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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 March 31, 2007
 OR
 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission
    
    Registrant, State of Incorporation,
    
    I.R.S. EmployerFile Number
    
    Address and Telephone Number
    
    Identification No.1-3526
    
    The Southern Company
    
    58-0690070(A Delaware Corporation)30 Ivan Allen Jr. Boulevard, N.W.Atlanta, Georgia 30308(404) 506-50001-3164
    
    Alabama Power Company
    
    63-0004250(An Alabama Corporation)600 North 18th StreetBirmingham, Alabama 35291(205) 257-10001-6468
    
    Georgia Power Company
    
    58-0257110(A Georgia Corporation)241 Ralph McGill Boulevard, N.E.Atlanta, Georgia 30308(404) 506-65260-2429
    
    Gulf Power Company
    
    59-0276810(A Florida Corporation)One Energy PlacePensacola, Florida 32520(850) 444-6111001-11229
    
    Mississippi Power Company
    
    64-0205820(A Mississippi Corporation)2992 West BeachGulfport, Mississippi 39501(228) 864-1211333-98553
    
    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, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):
 LargeAccelerated
    
    Accelerated
    
    Non-acceleratedRegistrant
    
    Filer
    
    Filer
    
    FilerThe Southern Company
    
    XAlabama Power Company
    
    
    
    
    
    XGeorgia Power Company
    
    
    
    
    
    XGulf Power Company
    
    
    
    
    
    XMississippi Power Company
    
    
    
    
    
    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 March 31, 2007The Southern Company
    
    Par Value $5 Per Share
    
    
    751,808,611Alabama Power Company
    
    Par Value $40 Per Share
    
    
    14,000,000Georgia 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
March 31, 2007
  
 PageNumberDEFINITIONS
    
    
    5CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
    
    
    6PART I  FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsThe Southern Company and Subsidiary CompaniesCondensed Consolidated Statements of Income
    
    
    8Condensed Consolidated Statements of Cash Flows
    
    
    9Condensed Consolidated Balance Sheets
    
    
    10Condensed Consolidated Statements of Comprehensive Income
    
    
    12Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    13Alabama Power CompanyCondensed Statements of Income
    
    
    29Condensed Statements of Comprehensive Income
    
    
    29Condensed Statements of Cash Flows
    
    
    30Condensed Balance Sheets
    
    
    31Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    33Georgia Power CompanyCondensed Statements of Income
    
    
    44Condensed Statements of Comprehensive Income
    
    
    44Condensed Statements of Cash Flows
    
    
    45Condensed Balance Sheets
    
    
    46Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    48Gulf Power CompanyCondensed Statements of Income
    
    
    60Condensed Statements of Comprehensive Income
    
    
    60Condensed Statements of Cash Flows
    
    
    61Condensed Balance Sheets
    
    
    62Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    64Mississippi Power CompanyCondensed Statements of Income
    
    
    74Condensed Statements of Comprehensive Income
    
    
    74Condensed Statements of Cash Flows
    
    
    75Condensed Balance Sheets
    
    
    76Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    78Southern Power Company and Subsidiary CompaniesCondensed Consolidated Statements of Income
    
    
    89Condensed Consolidated Statements of Comprehensive Income
    
    
    89Condensed Consolidated Statements of Cash Flows
    
    
    90Condensed Consolidated Balance Sheets
    
    
    91Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    93Notes to the Condensed Financial Statements
    
    
    102Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    27
 3




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INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2007
 PageNumberPART II
 OTHER INFORMATIONItem 1.
    

Legal
Proceedings
    
    
    112Item 1A.
    

Risk
Factors
    
    
    112Item 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
    
    InapplicableItem 5.
    
    Other Information
    
    InapplicableItem 6.
    
    Exhibits
    
    
    113Signatures
    
    
    118
 4




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DEFINITIONS
 TERM
    
    MEANINGAlabama Power
    
    Alabama Power CompanyALJ
    
    Administrative law judgeBMA
    
    Bond Market AssociationClean Air Act
    
    Clean Air Act Amendments of 1990DOE
    
    U.S. Department of EnergyDuke Energy
    
    Duke Energy CorporationECO Plan
    
    Environmental Compliance Overview PlanEPA
    
    U.S. Environmental Protection AgencyERISA
    
    Employee Retirement Income Security Act of 1974, as amendedFASB
    
    Financial Accounting Standards BoardFERC
    
    Federal Energy Regulatory CommissionForm 10-K
    
    Combined Annual Report on Form 10-K of Southern Company,
Alabama Power, Georgia Power, Gulf Power, Mississippi Power,
and Southern Power for the year ended December 31, 2006 and, with
respect to Gulf Power, Amendment No. 1 theretoGeorgia Power
    
    Georgia Power CompanyGulf Power
    
    Gulf Power CompanyIIC
    
    Intercompany Interchange ContractIRC
    
    Internal Revenue Code of 1986, as amendedIRS
    
    Internal Revenue ServiceKWH
    
    Kilowatt-hourLIBOR
    
    London Interbank Offered RateMirant
    
    Mirant CorporationMississippi Power
    
    Mississippi Power CompanyMW
    
    MegawattNRC
    
    Nuclear Regulatory CommissionNSR
    
    New Source ReviewPEP
    
    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 RSE
    
    Alabama Powers rate
stabilization and equalization rate mechanismSavannah Electric
    
    Savannah Electric and Power Company (merged into Georgia Power on
July 1, 2006)SCS
    
    Southern Company Services, Inc.SEC
    
    Securities and Exchange CommissionSouthern 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 Companytraditional operating companies
    
    Alabama Power, Georgia Power, Gulf Power, and Mississippi Powerwholesale revenues
    
    revenues generated from sales for resale
 5




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
  
    
    the impact of recent and future federal and state regulatory change, including legislative and regulatory
initiatives regarding deregulation and restructuring of the electric utility industry, implementation of the Energy
Policy Act of 2005, and also changes in environmental, tax, and other laws and regulations to which Southern
Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations;
 
    
    current and future litigation, regulatory investigations, proceedings or inquiries, including the pending EPA civil
actions against certain Southern Company subsidiaries, FERC matters, IRS audits, and Mirant matters;
 
    
    the effects, extent, and timing of the entry of additional competition in the markets in which Southern Companys
subsidiaries operate;
 
    
    variations in demand for electricity, including those relating to weather, the general economy and population, and
business growth (and declines);
 
    
    available sources and costs of fuels;
 
    
    ability to control costs;
 
    
    investment performance of Southern Companys employee benefit plans;
 
    
    advances in technology;
 
    
    state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate
actions relating to fuel and storm restoration cost recovery;
 
    
    the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and
develop new opportunities;
 
    
    fluctuations in the level of oil prices;
 
    
    the level of production, if any, by the synthetic fuel operations at Carbontronics Synfuels Investors LP and
Alabama Fuel Products, LLC for fiscal year 2007;
 
    
    internal restructuring or other restructuring options that may be pursued;
 
    
    potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be
assured to be completed or beneficial to Southern Company or its subsidiaries;
 
    
    the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due;
 
    
    the ability to obtain new short- and long-term contracts with neighboring utilities;
 
    
    the direct or indirect effect on Southern Companys business resulting from terrorist incidents and the threat of
terrorist incidents;
 
    
    interest rate fluctuations and financial market conditions and the results of financing efforts, including Southern
Companys and its subsidiaries credit ratings;
 
    
    the ability of Southern Company and its subsidiaries to obtain additional generating capacity at competitive prices;
 
    
    catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, 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.
 6




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THE SOUTHERN COMPANY AND
SUBSIDIARY COMPANIES
 7




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Revenues:Retail revenues
    
    $
    2,743,811
    
    
    $
    2,471,413Wholesale revenues
    
    
    480,699
    
    
    
    414,869Other electric revenues
    
    
    121,294
    
    
    
    110,990Other revenues
    
    
    62,865
    
    
    
    65,988Total operating revenues
    
    
    3,408,669
    
    
    
    3,063,260Operating Expenses:Fuel
    
    
    1,316,519
    
    
    
    1,048,545Purchased power
    
    
    64,073
    
    
    
    104,411Other operations
    
    
    565,372
    
    
    
    562,452Maintenance
    
    
    281,995
    
    
    
    283,630Depreciation and amortization
    
    
    306,344
    
    
    
    298,926Taxes other than income taxes
    
    
    183,039
    
    
    
    175,003Total operating expenses
    
    
    2,717,342
    
    
    
    2,472,967Operating Income
    
    
    691,327
    
    
    
    590,293Other Income and (Expense):Allowance for equity funds used during construction
    
    
    20,174
    
    
    
    11,527Interest income
    
    
    10,555
    
    
    
    6,672Equity in losses of unconsolidated subsidiaries
    
    
    (6,735
    )
    
    
    (32,575
    )Leveraged lease income
    
    
    9,862
    
    
    
    18,103Interest expense, net of amounts capitalized
    
    
    (194,023
    )
    
    
    (176,375
    )Interest expense to affiliate trusts
    
    
    (23,827
    )
    
    
    (30,629
    )Preferred and preference dividends of subsidiaries
    
    
    (10,129
    )
    
    
    (9,015
    )Other income (expense), net
    
    
    (2,931
    )
    
    
    (8,430
    )Total other income and (expense)
    
    
    (197,054
    )
    
    
    (220,722
    )Earnings Before Income Taxes
    
    
    494,273
    
    
    
    369,571Income taxes
    
    
    155,584
    
    
    
    107,964Consolidated Net Income
    
    $
    338,689
    
    
    $
    261,607Common Stock Data:Earnings per share-Basic
    
    $
    0.45
    
    
    $
    0.35Diluted
    
    $
    0.45
    
    
    $
    0.35Average number of basic shares of common
stock outstanding (in thousands)
    
    
    750,259
    
    
    
    742,195Average number of diluted shares of common
stock outstanding (in thousands)
    
    
    755,352
    
    
    
    747,039Cash dividends paid per share of common stock
    
    $
    0.3875
    
    
    $
    0.3725
  8




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Activities:Consolidated net income
    
    $
    338,689
    
    
    $
    261,607Adjustments to reconcile consolidated net income
to net cash provided from operating activities Depreciation and amortization
    
    
    363,903
    
    
    
    351,946Deferred income taxes and investment tax credits
    
    
    53,433
    
    
    
    (39,650
    )Allowance for equity funds used during construction
    
    
    (20,174
    )
    
    
    (11,527
    )Equity in losses of unconsolidated subsidiaries
    
    
    6,735
    
    
    
    32,575Leveraged lease income
    
    
    (9,862
    )
    
    
    (18,103
    )Pension, postretirement, and other employee benefits
    
    
    19,992
    
    
    
    18,448Stock option expense
    
    
    20,554
    
    
    
    19,104Hedge settlements
    
    
    (3,923
    )
    
    
    18,006Other, net
    
    
    (15,990
    )
    
    
    (2,608
    )Changes in certain current assets and liabilities Receivables
    
    
    161,960
    
    
    
    236,127Fossil fuel stock
    
    
    (63,438
    )
    
    
    (78,471
    )Materials and supplies
    
    
    (7,077
    )
    
    
    (11,089
    )Other current assets
    
    
    (63,751
    )
    
    
    (41,642
    )Accounts payable
    
    
    (92,238
    )
    
    
    (310,962
    )Accrued taxes
    
    
    (100,356
    )
    
    
    (9,425
    )Accrued compensation
    
    
    (325,500
    )
    
    
    (337,600
    )Other current liabilities
    
    
    (1,107
    )
    
    
    (18,331
    )Net cash provided from operating activities
    
    
    261,850
    
    
    
    58,405Investing Activities:Property additions
    
    
    (742,384
    )
    
    
    (546,261
    )Nuclear decommissioning trust fund purchases
    
    
    (167,193
    )
    
    
    (172,551
    )Nuclear decommissioning trust fund sales
    
    
    160,313
    
    
    
    165,671Proceeds from property sales
    
    
    3,922
    
    
    
    150,521Investment in unconsolidated subsidiaries
    
    
    (11,423
    )
    
    
    (38,364
    )Cost of removal, net of salvage
    
    
    (22,870
    )
    
    
    (31,230
    )Other
    
    
    (8,237
    )
    
    
    (32,696
    )Net cash used for investing activities
    
    
    (787,872
    )
    
    
    (504,910
    )Financing Activities:Increase (decrease) in notes payable, net
    
    
    (299,583
    )
    
    
    433,101Proceeds Long-term debt
    
    
    1,350,000
    
    
    
    800,000Common stock
    
    
    167,509
    
    
    
    13,875Redemptions Long-term debt
    
    
    (405,210
    )
    
    
    (322,839
    )Long-term debt to affiliate trusts
    
    
    
    
    
    
    (67,457
    )Preferred and preference stock
    
    
    
    
    
    
    (14,569
    )Common stock repurchased
    
    
    
    
    
    
    (117
    )Payment of common stock dividends
    
    
    (290,292
    )
    
    
    (276,442
    )Other
    
    
    (1,759
    )
    
    
    (20,372
    )Net cash provided from financing activities
    
    
    520,665
    
    
    
    545,180Net Change in Cash and Cash Equivalents
    
    
    (5,357
    )
    
    
    98,675Cash and Cash Equivalents at Beginning of Period
    
    
    166,846
    
    
    
    202,111Cash and Cash Equivalents at End of Period
    
    $
    161,489
    
    
    $
    300,786Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $12,259 and $4,942 capitalized for 2007 and 2006, respectively)
    
    $
    181,712
    
    
    $
    198,762Income taxes (net of refunds)
    
    $
    (19,257
    )
    
    $
    919
  9




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 At March 31,
    
    
    At December 31,Assets
    
    2007
    
    
    2006(in thousands)Current Assets:Cash and cash equivalents
    
    $
    161,489
    
    
    $
    166,846Receivables Customer accounts receivable
    
    
    883,716
    
    
    
    942,821Unbilled revenues
    
    
    264,383
    
    
    
    283,275Under recovered regulatory clause revenues
    
    
    527,206
    
    
    
    516,441Other accounts and notes receivable
    
    
    286,491
    
    
    
    329,619Accumulated provision for uncollectible accounts
    
    
    (30,117
    )
    
    
    (34,901
    )Fossil fuel stock, at average cost
    
    
    736,970
    
    
    
    674,902Materials and supplies, at average cost
    
    
    653,734
    
    
    
