<PAGE>
===============================================================================
<TABLE>
<CAPTION>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                           _________________________
                                    FORM 10-Q
              (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    For the Quarter Ended September 30, 1997
                                       OR
             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the Transition Period from _____to_____

      <S>                           <C>                                                   <C>     

      Commission                    Registrant, State of Incorporation,                   I.R.S. Employer
      File Number                   Address and Telephone Number                          Identification No.

         1-3526                     The Southern Company                                      58-0690070
                                    (A Delaware Corporation)
                                    270 Peachtree Street, N.W.
                                    Atlanta, Georgia 30303
                                    (770) 393-0650

         1-3164                     Alabama Power Company                                     63-0004250
                                    (An Alabama Corporation)
                                    600 North 18th Street
                                    Birmingham, Alabama 35291
                                    (205) 257-1000

         1-6468                     Georgia Power Company                                     58-0257110
                                    (A Georgia Corporation)
                                    333 Piedmont Avenue, N.E.
                                    Atlanta, Georgia 30308
                                    (404) 526-6526

         0-2429                     Gulf Power Company                                        59-0276810
                                    (A Maine Corporation)
                                    500 Bayfront Parkway
                                    Pensacola, Florida 32501
                                    (850) 444-6111

         0-6849                     Mississippi Power Company                                 64-0205820
                                    (A Mississippi Corporation)
                                    2992 West Beach
                                    Gulfport, Mississippi 39501
                                    (601) 864-1211

         1-5072                     Savannah Electric and Power Company                       58-0418070
                                    (A Georgia Corporation)
                                    600 East Bay Street
                                    Savannah, Georgia 31401
                                    (912) 644-7171

==============================================================================
</TABLE>


<PAGE>



    Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No____ 
<TABLE>
<CAPTION>
     
                                                         Description of                                 Shares Outstanding 
Registrant                                               Common Stock                                   at October 31, 1997

<S>                                                      <C>                                            <C>        
The Southern Company                                     Par Value $5 Per Share                         690,113,512
Alabama Power Company                                    Par Value $40 Per Share                          5,608,955
Georgia Power Company                                    No Par Value                                     7,761,500
Gulf Power Company                                       No Par Value                                       992,717
Mississippi Power Company                                Without Par Value                                1,121,000
Savannah Electric and Power Company                      Par Value $5 Per Share                          10,844,635

     This combined Form 10-Q is separately filed by The Southern Company,
Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company and Savannah Electric and Power Company. Information contained
herein relating to any individual company is filed by such company on its own
behalf. Each company makes no representation as to information relating to the
other companies.

</TABLE>


<PAGE>


                     INDEX TO QUARTERLY REPORT ON FORM 10-Q
                               September 30, 1997
<TABLE>
<CAPTION>

<S>                                                                                                                          <C>
                                                                                                                              Page
                                                                                                                             Number
DEFINITIONS........................................................................................................            4
                                                   PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements (Unaudited) and
Item 2.  Management's Discussion and Analysis of Results of Operations and Financial Condition
             The Southern Company and Subsidiary Companies
                Condensed Consolidated Statements of Income........................................................            6
                Condensed Consolidated Statements of Cash Flows....................................................            7
                Condensed Consolidated Balance Sheets..............................................................            8
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           10
             Alabama Power Company
                Condensed Statements of Income.....................................................................           17
                Condensed Statements of Cash Flows.................................................................           18
                Condensed Balance Sheets...........................................................................           19
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           21
                Exhibit 1 - Report of Independent Public Accountants...............................................           25
             Georgia Power Company
                Condensed Statements of Income.....................................................................           27
                Condensed Statements of Cash Flows.................................................................           28
                Condensed Balance Sheets...........................................................................           29
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           31
                Exhibit 1 - Report of Independent Public Accountants...............................................           36
             Gulf Power Company
                Condensed Statements of Income.....................................................................           38
                Condensed Statements of Cash Flows.................................................................           39
                Condensed Balance Sheets...........................................................................           40
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           42
             Mississippi Power Company
                Condensed Statements of Income.....................................................................           47
                Condensed Statements of Cash Flows.................................................................           48
                Condensed Balance Sheets...........................................................................           49
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           51
             Savannah Electric and Power Company
                Condensed Statements of Income.....................................................................           56
                Condensed Statements of Cash Flows.................................................................           57
                Condensed Balance Sheets...........................................................................           58
                Management's Discussion and Analysis of Results of Operations and Financial Condition..............           60
             Notes to the Condensed Financial Statements...........................................................           63
                                                    PART II - OTHER INFORMATION
Item 1.  Legal Proceedings.........................................................................................           71
Item 2.  Changes in Securities..................................................................................... Inapplicable
Item 3.  Defaults Upon Senior Securities........................................................................... Inapplicable
Item 4.  Submission of Matters to a Vote of Security Holders....................................................... Inapplicable
Item 5.  Other Information.........................................................................................           71
Item 6.  Exhibits and Reports on Form 8-K..........................................................................           72
         Signatures ...............................................................................................           73

</TABLE>
                                       3
<PAGE>
<TABLE>
<CAPTION>


                                   DEFINITIONS
TERM                                             MEANING
<S>                                              <C>
affiliates..................................     ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH
ALABAMA.....................................     Alabama Power Company
CEPA........................................     Consolidated Electric Power Asia
Clean Air Act...............................     Clean Air Act Amendments of 1990
ECO Plan....................................     Environmental Compliance Overview Plan
Energy Act..................................     Energy Policy Act of 1992
EWG.........................................     Exempt wholesale generator
FASB........................................     Financial Accounting Standards Board
FERC........................................     Federal Energy Regulatory Commission
Form 10-K...................................     Combined Annual Report on Form 10-K of SOUTHERN, ALABAMA,
                                                 GEORGIA, GULF, MISSISSIPPI and SAVANNAH for the year ended
                                                 December 31, 1996
FUCO........................................     Foreign utility company
GEORGIA.....................................     Georgia Power Company
GULF........................................     Gulf Power Company
MEAG........................................     Municipal Electric Authority of Georgia
MISSISSIPPI.................................     Mississippi Power Company
OPC.........................................     Oglethorpe Power Corporation
operating affiliates........................     see affiliates
operating companies.........................     see affiliates
PEP.........................................     Performance Evaluation Plan
PSC.........................................     Public Service Commission
SAVANNAH....................................     Savannah Electric and Power Company
SEC.........................................     Securities and Exchange Commission
SOUTHERN....................................     The Southern Company
Southern Energy.............................     Southern Energy, Inc. (formerly Southern Electric International, Inc.),
                                                 including SOUTHERN subsidiaries managed or controlled by Southern
                                                 Energy
SWEB........................................     South Western Electricity plc (United Kingdom)
TVA.........................................     Tennessee Valley Authority

</TABLE>

                                       4
<PAGE>






                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES



                                       5
<PAGE>
<TABLE>
<CAPTION>

                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                      For the Three Months               For the Nine Months
                                                                      Ended September 30,                  Ended September 30, 
                                                                      1997             1996              1997             1996

<S>                                                              <C>              <C>               <C>              <C>          
OPERATING REVENUES                                               $   4,071,204    $   2,932,556     $   9,372,813    $   7,925,418
                                                                 --------------   --------------    --------------   --------------
OPERATING EXPENSES:
Operation--
     Fuel                                                              694,152          642,408         1,697,158        1,700,439
     Purchased power                                                 1,138,447          256,463         2,079,864          766,914
     Other (Note H)                                                    480,519          460,975         1,364,054        1,387,718
Maintenance                                                            164,748          169,856           567,593          553,573
Depreciation and amortization                                          357,564          249,915           936,595          745,751
Amortization of deferred Plant Vogtle costs (Note M)                    37,580           34,077           112,791          101,070
Taxes other than income taxes                                          145,668          162,836           436,635          485,044
Income taxes                                                           332,182          290,600           632,070          661,523
                                                                 --------------   --------------    --------------   --------------
Total operating expenses                                             3,350,860        2,267,130         7,826,760        6,402,032
                                                                 --------------   --------------    --------------   --------------
OPERATING INCOME                                                       720,344          665,426         1,546,053        1,523,386
OTHER INCOME:
Allowance for equity funds used during construction                      2,649            1,169             4,272            2,213
Interest income                                                         30,027           11,783            78,250           39,590
Other, net                                                              (3,678)          18,832            28,921           48,333
Income taxes applicable to other income                                 14,354          (19,264)           27,402            2,681
United Kingdom Windfall Profit Tax (Note R)                           (148,062)               -          (148,062)               -
                                                                 --------------   --------------    --------------   --------------
INCOME BEFORE INTEREST CHARGES                                         615,634          677,946         1,536,836        1,616,203
                                                                 --------------   --------------    --------------   --------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt                                             160,891          126,428           478,236          389,774
Allowance for debt funds used during construction                       (1,840)          (4,400)          (10,424)         (15,189)
Interest on notes payable                                               26,406           30,288            81,834           95,095
Amortization of debt discount, premium and expense, net                  9,395           15,560            25,750           36,500
Other interest charges                                                  15,947           12,326            44,815           40,478
Minority interest in subsidiaries                                      (15,454)           3,765            12,888            4,591
Distributions on capital and preferred
     securities of subsidiary companies                                 34,572            4,183            84,965           11,823
Preferred dividends of subsidiary companies                             11,007           22,356            42,254           65,556
                                                                 --------------   --------------    --------------   --------------
Interest charges and other, net                                        240,924          210,506           760,318          628,628
                                                                 --------------   --------------    --------------   --------------

CONSOLIDATED NET INCOME                                          $     374,710    $     467,440     $     776,518    $     987,575
                                                                 ==============   ==============    ==============   ==============


AVERAGE NUMBER OF SHARES OF
     COMMON STOCK OUTSTANDING (Thousands)                              687,159          673,651           682,924          671,838

EARNINGS PER SHARE OF COMMON STOCK                                       $0.55            $0.69             $1.14            $1.47

CASH DIVIDENDS PAID PER SHARE
     OF COMMON STOCK                                                    $0.325           $0.315            $0.975           $0.945




              The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.
</TABLE>

                                                                6

<PAGE>
<TABLE>
<CAPTION>

                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                        (Stated in Thousands of Dollars)
                                                                                             For the Nine Months
                                                                                              Ended September 30, 
                                                                                          1997                 1996
OPERATING ACTIVITIES:
<S>                                                                                 <C>                  <C>            
Consolidated net income                                                             $       776,518      $       987,575
Adjustments to reconcile net income to net cash provided by
     operating activities--
         Depreciation and amortization                                                    1,112,051              913,122
         Deferred income taxes and investment tax credits                                   (16,696)              67,694
         Allowance for equity funds used during construction                                 (4,272)              (2,213)
         Amortization of deferred Plant Vogtle costs (Note M)                               112,791              101,070
         Gain on asset sales                                                                (16,167)             (62,787)
         Other, net                                                                          76,471               39,254
         Changes in certain current assets and liabilities--
            Receivables, net                                                               (420,068)             (75,918)
            Fossil fuel stock                                                                33,942               64,170
            Materials and supplies                                                           18,553               22,266
            Prepayments                                                                     (24,433)             (29,748)
            Payables                                                                         34,266             (136,168)
            Customer deposits                                                                 2,418              (83,360)
            Taxes Accrued                                                                   478,208              159,459
            Other                                                                            85,096              (82,096)
                                                                                    ----------------     ----------------
Net cash provided from operating activities                                               2,248,678            1,882,320
                                                                                    ----------------     ----------------
INVESTING ACTIVITIES:
Gross property additions                                                                 (1,220,017)            (911,435)
Southern Energy business acquisitions                                                    (2,812,404)                   -
Sales of property                                                                            33,270              209,558
Other                                                                                       (42,086)             (98,990)
                                                                                    ----------------     ----------------
Net cash used for investing activities                                                   (4,041,237)            (800,867)
                                                                                    ----------------     ----------------
FINANCING ACTIVITIES:
Proceeds--
     Common stock                                                                           270,632               95,873
     Capital and preferred securities                                                     1,321,250              322,000
     First mortgage bonds                                                                         -               60,000
     Pollution control obligations                                                          339,500              146,100
     Other long-term debt                                                                 1,827,088              319,148
Retirements--
     Preferred stock                                                                       (428,440)             (78,897)
     First mortgage bonds                                                                  (112,409)            (377,149)
     Pollution control obligations                                                         (289,500)             (91,460)
     Other long-term debt                                                                  (534,095)          (1,116,073)
Special deposits-redemption funds                                                            (6,877)             (61,480)
Notes payable, net                                                                          316,104              (40,027)
Payment of common stock dividends                                                          (664,718)            (634,553)
Miscellaneous                                                                               (70,453)             (16,318)
                                                                                    ----------------     ----------------
Net cash provided from (used for) financing activities                                    1,968,082           (1,472,836)
                                                                                    ----------------     ----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                     175,523             (391,383)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                            444,832              772,340
                                                                                    ----------------     ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                          $       620,355      $       380,957
                                                                                    ================     ================

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
     Interest (net of amount capitalized)                                                  $674,499             $545,845
     Income taxes                                                                          $427,029             $458,731
Southern Energy business acquisitions--
     Fair value of assets acquired                                                       $4,795,324                    -
     Less cash paid for common stock                                                      2,812,404                    -
                                                                                      --------------       --------------
         Liabilities assumed                                                             $1,982,920                    -
                                                                                      ==============       ==============

         The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.
</TABLE>

                                                           7

<PAGE>
<TABLE>
<CAPTION>

                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                                     ASSETS

                                                                                At September 30,
                                                                                      1997               At December 31,
                                                                                  (Unaudited)                1996
                                                                                 -----------------     ------------------
UTILITY PLANT:
<S>                                                                              <C>                   <C>            
Plant in service                                                                 $   33,702,312        $    33,260,914
Less accumulated provision for depreciation                                          11,727,455             10,921,242
                                                                                 ---------------       ----------------
                                                                                     21,974,857             22,339,672
Nuclear fuel, at amortized cost                                                         202,134                245,702
Construction work in progress                                                           845,908                683,924
                                                                                 ---------------       ----------------
Total                                                                                23,022,899             23,269,298
                                                                                 ---------------       ----------------

OTHER PROPERTY AND INVESTMENTS:
Goodwill, being amortized                                                             1,886,188                318,142
Leasehold interests                                                                   1,818,598                415,600
Equity investments in subsidiaries                                                    1,160,461                227,097
Long-term notes receivable                                                              582,530                      -
Nuclear decommissioning trusts, at market                                               365,338                278,938
Miscellaneous                                                                           269,313                261,175
                                                                                 ---------------       ----------------
Total                                                                                 6,082,428              1,500,952
                                                                                 ---------------       ----------------

CURRENT ASSETS:
Cash and cash equivalents                                                               620,355                444,832
Special deposits                                                                        169,472                139,387
Receivables, less accumulated provisions for uncollectible accounts
     of $78,063 at September 30, 1997 and $31,587 at December 31, 1996                2,064,490              1,363,159
Fossil fuel stock, at average cost                                                      236,604                269,940
Materials and supplies, at average cost                                                 494,834                509,409
Prepayments                                                                             294,201                252,977
Vacation pay deferred                                                                    75,690                 77,195
                                                                                 ---------------       ----------------
Total                                                                                 3,955,646              3,056,899
                                                                                 ---------------       ----------------

DEFERRED CHARGES:
Deferred charges related to income taxes                                              1,244,490              1,302,342
Deferred Plant Vogtle costs (Note M)                                                     58,198                170,988
Debt expense, being amortized                                                           101,742                 78,042
Premium on reacquired debt, being amortized                                             284,613                289,019
Miscellaneous                                                                           634,204                624,262
                                                                                 ---------------       ----------------
Total                                                                                 2,323,247              2,464,653
                                                                                 ---------------       ----------------

TOTAL ASSETS                                                                     $   35,384,220        $    30,291,802
                                                                                 ===============       ================



         The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.

