    
    27.4
    
    $8.6
    
    14.1
   Other Revenues
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$0.9
    
    6.6
    
    $2.7
    
    10.2
  79




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GULF POWER COMPANY
 Fuel and Purchased Power Expenses
 Second Quarter 2008
    
    Year-to-Date 2008vs.
    
    vs.Second Quarter 2007
    
    Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)Fuel
    
    $
    33.0
    
    
    
    24.8
    
    
    $
    36.6
    
    
    
    13.1Purchased power  non-affiliates
    
    
    4.1
    
    
    
    211.3
    
    
    
    5.9
    
    
    
    175.6Purchased power  affiliates
    
    
    6.2
    
    
    
    59.4
    
    
    
    7.9
    
    
    
    45.2Total fuel and purchased power expenses
    
    $
    43.3
    
    
    
    
    
    
    $
    50.4
     Second Quarter
    
    Second Quarter
    
    Percent
    
    Year-to-Date
    
    Year-to-Date
    
    PercentAverage Cost
    
    2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    Change(cents per net KWH)
    
    
    
    
    
    (cents per net KWH)Fuel
    
    
    4.26
    
    
    
    3.33
    
    
    
    27.9
    
    
    
    4.03
    
    
    
    3.41
    
    
    
    18.2Purchased power
    
    
    10.73
    
    
    
    7.71
    
    
    
    39.2
    
    
    
    8.90
    
    
    
    5.92
    
    
    
    50.3
   80




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GULF POWER COMPANY
 Non-affiliates
    Affiliates
    Other Operations and Maintenance Expenses
 Second Quarter 2008
    
    Year-to-Date 2008vs.
    
    vs.Second Quarter 2007
    
    Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)Other operations
    
    $
    0.1
    
    
    
    0.1
    
    
    $
    1.8
    
    
    
    2.0Maintenance
    
    
    (0.7
    )
    
    
    (3.6
    )
    
    
    4.7
    
    
    
    14.3Total other operations and maintenance
    
    $
    (0.6
    )
    
    
    
    
    
    $
    6.5
  81




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GULF POWER COMPANY
 Allowance for Equity Funds Used During Construction
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$1.5
    
    320.6
    
    $2.6
    
    307.8
  Interest Income
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(0.6)
    
    (45.0)
    
    $(1.5)
    
    (51.1)
  Interest Expense, Net of Amounts Capitalized
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(0.7)
    
    (6.1)
    
    $(0.8)
    
    (3.8)
  Income Taxes
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$2.5
    
    19.3
    
    $1.3
    
    5.3
   82




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GULF POWER COMPANY
 Dividends on Preference Stock
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$0.7
    
    87.9
    
    $1.4
    
    87.9
  FUTURE EARNINGS POTENTIAL
  Environmental Matters
  New Source Review Actions
  83




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##### Table of Contents



GULF POWER COMPANY
 Clean Air Interstate Rule
  Eight-Hour Ozone Regulations
  Carbon Dioxide Litigation
  Global Climate Issues
  84




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##### Table of Contents



GULF POWER COMPANY
  FERC and Florida PSC Matters
 Retail Fuel Cost Recovery
   Income Tax Matters
 Bonus Depreciation
  85




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##### Table of Contents



GULF POWER COMPANY
 Other Matters
   ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  FINANCIAL CONDITION AND LIQUIDITY
 Overview
  86




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##### Table of Contents



GULF POWER COMPANY
   Capital Requirements and Contractual Obligations
 
 Sources of Capital
   87




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##### Table of Contents



GULF POWER COMPANY
 Credit Rating Risk
   Market Price Risk
    Second Quarter
    
    Year-to-Date2008
    
    2008Changes
    
    ChangesFair Value(in millions)Contracts outstanding at the beginning of the period, assets
(liabilities), net
    
    $
    14.0
    
    
    $
    (0.2
    )Contracts realized or settled
    
    
    (4.3
    )
    
    
    (3.1
    )Current period changes(a)
    
    
    15.7
    
    
    
    28.7Contracts outstanding at the end of the period, assets (liabilities), net
    
    $
    25.4
    
    
    $
    25.4
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered into
during the period, if any.
  88




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GULF POWER COMPANY
  Amounts(in millions)Regulatory liabilities, net
    
    $
    25.4Accumulated other comprehensive income
    
    
    Net income
    
    
    Total fair value gain/(loss)
    
    $
    25.4
   June 30, 2008Fair Value MeasurementsTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in millions)Level 1
    
    $
    
    
    
    $
    
    
    
    $
    Level 2
    
    
    25.4
    
    
    
    16.9
    
    
    
    8.5Level 3
    
    
    
    
    
    
    
    
    
    
    Fair value of contracts
outstanding at end of period
    
    $
    25.4
    
    
    $
    16.9
    
    
    $
    8.5
   Financing Activities
  89




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GULF POWER COMPANY
    90




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 91




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##### Table of Contents



MISSISSIPPI POWER COMPANY
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Operating Revenues:Retail revenues
    
    $
    187,121
    
    
    $
    182,145
    
    
    $
    355,510
    
    
    $
    338,269Wholesale revenues Non-affiliates
    
    
    83,595
    
    
    
    76,702
    
    
    
    168,401
    
    
    
    153,996Affiliates
    
    
    22,546
    
    
    
    9,657
    
    
    
    50,925
    
    
    
    28,572Other revenues
    
    
    4,670
    
    
    
    4,712
    
    
    
    8,512
    
    
    
    9,205Total operating revenues
    
    
    297,932
    
    
    
    273,216
    
    
    
    583,348
    
    
    
    530,042Operating Expenses:Fuel
    
    
    138,857
    
    
    
    122,158
    
    
    
    268,973
    
    
    
    243,917Purchased power Non-affiliates
    
    
    5,426
    
    
    
    1,259
    
    
    
    7,681
    
    
    
    2,213Affiliates
    
    
    17,484
    
    
    
    17,040
    
    
    
    43,482
    
    
    
    29,464Other operations
    
    
    45,618
    
    
    
    43,109
    
    
    
    92,303
    
    
    
    86,956Maintenance
    
    
    17,750
    
    
    
    17,331
    
    
    
    35,838
    
    
    
    31,278Depreciation and amortization
    
    
    17,101
    
    
    
    15,153
    
    
    
    35,098
    
    
    
    29,381Taxes other than income taxes
    
    
    16,286
    
    
    
    15,495
    
    
    
    31,851
    
    
    
    28,338Total operating expenses
    
    
    258,522
    
    
    
    231,545
    
    
    
    515,226
    
    
    
    451,547Operating Income
    
    
    39,410
    
    
    
    41,671
    
    
    
    68,122
    
    
    
    78,495Other Income and (Expense):Interest income
    
    
    184
    
    
    
    424
    
    
    
    593
    
    
    
    999Interest expense, net of amounts capitalized
    
    
    (4,393
    )
    
    
    (4,365
    )
    
    
    (8,833
    )
    
    
    (9,437
    )Other income (expense), net
    
    
    2,901
    
    
    
    5,105
    
    
    
    4,519
    
    
    
    4,977Total other income and (expense)
    
    
    (1,308
    )
    
    
    1,164
    
    
    
    (3,721
    )
    
    
    (3,461
    )Earnings Before Income Taxes
    
    
    38,102
    
    
    
    42,835
    
    
    
    64,401
    
    
    
    75,034Income taxes
    
    
    13,664
    
    
    
    16,122
    
    
    
    23,358
    
    
    
    28,252Net Income
    
    
    24,438
    
    
    
    26,713
    
    
    
    41,043
    
    
    
    46,782Dividends on Preferred Stock
    
    
    433
    
    
    
    433
    
    
    
    866
    
    
    
    866Net Income After Dividends on Preferred Stock
    
    $
    24,005
    
    
    $
    26,280
    
    
    $
    40,177
    
    
    $
    45,916
 
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Net Income After Dividends on Preferred Stock
    
    $
    24,005
    
    
    $
    26,280
    
    
    $
    40,177
    
    
    $
    45,916Other comprehensive income (loss):Qualifying hedges:Changes in fair value, net of tax of
$(144), $408, $(1,454),
and $46, respectively
    
    
    (233
    )
    
    
    657
    
    
    
    (2,347
    )
    
    
    73COMPREHENSIVE INCOME
    
    $
    23,772
    
    
    $
    26,937
    
    
    $
    37,830
    
    
    $
    45,989
  92




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MISSISSIPPI POWER COMPANY
  For the Six MonthsEnded June 30,2008
    
    
    2007(in thousands)Operating Activities:Net income
    
    $
    41,043
    
    
    $
    46,782Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    37,231
    
    
    
    34,116Deferred income taxes and investment tax credits, net
    
    
    (8,732
    )
    
    
    (12,089
    )Plant Daniel capacity
    
    
    
    
    
    
    (2,829
    )Pension, postretirement, and other employee benefits
    
    
    3,765
    
    
    
    3,928Stock option expense
    
    
    555
    
    
    
    830Tax benefit of stock options
    
    
    95
    
    
    
    238Hurricane Katrina grant proceeds-property reserve
    
    
    
    
    
    
    60,000Other, net
    
    
    (10,640
    )
    
    
    (15,859
    )Changes in certain current assets and liabilities Receivables
    
    
    (22,108
    )
    
    
    16,671Fossil fuel stock
    
    
    (30,521
    )
    
    
    (23,319
    )Materials and supplies
    
    
    (13,569
    )
    
    
    (880
    )Prepaid income taxes
    
    
    1,607
    
    
    
    19,666Other current assets
    
    
    272
    
    
    
    (764
    )Hurricane Katrina grant proceeds
    
    
    
    
    
    
    14,345Hurricane Katrina accounts payable
    
    
    
    
    
    
    5,440Other accounts payable
    
    
    14,947
    
    
    
    (9,313
    )Accrued taxes
    
    
    (20,369
    )
    
    
    (2,669
    )Accrued compensation
    
    
    (12,379
    )
    
    
    (13,420
    )Other current liabilities
    
    
    19,802
    
    
    
    (77
    )Net cash provided from operating activities
    
    
    999
    
    
    
    120,797Investing Activities:Property additions
    
    
    (57,404
    )
    
    
    (56,089
    )Cost of removal, net of salvage
    
    
    (424
    )
    
    
    7,113Construction payables
    
    
    (7,275
    )
    
    
    (408
    )Hurricane Katrina capital grant proceeds
    
    
    7,314
    
    
    
    10,869Other
    
    
    (998
    )
    
    
    527Net cash used for investing activities
    
    
    (58,787
    )
    
    
    (37,988
    )Financing Activities:Increase (decrease) in notes payable, net
    
    
    10,669
    
    
    
    (774
    )Proceeds Capital contributions
    
    
    2,714
    
    
    
    (3
    )Gross excess tax benefit of stock options
    
    
    253
    
    
    
    478Other long-term debt
    
    
    80,000
    
    
    
    Redemptions  Long-term debt
    
    
    
    
    
    
    (36,082
    )Payment of preferred stock dividends
    
    
    (866
    )
    
    
    (866
    )Payment of common stock dividends
    
    
    (34,200
    )
    
    
    (33,650
    )Other
    
    
    (1,470
    )
    
    
    Net cash provided from (used for) financing activities
    
    
    57,100
    
    
    
    (70,897
    )Net Change in Cash and Cash Equivalents
    
    
    (688
    )
    
    
    11,912Cash and Cash Equivalents at Beginning of Period
    
    
    4,827
    
    
    
    4,214Cash and Cash Equivalents at End of Period
    
    $
    4,139
    
    
    $
    16,126Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $58 and $0 capitalized for 2008 and 2007, respectively)
    
    $
    7,844
    
    
    $
    9,046Income taxes (net of refunds)
    
    $
    32,628
    
    
    $
    (270
    )
  93




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MISSISSIPPI POWER COMPANY
  At June 30,
    
    
    At December 31,Assets
    
    2008
    
    
    2007(in thousands)Current Assets:Cash and cash equivalents
    
    $
    4,139
    
    
    $
    4,827Receivables Customer accounts receivable
    
    
    51,031
    
    
    
    43,946Unbilled revenues
    
    
    28,243
    
    
    
    23,163Under recovered regulatory clause revenues
    
    
    27,860
    
    
    
    40,545Other accounts and notes receivable
    
    
    11,364
    
    
    
    5,895Affiliated companies
    
    
    33,971
    
    
    
    11,838Accumulated provision for uncollectible accounts
    
    
    (775
    )
    
    
    (924
    )Fossil fuel stock, at average cost
    
    
    77,987
    
    
    
    47,466Materials and supplies, at average cost
    
    
    38,597
    
    
    
    27,440Assets from risk management activities
    
    
    40,853
    
    
    
    3,756Other regulatory assets
    
    
    28,435
    
    
    
    32,234Other
    
    
    21,208
    
    
    
    14,666Total current assets
    
    
    362,913
    
    
    
    254,852Property, Plant, and Equipment:In service
    
    
    2,163,644
    
    
    
    2,130,835Less accumulated provision for depreciation
    
    
    903,892
    
    
    
    880,1481,259,752
    
    
    
    1,250,687Construction work in progress
    
    
    58,433
    
    
    
    50,015Total property, plant, and equipment
    
    
    1,318,185
    
    
    
    1,300,702Other Property and Investments
    
    
    8,847
    
    
    
    9,556Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    8,574
    
    
    
    8,867Prepaid pension costs
    
    
    65,773
    
    
    
    66,099Other regulatory assets
    
    
    70,702
    
    
    
    62,746Other
    
    
    32,809
    
    
    
    24,843Total deferred charges and other assets
    
    
    177,858
    
    
    
    162,555Total Assets
    
    $
    1,867,803
    
    
    $
    1,727,665
  94




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 At June 30,
    
    
    At December 31,Liabilities and Stockholder's Equity
    
    2008
    
    
    2007(in thousands)Current Liabilities:Securities due within one year
    
    $
    41,183
    
    
    $
    1,138Notes payable
    
    
    20,612
    
    
    