    648,127Vacation pay
    
    
    122,709
    
    
    
    121,246Prepaid expenses
    
    
    227,147
    
    
    
    127,908Other
    
    
    190,610
    
    
    
    242,735Total current assets
    
    
    4,024,338
    
    
    
    4,019,019Property, Plant, and Equipment:In service
    
    
    45,777,616
    
    
    
    45,484,895Less accumulated depreciation
    
    
    16,808,693
    
    
    
    16,581,88628,968,923
    
    
    
    28,903,009Nuclear fuel, at amortized cost
    
    
    323,727
    
    
    
    317,429Construction work in progress
    
    
    2,230,033
    
    
    
    1,871,538Total property, plant, and equipment
    
    
    31,522,683
    
    
    
    31,091,976Other Property and Investments:Nuclear decommissioning trusts, at fair value
    
    
    1,086,250
    
    
    
    1,057,534Leveraged leases
    
    
    955,788
    
    
    
    1,138,730Other
    
    
    291,153
    
    
    
    296,484Total other property and investments
    
    
    2,333,191
    
    
    
    2,492,748Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    916,888
    
    
    
    895,446Prepaid pension costs
    
    
    1,558,673
    
    
    
    1,548,983Unamortized debt issuance expense
    
    
    176,515
    
    
    
    171,758Unamortized loss on reacquired debt
    
    
    287,516
    
    
    
    293,016Deferred under recovered regulatory clause revenues
    
    
    797,151
    
    
    
    845,201Other regulatory assets
    
    
    921,549
    
    
    
    935,804Other
    
    
    566,930
    
    
    
    564,498Total deferred charges and other assets
    
    
    5,225,222
    
    
    
    5,254,706Total Assets
    
    $
    43,105,434
    
    
    $
    42,858,449
  10




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 At March 31,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2007
    
    
    2006(in thousands)Current Liabilities:Securities due within one year
    
    $
    1,505,952
    
    
    $
    1,416,898Notes payable
    
    
    1,641,217
    
    
    
    1,940,801Accounts payable
    
    
    983,918
    
    
    
    1,081,256Customer deposits
    
    
    257,609
    
    
    
    248,781Accrued taxes Income taxes
    
    
    128,526
    
    
    
    110,009Other
    
    
    215,410
    
    
    
    390,716Accrued interest
    
    
    205,122
    
    
    
    183,918Accrued vacation pay
    
    
    151,372
    
    
    
    151,113Accrued compensation
    
    
    119,777
    
    
    
    443,610Other
    
    
    286,924
    
    
    
    385,858Total current liabilities
    
    
    5,495,827
    
    
    
    6,352,960Long-term Debt
    
    
    12,288,193
    
    
    
    10,942,025Long-term Debt Payable to Affiliated Trusts
    
    
    1,071,667
    
    
    
    1,561,358Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    5,863,088
    
    
    
    5,989,063Deferred credits related to income taxes
    
    
    287,072
    
    
    
    291,474Accumulated deferred investment tax credits
    
    
    497,231
    
    
    
    503,217Employee benefit obligations
    
    
    1,580,291
    
    
    
    1,566,591Asset retirement obligations
    
    
    1,150,708
    
    
    
    1,136,982Other cost of removal obligations
    
    
    1,303,503
    
    
    
    1,300,461Other regulatory liabilities
    
    
    804,844
    
    
    
    793,869Other
    
    
    536,300
    
    
    
    305,255Total deferred credits and other liabilities
    
    
    12,023,037
    
    
    
    11,886,912Total Liabilities
    
    
    30,878,724
    
    
    
    30,743,255Preferred and Preference Stock of Subsidiaries
    
    
    743,938
    
    
    
    744,065Common Stockholders Equity:Common stock, par value $5 per share Authorized  1 billion sharesIssued  March 31, 2007: 752,163,794 Shares; December 31, 2006: 751,863,854 SharesTreasury  March 31, 2007: 355,183 Shares; December 31, 2006: 5,593,691 SharesPar value
    
    
    3,760,819
    
    
    
    3,759,319Paid-in capital
    
    
    1,114,045
    
    
    
    1,096,387Treasury, at cost
    
    
    (9,509
    )
    
    
    (192,309
    )Retained earnings
    
    
    6,673,423
    
    
    
    6,765,219Accumulated other comprehensive loss
    
    
    (56,006
    )
    
    
    (57,487
    )Total Common Stockholders Equity
    
    
    11,482,772
    
    
    
    11,371,129Total Liabilities and Stockholders Equity
    
    $
    43,105,434
    
    
    $
    42,858,449
  11




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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Consolidated Net Income
    
    $
    338,689
    
    
    $
    261,607Other comprehensive income (loss):Qualifying hedges:Changes in fair value of qualifying hedges,
net of tax of $(1,567) and $7,130,
respectively
    
    
    (2,468
    )
    
    
    11,392Reclassification adjustment for amounts
included in net income, net of tax of $1,259
and $241, respectively
    
    
    2,204
    
    
    
    290Marketable securities:Change in fair value of marketable securities,
net of tax of $818 and $1,609, respectively
    
    
    1,307
    
    
    
    2,521Pension and other post retirement benefit plans:Reclassification adjustment for amounts
included in net income, net of tax of $246 and
$-, respectively
    
    
    438
    
    
    
    Total other comprehensive income
    
    
    1,481
    
    
    
    14,203COMPREHENSIVE INCOME
    
    $
    340,170
    
    
    $
    275,810
  12




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  OVERVIEW
   RESULTS OF OPERATIONS
 Net Income
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$77.1
    
    29.5
  Retail Revenues
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$272.4
    
    11.0
  First Quarter2007(in millions)
    
    % changeRetail  prior year
    
    $
    2,471.4Change in Rates and pricing
    
    
    32.7
    
    
    
    1.3Sales growth
    
    
    26.3
    
    
    
    1.1Weather
    
    
    19.8
    
    
    
    0.8Fuel cost recovery
    
    
    193.6
    
    
    
    7.8Retail  current year
    
    $
    2,743.8
    
    
    
    11.0
    %
 13




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
     Wholesale Revenues
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$65.8
    
    15.9
  Other Electric Revenues
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$10.3
    
    9.3
  Fuel and Purchased Power Expenses
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % changeFuel
    
    $
    268.0
    
    
    
    25.6Purchased power
    
    
    (40.3
    )
    
    
    (38.6
    )Total fuel and purchased power expenses
    
    $
    227.7
 14




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  First Quarter
    
    First QuarterAverage Cost
    
    2007
    
    2006
    
    % change(cents per net KWH)Fuel
    
    
    2.80
    
    
    
    2.46
    
    
    
    13.8Purchased power
    
    
    3.88
    
    
    
    4.85
    
    
    
    (20.0
    )
  Allowance for Equity Funds Used During Construction
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$8.6
    
    75.0
  Equity in Losses of Unconsolidated Subsidiaries
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(25.8)
    
    (79.3)
  15




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Leveraged Lease Income
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(8.2)
    
    (45.5)
  Interest Expense, Net of Amounts Capitalized
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$17.6
    
    10.0
  Interest Expense to Affiliate Trusts
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(6.8)
    
    (22.2)
  Other Income (Expense), Net
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$5.5
    
    65.2
  16




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  Income Taxes
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$47.6
    
    44.1
  FUTURE EARNINGS POTENTIAL
 ANALYSIS  FUTURE EARNINGS POTENTIAL
 Environmental Matters
  New Source Review Litigation
  17




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  Fine Particulate Matter Regulations
  Plant Wansley Environmental Litigation
  FERC and State PSC Matters
 Intercompany Interchange Contract
   18




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Retail Fuel Cost Recovery
  Mirant Matters
  Mirant Securities Litigation
  MC Asset Recovery Litigation
  19




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  Income Tax Matters
 Leveraged Lease Transactions
  Synthetic Fuel Tax Credits
  20




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Construction Projects
 Integrated Gasification Combined Cycle (IGCC) Project
  Nuclear
  Other Matters
   21




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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
 Income Taxes
  Leveraged Leases
  Fair Value Measurement
  22




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
 Market Price Risk
    First Quarter2007ChangesFair Value(in millions)Contracts beginning of period
    
    $
    (82
    )Contracts realized or settled
    
    
    28New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    65Contracts at March 31, 2007
    
    $
    11
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered
into during the period, if any.
 Source of March 31, 2007Valuation PricesTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in millions)Actively quoted
    
    $
    11
    
    
    $
    (1
    )
    
    $
    12External sources
    
    
    
    
    
    
    
    
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2007
    
    $
    11
    
    
    $
    (1
    )
    
    $
    12
  25




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##### Table of Contents



THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
  Amounts(in millions)Regulatory liabilities, net
    
    $
    11.0Accumulated other comprehensive
income
    
    
    (0.2
    )Net income
    
    
    0.1Total fair value
    
    $
    10.9
    Financing Activities
    26




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##### Table of Contents



PART I
 
 Item 3.      Quantitative And Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
     27




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##### Table of Contents



ALABAMA POWER COMPANY
 28




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##### Table of Contents



ALABAMA POWER COMPANY
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Revenues:Retail revenues
    
    $
    955,773
    
    
    $
    802,209Wholesale revenuesNon-affiliates
    
    
    155,122
    
    
    
    146,354Affiliates
    
    
    42,194
    
    
    
    79,315Other revenues
    
    
    44,113
    
    
    
    44,829Total operating revenues
    
    
    1,197,202
    
    
    
    1,072,707Operating Expenses:Fuel
    
    
    386,072
    
    
    
    341,767Purchased power Non-affiliates
    
    
    4,638
    
    
    
    22,086Affiliates
    
    
    72,714
    
    
    
    56,665Other operations
    
    
    171,403
    
    
    
    169,013Maintenance
    
    
    118,762
    
    
    
    109,500Depreciation and amortization
    
    
    115,943
    
    
    
    109,862Taxes other than income taxes
    
    
    72,718
    
    
    
    65,657Total operating expenses
    
    
    942,250
    
    
    
    874,550Operating Income
    
    
    254,952
    
    
    
    198,157Other Income and (Expense):Allowance for equity funds used during construction
    
    
    6,586
    
    
    
    5,529Interest income
    
    
    4,394
    
    
    
    4,174Interest expense, net of amounts capitalized
    
    
    (63,131
    )
    
    
    (53,219
    )Interest expense to affiliate trusts
    
    
    (4,059
    )
    
    
    (4,059
    )Other income (expense), net
    
    
    (2,924
    )
    
    
    (9,005
    )Total other income and (expense)
    
    
    (59,134
    )
    
    
    (56,580
    )Earnings Before Income Taxes
    
    
    195,818
    
    
    
    141,577Income taxes
    
    
    72,702
    
    
    
    53,363Net Income
    
    
    123,116
    
    
    
    88,214Dividends on Preferred and Preference Stock
    
    
    8,182
    
    
    
    6,072Net Income After Dividends on Preferred and Preference Stock
    
    $
    114,934
    
    
    $
    82,142
 
  For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Net Income After Dividends on Preferred and Preference Stock
    
    $
    114,934
    
    
    $
    82,142Other comprehensive income (loss):Changes in fair value of qualifying hedges, net of tax
of $(102) and $1,473, respectively
    
    
    (168
    )
    
    
    2,423Reclassification adjustment for amounts included in
net income, net of tax of $59 and $(1,006),
respectively
    
    
    96
    
    
    
    (1,654
    )COMPREHENSIVE INCOME
    
    $
    114,862
    
    
    $
    82,911
  29




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##### Table of Contents



ALABAMA POWER COMPANY
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Activities:Net income
    
    $
    123,116
    
    
    $
    88,214Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    136,060
    
    
    
    129,238Deferred income taxes and investment tax credits, net
    
    
    (889
    )
    
    
    (43,904
    )Deferred revenues
    
    
    (2,276
    )
    
    
    (559
    )Allowance for equity funds used during construction
    
    
    (6,586
    )
    
    
    (5,529
    )Pension, postretirement, and other employee benefits
    
    
    (2,439
    )
    
    
    (292
    )Stock option expense
    
    
    3,713
    
    
    
    3,583Tax benefit of stock options
    
    
    286
    
    
    
    111Hedge settlements
    
    
    
    
    
    
    18,006Other, net
    
    
    6,055
    
    
    
    1,271Changes in certain current assets and liabilities Receivables
    
    
    43,143
    
    
    
    111,212Fossil fuel stock
    
    
    (21,732
    )
    
    
    (32,192
    )Materials and supplies
    
    
    (2,288
    )
    
    
    7,161Other current assets
    
    
    (45,381
    )
    
    
    (21,978
    )Accounts payable
    
    
    (94,769
    )
    
    
    (152,217
    )Accrued taxes
    
    
    93,770
    
    
    
    103,107Accrued compensation
    
    
    (61,830
    )
    
    
    (66,139
    )Other current liabilities
    
    
    7,811
    
    
    
    25,325Net cash provided from operating activities
    
    
    175,764
    
    
    
    164,418Investing Activities:Property additions
    
    
    (263,712
    )
    
    
    (228,402
    )Nuclear decommissioning trust fund purchases
    
    
    (73,062
    )
    
    
    (72,384
    )Nuclear decommissioning trust fund sales
    
    
    73,062
    
    
    
    72,384Cost of removal, net of salvage
    
    
    (10,012
    )
    
    
    (11,839
    )Other
    
    
    (1,863
    )
    
    
    (5,292
    )Net cash used for investing activities
    
    
    (275,587
    )
    
    
    (245,533
    )Financing Activities:Decrease in notes payable, net
    
    
    (44,875
    )
    
    
    (315,278
    )Proceeds Common stock issued to parent
    
    
    70,000
    
    
    
    Senior notes
    
    
    200,000
    
    
    
    800,000Gross excess tax benefit of stock options
    
    
    741
    
    
    
    217Redemptions Senior notes
    
    
    
    
    
    
    (170,000
    )Payment of preferred and preference stock dividends
    
    
    (6,515
    )
    
    
    (6,070
    )Payment of common stock dividends
    
    
    (116,250
    )
    
    
    (110,150
    )Other
    
    
    (2,469
    )
    
    
    (16,505
    )Net cash provided from financing activities
    
    
    100,632
    
    
    
    182,214Net Change in Cash and Cash Equivalents
    
    
    809
    
    
    