</TABLE>
                                        8
<PAGE>
<TABLE>
<CAPTION>

                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                         CAPITALIZATION AND LIABILITIES

                                                                         At September 30,
                                                                              1997                At December 31,
                                                                           (Unaudited)                1996
                                                                         ----------------       ----------------
CAPITALIZATION:
<S>                                                                      <C>                    <C>            
Common stock, par value $5 per share-
     Authorized -- 1 billion shares
     Outstanding -- September 30, 1997: 689,591,537 shares
                          -- December 31, 1996: 677,035,961 shares       $     3,447,958        $     3,385,180
Paid-in capital                                                                2,265,204              2,067,228
Retained earnings                                                              3,875,410              3,763,987
                                                                         ----------------       ----------------
                                                                               9,588,572              9,216,395
Preferred stock of subsidiaries                                                  695,702                979,527
Subsidiary obligated mandatorily redeemable
     capital and preferred securities (Note I)                                 1,742,020                422,000
Long-term debt                                                                10,055,279              7,935,269
                                                                         ----------------       ----------------
Total                                                                         22,081,573             18,553,191
                                                                         ----------------       ----------------

CURRENT LIABILITIES:
Preferred stock of subsidiaries due within one year                               28,913                173,528
Long-term debt due within one year                                               679,670                191,411
Notes payable                                                                  1,871,505              1,482,822
Accounts payable                                                                 896,628                787,809
Customer deposits                                                                133,962                131,544
Taxes accrued--
     Income taxes                                                                395,708                 11,965
     Other                                                                       315,110                192,921
Interest accrued                                                                 191,525                187,152
Vacation pay accrued                                                             104,240                103,514
Miscellaneous                                                                    858,090                535,366
                                                                         ----------------       ----------------
Total                                                                          5,475,351              3,798,032
                                                                         ----------------       ----------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                              4,580,072              4,738,085
Deferred credits related to income taxes                                         844,343                879,090
Accumulated deferred investment tax credits                                      764,915                787,545
Employee benefits provisions                                                     488,647                439,176
Minority interests in subsidiaries                                               394,750                374,922
Prepaid capacity revenues                                                        113,206                122,496
Department of Energy assessments                                                  80,523                 80,523
Disallowed Plant Vogtle capacity buyback costs                                    56,316                 57,250
Storm damage reserves                                                             37,852                 35,112
Miscellaneous                                                                    466,672                426,380
                                                                         ----------------       ----------------
Total                                                                          7,827,296              7,940,579
                                                                         ----------------       ----------------

TOTAL CAPITALIZATION AND LIABILITIES                                     $    35,384,220        $    30,291,802
                                                                         ================       ================

     The accompanying notes as they relate to SOUTHERN are an integral part of these condensed statements.

                                                       9

</TABLE>

<PAGE>


                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                   THIRD QUARTER 1997 vs. THIRD QUARTER 1996
                                       AND
                     YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996

RESULTS OF OPERATIONS

Earnings

SOUTHERN's consolidated net income for the third quarter and year-to-date 1997 
was $375 million ($0.55 per share) and $777 million ($1.14 per share), 
respectively, compared to $467 million ($0.69 per share) and $988 million 
($1.47 per share) for the corresponding periods of 1996.  Earnings decreased 
19.8% and 21.4% for the quarter and year-to-date, respectively due to several 
factors. These factors included a windfall profit tax imposed by the government
of the United Kingdom on SWEB and increased depreciation and amortization 
expenses. The windfall profit tax caused a one-time charge in the third quarter
reducing earnings by $111 million or about $0.16 per share, after giving effect
to minority interest. 

     SOUTHERN's traditional core business is primarily represented by its five 
domestic electric utility operating companies, which provide electric service 
in four Southeastern states. Another significant portion of SOUTHERN's business
is its non-traditional business primarily represented by Southern Energy, which
owns and manages international and domestic businesses for SOUTHERN. Businesses
acquired by Southern Energy have been included in the consolidated statements of
income since the date of acquisition. Certain changes in operating revenues and
expenses from the prior period are the result of such acquisitions. 

     Significant income statement items appropriate for discussion include
the following:
<TABLE>
<CAPTION>

                                                                          Increase (Decrease)
                                                     --------------------------------------------------------------
                                                             Third Quarter                   Year-To-Date
                                                     ------------------------------- ------------------------------
                                                       (in thousands)        %       (in thousands)          %
<S>                                                    <C>                  <C>        <C>                  <C> 
Operating revenues...............................      $1,138,648           38.8       $1,447,395           18.3
Purchased power expense..........................         881,984          343.9        1,312,950          171.2
Depreciation and amortization expense............         107,649           43.1          190,844           25.6
Taxes other than income taxes....................         (17,168)         (10.5)         (48,409)         (10.0)
Interest income..................................          18,244          154.8           38,660           97.7
Income taxes applicable to other income..........          33,618         (174.5)          24,721            N/M
United Kingdom Windfall Profit Tax...............        (148,062)            N/A        (148,062)           N/A
Interest on long-term debt.......................          34,463           27.3           88,462           22.7
Interest on notes payable........................          (3,882)         (12.8)         (13,261)         (13.9)
Minority interest in subsidiaries................         (19,219)            N/M           8,297          180.7
Distributions on capital and preferred
   securities of subsidiary companies............          30,389             N/M          73,142             N/M
Preferred dividends of subsidiary
   companies.....................................         (11,349)         (50.8)         (23,302)         (35.5)

     N/M - Not meaningful. 
     N/A - Not applicable.
</TABLE>

                                       10

<PAGE>


                 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION


    Operating revenues. Operating revenues for the traditional core business
for the third quarter increased $207 million or 8.1% and year-to-date decreased
$33 million or 0.5%, compared to the corresponding periods of 1996. Operating
revenues for non-traditional business were up $931 million or 260.2% for the
quarter and $1.480 billion or 128.5% for year-to-date. The increase in third
quarter traditional core revenues was mainly due to a 5.6% increase in energy
sales during the quarter. Energy sales to the residential, commercial and
industrial sectors increased by 5.7%, 5.4% and 4.1%, respectively. The decrease
in year-to-date traditional core revenues was mainly due to the 5.2% decrease in
energy sales to residential customers. This decrease in energy sales was a
result of milder-than-normal weather experienced throughout the operating
companies' service areas. Non-traditional operating revenues increased for the
quarter and year-to-date due primarily to increased sales by Southern Energy's
energy marketing organization. These revenues were $883 million and $1.313
billion for the current quarter and year-to-date 1997, respectively.

     Purchased power expense. For the third quarter, purchased power expenses
for the traditional core business rose by 35.3% while year-to-date traditional
core business purchased power expenses fell by 5.5%. The increase for the
quarter was primarily due to increased energy sales to residential, commercial
and industrial customers. The decrease year-to-date was primarily due to
decreased energy sales to residential customers. For non-traditional business,
purchased power expenses rose 466.9% and 225.8% for the quarter and year-to-date
1997. These increases are primarily due to the power purchasing activities of
Southern Energy's energy marketing organization. These power purchases rose by
$866 million for the quarter and $1.288 billion year-to-date.

     Depreciation and amortization expense. Depreciation and amortization
expense of the traditional core business for the quarter and year-to-date
increased compared to the corresponding periods in 1996. These increases can be
attributed primarily to additional depreciation charges of $76.7 million and
$104.9 million, respectively for the quarter and year-to-date 1997 pursuant to
GEORGIA's retail accounting order as discussed in Note (L) in the "Notes to the
Condensed Financial Statements" herein. Additions to utility plant further
contributed to the increase in depreciation and amortization for the quarter and
year-to-date 1997. The acquisition of CEPA is the primary cause for the
increases in non-traditional business depreciation and amortization expense for
the quarter and year-to-date. These expenses increased by $23.6 million and
$63.0 million for the respective periods.

     Taxes other than income taxes. Taxes other than income taxes decreased for
the third quarter and year-to-date 1997 when compared to the same periods of
1996 primarily due to reductions of $17.7 million for the quarter and $51.4
million year-to-date attributable to SWEB. These decreases resulted from the
lowering, in November 1996, of the taxes on electricity sales in the United
Kingdom from 10% to 3.7%. 

     Interest income. The increase in interest income for
the quarter and year-to-date as compared to the corresponding periods of 1996,
is due to a $14.2 million increase for the quarter and a $33.4 million increase
year-to-date in interest income for the non-traditional business, primarily
CEPA.



                                       11
<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     Income taxes applicable to other income. The decreases for the quarter and
year-to-date 1997 when compared to the same periods in 1996 is primarily due to
increased tax benefits from increased interest expense at the corporate level
and to taxes relating to the sale, in July 1996, of a 25% interest in SWEB.

     United Kingdom Windfall Profit Tax. This item represents 100% of the
Windfall Profit Tax applicable to SWEB before giving effect to a 25% minority
interest ownership. See Note (R) in the "Notes to the Condensed Financial
Statements" herein for further details.

     Interest on long-term debt. Interest on long-term debt for the quarter and
year-to-date 1997 compared to the same periods of 1996, increased primarily due
to the CEPA acquisition. Southern Energy's interest on long-term debt increased
$43.3 million for the quarter and $92.6 million year-to-date 1997 compared to
the corresponding periods in 1996, mainly as a result of that acquisition.

     Interest on notes payable. The decreases for the quarter and year-to-date
when compared to the same periods of 1996, is primarily due to a reduction in 
the amount of notes payable outstanding for the non-traditional business.

     Minority interest in subsidiaries. The decrease in minority interest for
the quarter results from the recording of the effect of the windfall profit tax.
Such tax also affected year-to-date 1997 results; however, its effect was
somewhat offset due to minority interests in other consolidated subsidiaries.

     Distributions on capital and preferred securities of subsidiaries. This
increase for the quarter and year-to-date 1997 resulted from the sales of
securities in 1996 and the first half of 1997. See Note (I) in the "Notes to the
Condensed Financial Statements" herein for additional information.

     Preferred dividends of subsidiary companies. The decrease in this item for
the quarter and year-to-date when compared to the corresponding periods in 1997
is due to redemptions of preferred stock, including redemptions during the
first, second and third quarters of 1997. See "Financing Activities" herein for
additional information. 

Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future  earnings  potential.  The level of future  earnings  depends on numerous
factors ranging from energy sales growth to a less regulated,  more  competitive
environment, with non-traditional business becoming more significant.

     On September 29, 1997, SOUTHERN, through Southern Energy, completed its
purchase of 26% of the outstanding common stock of Berliner Kraft und Licht AG
(Bewag), the vertically integrated electric utility that serves Berlin, Germany,
for approximately $820 million. That investment is accounted for under the
equity method.

                                       12

<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


   In July 1997, Southern Energy entered into an agreement to acquire Hopewell
Holdings Limited's (Hopewell) 19.99% share of CEPA. Under this agreement, which
closed on August 13, 1997, Southern Energy bought from Hopewell its CEPA shares
in exchange for $150 million and CEPA's 80% interest in the Tanjung Jati B
Project. The Tanjung Jati B Project is a 1,320 megawatt coal-fired power station
under development in Central Java, Indonesia. As a result of the transaction,
Southern Energy now owns over 99.9% of CEPA's shares.

     In August 1997, Southern Energy entered into an agreement with Vastar
Resources Inc. (Vastar) providing for the organization of a limited partnership
to which the parties are to contribute their gas and power trading and marketing
businesses. Southern Energy and Vastar initially acquired indirect ownership
interests of 60% and 40%, respectively, of the new entity. In September 1997,
Southern Energy contributed its gas marketing operations to the partnership and
made a cash payment of $40 million into escrow for Vastar's account.

     For additional information relating to non-traditional business activities,
including information relating to the acquisition of Southern Energy's interest
in CEPA, see Item 1 - BUSINESS - "New Business Development" in the Form 10-K.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, SOUTHERN is positioning the
business to meet the challenge of increasing competition. For additional
information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SOUTHERN in the Form
10-K.

     Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
"Environmental Matters" of SOUTHERN in the Form 10-K.

     In July 1997, the United States Environmental Protection Agency ("EPA")
published revisions to the ambient air quality standards for ozone and
particulate matter, making the standards significantly more stringent. In
addition, in October 1997, EPA issued a proposed rule which, if implemented as
proposed, would require substantial further reductions in NOx emissions from
fossil-fueled generating facilities. Implementation of the above-described
standards and proposed rules would result in increased compliance costs and
capital expenditures for the operating companies in amounts that cannot be
determined at this time.

     In February, 1997, the FASB issued Statement No. 128, Earnings Per Share.
The standard simplifies the computation of earnings per share (EPS) required by
existing rules. SOUTHERN will adopt this standard on December 31, 1997. If EPS
amounts were computed as specified by Statement No. 128, basic EPS and diluted
EPS would be equal, and would equal the amounts currently reported in the
"Condensed Statements of Income."

     In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income, which establishes standards for reporting and display of "comprehensive
income," which is the total of net income and all other non-owner changes in
stockholders' equity, and its components. SOUTHERN will adopt the standard in
1998.


                                       13

<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     In June 1997, the FASB issued Statement No. 131, Disclosures about Segments
of an Enterprise and Related  Information.  Statement No. 131, which  supersedes
Statement  Nos.  14,  18,  24 and 30,  establishes  new  standards  for  segment
reporting,  using the "management  approach," in which  reportable  segments are
based on the same  criteria on which  management  disaggregates  a business  for
making operating decisions and assessing performance. SOUTHERN is in the process
of  evaluating  Statement  No. 131 and its impact and will adopt the standard by
1998.

     Reference is made to Notes (B), (C), (D), (G), (J), (K), (L), (M), (N) and
(P) in the "Notes to the Condensed Financial Statements" herein for discussion
of various contingencies and other matters which may affect future earnings
potential. Reference is also made to Part II - Item 1 - "Legal Proceedings"
herein.


FINANCIAL CONDITION

Overview

Major changes in SOUTHERN's financial condition during the first nine months of
1997 included the addition of approximately $1.2 billion to utility plant and
the acquisition of CEPA. The funds for these additions and other capital
requirements were from operations and sales of securities. See SOUTHERN's
Condensed Statements of Cash Flows for further details.

Financing Activities

During the first nine months of 1997, retirements of the operating companies'
first mortgage bonds totaled $109 million and redemptions of preferred stock
totaled $428 million. Subsidiaries of SOUTHERN, ALABAMA, GEORGIA, GULF and
MISSISSIPPI have formed statutory business trusts which sold, during the first
nine months of 1997, an aggregate of $1.3 billion of trust preferred or capital
securities. See Note (I) in the "Notes to the Condensed Financial Statements"
herein for further details.

     During the first nine months of 1997, SOUTHERN raised $271 million from the
issuance of new common stock under SOUTHERN's various stock plans. The market
price of SOUTHERN's common stock at September 30, 1997 was $22.5625 per share
and the book value was $13.90 per share, representing a market-to-book ratio of
162%, compared to $22.625, $13.61 and 166%, respectively, at the end of 1996.
The dividend for the third quarter of 1997 was $0.325 per share.

Capital Requirements

Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of SOUTHERN
under "Capital Requirements for Construction," "Environmental Matters" and
"Other Capital Requirements" in the Form 10-K for a description of the Southern
electric system's capital requirements for its construction program,
environmental compliance efforts, sinking fund requirements and maturing debt.
Approximately $709 million will be required by September 30, 1998, for present
sinking fund requirements, redemption of preferred stock and redemptions and
maturities of long-term debt. Also, the operating companies plan to continue, to
the extent possible, a program to retire higher-cost debt and preferred stock
and replace these securities with lower-cost capital.

                                       14

<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


Sources of Capital

In addition to the financing activities previously described, SOUTHERN may
require additional equity capital during the remainder of the year. The amounts
and timing of additional equity capital to be raised in 1997, as well as in
subsequent years, will be contingent on SOUTHERN's investment opportunities. The
operating companies plan to obtain the funds required for construction and other
purposes from sources similar to those used in the past. The amount, type and
timing of any financings--if needed--will depend upon maintenance of adequate
earnings, regulatory approval, prevailing market conditions and other factors.
Currently, each of the operating companies expects to have adequate earnings
coverage ratios for any anticipated security sales through at least 1999. See
Item 1 BUSINESS - "Financing Programs" in the Form 10-K for additional
information.