    9,944Accounts payable Affiliated
    
    
    48,984
    
    
    
    40,394Other
    
    
    59,842
    
    
    
    60,758Customer deposits
    
    
    10,077
    
    
    
    9,640Accrued taxes Income taxes
    
    
    
    
    
    
    Other
    
    
    28,490
    
    
    
    48,853Accrued interest
    
    
    3,059
    
    
    
    2,713Accrued compensation
    
    
    9,587
    
    
    
    21,965Other regulatory liabilities
    
    
    54,871
    
    
    
    11,082Other
    
    
    32,493
    
    
    
    23,882Total current liabilities
    
    
    309,198
    
    
    
    230,369Long-term Debt
    
    
    321,373
    
    
    
    281,963Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    205,627
    
    
    
    206,818Deferred credits related to income taxes
    
    
    13,849
    
    
    
    15,156Accumulated deferred investment tax credits
    
    
    14,680
    
    
    
    15,254Employee benefit obligations
    
    
    90,226
    
    
    
    88,300Other cost of removal obligations
    
    
    95,902
    
    
    
    90,485Other regulatory liabilities
    
    
    127,436
    
    
    
    119,458Other
    
    
    35,661
    
    
    
    33,252Total deferred credits and other liabilities
    
    
    583,381
    
    
    
    568,723Total Liabilities
    
    
    1,213,952
    
    
    
    1,081,055Preferred 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
    
    
    317,935
    
    
    
    314,324Retained earnings
    
    
    267,219
    
    
    
    261,242Accumulated other comprehensive income (loss)
    
    
    (1,774
    )
    
    
    573Total common stockholders equity
    
    
    621,071
    
    
    
    613,830Total Liabilities and Stockholders Equity
    
    $
    1,867,803
    
    
    $
    1,727,665
  95




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##### Table of Contents



MISSISSIPPI
POWER COMPANY
 
 
 OVERVIEW
   RESULTS OF OPERATIONS
 Net Income
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(2.3)
    
    (8.7)
    
    $(5.7)
    
    (12.5)
   96




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Retail Revenues
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$5.0
    
    2.7
    
    $17.2
    
    5.1
   Second Quarter
    
    Year-to-Date2008
    
    2008(in millions)
    
    (% change)
    
    (in millions)
    
    (% change)Retail  prior year
    
    $
    182.1
    
    
    
    
    
    
    $
    338.3Estimated change in Rates and pricing
    
    
    2.9
    
    
    
    1.6
    
    
    
    7.2
    
    
    
    2.1Sales growth
    
    
    (1.9
    )
    
    
    (1.0
    )
    
    
    (0.5
    )
    
    
    (0.2
    )Weather
    
    
    2.2
    
    
    
    1.1
    
    
    
    1.4
    
    
    
    0.5Fuel and other cost recovery
    
    
    1.8
    
    
    
    1.0
    
    
    
    9.1
    
    
    
    2.7Retail  current year
    
    $
    187.1
    
    
    
    2.7
    %
    
    $
    355.5
    
    
    
    5.1
    %
    97




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##### Table of Contents



MISSISSIPPI POWER COMPANY
  Wholesale Revenues  Non-Affiliates
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$6.9
    
    9.0
    
    $14.4
    
    9.4
    Wholesale Revenues  Affiliates
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$12.9
    
    133.5
    
    $22.4
    
    78.2
  98




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##### Table of Contents



MISSISSIPPI POWER COMPANY
   Fuel and Purchased Power Expenses
 Second Quarter 2008
    
    Year-to-Date 2008vs.
    
    vs.Second Quarter 2007
    
    Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)Fuel
    
    $
    16.7
    
    
    
    13.7
    
    
    $
    25.1
    
    
    
    10.3Purchased power  non-affiliates
    
    
    4.2
    
    
    
    331.0
    
    
    
    5.5
    
    
    
    247.1Purchased power  affiliates
    
    
    0.4
    
    
    
    2.6
    
    
    
    14.0
    
    
    
    47.6Total fuel and purchased power expenses
    
    $
    21.3
    
    
    
    
    
    
    $
    44.6
     Second Quarter
    
    Second Quarter
    
    Percent
    
    Year-to-Date
    
    Year-to-Date
    
    PercentAverage Cost
    
    2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    Change(cents per net KWH)
    
    
    
    
    
    (cents per net KWH)Fuel
    
    
    4.03
    
    
    
    3.71
    
    
    
    8.6
    
    
    
    3.97
    
    
    
    3.63
    
    
    
    9.4Purchased power
    
    
    6.77
    
    
    
    4.14
    
    
    
    63.5
    
    
    
    5.94
    
    
    
    3.77
    
    
    
    57.6
   99




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Non-affiliates
    Affiliates
    Other Operations and Maintenance Expenses
 Second Quarter 2008
    
    Year-to-Date 2008vs.
    
    vs.Second Quarter 2007
    
    Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)Other operations
    
    $
    2.5
    
    
    
    5.8
    
    
    $
    5.3
    
    
    
    6.1Maintenance
    
    
    0.4
    
    
    
    2.4
    
    
    
    4.6
    
    
    
    14.6Total other operations and maintenance
    
    $
    2.9
    
    
    
    
    
    
    $
    9.9
  100




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##### Table of Contents



MISSISSIPPI POWER COMPANY
  Depreciation and Amortization
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$1.9
    
    12.9
    
    $5.7
    
    19.5
    Taxes Other Than Income Taxes
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$0.8
    
    5.1
    
    $3.5
    
    12.4
    101




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Other Income (Expense), Net
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(2.2)
    
    (43.2)
    
    $(0.5)
    
    (9.2)
   Income Taxes
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(2.5)
    
    (15.2)
    
    $(4.9)
    
    (17.3)
   FUTURE EARNINGS POTENTIAL
  102




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Environmental Matters
  New Source Review Actions
  Clean Air Interstate Rule
  Eight-Hour Ozone Regulations
  103




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Carbon Dioxide Litigation
  FERC and Mississippi PSC Matters
 Retail Regulatory Matters
 Environmental Compliance Overview Plan
   Performance Evaluation Plan
   104




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Fuel Cost Recovery
  Statewide Electric Generation Needs Review
  Mississippi Base Load Construction Legislation
  Integrated Coal Gasification Combined Cycle
  105




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##### Table of Contents



MISSISSIPPI POWER COMPANY
   Income Tax Matters
 Bonus Depreciation
  Other Matters
   106




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  FINANCIAL CONDITION AND LIQUIDITY
 Overview
   Capital Requirements and Contractual Obligations
  107




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Sources of Capital
   Off-Balance Sheet Financing Arrangements
  Credit Rating Risk
   108




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Market Price Risk
    Second Quarter
    
    Year-to-Date2008
    
    2008Changes
    
    ChangesFair Value(in millions)Contracts outstanding at the beginning of the period, assets
(liabilities), net
    
    $
    27.2
    
    
    $
    2.0Contracts realized or settled
    
    
    (10.0
    )
    
    
    (9.5
    )Current period changes(a)
    
    
    26.9
    
    
    
    51.6Contracts outstanding at the end of the period, assets (liabilities), net
    
    $
    44.1
    
    
    $
    44.1
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered into
during the period, if any.
   Amounts(in millions)Regulatory liabilities, net
    
    $
    44.8Accumulated other comprehensive income
    
    
    (2.3
    )Net income
    
    
    1.6Total fair value gain/(loss)
    
    $
    44.1
  109




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##### Table of Contents



MISSISSIPPI POWER COMPANY
  June 30, 2008Fair Value MeasurementsTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in millions)Level 1
    
    $
    
    
    
    $
    
    
    
    $
    Level 2
    
    
    44.1
    
    
    
    37.0
    
    
    
    7.1Level 3
    
    
    
    
    
    
    
    
    
    
    Fair value of contracts
outstanding at end of
period
    
    $
    44.1
    
    
    $
    37.0
    
    
    $
    7.1
   Financing Activities
    110




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##### Table of Contents



SOUTHERN POWER COMPANY
AND SUBSIDIARY COMPANIES
 111




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Operating Revenues:Wholesale revenues Non-affiliates
    
    $
    170,907
    
    
    $
    98,053
    
    
    $
    251,376
    
    
    $
    179,170Affiliates
    
    
    143,893
    
    
    
    143,925
    
    
    
    277,386
    
    
    
    253,427Other revenues
    
    
    1,784
    
    
    
    2,040
    
    
    
    3,354
    
    
    
    3,913Total operating revenues
    
    
    316,584
    
    
    
    244,018
    
    
    
    532,116
    
    
    
    436,510Operating Expenses:Fuel
    
    
    76,341
    
    
    
    58,779
    
    
    
    112,388
    
    
    
    86,145Purchased power Non-affiliates
    
    
    34,312
    
    
    
    11,181
    
    
    
    50,868
    
    
    
    22,211Affiliates
    
    
    64,963
    
    
    
    36,840
    
    
    
    115,671
    
    
    
    68,127Other operations
    
    
    22,238
    
    
    
    21,555
    
    
    
    48,437
    
    
    
    42,444Maintenance
    
    
    13,416
    
    
    
    8,205
    
    
    
    22,248
    
    
    
    13,503Depreciation and amortization
    
    
    20,943
    
    
    
    18,302
    
    
    
    40,930
    
    
    
    36,696Taxes other than income taxes
    
    
    4,639
    
    
    
    4,316
    
    
    
    9,181
    
    
    
    8,027Total operating expenses
    
    
    236,852
    
    
    
    159,178
    
    
    
    399,723
    
    
    
    277,153Operating Income
    
    
    79,732
    
    
    
    84,840
    
    
    
    132,393
    
    
    
    159,357Other Income and (Expense):Interest expense, net of amounts capitalized
    
    
    (19,895
    )
    
    
    (20,458
    )
    
    
    (39,252
    )
    
    
    (41,352
    )Other income (expense), net
    
    
    35
    
    
    
    1,185
    
    
    
    12,615
    
    
    
    1,103Total other income and (expense)
    
    
    (19,860
    )
    
    
    (19,273
    )
    
    
    (26,637
    )
    
    
    (40,249
    )Earnings Before Income Taxes
    
    
    59,872
    
    
    
    65,567
    
    
    
    105,756
    
    
    
    119,108Income taxes
    
    
    24,452
    
    
    
    25,713
    
    
    
    41,361
    
    
    
    47,218Net Income
    
    $
    35,420
    
    
    $
    39,854
    
    
    $
    64,395
    
    
    $
    71,890
 
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Net Income
    
    $
    35,420
    
    
    $
    39,854
    
    
    $
    64,395
    
    
    $
    71,890Other comprehensive income (loss):Qualifying hedges:Changes in fair value, net of tax of
$(4,887), $509, $(7,831),
and $(71), respectively
    
    
    (7,554
    )
    
    
    769
    
    
    
    (12,116
    )
    
    
    (122
    )Reclassification adjustment for
amounts included in net income,
net of tax of $1,348, $1,249,
$2,690, and $2,405, respectively
    
    
    2,084
    
    
    
    1,921
    
    
    
    4,158
    
    
    
    3,958Total other comprehensive income
(loss)
    
    
    (5,470
    )
    
    
    2,690
    
    
    
    (7,958
    )
    
    
    3,836COMPREHENSIVE INCOME
    
    $
    29,950
    
    
    $
    42,544
    
    
    $
    56,437
    
    
    $
    75,726
  112




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 For the Six MonthsEnded June 30,2008
    
    
    2007(in thousands)Operating Activities:Net income
    
    $
    64,395
    
    
    $
    71,890Adjustments to reconcile net income to net cash provided from operating activities Depreciation and amortization
    
    
    48,844
    
    
    
    43,874Deferred income taxes and investment tax credits, net
    
    
    23,614
    
    
    
    32,770Deferred revenues
    
    
    (27,234
    )
    
    
    (29,872
    )Mark-to-market adjustments
    
    
    8,534
    
    
    
    (1,115
    )Accumulated billings on construction contract
    
    
    39,437
    
    
    
    30,195Accumulated costs on construction contract
    
    
    (46,014
    )
    
    
    (8,901
    )Gain on sale of property
    
    
    (6,015
    )
    
    
    Other, net
    
    
    1,552
    
    
    
    786Changes in certain current assets and liabilities Receivables
    
    
    (114,097
    )
    
    
    (55,286
    )Fossil fuel stock
    
    
    (2,776
    )
    
    
    (2,928
    )Materials and supplies
    
    
    (1,049
    )
    
    
    (7,853
    )Prepaid income taxes
    
    
    (12,033
    )
    
    
    Other current assets
    
    
    (494
    )
    
    
    (432
    )Accounts payable
    
    
    59,180
    
    
    
    16,458Accrued taxes
    
    
    7,829
    
    
    
    7,007Accrued interest
    
    
    (25
    )
    
    
    281Other current liabilities
    
    
    2,326
    
    
    
    Net cash provided from operating activities
    
    
    45,974
    
    
    
    96,874Investing Activities:Property additions
    
    
    (40,444
    )
    
    
    (74,347
    )Sale of property
    
    
    5,001
    
    
    
    Change in construction payables, net
    
    
    (7,222
    )
    
    
    (4,096
    )Payments pursuant to long-term service agreements
    
    
    (14,094
    )
    
    
    (14,583
    )Other
    
    
    (726
    )
    
    
    (1,405
    )Net cash used for investing activities
    
    
    (57,485
    )
    
    
    (94,431
    )Financing Activities:Increase in notes payable, net
    
    
    56,625
    
    
    
    16,374Proceeds  Capital contributions
    
    
    2,135
    
    
    
    Redemptions  Long-term debt
    
    
    
    
    