    101,099Cash and Cash Equivalents at Beginning of Period
    
    
    15,539
    
    
    
    22,472Cash and Cash Equivalents at End of Period
    
    $
    16,348
    
    
    $
    123,571Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $3,346 and $2,423 capitalized for 2007 and 2006, respectively)
    
    $
    52,607
    
    
    $
    35,993Income taxes (net of refunds)
    
    $
    (3,250
    )
    
    $
    (10,989
    )
  30




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##### Table of Contents



ALABAMA POWER COMPANY
 At March 31,
    
    
    At December 31,Assets
    
    2007
    
    
    2006(in thousands)Current Assets:Cash and cash equivalents
    
    $
    16,348
    
    
    $
    15,539Receivables Customer accounts receivable
    
    
    307,878
    
    
    
    323,202Unbilled revenues
    
    
    88,890
    
    
    
    90,596Under recovered regulatory clause revenues
    
    
    17,583
    
    
    
    32,451Other accounts and notes receivable
    
    
    44,066
    
    
    
    49,708Affiliated companies
    
    
    55,461
    
    
    
    70,836Accumulated provision for uncollectible accounts
    
    
    (9,416
    )
    
    
    (7,091
    )Fossil fuel stock, at average cost
    
    
    173,051
    
    
    
    153,120Materials and supplies, at average cost
    
    
    257,739
    
    
    
    255,664Vacation pay
    
    
    46,415
    
    
    
    46,465Prepaid expenses
    
    
    112,924
    
    
    
    76,265Other
    
    
    31,387
    
    
    
    66,663Total current assets
    
    
    1,142,326
    
    
    
    1,173,418Property, Plant, and Equipment:In service
    
    
    16,167,366
    
    
    
    15,997,793Less accumulated provision for depreciation
    
    
    5,719,366
    
    
    
    5,636,47510,448,000
    
    
    
    10,361,318Nuclear fuel, at amortized cost
    
    
    139,202
    
    
    
    137,300Construction work in progress
    
    
    623,625
    
    
    
    562,119Total property, plant, and equipment
    
    
    11,210,827
    
    
    
    11,060,737Other Property and Investments:Equity investments in unconsolidated subsidiaries
    
    
    48,589
    
    
    
    47,486Nuclear decommissioning trusts, at fair value
    
    
    525,117
    
    
    
    513,521Other
    
    
    35,647
    
    
    
    35,980Total other property and investments
    
    
    609,353
    
    
    
    596,987Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    373,025
    
    
    
    354,225Prepaid pension costs
    
    
    731,311
    
    
    
    722,287Deferred under recovered regulatory clause revenues
    
    
    311,686
    
    
    
    301,048Other regulatory assets
    
    
    271,155
    
    
    
    279,661Other
    
    
    157,745
    
    
    
    166,927Total deferred charges and other assets
    
    
    1,844,922
    
    
    
    1,824,148Total Assets
    
    $
    14,807,428
    
    
    $
    14,655,290
  31




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##### Table of Contents



ALABAMA POWER COMPANY
 At March 31,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2007
    
    
    2006(in thousands)Current Liabilities:Securities due within one year
    
    $
    668,648
    
    
    $
    668,646Notes payable
    
    
    74,794
    
    
    
    119,670Accounts payable Affiliated
    
    
    129,618
    
    
    
    162,951Other
    
    
    202,208
    
    
    
    263,506Customer deposits
    
    
    62,735
    
    
    
    62,978Accrued taxes Income taxes
    
    
    49,592
    
    
    
    3,120Other
    
    
    49,795
    
    
    
    29,696Accrued interest
    
    
    61,421
    
    
    
    53,573Accrued vacation pay
    
    
    38,645
    
    
    
    38,767Accrued compensation
    
    
    25,364
    
    
    
    87,194Other
    
    
    56,581
    
    
    
    79,907Total current liabilities
    
    
    1,419,401
    
    
    
    1,570,008Long-term Debt
    
    
    4,038,399
    
    
    
    3,838,906Long-term Debt Payable to Affiliated Trusts
    
    
    309,279
    
    
    
    309,279Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    2,137,888
    
    
    
    2,116,575Deferred credits related to income taxes
    
    
    97,999
    
    
    
    98,941Accumulated deferred investment tax credits
    
    
    186,581
    
    
    
    188,582Employee benefit obligations
    
    
    379,409
    
    
    
    375,940Asset retirement obligations
    
    
    483,660
    
    
    
    476,460Other cost of removal obligations
    
    
    601,049
    
    
    
    600,278Other regulatory liabilities
    
    
    405,268
    
    
    
    399,822Other
    
    
    30,742
    
    
    
    35,805Total deferred credits and other liabilities
    
    
    4,322,596
    
    
    
    4,292,403Total Liabilities
    
    
    10,089,675
    
    
    
    10,010,596Preferred and Preference Stock
    
    
    612,271
    
    
    
    612,407Common Stockholders Equity:Common stock, par value $40 per share Authorized  25,000,000 sharesOutstanding  March 31, 2007: 14,000,000 shares December 31, 2006: 12,250,000 shares
    
    
    560,000
    
    
    
    490,000Paid-in capital
    
    
    2,033,544
    
    
    
    2,028,963Retained earnings
    
    
    1,514,931
    
    
    
    1,516,245Accumulated other comprehensive loss
    
    
    (2,993
    )
    
    
    (2,921
    )Total common stockholders equity
    
    
    4,105,482
    
    
    
    4,032,287Total Liabilities and Stockholders Equity
    
    $
    14,807,428
    
    
    $
    14,655,290
  32




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##### Table of Contents



ALABAMA POWER COMPANY
  OVERVIEW
   RESULTS OF OPERATIONS
 Net Income
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$32.8
    
    39.9
  Retail Revenues
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$153.6
    
    19.1
  33




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##### Table of Contents



ALABAMA POWER COMPANY
  First Quarter2007(in millions)
    
    % changeRetail  prior year
    
    $
    802.2Change in Rates and pricing
    
    
    54.0
    
    
    
    6.7Sales growth
    
    
    5.0
    
    
    
    0.6Weather
    
    
    14.1
    
    
    
    1.8Fuel and other cost recovery
    
    
    80.5
    
    
    
    10.0Retail  current year
    
    $
    955.8
    
    
    
    19.1
    %
     Wholesale Revenues  Non-Affiliates
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$8.8
    
    6.0
  34




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##### Table of Contents



ALABAMA POWER COMPANY
 Wholesale Revenues  Affiliates
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(37.1)
    
    (46.8)
  Fuel and Purchased Power Expenses
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % changeFuel
    
    $
    44.3
    
    
    
    13.0Purchased power-non-affiliates
    
    
    (17.4
    )
    
    
    (79.0
    )Purchased power-affiliates
    
    
    16.0
    
    
    
    28.3Total fuel and purchased power expenses
    
    $
    42.9
  First Quarter
    
    First QuarterAverage Cost
    
    2007
    
    2006
    
    % change(cents per net KWH)Fuel
    
    
    2.29
    
    
    
    2.21
    
    
    
    3.6Purchased power
    
    
    4.55
    
    
    
    5.46
    
    
    
    (16.7
    )
   35




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##### Table of Contents



ALABAMA POWER COMPANY
  Maintenance Expense
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$9.3
    
    8.5
  Depreciation and Amortization
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$6.1
    
    5.5
  Taxes Other than Income Taxes
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$7.1
    
    10.8
  Interest Expense, Net of Amounts Capitalized
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$9.9
    
    18.6
  36




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##### Table of Contents



ALABAMA POWER COMPANY
  Other Income (Expense), Net
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$6.1
    
    67.5
  FUTURE EARNINGS POTENTIAL
  Environmental Matters
  New Source Review Litigation
  37




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##### Table of Contents



ALABAMA POWER COMPANY
  Fine Particulate Matter Regulations
  FERC and Alabama PSC Matters
 Intercompany Interchange Contract
 
  Retail Fuel Cost Recovery
  38




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##### Table of Contents



ALABAMA POWER COMPANY
 Other Matters
   ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  New Accounting Standards
 Income Taxes
  Fair Value Measurement
  39




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##### Table of Contents



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




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##### Table of Contents



ALABAMA POWER COMPANY
  Credit Rating Risk
  Market Price Risk
    First Quarter2007ChangesFair Value(in thousands)Contracts beginning of period
    
    $
    (32,628
    )Contracts realized or settled
    
    
    12,826New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    19,441Contracts at March 31, 2007
    
    $
    (361
    )
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered
into during the period, if any.
 Source of March 31, 2007Valuation PricesTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in thousands)Actively quoted
    
    $
    (281
    )
    
    $
    (3,829
    )
    
    $
    3,548External sources
    
    
    (80
    )
    
    
    (80
    )
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2007
    
    $
    (361
    )
    
    $
    (3,909
    )
    
    $
    3,548
 41




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##### Table of Contents



ALABAMA POWER COMPANY
  Amounts(in thousands)Regulatory assets, net
    
    $
    (307
    )Accumulated other comprehensive
income
    
    
    (57
    )Net income
    
    
    3Total fair value
    
    $
    (361
    )
  
 Financing Activities
     42




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##### Table of Contents



GEORGIA POWER COMPANY
 43




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##### Table of Contents



GEORGIA POWER COMPANY
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Revenues:Retail revenues
    
    $
    1,412,329
    
    
    $
    1,358,523Wholesale revenues Non-affiliates
    
    
    143,767
    
    
    
    134,658Affiliates
    
    
    41,788
    
    
    
    37,203Other revenues
    
    
    59,286
    
    
    
    53,637Total operating revenues
    
    
    1,657,170
    
    
    
    1,584,021Operating Expenses:Fuel
    
    
    593,894
    
    
    
    460,724Purchased power Non-affiliates
    
    
    46,093
    
    
    
    58,798Affiliates
    
    
    184,542
    
    
    
    217,876Other operations
    
    
    230,748
    
    
    
    235,184Maintenance
    
    
    124,442
    
    
    
    128,551Depreciation and amortization
    
    
    126,149
    
    
    
    123,825Taxes other than income taxes
    
    
    72,341
    
    
    
    71,257Total operating expenses
    
    
    1,378,209
    
    
    
    1,296,215Operating Income
    
    
    278,961
    
    
    
    287,806Other Income and (Expense):Allowance for equity funds used during construction
    
    
    13,179
    
    
    
    5,981Interest income
    
    
    475
    
    
    
    325Interest expense, net of amounts capitalized
    
    
    (70,587
    )
    
    
    (64,377
    )Interest expense to affiliate trusts
    
    
    (14,878
    )
    
    
    (14,878
    )Other income (expense), net
    
    
    (4,216
    )
    
    
    (1,332
    )Total other income and (expense)
    
    
    (76,027
    )
    
    
    (74,281
    )Earnings Before Income Taxes
    
    
    202,934
    
    
    
    213,525Income taxes
    
    
    70,980
    
    
    
    79,900Net Income
    
    
    131,954
    
    
    
    133,625Dividends on Preferred Stock
    
    
    689
    
    
    
    1,685Net Income After Dividends on Preferred Stock
    
    $
    131,265
    
    
    $
    131,940
 
  For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Net Income After Dividends on Preferred Stock
    
    $
    131,265
    
    
    $
    131,940Other comprehensive income (loss):Change in fair value of marketable
securities, net of tax of $42 and
$(97), respectively
    
    
    65
    
    
    
    (155
    )Changes in fair value of qualifying
hedges, net of tax of $(1,082) and
$5,596, respectively
    
    
    (1,714
    )
    
    
    8,866Reclassification adjustment for amounts
included in net income, net of tax of
$(29) and $113, respectively
    
    
    (46
    )
    
    
    179COMPREHENSIVE INCOME
    
    $
    129,570
    
    
    $
    140,830
  44




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##### Table of Contents



GEORGIA POWER COMPANY
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Activities:Net income
    
    $
    131,954
    
    
    $
    133,625Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    149,339
    
    
    
    145,167Deferred income taxes and investment tax credits
    
    
    12,709
    
    
    
    1,924Deferred expenses  affiliates
    
    
    21,524
    
    
    
    19,937Allowance for equity funds used during construction
    
    
    (13,179
    )
    
    
    (5,981
    )Pension, postretirement, and other employee benefits
    
    
    5,289
    
    
    
    846Stock option expense
    
    
    3,911
    
    
    
    3,997Tax benefit of stock options
    
    
    794
    
    
    
    202Other, net
    
    
    (12,848
    )
    
    
    1,153Changes in certain current assets and liabilities Receivables
    
    
    81,442
    
    
    
    125,870Fossil fuel stock
    
    
    (14,009
    )
    
    
    (50,694
    )Materials and supplies
    
    
    (2,412
    )
    
    
    (18,240
    )Prepaid income taxes
    
    
    19,084
    
    
    
    61,863Other current assets
    
    
    (5,635
    )
    
    
    (20,602
    )Accounts payable
    
    
    (86,459
    )
    
    
    (229,697
    )Accrued taxes
    
    
    (124,431
    )
    
    
    (77,501
    )Accrued compensation
    
    
    (111,026
    )
    
    
    (111,434
    )Other current liabilities
    
    
    35,473
    
    
    
    5,021Net cash provided from (used for) operating activities
    
    
    91,520
    
    
    
    (14,544
    )Investing Activities:Property additions
    
    
    (352,475
    )
    
    
    (215,969
    )Nuclear decommissioning trust fund purchases
    
    
    (94,131
    )
    
    
    (100,167
    )Nuclear decommissioning trust fund sales
    
    
    87,251
    
    
    
    93,287Cost of removal, net of salvage
    
    
    (8,937
    )
    
    
    (6,034
    )Change in construction payables, net of joint owner portion
    
    
    379
    
    
    
    (24,192
    )Other
    
    
    (11,714
    )
    
    
    444Net cash used for investing activities
    
    
    (379,627
    )
    
    
    (252,631
    )Financing Activities:Increase (decrease) in notes payable, net
    
    
    (58,951
    )
    
    
    333,852Proceeds Senior notes
    
    
    250,000
    
    
    
    Capital contributions from parent company
    
    
    269,949
    
    
    
    261,000Gross excess tax benefit of stock options
    
    
    2,208
    
    
    
    465Redemptions Senior notes
    
    
    
    
    
    
    (150,000
    )Capital leases
    
    
    (1,841
    )
    