     To meet short-term cash needs and contingencies, the SOUTHERN system had at
September 30, 1997, approximately $620 million of cash and cash equivalents and
approximately $4,265 million of unused credit arrangements with banks (including
$1,160 million of such arrangements under which borrowings may be made only to
fund purchase obligations of the operating companies relating to variable rate
pollution control bonds). At September 30, 1997, the system companies had
outstanding approximately $218 million of short-term notes payable and $1,653
million of commercial paper. Since SOUTHERN's construction program with respect
to major generating projects in the traditional core business has been
completed, management believes that the need for working capital can be
adequately met by utilizing lines of credit without maintaining large cash
balances.

     See Note (D) in the "Notes to the Condensed Financial Statements" herein
for discussion of financial derivative contracts entered into by SOUTHERN.

                                       15


<PAGE>


                              ALABAMA POWER COMPANY



                                       16

<PAGE>
<TABLE>
<CAPTION>
                             ALABAMA POWER COMPANY
                   CONDENSED STATEMENTS OF INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)


   

                                                                 For the Three Months             For the Nine Months
                                                                  Ended September 30,             Ended September 30,
                                                                 1997            1996             1997             1996


<S>                                                          <C>             <C>             <C>              <C>          
 OPERATING REVENUES:                                         $   932,313     $   869,950     $   2,289,637    $   2,253,194
 Revenues                                                         30,133          43,358           105,666          172,510
 Revenues from affiliates                                   ------------    ------------    --------------   --------------
 Total operating revenues                                        962,446         913,308         2,395,303        2,425,704
                                                             ------------    ------------    --------------   --------------

OPERATING EXPENSES:
Operation--
     Fuel                                                        253,645         245,386           660,216          668,034
     Purchased power from non-affiliates                          25,036          11,795            33,180           31,651
     Purchased power from affiliates                              25,313          27,502            70,822           67,365
     Other                                                       125,618         124,623           367,622          375,808
Maintenance                                                       47,171          62,361           193,668          193,354
Depreciation and amortization                                     82,346          80,142           247,628          239,859
Taxes other than income taxes                                     43,161          46,507           138,553          140,244
Federal and state income taxes                                   110,669          92,469           184,922          193,141
                                                             ------------    ------------    --------------   --------------
Total operating expenses                                        712,959         690,785         1,896,611        1,909,456
                                                             ------------    ------------    --------------   --------------
OPERATING INCOME                                                 249,487         222,523           498,692          516,248
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction                    -             161                 -              594
Income from subsidiary                                               876             944             2,861            2,885
Interest income                                                    7,879           6,521            23,626           21,506
Other, net                                                        (5,993)         (7,907)          (20,642)         (30,526)
Income taxes applicable to other income                            7,033           1,368             7,419           15,463
                                                             ------------    ------------    --------------   --------------
INCOME BEFORE INTEREST CHARGES                                   259,282         223,610           511,956          526,170
                                                             ------------    ------------    --------------   --------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt                                        41,618          42,179           124,846          127,067
Allowance for debt funds used during construction                   (299)         (1,390)           (2,679)          (5,112)
Interest on interim obligations                                    7,144           5,374            18,016           16,852
Amortization of debt discount, premium and expense, net            2,403          10,165             7,201           19,809
Other interest charges                                             7,382           6,221            21,345           21,179
Distributions on preferred securities of subsidiary trusts         5,588           1,788            16,174            4,928
                                                             ------------    ------------    --------------   --------------
Total Interest charges and other                                  63,836          64,337           184,903          184,723
                                                             ------------    ------------    --------------   --------------
NET INCOME                                                       195,446         159,273           327,053          341,447
DIVIDENDS ON PREFERRED STOCK                                       3,646           6,684            14,309           19,921
                                                             ------------    ------------    --------------   --------------
NET INCOME AFTER DIVIDENDS ON
 PREFERRED STOCK                                             $   191,800     $   152,589     $     312,744    $     321,526
                                                             ============    ============    ==============   ==============

</TABLE>



                                       17
<PAGE>
<TABLE>
<CAPTION>

                             ALABAMA POWER COMPANY
                 CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                                               For the Nine Months
                                                                                               Ended September 30,
                                                                                             1997               1996
OPERATING ACTIVITIES:
<S>                                                                                           <C>          <C>                    
Net income                                                                                  $ 327,053      $     341,447          
Adjustments to reconcile net income to net cash provided by operating activities--
         Depreciation and amortization                                                        294,436            303,893
         Deferred income taxes and investment tax credits, net                                  1,147                (50)
         Allowance for equity funds used during construction                                        -               (594)
         Other, net                                                                              (911)            22,666
         Changes in certain current assets and liabilities--
            Receivables, net                                                                  (75,636)           (39,366)
            Inventories                                                                         2,439             40,621
            Prepayments                                                                       (37,607)           (27,527)
            Payables                                                                          (76,033)           (71,740)
            Taxes accrued                                                                     114,784             81,314
            Energy cost recovery, retail                                                       (3,015)            25,186
            Other                                                                             (17,027)            (9,764)
                                                                                           -------------   -------------
Net cash provided from operating activities                                                   529,630            666,086
                                                                                        --------------     --------------
INVESTING ACTIVITIES:
Gross property additions                                                                     (290,200)          (325,313)
Other                                                                                         (32,258)           (34,838)
                                                                                         -------------     -------------
Net cash used for investing activities                                                       (322,458)          (360,151)
                                                                                        --------------     --------------
FINANCING ACTIVITIES:
Proceeds--
     Company obligated mandatorily redeemable preferred securities                            200,000             97,000
Retirements--
     Preferred stock                                                                         (162,000)                 -
     First mortgage bonds                                                                     (19,801)           (83,797)
     Other long-term debt                                                                        (693)              (706)
Interim obligations, net                                                                       55,083            (58,637)
Payment of preferred stock dividends                                                          (17,027)           (19,945)
Payment of common stock dividends                                                            (251,800)          (228,800)
Miscellaneous                                                                                  (6,407)            (3,042)
                                                                                         -------------     -------------
Net cash used for financing activities                                                       (202,645)          (297,927)
                                                                                        --------------     --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                         4,527              8,008
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                9,587             12,616
                                                                                        --------------     --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                $    14,114      $      20,624        
                                                                                        ==============     ==============

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
     Interest (net of amount capitalized)                                                 $   162,897      $     152,197      
     Income taxes                                                                              97,705            135,370





           The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.

</TABLE>


                                       18
<PAGE>
<TABLE>

<CAPTION>


                             ALABAMA POWER COMPANY
                            CONDENSED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                                     ASSETS

                                                                                At September 30,
                                                                                    1997               At December 31,
                                                                                 (Unaudited)               1996
                                                                               ----------------       -----------------
UTILITY PLANT:
<S>                                                                            <C>                        <C>                    
Plant in service                                                               $    10,981,995         $  10,806,921     
Less accumulated provision for depreciation                                          4,322,467             4,113,622
                                                                               ----------------       ---------------
                                                                                     6,659,528             6,693,299
Nuclear fuel, at amortized cost                                                         89,597               123,862
Construction work in progress                                                          298,087               256,802
                                                                               ----------------       ---------------
Total                                                                                7,047,212             7,073,963
                                                                               ----------------       ---------------

OTHER PROPERTY AND INVESTMENTS:
Southern Electric Generating Company, at equity                                         25,093                26,032
Nuclear decommissioning trusts                                                         173,558               148,760
Miscellaneous                                                                           21,844                20,243
                                                                               ----------------       ---------------
Total                                                                                  220,495               195,035
                                                                               ----------------       ---------------

CURRENT ASSETS:
Cash and cash equivalents                                                               14,114                 9,587
Receivables--
     Customer accounts receivable                                                      400,392               334,150
     Other accounts and notes receivable                                                50,128                28,524
     Affiliated companies                                                               42,318                47,630
     Accumulated provision for uncollectible accounts                                   (2,213)               (1,171)
Refundable income taxes                                                                      -                 5,856
Fossil fuel stock, at average cost                                                      90,611                81,704
Materials and supplies, at average cost                                                156,446               167,792
Prepayments                                                                            169,477               131,870
Vacation pay deferred                                                                   27,083                28,369
                                                                               ----------------       ---------------
Total                                                                                  948,356               834,311
                                                                               ----------------       ---------------

DEFERRED CHARGES:
Deferred charges related to income taxes                                               407,858               410,010
Debt expense, being amortized                                                            7,399                 7,398
Premium on reacquired debt, being amortized                                             79,245                84,149
Uranium enrichment decontamination and decommissioning fund                             37,490                37,490
Miscellaneous                                                                           95,940                91,490
                                                                               ----------------       ---------------
Total                                                                                  627,932               630,537
                                                                               ----------------       ---------------

TOTAL ASSETS                                                                   $     8,843,995        $    8,733,846   
                                                                               ================       ===============







         The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.

                                                          19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                             ALABAMA POWER COMPANY
                            CONDENSED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                         CAPITALIZATION AND LIABILITIES

                                                                                    At September 30,
                                                                                        1997               At December 31,
                                                                                     (Unaudited)              1996
                                                                                    --------------       ----------------
CAPITALIZATION:
<S>                                                                                <C>                  <C>          
Common stock equity--
Common stock (par value $40 per share)--
     authorized 6,000,000 shares; outstanding 5,608,955 shares                      $     224,358        $     224,358
Paid-in capital                                                                         1,304,645            1,304,645
Premium on preferred stock                                                                     99                  146
Retained earnings                                                                       1,246,219            1,185,128
                                                                                    --------------       --------------
                                                                                        2,775,321            2,714,277
Preferred stock                                                                           278,400              340,400
Company obligated mandatorily redeemable preferred securities of
     subsidiary trusts holding Company Junior Subordinated  Notes (Note I)                297,000               97,000
Long-term debt                                                                          2,219,594            2,354,006
                                                                                    --------------       --------------
Total                                                                                   5,570,315            5,505,683
                                                                                    --------------       --------------

CURRENT LIABILITIES:
Preferred stock due within one year                                                             -              100,000
Long-term debt due within one year                                                        130,576               20,753
Commercial paper                                                                          419,936              364,853
Accounts payable--
     Affiliated companies                                                                  65,950               64,307
     Other                                                                                102,620              182,563
Customer deposits                                                                          34,410               32,003
Taxes accrued--
     Federal and state income                                                              98,660               35,638
     Other                                                                                 57,259               15,271
Interest accrued                                                                           46,645               51,941
Vacation pay accrued                                                                       27,083               28,369
Miscellaneous                                                                              76,513               96,485
                                                                                    --------------       --------------
Total                                                                                   1,059,652              992,183
                                                                                    --------------       --------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                                       1,199,126            1,177,687
Accumulated deferred investment tax credits                                               285,664              294,071
Prepaid capacity revenues, net                                                            113,206              122,496
Uranium enrichment decontamination and decommissioning fund                                33,741               33,741
Deferred credits related to income taxes                                                  352,121              364,792
Natural disaster reserve                                                                   21,809               20,757
Miscellaneous                                                                             208,361              222,436
                                                                                    --------------       --------------
Total                                                                                   2,214,028            2,235,980
                                                                                    --------------       --------------

TOTAL CAPITALIZATION AND LIABILITIES                                                $   8,843,995        $   8,733,846
                                                                                    ==============       ==============



           The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.

                                                            20

</TABLE>



<PAGE>


                              ALABAMA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                    THIRD QUARTER 1997 vs. THIRD QUARTER 1996
                                       AND
                     YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996


RESULTS OF OPERATIONS

Earnings

ALABAMA's net income after dividends on preferred stock for the third quarter
and year-to-date 1997 was $191.8 million and $312.7 million, respectively,
compared to $152.6 million and $321.5 million for the corresponding periods of
1996. Earnings increased 25.7% for this quarter due primarily to a rise in
energy sales. Year-to-date earnings decreased 2.7% when compared to the
corresponding period in 1996 due mainly to milder-than-normal temperatures
during the first half of 1997 .

     Significant income statement items appropriate for discussion include the
following:

<TABLE>
<CAPTION>
                                                                             Increase (Decrease)
                                                           --------------------------------------------------------
                                                                 Third Quarter                Year-To-Date
                                                           -------------------------- -----------------------------
                                                           (in thousands)       %     (in thousands)       %
<S>                                                            <C>              <C>       <C>                <C>
Revenues.............................................          $62,363          7.2       $36,443            1.6
Revenues from affiliates.............................          (13,225)       (30.5)      (66,844)         (38.7)
Purchased power from non-affiliates..................           13,241        112.3         1,529            4.8
Maintenance..........................................          (15,190)       (24.4)          314            0.2
Income taxes applicable to other income..............            5,665        414.1        (8,044)         (52.0)
Amortization of debt discount, premium
     and expense net.................................           (7,762)       (76.4)      (12,608)         (63.6)
Distributions on preferred securities of
   subsidiary trusts.................................            3,800        212.5        11,246          228.2
Dividends on preferred stock.........................           (3,038)       (45.5)       (5,612)         (28.2)


</TABLE>


     Revenues. Excluding fuel revenues, which represent the pass-through of fuel
expenses and do not affect net income, revenues for the third quarter increased
$28.7 million and decreased for year-to-date 1997 $27.8 million, compared to the
corresponding periods of 1996. The increase in third quarter revenues can be
attributed primarily to a 6.7% increase in total retail energy sales. The
increase in retail energy sales is due primarily to relatively normal weather
compared to milder weather in the third quarter of 1996. Energy sales to
residential, commercial, and industrial customers were up by 5.8%, 6.3% and
7.7%, respectively for the quarter. The drop in year-to-date revenues resulted
primarily from decreases in prices charged to industrial and commercial
customers and a decrease in energy sales to residential customers of 5.2%. The
decrease in energy sales to residential customers is primarily due to
milder-than-normal temperatures during the first half of 1997.

     Revenues from affiliates. Revenues from sales to affiliated companies
within the Southern electric system will vary from period to period depending on
demand, the availability, and cost of generating resources at each company.
These transactions did not have a significant impact on earnings.

                                       21


<PAGE>


                              ALABAMA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     Purchased power from non-affiliates. The increase for the quarter compared
to the corresponding period of 1996 resulted primarily from increased purchases
in connection with power marketing activities, the majority of which were resold
to non-affiliated third parties. These transactions had no significant effect on
net income.

     Maintenance expense. The decrease during the third quarter when compared to
the same period in 1996 was due to the reclassification in 1996 of expenses
charged to operations and the write-off of obsolete steam generating plant
inventory, accompanied by overall cost reduction efforts in 1997.

     Income taxes applicable to other income. This increase for the quarter when
compared to the corresponding period in 1996 is primarily a result of increased
tax benefits from losses of the parent company allocated to ALABAMA under the
joint consolidated income tax agreement between SOUTHERN and its subsidiaries .
The year-to-date decrease in income taxes applicable to other income can be
attributed to ALABAMA's donation, in June 1996, of certain nonutility property
which resulted in a reduction of income taxes applicable to other income of
approximately $10.6 million.

     Amortization of debt discount, premium and expense, net. The decrease in
this item for the current quarter and year-to-date compared to the same periods
of 1996 is the result of ALABAMA's reducing the asset account related to
premiums incurred in connection with the refinancing of high cost debt by $5.0
million and $8.0 million in February and July 1996, respectively, as allowed by
the Alabama PSC. See Note (J) in the "Notes to the Condensed Financial
Statements herein for further details.

     Distributions on preferred securities of subsidiary trusts. The change in
this item resulted primarily from the issuance of additional mandatorily
redeemable preferred securities. For additional information, see Item 7
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Capital Structure" of ALABAMA in the
Form 10-K.

     Dividends on preferred stock. The decrease for the quarter and year-to-date
1997, compared to the corresponding periods of 1996, resulted from redemptions
of preferred stock in the first nine months of 1997.


Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from energy sales growth to a less regulated, more competitive
environment.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 1 - BUSINESS - "Competition" and Item 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of ALABAMA in
the Form 10-K.

     Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
"Environmental Matters" of ALABAMA in the Form 10-K.