    
    (1,209
    )Payment of common stock dividends
    
    
    (47,250
    )
    
    
    (44,900
    )Other
    
    
    
    
    
    
    (26
    )Net cash provided from (used for) financing activities
    
    
    11,510
    
    
    
    (29,761
    )Net Change in Cash and Cash Equivalents
    
    
    (1
    )
    
    
    (27,318
    )Cash and Cash Equivalents at Beginning of Period
    
    
    5
    
    
    
    29,929Cash and Cash Equivalents at End of Period
    
    $
    4
    
    
    $
    2,611Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $7,000 and $7,382 capitalized for 2008 and 2007, respectively)
    
    $
    31,941
    
    
    $
    33,510Income taxes (net of refunds)
    
    $
    29,866
    
    
    $
    16,681
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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 At June 30,
    
    
    At December 31,Assets
    
    2008
    
    
    2007(in thousands)Current Assets:Cash and cash equivalents
    
    $
    4
    
    
    $
    5Receivables Customer accounts receivable
    
    
    64,219
    
    
    
    19,100Other accounts receivable
    
    
    1,431
    
    
    
    1,025Affiliated companies
    
    
    104,327
    
    
    
    27,004Fossil fuel stock, at average cost
    
    
    17,937
    
    
    
    15,160Materials and supplies, at average cost
    
    
    20,333
    
    
    
    19,284Prepaid service agreements  current
    
    
    46,535
    
    
    
    14,233Prepaid income taxes
    
    
    20,993
    
    
    
    135Assets from risk management activities
    
    
    46,884
    
    
    
    16,079Other
    
    
    7,648
    
    
    
    6,931Total current assets
    
    
    330,311
    
    
    
    118,956Property, Plant, and Equipment:In service
    
    
    2,846,701
    
    
    
    2,534,507Less accumulated provision for depreciation
    
    
    321,890
    
    
    
    280,9622,524,811
    
    
    
    2,253,545Construction work in progress
    
    
    1,221
    
    
    
    283,084Total property, plant, and equipment
    
    
    2,526,032
    
    
    
    2,536,629Deferred Charges and Other Assets:Prepaid long-term service agreements
    
    
    67,538
    
    
    
    87,058Other Affiliated
    
    
    3,983
    
    
    
    4,138Other
    
    
    17,799
    
    
    
    21,993Total deferred charges and other assets
    
    
    89,320
    
    
    
    113,189Total Assets
    
    $
    2,945,663
    
    
    $
    2,768,774
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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 At June 30,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2008
    
   
    2007(in thousands)Current Liabilities:Notes payable
    
    $
    106,373
    
    
    $
    49,748Accounts payable Affiliated
    
    
    108,700
    
    
    
    48,475Other
    
    
    12,969
    
    
    
    20,322Accrued taxes Income taxes
    
    
    
    
    
    
    392Other
    
    
    11,071
    
    
    
    2,658Accrued interest
    
    
    30,143
    
    
    
    30,168Liabilities from risk management activities
    
    
    73,170
    
    
    
    12,639Billings in excess of cost on construction contract
    
    
    29,807
    
    
    
    36,384Other
    
    
    1,082
    
    
    
    9,523Total current liabilities
    
    
    373,315
    
    
    
    210,309Long-term Debt
    
    
    1,297,226
    
    
    
    1,297,099Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    165,831
    
    
    
    138,123Deferred capacity revenues  Affiliated
    
    
    8,223
    
    
    
    34,801Other Affiliated
    
    
    7,235
    
    
    
    7,754Other
    
    
    5,304
    
    
    
    2,801Total deferred credits and other liabilities
    
    
    186,593
    
    
    
    183,479Total Liabilities
    
    
    1,857,134
    
    
    
    1,690,887Common Stockholders Equity:Common stock, par value $.01 per share Authorized - 1,000,000 sharesOutstanding - 1,000 shares
    
    
    
    
    
    
    Paid-in capital
    
    
    860,601
    
    
    
    858,466Retained earnings
    
    
    269,596
    
    
    
    253,131Accumulated other comprehensive loss
    
    
    (41,668
    )
    
    
    (33,710
    )Total common stockholders equity
    
    
    1,088,529
    
    
    
    1,077,887Total Liabilities and Stockholders Equity
    
    $
    2,945,663
    
    
    $
    2,768,774
  115




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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 
 OVERVIEW
   RESULTS OF OPERATIONS
 Net Income
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(4.5)
    
    (11.1)
    
    $(7.5)
    
    (10.4)
   116




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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 Wholesale Revenues  Non-Affiliates
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$72.8
    
    74.3
    
    $72.2
    
    40.3
    Wholesale Revenues  Affiliates
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)N/M
    
    N/M
    
    $24.0
    
    9.5
     117




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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 Fuel and Purchased Power Expenses
 Second Quarter 2008
    
    Year-to-Date 2008vs.
    
    vs.Second Quarter 2007
    
    Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)Fuel
    
    $
    17.6
    
    
    
    29.9
    
    
    $
    26.2
    
    
    
    30.5Purchased power  non-affiliates
    
    
    23.1
    
    
    
    206.9
    
    
    
    28.7
    
    
    
    129.0Purchased power  affiliates
    
    
    28.1
    
    
    
    76.3
    
    
    
    47.5
    
    
    
    69.8Total fuel and purchased power expenses
    
    $
    68.8
    
    
    
    
    
    
    $
    102.4
   Other Operations and Maintenance Expenses
 Second Quarter 2008
    
    Year-to-Date 2008vs.
    
    vs.Second Quarter 2007
    
    Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)Other operations
    
    $
    0.7
    
    
    
    3.2
    
    
    $
    6.0
    
    
    
    14.1Maintenance
    
    
    5.2
    
    
    
    63.5
    
    
    
    8.8
    
    
    
    64.8Total other operations and maintenance
    
    $
    5.9
    
    
    
    
    
    
    $
    14.8
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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 Depreciation and Amortization
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$2.6
    
    14.4
    
    $4.2
    
    11.5
   Other Income (Expense), Net
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(1.2)
    
    N/M
    
    $11.5
    
    N/M
    Income Taxes
 Second Quarter 2008 vs. Second Quarter 2007
    
    Year-to-Date 2008 vs. Year-to-Date 2007(change in millions)
    
    (% change)
    
    (change in millions)
    
    (% change)$(1.2)
    
    (4.9)
    
    $(5.8)
    
    (12.4)
  FUTURE EARNINGS POTENTIAL
  119




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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
  Construction Projects
 Plant Franklin Unit 3
  Power Sales Agreements
  Environmental Matters
  Carbon Dioxide Litigation
  120




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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 Other Matters
   ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  Depreciation
   121




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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 New Accounting Standards
 Business Combinations
   FINANCIAL CONDITION AND LIQUIDITY
 Overview
   Capital Requirements and Contractual Obligations
  122




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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
   Sources of Capital
     Credit Rating Risk
   123




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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
  Market Price Risk
     Second Quarter
    
    Year-to-Date2008
    
    2008Changes
    
    ChangesFair Value(in millions)Contracts outstanding at the beginning of the period, assets
(liabilities), net
    
    $
    (18.6
    )
    
    $
    3.4Contracts realized or settled
    
    
    2.7
    
    
    
    (0.1
    )Current period changes(a)
    
    
    (13.8
    )
    
    
    (33.0
    )Contracts outstanding at the end of the period, assets (liabilities), net
    
    $
    (29.7
    )
    
    $
    (29.7
    )
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered into
during the period, if any.
  124




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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
  Amounts(in millions)Accumulated other comprehensive income
    
    $
    (21.6
    )Net income
    
    
    (8.1
    )Total fair value gain/(loss)
    
    $
    (29.7
    )
   June 30, 2008Fair Value MeasurementsTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in millions)Level 1
    
    $
    
    
    
    $
    
    
    
    $
    Level 2
    
    
    (29.7
    )
    
    
    (26.3
    )
    
    
    (3.4
    )Level 3
    
    
    
    
    
    
    
    
    
    
    Fair value of contracts outstanding at end of period
    
    $
    (29.7
    )
    
    $
    (26.3
    )
    
    $
    (3.4
    )
   Financing Activities
  125




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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
 SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 
 Registrant
    
    Applicable NotesSouthern Company
    
    A, B, C, D, E, F, G, H, I, KAlabama Power
    
    A, B, C, F, G, H, IGeorgia Power
    
    A, B, C, D, F, G, H, IGulf Power
    
    A, B, C, F, G, HMississippi Power
    
    A, B, C, D, F, G, HSouthern Power
    
    A, B, C, F, H, J
 126




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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
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 NOTES TO THE CONDENSED FINANCIAL STATEMENTS:
 (A)
    
    INTRODUCTIONThe condensed quarterly financial statements of each registrant included herein have been
prepared by such registrant, without audit, pursuant to the rules and regulations of the
SEC. The Condensed Balance Sheets as of December 31, 2007 have been derived from the
audited financial statements of each registrant. In the opinion of each registrants
management, the information regarding such registrant furnished herein reflects all
adjustments, which, except as otherwise disclosed, are of a normal recurring nature,
necessary to present fairly the results of operations for the periods ended June 30, 2008
and 2007. Certain information and footnote disclosures normally included in annual
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. Disclosures which would
substantially duplicate the disclosures in the Form 10-K and details which have not changed
significantly in amount or composition since the filing of the Form 10-K are generally
omitted from this Quarterly Report on Form 10-Q. Therefore, these Condensed Financial
Statements should be read in conjunction with the financial statements and the notes thereto
included in the Form 10-K. Due to the seasonal variations in the demand for energy,
operating results for the periods presented do not necessarily indicate operating results
for the entire year.Certain prior period amounts have been reclassified to conform to current period
presentation. Where applicable, each registrants statements of income for the three months
and six months ended June 30, 2007 were modified to report Interest expense to affiliate
trusts together with Interest expense, net of amounts capitalized. In addition, where
applicable, the financing activities section of each registrants statement of cash flows
for the six months ended June 30, 2007 was modified to report Long-term debt to affiliate
trust together with Long-term debt. Also, where applicable, each registrants balance
sheet at December 31, 2007 was modified within the current liabilities section to present a
separate line item for Other regulatory liabilities previously included in Other. Due
to materiality in the current period, the balance sheets of Southern Company, Alabama Power,
Georgia Power, and Mississippi Power were modified to present a separate line item for
Assets from risk management activities previously included in Other in the prior period.Southern Companys current liability section of the balance sheet at December 31, 2007 was
modified to reflect the amount of Unrecognized tax benefits as a separate line item
previously included within Accrued taxesIncome taxes. Also, Southern Companys
statement of cash flows for the prior period was modified within the operating activities
section to present separate line items for Derivative fair value adjustments and Deferred
revenues previously included in Other, net.Georgia Powers statement of cash flows for the prior period was modified within the
operating activities section to present separate line items for Deferred revenues and Hedge
settlements previously included in Other, net. Additionally, the line item Material and
supplies was combined into Other current assets.Gulf Power modified its statements of income for the three months and six months ended June
30, 2007 to report a separate line item for Allowance for equity funds used during construction
previously
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 included in Other income and expense, net. In conjunction with such modification, Gulf
Power modified its statement of cash flows within the operating activities section to
present a separate line item for Allowance for equity funds used during construction
previously included in Other, net. In addition, the operating activities section now
includes a separate line item to present Hedge settlements previously included in Other,
net in the prior period.Due to the relative insignificance of the amount reported at June 30, 2008, the balance
sheet at December 31, 2007 of Mississippi Power was modified to combine assets in Prepaid
income taxes into Other.Southern Power modified its statement of cash flows for the six months ended June 30, 2007
to present a separate line within the investing section for Payments pursuant to long-term
service agreements previously included in Property additions. In order to conform to the
current period presentation, Southern Power also modified its balance sheet for the prior
period to present separately the amount of Prepaid income taxes. The remaining amount of
assets in Prepaid expenses was collapsed into Other.These reclassifications had no effect on total assets, net income, cash flows, or earnings
per share.In the first quarter 2008, Gulf Power sold a turbine rotor assembly to Southern Power for
$9.4 million. In the second quarter 2008, Southern Power sold a turbine rotor assembly to
Alabama Power for $8.2 million. These affiliate transactions were made in accordance with
FERC and state PSC rules and guidelines and were eliminated in consolidation for Southern
Company.(B)
    