    
    Preferred stock
    
    
    
    
    
    
    (14,569
    )Payment of preferred stock dividends
    
    
    (832
    )
    
    
    (1,362
    )Payment of common stock dividends
    
    
    (172,475
    )
    
    
    (157,500
    )Other
    
    
    (3,768
    )
    
    
    151Net cash provided from financing activities
    
    
    284,290
    
    
    
    272,037Net Change in Cash and Cash Equivalents
    
    
    (3,817
    )
    
    
    4,862Cash and Cash Equivalents at Beginning of Period
    
    
    16,850
    
    
    
    11,138Cash and Cash Equivalents at End of Period
    
    $
    13,033
    
    
    $
    16,000Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $5,251 and $2,512 capitalized for 2007 and 2006, respectively)
    
    $
    64,595
    
    
    $
    81,610Income taxes (net of refunds)
    
    $
    6,585
    
    
    $
    (25,786
    )
  45




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##### Table of Contents



GEORGIA POWER COMPANY
 At March 31,
    
    
    At December 31,Assets
    
    2007
    
    
    2006(in thousands)Current Assets:Cash and cash equivalents
    
    $
    13,033
    
    
    $
    16,850Receivables Customer accounts receivable
    
    
    438,277
    
    
    
    474,046Unbilled revenues
    
    
    117,771
    
    
    
    130,585Under recovered regulatory clause revenues
    
    
    391,923
    
    
    
    353,976Other accounts and notes receivable
    
    
    89,285
    
    
    
    93,656Affiliated companies
    
    
    15,677
    
    
    
    21,941Accumulated provision for uncollectible accounts
    
    
    (8,929
    )
    
    
    (10,030
    )Fossil fuel stock, at average cost
    
    
    406,019
    
    
    
    392,011Materials and supplies, at average cost
    
    
    306,101
    
    
    
    304,514Vacation pay
    
    
    61,835
    
    
    
    61,907Prepaid expenses
    
    
    65,514
    
    
    
    74,788Other
    
    
    32,590
    
    
    
    72,041Total current assets
    
    
    1,929,096
    
    
    
    1,986,285Property, Plant, and Equipment:In service
    
    
    21,375,467
    
    
    
    21,279,792Less accumulated provision for depreciation
    
    
    8,431,908
    
    
    
    8,343,30912,943,559
    
    
    
    12,936,483Nuclear fuel, at amortized cost
    
    
    184,526
    
    
    
    180,129Construction work in progress
    
    
    1,141,872
    
    
    
    923,948Total property, plant, and equipment
    
    
    14,269,957
    
    
    
    14,040,560Other Property and Investments:Equity investments in unconsolidated subsidiaries
    
    
    73,632
    
    
    
    70,879Nuclear decommissioning trusts, at fair value
    
    
    561,132
    
    
    
    544,013Other
    
    
    58,251
    
    
    
    58,848Total other property and investments
    
    
    693,015
    
    
    
    673,740Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    513,238
    
    
    
    510,531Prepaid pension costs
    
    
    695,535
    
    
    
    688,671Deferred under recovered regulatory clause revenues
    
    
    485,465
    
    
    
    544,152Other regulatory assets
    
    
    630,741
    
    
    
    629,003Other
    
    
    224,660
    
    
    
    235,788Total deferred charges and other assets
    
    
    2,549,639
    
    
    
    2,608,145Total Assets
    
    $
    19,441,707
    
    
    $
    19,308,730
  46




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##### Table of Contents



GEORGIA POWER COMPANY
 At March 31,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2007
    
    
    2006(in thousands)Current Liabilities:Securities due within one year
    
    $
    756,605
    
    
    $
    303,906Notes payable
    
    
    674,330
    
    
    
    733,281Accounts payable Affiliated
    
    
    164,839
    
    
    
    238,093Other
    
    
    394,121
    
    
    
    402,222Customer deposits
    
    
    162,308
    
    
    
    155,763Accrued taxes Income taxes
    
    
    174,402
    
    
    
    217,603Other
    
    
    121,055
    
    
    
    275,098Dividends payable to parent
    
    
    172,475
    
    
    
    Accrued interest
    
    
    87,768
    
    
    
    74,643Accrued vacation pay
    
    
    49,485
    
    
    
    49,704Accrued compensation
    
    
    31,997
    
    
    
    141,356Other
    
    
    102,263
    
    
    
    125,494Total current liabilities
    
    
    2,891,648
    
    
    
    2,717,163Long-term Debt
    
    
    4,489,726
    
    
    
    4,242,839Long-term Debt Payable to Affiliated Trusts
    
    
    515,465
    
    
    
    969,073Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    2,842,780
    
    
    
    2,815,724Deferred credits related to income taxes
    
    
    154,775
    
    
    
    157,297Accumulated deferred investment tax credits
    
    
    278,833
    
    
    
    282,070Employee benefit obligations
    
    
    708,154
    
    
    
    698,274Asset retirement obligations
    
    
    635,857
    
    
    
    626,681Other cost of removal obligations
    
    
    434,367
    
    
    
    436,137Other regulatory liabilities
    
    
    281,244
    
    
    
    281,391Other
    
    
    146,133
    
    
    
    80,839Total deferred credits and other liabilities
    
    
    5,482,143
    
    
    
    5,378,413Total Liabilities
    
    
    13,378,982
    
    
    
    13,307,488Preferred Stock
    
    
    45,000
    
    
    
    44,991Common Stockholders Equity:Common stock, without par valueAuthorized - 20,000,000 sharesOutstanding - 9,261,500 shares
    
    
    398,473
    
    
    
    398,473Paid-in capital
    
    
    3,316,707
    
    
    
    3,039,845Retained earnings
    
    
    2,316,133
    
    
    
    2,529,826Accumulated other comprehensive loss
    
    
    (13,588
    )
    
    
    (11,893
    )Total common stockholders equity
    
    
    6,017,725
    
    
    
    5,956,251Total Liabilities and Stockholders Equity
    
    $
    19,441,707
    
    
    $
    19,308,730
  47




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##### Table of Contents



GEORGIA POWER COMPANY
  OVERVIEW
    RESULTS OF OPERATIONS
 Net Income
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(0.7)
    
    (0.5)
  Retail Revenues
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$53.8
    
    4.0
  48




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##### Table of Contents



GEORGIA POWER COMPANY
  First Quarter 2007(in millions)
    
    % changeRetail  prior year
    
    $
    1,358.5Change in Rates and pricing
    
    
    (27.9
    )
    
    
    (2.1
    )Sales growth
    
    
    12.1
    
    
    
    0.9Weather
    
    
    (0.3
    )
    
    
    Fuel cost recovery
    
    
    69.9
    
    
    
    5.2Retail  current year
    
    $
    1,412.3
    
    
    
    4.0
     Wholesale Revenues Non-Affiliates
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$9.1
    
    6.8
  Wholesale Revenues Affiliates
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$4.6
    
    12.3
 49




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##### Table of Contents



GEORGIA POWER COMPANY
  Other Revenues
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$5.7
    
    10.5
  Fuel and Purchased Power Expenses
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % changeFuel
    
    $
    133.2
    
    
    
    28.9Purchased power-non-affiliates
    
    
    (12.7
    )
    
    
    (21.6
    )Purchased power-affiliates
    
    
    (33.4
    )
    
    
    (15.3
    )Total fuel and purchased power expenses
    
    $
    87.1
   First Quarter
    
    First QuarterAverage Cost
    
    2007
    
    2006
    
    % change(cents per net KWH)Fuel
    
    
    2.64
    
    
    
    2.33
    
    
    
    13.3Purchased Power
    
    
    5.95
    
    
    
    5.95
    
    
    
    
  50




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##### Table of Contents



GEORGIA POWER COMPANY
     Other Operations Expense
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(4.5)
    
    (1.9)
  Maintenance Expense
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(4.2)
    
    (3.2)
  Allowance for Equity Funds Used During Construction
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$7.2
    
    120.3
 51




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##### Table of Contents



GEORGIA POWER COMPANY
  Interest Expense, Net of Amounts Capitalized
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$6.2
    
    9.6
  Income Taxes
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(8.9)
    
    (11.2)
  FUTURE EARNINGS POTENTIAL
  Environmental Matters
  52




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##### Table of Contents



GEORGIA POWER COMPANY
 Fine Particulate Matter Regulations
  Plant Wansley Environmental Litigation
  FERC and Georgia PSC Matters
 Intercompany Interchange Contract
 
  Retail Fuel Cost Recovery
  53




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##### Table of Contents



GEORGIA POWER COMPANY
  Retail General Rate Recovery
  Other Matters
    ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  54




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##### Table of Contents



GEORGIA POWER COMPANY
  New Accounting Standards
 Income Taxes
  Fair Value Measurement
  Fair Value Option
  FINANCIAL CONDITION AND LIQUIDITY
 Overview
  Capital Requirements and Contractual Obligations
 
 55




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##### Table of Contents



GEORGIA POWER COMPANY
  Sources of Capital
    Credit Rating Risk
  56




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##### Table of Contents



GEORGIA POWER COMPANY
  Market Price Risk
    First Quarter 2007ChangesFair Value(in thousands)Contracts beginning of period
    
    $
    (38,003
    )Contracts realized or settled
    
    
    12,498New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    29,276Contracts at March 31, 2007
    
    $
    3,771
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered
into during the period, if any.
 Source of March 31, 2007Valuation PricesTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in thousands)Actively quoted
    
    $
    3,876
    
    
    $
    (1,332
    )
    
    $
    5,208External sources
    
    
    (105
    )
    
    
    (105
    )
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2007
    
    $
    3,771
    
    
    $
    (1,437
    )
    
    $
    5,208
  Amounts(in thousands)Regulatory liabilities, net
    
    $
    3,767Accumulated other comprehensive
income
    
    
    Net income
    
    
    4Total fair value
    
    $
    3,771
 57




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##### Table of Contents



GEORGIA POWER COMPANY
   Financing Activities
   58




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##### Table of Contents



GULF POWER COMPANY
 59




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##### Table of Contents



GULF POWER COMPANY
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Revenues:Retail revenues
    
    $
    219,584
    
    
    $
    179,317Wholesale revenues Non-affiliates
    
    
    23,400
    
    
    
    20,838Affiliates
    
    
    40,080
    
    
    
    52,608Other revenues
    
    
    13,169
    
    
    
    10,279Total operating revenues
    
    
    296,233
    
    
    
    263,042Operating Expenses:Fuel
    
    
    146,474
    
    
    
    121,241Purchased power Non-affiliates
    
    
    1,388
    
    
    
    4,796Affiliates
    
    
    7,041
    
    
    
    6,990Other operations
    
    
    46,050
    
    
    
    43,490Maintenance
    
    
    13,202
    
    
    
    14,572Depreciation and amortization
    
    
    21,097
    
    
    
    21,985Taxes other than income taxes
    
    
    20,206
    
    
    
    18,889Total operating expenses
    
    
    255,458
    
    
    
    231,963Operating Income
    
    
    40,775
    
    
    
    31,079Other Income and (Expense):Interest income
    
    
    1,608
    
    
    
    781Interest expense, net of amounts capitalized
    
    
    (10,576
    )
    
    
    (9,272
    )Interest expense to affiliate trusts
    
    
    (577
    )
    
    
    (1,148
    )Other income (expense), net
    
    
    (171
    )
    
    
    (550
    )Total other income and (expense)
    
    
    (9,716
    )
    
    
    (10,189
    )Earnings Before Income Taxes
    
    
    31,059
    
    
    
    20,890Income taxes
    
    
    11,371
    
    
    
    7,663Net Income
    
    
    19,688
    
    
    
    13,227Dividends on Preference Stock
    
    
    825
    
    
    
    825Net Income After Dividends on
Preference Stock
    
    $
    18,863
    
    
    $
    12,402
 
  For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Net Income After Dividends on Preference Stock
    
    $
    18,863
    
    
    $
    12,402Other comprehensive income (loss):Changes in fair value of qualifying hedges,
net of tax of $559 and $-, respectively
    
    
    890
    
    
    
    Reclassification adjustment for amounts included in net income,
net of tax of $84 and $31, respectively
    
    
    133
    
    
    
    50COMPREHENSIVE INCOME
    
    $
    19,886
    
    
    $
    12,452
  60




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##### Table of Contents



GULF POWER COMPANY
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Activities:Net income
    
    $
    19,688
    
    
    $
    13,227Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    22,384
    
    
    
    23,488Deferred income taxes
    
    
    (3,997
    )
    
    
    (6,462
    )Pension, postretirement, and other employee benefits
    
    
    388
    
    
    
    1,358Stock option expense
    
    
    721
    
    
    
    599Tax benefit of stock options
    
    
    105
    
    
    
    48Other, net
    
    
    (1,159
    )
    
    
    3,222Changes in certain current assets and liabilities Receivables
    
    
    1,208
    
    
    
    26,332Fossil fuel stock
    
    
    (17,154
    )
    
    
    (7,852
    )Materials and supplies
    
    
    (105
    )
    
    
    (153
    )Prepaid income taxes
    
    
    7,306
    
    
    
    295Property damage cost recovery
    
    
    5,325
    
    
    
    5,116Other current assets
    
    
    945
    
    
    
    556Accounts payable
    
    
    2,078
    
    
    
    (3,142
    )Accrued taxes
    
    
    6,885
    
    
    
    10,280Accrued compensation
    
    
    (12,345
    )
    
    
    (15,594
    )Other current liabilities
    
    
    1,089
    
    
    
    5,889Net cash provided from operating activities
    
    
    33,362
    
    
    
    57,207Investing Activities:Property additions
    
    
    (43,526
    )
    
    
    (38,277
    )Cost of removal, net of salvage
    
    
    (2,755
    )
    
    
    (945
    )Construction payables
    
    
    (7,287
    )
    
    
    (3,747
    )Other
    
    
    (80
    )
    
    
    (19
    )Net cash used for investing activities
    
    
    (53,648
    )
    
    
    (42,988
    )Financing Activities:Decrease in notes payable, net
    
    
    (42,232
    )
    
    
    (8,184
    )Proceeds Common stock issued to parent
    
    
    80,000
    
    
    
    Capital contributions from parent company
    
    
    
    
    
    
    21,000Gross excess tax benefit of stock options
    
    
    218
    
    
    