                                       22

<PAGE>


                              ALABAMA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     In July 1997, the United States Environmental Protection Agency ("EPA")
published revisions to the ambient air quality standards for ozone and
particulate matter, making the standards significantly more stringent. In
addition, in October 1997, EPA issued a proposed rule which, if implemented as
proposed, would require substantial further reductions in NOx emissions from
fossil-fueled generating facilities. Implementation of the above-described
standards and proposed rules would result in increased compliance costs and
capital expenditures for the operating companies in amounts that cannot be
determined at this time.

     In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income, which establishes standards for reporting and display of "comprehensive
income," which is the total of net income and all other non-owner changes in
stockholders' equity, and its components. The standard is effective in 1998. It
is not expected to affect ALABAMA's financial reporting.

     In June 1997, the FASB issued Statement No. 131, Disclosures about Segments
of an Enterprise and Related  Information.  Statement No. 131, which  supersedes
Statement  Nos.  14,  18,  24 and 30,  establishes  new  standards  for  segment
reporting,  using the "management  approach," in which  reportable  segments are
based on the same  criteria on which  management  disaggregates  a business  for
making operating decisions and assessing performance.  ALABAMA is in the process
of  evaluating  Statement  No. 131 and its impact and will adopt the standard by
1998.

     Reference is made to Notes (B), (C), (G), (H), (J) and (K) in the "Notes to
the Condensed Financial Statements" herein for discussion of various
contingencies and other matters which may affect future earnings potential.
Reference is also made to Part II - Item 1 - "Legal Proceedings" herein.

FINANCIAL CONDITION

Overview

Major changes in ALABAMA's financial condition during the first nine months of
1997 included the addition of approximately $290.2 million to utility plant. The
funds for these additions and other capital requirements were derived primarily
from operating activities. See ALABAMA's Condensed Statements of Cash Flows for
further details.

Financing Activities

During the first nine months of 1997, redemptions of first mortgage bonds and
preferred stock of ALABAMA totaled $181.8 million. Also, Alabama Power Capital
Trust II, a statutory business trust established for the purpose of holding
ALABAMA's junior subordinated notes and issuing trust preferred securities and
common securities, sold $200.0 million of its 7.60% trust originated preferred
securities which are guaranteed by ALABAMA. For additional information, see Note
(I) in the "Notes to the Condensed Financial Statements" and Item 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Capital Structure" of ALABAMA in the
Form 10-K. In addition, ALABAMA has announced its plans to redeem an aggregate
of approximately $80.0 million of first mortgage bonds in November 1997 and
January 1998.

     ALABAMA will continue to retire higher-cost debt and preferred stock and
replace these securities with lower-cost capital, if market conditions permit.

                                       23

<PAGE>


                              ALABAMA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


Capital Requirements

Capital expenditures are estimated to be $463 million for 1997, $615 million for
1998, and $723 million for 1999. The total is $1.8 billion for the three years.
Actual capital costs may vary from this estimate because of factors such as
changes in business conditions; revised load growth projections; changes in
environmental regulations; changes in the existing nuclear plant to meet new
regulatory requirements; increasing cost of labor, equipment, and materials; and
cost of capital. In addition, there can be no assurance that costs related to
capital expenditures will be fully recovered.

     ALABAMA will replace all six steam generators at Plant Farley at a total
cost of approximately $202 million. Additionally, subject to requisite
regulatory approval, ALABAMA plans to construct and install new generating
capacity and transmission facilities at Plant Barry. The increase in projected
capital expenditures for this project is approximately $85 million.

     Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of
ALABAMA under "Capital Requirements," "Other Capital Requirements" and
"Environmental Matters" in the Form 10-K for a description of ALABAMA's capital
requirements for its construction program, maturing debt and environmental
compliance efforts.

Sources of Capital

In addition to the financing activities previously described herein, ALABAMA
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. Currently,
ALABAMA expects to have adequate earnings coverage ratios for any anticipated
security sales through at least 1999. See Item 1 - BUSINESS - "Financing
Programs" in the Form 10-K for additional information.

     To meet short-term cash needs and contingencies, ALABAMA had at September
30, 1997, approximately $14.1 million of cash and cash equivalents and had
unused committed lines of credit of approximately $813.6 million (including
$208.2 million of such lines under which borrowings may be made only to fund
purchase obligations relating to variable rate pollution control bonds) with
regulatory authority for up to $750 million of short-term borrowings. At
September 30, 1997, ALABAMA had no outstanding short-term notes payable to banks
and $419.9 million of commercial paper.

                                       24
<PAGE>

                              ARTHUR ANDERSEN LLP


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




TO ALABAMA POWER COMPANY:

     We have reviewed the accompanying condensed balance sheet of ALABAMA POWER
COMPANY as of September 30, 1997, and the related condensed statements of income
and cash flows for the three-month and nine-month periods ended September 30,
1997 and 1996. These financial statements are the responsibility of the
Company's management.

     We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

     Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.

     We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of ALABAMA POWER COMPANY as of December 31, 1996
(not presented herein) and, in our report dated February 12, 1997, we expressed
an unqualified opinion on that statement. In our opinion, the information set
forth in the accompanying condensed balance sheet as of December 31, 1996 is
fairly stated, in all material respects, in relation to the balance sheet from
which it has been derived.



/s/  Arthur Andersen LLP
Birmingham, Alabama
November 7, 1997

                                       25
<PAGE>


                                                        
                              GEORGIA POWER COMPANY

                                       26
<PAGE>
<TABLE>
<CAPTION>

                             GEORGIA POWER COMPANY
                   CONDENSED STATEMENTS OF INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                          For the Three Months               For the Nine Months
                                                                             Ended September 30,              Ended September 30, 
                                                                         1997              1996             1997              1996

OPERATING REVENUES:
<S>                                                          <C>               <C>              <C>               <C>          
Revenues                                                     $   1,396,896     $   1,303,783    $   3,352,311     $   3,444,445
Revenues from affiliates                                             9,736             7,044           28,379            29,367
                                                             --------------    --------------   --------------    --------------
Total operating revenues                                         1,406,632         1,310,827        3,380,690         3,473,812
                                                             --------------    --------------   --------------    --------------

OPERATING EXPENSES:
Operation--
     Fuel                                                          276,814           245,635          657,443           648,320
     Purchased power from non-affiliates                            54,624            46,563          113,293           124,335
     Purchased power from affiliates                                45,148            51,592          118,732           174,349
     Provision for separation benefits (Note H)                      1,641             7,947            4,512            34,821
     Other                                                         178,451           171,032          490,337           532,035
Maintenance                                                         71,565            65,014          225,852           217,617
Depreciation and amortization                                      187,710           108,556          434,537           323,824
Amortization of deferred Plant Vogtle costs (Note M)                37,580            34,077          112,791           101,070
Taxes other than income taxes                                       55,829            56,725          159,846           163,585
Federal and state income taxes                                     179,637           184,787          361,037           390,026
                                                             --------------    --------------   --------------    --------------
Total operating expenses                                         1,088,999           971,928        2,678,380         2,709,982
                                                             --------------    --------------   --------------    --------------
OPERATING INCOME                                                   317,633           338,899          702,310           763,830
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction                  2,610               912            3,849             1,167
Equity in earnings of unconsolidated subsidiary                        876               944            2,861             2,885
Interest income                                                      3,317             1,002            6,187             3,916
Other, net                                                          (8,330)          (20,281)         (19,180)          (29,671)
Income taxes applicable to other income                             14,739             7,800           18,706            10,326
                                                             --------------    --------------   --------------    --------------
INCOME BEFORE INTEREST CHARGES                                     330,845           329,276          714,733           752,453
                                                             --------------    --------------   --------------    --------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt                                          48,092            51,492          146,904           157,602
Allowance for debt funds used during construction                   (1,500)           (2,724)          (7,426)           (9,215)
Interest on interim obligations                                        356             3,500            6,794            14,657
Amortization of debt discount, premium and expense, net              3,388             3,597           10,879            11,069
Other interest charges                                               4,332             3,122           10,316            11,370
Distributions on preferred securities of subsidiary companies       13,601             2,395           33,767             6,895
                                                             --------------    --------------   --------------    --------------
Interest charges and other, net                                     68,269            61,382          201,234           192,378
                                                             --------------    --------------   --------------    --------------
NET INCOME                                                         262,576           267,894          513,499           560,075
DIVIDENDS ON PREFERRED STOCK                                         5,132            12,415           19,510            35,906
                                                             --------------    --------------   --------------    --------------
NET INCOME AFTER DIVIDENDS ON
  PREFERRED STOCK                                            $     257,444     $     255,479    $     493,989     $     524,169
                                                             ==============    ==============   ==============    ==============


                 The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.

                                                                  27

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             GEORGIA POWER COMPANY
                 CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                                               For the Nine Months
                                                                                                Ended September 30, 
                                                                                             1997               1996
OPERATING ACTIVITIES:
<S>                                                                                     <C>                <C>          
Net income                                                                              $     513,499      $     560,075
Adjustments to reconcile net income to net cash provided by operating activities--
         Depreciation and amortization                                                        519,380            384,726
         Deferred income taxes and investment tax credits, net                                (35,910)            45,883
         Allowance for equity funds used during construction                                   (3,849)            (1,167)
         Amortization of deferred Plant Vogtle costs (Note M)                                 112,791            101,070
         Other, net                                                                            55,703             42,855
         Changes in certain current assets and liabilities--
            Receivables, net                                                                  (62,023)           (55,008)
            Inventories                                                                        27,651             27,632
            Payables                                                                          (29,752)           (58,218)
            Taxes accrued                                                                     159,873            125,462
            Energy cost recovery, retail                                                      (11,887)            (9,416)
            Other                                                                             (41,386)           (15,161)
                                                                                        --------------     --------------
Net cash provided from operating activities                                                 1,204,090          1,148,733
                                                                                        --------------     --------------
INVESTING ACTIVITIES:
Gross property additions                                                                     (327,768)          (328,219)
Other                                                                                         (20,831)           (49,167)
                                                                                        --------------     --------------
Net cash used for investing activities                                                       (348,599)          (377,386)
                                                                                        --------------     --------------
FINANCING ACTIVITIES:
Proceeds--
     Preferred securities                                                                     364,250            225,000
     Pollution control bonds                                                                  284,700            112,825
     First mortgage bonds                                                                           -             10,000
Retirements--
     Preferred stock                                                                         (191,940)           (78,897)
     Pollution control bonds                                                                 (234,700)           (58,185)
     First mortgage bonds                                                                     (60,258)          (210,860)
Special deposits - redemption funds                                                            (5,546)           (61,480)
Interim obligations, net                                                                     (430,496)          (298,117)
Payment of preferred stock dividends                                                          (21,665)           (35,705)
Payment of common stock dividends                                                            (385,500)          (365,700)
Miscellaneous                                                                                 (18,815)            (8,409)
                                                                                        --------------     --------------
Net cash used for financing activities                                                       (699,970)          (769,528)
                                                                                        --------------     --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                       155,521              1,819
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                               15,356             28,930
                                                                                        --------------     --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                              $     170,877      $      30,749
                                                                                        ==============     ==============

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
     Interest (net of amount capitalized)                                               $     204,091      $     199,603
     Income taxes (net of refunds)                                                            264,593            261,270





           The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.

                                                            28

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             GEORGIA POWER COMPANY
                            CONDENSED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                                     ASSETS

                                                                           At September 30,
                                                                                  1997                At December 31,
                                                                               (Unaudited)                1996
                                                                             ----------------       -----------------
UTILITY PLANT:
<S>                                                                          <C>                    <C>            
Plant in service                                                             $    14,982,122        $    14,769,573
Less accumulated provision for depreciation                                        5,219,574              4,793,638
                                                                             ----------------       ----------------
                                                                                   9,762,548              9,975,935
Nuclear fuel, at amortized cost                                                      112,537                121,840
Construction work in progress                                                        256,423                256,141
                                                                             ----------------       ----------------
Total                                                                             10,131,508             10,353,916
                                                                             ----------------       ----------------

OTHER PROPERTY AND INVESTMENTS:
Southern Electric Generating Company, at equity                                       25,093                 26,032
Nuclear decommissioning trusts, at market                                            191,780                130,178
Miscellaneous                                                                         87,210                103,787
                                                                             ----------------       ----------------
Total                                                                                304,083                259,997
                                                                             ----------------       ----------------

CURRENT ASSETS:
Cash and cash equivalents                                                            170,877                 15,356
Receivables--
     Customer accounts receivable                                                    495,687                392,328
     Other accounts and notes receivable                                             117,572                159,499
     Affiliated companies                                                             14,717                 20,095
     Accumulated provision for uncollectible accounts                                 (3,000)                (4,000)
Fossil fuel stock, at average cost                                                    95,164                117,382
Materials and supplies, at average cost                                              253,387                258,820
Prepayments                                                                           91,199                109,771
Vacation pay deferred                                                                 39,746                 39,965
                                                                             ----------------       ----------------
Total                                                                              1,275,349              1,109,216
                                                                             ----------------       ----------------

DEFERRED CHARGES:
Deferred charges related to income taxes                                             763,247                818,418
Deferred Plant Vogtle costs (Note M)                                                  58,198                170,988
Premium on reacquired debt, being amortized                                          167,354                166,670
Debt expense, being amortized                                                         41,235                 32,693
Miscellaneous                                                                        151,516                159,153
                                                                             ----------------       ----------------
Total                                                                              1,181,550              1,347,922
                                                                             ----------------       ----------------

TOTAL ASSETS                                                                 $    12,892,490        $    13,071,051
                                                                             ================       ================








        The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.

                                                         29

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             GEORGIA POWER COMPANY
                            CONDENSED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                         CAPITALIZATION AND LIABILITIES

                                                                           At September 30,
                                                                                  1997                At December 31,
                                                                               (Unaudited)                1996
                                                                             ----------------       -----------------
CAPITALIZATION:
<S>                                                                          <C>                    <C>            
Common stock equity--
Common stock (without par value)--
     authorized 15,000,000 shares; outstanding 7,761,500 shares              $       344,250        $       344,250
Paid-in capital                                                                    2,134,971              2,134,886
Premium on preferred stock                                                               371                    371
Retained earnings                                                                  1,783,246              1,674,774
                                                                             ----------------       ----------------
                                                                                   4,262,838              4,154,281
Preferred stock                                                                      292,786                464,611
Company obligated mandatorily redeemable preferred securities
     of subsidiaries substantially all of whose assets are junior
     subordinated debentures or notes (Note I)                                       689,250                325,000
Long-term debt                                                                     3,102,481              3,200,419
                                                                             ----------------       ----------------
Total                                                                              8,347,355              8,144,311
                                                                             ----------------       ----------------

CURRENT LIABILITIES:
Preferred stock due within one year                                                   28,913                 49,028
Long-term debt due within one year                                                   150,388                 60,622
Notes payable to banks                                                                     -                207,300
Commercial paper                                                                           -                223,196
Accounts payable--
     Affiliated companies                                                             74,009                 66,821
     Other                                                                           206,952                263,093
Customer deposits                                                                     68,320                 64,901
Taxes accrued--
     Federal and state income                                                        129,145                 15,497
     Other                                                                           146,886                100,661
Interest accrued                                                                      66,200                 79,936
Vacation pay accrued                                                                  31,666                 38,597
Miscellaneous                                                                         97,900                114,530
                                                                             ----------------       ----------------
Total                                                                              1,000,379              1,284,182
                                                                             ----------------       ----------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                                  2,415,183              2,522,945
Accumulated deferred investment tax credits                                          404,413                415,477
Deferred credits related to income taxes                                             363,810                382,381
Employee benefits provisions                                                         184,873                186,319
Disallowed Plant Vogtle capacity buyback costs                                        56,316                 57,250
Miscellaneous                                                                        120,161                 78,186
                                                                             ----------------       ----------------
Total                                                                              3,544,756              3,642,558
                                                                             ----------------       ----------------

TOTAL CAPITALIZATION AND LIABILITIES                                         $    12,892,490        $    13,071,051
                                                                             ================       ================


         The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.