    CONTINGENCIES AND REGULATORY MATTERSSee Note 3 to the financial statements of the registrants in Item 8 of the Form 10-K for
information relating to various lawsuits, other contingencies, and regulatory matters.General Litigation MattersEach registrant is subject to certain claims and legal actions arising in the ordinary
course of business. In addition, each registrants business activities are subject to
extensive governmental regulation related to public health and the environment. Litigation
over environmental issues and claims of various types, including property damage, personal
injury, common law nuisance, and citizen enforcement of environmental requirements such as
opacity and air and water quality standards, has increased generally throughout the United
States. In particular, personal injury claims for damages caused by alleged exposure to
hazardous materials have become more frequent. The ultimate outcome of such pending or
potential litigation against the registrants and any of their subsidiaries cannot be
predicted at this time; however, for current proceedings not specifically reported herein or
in Note 3 to the financial statements of each registrant in Item 8 of the Form 10-K,
management does not anticipate that the liabilities, if any, arising from such current
proceedings would have a material adverse effect on such registrants financial statements.Mirant MattersMirant was an energy company with businesses that included independent power projects and
energy trading and risk management companies in the United States 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.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 Mirant BankruptcyIn July 2003, Mirant and certain of its affiliates filed voluntary petitions for relief
under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Northern
District of Texas. The Bankruptcy Court entered an order confirming Mirants plan of
reorganization in December 2005, and Mirant announced that this plan became effective in
January 2006. As part of the plan, Mirant transferred substantially all of its assets and
its restructured debt to a new corporation that adopted the name Mirant Corporation
(Reorganized Mirant).Southern Company has certain contingent liabilities associated with guarantees of
contractual commitments made by Mirants subsidiaries discussed under Guarantees in Note 7
to the financial statements of Southern Company in Item 8 of the Form 10-K and with various
lawsuits related to Mirant discussed below. Also, Southern Company has joint and several liability with Mirant
regarding the joint consolidated federal income tax returns through 2001, as discussed in
Note 5 to the financial statements of Southern Company in Item 8 of the Form 10-K. In
December 2004, as a result of concluding an IRS audit for the tax years 2000 and 2001,
Southern Company paid approximately $39 million in additional tax and interest related to
Mirant tax items and filed a claim in Mirants bankruptcy case for that amount. Through
December 2007, Southern Company received from the IRS approximately $36 million in refunds
related to Mirant. Southern Company believes it has a right to recoup the $39 million tax
payment owed by Mirant from such tax refunds. As a result, Southern Company intends to
retain the tax refunds and reduce its claim against Mirant for the payment of Mirant taxes
by the amount of such refunds. MC Asset Recovery, a special purpose subsidiary of
Reorganized Mirant, has objected to and sought to equitably subordinate the Southern Company
tax claim in its fraudulent transfer litigation against Southern Company. Southern Company
has reserved the approximately $3 million amount remaining with respect to its Mirant tax
claim.Under the terms of the separation agreements entered into in connection with the spin-off,
Mirant agreed to indemnify Southern Company for costs associated with these guarantees,
lawsuits, and additional IRS assessments. However, as a result of Mirants bankruptcy,
Southern Company sought reimbursement as an unsecured creditor in Mirants Chapter 11
proceeding. As part of a complaint filed against Southern Company in June 2005 and amended
thereafter, Mirant and The Official Committee of Unsecured Creditors of Mirant Corporation
(Unsecured Creditors Committee) objected to and sought equitable subordination of Southern
Companys claims, and Mirant moved to reject the separation agreements entered into in
connection with the spin-off. MC Asset Recovery has been substituted as plaintiff in the
complaint. If Southern Companys claims for indemnification with respect to these, or any
additional future payments, are allowed, then Mirants indemnity obligations to Southern
Company would constitute unsecured claims against Mirant entitled to stock in Reorganized
Mirant. The final outcome of this matter cannot now be determined.MC Asset Recovery LitigationIn June 2005, Mirant, as a debtor in possession, and the Unsecured Creditors Committee
filed a complaint against Southern Company in the U.S. Bankruptcy Court for the Northern
District of Texas, which was amended in July 2005, February 2006, May 2006, and March 2007.In December 2005, the Bankruptcy Court entered an order authorizing the transfer of this
proceeding, along with certain other actions, to MC Asset Recovery. Under that order,
Reorganized Mirant is obligated to fund up to $20 million in professional fees in connection
with the lawsuits, as well as certain additional amounts. Any net recoveries from these
lawsuits will be distributed to, and shared equally by, certain unsecured creditors and the
original equity holders. In January 2006, the U.S. District Court for the Northern District
of Texas substituted MC Asset Recovery as plaintiff.
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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 The complaint, as amended in March 2007, alleges that Southern Company caused Mirant to
engage in certain fraudulent transfers and to pay illegal dividends to Southern Company
prior to the spin-off. The alleged fraudulent transfers and illegal dividends include
without limitation: (1) certain dividends from Mirant to Southern Company in the aggregate
amount of $668 million, (2) the repayment of certain intercompany loans and accrued interest
in an aggregate amount of $1.035 billion, and (3) the dividend distribution of one share of
Series B Preferred Stock and its subsequent redemption in exchange for Mirants 80% interest
in a holding company that owned SE Finance Capital Corporation and Southern Company Capital
Funding, Inc., which transfer plaintiff asserts is valued at over $200 million. The
complaint also seeks to recharacterize certain advances from Southern Company
to Mirant for investments in energy facilities from debt to equity. The complaint further
alleges that Southern Company is liable to Mirants creditors for the full amount of
Mirants liability under an alter ego theory of recovery and that Southern Company breached
its fiduciary duties to Mirant and
its creditors, caused Mirant to breach its fiduciary duties to creditors, and aided and
abetted breaches of fiduciary duties by Mirants directors and officers. The complaint also
seeks recoveries under the theories of restitution and unjust enrichment. In addition, the
complaint alleges a claim under the Federal Debt Collection Procedure Act (FDCPA) to void
certain transfers from Mirant to Southern Company. MC Asset Recovery claims to have
standing to assert violations of the FDCPA and to recover property on behalf of the Mirant
debtors estates. On July 7, 2008, the court ruled that the FDCPA does not apply and that
Georgia law should apply instead. The complaint seeks monetary damages in excess of $2
billion plus interest, punitive damages, attorneys fees, and costs. Finally, the complaint
includes an objection to Southern Companys pending claims against Mirant in the Bankruptcy
Court (which relate to reimbursement under the separation agreements of payments such as
income taxes, interest, legal fees, and other guarantees described in Note 7 to the
financial statements of Southern Company in Item 8 of the Form 10-K) and seeks equitable
subordination of Southern Companys claims to the claims of all other creditors. Southern
Company served an answer to the complaint in April 2007.In January 2006, the U.S. District Court for the Northern District of Texas granted Southern
Companys motion to withdraw this action from the Bankruptcy Court and, in February 2006,
granted Southern Companys motion to transfer the case to the U.S. District Court for the
Northern District of Georgia. In May 2006, Southern Company filed a motion for summary
judgment seeking entry of judgment against the plaintiff as to all counts of the complaint.
In December 2006, the U.S. District Court for the Northern District of Georgia granted in
part and denied in part the motion. As a result, certain breach of fiduciary duty claims
alleged in earlier versions of the complaint are barred; all other claims in the complaint
may proceed. Southern Company believes there is no meritorious basis for the claims in the
complaint and is vigorously defending itself in this action. However, the final outcome of
this matter cannot now be determined.Mirant Securities LitigationIn 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 in
a class action lawsuit that several Mirant shareholders originally filed against Mirant and
certain Mirant officers in May 2002. Several other similar lawsuits filed subsequently were
consolidated into this litigation in the U.S. District Court for the Northern District of
Georgia. The amended complaint is based on allegations related to alleged improper energy
trading and marketing activities involving the California energy market, alleged false
statements and omissions in Mirants prospectus for its initial public offering and in
subsequent public statements by Mirant, and accounting-related issues previously disclosed
by Mirant. The lawsuit purports to include persons who acquired Mirant securities between
September 26, 2000 and September 5, 2002.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 In July 2003, the court dismissed all claims based on Mirants alleged improper energy
trading and marketing activities involving the California energy market. The other claims
do not allege any improper trading and marketing activity, accounting errors, or material misstatements or
omissions on the part of Southern Company but seek to impose liability on Southern Company
based on allegations that Southern Company was a control person as to Mirant prior to the
spin-off date. Southern Company filed an answer to the consolidated amended class action
complaint in September 2003. The plaintiffs have also filed a motion for class
certification.During Mirants Chapter 11 proceeding, the securities litigation was stayed, with the
exception of limited discovery. Since Mirants plan of reorganization has become effective,
the stay has been lifted. In March 2006, the plaintiffs filed a motion for reconsideration
requesting that the court vacate that portion of its July 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. In March
2007, the court granted plaintiffs motion for reconsideration, reinstated the California
energy market claims, and
granted in part and denied in part defendants motion to compel certain class certification
discovery. In March 2007, defendants filed renewed motions to dismiss the California energy
claims on grounds originally set forth in their 2003 motions to dismiss, but which were not
addressed by the court. In July 2007, certain defendants, including Southern Company, filed
motions for reconsideration of the courts denial of a motion seeking dismissal of certain
federal securities laws claims based upon, among other things, certain alleged errors
included in financial statements issued by Mirant. The ultimate outcome of this matter
cannot be determined at this time.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 MC Asset Recovery litigation.Under certain circumstances, Southern Company will be obligated under its by-laws to
indemnify the four current and/or former Southern Company officers who served as directors
of Mirant at the time of its initial public offering through the date of the spin-off and
who are also named as defendants in this lawsuit. The final outcome of this matter cannot
now be determined.Environmental MattersNew Source Review ActionsIn November 1999, the EPA brought a civil action in the U.S. District Court for the Northern
District of Georgia against certain Southern Company subsidiaries, including Alabama Power
and Georgia Power, alleging that these subsidiaries had violated the NSR provisions of the
Clean Air Act and related state laws at certain coal-fired generating facilities. Through
subsequent amendments and other legal procedures, the EPA filed a separate action in January
2001 against Alabama Power in the U.S. District Court for the Northern District of Alabama
after Alabama Power was dismissed from the original action. In these lawsuits, the EPA
alleged that NSR violations occurred at eight coal-fired generating facilities operated by
Alabama Power and Georgia Power, including one co-owned by Mississippi Power. The civil
actions request penalties and injunctive relief, including an order requiring the
installation of the best available control technology at the affected units. The EPA
concurrently issued notices of violations relating to Gulf Powers Plant Crist and a unit
partially owned by Gulf Power at Plant Scherer. In early 2000, the EPA filed a motion to
amend its complaint to add the allegations in the notice of violation and to add Gulf Power
as a defendant. However, in March 2001, the court denied the motion based on lack of
jurisdiction, and the EPA has not refiled. The action against Georgia Power has been
administratively closed since the spring of 2001, and the case has not been reopened.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 In June 2006, the U.S. District Court for the Northern District of Alabama entered a consent
decree between Alabama Power and the EPA, resolving the alleged NSR violations at Plant
Miller. The consent decree required Alabama Power to pay $100,000 to resolve the
governments claim for a civil penalty and to donate $4.9 million of sulfur dioxide emission
allowances to a nonprofit charitable organization and formalized specific emissions
reductions to be accomplished by Alabama Power, consistent with other Clean Air Act programs
that require emissions reductions. In August 2006, the district court in Alabama granted
Alabama Powers motion for summary judgment and entered final judgment in favor of Alabama
Power on the EPAs claims related to all of the remaining plants: Plants Barry, Gaston,
Gorgas, and Greene County.The plaintiffs appealed the district courts decision to the U.S. Court of Appeals for the
Eleventh Circuit, and the appeal was stayed by the Appeals Court pending the U.S. Supreme
Courts decision in a similar case against Duke Energy. The Supreme Court issued its
decision in the Duke Energy case in April 2007. In October 2007, the U.S. District Court
for the Northern District of Alabama issued an order in the Alabama Power case indicating a
willingness to re-evaluate its previous decision in light of the Supreme Courts Duke Energy opinion. In December 2007, the
Eleventh Circuit vacated the district courts decision in the Alabama Power case and
remanded the case back to the district court for consideration of the legal issues in light
of the Supreme Courts decision in the Duke Energy case. On July 24, 2008, the U.S.
District Court for the Northern District of Alabama granted partial summary judgment in
favor of Alabama Power regarding the proper legal test for determining whether projects are
routine maintenance, repair, and replacement and therefore are excluded from NSR permitting.
The decision does not resolve the case, the ultimate outcome of which cannot be determined
at this time.Southern Company and the traditional operating companies believe they complied with
applicable laws and the EPA regulations and interpretations in effect at the time the work
in question took place. The Clean Air Act authorizes maximum civil penalties of $25,000 to
$32,500 per day, per violation at each generating unit, depending on the date of the alleged
violation. An adverse outcome in either of these cases could require substantial capital
expenditures or affect the timing of currently budgeted capital expenditures that cannot be
determined at this time and could possibly require payment of substantial penalties. Such
expenditures could affect future results of operations, cash flows, and financial condition
if such costs are not recovered through regulated rates.Carbon Dioxide LitigationNew York CaseIn July 2004, attorneys general from eight states, each outside of Southern Companys
service territory, and the corporation counsel for New York City filed a complaint in the
U.S. District Court for the Southern District of New York against Southern Company and four
other electric power companies. A nearly identical complaint was filed by three
environmental groups in the same court. The complaints allege that the companies emissions
of carbon dioxide, a greenhouse gas, contribute to global warming, which the plaintiffs
assert is a public nuisance. Under common law public and private nuisance theories, the
plaintiffs seek a judicial order (1) holding each defendant jointly and severally liable for
creating, contributing to, and/or maintaining global warming and (2) requiring each of the
defendants to cap its emissions of carbon dioxide and then reduce those emissions by a
specified percentage each year for at least a decade. The plaintiffs have not, however,
requested that damages be awarded in connection with their claims. Southern Company
believes these claims are without merit and notes that the complaint cites no statutory or
regulatory basis for the claims. In September 2005, the U.S. District Court for the
Southern District of New York granted Southern Companys and the other defendants motions
to dismiss these cases. The plaintiffs filed an appeal to the U.S. Court of Appeals for the
Second Circuit in October 2005 and no decision has been issued. The ultimate outcome of
these matters cannot be determined at this time.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 Kivalina CaseOn February 26, 2008, the Native Village of Kivalina and the City of Kivalina filed a suit
in the U.S. District Court for the Northern District of California against several electric
utilities (including Southern Company), several oil companies, and a coal company. The
plaintiffs are the governing bodies of an Inupiat village in Alaska. The plaintiffs contend
that the village is being destroyed by erosion allegedly caused by global warming that the
plaintiffs attribute to emissions of greenhouse gases by the defendants. The plaintiffs
assert claims for public and private nuisance and contend that the defendants have acted in
concert and are therefore jointly and severally liable for the plaintiffs damages. The
suit seeks damages for lost property values and for the cost of relocating the village,
which cost is alleged to be $95 million to $400 million. On June 30, 2008, all defendants
filed motions to dismiss this case. Southern Company believes that these claims are without
merit and notes that the complaint cites no statutory or regulatory basis for the claims.
The ultimate outcome of this matter cannot be determined at this time.Environmental RemediationThe registrants must comply with environmental laws and regulations that cover the handling
and disposal of waste and releases of hazardous substances. Under these various laws and
regulations, the subsidiaries may also incur substantial costs to clean up properties. The
traditional operating companies have each received authority from their respective state
PSCs to recover approved environmental compliance costs through regulatory mechanisms.
Within limits approved by the state PSCs, these rates are adjusted annually or as necessary.Georgia Power has been designated or identified as a potentially responsible party at sites governed by
the Georgia Hazardous Site Response Act and/or by the federal Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA), including a large site in Brunswick,
Georgia on the CERCLA National Priorities List (NPL). The parties have completed the
removal of wastes from the Brunswick site as ordered by the EPA. Additional claims for
recovery of natural resource damages at this site or for the assessment and potential
cleanup of other sites on the Georgia Hazardous Sites Inventory and CERCLA NPL are
anticipated. The balance of Georgia Powers environmental remediation liability at June 30,
2008 was $11.1 million.Gulf Powers environmental remediation liability includes estimated costs of environmental
remediation projects of approximately $67.1 million as of June 30, 2008. These estimated
costs relate to site closure criteria by the Florida Department of Environmental Protection
(FDEP) for impacts to groundwater from herbicide applications at Gulf Power substations.
The schedule for completion of the remediation projects will be subject to FDEP approval.
The projects have been approved by the Florida PSC for recovery through Gulf Powers
environmental cost recovery clause; therefore, there was no impact on net income as a result
of these estimates.In 2003, the Texas Commission on Environmental Quality (TCEQ) designated Mississippi Power
as a potentially responsible party at a site in Texas. The site was owned by an electric
transformer company that handled Mississippi Powers transformers as well as those of many
other entities. The site owner is now in bankruptcy and the State of Texas has entered into
an agreement with Mississippi Power and several other utilities to investigate and remediate
the site. Amounts expensed during 2005, 2006, and 2007 related to this work were not
material. Hundreds of entities have received notices from the TCEQ requesting their
participation in the anticipated site remediation. The final impact of this matter on
Mississippi Power will depend upon further environmental assessment and the ultimate number
of potentially responsible parties. The remediation expenses incurred by Mississippi Power
are expected to be recovered through the ECO Plan. See Note 3 to the financial statements
of Mississippi Power under Retail Regulatory Matters  Environmental Compliance Overview
Plan in Item 8 of the Form 10-K for additional information.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 The final outcome of these matters cannot now be determined. However, based on the
currently known conditions at these sites and the nature and extent of activities relating
to these sites, Southern Company, Georgia Power, Gulf Power, and Mississippi Power do not
believe that additional liabilities, if any, at these sites would be material to their
respective financial statements.FERC MattersMarket-Based Rate AuthorityEach of the traditional operating companies and Southern Power has authorization from the
FERC to sell power to non-affiliates, including short-term opportunity sales, at
market-based prices. Specific FERC approval must be obtained with respect to a market-based
contract with an affiliate.In December 2004, the FERC initiated a proceeding to assess Southern Companys generation
dominance within its retail service territory. The ability to charge market-based rates in
other markets is not an issue in the proceeding. Any new market-based rate sales by any
subsidiary of Southern Company in Southern Companys retail service territory entered into
during a 15-month refund period that ended in May 2006 could be subject to refund to a
cost-based rate level.In November 2007, the presiding administrative law judge issued an initial decision
regarding the methodology to be used in the generation dominance tests. The proceedings are
ongoing. The ultimate outcome of this generation dominance proceeding cannot now be
determined, but an adverse decision by the FERC in a final order could require the
traditional operating companies and Southern Power 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 and could also result in total refunds of up to $19.7 million,
plus interest. The potential refunds include $3.9 million for Alabama Power, $5.8 million
for Georgia Power, $0.8 million for Gulf Power, $8.4 million for Mississippi Power, and $0.7
million for Southern Power, in each case plus interest. Southern Company and its
subsidiaries believe that there is no meritorious basis for this proceeding and are
vigorously defending themselves in this matter.In June 2007, the FERC issued its final rule in Order No. 697 regarding market-based rate
authority. The FERC generally retained its current market-based rate standards. Responding
to a number of requests for rehearing, the FERC issued Order No. 697-A on April 21, 2008.
This latest order largely affirmed its prior revision and codification of the regulations
governing market-based rates for public utilities. The impact of these orders and their
effect on the generation dominance proceeding cannot now be determined.Intercompany Interchange ContractSouthern Companys generation fleet in its retail service territory is operated under the
IIC as approved by the FERC. In May 2005, the FERC initiated a new proceeding to examine
(1) the provisions of the IIC among the traditional operating companies, Southern Power, and
SCS, as agent, under the terms of which the Power Pool is operated, (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 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.In October 2006, the FERC issued an order accepting a settlement resolving the proceeding
subject to Southern Companys agreement to accept certain modifications to the settlements
terms and Southern Company notified the FERC that it accepted the modifications. The
modifications largely
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 involve functional separation and information restrictions related to marketing activities
conducted on behalf of Southern Power. Southern Company filed with the FERC in November
2006 a compliance plan in connection with the order. In April 2007, the FERC approved, with
certain modifications, the plan submitted by Southern Company. Implementation of the plan
is not expected to have a material impact on the financial statements of Southern Company or
the traditional operating companies. Southern Powers cost of implementing the compliance
plan, including the modifications, is expected to be approximately $8 million annually. In
November 2007, Southern Company notified the FERC that the plan had been implemented and the
FERC division of audits subsequently began an audit pertaining to compliance implementation
and related matters, which is ongoing.Generation Interconnection AgreementsIn November 2004, generator company subsidiaries of Tenaska, Inc. (Tenaska), as
counterparties to three previously executed interconnection agreements with subsidiaries of
Southern Company, filed complaints at the FERC requesting that the FERC modify the
agreements and that those Southern Company subsidiaries refund a total of $19 million
previously paid for interconnection facilities of which $11 million would be refunded by
Alabama Power and $8 million by Georgia Power. No other similar complaints are pending with
the FERC.In January 2007, the FERC issued an order granting Tenaskas requested relief. Although the
FERCs order required the modification of Tenaskas interconnection agreements, under the
provisions of the order, Southern Company determined that no refund was payable to Tenaska.
Southern Company requested rehearing asserting that the FERC retroactively applied a new
principle to existing interconnection agreements. Tenaska requested rehearing of FERCs
methodology for determining the amount of refunds. The requested rehearings were denied,
and Southern Company and Tenaska have appealed the orders to the U.S. Circuit Court for the
District of Columbia. The final outcome of this matter cannot now be determined.Right of Way LitigationSouthern Company and certain of its subsidiaries, including Gulf Power, Mississippi Power,
and Southern Telecom, Inc. (a subsidiary of SouthernLINC Wireless), have been named as
defendants in numerous lawsuits brought by landowners since 2001. The plaintiffs lawsuits
claim that the defendants may not use, or sublease to third parties, some or all of the
fiber optic communications lines on the rights of way that cross the plaintiffs properties
and that such actions exceed the easements or other property rights held by the defendants.
The plaintiffs assert claims for, among other things, trespass and unjust enrichment and
seek compensatory and punitive damages and injunctive relief. Management of Southern
Company and its subsidiaries believe that they have complied with applicable laws and that
the plaintiffs claims are without merit.In November 2003, the Second Circuit Court in Gadsden County, Florida, ruled in favor of the
plaintiffs on their motion for partial summary judgment concerning liability in one such
lawsuit brought by landowners regarding the installation and use of fiber optic cable over
Gulf Power rights of way located on the landowners property. Subsequently, the plaintiffs
sought to amend their complaint and asked the court to enter a final declaratory judgment
and to enter an order enjoining Gulf Power from allowing expanded general telecommunications
use of the fiber optic cables that are the subject of this litigation. In January 2005, the
trial court granted in part the plaintiffs motion to amend their complaint and denied the
requested declaratory and injunctive relief. In November 2005, the trial court ruled in
favor of the plaintiffs and against Gulf Power on their respective motions for partial
summary judgment. In that same order, the trial court also denied Gulf Powers motion to
dismiss certain claims. Gulf Power filed an appeal to the Florida First District Court of
Appeals in December 2005. In October 2006, the Florida First District Court of Appeals issued
an order dismissing Gulf Powers December 2005 appeal on the basis that the trial courts
order was a
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 non-final order and therefore not subject to review on appeal at that time. The case was
returned to the trial court for further proceedings. The parties reached agreement on a
proposed settlement plan that was subject to approval by the trial court. In November 2007,
the trial court granted preliminary approval and set forth the requirements for the trial
court to make its final determination on the proposed settlement. At a hearing on April 30,
2008, the trial court granted final approval of the settlement agreement. The time period
for filing a timely appeal of that order has since expired.To date, Mississippi Power has entered into agreements with the plaintiffs in approximately
90% of the actions pending against Mississippi Power to clarify its easement rights in the
State of Mississippi. These agreements have been approved by the Circuit Courts of Harrison
County and Jasper County, Mississippi (First Judicial Circuit), and dismissals of the
related cases are in progress. These agreements have not resulted in any material effects
on Southern Companys or Mississippi Powers financial statements.In addition, in late 2001, certain subsidiaries of Southern Company, including Alabama
Power, Georgia Power, Gulf Power, Mississippi Power, and Southern Telecom, Inc. (a
subsidiary of SouthernLINC Wireless), were named as defendants in a lawsuit brought by a
telecommunications company that uses certain of the defendants rights of way. This lawsuit
alleges, among other things, that the defendants are contractually obligated to indemnify,
defend, and hold harmless the telecommunications company from any liability that may be
assessed against it in pending and future right of way litigation. The defendants believe
that the plaintiffs claims are without merit. In the fall of 2004, the trial court stayed
the case until resolution of the underlying landowner litigation discussed above. In
January 2005, the Georgia Court of Appeals dismissed the telecommunications companys appeal
of the trial courts order for lack of jurisdiction. An adverse outcome in this matter,
combined with an adverse outcome against the telecommunications company in one or more of
the right of way lawsuits, could result in substantial judgments; however, the final outcome
of these matters cannot now be determined.Income Tax MattersLeveraged Lease TransactionsSee Note 1 to the financial statements of Southern Company under Income and Other Taxes,
Note 3 to the financial statements of Southern Company under Income Tax Matters, and Note
5 to the financial statements of Southern Company under Unrecognized Tax Benefits 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 audits of Southern Companys 2000 through 2003 tax returns. In the
third quarter 2006, Southern Company paid the full amount of the disputed tax and the
applicable interest on the SILO issue for tax years 2000  2001 and filed a claim for refund
which has now been denied by the IRS. The disputed tax amount is $79 million and the related
interest is approximately $24 million for these tax years. This payment, and the subsequent
IRS disallowance of the refund claim, closed the issue with the IRS and Southern Company has
initiated litigation in the U.S. District Court for the Northern District of Georgia for a
complete refund of tax and interest paid for the 2000  2001 tax years. The IRS also
challenged the SILO deductions for the tax years 2002 and 2003. The estimated amount of
disputed tax and interest for these tax years was approximately $83 million and $15 million,
respectively. The tax and interest for these tax years was paid to the IRS in the fourth
quarter 2006. Southern Company has accounted for both payments in 2006 as deposits. For
tax years 2000 through 2007, Southern Company has claimed approximately $330 million in tax
benefits related to these SILO transactions challenged by the IRS. These tax benefits
relate to timing differences and do not impact total net income over the life of the
transactions. Southern Company believes these transactions are valid leases for U.S. tax
purposes and the related deductions are allowable.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 During the second quarter 2008, decisions in favor of the IRS were reached in several court
cases involving other tax payers with similar leveraged lease investments. Pursuant to the
application of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN
48) and FASB Staff Position No. 13-2, Accounting for a Change in the Timing of Cash Flows
Relating to Income Taxes Generated by a Leveraged Lease Transaction (FSP 13-2), management
is required to assess, on a periodic basis, the likely outcome of the uncertain tax
positions related to the SILO transactions. Based on these accounting standards and
managements review of the recent court decisions, Southern Company recorded an after tax
charge of approximately $67 million in the second quarter 2008. Of the total, approximately
$16 million is associated with the application of FIN 48 and represents additional interest
expense related to tax returns for years 2000 through 2007 and approximately $51 million
represents non-cash charges related to the application of FSP 13-2. The charges related to
FSP 13-2 reflect the reallocation of lease income and will be recognized as income over the
remaining term of the affected leases. The tax benefit associated with the lease
transactions represents timing differences that do not impact total net income over the life
of the transactions. In accordance with the requirements of FIN 48 and FSP 13-2 Southern
Company will continue to evaluate the SILO transactions and the projected timing of income
tax cash flows in light of Southern Companys pending litigation and other recent court
decisions involving lease-in-lease-out (LILO) and SILO transactions. In addition, the U.S.
Senate is currently considering legislation that would disallow tax benefits after December
31, 2007 for SILO losses and other international leveraged lease transactions (such as LILO
transactions). The ultimate impact on Southern Companys net income and cash flow will be
dependent on the outcome of its pending litigation, other court decisions, and proposed
legislation and cannot be determined at this time.Georgia State Income Tax CreditsGeorgia Powers 2005 through 2008 income tax filings for the State of Georgia include state
income tax credits for increased activity through Georgia ports. Georgia Power has also
filed similar claims for the years 2002 through 2004. The Georgia Department of Revenue has
not responded to these claims. On July 24, 2007, Georgia Power filed a complaint in the
Superior Court of Fulton County to recover the credits claimed for the years 2002 through
2004. An unrecognized tax benefit has been recorded related to these credits. If Georgia
Power prevails, these claims could have a significant, and possibly material, positive
effect on Southern Companys and Georgia Powers net income. If Georgia Power is not
successful, payment of the related state tax could have a significant, and possibly
material, negative effect on Southern Companys and Georgia Powers cash flow. The ultimate
outcome of this matter cannot now be determined.IRC Section 199 Domestic Production DeductionThe American Jobs Creation Act of 2004 created a tax deduction for a portion of income
attributable to U.S. production activities as defined in the IRC Section 199 (production
activities deduction). The deduction is equal to a stated percentage of qualified
production activities net income. The percentage is phased in over the years 2005 through
2010 with a 3% rate applicable to the years 2005 and 2006, a 6% rate applicable for years
2007 through 2009, and a 9% rate applicable for all years after 2009. The IRS has not
clearly defined a methodology for calculating this deduction; therefore, an unrecognized tax
benefit has been recorded related to this deduction.(C)
    