    125Payment of preference stock dividends
    
    
    (825
    )
    
    
    (825
    )Payment of common stock dividends
    
    
    (18,525
    )
    
    
    (17,575
    )Other
    
    
    (122
    )
    
    
    (602
    )Net cash provided from (used for) financing activities
    
    
    18,514
    
    
    
    (6,061
    )Net Change in Cash and Cash Equivalents
    
    
    (1,772
    )
    
    
    8,158Cash and Cash Equivalents at Beginning of Period
    
    
    7,526
    
    
    
    3,847Cash and Cash Equivalents at End of Period
    
    $
    5,754
    
    
    $
    12,005Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $167 and $7 capitalized for 2007 and 2006, respectively)
    
    $
    8,826
    
    
    $
    9,261Income taxes (net of refunds)
    
    $
    264
    
    
    $
    2,935
  61




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##### Table of Contents



GULF POWER COMPANY
 At March 31,
    
    
    At December 31,Assets
    
    2007
    
    
    2006(in thousands)Current Assets:Cash and cash equivalents
    
    $
    5,754
    
    
    $
    7,526Receivables Customer accounts receivable
    
    
    57,995
    
    
    
    56,489Unbilled revenues
    
    
    35,479
    
    
    
    38,287Under recovered regulatory clause revenues
    
    
    77,217
    
    
    
    79,235Other accounts and notes receivable
    
    
    8,998
    
    
    
    9,015Affiliated companies
    
    
    17,264
    
    
    
    15,302Accumulated provision for uncollectible accounts
    
    
    (973
    )
    
    
    (1,279
    )Fossil fuel stock, at average cost
    
    
    93,190
    
    
    
    76,036Materials and supplies, at average cost
    
    
    35,411
    
    
    
    35,306Property damage cost recovery
    
    
    29,048
    
    
    
    28,771Other regulatory assets
    
    
    10,778
    
    
    
    15,977Other
    
    
    8,388
    
    
    
    14,259Total current assets
    
    
    378,549
    
    
    
    374,924Property, Plant, and Equipment:In service
    
    
    2,581,545
    
    
    
    2,574,517Less accumulated provision for depreciation
    
    
    913,540
    
    
    
    901,5641,668,005
    
    
    
    1,672,953Construction work in progress
    
    
    91,406
    
    
    
    62,815Total property, plant, and equipment
    
    
    1,759,411
    
    
    
    1,735,768Other Property and Investments
    
    
    16,558
    
    
    
    14,846Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    17,169
    
    
    
    17,148Prepaid pension costs
    
    
    70,278
    
    
    
    69,895Other regulatory assets
    
    
    102,197
    
    
    
    110,077Other
    
    
    21,033
    
    
    
    17,831Total deferred charges and other assets
    
    
    210,677
    
    
    
    214,951Total Assets
    
    $
    2,365,195
    
    
    $
    2,340,489
  62




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GULF POWER COMPANY
 At March 31,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2007
    
    
    2006(in thousands)Current Liabilities:Notes payable
    
    $
    78,214
    
    
    $
    120,446Accounts payable Affiliated
    
    
    50,813
    
    
    
    44,375Other
    
    
    36,971
    
    
    
    49,979Customer deposits
    
    
    23,640
    
    
    
    21,363Accrued taxes Income taxes
    
    
    35,602
    
    
    
    29,771Other
    
    
    14,362
    
    
    
    15,033Accrued interest
    
    
    8,946
    
    
    
    7,645Accrued compensation
    
    
    4,587
    
    
    
    16,932Other regulatory liabilities
    
    
    12,235
    
    
    
    9,029Other
    
    
    21,716
    
    
    
    30,975Total current liabilities
    
    
    287,086
    
    
    
    345,548Long-term Debt
    
    
    654,956
    
    
    
    654,860Long-term Debt Payable to Affiliated Trusts
    
    
    41,238
    
    
    
    41,238Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    236,677
    
    
    
    237,862Accumulated deferred investment tax credits
    
    
    14,259
    
    
    
    14,721Employee benefit obligations
    
    
    74,518
    
    
    
    73,922Other cost of removal obligations
    
    
    167,077
    
    
    
    165,410Other regulatory liabilities
    
    
    48,443
    
    
    
    46,485Other
    
    
    70,647
    
    
    
    72,533Total deferred credits and other liabilities
    
    
    611,621
    
    
    
    610,933Total Liabilities
    
    
    1,594,901
    
    
    
    1,652,579Preference Stock
    
    
    53,887
    
    
    
    53,887Common Stockholders Equity:Common stock, without par valueAuthorized  20,000,000 sharesOutstanding  March 31, 2007: 1,792,717 shares December 31, 2006: 992,717 shares
    
    
    118,060
    
    
    
    38,060Paid-in capital
    
    
    429,615
    
    
    
    428,592Retained earnings
    
    
    172,306
    
    
    
    171,968Accumulated other comprehensive loss
    
    
    (3,574
    )
    
    
    (4,597
    )Total common stockholders equity
    
    
    716,407
    
    
    
    634,023Total Liabilities and Stockholders Equity
    
    $
    2,365,195
    
    
    $
    2,340,489
  63




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##### Table of Contents



GULF POWER COMPANY
  OVERVIEW
   RESULTS OF OPERATIONS
 Net Income
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$6.5
    
    52.1
  Retail Revenues
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$40.3
    
    22.5
  First Quarter2007(in millions)
    
    % changeRetail  prior year
    
    $
    179.3Change in Rates and pricing
    
    
    2.7
    
    
    
    1.5Sales growth
    
    
    4.3
    
    
    
    2.4Weather
    
    
    3.2
    
    
    
    1.8Fuel cost recovery
    
    
    30.1
    
    
    
    16.8Retail  current year
    
    $
    219.6
    
    
    
    22.5
 64




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##### Table of Contents



GULF POWER COMPANY
     Wholesale Revenues  Affiliates
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change($12.5)
    
    (23.8)
   65




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##### Table of Contents



GULF POWER COMPANY
 Other Revenues
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$2.9
    
    28.1
  Fuel and Purchased Power Expenses
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    
    % changeFuel
    
    $
    25.2
    
    
    
    20.8Purchased power-non-affiliates
    
    
    (3.4
    )
    
    
    (71.1
    )Purchased power-affiliates
    
    
    0.1
    
    
    
    0.7Total fuel and purchased power expenses
    
    $
    21.9
  First Quarter
    
    First QuarterAverage Cost
    
    2007
    
    2006
    
    % change(cents per net KWH)Fuel
    
    
    3.48
    
    
    
    2.99
    
    
    
    16.4Purchased power
    
    
    4.41
    
    
    
    6.75
    
    
    
    (34.7
    )
  Other Operations Expense
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$2.6
    
    5.9
  66




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##### Table of Contents



GULF POWER COMPANY
  Maintenance Expense
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change($1.4)
    
    (9.4)
  Income Taxes
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$3.7
    
    48.4
  FUTURE EARNINGS POTENTIAL
  Environmental Matters
  Fine Particulate Matter Regulations
  67




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##### Table of Contents



GULF POWER COMPANY
  FERC and Florida PSC Matters
 Intercompany Interchange Contract
 
  Retail Fuel Cost Recovery
  Other Matters
  68




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##### Table of Contents



GULF POWER COMPANY
    ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  New Accounting Standards
 Income Taxes
  Fair Value Measurement
  69




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##### Table of Contents



GULF POWER COMPANY
 Fair Value Option
  FINANCIAL CONDITION AND LIQUIDITY
 Overview
  Capital Requirements and Contractual Obligations
 
 Sources of Capital
   70




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##### Table of Contents



GULF POWER COMPANY
  Credit Rating Risk
  Market Price Risk
    First Quarter2007ChangesFair Value(in thousands)Contracts beginning of period
    
    $
    (7,186
    )Contracts realized or settled
    
    
    3,089New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    4,998Contracts at March 31, 2007
    
    $
    901
 
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered
into during the period, if any. 71




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##### Table of Contents



GULF POWER COMPANY
 Source of March 31, 2007Valuation PricesTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in thousands)Actively quoted
    
    $
    917
    
    
    $
    (56
    )
    
    $
    973External sources
    
    
    (16
    )
    
    
    (16
    )
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2007
    
    $
    901
    
    
    $
    (72
    )
    
    $
    973
  Amounts(in thousands)Regulatory liabilities, net
    
    $
    900Accumulated other comprehensive
income
    
    
    Net income
    
    
    1Total fair value
    
    $
    901
   Financing Activities
   72




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MISSISSIPPI POWER COMPANY
 73




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Revenues:Retail revenues
    
    $
    156,124
    
    
    $
    131,364Wholesale revenues Non-affiliates
    
    
    77,294
    
    
    
    61,322Affiliates
    
    
    18,915
    
    
    
    11,772Other revenues
    
    
    4,493
    
    
    
    4,483Total operating revenues
    
    
    256,826
    
    
    
    208,941Operating Expenses:Fuel
    
    
    121,759
    
    
    
    78,263Purchased power Non-affiliates
    
    
    954
    
    
    
    4,702Affiliates
    
    
    12,424
    
    
    
    19,036Other operations
    
    
    43,847
    
    
    
    37,277Maintenance
    
    
    13,947
    
    
    
    14,415Depreciation and amortization
    
    
    14,228
    
    
    
    12,320Taxes other than income taxes
    
    
    12,843
    
    
    
    14,200Total operating expenses
    
    
    220,002
    
    
    
    180,213Operating Income
    
    
    36,824
    
    
    
    28,728Other Income and (Expense):Interest income
    
    
    575
    
    
    
    49Interest expense
    
    
    (4,423
    )
    
    
    (4,291
    )Interest expense to affiliate trusts
    
    
    (649
    )
    
    
    (649
    )Other income (expense), net
    
    
    (128
    )
    
    
    943Total other income and (expense)
    
    
    (4,625
    )
    
    
    (3,948
    )Earnings Before Income Taxes
    
    
    32,199
    
    
    
    24,780Income taxes
    
    
    12,130
    
    
    
    9,065Net Income
    
    
    20,069
    
    
    
    15,715Dividends on Preferred Stock
    
    
    433
    
    
    
    433Net Income After Dividends on Preferred Stock
    
    $
    19,636
    
    
    $
    15,282
 
  For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Net Income After Dividends on Preferred Stock
    
    $
    19,636
    
    
    $
    15,282Other comprehensive income (loss):Changes in fair value of qualifying hedges,
net of tax of $(362) and $140, respectively
    
    
    (584
    )
    
    
    225COMPREHENSIVE INCOME
    
    $
    19,052
    
    
    $
    15,507
  74




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Activities:Net income
    
    $
    20,069
    
    
    $
    15,715Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    16,949
    
    
    
    16,680Deferred income taxes and investment tax credits, net
    
    
    9,224
    
    
    
    10,943Plant Daniel capacity
    
    
    (1,415
    )
    
    
    (3,252
    )Pension, postretirement, and other employee benefits
    
    
    2,680
    
    
    
    1,506Stock option expense
    
    
    711
    
    
    
    743Tax benefit of stock options
    
    
    71
    
    
    
    25Other, net
    
    
    (4,151
    )
    
    
    (8,790
    )Changes in certain current assets and liabilities Receivables
    
    
    11,469
    
    
    
    54,402Fossil fuel stock
    
    
    (10,693
    )
    
    
    12,561Materials and supplies
    
    
    (532
    )
    
    
    460Prepaid income taxes
    
    
    18,301
    
    
    
    (7,904
    )Other current assets
    
    
    803
    
    
    
    4,140Hurricane Katrina accounts payable
    
    
    (1,588
    )
    
    
    (36,088
    )Other accounts payable
    
    
    (9,578
    )
    
    
    (51,267
    )Accrued taxes
    
    
    (28,308
    )
    
    
    (31,003
    )Accrued compensation
    
    
    (17,828
    )
    
    
    (18,661
    )Over recovered regulatory clause revenues
    
    
    
    
    
    
    (10,797
    )Other current liabilities
    
    
    459
    
    
    
    (6,681
    )Net cash provided from (used for) operating activities
    
    
    6,643
    
    
    
    (57,268
    )Investing Activities:Property additions
    
    
    (23,545
    )
    
    
    (52,798
    )Cost of removal, net of salvage
    
    
    (420
    )
    
    
    (12,229
    )Construction payables
    
    
    (2,926
    )
    
    
    (10,112
    )Other
    
    
    (50
    )
    
    
    (37
    )Net cash used for investing activities
    
    
    (26,941
    )
    
    
    (75,176
    )Financing Activities:Increase in notes payable, net
    
    
    35,354
    
    
    
    140,974Proceeds Gross excess tax benefit of stock options
    
    
    178
    
    
    
    9Capital contributions from parent company
    
    
    (3
    )
    
    
    Payment of preferred stock dividends
    
    
    (433
    )
    
    
    (433
    )Payment of common stock dividends
    
    
    (16,825
    )
    
    
    (16,300
    )Net cash provided from financing activities
    
    
    18,271
    
    
    
    124,250Net Change in Cash and Cash Equivalents
    
    
    (2,027
    )
    
    
    (8,194
    )Cash and Cash Equivalents at Beginning of Period
    
    
    4,214
    
    
    
    14,301Cash and Cash Equivalents at End of Period
    
    $
    2,187
    
    
    $
    6,107Supplemental Cash Flow Information:Cash paid during the period for Interest
    
    $
    5,183
    
    
    $
    7,073Income taxes (net of refunds)
    
    $
    (21,559
    )
    
    $
    5,824
  75




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 At March 31,
    
    
    At December 31,Assets
    
    2007
    
    
    2006(in thousands)Current Assets:Cash and cash equivalents
    
    $
    2,187
    
    
    $
    4,214Receivables Customer accounts receivable
    
    
    36,215
    
    
    
    42,099Unbilled revenues
    
    
    22,243
    
    
    
    23,807Under recovered regulatory clause revenues
    
    
    40,483
    
    
    
    50,778Other accounts and notes receivable
    
    
    4,381
    
    
    
    5,870Insurance receivable
    
    
    20,975
    
    
    
    20,551Affiliated companies
    
    
    31,394
    
    
    
    23,696Accumulated provision for uncollectible accounts
    
    
    (621
    )
    
    
    (855
    )Fossil fuel stock, at average cost
    
    
    53,372
    
    
    
    42,679Materials and supplies, at average cost
    
    
    28,459
    
    
    