                                                          30

</TABLE>


<PAGE>


                              GEORGIA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                    THIRD QUARTER 1997 vs. THIRD QUARTER 1996
                                       AND
                     YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996


RESULTS OF OPERATIONS

Earnings

GEORGIA's net income after dividends on preferred stock for the third quarter
and year-to-date 1997 was $257.4 million and $494.0 million, respectively,
compared to $255.5 million and $524.2 million for the corresponding periods in
1996. Earnings for this quarter increased slightly above the same period in 1996
while year-to-date earnings decreased 5.8% compared to the same period in 1996.
This year-to-date earnings decrease resulted primarily from lower revenues due
to milder-than-normal weather and additional depreciation charges pursuant to a
Georgia PSC retail accounting order discussed below.

     Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>

                                                                             Increase (Decrease)
                                                            -------------------------------------------------------
                                                                  Third Quarter               Year-To-Date
                                                            -------------------------- ----------------------------
                                                            (in thousands)      %      (in thousands)       %
<S>                                                             <C>             <C>       <C>              <C>  
Revenues.............................................           $93,113         7.1       $(92,134)        (2.7)
Revenues from affiliates.............................             2,692        38.2           (988)        (3.4)
Fuel expense.........................................            31,179        12.7          9,123          1.4
Purchased power from non-affiliates..................             8,061        17.3        (11,042)        (8.9)
Purchased power from affiliates......................            (6,444)      (12.5)       (55,617)       (31.9)
Maintenance expense..................................             6,551        10.1          8,235          3.8
Depreciation and amortization expense................            79,154        72.9        110,713         34.2
Other, net...........................................           (11,951)      (58.9)       (10,491)       (35.4)
Income taxes applicable to other income..............             6,939        89.0          8,380         81.2
Distributions on preferred securities
   of subsidiary companies...........................            11,206       467.9         26,872        389.7
Dividends on preferred stock.........................            (7,283)      (58.7)       (16,396)       (45.7)
</TABLE>

     Revenues. Excluding fuel revenues, which represent the pass-through of fuel
expenses and do not affect income, revenues for the third quarter of 1997
increased $62.4 million and for year-to-date 1997 decreased $45.7 million,
compared to the corresponding periods of 1996. Retail revenues, excluding fuel
revenues, increased 6.8%, or $63.7 million for the current quarter and decreased
1.7%, or $40.9 million year-to-date as compared to the corresponding periods of
1996. The increase in third quarter retail revenues was primarily due to
increased energy sales to residential, commercial and industrial customers of
5.5%, 4.6% and 1.3%, respectively.

     The decrease in year-to-date retail revenues can be attributed to lower
energy sales in the residential sector as well as industrial customers taking
advantage of load management rates. Year-to-date sales to residential customers
dropped 5.7% while sales to commercial and industrial customers increased
slightly by 0.5% and 1.5%, respectively. The year-to-date decrease in
residential sales is a result of the milder-than-normal temperatures experienced
during 1997.

                                       31
<PAGE>


                              GEORGIA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     Revenues from affiliates and Purchased power from affiliates. Revenues from
sales to affiliated companies within the Southern electric system, as well as
purchases of energy, will vary from period to period depending on demand and the
availability and cost of generating resources at each company. These
transactions do not have a significant impact on earnings.

     Fuel expense. The increase for the current quarter is primarily due to
increased generation resulting from higher energy sales.

     Purchased power from non-affiliates. The current quarter increase in
purchased power from non-affiliates is primarily due to an increase in energy
purchases in connection with power marketing activities, the majority of which
were resold to non-affiliated third parties. These transactions had no
significant effect on net income.

     Maintenance expense. The increase in the current quarter from the
corresponding period of 1996 is primarily due to an increase in transmission and
distribution line maintenance.

     Depreciation and amortization expense. The increase in depreciation and
amortization for the current quarter and year-to-date compared to the same
period of 1996 is primarily due to additional depreciation charges of $76.7
million and $104.9 million, respectively, pursuant to a Georgia PSC retail
accounting order discussed below. See "Future Earnings Potential" below and Note
(L) in the "Notes to the Condensed Financial Statements" herein for further
details.

     Other, net. The decrease for the current quarter and year-to-date is
primarily the result of expenses incurred in connection with activities related
to the 1996 Summer Olympic games.

     Income taxes applicable to other income. The change for the current quarter
and year-to-date is primarily the result of increased tax benefits from losses
of the parent company allocated to GEORGIA under the joint consolidated income
tax agreement between SOUTHERN and its subsidiaries.

     Distributions on preferred securities of subsidiary companies. The increase
in this item resulted primarily from the issuance of additional mandatorily
redeemable preferred securities in August 1996, January 1997 and June 1997. For
additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Financing Activities" of GEORGIA in the Form 10-K, and Note (I) in the "Notes
to the Condensed Financial Statements" herein.

     Dividends on preferred stock. The decrease in dividends on preferred stock
for the current quarter and year-to-date results from the redemption of various
issues of such securities.


Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors including regulatory matters and energy sales.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 1 - BUSINESS - "Competition" and Item 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GEORGIA in
the Form 10-K.
  

                                       32

<PAGE>


                              GEORGIA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     Effective January 1, 1996, GEORGIA began operating under a three-year
retail accounting order. Under the order, GEORGIA's earnings are evaluated
against a retail return on common equity range of 10% to 12.5%. GEORGIA is
required to absorb cost increases of approximately $29.0 million annually during
the order's three-year operation, including $14.0 million annually of
accelerated depreciation of electric plant. Reference is made to Note (L) in the
"Notes to the Condensed Financial Statements" herein for additional information.

     The staff of the Georgia PSC has issued a report regarding its prudence
review of the Rocky Mountain pumped storage hydroelectric plant. Reference is
made to Note (N) in the "Notes to the Condensed Financial Statements" herein for
additional information.

     Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
"Environmental Issues" of GEORGIA in the Form 10-K.

     In July 1997, the United States Environmental Protection Agency ("EPA")
published revisions to the ambient air quality standards for ozone and
particulate matter, making the standards significantly more stringent. In
addition, in October 1997, EPA issued a proposed rule which, if implemented as
proposed, would require substantial further reductions in NOx emissions from
fossil-fueled generating facilities. Implementation of the above-described
standards and proposed rules would result in increased compliance costs and
capital expenditures for the operating companies in amounts that cannot be
determined at this time.

     In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income, which establishes standards for reporting and display of "comprehensive
income," which is the total of net income and all other non-owner changes in
stockholders' equity, and its components. The standard is effective in 1998. It
is not expected to affect GEORGIA's financial reporting.

     In June 1997, the FASB issued Statement No. 131, Disclosures about Segments
of an Enterprise and Related  Information.  Statement No. 131, which  supersedes
Statement  Nos.  14,  18,  24 and 30,  establishes  new  standards  for  segment
reporting,  using the "management  approach," in which  reportable  segments are
based on the same  criteria on which  management  disaggregates  a business  for
making operating decisions and assessing performance.  GEORGIA is in the process
of  evaluating  Statement  No. 131 and its impact and will adopt the standard by
1998.

     Reference is made to Notes (B), (C), (G) and (L) through (P) in the "Notes
to the Condensed Financial Statements" herein for discussion of various
contingencies and other matters which may affect future earnings potential.
Reference is also made to Part II - Item 1 - "Legal Proceedings" herein.

FINANCIAL CONDITION

Overview

The major change in GEORGIA's financial condition during the first nine months
of 1997 was the addition of approximately $327.8 million to utility plant. The
funds for these additions and other capital requirements were derived primarily
from operations. See GEORGIA's Condensed Statements of Cash Flows for further
details.

                                       33

<PAGE>


                              GEORGIA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


Financing Activities

During the first nine months of 1997, maturities and redemptions of first
mortgage bonds and preferred stock by GEORGIA totaled $252.2 million. In January
1997, Georgia Power Capital Trust II, a statutory business trust established for
the purpose of holding GEORGIA's junior subordinated notes and issuing trust
preferred securities and common securities, sold $175.0 million of its 7.60%
trust preferred securities, which are guaranteed by GEORGIA. (See Note (I) in
the " Notes to the Condensed Financial Statements" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Financing Activities" of GEORGIA in the Form 10-K for
further details.)

     In April 1997, GEORGIA sold, through public authorities, $90.0 million of
variable rate pollution control revenue bonds due 2032. The proceeds were
applied to the redemption on July 1, 1997 of $90.0 million outstanding principal
amount of 8.375% pollution control revenue bonds.

     In June 1997, Georgia Power Capital Trust III , a statutory business trust
established for the purpose of holding GEORGIA's junior subordinated notes and
issuing trust preferred securities and common securities, sold $189.3 million of
its 7.75% quarterly income preferred securities, which are guaranteed by
GEORGIA. (See Note (I) in the " Notes to the Condensed Financial Statements" for
further details.)

     In September 1997, GEORGIA sold, through public authorities, $194.7 million
of variable rate pollution control revenue bonds with $144.7 million due in 2029
and $50.0 million due in 2034. The proceeds were used to redeem $105.9 million
aggregate principal amount of 6.20% pollution control revenue bonds and $38.8
million aggregate principal amount of 5.70% pollution control revenue bonds in
September 1997. The remaining proceeds will be used to redeem $50.0 million
aggregate principal amount of 9 3/8% pollution control revenue bonds in December
1997.

     GEORGIA has announced the planned redemption of $28.9 million of preferred
stock in December 1997.

     GEORGIA plans to continue, to the extent possible, a program to retire
higher-cost debt and preferred stock and replace these securities with
lower-cost capital.

Capital Requirements

Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GEORGIA
under "Liquidity and Capital Requirements" and "Environmental Issues" in the
Form 10-K for a description of GEORGIA's capital requirements for its
construction program and environmental compliance efforts.

Sources of Capital

In addition to the financing activities previously described herein, GEORGIA
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. Currently,
GEORGIA expects to have adequate earnings coverage ratios for any anticipated
security sales through at least 1999. See Item 1 - BUSINESS - "Financing
Programs" in the Form 10-K for additional information.

                                       34
<PAGE>




                              GEORGIA POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     To meet short-term cash needs and contingencies, GEORGIA had at September
30, 1997, approximately $170.9 million of cash and cash equivalents and
approximately $1,143.9 million of unused credit arrangements with banks
(including $878.9 million of such arrangements under which borrowings may be
made only to fund purchase obligations relating to variable rate pollution
control bonds). At September 30, 1997, GEORGIA had no outstanding short-term
notes payable to banks or commercial paper. Since GEORGIA has no major
generating plants under construction, management believes that the need for
working capital can be adequately met by utilizing lines of credit without
maintaining large cash balances.



                                       35
<PAGE>


                              ARTHUR ANDERSEN LLP

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




TO GEORGIA POWER COMPANY:

     We have reviewed the accompanying condensed balance sheet of GEORGIA POWER
COMPANY (a Georgia corporation) as of September 30, 1997, and the related
condensed statements of income and cash flows for the three-month and nine-month
periods ended September 30, 1997 and 1996. These financial statements are the
responsibility of the Company's management.

     We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

     Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.

     We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of GEORGIA POWER COMPANY as of December 31, 1996
(not presented herein), and, in our report dated February 12, 1997, we expressed
an unqualified opinion on that statement. In our opinion, the information set
forth in the accompanying condensed balance sheet as of December 31, 1996, is
fairly stated, in all material respects, in relation to the balance sheet from
which it has been derived.



/s/  Arthur Andersen LLP
Atlanta, Georgia
November 7, 1997
                                       36

<PAGE>


                               GULF POWER COMPANY



  
                                       37
<PAGE>
<TABLE>
<CAPTION>

                               GULF POWER COMPANY
                   CONDENSED STATEMENTS OF INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                       For the Three Months           For the Nine Months
                                                                       Ended September 30,            Ended September 30,
                                                                       1997            1996           1997            1996

OPERATING REVENUES:
<S>                                                               <C>             <C>             <C>             <C>        
Revenues                                                          $    187,841    $    173,993    $   467,488     $   477,986
Revenues from affiliates                                                 5,869           5,626         12,888          10,375
                                                                  -------------   -------------   ------------    ------------
Total operating revenues                                               193,710         179,619        480,376         488,361
                                                                  -------------   -------------   ------------    ------------

OPERATING EXPENSES:
Operation--
     Fuel                                                               60,938          56,105        138,712         140,240
     Purchased power from non-affiliates                                 6,908           2,941          9,697           6,804
     Purchased power from affiliates                                     4,482           6,835         19,381          32,177
     Other                                                              31,414          28,324         93,241          83,062
Maintenance                                                              9,731           8,998         32,532          38,360
Depreciation and amortization                                           14,470          14,199         43,362          42,373
Taxes other than income taxes                                           14,736          14,527         39,775          40,377
Federal and state income taxes                                          16,281          15,122         29,561          30,634
                                                                  -------------   -------------   ------------    ------------
Total operating expenses                                               158,960         147,051        406,261         414,027
                                                                  -------------   -------------   ------------    ------------
OPERATING INCOME                                                        34,750          32,568         74,115          74,334
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction                          -               1              2              12
Interest income                                                            387             376            895           1,142
Other, net                                                                 (81)           (294)          (274)         (1,041)
Income taxes applicable to other income                                    979             (74)           758            (167)
                                                                  -------------   -------------   ------------    ------------
INCOME BEFORE INTEREST CHARGES                                          36,035          32,577         75,496          74,280
                                                                  -------------   -------------   ------------    ------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt                                               5,691           5,880         16,978          18,264
Other interest charges                                                     438             288          1,960             793
Interest on notes payable                                                  242             716            764           1,845
Amortization of debt discount, premium, and expense, net                   592             524          1,728           1,567
Allowance for debt funds used during construction                            -              (3)            (6)            (61)
Distributions on preferred securities of subsidiary trust                  763               -          2,042               -
                                                                  -------------   -------------   ------------    ------------
Interest charges and other, net                                          7,726           7,405         23,466          22,408
                                                                  -------------   -------------   ------------    ------------
NET INCOME                                                              28,309          25,172         52,030          51,872
DIVIDENDS ON PREFERRED STOCK                                               825           1,451          3,420           4,312
                                                                  -------------   -------------   ------------    ------------
NET INCOME AFTER DIVIDENDS ON
  PREFERRED STOCK                                                 $     27,484    $     23,721    $    48,610     $    47,560
                                                                  =============   =============   ============    ============




              The accompanying notes as they relate to GULF are an integral part of these condensed statements.

                                       38


</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                               GULF POWER COMPANY
                 CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                                              For the Nine Months
                                                                                              Ended September 30,
                                                                                             1997              1996
OPERATING ACTIVITIES:
<S>                                                                                     <C>                <C>        
Net income                                                                              $      52,030      $    51,872
Adjustments to reconcile net income to net cash provided by operating activities--
         Depreciation and amortization                                                         54,642           56,903
         Deferred income taxes                                                                 (3,573)             559
         Allowance for equity funds used during construction                                       (2)             (12)
         Deferred costs of 1995 coal contract renegotiation                                     1,246            7,172
         Other, net                                                                             3,522            5,841
         Changes in certain current assets and liabilities--
            Receivables, net                                                                   (7,590)          (7,868)
            Inventories                                                                         8,610           14,132
            Payables                                                                            1,531           (9,553)
            Taxes accrued                                                                      23,368           16,987
            Current costs of 1995 coal contract renegotiation                                  10,529           (5,157)
            Other                                                                              (5,043)          (3,000)
                                                                                          -------------    -----------
Net cash provided from operating activities                                                   139,270          127,876
                                                                                        --------------     ------------
INVESTING ACTIVITIES:
Gross property additions                                                                      (31,968)         (49,747)
Other                                                                                          (1,709)          (3,533)
                                                                                         -------------     -----------
Net cash used for investing activities                                                        (33,677)         (53,280)
                                                                                        --------------     ------------
FINANCING ACTIVITIES:
Proceeds--
     Preferred securities                                                                      40,000                -
     First mortgage bonds                                                                           -           30,000
     Pollution control bonds                                                                   40,930           33,275
     Other long-term debt                                                                      20,000           22,148
Retirements--
     Preferred stock                                                                          (39,500)               -
     First mortgage bonds                                                                     (25,000)          (1,750)
     Pollution control bonds                                                                  (40,930)         (33,275)
     Other long-term debt                                                                     (13,482)         (32,588)
Notes payable, net                                                                            (25,000)         (43,000)
Payment of preferred stock dividends                                                           (4,148)          (4,312)
Payment of common stock dividends                                                             (50,500)         (37,100)
Miscellaneous                                                                                  (3,413)          (1,852)
                                                                                         -------------     -----------
Net cash used for financing activities                                                       (101,043)         (68,454)
                                                                                        --------------     ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                         4,550            6,142
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                  807              680
                                                                                        --------------     ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                              $       5,357      $     6,822
                                                                                        ==============     ============

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
     Interest (net of amount capitalized)                                               $      17,572      $    19,269
     Income taxes                                                                              17,644           20,846



           The accompanying notes as they relate to GULF are an integral part of these condensed statements.