    FAIR VALUE MEASUREMENTOn January 1, 2008, the registrants adopted FASB Statement No. 159, Fair Value Option
for Financial Assets and Financial Liabilities  Including an Amendment of FASB
Statement No. 115 (SFAS No. 159). This standard permits an entity to choose to measure
many financial instruments and certain other items at fair value. Southern Company,
Alabama Power, and Georgia Power have elected the fair value option only for investment
securities held in nuclear decommissioning trust funds (Funds). See Note 1 to the
financial statements of Southern
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 Company, Alabama Power, and Georgia Power under Nuclear Decommissioning in Item 8 of
the Form 10-K for information on these trusts funds.Management elected the fair value option for the Funds because management believes that
fair value best represents the nature of the Funds. Management has delegated day-to-day
management of the investments in the Funds to unrelated third party managers with
oversight by Southern Company, Alabama Power, and Georgia Power management. The managers
of the Funds are authorized, within broad limits, to actively buy and sell securities at
their own discretion in order to maximize the investment return on the Funds
investments.The adoption of SFAS No. 159 had no impact on the results of operations, cash flows, or
financial condition of Southern Company, Alabama Power, and Georgia Power as all gains,
losses, and other-than-temporary impairments, whether realized or unrealized, continue to
be recorded through a regulatory liability. For the three months and six months ended
June 30, 2008, the reduction in fair value of the Funds, which includes reinvested
interest and dividends, was $3.5 million and $36.7 million, respectively, for Alabama
Power, and was $3.5 million and $43.4 million, respectively, for Georgia Power, and which
totals $7.0 million and $80.1 million, respectively, for Southern Company.Also on January 1, 2008, the registrants adopted SFAS No. 157 which defines fair value,
establishes a framework for measuring fair value, and requires additional disclosures
about fair value measurements. The criterion that is set forth in this standard is
applicable to fair value measurement where it is permitted or required under other
accounting pronouncements.SFAS No. 157 defines fair value as the exit price, which is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value measurement is based
on inputs of observable and unobservable market data that a market participant would use
in pricing the asset or liability. The use of observable inputs is maximized where
available and the use of unobservable inputs is minimized for fair value measurement. As
a means to illustrate the inputs used, SFAS No. 157 establishes a three-tier fair value
hierarchy that prioritizes inputs to valuation techniques used for fair value
measurement.
 