    27,927Prepaid income taxes
    
    
    3,730
    
    
    
    22,031Other regulatory assets
    
    
    39,980
    
    
    
    42,391Other
    
    
    11,765
    
    
    
    15,091Total current assets
    
    
    294,563
    
    
    
    320,279Property, Plant, and Equipment:In service
    
    
    2,074,011
    
    
    
    2,054,151Less accumulated provision for depreciation
    
    
    848,063
    
    
    
    836,9221,225,948
    
    
    
    1,217,229Construction work in progress
    
    
    45,678
    
    
    
    40,608Total property, plant, and equipment
    
    
    1,271,626
    
    
    
    1,257,837Other Property and Investments
    
    
    4,685
    
    
    
    4,636Deferred Charges and Other Assets:Deferred charges related to income taxes
    
    
    9,161
    
    
    
    9,280Prepaid pension costs
    
    
    36,144
    
    
    
    36,424Other regulatory assets
    
    
    58,593
    
    
    
    61,086Other
    
    
    22,240
    
    
    
    18,834Total deferred charges and other assets
    
    
    126,138
    
    
    
    125,624Total Assets
    
    $
    1,697,012
    
    
    $
    1,708,376
  76




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 At March 31,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2007
    
    
    2006(in thousands)Current Liabilities:Securities due within one year
    
    $
    36,082
    
    
    $
    Notes payable
    
    
    86,731
    
    
    
    51,377Accounts payable Affiliated
    
    
    26,915
    
    
    
    24,615Other
    
    
    57,454
    
    
    
    73,236Customer deposits
    
    
    8,927
    
    
    
    8,676Accrued taxes Income taxes
    
    
    5,911
    
    
    
    4,171Other
    
    
    16,201
    
    
    
    50,346Accrued interest
    
    
    1,964
    
    
    
    2,332Accrued compensation
    
    
    6,130
    
    
    
    23,958Plant Daniel capacity
    
    
    4,244
    
    
    
    5,659Other regulatory liabilities
    
    
    14,619
    
    
    
    11,386Other
    
    
    27,193
    
    
    
    28,880Total current liabilities
    
    
    292,371
    
    
    
    284,636Long-term Debt
    
    
    242,553
    
    
    
    242,553Long-term Debt Payable to Affiliated Trusts
    
    
    
    
    
    
    36,082Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    248,878
    
    
    
    236,202Deferred credits related to income taxes
    
    
    15,912
    
    
    
    16,218Accumulated deferred investment tax credits
    
    
    16,136
    
    
    
    16,402Employee benefit obligations
    
    
    93,854
    
    
    
    92,403Other cost of removal obligations
    
    
    84,807
    
    
    
    82,397Other regulatory liabilities
    
    
    24,421
    
    
    
    22,559Other
    
    
    52,296
    
    
    
    56,324Total deferred credits and other liabilities
    
    
    536,304
    
    
    
    522,505Total Liabilities
    
    
    1,071,228
    
    
    
    1,085,776Preferred 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
    
    
    307,975
    
    
    
    307,019Retained earnings
    
    
    247,323
    
    
    
    244,511Accumulated other comprehensive income
    
    
    15
    
    
    
    599Total common stockholders equity
    
    
    593,004
    
    
    
    589,820Total Liabilities and Stockholders Equity
    
    $
    1,697,012
    
    
    $
    1,708,376
  77




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##### Table of Contents



MISSISSIPPI POWER COMPANY
  OVERVIEW
   RESULTS OF OPERATIONS
 Net Income
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$4.3
    
    28.5
  Retail Revenues
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$24.7
    
    18.8
  78




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 First Quarter2007(in millions)
    
    % changeRetail  prior year
    
    $
    131.4Change in Rates and pricing
    
    
    3.8
    
    
    
    2.9Sales growth
    
    
    2.8
    
    
    
    2.1Weather
    
    
    2.8
    
    
    
    2.1Fuel cost recovery
    
    
    15.3
    
    
    
    11.7Retail  current year
    
    $
    156.1
    
    
    
    18.8
    %
     Wholesale Revenues  Non-Affiliates
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$16.0
    
    26.0
  Wholesale Revenues  Affiliates
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$7.1
    
    60.7
  79




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##### Table of Contents



MISSISSIPPI POWER COMPANY
  Fuel and Purchased Power Expenses
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % changeFuel
    
    $
    43.5
    
    
    
    55.6Purchased power-non-affiliates
    
    
    (3.8
    )
    
    
    (79.7
    )Purchased power-affiliates
    
    
    (6.6
    )
    
    
    (34.7
    )Total fuel and purchased power expenses
    
    $
    33.1
    First Quarter
    
    First QuarterAverage Cost
    
    2007
    
    2006
    
    % change(cents per net KWH)Fuel
    
    
    3.56
    
    
    
    3.14
    
    
    
    13.4Purchased power
    
    
    3.37
    
    
    
    4.38
    
    
    
    (23.1
    )
    80




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 Other Operations Expense
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$6.6
    
    17.6
  Depreciation and Amortization Expense
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$1.9
    
    15.5
  Taxes Other Than Income Taxes
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(1.4)
    
    (9.6)
  Total Other Income and (Expense)
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(0.7)
    
    (17.1)
  81




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MISSISSIPPI POWER COMPANY
 Income Taxes
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$3.1
    
    33.8
  FUTURE EARNINGS POTENTIAL
  Environmental Matters
  FERC and Mississippi PSC Matters
 Intercompany Interchange Contract
 
  82




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MISSISSIPPI POWER COMPANY
 Retail Regulatory Matters
   Fuel Cost Recovery
  Other Matters
   83




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##### Table of Contents



MISSISSIPPI POWER COMPANY
 ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
  New Accounting Standards
 Income Taxes
  Fair Value Measurement
  Fair Value Option
  FINANCIAL CONDITION AND LIQUIDITY
 Overview
  84




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MISSISSIPPI POWER COMPANY
 Capital Requirements and Contractual Obligations
  Sources of Capital
   Off-Balance Sheet Financing Arrangements
  Credit Rating Risk
  85




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##### Table of Contents



MISSISSIPPI POWER COMPANY
  Market Price Risk
    First Quarter2007ChangesFair Value(in thousands)Contracts beginning of period
    
    $
    (6,360
    )Contracts realized or settled
    
    
    1,497New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    11,506Contracts at March 31, 2007
    
    $
    6,643
 
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered
into during the period, if any. Source of March 31, 2007Valuation PricesTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in thousands)Actively quoted
    
    $
    6,616
    
    
    $
    4,286
    
    
    $
    2,330External sources
    
    
    27
    
    
    
    27
    
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2007
    
    $
    6,643
    
    
    $
    4,313
    
    
    $
    2,330
  86




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MISSISSIPPI POWER COMPANY
  Amounts(in thousands)Regulatory liabilities, net
    
    $
    6,591Accumulated other comprehensive
income
    
    
    24Net income
    
    
    28Total fair value
    
    $
    6,643
   Financing Activities
  87




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SOUTHERN POWER COMPANY
AND SUBSIDIARY COMPANIES
 88




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Revenues:Wholesale revenues Non-affiliates
    
    $
    81,117
    
    
    $
    51,697Affiliates
    
    
    109,502
    
    
    
    87,323Other revenues
    
    
    1,873
    
    
    
    809Total operating revenues
    
    
    192,492
    
    
    
    139,829Operating Expenses:Fuel
    
    
    27,366
    
    
    
    14,259Purchased power Non-affiliates
    
    
    11,030
    
    
    
    13,971Affiliates
    
    
    31,287
    
    
    
    19,407Other operations
    
    
    20,889
    
    
    
    17,507Maintenance
    
    
    5,298
    
    
    
    5,885Depreciation and amortization
    
    
    18,394
    
    
    
    14,707Taxes other than income taxes
    
    
    3,711
    
    
    
    3,661Total operating expenses
    
    
    117,975
    
    
    
    89,397Operating Income
    
    
    74,517
    
    
    
    50,432Other Income and (Expense):Interest expense, net of amounts capitalized
    
    
    (20,894
    )
    
    
    (20,342
    )Other income (expense), net
    
    
    (82
    )
    
    
    2,403Total other income and (expense)
    
    
    (20,976
    )
    
    
    (17,939
    )Earnings Before Income Taxes
    
    
    53,541
    
    
    
    32,493Income taxes
    
    
    21,505
    
    
    
    12,593Net Income
    
    $
    32,036
    
    
    $
    19,900
 
  For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Net Income
    
    $
    32,036
    
    
    $
    19,900Other comprehensive income (loss):Changes in fair value of qualifying hedges,
net of tax of $(580) and $(79), respectively
    
    
    (891
    )
    
    
    (122
    )Reclassification adjustment for amounts included in net income,
net of tax of $1,156 and $1,112, respectively
    
    
    2,037
    
    
    
    1,732COMPREHENSIVE INCOME
    
    $
    33,182
    
    
    $
    21,510
  89




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 For the Three MonthsEnded March 31,2007
    
    
    2006(in thousands)Operating Activities:Net income
    
    $
    32,036
    
    
    $
    19,900Adjustments to reconcile net income
to net cash provided from operating activities Depreciation and amortization
    
    
    22,086
    
    
    
    18,070Deferred income taxes and investment tax credits, net
    
    
    20,953
    
    
    
    17,251Deferred revenues
    
    
    (27,924
    )
    
    
    (26,672
    )Accumulated deferred billings on construction contract
    
    
    15,098
    
    
    
    5,490Accumulated deferred costs on construction contract
    
    
    (4,408
    )
    
    
    Other, net
    
    
    927
    
    
    
    (2,010
    )Changes in certain current assets and liabilities Receivables
    
    
    5,399
    
    
    
    38,672Fossil fuel stock
    
    
    149
    
    
    
    (293
    )Materials and supplies
    
    
    (650
    )
    
    
    (356
    )Other current assets
    
    
    80
    
    
    
    (8,517
    )Accounts payable
    
    
    (3,065
    )
    
    
    (46,701
    )Accrued taxes
    
    
    (2,961
    )
    
    
    2,899Accrued interest
    
    
    (12,067
    )
    
    
    (15,365
    )Net cash provided from operating activities
    
    
    45,653
    
    
    
    2,368Investing Activities:Property additions
    
    
    (45,852
    )
    
    
    (1,175
    )Change in construction payables, net
    
    
    5,104
    
    
    
    2Net cash used for investing activities
    
    
    (40,748
    )
    
    
    (1,173
    )Financing Activities:Increase in notes payable, net
    
    
    21,380
    
    
    
    231Payment of common stock dividends
    
    
    (22,450
    )
    
    
    (19,425
    )Other
    
    
    (26
    )
    
    
    Net cash used for financing activities
    
    
    (1,096
    )
    
    
    (19,194
    )Net Change in Cash and Cash Equivalents
    
    
    3,809
    
    
    
    (17,999
    )Cash and Cash Equivalents at Beginning of Period
    
    
    29,929
    
    
    
    27,631Cash and Cash Equivalents at End of Period
    
    $
    33,738
    
    
    $
    9,632Supplemental Cash Flow Information:Cash paid during the period for Interest (net of $3,409 and $0 capitalized for 2007 and 2006, respectively)
    
    $
    29,293
    
    
    $
    32,260Income taxes (net of refunds)
    
    $
    6,948
    
    
    $
    4,227
  90




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 At March 31,
    
    
    At December 31,Assets
    
    2007
    
    
    2006(in thousands)Current Assets:Cash and cash equivalents
    
    $
    33,738
    
    
    $
    29,929Receivables Customer accounts receivable
    
    
    16,379
    
    
    
    16,789Other accounts receivable
    
    
    1,182
    
    
    
    125Affiliated companies
    
    
    21,034
    
    
    
    26,215Fossil fuel stock, at average cost
    
    
    11,337
    
    
    
    11,056Materials and supplies, at average cost
    
    
    20,096
    
    
    
    19,877Prepaid service agreements  current
    
    
    32,542
    
    
    
    30,280Other prepaid expenses
    
    
    12,671
    
    
    
    5,878Other
    
    
    512
    
    
    
    2,006Total current assets
    
    
    149,491
    
    
    
    142,155Property, Plant, and Equipment:In service
    
    
    2,437,160
    
    
    
    2,434,146Less accumulated provision for depreciation
    
    
    238,028
    
    
    
    219,6542,199,132
    
    
    
    2,214,492Construction work in progress
    
    
    297,571
    
    
    
    260,279Total property, plant, and equipment
    
    
    2,496,703
    
    
    
    2,474,771Deferred Charges and Other Assets:Prepaid long-term service agreements
    
    
    55,161
    
    
    
    51,615OtherAffiliated
    
    
    4,389
    
    
    
    4,473Other
    
    
    16,461
    
    
    
    17,929Total deferred charges and other assets
    
    
    76,011
    
    
    
    74,017Total Assets
    
    $
    2,722,205
    
    
    $
    2,690,943
  91




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 At March 31,
    
    
    At December 31,Liabilities and Stockholders Equity
    
    2007
    
    
    2006(in thousands)Current Liabilities:Securities due within one year
    
    $
    1,209
    
    
    $
    1,209Notes payable
    
    
    145,132
    
    
    
    123,752Accounts payable Affiliated
    
    
    28,936
    
    
    
    33,205Other
    
    
    23,032
    
    
    
    16,453Accrued taxes Income taxes
    
    
    
    
    
    
    393Other
    
    
    6,354
    
    
    
    2,183Accrued interest
    
    
    17,781
    
    
    
    29,849Other
    
    
    2,701
    
    
    
    4,840Total current liabilities
    
    
    225,145
    
    
    
    211,884Long-term Debt
    
    
    1,296,909
    
    
    
    1,296,845Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    128,005
    
    
    
    106,016Deferred capacity revenues  Affiliated
    
    
    10,041
    
    
    
    36,313OtherAffiliated
    
    
    8,459
    
    
    
    8,958Other
    
    
    17,413
    
    
    
    5,423Total deferred credits and other liabilities
    
    
    163,918
    
    
    
    156,710Total Liabilities
    
    
    1,685,972
    
    
    
    1,665,439Common Stockholders Equity:Common stock, par value $.01 per share Authorized - 1,000,000 sharesOutstanding - 1,000 shares
    
    
    
    
    
    
    Paid-in capital
    
    
    854,930
    
    
    