                                       39

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                               GULF POWER COMPANY
                            CONDENSED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                                     ASSETS

                                                                                   At September 30,
                                                                                      1997               At December 31,
                                                                                   (Unaudited)              1996
                                                                                  --------------       ----------------
UTILITY PLANT:
<S>                                                                               <C>                  <C>          
Plant in service                                                                  $   1,748,011        $   1,734,510
Less accumulated provision for depreciation                                             728,541              694,245
                                                                                  --------------       --------------
                                                                                      1,019,470            1,040,265
Construction work in progress                                                            30,296               23,465
                                                                                  --------------       --------------
Total                                                                                 1,049,766            1,063,730
                                                                                  --------------       --------------

OTHER PROPERTY AND INVESTMENTS:                                                             623                  652
                                                                                  --------------       --------------

CURRENT ASSETS:
Cash and cash equivalents                                                                 5,357                  807
Receivables--
     Customer accounts receivable                                                        74,833               67,727
     Other accounts and notes receivable                                                  2,831                3,098
     Affiliated companies                                                                 2,483                1,821
     Accumulated provision for uncollectible accounts                                      (700)                (789)
Fossil fuel stock, at average cost                                                       20,204               28,352
Materials and supplies, at average cost                                                  29,790               30,252
Current portion of deferred coal contract costs                                           4,982               16,389
Regulatory clauses under recovery                                                         3,046                4,144
Prepaid income taxes                                                                          -                  353
Other prepayments                                                                        11,045                8,833
Vacation pay deferred                                                                     4,055                4,055
                                                                                  --------------       --------------
Total                                                                                   157,926              165,042
                                                                                  --------------       --------------

DEFERRED CHARGES:
Deferred charges related to income taxes                                                 28,038               28,313
Debt expense and loss, being amortized                                                   23,350               23,308
Deferred coal contract costs                                                              4,521               13,126
Deferred storm charges                                                                      895                3,275
Miscellaneous                                                                            11,683               10,920
                                                                                  --------------       --------------
Total                                                                                    68,487               78,942
                                                                                  --------------       --------------

TOTAL ASSETS                                                                      $   1,276,802        $   1,308,366
                                                                                  ==============       ==============




          The accompanying notes as they relate to GULF are an integral part of these condensed statements.

                                       40

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                               GULF POWER COMPANY
                            CONDENSED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                         CAPITALIZATION AND LIABILITIES

                                                                                   At September 30,
                                                                                      1997               At December 31,
                                                                                   (Unaudited)              1996
                                                                                  --------------       ----------------
CAPITALIZATION:
<S>                                                                              <C>                  <C>          
Common stock equity--
Common stock (without par value)--
     authorized and outstanding--992,717 shares                                   $      38,060        $      38,060
Paid-in capital                                                                         218,438              218,438
Premium on preferred stock                                                                   44                   81
Retained earnings                                                                       187,325              179,179
                                                                                  --------------       --------------
                                                                                        443,867              435,758
Preferred stock                                                                          50,102               65,102
Company obligated mandatorily redeemable preferred securities of
     subsidiary trust holding Company Junior Subordinated Notes (Note I)                 40,000                    -
Long-term debt                                                                          296,911              331,880
                                                                                  --------------       --------------
Total                                                                                   830,880              832,740
                                                                                  --------------       --------------

CURRENT LIABILITIES:
Preferred stock due within one year                                                           -               24,500
Long-term debt due within one year                                                       55,817               40,972
Notes payable                                                                                 -               25,000
Accounts payable--
     Affiliated companies                                                                11,712               10,274
     Other                                                                               21,648               22,496
Customer deposits                                                                        13,825               13,464
Taxes accrued--
     Federal and state income                                                            12,308                    -
     Other                                                                               16,976                8,342
Interest accrued                                                                          6,767                7,629
Regulatory clauses over recovery                                                          4,617                5,884
Vacation pay accrued                                                                      4,055                4,055
Dividends declared                                                                          725               11,453
Miscellaneous                                                                             2,629                5,668
                                                                                  --------------       --------------
Total                                                                                   151,079              179,737
                                                                                  --------------       --------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                                       164,913              163,857
Deferred credits related to income taxes                                                 61,524               64,354
Accumulated deferred investment tax credits                                              32,104               33,760
Accumulated provision for postretirement benefits                                        20,022               18,339
Miscellaneous                                                                            16,280               15,579
                                                                                  --------------       --------------
Total                                                                                   294,843              295,889
                                                                                  --------------       --------------

TOTAL CAPITALIZATION AND LIABILITIES                                              $   1,276,802        $   1,308,366
                                                                                  ==============       ==============



           The accompanying notes as they relate to GULF are an integral part of these condensed statements.

                                       41

</TABLE>

<PAGE>


                               GULF POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                    THIRD QUARTER 1997 vs. THIRD QUARTER 1996
                                       AND
                     YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996


RESULTS OF OPERATIONS

Earnings

GULF's net income after dividends on preferred stock for the third quarter and
year-to-date 1997 was $27.5 million and $48.6 million, respectively, compared to
$23.7 million and $47.6 million for the corresponding periods of 1996. Earnings
for the quarter and year-to-date 1997 compared to the same periods in 1996
increased 15.9% and 2.2%, respectively. The increase for the current quarter was
due primarily to increased energy sales.

     Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>

                                                                      Increase (Decrease)
                                                   ----------------------------------------------------------
                                                           Third Quarter                 Year-To-Date
                                                   ------------------------------ ---------------------------
                                                      (in thousands)      %        (in thousands)       %
<S>                                                    <C>                <C>        <C>               <C>  
Revenues.........................................      $13,848            8.0        $(10,498)         (2.2)
Revenues from affiliates.........................          243            4.3           2,513          24.2
Fuel expense.....................................        4,833            8.6          (1,528)         (1.1)
Purchased power from non-affiliates..............        3,967          134.9           2,893          42.5
Purchased power from affiliates..................       (2,353)         (34.4)        (12,796)        (39.8)
Other operation expense..........................        3,090           10.9          10,179          12.3
Maintenance expense..............................          733            8.1          (5,828)        (15.2)
Income taxes applicable to other income..........        1,053            N/M             925           N/M
Distributions on preferred securities of
    subsidiary trust.............................          763            N/A           2,042           N/A
Dividends on preferred stock.....................         (626)         (43.1)           (892)        (20.7)

     N/A - Not applicable
     N/M - Not meaningful
</TABLE>

     Revenues. Excluding fuel and other revenues which represent the
pass-through of fuel expense and certain other expenses and do not affect net
income, revenues increased $6.3 million or 6.2% for the third quarter and
decreased $3.5 million or 1.3% year-to-date 1997, compared to the corresponding
periods of 1996. Retail revenues rose 4.9% for the current quarter primarily due
to an increase in retail sales as a result of warmer weather during the third
quarter; however, retail revenues fell 1.6% year-to-date primarily due to a
decrease in energy sales to residential customers reflecting the impact of
milder-than-normal temperatures during the first half of 1997. Energy sales to
industrial customers increased 7.2% and 4.6% for the quarter and year-to-date,
respectively; however, revenues from this sector increased by only 2.0% for the
quarter and decreased by 0.3% year-to-date 1997. The disparity between
industrial energy sales and industrial revenues is primarily due to increased
participation in the Real-Time-Pricing program. See Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GULF in the Form 10-K
for information on initiatives to remain competitive and to meet conservation
goals set by the Florida PSC.

                                       42

<PAGE>


                               GULF POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     Revenues from affiliates and Purchased power from affiliates. The
year-to-date decrease in purchased power from affiliates compared to the
corresponding period in 1996 can be attributed to maintenance outages at Plant
Crist and Plant Daniel during the first half of 1996. Revenues from sales to
affiliated companies within the Southern electric system, as well as purchases
of energy, will vary from period to period depending on demand and the
availability and cost of generating resources at each company. These
transactions do not have a significant impact on earnings.

     Fuel expense. The current quarter increase in fuel expense is due to
increased generation as a result of warmer weather and increased energy sales
during the third quarter.

     Purchased power from non-affiliates. The increases in purchased power from
non-affiliates can primarily be attributed to an increase in energy purchases
due to increased power marketing activities, the majority of which were resold
to non-affiliated third parties. These transactions had no significant effect on
net income.

     Other operation expense. The current quarter and year-to-date increases
were primarily due to an increase in amortization costs related to the buyout
and renegotiation of a coal supply contract.

     Maintenance expense. The increase in maintenance expense for the third
quarter is primarily due to routine maintenance, while the year-to-date decrease
is primarily attributed to the scheduled maintenance on production facilities
which occurred in the first half of 1996 at Plant Crist and Plant Daniel.

     Income taxes applicable to other income. The change for the third quarter
and year-to-date when compared to the corresponding periods of 1996 is primarily
due to increased tax benefits from losses of the parent company allocated to
GULF under the joint consolidated income tax agreement between SOUTHERN and its
subsidiaries.

     Distributions on preferred securities of subsidiary trust. See "Financing
Activities" herein for details relating to the January 1997 issuance by Gulf
Power Capital Trust I of its 7.625% trust preferred securities.

     Dividends on preferred stock. Current quarter and year-to-date preferred
stock dividends decreased when compared to the same periods in 1996 due to
redemptions of preferred stock in March and August of 1997.

Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from energy sales growth to a potentially less regulated, more
competitive environment.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Future Earnings Potential" of GULF and Item 1 - BUSINESS - "Competition" in the
Form 10-K.

     Compliance costs related to the Clean Air Act could affect earnings if such
costs are not fully recovered through GULF's Environmental Cost Recovery Clause.
For additional information about the Clean Air Act and other environmental
issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental
Matters" of GULF in the Form 10-K.


                                       43
<PAGE>


                               GULF POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     In July 1997, the United States Environmental Protection Agency ("EPA")
published revisions to the ambient air quality standards for ozone and
particulate matter, making the standards significantly more stringent. In
addition, in October 1997, EPA issued a proposed rule which, if implemented as
proposed, would require substantial further reductions in NOx emissions from
fossil-fueled generating facilities. Implementation of the above-described
standards and proposed rules would result in increased compliance costs and
capital expenditures for the operating companies in amounts that cannot be
determined at this time.

     In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income, which establishes standards for reporting and display of "comprehensive
income," which is the total of net income and all other non-owner changes in
stockholders' equity, and its components. The standard is effective in 1998. It
is not expected to affect GULF's financial reporting.

     In June 1997, the FASB issued Statement No. 131, Disclosures about Segments
of an Enterprise and Related  Information.  Statement No. 131, which  supersedes
Statement  Nos.  14,  18,  24 and 30,  establishes  new  standards  for  segment
reporting,  using the "management  approach," in which  reportable  segments are
based on the same  criteria on which  management  disaggregates  a business  for
making operating decisions and assessing performance.  GULF is in the process of
evaluating Statement No. 131 and its impact and will adopt the standard by 1998.

     Reference is made to Notes (B) and (G) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.

FINANCIAL CONDITION

Overview

Major changes in GULF's financial condition during the first nine months of 1997
included the addition of approximately $32.0 million to utility plant. The funds
for these additions and other capital requirements were derived primarily from
operations. See GULF's Condensed Statements of Cash Flows for further details.

Financing Activities

During the first quarter of 1997, Gulf Power Capital Trust I, a statutory
business trust established for the purpose of holding GULF's junior subordinated
notes and issuing trust preferred securities and common securities, sold $40
million of its 7.625% trust preferred securities which are guaranteed by GULF.
For additional information, see Note (I) in the "Notes to the Condensed
Financial Statements" and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Sources of Capital" of GULF in the Form 10-K. A portion of these proceeds was
used to redeem $5 million of 7.88% cumulative preferred stock, $5 million of
7.52% cumulative preferred stock and $14.5 million of 7.00% cumulative preferred
stock during the first quarter of 1997 and $15 million of 7.30% cumulative
preferred stock in August 1997.

     On July 1, 1997, GULF sold, through public authorities, $40.93 million of
variable rate pollution control revenue refunding bonds due July 1, 2022. The
proceeds were used to redeem $32 million aggregate principal amount of 8.25%
pollution control revenue refunding bonds; $5 million aggregate principal amount
of 6.75% pollution control revenue refunding bonds; and $3.93 million aggregate
principal amount of 6.75% pollution control revenue refunding bonds.

                                       44

<PAGE>


                               GULF POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     Also, on August 1, 1997, GULF sold $20 million of Series B 7.50% Junior
Subordinated Notes due June 30, 2037. The proceeds were used to pay a portion of
the scheduled maturity of $25 million of 5.875% first mortgage bonds that were
due on August 1, 1997.

     GULF plans to continue, to the extent possible, a program to retire
higher-cost debt and preferred stock and replace these securities with
lower-cost capital.


Capital Requirements

     Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GULF
under "Capital Requirements for Construction," "Environmental Matters" and
"Other Capital Requirements" in the Form 10-K for a description of GULF's
capital requirements for its construction program, environmental compliance
efforts and maturing debt. GULF's capital requirements for its construction
program for 1997 through 1999 were increased in October 1997 by $43 million
primarily due to production project costs at Plant Daniel and additional costs
related to a new company-owned cogeneration facility being built at an
industrial customer's site. GULF's gross property additions, including those
amounts related to environmental compliance, are now budgeted at $185 million
for 1997 through 1999 ($55 million in 1997, $68 million in 1998, and $62 million
in 1999). Approximately $55.8 million will be required through September 30,
1998, for maturities of long-term debt.


Sources of Capital

In addition to the financing activities previously described herein, GULF plans
to obtain the funds required for construction and other purposes from sources
similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. Currently,
GULF expects to have adequate earnings coverage ratios for any anticipated
security sales through at least 1999. See Item 1 - BUSINESS - "Financing
Programs" in the Form 10-K for additional information.

     To meet short-term cash needs and contingencies, GULF had at September 30,
1997, approximately $5.4 million of cash and cash equivalents and $103.4 million
of unused committed lines of credit with banks (including $61.9 million
liquidity support for variable rate pollution control bonds). At September 30,
1997, GULF had no outstanding short-term notes payable to banks. Since GULF has
no major generating plants under construction, management believes that the need
for working capital can be adequately met by utilizing lines of credit without
maintaining large cash balances.