    
    Level 1 consists of observable market data in an active market for identical
assets or liabilities.
    
    Level 2 consists of observable market data, other than that included in Level
1, that is either directly or indirectly observable.
    
    Level 3 consists of unobservable market data. The input may reflect the
assumptions of the registrant of what a market participant would use in pricing
an asset or liability. If there is little available market data, then the
registrants own assumptions are the best available information.
 In the case of multiple inputs being used in a fair value measurement, the lowest level
input that is significant to the fair value measurement represents the level in the fair
value hierarchy in which the fair value measurement is reported.The adoption of SFAS No. 157 has not resulted in any significant changes to the
methodologies used for fair value measurement. Primarily all the changes in the fair value
of assets and liabilities are recorded in other comprehensive income or regulatory assets
and liabilities, and thus the impact on earnings is limited to derivatives that do not
qualify for hedge accounting. See Note 1 to the financial statements of Southern Company,
Alabama Power, and Georgia Power under Nuclear Decommissioning in Item 8 of the Form 10-K
for additional information and Note 6 to the financial statements of the registrants in Item
8 of the Form 10-K for information on financial instruments.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
  As of June 30, 2008:
    
    Level 1
    
    Level 2
    
    Level 3
    
    Total(in millions)Southern CompanyAssets:Energy-related derivatives
    
    $
    
    
    
    $
    400.6
    
    
    $
    
    
    
    $
    400.6Interest rate derivatives
    
    
    
    
    
    
    7.3
    
    
    
    
    
    
    
    7.3Nuclear decommissioning trusts
    
    
    683.9
    
    
    
    368.4
    
    
    
    
    
    
    
    1,052.3
    (a)Other
    
    
    1.0
    
    
    
    41.9
    
    
    
    44.3
    
    
    
    87.2Total fair value
    
    $
    684.9
    
    
    $
    818.2
    
    
    $
    44.3
    
    
    $
    1,547.4Liabilities:Energy-related derivatives
    
    $
    
    
    
    $
    87.4
    
    
    $
    
    
    
    $
    87.4Interest rate derivatives
    
    
    
    
    
    
    7.5
    
    
    
    
    
    
    
    7.5Total fair value
    
    $
    
    
    
    $
    94.9
    
    
    $
    
    
    
    $
    94.9Alabama PowerAssets:Energy-related derivatives
    
    $
    
    
    
    $
    107.3
    
    
    $
    
    
    
    $
    107.3Interest rate derivatives
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    0.7Nuclear decommissioning trusts
    
    
    315.4
    
    
    
    187.9
    
    
    
    
    
    
    
    503.3
    (a)Total fair value
    
    $
    315.4
    
    
    $
    295.9
    
    
    $
    
    
    
    $
    611.3Liabilities:Energy-related derivatives
    
    $
    
    
    
    $
    2.4
    
    
    $
    
    
    
    $
    2.4Interest rate derivatives
    
    
    
    
    
    
    3.8
    
    
    
    
    
    
    
    3.8Total fair value
    
    $
    
    
    
    $
    6.2
    
    
    $
    
    
    
    $
    6.2Georgia PowerAssets:Energy-related derivatives
    
    $
    
    
    
    $
    171.8
    
    
    $
    
    
    
    $
    171.8Interest rate derivatives
    
    
    
    
    
    
    6.6
    
    
    
    
    
    
    
    6.6Nuclear decommissioning trusts
    
    
    368.5
    
    
    
    180.5
    
    
    
    
    
    
    
    549.0
    (a)Total fair value
    
    $
    368.5
    
    
    $
    358.9
    
    
    $
    
    
    
    $
    727.4Liabilities:Energy-related derivatives
    
    $
    
    
    
    $
    3.3
    
    
    $
    
    
    
    $
    3.3Interest rate derivatives
    
    
    
    
    
    
    3.7
    
    
    
    
    
    
    
    3.7Total fair value
    
    $
    
    
    
    $
    7.0
    
    
    $
    
    
    
    $
    7.0Gulf PowerAssets:Energy-related derivatives
total fair value
    
    $
    
    
    
    $
    26.1
    
    
    $
    
    
    
    $
    26.1Liabilities:Energy-related derivatives
total fair value
    
    $
    
    
    
    $
    0.7
    
    
    $
    
    
    
    $
    0.7Mississippi PowerAssets:Energy-related derivatives
total fair value
    
    $
    
    
    
    $
    48.5
    
    
    $
    
    
    
    $
    48.5Liabilities:Energy-related derivatives
total fair value
    
    $
    
    
    
    $
    4.4
    
    
    $
    
    
    
    $
    4.4Southern PowerAssets:Energy-related derivatives
total fair value
    
    $
    
    
    
    $
    46.9
    
    
    $
    
    
    
    $
    46.9Liabilities:Energy-related derivatives
total fair value
    
    $
    
    
    
    $
    76.6
    
    
    $
    
    
    
    $
    76.6
 (a)
    
    Excludes receivables related to investment income and pending investment sales, and
payables related to pending investment purchases.
 139




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
   Southern CompanyThree Months Ended
    
    Six Months EndedOther
    
    June 30, 2008
    
    June 30, 2008(in millions)Beginning balance
    
    $
    44.9
    
    
    $
    50.4Total gains or losses (realized/unrealized)Included in other comprehensive income
    
    
    (0.6
    )
    
    
    (6.1
    )Purchases, issuances and settlements
    
    
    
    
    
    
    Transfers in and/or out of Level 3
    
    
    
    
    
    
    Ending balance as of June 30, 2008
    
    $
    44.3
    
    
    $
    44.3
 (D)
    
    CONSTRUCTION PROJECTSConstruction ProgramThe revised estimated total construction program for Southern Company is $4.4 billion in
2008, $5.2 billion in 2009, and $4.8 billion in 2010 and for Georgia Power is $2.0 billion
in 2008, $2.6 billion in 2009, and $2.5 billion in 2010. The revised estimates are a result
of Georgia Powers entering into an engineering, procurement, and construction agreement to
design, engineer, procure, construct, and test two AP 1000 nuclear units with electric
generating capacity of approximately 1,100 MWs each and related facilities, structures, and
improvements at Plant Vogtle. Actual construction costs may vary from these estimates
because of changes in such factors as: business conditions; environmental statutes and
regulations; nuclear plant regulation; FERC rules and regulations; load projections; the
cost and efficiency of construction labor, equipment, and materials; and the cost of
capital. In addition, there can be no assurance that costs related to capital expenditures
will be fully recovered. See Note 7 to the financial statements of Southern Company and
Georgia Power under COMMITMENTS  Construction Program in Item 8 of the Form 10-K for
additional information.Integrated Coal Gasification Combined CycleAs part of the evaluation and screening of alternatives to meet its future generation needs,
Mississippi Power is considering the construction of an advanced coal gasification facility
to be located in Kemper County, Mississippi, that would use locally mined lignite coal. The
plant would use an air-blown IGCC technology that generates power from low-rank coals and
coals with high moisture or high ash content. These coals, which include lignite, make up
approximately half the proven United States and worldwide coal reserves. The feasibility
assessment of the project is currently underway. Mississippi Power filed an application in
June 2006 with the DOE for certain tax credits available to projects using clean coal
technologies under the Energy Policy Act of 2005. The DOE subsequently certified the
project and in November 2006, the IRS allocated IRC Section 48A tax credits of $133 million
to Mississippi Power. The utilization of these credits is dependent upon meeting the
 140




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 certification requirements for the project, including an in-service date no later than
November 2013. On February 14, 2008, Mississippi Power also requested that the DOE transfer
the remaining funds previously granted to another Southern Company project that would have
been located in Orlando, Florida. The Orlando project was cancelled in 2007.In December 2006, the Mississippi PSC approved Mississippi Powers request for accounting
treatment of the costs associated with Mississippi Powers generation resource planning,
evaluation, and screening activities. The Mississippi PSC gave Mississippi Power the
authority to defer such costs as a regulatory asset. In December 2007, Mississippi Power
reported to the Mississippi PSC an updated estimate and received an order directing
Mississippi Power to continue charging all costs associated with the generation capacity
assessment to the regulatory asset. At June 30, 2008, Mississippi Power had spent $31.1
million, of which $2.7 million related to land purchases capitalized. Of the remaining
$28.4 million, the retail portion of $20 million was deferred in other regulatory assets and
the wholesale portion of $8.4 million was expensed. Of this $8.4 million, $4.3 million and
$4.1 million are related to expenses through June 30, 2008 and 2007, respectively. The
retail portion of these costs will be charged to and remain as a regulatory asset until the
Mississippi PSC determines the prudence and ultimate recovery of such costs, which decision
is expected by January 2009. The balance of such regulatory asset is included in
Mississippi Powers rate base for retail ratemaking purposes. Approval by various
regulatory agencies, including the Mississippi PSC, will also be required if the project
proceeds.The final outcome of this matter cannot now be determined.(E)
    
    COMMON STOCKFor 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
    
    Three Months
    
    Six Months
    
    Six MonthsEnded
    
    Ended
    
    Ended
    
    EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007As reported shares
    
    
    769,122
    
    
    
    755,137
    
    
    
    767,636
    
    
    
    752,698Effect of options
    
    
    4,018
    
    
    
    4,709
    
    
    
    4,091
    
    
    
    4,898Diluted shares
    
    
    773,140
    
    
    
    759,846
    
    
    
    771,727
    
    
    
    757,596
 (F)
    
    FINANCIAL INSTRUMENTSSee Note 6 to the financial statements of the registrants under Financial Instruments in
Item 8 of the Form 10-K. At June 30, 2008, the fair value of energy-related derivative
contracts was reflected in the financial statements as follows (in millions):
 Southern
    
    Alabama
    
    Georgia
    
    Gulf
    
    Mississippi
    
    SouthernCompany
    
    Power
    
    Power
    
    Power
    
    Power
    
    PowerRegulatory (assets)/liabilities, net
    
    $
    343.6
    
    
    $
    104.9
    
    
    $
    168.5
    
    
    $
    25.4
    
    
    $
    44.8
    
    
    $
    Accumulated other comprehensive income (loss)
    
    
    (23.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.3
    )
    
    
    (21.6
    )Net income (loss)
    
    
    (6.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6
    
    
    