    854,933Retained earnings
    
    
    220,881
    
    
    
    211,295Accumulated other comprehensive loss
    
    
    (39,578
    )
    
    
    (40,724
    )Total common stockholders equity
    
    
    1,036,233
    
    
    
    1,025,504Total Liabilities and Stockholders Equity
    
    $
    2,722,205
    
    
    $
    2,690,943
  92




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
  OVERVIEW
   RESULTS OF OPERATIONS
 Net Income
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$12.1
    
    61.0
  Wholesale Revenues  Affiliates and Wholesale Revenues  Non-Affiliates
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$51.6
    
    37.1
  93




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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
   Fuel and Purchased Power Expenses
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % changeFuel
    
    $
    13.1
    
    
    
    91.9Purchased power-non-affiliates
    
    
    (2.9
    )
    
    
    (21.1
    )Purchased power-affiliates
    
    
    11.9
    
    
    
    61.2Total fuel and purchased power expenses
    
    $
    22.1
  Other Operations Expense
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$3.4
    
    19.3
  Maintenance Expense
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(0.6)
    
    (10.0)
  94




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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 Depreciation and Amortization Expense
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$3.7
    
    25.1
  Other Income (Expense), Net
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$(2.5)
    
    (103.4)
  Income Tax Expense
 First Quarter 2007 vs. First Quarter 2006(change in millions)
    
    % change$8.9
    
    70.8
  FUTURE EARNINGS POTENTIAL
  95




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 FERC Matters
 Intercompany Interchange Contract
   Integrated Gasification Combined Cycle (IGCC) Project
  Power Sales Agreements
  96




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
  Other Matters
    ACCOUNTING POLICIES
 Application of Critical Accounting Policies and Estimates
 
 97




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 New Accounting Standards
 Income Taxes
  Fair Value Measurement
  Fair Value Option
  FINANCIAL CONDITION AND LIQUIDITY
 Overview
  Capital Requirements and Contractual Obligations
  98




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
  Sources of Capital
   Credit Rating Risk
  99




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 Market Price Risk
     First Quarter2007ChangesFair Value(in thousands)Contracts beginning of period
    
    $
    1,850Contracts realized or settled
    
    
    (1,378
    )New contracts at inception
    
    
    Changes in valuation techniques
    
    
    Current period changes (a)
    
    
    (504
    )Contracts at March 31, 2007
    
    $
    (32
    )
 
 (a)
    
    Current period changes also include the changes in fair value of new contracts entered into
during the period, if any. Source of March 31, 2007Valuation PricesTotal
    
    MaturityFair Value
    
    Year 1
    
    1-3 Years(in thousands)Actively quoted
    
    $
    (267
    )
    
    $
    (267
    )
    
    $
    External sources
    
    
    235
    
    
    
    235
    
    
    
    Models and other methods
    
    
    
    
    
    
    
    
    
    
    Contracts at March 31, 2007
    
    $
    (32
    )
    
    $
    (32
    )
    
    $
    
  100




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##### Table of Contents



SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
  Amounts(in thousands)Net Income
    
    $
    84Accumulated other comprehensive loss
    
    
    (116
    )Total fair value
    
    $
    (32
    )
  Financing Activities
  101




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
GULF POWER COMPANY
MISSISSIPPI POWER COMPANY
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
 
 Registrant
    
    Applicable NotesSouthern Company
    
    A, B, C, E, F, G, H, IAlabama Power
    
    A, B, F, G, IGeorgia Power
    
    A, B, F, G, H, IGulf Power
    
    A, B, F, G, IMississippi Power
    
    A, B, D, F, G, ISouthern Power
    
    A, B, F, I
 102




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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 the registrants included herein have been
prepared by each registrant, without audit, pursuant to the rules and regulations of the
SEC. The Condensed Balance Sheets as of December 31, 2006 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 necessary to present fairly the results of operations for the periods ended
March 31, 2007 and 2006. 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. Disclosure which
would substantially duplicate the disclosure in the latest Form 10-K and details which have
not changed significantly in amount or composition since the filing of the Form 10-K are
omitted from this Quarterly Report on Form 10-Q. Therefore, these condensed financial
statements should be read in conjunction with the financial statements and the notes thereto
included in the Form 10-K. Certain prior period amounts have been reclassified to conform
to current period presentation. Due to seasonal variations in the demand for energy,
operating results for the periods presented do not necessarily indicate operating results
for the entire year.(B)
    
    CONTINGENCIES AND REGULATORY MATTERSSee Note 3 to the financial statements of Southern Company, the traditional operating
companies, and Southern Power in Item 8 of the Form 10-K for information relating to various
lawsuits and other contingencies.NEW SOURCE REVIEW LITIGATIONSee Note 3 to the financial statements of Southern Company and Alabama Power under
Environmental Matters  New Source Review Actions in Item 8 of the Form 10-K for
additional information regarding civil actions brought by the EPA alleging that Alabama
Power and Georgia Power had violated the NSR provisions of the Clean Air Act and related
state laws with respect to certain of their respective coal-fired generating facilities.
The plaintiffs appeal against Alabama Power was stayed by the U.S. Court of Appeals for the
Eleventh Circuit pending the U.S. Supreme Courts decision in a similar case against Duke
Energy. On April 2, 2007, the U.S. Supreme Court issued an opinion in the Duke Energy case.
On April 11, 2007, Alabama Power filed a motion to lift the stay and to reset the briefing
schedule. The plaintiffs have opposed the motion and have moved to vacate the district
courts decision and remand for further proceedings consistent with the Duke Energy
decision. The final resolution of these claims is dependent on these appeals and possible
further court action and, therefore, cannot be determined at this time.PLANT WANSLEY ENVIRONMENTAL LITIGATIONSee MANAGEMENTS DISCUSSION AND ANALYSIS - FUTURE EARNINGS POTENTIAL  Environmental
Matters  Plant Wansley Environmental Litigation of Southern Company and Georgia Power in
Item 7 and Note 3 to the financial statements of Southern Company and Georgia Power under
Environmental Matters - Plant Wansley Environmental Litigation in Item 8 of the Form 10-K
for
 103




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
  MIRANT MATTERS
 .
 Mirant Securities Litigation
  MC Asset Recovery Litigation
  104




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 FERC MATTERS
 Intercompany Interchange Contract
 Matters  Intercompany Interchange Contract
  INCOME TAX MATTERS
 Leveraged Lease Transactions
 2000 - 2001
  105




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
   Synthetic Fuel Tax Credits
  PROPERTY TAX DISPUTE
  106




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 (C)
    
    SEGMENT AND RELATED INFORMATIONSouthern Companys reportable business segment is 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 synthetic fuels and leveraged lease
projects, telecommunications, and energy-related services. Southern Powers revenues from
sales to the traditional operating companies were $110 million and $87 million for the three
months ended March 31, 2007 and March 31, 2006, respectively. All other intersegment
revenues are not material. Financial data for business segments and products and services
are as follows:
 Electric UtilitiesTraditionalOperating
    
    
    
    
    
    
    
    
    
    
    
    
    
    AllCompanies
    
    Southern Power
    
    Eliminations
    
    Total
    
    Other
    
    Eliminations
    
    Consolidated(in millions)Three Months Ended March 
31,
2007:Operating revenues
    
    $
    3,294
    
    
    $
    192
    
    
    $
    (140
    )
    
    $
    3,346
    
    
    $
    101
    
    
    $
    (38
    )
    
    $
    3,409Segment net income (loss)
    
    
    284
    
    
    
    32
    
    
    
    
    
    
    
    316
    
    
    
    24
    
    
    
    (1
    )
    
    
    339Total assets at March 31, 2007
    
    $
    39,107
    
    
    $
    2,722
    
    
    $
    (73
    )
    
    $
    41,756
    
    
    $
    1,993
    
    
    $
    (644
    )
    
    $
    43,105
 Electric UtilitiesTraditionalOperating
    
    
    
    
    
    
    
    
    
    
    
    
    
    AllCompanies
    
    Southern Power
    
    Eliminations
    
    Total
    
    Other
    
    Eliminations
    
    Consolidated(in millions)Three Months Ended March 
31,
2006:Operating revenues
    
    $
    2,964
    
    
    $
    140
    
    
    $
    (107
    )
    
    $
    2,997
    
    
    $
    104
    
    
    $
    (38
    )
    
    $
    3,063Segment net income (loss)
    
    
    239
    
    
    
    20
    
    
    
    
    
    
    
    259
    
    
    
    1
    
    
    
    2
    
    
    
    262Total assets at December 31, 2006
    
    $
    38,825
    
    
    $
    2,691
    
    
    $
    (110
    )
    
    $
    41,406
    
    
    $
    1,933
    
    
    $
    (481
    )
    
    $
    42,858
 Products and Services
 Electric Utilities RevenuesPeriod
    
    Retail
    
    Wholesale
    
    Other
    
    Total(in millions)Three Months Ended March 31, 2007
    
    $
    2,744
    
    
    $
    481
    
    
    $
    121
    
    
    $
    3,346Three Months Ended March 31, 2006
    
    
    2,471
    
    
    
    415
    
    
    
    111
    
    
    
    2,997
 (D)
    
    MISSISSIPPI POWER RETAIL REGULATORY MATTERSSee 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 information on
Mississippi Powers annual environmental filing with the Mississippi PSC. In February 2007,
Mississippi Power filed with the Mississippi PSC its annual ECO Plan evaluation for 2007.
Mississippi Power requested an 86 cent per 1,000 KWH increase for retail customers. This
increase represents approximately $7.5 million in annual revenues for Mississippi Power. On
April 13, 2007, the Mississippi PSC approved Mississippi Powers ECO Plan as filed. The new
rates are effective in May 2007.In April 2007, the Mississippi PSC issued an order allowing Mississippi Power to defer
approximately $10.4 million of certain reliability related maintenance costs beginning
January 1, 2007 and recover them over a four-year period beginning January 1, 2008. These
costs relate to system upgrades and improvements that are now being made as a follow-up to
the emergency repairs that were made subsequent to Hurricane Katrina. As of March 31, 2007,
Mississippi Power had incurred and deferred approximately $2.1 million of such costs, which
are included in Other Regulatory Assets on the Condensed Balance Sheets herein.
 107




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 (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 MonthsEnded
    
    EndedMarch 31,
    
    March 31,2007
    
    2006As reported shares
    
    
    750,259
    
    
    
    742,195Effect of options
    
    
    5,093
    
    
    
    4,844Diluted shares
    
    
    755,352
    
    
    
    747,039
 (F)
    
    FINANCIAL INSTRUMENTSSee Note 6 to the financial statements of Southern Company, the traditional operating
companies, and Southern Power under Financial Instruments in Item 8 of the Form 10-K. At
March 31, 2007, the fair value gain/(loss) of derivative energy 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
    
    $
    11.0
    
    
    $
    (0.3
    )
    
    $
    3.8
    
    
    $
    0.9
    
    
    $
    6.6
    
    
    $
    Accumulated other
comprehensive
income (loss)
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Net income (loss)
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Total fair value
    
    $
    10.9
    
    
    $
    (0.4
    )
    
    $
    3.8
    
    
    $
    0.9
    
    
    $
    6.6
    
    
    $
    
    108




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 
 Cash Flow Hedges
 Weighted
    
    
    
    Fair ValueVariable
    
    Average
    
    Hedge
    
    Gain (Loss)Notional
    
    Rate
    
    Fixed Rate
    
    Maturity
    
    March 31, 2007Amount
    
    Received
    
    Paid
    
    Date
    
    (in millions)Alabama Power*
    
    $100 million
    
    3-month LIBOR
    
    
    6.15
    %
    
    November 2017
    
    $
    (1.6
    )Alabama Power*
    
    $100 million
    
    3-month LIBOR
    
    
    6.15
    %
    
    December 2017
    
    
    (1.7
    )Georgia Power*
    
    $300 million
    
    3-month LIBOR
    
    
    5.75
    %
    
    July 2037
    
    
    1.1Georgia Power**
    
    $400 million
    
    Floating
    
    
    3.85
    %
    
    December 2007
    
    Georgia Power
    
    $150 million
    
    3-month LIBOR
    
    
    5.25
    %
    
    June 2017
    
    
    (0.9
    )Georgia Power
    
    $100 million
    
    3-month LIBOR
    
    
    5.10
    %
    
    December 2017
    
    
    0.7Georgia Power
    
    $225 million
    
    3-month LIBOR
    
    
    5.26
    %
    
    March 2018
    
    
    (1.1
    )Georgia Power
    
    $100 million
    
    3-month LIBOR
    
    
    5.12
    %
    
    June 2018
    
    
    0.7Georgia Power
    
    $300 million
    
    1-month LIBOR
    
    
    2.68
    %
    
    June 2007
    
    
    0.7Georgia Power
    
    $14 million
    
    BMA Index
    
    
    2.50
    %
    
    December 2007
    
    
    0.1Gulf Power
    
    $85 million
    
    3-month LIBOR
    
    
    5.07
    %
    
    July 2017
    
    
    0.7Gulf Power
    
    $80 million
    
    3-month LIBOR
    
    
    5.10
    %
    
    July 2018
    
    
    0.8
 
 *
    
    Interest rate collar showing rate cap**
    
    Interest rate collar with variable rate based on one-month LIBOR (showing rate cap)   Southern Company
    
    $
    (17.5
    )Alabama Power
    
    
    (0.9
    )Georgia Power
    
    
    (2.2
    )Gulf Power
    
    
    (0.8
    )Southern Power
    
    
    (13.6
    )
 109




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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 (G)
    
    RETIREMENT BENEFITSSee 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-month periods ended March
31, 2007 and 2006 are as follows (in millions):
 Southern
    
    Alabama
    
    Georgia
    
    Gulf
    
    MississippiPENSION PLANS
    
    Company
    
    Power
    
    Power
    
    Power
    
    PowerThree Months Ended
March 31, 2007Service cost
    
    $
    37
    
    
    $
    9
    
    
    $
    13
    
    
    $
    2
    
    
    $
    2Interest cost
    
    
    81
    
    
    
    21
    
    
    
    31
    
    
    
    4
    
    
    
    4Expected return on plan assets
    
    
    (120
    )
    
    
    (37
    )
    
    
    (49
    )
    
    
    (6
    )
    