                                       45
<PAGE>


                            MISSISSIPPI POWER COMPANY

                                       46
<PAGE>
<TABLE>
<CAPTION>
                           MISSISSIPPI POWER COMPANY
                   CONDENSED STATEMENTS OF INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                    For the Three Months           For the Nine Months
                                                                     Ended September 30,            Ended September 30,
                                                                     1997            1996            1997           1996

OPERATING REVENUES:
<S>                                                              <C>             <C>            <C>             <C>        
Revenues                                                         $   163,622     $   148,125    $    408,761    $   403,425
Revenues from affiliates                                               8,252           8,478           8,931         16,881
                                                                 ------------    ------------   -------------   ------------
Total operating revenues                                             171,874         156,603         417,692        420,306
                                                                 ------------    ------------   -------------   ------------

OPERATING EXPENSES:
Operation--
     Fuel                                                             49,858          40,029         109,888        106,506
     Purchased power from non-affiliates                              10,721          11,075          12,919         17,011
     Purchased power from affiliates                                   5,295           5,840          26,438         26,359
     Other                                                            27,241          25,686          71,912         76,958
Maintenance                                                           10,423          10,278          32,427         35,116
Depreciation and amortization                                         11,417          11,559          34,010         34,912
Taxes other than income taxes                                         11,736          11,082          33,916         32,532
Federal and state income taxes                                        14,742          13,384          29,269         27,477
                                                                 ------------    ------------   -------------   ------------
Total operating expenses                                             141,433         128,933         350,779        356,871
                                                                 ------------    ------------   -------------   ------------
OPERATING INCOME                                                      30,441          27,670          66,913         63,435
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction                       11              29              22            153
Interest income                                                          182              23             544            201
Other, net                                                               955             787           2,575          3,519
Income taxes applicable to other income                                  615              40            (157)          (983)
                                                                 ------------    ------------   -------------   ------------
INCOME BEFORE INTEREST CHARGES                                        32,204          28,549          69,897         66,325
                                                                 ------------    ------------   -------------   ------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt                                             4,968           4,691          14,857         15,119
Allowance for debt funds used during construction                        (22)           (225)            (45)          (541)
Interest on notes payable                                                 40             488              96          1,339
Amortization of debt discount, premium, and expense, net                 408             390           1,182          1,159
Other interest charges                                                   125             196             439            696
Distributions on preferred securities of subsidiary trust                699               -           1,670              -
                                                                 ------------    ------------   -------------   ------------
Interest charges and other, net                                        6,218           5,540          18,199         17,772
                                                                 ------------    ------------   -------------   ------------
NET INCOME                                                            25,986          23,009          51,698         48,553
DIVIDENDS ON PREFERRED STOCK                                             823           1,225           3,272          3,674
                                                                 ------------    ------------   -------------   ------------
NET INCOME AFTER DIVIDENDS ON
  PREFERRED STOCK                                                $    25,163     $    21,784    $     48,426    $    44,879
                                                                 ============    ============   =============   ============





         The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.

                                                            47
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                           MISSISSIPPI POWER COMPANY
                 CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                                             For the Nine Months
                                                                                              Ended September 30,
                                                                                            1997             1996
OPERATING ACTIVITIES:
<S>                                                                                     <C>              <C>
Net income                                                                              $    51,698      $    48,553
Adjustments to reconcile net income to net cash provided by operating activities--
         Depreciation and amortization                                                       37,082           39,372
         Deferred income taxes                                                                1,042           (2,757)
         Allowance for equity funds used during construction                                    (22)            (153)
         Other, net                                                                             249              113
         Changes in certain current assets and liabilities--
            Receivables, net                                                                (10,340)           1,751
            Inventories                                                                       2,044            4,765
            Payables                                                                         (7,213)          (1,489)
            Taxes accrued                                                                     5,675            2,834
            Other                                                                               309              327
                                                                                        ------------     ------------
Net cash provided from operating activities                                                  80,524           93,316
                                                                                        ------------     ------------
INVESTING ACTIVITIES:
Gross property additions                                                                    (38,509)         (43,879)
Other                                                                                          (144)          (2,765)
                                                                                        ------------     ------------
Net cash used for investing activities                                                      (38,653)         (46,644)
                                                                                        ------------     ------------
FINANCING ACTIVITIES:
Proceeds--
     Capital contribution                                                                         -               27
     Preferred securities                                                                    35,000                -
     Other long-term debt                                                                         -           30,000
Retirements--
     Preferred stock                                                                        (35,000)               -
     First mortgage bonds                                                                         -          (45,447)
     Other long-term debt                                                                         -          (20,000)
Notes payable, net                                                                                -           16,500
Payment of preferred stock dividends                                                         (3,272)          (3,674)
Payment of common stock dividends                                                           (35,600)         (31,900)
Miscellaneous                                                                                (1,283)          (2,932)
                                                                                        ------------     ------------
Net cash used for financing activities                                                      (40,155)         (57,426)
                                                                                        ------------     ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                       1,716          (10,754)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                              7,058           12,641
                                                                                        ------------     ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                              $     8,774      $     1,887
                                                                                        ============     ============

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
     Interest (net of amount capitalized)                                               $     2,864      $    16,715
     Income taxes                                                                            16,310           22,240







       The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.

                                                          48
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                           MISSISSIPPI POWER COMPANY
                            CONDENSED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                                     ASSETS

                                                                                  At September 30,
                                                                                        1997               At December 31,
                                                                                     (Unaudited)              1996
                                                                                    --------------       ----------------
UTILITY PLANT:
<S>                                                                                 <C>                  <C>          
Plant in service, at original cost                                                  $   1,504,021        $   1,483,875
Less accumulated provision for depreciation                                               556,110              526,776
                                                                                    --------------       --------------
                                                                                          947,911              957,099
Construction work in progress                                                              47,118               35,100
                                                                                    --------------       --------------
Total                                                                                     995,029              992,199
                                                                                    --------------       --------------

OTHER PROPERTY AND INVESTMENTS:                                                             2,976                3,054
                                                                                    --------------       --------------

CURRENT ASSETS:
Cash and cash equivalents                                                                   8,774                7,058
Receivables--
     Customer accounts receivable                                                          34,599               26,364
     Regulatory clauses under recovery                                                      8,257                7,300
     Other accounts and notes receivable                                                    6,671                7,468
     Affiliated companies                                                                   8,287                6,329
     Accumulated provision for uncollectible accounts                                        (852)                (839)
Fossil fuel stock, at average cost                                                         11,328               12,168
Materials and supplies, at average cost                                                    19,879               21,083
Current portion of accumulated deferred income taxes                                        4,107                7,227
Prepayments                                                                                 3,647                4,744
Vacation pay deferred                                                                       4,806                4,806
                                                                                    --------------       --------------
Total                                                                                     109,503              103,708
                                                                                    --------------       --------------

DEFERRED CHARGES:
Debt expense and loss, being amortized                                                     12,552               12,220
Deferred charges related to income taxes                                                   23,072               22,274
Long-term notes receivable                                                                  2,990                3,737
Work Force Reduction Plan of 1997                                                          15,700                    -
Miscellaneous                                                                               7,932                5,135
                                                                                    --------------       --------------
Total                                                                                      62,246               43,366
                                                                                    --------------       --------------

TOTAL ASSETS                                                                        $   1,169,754        $   1,142,327
                                                                                    ==============       ==============




         The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.

                                                           49


</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                           MISSISSIPPI POWER COMPANY
                            CONDENSED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                         CAPITALIZATION AND LIABILITIES

                                                                                  At September 30,
                                                                                        1997               At December 31,
                                                                                     (Unaudited)              1996
                                                                                    --------------       ----------------
CAPITALIZATION:
<S>                                                                                <C>                  <C>          
Common stock equity--
Common stock (without par value)--
     authorized 1,130,000 shares; outstanding 1,121,000 shares                      $      37,691        $      37,691
Paid-in capital                                                                           179,389              179,389
Premium on preferred stock                                                                    372                  372
Retained earnings                                                                         179,108              166,282
                                                                                    --------------       --------------
                                                                                          396,560              383,734
Preferred stock                                                                            39,414               74,414
Company obligated mandatorily redeemable preferred securities of
     subsidiary trust holding Company Junior Subordinated Notes (Note I)                   35,000                    -
Long-term debt                                                                            291,609              326,379
                                                                                    --------------       --------------
Total                                                                                     762,583              784,527
                                                                                    --------------       --------------

CURRENT LIABILITIES:
Long-term debt due within one year                                                         35,010                   10
Accounts payable--
     Affiliated companies                                                                   5,626                4,136
     Regulatory clauses over recovery                                                       6,756                8,788
     Other                                                                                 31,829               38,720
Customer deposits                                                                           3,475                3,154
Taxes accrued--
     Federal and state income                                                              10,725                    -
     Other                                                                                 27,395               32,445
Interest accrued                                                                            4,035                4,384
Miscellaneous                                                                              13,094               13,942
                                                                                    --------------       --------------
Total                                                                                     137,945              105,579
                                                                                    --------------       --------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                                         132,962              133,437
Accumulated deferred investment tax credits                                                27,423               28,333
Deferred credits related to income taxes                                                   39,764               40,568
Postretirement benefits                                                                    22,644               21,850
Accumulated provision for property damage                                                  14,080               12,955
Work Force Reduction Plan of 1997                                                          15,700                    -
Miscellaneous                                                                              16,653               15,078
                                                                                    --------------       --------------
Total                                                                                     269,226              252,221
                                                                                    --------------       --------------

TOTAL CAPITALIZATION AND LIABILITIES                                                $   1,169,754        $   1,142,327
                                                                                    ==============       ==============





         The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.

                                                            50

</TABLE>


<PAGE>


                            MISSISSIPPI POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                    THIRD QUARTER 1997 vs. THIRD QUARTER 1996
                                       AND
                     YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996


RESULTS OF OPERATIONS

Earnings

MISSISSIPPI's net income after dividends on preferred stock for the third
quarter and year-to-date 1997 was $25.2 million and $48.4 million, respectively,
compared to $21.8 million and $44.9 million for the corresponding periods of
1996. Earnings for the current quarter increased by 15.5% primarily as a result
of increased operating revenues.
Year-to-date earnings increased 7.9% due primarily to lower operating expenses.

     Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>

                                                                       Increase (Decrease)
                                                     --------------------------------------------------------
                                                           Third Quarter                Year-To-Date
                                                     --------------------------- ----------------------------
                                                      (in thousands)      %       (in thousands)       %
<S>                                                      <C>              <C>         <C>              <C>
Revenues...........................................      $15,497          10.5        $5,336           1.3
Revenues from affiliates...........................         (226)         (2.7)       (7,950)        (47.1)
Fuel expense.......................................        9,829          24.6         3,382           3.2
Purchased power from non-affiliates................         (354)         (3.2)       (4,092)        (24.1)
Other operation expense............................        1,555           6.1        (5,046)         (6.6)

</TABLE>

     Revenues. The increase in revenues for the third quarter was primarily due
to increased energy sales to retail customers. Energy sales increased 1.9%, 5.4%
and 2.1% to residential, commercial and industrial customers, respectively. The
revenue increases associated with these sales were 6.6%, 7.4% and 5.3%. Retail
revenues, excluding those revenues which represent the recovery of fuel expense
and certain other expenses and do not affect income, increased $3.0 million for
the quarter due to increased energy sales and decreased $1.4 million for
year-to-date 1997 primarily due to milder temperatures experienced during this
period as compared to 1996. Third quarter and year-to-date revenues from
territorial wholesale customers, excluding fuel revenues which do not affect
income, increased $4.5 million and decreased $1.1 million, respectively,
compared to the same periods of 1996, with a increase in energy sales of 8.1%
and 0.7%, respectively.

     Revenues from affiliates. Revenues from sales to affiliated companies
within the Southern electric system will vary from period to period depending on
demand and the availability and cost of generating resources at each company. In
addition, the third quarter and year-to-date 1997 periods reflect adjustments in
affiliated billings. These transactions do not have a significant impact on
earnings.

     Fuel expense. The increases in fuel expense was due to increased generation
resulting from a rise in retail and territorial wholesale energy sales.



                                       51
<PAGE>


                            MISSISSIPPI POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     Purchased power from non-affiliates. Purchased power from non-affiliates
decreased in both the current quarter and year-to-date when compared to the same
periods in 1996 due to MISSISSIPPI's purchase during the third quarter 1996 of
capacity and energy from another utility.

     Other operation expense. The current quarter increase in other operation
expense was primarily due to higher administrative and general expenses. The
year-to-date decrease can be primarily attributed to lower administrative and
general expenses in 1997.


Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from energy sales growth to a less regulated, more competitive
environment. Operating revenues will be affected by any changes in rates under
the PEP and ECO plans. The PEP has proven to be a stabilizing force on electric
rates, with only moderate changes in rates taking place. MISSISSIPPI's 1997
annual filing under the ECO Plan with the Mississippi PSC resulted in an
approved annual revenue requirement increase of $0.9 million, effective April
1997.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 1 - BUSINESS - "Competition" and Item 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of
MISSISSIPPI in the Form 10-K.

     The Mississippi PSC has initiated a docket to study retail access in order
to determine a position on electric deregulation which best serves the 
State.  Hearings have been and will continue to be held in which interested
parties including MISSISSIPPI are participating.  The Public Utilities Staff of
the Mississippi PSC has issued without recommendation a proposed deregulation
plan for comment from interested parties and to form a basis for future 
hearings of the Mississippi PSC.  No conclusion by the Mississippi PSC is 
anticipated during this year.  Further hearings will be held in 1998.

     Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be recovered. For additional information about the Clean Air Act
and other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND
ANALYSIS - "Environmental Matters" of MISSISSIPPI in the Form 10-K.

     In July 1997, the United States Environmental Protection Agency ("EPA")
published revisions to the ambient air quality standards for ozone and
particulate matter, making the standards significantly more stringent. In
addition, in October 1997, EPA issued a proposed rule which, if implemented as
proposed, would require substantial further reductions in NOx emissions from
fossil-fueled generating facilities. Implementation of the above-described
standards and proposed rules would result in increased compliance costs and
capital expenditures for the operating companies in amounts that cannot be
determined at this time.

     In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income, which establishes standards for reporting and display of "comprehensive
income," which is the total of net income and all other non-owner changes in
stockholders' equity, and its components. The standard is effective in 1998. It
is not expected to affect MISSISSIPPI's financial reporting.


                                       52

<PAGE>


                            MISSISSIPPI POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     In June 1997, the FASB issued Statement No. 131, Disclosures about Segments
of an Enterprise and Related  Information.  Statement No. 131, which  supersedes
Statement  Nos.  14,  18,  24 and 30,  establishes  new  standards  for  segment
reporting,  using the "management  approach," in which  reportable  segments are
based on the same  criteria on which  management  disaggregates  a business  for
making  operating  decisions and assessing  performance.  MISSISSIPPI  is in the
process  of  evaluating  Statement  No.  131 and its  impact  and will adopt the
standard by 1998.

     One hundred employees of MISSISSIPPI, in certain areas, including finance,
environmental quality and external affairs, have accepted a workforce reduction
plan. This voluntary plan was an effort to find appropriate ways to reduce fixed
costs, while at the same time providing employees with choices about their
future. The total cost to be incurred in connection with this voluntary plan is
expected to be within the range of $16 million to $19 million and will be
deferred and amortized, pending regulatory approval. See Note (H) in the "Notes
to the Condensed Financial Statements" herein for additional information.

     Reference is made to Notes (B), (G) and (H) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential. Reference is also made to
Part II - Item 1 - "Legal Proceedings" herein.


FINANCIAL CONDITION

Overview

Major changes in MISSISSIPPI's financial condition during the first nine months
of 1997 included the addition of approximately $38.5 million to utility plant.
The funds for these additions and other capital requirements were derived
primarily from operations. See MISSISSIPPI's Condensed Statements of Cash Flows
for further details.

Financing Activities

During the first quarter of 1997, Mississippi Power Capital Trust I, a statutory
business trust established for the purpose of holding MISSISSIPPI's junior
subordinated notes and issuing trust preferred securities and common securities,
sold $35 million of its 7.75% trust originated preferred securities which are
guaranteed by MISSISSIPPI. For additional information, see Note (I) in the
"Notes to the Condensed Financial Statements" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Sources of Capital" of MISSISSIPPI in the Form 10-K.

     MISSISSIPPI plans to continue, to the extent possible, a program to retire
higher-cost debt and preferred stock and replace these securities with
lower-cost capital.

Capital Requirements

Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of
MISSISSIPPI under "Capital Requirements for Construction," "Environmental
Matters" and "Other Capital Requirements" in the Form 10-K for a description of
MISSISSIPPI's capital requirements for its construction program, environmental
compliance efforts, sinking fund requirements and maturities of long-term debt.



                                       53
<PAGE>




                            MISSISSIPPI POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION



     MISSISSIPPI has applied for a certificate of public convenience and
necessity to the Mississippi PSC to build up to 1,000 MW of natural gas-fired
combined cycle generation at Plant Daniel. The estimated capital cost associated
with construction of this additional generation at Plant Daniel is approximately
$450 million. MISSISSIPPI would own two-thirds of the new generation, with an
affiliate owning the other one-third. This two-thirds share results in an
estimated capital cost of approximately $300 million. Hearings on MISSISSIPPI's
certificate request are expected in November 1997.