    (8.1
    )Total fair value
    
    $
    313.2
    
    
    $
    104.9
    
    
    $
    168.5
    
    
    $
    25.4
    
    
    $
    44.1
    
    
    $
    (29.7
    )
 141




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 For the three months and six months ended June 30, 2008, the unrealized gain/(loss)
recognized in income for energy-related derivative contracts that are not hedges was $7.6
million and $(6.6) million, respectively, for Southern Company, was $1.5 million and $1.8
million, respectively, for Mississippi Power, was $5.9 million and $(8.5) million,
respectively, for Southern Power, and was immaterial for all other registrants. For the
three months and six months ended June 30, 2007, the unrealized gain recognized in income
was $1.7 million and $1.5 million, respectively, for Southern Company, was $1.5 million and
$1.1 million, respectively, for Southern Power, and was immaterial for all other
registrants.The amounts reclassified from other comprehensive income to revenue and fuel expense for the
three months and six months ended June 30, 2008 and 2007 were immaterial for each
registrant. Additionally, no material ineffectiveness has been recorded in net income for
the three months and six months ended June 30, 2008 and 2007. The amounts expected to be
reclassified from other comprehensive income to revenue for the next twelve-month period to
June 30, 2009 are losses of $25.1 million for Southern Company, $3.4 million for Mississippi
Power, $21.7 million for Southern Power, and are immaterial for all other registrants. All
other expected reclassifications to income are immaterial for each registrant.During 2007, Southern Company had derivatives in place to reduce its exposure to a phase-out
of certain income tax credits related to synthetic fuel production in 2007. In accordance
with Section 45K of the IRC, these tax credits were subject to limitation as the annual
average price of oil increases. These derivatives settled on January 1, 2008 and thus there
was no income statement impact in the six months ended June 30, 2008. For the three months
and six months ended June 30, 2007, the fair value loss recognized in income to mark the
derivatives to market was $6.5 million and $0.2 million, respectively.At June 30, 2008, Southern Company had a total of $1.6 billion notional amount of interest
rate derivatives outstanding with net fair value losses of approximately $0.2 million as
follows:Cash Flow Hedges
 Fair ValueWeighted
    
    Hedge
    
    Gain(Loss)Notional
    
    Variable Rate
    
    Average
    
    Maturity
    
    June 30,Amount
    
    Received
    
    Fixed Rate Paid
    
    Date
    
    2008(in millions)
    
    
    
    
    
    
    
    
    
    
    
    
    
    (in millions)Alabama Power*
    
    $
    576
    
    
    SIFMA Index
    
    
    2.69
    %
    
    February 2010
    
    $
    (3.1
    )Georgia Power*
    
    
    301
    
    
    SIFMA Index
    
    
    2.22
    %
    
    December 2009
    
    
    0.7Georgia Power
    
    
    75
    
    
    1-month LIBOR
    
    
    2.70
    %
    
    September 2008
    
    
    Georgia Power
    
    
    75
    
    
    1-month LIBOR
    
    
    2.61
    %
    
    November 2008
    
    
    0.1Georgia Power
    
    
    150
    
    
    3-month LIBOR
    
    
    2.63
    %
    
    February 2009
    
    
    0.5Georgia Power
    
    
    100
    
    
    3-month LIBOR
    
    
    5.28
    %
    
    February 2019
    
    
    (3.6
    )Georgia Power
    
    
    300
    
    
    1-month LIBOR
    
    
    2.43
    %
    
    April 2010
    
    
    5.2
 
 *
    
    Hedged using the Securities Industry and Financial Markets Association
Municipal Swap Index (SIFMA) (formerly the Bond Market Association/PSA
Municipal Swap Index)
 The amounts reclassified from other comprehensive income to interest expense for the three
months and six months ended June 30, 2008 were losses of $6.2 million and $10.8 million,
respectively, for Southern Company and $3.5 million and $7.0 million, respectively, for
Southern Power, and were immaterial for all other registrants. For the three months and six
months ended June 30, 2007, the losses reclassified to interest expense were $3.8 million
and $7.3 million, respectively, for Southern Company and $3.3 million and $6.6 million,
respectively, for Southern Power, and were immaterial
 142




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 for all other registrants. No material ineffectiveness has been recorded in net income for
any of the periods reported.For the next twelve-month period ending June 30, 2009, the following table reflects the
estimated pre-tax gains/(losses) that will be reclassified from other comprehensive income
to interest expense (in millions):
 Southern Company
    
    $
    (15.6
    )Alabama Power
    
    
    (2.8
    )Georgia Power
    
    
    (1.9
    )Gulf Power
    
    
    (1.1
    )Southern Power
    
    
    (9.9
    )
 (G)
    
    RETIREMENT BENEFITSSouthern Company accounts for pension and other postretirement obligations in accordance
with SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans, which is an amendment of FASB Statements No. 87, 88, 106, and 132(R)
(SFAS No. 158). SFAS No. 158 requires recognition of an asset for a plans over funded
status or a liability for a plans under funded status in Southern Companys statement of
financial position. In addition, the measurement date (the date at which plan assets and the
benefit obligation are measured) is required to be the same as Southern Companys fiscal
year end. As permitted, Southern Company adopted the measurement date provisions of SFAS
No. 158 effective January 1, 2008. Southern Companys pension and postretirement plans
previously used a September 30 measurement date. All plans are now measured as of December
31, consistent with Southern Companys fiscal year end. The adoption of the measurement
date provisions of SFAS No. 158 increased long-term liabilities by approximately $28 million
and prepaid pension costs by approximately $16 million. There was no effect on Southern
Companys results of operations or cash flows.See Note 2 to the financial statements of Southern Company, Alabama Power, Georgia Power,
Gulf Power, and Mississippi Power in Item 8 of the Form 10-K. Components of the pension
plans and postretirement plans net periodic costs for the three- and six-month periods
ended June 30, 2008 and 2007 are as follows (in millions):
 Southern
    
    Alabama
    
    Georgia
    
    Gulf
    
    MississippiPENSION PLANS
    
    Company
    
    Power
    
    Power
    
    Power
    
    PowerThree Months Ended
June 30, 2008Service cost
    
    $
    37
    
    
    $
    8
    
    
    $
    13
    
    
    $
    1
    
    
    $
    1Interest cost
    
    
    87
    
    
    
    22
    
    
    
    34
    
    
    
    4
    
    
    
    4Expected return on plan assets
    
    
    (132
    )
    
    
    (40
    )
    
    
    (53
    )
    
    
    (6
    )
    
    
    (5
    )Net amortization
    
    
    11
    
    
    
    3
    
    
    
    3
    
    
    
    1
    
    
    
    1Net cost (income)
    
    $
    3
    
    
    $
    (7
    )
    
    $
    (3
    )
    
    $
    
    
    
    $
    1Six Months Ended
June 30, 2008Service cost
    
    $
    73
    
    
    $
    17
    
    
    $
    25
    
    
    $
    3
    
    
    $
    3Interest cost
    
    
    174
    
    
    
    44
    
    
    
    67
    
    
    
    8
    
    
    
    8Expected return on plan assets
    
    
    (263
    )
    
    
    (80
    )
    
    
    (106
    )
    
    
    (12
    )
    
    
    (10
    )Net amortization
    
    
    23
    
    
    
    6
    
    
    
    8
    
    
    
    1
    
    
    
    1Net cost (income)
    
    $
    7
    
    
    $
    (13
    )
    
    $
    (6
    )
    
    $
    
    
    
    $
    2
 143




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 Southern
    
    Alabama
    
    Georgia
    
    Gulf
    
    MississippiPENSION PLANS
    
    Company
    
    Power
    
    Power
    
    Power
    
    PowerThree Months Ended
June 30, 2007Service cost
    
    $
    36
    
    
    $
    8
    
    
    $
    12
    
    
    $
    1
    
    
    $
    1Interest cost
    
    
    80
    
    
    
    20
    
    
    
    32
    
    
    
    3
    
    
    
    3Expected return on plan assets
    
    
    (121
    )
    
    
    (36
    )
    
    
    (48
    )
    
    
    (5
    )
    
    
    (4
    )Net amortization
    
    
    10
    
    
    
    3
    
    
    
    3
    
    
    
    1
    
    
    
    1Net cost (income)
    
    $
    5
    
    
    $
    (5
    )
    
    $
    (1
    )
    
    $
    
    
    
    $
    1Six Months Ended
June 30, 2007Service cost
    
    $
    73
    
    
    $
    17
    
    
    $
    25
    
    
    $
    3
    
    
    $
    3Interest cost
    
    
    161
    
    
    
    41
    
    
    
    63
    
    
    
    7
    
    
    
    7Expected return on plan assets
    
    
    (241
    )
    
    
    (73
    )
    
    
    (97
    )
    
    
    (11
    )
    
    
    (9
    )Net amortization
    
    
    22
    
    
    
    6
    
    
    
    8
    
    
    
    1
    
    
    
    1Net cost (income)
    
    $
    15
    
    
    $
    (9
    )
    
    $
    (1
    )
    
    $
    
    
    
    $
    2
 Southern
    
    Alabama
    
    Georgia
    
    Gulf
    
    MississippiPOSTRETIREMENT PLANS
    
    Company
    
    Power
    
    Power
    
    Power
    
    PowerThree Months Ended
June 30, 2008Service cost
    
    $
    7
    
    
    $
    2
    
    
    $
    3
    
    
    $
    1
    
    
    $
    1Interest cost
    
    
    27
    
    
    
    8
    
    
    
    13
    
    
    
    1
    
    
    
    2Expected return on plan assets
    
    
    (14
    )
    
    
    (6
    )
    
    
    (8
    )
    
    
    (1
    )
    
    
    (1
    )Net amortization
    
    
    7
    
    
    
    2
    
    
    
    4
    
    
    
    1
    
    
    
    Net cost (income)
    
    $
    27
    
    
    $
    6
    
    
    $
    12
    
    
    $
    2
    
    
    $
    2Six Months Ended
June 30, 2008Service cost
    
    $
    14
    
    
    $
    4
    
    
    $
    5
    
    
    $
    1
    
    
    $
    1Interest cost
    
    
    55
    
    
    
    15
    
    
    
    25
    
    
    
    2
    
    
    
    3Expected return on plan assets
    
    
    (29
    )
    
    
    (11
    )
    
    
    (15
    )
    
    
    (1
    )
    
    
    (1
    )Net amortization
    
    
    15
    
    
    
    4
    
    
    
    8
    
    
    
    1
    
    
    
    Net cost (income)
    
    $
    55
    
    
    $
    12
    
    
    $
    23
    
    
    $
    3
    
    
    $
    3Three Months Ended
June 30, 2007Service cost
    
    $
    7
    
    
    $
    2
    
    
    $
    2
    
    
    $
    1
    
    
    $
    1Interest cost
    
    
    26
    
    
    
    7
    
    
    
    11
    
    
    
    1
    
    
    
    1Expected return on plan assets
    
    
    (13
    )
    
    
    (5
    )
    
    
    (6
    )
    
    
    (1
    )
    
    
    (1
    )Net amortization
    
    
    10
    
    
    
    3
    
    
    
    5
    
    
    
    1
    
    
    
    Net cost (income)
    
    $
    30
    
    
    $
    7
    
    
    $
    12
    
    
    $
    2
    
    
    $
    1Six Months Ended
June 30, 2007Service cost
    
    $
    14
    
    
    $
    4
    
    
    $
    5
    
    
    $
    1
    
    
    $
    1Interest cost
    
    
    53
    
    
    
    14
    
    
    
    23
    
    
    
    2
    
    
    
    2Expected return on plan assets
    
    
    (26
    )
    
    
    (10
    )
    
    
    (13
    )
    
    
    (1
    )
    
    
    (1
    )Net amortization
    
    
    20
    
    
    
    6
    
    
    
    10
    
    
    
    1
    
    
    
    1Net cost (income)
    
    $
    61
    
    
    $
    14
    
    
    $
    25
    
    
    $
    3
    
    
    $
    3
 144




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 (H)
    
    EFFECTIVE TAX RATE AND UNRECOGNIZED TAX BENEFITSEffective Tax RateSouthern Companys effective tax rate was 33.3% for the six months ended June 30, 2008, as
compared to 31.4% for the same period in 2007. The increase was largely due to the
unavailability of synthetic fuel tax credits in 2008. See Note 5 to the financial
statements of each registrant in Item 8 of the Form 10-K for information on the effective
income tax rate. Southern Company recorded net synthetic fuel tax credits for the six
months ended June 30, 2008 that are $42 million less than the net synthetic fuel tax credits
recorded for the same period in 2007, which resulted in an increase in income tax expense.
The credits are not allowed under IRC Section 45K for any production after December 31,
2007. The increase in Southern Companys effective tax rate was partially offset by
decreases in the effective tax rate at all of the other registrants. These decreases were
due to additional allowance for equity funds used during construction (which is not taxable)
recorded by Alabama Power, Georgia Power, and Gulf Power and by an increase in the
production activities deduction.Unrecognized Tax BenefitsFor the first six months of 2008, the total amount of unrecognized tax benefits increased
$142 million, resulting in $406 million in unrecognized tax benefits as of June 30, 2008.
Of the $142 million increase, $115 million relates to tax positions for which the
deductibility is certain, but some uncertainty exists regarding the timing of the
deductibility. Of the remaining $27 million, $24 million is for unrecognized tax benefits
at Georgia Power and relates to positions that if recognized would impact Georgia Powers
and Southern Companys effective tax rates.It is reasonably possible that the amount of the unrecognized benefit with respect to a
majority of Georgia Powers and Southern Companys unrecognized tax positions will
significantly increase or decrease within the next 12 months. The possible settlement of
the SILO litigation, the Georgia state tax credits litigation, the production activities
deduction, and/or the conclusion or settlement of federal or state audits could impact the
balances significantly. At this time, other than the SILO litigation, an estimate of the
range of reasonably possible outcomes cannot be determined. Southern Companys unrecognized
tax benefit related to the SILO litigation could decrease by $280 million within the next 12
months. However, since the unrecognized tax benefits related to the SILO litigation are
related to timing differences only, the $280 million decrease would have no impact on
income.(I)
    