    
    (5
    )Recognized net (gain)/loss
    
    
    10
    
    
    
    3
    
    
    
    4
    
    
    
    
    
    
    
    Net amortization
    
    
    2
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    Net cost (income)
    
    $
    10
    
    
    $
    (4
    )
    
    $
    
    
    
    $
    
    
    
    $
    1Three Months Ended
March 31, 2006Service cost
    
    $
    38
    
    
    $
    9
    
    
    $
    13
    
    
    $
    2
    
    
    $
    2Interest cost
    
    
    75
    
    
    
    19
    
    
    
    30
    
    
    
    3
    
    
    
    3Expected return on plan assets
    
    
    (114
    )
    
    
    (35
    )
    
    
    (46
    )
    
    
    (5
    )
    
    
    (4
    )Recognized net (gain)/loss
    
    
    4
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Net amortization
    
    
    7
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    Net cost (income)
    
    $
    10
    
    
    $
    (4
    )
    
    $
    
    
    
    $
    
    
    
    $
    1
 Southern
    
    Alabama
    
    Georgia
    
    Gulf
    
    MississippiPOSTRETIREMENT PLANS
    
    Company
    
    Power
    
    Power
    
    Power
    
    PowerThree Months Ended
March 31, 2007Service cost
    
    $
    7
    
    
    $
    2
    
    
    $
    3
    
    
    $
    
    
    
    $
    Interest cost
    
    
    27
    
    
    
    7
    
    
    
    12
    
    
    
    1
    
    
    
    1Expected return on plan assets
    
    
    (13
    )
    
    
    (5
    )
    
    
    (7
    )
    
    
    
    
    
    
    Net amortization
    
    
    10
    
    
    
    3
    
    
    
    5
    
    
    
    
    
    
    
    1Net cost (income)
    
    $
    31
    
    
    $
    7
    
    
    $
    13
    
    
    $
    1
    
    
    $
    2Three Months Ended
March 31, 2006Service cost
    
    $
    7
    
    
    $
    2
    
    
    $
    3
    
    
    $
    
    
    
    $
    Interest cost
    
    
    25
    
    
    
    6
    
    
    
    11
    
    
    
    1
    
    
    
    1Expected return on plan assets
    
    
    (12
    )
    
    
    (4
    )
    
    
    (6
    )
    
    
    
    
    
    
    Net amortization
    
    
    11
    
    
    
    3
    
    
    
    5
    
    
    
    
    
    
    
      -Net cost (income)
    
    $
    31
    
    
    $
    7
    
    
    $
    13
    
    
    $
    1
    
    
    $
    1
 (H)
    
    EFFECTIVE TAX RATESSee Note 5 to the financial statements of Southern Company and Georgia Power in Item 8 of
the Form 10-K for information on each companys effective income tax rate. Southern Company
has recorded synthetic fuel tax credits as of the three months ended March 31, 2007 that are
$23.1 million less than the synthetic fuel tax credits recorded for the same period in 2006,
which resulted in an increase in income tax expense. The increase in income tax expense was
partially offset by a $17.3 million reduction to tax credit reserves in the first quarter of
2007 compared to the first quarter 2006. See Note (B) herein for additional information
regarding the production of synthetic fuel tax credits in 2007. The impact of the reduction
in synthetic fuel tax credits and these reserves is an increase in Southern Companys
effective tax rate for the three months ended March 31, 2007 as compared to the same period
in 2006.
 110




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##### Table of Contents



NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
 Georgia Power recorded certain state income tax credits that resulted in a lower effective
income tax rate for the first quarter ended March 31, 2007 when compared to the same period
in 2006. In September 2006, Georgia Power filed its 2005 income tax returns, which included
certain other state income tax credits. Georgia Power has also filed similar claims for the
years 2001 through 2004. The Georgia Department of Revenue is currently reviewing these
claims. If approved as filed, such claims could have a significant, and possibly material,
effect on Georgia Powers net income. The ultimate outcome of this matter cannot now be
determined.(I)
    
    ADOPTION OF FIN 48On January 1, 2007, Southern Company, the traditional operating companies, and Southern
Power adopted FIN 48, which requires companies to determine whether it is more likely than
not that a tax position will be sustained upon examination by the appropriate taxing
authorities before any part of the benefit can be recorded in the financial statements. It
also provides guidance on the recognition, measurement, and classification of income tax
uncertainties, along with any related interest and penalties. Prior to adoption of FIN 48,
Southern Company had unrecognized tax benefits of approximately $65 million, which included
approximately $62 million for Georgia Power. As of adoption, an additional $146 million of
unrecognized tax benefits were recorded, which resulted in a total balance of $211 million.
The $146 million is associated with a tax timing difference which was recorded by
reclassifying a deferred tax liability to an unrecognized tax benefit. Of the total $211
million unrecognized tax benefits, $65 million would impact Southern Companys effective tax
rate if recognized, which includes $62 million for Georgia Power. For the first three
months of 2007, the total amount of unrecognized tax benefits increased by $7 million,
resulting in a balance of $218 million as of March 31, 2007.Southern Company classifies interest on tax uncertainties as interest expense. The net
amount of interest accrued as of adoption was $24 million. The impact of adopting FIN 48 on
Southern Companys financial statements was a reduction to beginning 2007 retained earnings
of approximately $15 million. The other registrants retained earnings balances were not
impacted by the adoption of FIN 48. Net interest accrued for the three months ended March
31, 2007 was $0.2 million.Southern Company files a consolidated federal income tax return. The IRS has audited and
closed all tax returns prior to 2004. Southern Company also files income tax
returns in various states. The audits for these returns have either been concluded, or the
statute of limitations has expired, for years prior to 2002.Southern Company does not anticipate that the total unrecognized tax benefits will
significantly change due to settlement of audits or litigation, or the expiration of statute
of limitations prior to March 31, 2008. See Note (B) herein for additional information
regarding the implementation of FIN 48.
 
 111




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  112




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##### Table of Contents



Item 6. Exhibits.
 (4) Instruments Describing Rights of Security Holders, Including Indentures
 Southern Company
 (a)1
    
    Second Supplemental Indenture to the
Senior Note Indenture dated as of March
28, 2007, providing for the issuance of
the Series 2007B Senior Notes.
(Designated in Form 8-K dated March 20,
2007, File No. 1-3526, as Exhibit 4.2.)Alabama Power(b)1
    
    Thirty-Eighth Supplemental Indenture to
Senior Note Indenture dated as of April
18, 2007, providing for the issuance of
the Series 2007B Senior Notes.
(Designated in Form 8-K dated April 4,
2007, File No. 1-3164, as Exhibit 4.2.)Georgia Power(c)1
    
    Twenty-Eighth Supplemental Indenture to
Senior Note Indenture dated as of March
13, 2007, providing for the issuance of
the Series 2007A Senior Notes.
(Designated in Form 8-K dated March 6,
2007, File No. 1-6468, as Exhibit 4.2.)(10) Material ContractsSouthern Company(a)1
    
    Amended and Restated Change in Control
Agreement dated November 16, 2006
between Southern Company, SCS and David
M. Ratcliffe. *(a)2
    
    Amended and Restated Change in Control
Agreement dated November 16, 2006
between Southern Company, SCS and
Thomas A. Fanning. *(a)3
    
    Amended and Restated Change in Control
Agreement dated November 16, 2006
between Southern Company, Georgia Power
and Michael D. Garrett. *(a)4
    
    Amended and Restated Change in Control
Agreement dated November 16, 2006
between Southern Company, SCS and
William Paul Bowers. *(a)5
    
    Amended and Restated Change in Control
Agreement dated November 16, 2006
between Southern Company, Alabama Power
and Charles D. McCrary. *(a)6
    
    The Southern Company Supplemental
Benefit Plan, Amended and Restated
Effective as of January 1, 2005.
(Designated in Form 8-K dated March 30,
2007, File No. 1-3526, as Exhibit
10.1.)(a)7
    
    The Southern Company Supplemental
Executive Retirement Plan, Amended and
Restated Effective as of January 1,
2005. (Designated in Form 8-K dated
March 30, 2007, File No. 1-3526, as
Exhibit 10.2)(a)8
    
    Amended and Restated Southern Company
Change in Control Benefits Protection
Plan, effective February 28, 2007.
 113




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##### Table of Contents



Item 6. Exhibits. (continued)
 Alabama Power(b)1
    
    Amended and Restated Change in Control Agreement dated
November 16, 2006 between Southern Company, Alabama Power
and Charles D. McCrary. See Exhibit 10(a)5 herein. *(b)2
    
    The Southern Company Supplemental Benefit Plan, Amended
and Restated Effective as of January 1, 2005. Exhibit
10(a)6 herein.(b)3
    
    The Southern Company Supplemental Executive Retirement
Plan, Amended and Restated Effective as of January 1,
2005. See Exhibit 10(a)7 herein.(b)4
    
    Amended and Restated Southern Company Change in Control
Benefits Protection Plan, effective February 28, 2007.
See Exhibit 10(a)8 herein.(b)5
    
    Intercompany Interchange Contract as revised effective May
1, 2007, among Alabama Power, Georgia Power, Gulf Power,
Mississippi Power, Southern Power and SCS.Georgia Power(c)1
    
    Amended and Restated Change in Control Agreement dated
November 16, 2006 between Southern Company, Georgia Power
and Michael D. Garrett. See Exhibit 10(a)3 herein. *(c)2
    
    The Southern Company Supplemental Benefit Plan, Amended
and Restated Effective as of January 1, 2005. Exhibit
10(a)6 herein.(c)3
    
    The Southern Company Supplemental Executive Retirement
Plan, Amended and Restated Effective as of January 1,
2005. See Exhibit 10(a)7 herein.(c)4
    
    Amended and Restated Southern Company Change in Control
Benefits Protection Plan, effective February 28, 2007.
See Exhibit 10(a)8 herein.(c)5
    
    Intercompany Interchange Contract as revised effective May
1, 2007, among Alabama Power, Georgia Power, Gulf Power,
Mississippi Power, Southern Power and SCS. See Exhibit
10(b)5 herein.Gulf Power(d)1
    
    The Southern Company Supplemental Benefit Plan, Amended
and Restated Effective as of January 1, 2005. Exhibit
10(a)6 herein.(d)2
    
    The Southern Company Supplemental Executive Retirement
Plan, Amended and Restated Effective as of January 1,
2005. See Exhibit 10(a)7 herein.(d)3
    
    Amended and Restated Southern Company Change in Control
Benefits Protection Plan, effective February 28, 2007.
See Exhibit 10(a)8 herein.(d)4
    
    Intercompany Interchange Contract as revised effective May
1, 2007, among Alabama Power, Georgia Power, Gulf Power,
Mississippi Power, Southern Power and SCS. See Exhibit
10(b)5 herein.
 114




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##### Table of Contents



Item 6. Exhibits. (continued)
 Mississippi Power(e)1
    
    The Southern Company Supplemental Benefit Plan,
Amended and Restated Effective as of January 1, 2005.
Exhibit 10(a)6 herein.(e)2
    
    The Southern Company Supplemental Executive Retirement
Plan, Amended and Restated Effective as of January 1,
2005. See Exhibit 10(a)7 herein.(e)3
    
    Amended and Restated Southern Company Change in
Control Benefits Protection Plan, effective February
28, 2007. See Exhibit 10(a)8 herein.(e)4
    
    Intercompany Interchange Contract as revised effective
May 1, 2007, among Alabama Power, Georgia Power, Gulf
Power, Mississippi Power, Southern Power and SCS. See
Exhibit 10(b)5 herein.Southern Power(f)1
    
    Intercompany Interchange Contract as revised effective
May 1, 2007, among Alabama Power, Georgia Power, Gulf
Power, Mississippi Power, Southern Power and SCS. See
Exhibit 10(b)5 herein.(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, 2006,
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, 2006,
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, 2006,
File No. 1-6468 as Exhibit 24(c) and incorporated
herein by reference.)Gulf Power(d)1
    -
    Power of Attorney and resolution. (Designated in
the Form 10-K for the year ended December 31, 2006,
File No. 0-2429 as Exhibit 24(d) and incorporated
herein by reference.)Mississippi Power(e)1
    -
    Power of Attorney and resolution. (Designated in
the Form 10-K for the year ended December 31, 2006,
File No. 001-11229 as Exhibit 24(e) and incorporated
herein by reference.)
 115




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##### Table of Contents



Item 6. Exhibits. (continued)
 Southern Power(f)1
    -
    Power of Attorney and resolution. (Designated in the
Form 10-K for the year ended December 31, 2006, 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.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.
 116




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##### Table of Contents



Item 6. Exhibits. (continued)
 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.
 
 * Reflects the correction of an error in the agreement as
originally filed.
 117




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THE SOUTHERN COMPANY
 
 SIGNATURES
  THE SOUTHERN COMPANYBy
    
    David M. RatcliffeChairman, President and Chief Executive Officer(Principal Executive Officer)By
    
    Thomas A. FanningExecutive Vice President, Chief Financial Officer and Treasurer(Principal Financial Officer)By
    
    /s/ Wayne Boston(Wayne Boston, Attorney-in-fact)
  118




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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)
  119




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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)
  120




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GULF POWER COMPANY
 SIGNATURES
  GULF POWER COMPANYBy
    
    Susan N. StoryPresident and Chief Executive Officer(Principal Executive Officer)By
    
    Ronnie R. LabratoVice President and Chief Financial Officer(Principal Financial Officer)By
    
    /s/ Wayne Boston(Wayne Boston, Attorney-in-fact)
  121




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MISSISSIPPI POWER COMPANY
 SIGNATURES
  MISSISSIPPI POWER COMPANYBy
    
    Anthony J. TopaziPresident and Chief Executive Officer(Principal Executive Officer)By
    
    Frances V. TurnageVice President, Treasurer and Chief Financial Officer(Principal Financial Officer)By
    
    /s/ Wayne Boston(Wayne Boston, Attorney-in-fact)
  122




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SOUTHERN POWER COMPANY
 SIGNATURES
  SOUTHERN POWER COMPANYBy
    
    Ronnie L. BatesPresident and Chief Executive Officer(Principal Executive Officer)By
    
    Michael W. SouthernSenior Vice President and Chief Financial Officer(Principal Financial Officer)By
    
    /s/ Wayne Boston(Wayne Boston, Attorney-in-fact)
  123