    NUCLEAR FUEL DISPOSAL COST LITIGATIONSee Note 1 to the financial statements of Southern Company, Alabama Power, and Georgia Power
under Nuclear Fuel Disposal Costs in Item 8 of the Form 10-K for information regarding the
litigation brought by Alabama Power and Georgia Power against the government for breach of
contracts related to the disposal of spent nuclear fuel. In July 2007, the U.S. Court of
Federal Claims awarded Georgia Power a total of $30 million, based on its ownership
interests, and awarded Alabama Power $17.3 million, representing all of the direct costs of
the expansion of spent nuclear fuel storage facilities from 1998 through 2004. In August
2007, the government filed a motion for reconsideration, which was denied in November 2007.
On January 2, 2008, the government filed a notice of appeal. On February 29, 2008, the
government filed a motion to stay the appeal pending the courts decisions in three other
cases already on appeal. On April 1, 2008, the court granted the governments motion to
stay the appeal. A claim against the government was also filed for damages incurred after
December 31, 2004 (the court-mandated cut-off in the original claim), due to the
governments continuing breach of contract. This claim was filed without including any
dollar amount for recovery of damages. The final outcome of this matter cannot be
determined at this time,
 145




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 but no material impact on net income is expected as any damage amounts collected from the
government are expected to be returned to customers.(J)
    
    SOUTHERN POWER DEPRECIATION STUDYSouthern Power revised its depreciation rates in January 2008. This change in estimate
arises from changes in useful life assumptions of certain components of plant in service
based on an engineering study completed in the first quarter 2008. Depreciation rates by
generating facility changed from a range of 2.7% to 3.8% to a range of 1.8% to 4.1%. These
changes increased depreciation and reduced net income by $1.3 million for the first six
months of 2008. The expected total impact on Southern Powers net income for 2008 is a
decrease of $2.7 million.(K)
    
    SEGMENT AND RELATED INFORMATIONSouthern Companys reportable business segments are the sale of electricity in the Southeast
by the traditional operating companies and Southern Power. 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 leveraged lease projects,
telecommunications, and energy-related services. Southern Powers revenues from sales to
the traditional operating companies were $144 million and $277 million for the three months
and six months ended June 30, 2008, respectively, and $144 million and $253 million for the
three months and six months ended June 30, 2007, respectively. All other intersegment
revenues are not material. Financial data for business segments and products and services
are as follows:
 Electric UtilitiesTraditionalOperating
    
    Southern
    
    
    
    
    
    
    
    
    
    AllCompanies
    
    Power
    
    Eliminations
    
    Total
    
    Other
    
    Eliminations
    
    Consolidated(in millions)Three Months Ended June 30, 2008:Operating revenues
    
    $
    4,075
    
    
    $
    316
    
    
    $
    (208
    )
    
    $
    4,183
    
    
    $
    47
    
    
    $
    (15
    )
    
    $
    4,215Segment net income (loss)
    
    
    451
    
    
    
    35
    
    
    
    
    
    
    
    486
    
    
    
    (71
    )
    
    
    2
    
    
    
    417Six Months Ended June 30, 2008:Operating revenues
    
    $
    7,693
    
    
    $
    532
    
    
    $
    (393
    )
    
    $
    7,832
    
    
    $
    95
    
    
    $
    (29
    )
    
    $
    7,898Segment net income (loss)
    
    
    793
    
    
    
    64
    
    
    
    
    
    
    
    857
    
    
    
    (81
    )
    
    
    
    
    
    
    776Total assets at June 30, 2008
    
    $
    44,012
    
    
    $
    2,946
    
    
    $
    (232
    )
    
    $
    46,726
    
    
    $
    1,608
    
    
    $
    (476
    )
    
    $
    47,858
 Electric UtilitiesTraditionalOperating
    
    Southern
    
    
    
    
    
    
    
    
    
    AllCompanies
    
    Power
    
    Eliminations
    
    Total
    
    Other
    
    Eliminations
    
    Consolidated(in millions)Three Months Ended June 30, 2007:Operating revenues
    
    $
    3,658
    
    
    $
    245
    
    
    $
    (182
    )
    
    $
    3,721
    
    
    $
    98
    
    
    $
    (47
    )
    
    $
    3,772Segment net income (loss)
    
    
    383
    
    
    
    40
    
    
    
    
    
    
    
    423
    
    
    
    6
    
    
    
    
    
    
    
    429Six Months Ended June 30, 2007:Operating revenues
    
    $
    6,952
    
    
    $
    437
    
    
    $
    (322
    )
    
    $
    7,067
    
    
    $
    199
    
    
    $
    (85
    )
    
    $
    7,181Segment net income (loss)
    
    
    667
    
    
    
    72
    
    
    
    
    
    
    
    739
    
    
    
    30
    
    
    
    (1
    )
    
    
    768Total assets at December 31, 2007
    
    $
    41,812
    
    
    $
    2,769
    
    
    $
    (122
    )
    
    $
    44,459
    
    
    $
    1,767
    
    
    $
    (437
    )
    
    $
    45,789
 Products and Services
 Electric Utilities RevenuesPeriod
    
    Retail
    
    Wholesale
    
    Other
    
    Total(in millions)Three Months Ended June 30, 2008
    
    $
    3,449
    
    
    $
    591
    
    
    $
    143
    
    
    $
    4,183Three Months Ended June 30, 2007
    
    
    3,105
    
    
    
    487
    
    
    
    129
    
    
    
    3,721Six Months Ended June 30, 2008
    
    $
    6,455
    
    
    $
    1,105
    
    
    $
    272
    
    
    $
    7,832Six Months Ended June 30, 2007
    
    
    5,849
    
    
    
    968
    
    
    
    250
    
    
    
    7,067
 
 146




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
 Southern Company
  Nominees
    
    Shares For
    
    Shares WithheldJuanita Powell Baranco
    
    
    567,366,162
    
    
    
    14,564,721Dorrit J. Bern
    
    
    566,417,257
    
    
    
    15,513,626Francis S. Blake
    
    
    567,270,778
    
    
    
    14,660,105Jon A. Boscia
    
    
    567,591,995
    
    
    
    14,338,888Thomas F. Chapman
    
    
    567,929,297
    
    
    
    14,001,586H. William Habermeyer, Jr.
    
    
    567,423,496
    
    
    
    14,507,387Warren A. Hood, Jr.
    
    
    567,961,419
    
    
    
    13,969,464Donald M. James
    
    
    565,846,067
    
    
    
    16,084,816J. Neal Purcell
    
    
    567,620,348
    
    
    
    14,310,535David M. Ratcliffe
    
    
    565,276,208
    
    
    
    16,654,675William G. Smith, Jr.
    
    
    568,114,980
    
    
    
    13,815,903Gerald J. St. Pé
    
    
    565,448,641
    
    
    
    16,482,242
  
    
    to ratify the appointment of the independent registered public accounting
firm. Vote tabulation for this proposal was 569,959,208 shares for, 3,490,470
shares against, and 8,481,205 shares abstaining. As a result of this vote, the
appointment of the independent registered public accounting firm was ratified.
    
    to amend the Southern Company by-laws. Vote tabulation for this proposal was
439,321,507 shares for, 35,944,864 shares against, and 10,512,423 shares
abstaining. Although this proposal received a majority of the votes, its approval
was contingent upon the approval of the next proposal to amend the Certificate of
Incorporation and, therefore, this proposal to amend the by-laws of Southern
Company was not approved.
 147




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders. (Continued)
 
    
    to amend Southern Companys Certificate of Incorporation. Vote tabulation for
this proposal was 442,348,920 shares for, 32,423,836 shares against, and
11,006,038 shares abstaining. Since this proposal to amend Southern Companys
Certificate of Incorporation did not receive the requisite votes totaling 66 2/3%
of the shares outstanding, it was not approved.
    
    stockholder proposal on an environmental report. Vote tabulation for this
proposal was 46,889,167 shares for, 334,179,914 shares against, and 57,084,932
shares abstaining. As a result of this vote, the shareholder proposal on an
environmental report was not approved.
 Alabama Power
  Whit Armstrong
    
    Robert D. PowersDavid J. Cooper, Sr.
    
    David M. RatcliffeJohn D. Johns
    
    C. Dowd RitterPatricia M. King
    
    James H. SanfordJames K. Lowder
    
    John C. Webb, IVCharles D. McCrary
    
    James W. WrightMalcolm Portera
   Georgia Power
  Robert L. Brown, Jr.
    
    D. Gary ThompsonAnna R. Cablik
    
    Richard W. UsseryMichael D. Garrett
    
    W. Jerry VereenDavid M. Ratcliffe
    
    E. Jenner Wood, IIIJimmy C. Tallent
  148




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders. (Continued)
 Gulf Power
  C. LeDon Anchors
    
    William A. PullumWilliam C. Cramer, Jr.
    
    Winston E. ScottFred C. Donovan, Sr.
    
    Susan N. Story
  Mississippi Power
  Roy Anderson, III
    
    Martha D. SaundersTommy E. Dulaney
    
    George A. SchloegelAubrey B. Patterson, Jr.
    
    Philip J. TerrellChristine L. Pickering
    
    Anthony J. Topazi
  Southern Power
  William P. Bowers
    
    G. Edison Holland, Jr.Thomas A. Fanning
    
    David M. Ratcliffe
  149




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##### Table of Contents



Item 6. Exhibits.
 (4) Instruments Describing Rights of Security Holders, Including IndenturesAlabama Power(b)1
    
    -
    
    Forty-First
Supplemental Indenture
to Senior Note Indenture
dated as of May 14,
2008, providing for the
issuance of the Series
2008A 6.125% Senior
Notes. (Designated in
Form 8-K dated May 8,
2008, File No. 1-3164,
as Exhibit 4.2.)Georgia Power(c)1
    
    -
    
    Thirty-Fifth
Supplemental Indenture
to Senior Note Indenture
dated as of June 5,
2008, providing for the
issuance of the Series
2008B 5.40% Senior
Notes. (Designated in
Form 8-K dated May 27,
2008, File No. 1-6468,
as Exhibit 4.2.)(10) Material ContractsAlabama Power(b)1
    
    -
    
    Deferred Compensation
Plan for Outside
Directors of Alabama
Power Company, Amended
and Restated effective
January 1, 2008.Georgia Power(c)1
    
    -
    
    Engineering,
Procurement and
Construction Agreement,
dated as of April 8,
2008, between Georgia
Power, for itself and as
agent for OPC, MEAG
Power, and Dalton
Utilities, as owners,
and a consortium
consisting of
Westinghouse Electric
Company LLC and Stone &
Webster, Inc., as
contractor, for Units 3
& 4 at the Vogtle
Electric Generating
Plant Site. (Georgia
Power requested
confidential treatment
for certain portions of
this document pursuant
to an application for
confidential treatment
sent to the SEC.
Georgia Power omitted
such portions from the
filing and filed them
separately with the
SEC.)(24) Power of Attorney and ResolutionsSouthern Company(a)1
    
    -
    
    Power of Attorney and
resolution. (Designated
in the Form 10-K for the
year ended December 31,
2007, 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,
2007, 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,
2007, File No. 1-6468 as
Exhibit 24(c) and
incorporated herein by
reference.)
 150




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##### Table of Contents



Gulf Power(d)1
    
    -
    
    Power of Attorney and
resolution. (Designated
in the Form 10-K for the
year ended December 31,
2007, File No. 0-2429 as
Exhibit 24(d) and
incorporated herein by
reference.)(d)2
    
    -
    
    Power of Attorney for
Philip C. Raymond.
(Designated in the Form
10-Q for the quarter
ended March 31, 2008,
File No. 0-2429 as
Exhibit 24(d)2 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,
2007, File No. 001-11229
as Exhibit 24(e) and
incorporated herein by
reference.)Southern Power(f)1
    
    -
    
    Power of Attorney and
resolution. (Designated
in the Form 10-K for the
year ended December 31,
2007, File No. 333-98553
as Exhibit 24(f) and
incorporated herein by
reference.)(31) Section 302 CertificationsSouthern 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.(d)2
    
    -
    
    Certificate of Gulf
Powers Chief Financial
Officer required by
Section 302 of the
Sarbanes-Oxley Act of
2002.
 151




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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.Southern Power(f)1
    
    -
    
    Certificate of
Southern Powers Chief
Executive Officer
required by Section 302
of the Sarbanes-Oxley
Act of 2002.(f)2
    
    -
    
    Certificate of
Southern Powers Chief
Financial Officer
required by Section 302
of the Sarbanes-Oxley
Act of 2002.(32) Section 906 CertificationsSouthern 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.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.Southern Power(f)
    
    -
    
    Certificate of
Southern Powers Chief
Executive Officer and
Chief Financial Officer
required by Section 906
of the Sarbanes-Oxley
Act of 2002.
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THE SOUTHERN COMPANY
 
 SIGNATURES
  THE SOUTHERN COMPANYBy
    
    David M. RatcliffeChairman, President, and Chief Executive Officer(Principal Executive Officer)By
    
    W. Paul BowersExecutive Vice President and Chief Financial Officer(Principal Financial Officer)By
    
    /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
  153




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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)
  154




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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)
  155




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GULF POWER COMPANY
 SIGNATURES
  GULF POWER COMPANYBy
    
    Susan N. StoryPresident and Chief Executive Officer(Principal Executive Officer)By
    
    Philip C. RaymondVice President and Chief Financial Officer(Principal Financial Officer)By
    
    /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
  156




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MISSISSIPPI POWER COMPANY
 SIGNATURES
  MISSISSIPPI POWER COMPANYBy
    
    Anthony J. TopaziPresident and Chief Executive Officer(Principal Executive Officer)By
    
    Frances TurnageVice President, Treasurer, and Chief Financial Officer(Principal Financial Officer)By
    
    /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
  157




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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, Treasurer, and Chief Financial Officer(Principal Financial Officer)By
    
    /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
  158