Sources of Capital

In addition to the financing activities previously described herein, MISSISSIPPI
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. Currently,
MISSISSIPPI expects to have adequate earnings coverage ratios for any
anticipated security sales through at least 1999. See Item 1 - BUSINESS -
"Financing Programs" in the Form 10-K for additional information.

     To meet short-term cash needs and contingencies, MISSISSIPPI had at
September 30, 1997, approximately $8.8 million of cash and cash equivalents and
approximately $76.3 million of unused committed credit arrangements with banks
(including $10.8 million of such arrangements under which borrowings may be made
only to fund purchase obligations relating to variable rate pollution control
bonds). At September 30, 1997, MISSISSIPPI had no short-term borrowings
outstanding. Since MISSISSIPPI has no major generating plants under
construction, management believes that the need for working capital can be
adequately met by utilizing lines of credit without maintaining large cash
balances.


                                       54
<PAGE>


                                SAVANNAH ELECTRIC
                                       AND
                                  POWER COMPANY



                                       55
<PAGE>
<TABLE>
<CAPTION>
                      SAVANNAH ELECTRIC AND POWER COMPANY
                   CONDENSED STATEMENTS OF INCOME (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                    For the Three Months           For the Nine Months
                                                                    Ended September 30,             Ended September 30,
                                                                      1997          1996           1997            1996

OPERATING REVENUES:
<S>                                                               <C>               <C>            <C>        <C>              
Revenues                                                          $   78,716     $  72,676     $   173,901    $    183,226      
Revenues from affiliates                                               1,184           683           1,460           2,614
                                                                  -----------    ----------    ------------   -------------
Total operating revenues                                              79,900        73,359         175,361         185,840
                                                                  -----------    ----------    ------------   -------------

OPERATING EXPENSES:
Operation--
     Fuel                                                             16,609        11,482          27,063          24,174
     Purchased power from non-affiliates                               1,669           802           2,351           2,014
     Purchased power from affiliates                                  11,756        14,395          31,786          45,915
     Other                                                            11,737        10,624          33,379          32,317
Maintenance                                                            2,991         3,064           9,551           9,515
Depreciation and amortization                                          5,027         4,525          15,047          14,329
Taxes other than income taxes                                          3,208         3,195           8,823           9,373
Federal and state income taxes                                         9,372         8,730          15,087          15,313
                                                                  -----------    ----------    ------------   -------------
Total operating expenses                                              62,369        56,817         143,087         152,950
                                                                  -----------    ----------    ------------   -------------
OPERATING INCOME                                                      17,531        16,542          32,274          32,890
OTHER INCOME (EXPENSE):
Allowance for equity funds used during construction                       11            48             216             229
Interest income                                                           41            24             165             129
Other, net                                                              (767)         (747)           (858)         (1,465)
Income taxes applicable to other income                                1,046           607           1,033             840
                                                                  -----------    ----------    ------------   -------------
INCOME BEFORE INTEREST CHARGES                                        17,862        16,474          32,830          32,623
                                                                  -----------    ----------    ------------   -------------
INTEREST CHARGES:
Interest on long-term debt                                             2,677         2,769           8,289           8,787
Allowance for debt funds used during construction                         (8)          (46)           (149)           (222)
Interest on notes payable                                                 54            81             174             219
Amortization of debt discount, premium, and expense, net                 186           185             552             396
Other interest charges                                                    96            89             264             286
                                                                  -----------    ----------    ------------   -------------
Net interest charges                                                   3,005         3,078           9,130           9,466
                                                                  -----------    ----------    ------------   -------------
NET INCOME                                                            14,857        13,396          23,700          23,157
DIVIDENDS ON PREFERRED STOCK                                             581           581           1,743           1,743
                                                                  -----------    ----------    ------------   -------------
NET INCOME AFTER DIVIDENDS ON
  PREFERRED STOCK                                                 $   14,276     $  12,815      $   21,957    $     21,414       
                                                                  ===========    ==========    ============   =============






          The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.

                                                            56
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                      SAVANNAH ELECTRIC AND POWER COMPANY
                 CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                        (Stated in Thousands of Dollars)

                                                                                               For the Nine Months
                                                                                               Ended September 30,
                                                                                              1997             1996
OPERATING ACTIVITIES:
<S>                                                                                      <C>               <C>        
Net income                                                                               $     23,700      $    23,157
Adjustments to reconcile net income to net cash provided by operating activities--
         Depreciation and amortization                                                         15,712           15,248
         Deferred income taxes and investment tax credits, net                                  2,179            5,974
         Allowance for equity funds used during construction                                     (216)            (229)
         Other, net                                                                             1,304            1,983
         Changes in certain current assets and liabilities--
            Receivables, net                                                                  (10,197)          (6,668)
            Inventories                                                                           464           (1,022)
            Payables                                                                            5,231             (171)
            Taxes accrued                                                                       6,772            5,689
            Other                                                                                (173)          (3,594)
                                                                                         -------------     ------------
Net cash provided from operating activities                                                    44,776           40,367
                                                                                         -------------     ------------
INVESTING ACTIVITIES:
Gross property additions                                                                      (14,938)         (21,078)
Other                                                                                          (1,385)          (4,774)
                                                                                         -------------     ------------
Net cash used for investing activities                                                        (16,323)         (25,852)
                                                                                         -------------     ------------
FINANCING ACTIVITIES:
Proceeds--
     First mortgage bonds                                                                           -           20,000
     Other long-term debt                                                                      13,870           17,000
Retirements--
     First mortgage bonds                                                                           -          (29,400)
     Other long-term debt                                                                     (14,263)            (403)
Notes payable, net                                                                             (5,000)          (2,500)
Payment of preferred stock dividends                                                           (1,743)          (1,743)
Payment of common stock dividends                                                             (16,000)         (14,400)
Miscellaneous                                                                                    (350)          (2,241)
                                                                                         -------------     ------------
Net cash used for financing activities                                                        (23,486)         (13,687)
                                                                                         -------------     ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                         4,967              828
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                5,214              877
                                                                                         -------------     ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                               $     10,181      $     1,705
                                                                                         =============     ============

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for--
     Interest (net of amount capitalized)                                                $      9,457      $    10,987
     Income taxes                                                                               5,382            6,070




         The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.

                                                           57

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                      SAVANNAH ELECTRIC AND POWER COMPANY
                            CONDENSED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                                     ASSETS

                                                                                 At September 30,
                                                                                      1997             At December 31,
                                                                                  (Unaudited)             1996
                                                                                  -------------       --------------
UTILITY PLANT:
<S>                                                                               <C>                     <C>          
Plant in service, at original cost                                                $    753,043         $  739,461   
Less accumulated provision for depreciation                                            317,355            304,760
                                                                                  -------------       ------------
                                                                                       435,688            434,701
Construction work in progress                                                           12,166             13,463
                                                                                  -------------       ------------
Total                                                                                  447,854            448,164
                                                                                  -------------       ------------

OTHER PROPERTY AND INVESTMENTS:                                                          1,784              1,785
                                                                                  -------------       ------------

CURRENT ASSETS:
Cash and cash equivalents                                                               10,181              5,214
Special deposits                                                                           250              1,395
Receivables--
     Customer accounts receivable                                                       26,608             18,827
     Other accounts and notes receivable                                                 2,060                769
     Affiliated companies                                                                2,597                844
     Accumulated provision for uncollectible accounts                                     (515)              (632)
     Fuel cost under recovery                                                            7,689              7,289
Fossil fuel stock, at average cost                                                       6,051              5,892
Materials and supplies, at average cost                                                  7,390              8,013
Prepayments                                                                              6,086              6,135
                                                                                  -------------       ------------
Total                                                                                   68,397             53,746
                                                                                  -------------       ------------

DEFERRED CHARGES:
Deferred charges related to income taxes                                                18,741             19,167
Premium on reacquired debt, being amortized                                              7,288              7,142
Cash surrender value of life insurance for deferred compensation plans                  10,288             10,288
Miscellaneous                                                                            2,196              2,003
                                                                                  -------------       ------------
Total                                                                                   38,513             38,600
                                                                                  -------------       ------------

TOTAL ASSETS                                                                      $    556,548        $   542,295    
                                                                                  =============       ============






       The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.

                                                        58

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                      SAVANNAH ELECTRIC AND POWER COMPANY
                            CONDENSED BALANCE SHEETS
                        (Stated in Thousands of Dollars)

                         CAPITALIZATION AND LIABILITIES

                                                                                 At September 30,
                                                                                       1997              At December 31,
                                                                                    (Unaudited)             1996
                                                                                    ------------       --------------
CAPITALIZATION:
<S>                                                                                 <C>                <C>         
Common stock equity--
Common stock (par value $5 per share)--
     authorized 16,000,000 shares; outstanding 10,844,635 shares                    $    54,223        $     54,223
Paid-in capital                                                                           8,688               8,688
Retained earnings                                                                       115,329             109,373
                                                                                    ------------       -------------
                                                                                        178,240             172,284
Preferred stock                                                                          35,000              35,000
Long-term debt                                                                          140,651             161,801
                                                                                    ------------       -------------
Total                                                                                   353,891             369,085
                                                                                    ------------       -------------

CURRENT LIABILITIES:
Long-term debt due within one year                                                       21,742                 637
Notes payable                                                                                 -               5,000
Accounts payable--
     Affiliated companies                                                                 5,424               6,374
     Other                                                                               15,011              10,201
Customer deposits                                                                         5,481               5,232
Taxes accrued--
     Federal and state income                                                             3,796                   -
     Other                                                                                3,991               1,015
Interest accrued                                                                          4,377               5,275
Vacation pay accrued                                                                      2,149               2,038
Miscellaneous                                                                             6,900               7,470
                                                                                    ------------       -------------
Total                                                                                    68,871              43,242
                                                                                    ------------       -------------

DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes                                                        79,377              76,654
Accumulated deferred investment tax credits                                              12,773              13,271
Deferred credits related to income taxes                                                 22,710              22,792
Deferred compensation plans                                                               9,206               8,602
Postretirement benefits                                                                   6,251               5,472
Miscellaneous                                                                             3,469               3,177
                                                                                    ------------       -------------
Total                                                                                   133,786             129,968
                                                                                    ------------       -------------

TOTAL CAPITALIZATION AND LIABILITIES                                                $   556,548        $    542,295
                                                                                    ============       =============




         The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.

                                                           59

</TABLE>


<PAGE>


                       SAVANNAH ELECTRIC AND POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                    THIRD QUARTER 1997 vs. THIRD QUARTER 1996
                                       AND
                     YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996


RESULTS OF OPERATIONS

Earnings

SAVANNAH's net income after dividends on preferred stock for the third quarter
and year-to-date 1997 was $14.3 million and $22.0 million, respectively, as
compared to $12.8 million and $21.4 million for the corresponding periods of
1996. For the quarter, earnings increased 11.4% due to increased operating
revenues during this period. Year-to-date earnings increased 2.5% primarily as a
result of lower interest charges and an increase in other income during this
period.

     Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>

                                                                       Increase (Decrease)
                                                     ---------------------------------------------------------
                                                           Third Quarter                 Year-To-Date
                                                     --------------------------- -----------------------------
                                                     (in thousands)       %       (in thousands)       %
<S>                                                       <C>            <C>         <C>              <C>  
Revenues.......................................           $6,040         8.3         $(9,325)         (5.1)
Revenues from affiliates.......................              501        73.4          (1,154)        (44.1)
Fuel expense...................................            5,127        44.7           2,889          12.0
Purchased power from affiliates................           (2,639)      (18.3)        (14,129)        (30.8)
Other operation expense........................            1,113        10.5           1,062           3.3
Income taxes applicable to other income........              439        72.3             193          23.0
</TABLE>

     Revenues. Excluding fuel revenues, which represent the pass-through of fuel
expenses and do not affect income, revenues increased $4.3 million for the
quarter and increased $1.4 million year-to-date when compared to the same
periods of 1996. Revenues for the current quarter of 1997 were up primarily
because of increased energy sales to residential, commercial and industrial
customers. Energy sales to these customers increased 3.7%, 5.4% and 14.7%,
respectively, resulting in revenue increases of 4.4%, 6.9% and 11.8%,
respectively. Year-to-date revenues for 1997 increased primarily because of a
$0.5 million increase in other operating revenues and a $1.0 million increase in
revenues from non-affiliates. Retail revenues, excluding fuel revenues were down
slightly primarily because of a 5.5% decrease in energy sales to residential
customers offset somewhat by increased energy sales of 1.0% in the commercial
sector and 3.5% in the industrial sector. Energy sales to residential customers
were impacted by the milder-than-normal temperatures experienced during 1997.

     Revenues from affiliates and Purchased power from affiliates. Revenues from
sales to affiliated companies within the Southern electric system, as well as
purchases of energy, will vary from period to period depending on demand and the
availability and cost of generating resources at each company. In addition, the
year-to-date 1997 reflects an adjustment in affiliated billings. These
transactions do not have a significant impact on earnings.

     Fuel expenses. The increases for the quarter and year-to-date can be
attributed to higher generation.

                                       60


<PAGE>


                       SAVANNAH ELECTRIC AND POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     Other operation expense. The current quarter and year-to-date increases
when compared to the same periods in 1996 are due primarily to higher
administrative and general expense due to expenses associated with the voluntary
severance plan during this quarter.

     Income taxes applicable to other income. The increases in this item for the
quarter and year-to-date can be attributed to increased tax benefits from losses
of the parent company allocated to SAVANNAH under the joint consolidated income
tax agreement between SOUTHERN and its subsidiaries.

Future Earnings Potential

The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from energy sales growth to a less regulated, more competitive
environment.

     With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, the Southern electric system
is positioning the business to meet the challenge of increasing competition. For
additional information, see Item 1 - BUSINESS - "Competition" and Item 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SAVANNAH
in the Form 10-K.

     Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
"Environmental Matters" of SAVANNAH in the Form 10-K.

     In July 1997, the United States Environmental Protection Agency ("EPA")
published revisions to the ambient air quality standards for ozone and
particulate matter, making the standards significantly more stringent. In
addition, in October 1997, EPA issued a proposed rule which, if implemented as
proposed, would require substantial further reductions in NOx emissions from
fossil-fueled generating facilities. Implementation of the above-described
standards and proposed rules would result in increased compliance costs and
capital expenditures for the operating companies in amounts that cannot be
determined at this time.

     In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income, which establishes standards for reporting and display of "comprehensive
income," which is the total of net income and all other non-owner changes in
stockholders' equity, and its components. The standard is effective in 1998. It
is not expected to affect SAVANNAH's financial reporting.

     In June 1997, the FASB issued Statement No. 131, Disclosures about Segments
of an Enterprise and Related  Information.  Statement No. 131, which  supersedes
Statement  Nos.  14,  18,  24 and 30,  establishes  new  standards  for  segment
reporting,  using the "management  approach," in which  reportable  segments are
based on the same  criteria on which  management  disaggregates  a business  for
making operating decisions and assessing performance. SAVANNAH is in the process
of  evaluating  Statement  No. 131 and its impact and will adopt the standard by
1998.

     Reference is made to Notes (B) and (Q) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.


                                       61
<PAGE>



                       SAVANNAH ELECTRIC AND POWER COMPANY
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


FINANCIAL CONDITION

Overview

Major changes in SAVANNAH's financial condition during the first nine months of
1997 included the addition of approximately $14.9 million to utility plant. The
funds for these additions and other capital requirements were derived primarily
from operations. See SAVANNAH's Condensed Statements of Cash Flows for further
details.

Financing Activities

In April 1997, SAVANNAH sold, through a public authority, $13.87 million of
variable rate pollution control revenue bonds due 2037. The proceeds were
applied to the redemption in May 1997 of $13.87 million of 6 3/4% pollution
control revenue bonds.

     SAVANNAH plans to continue, to the extent possible, a program to retire
higher-cost debt and replace these obligations with lower-cost capital.

Sources of Capital

SAVANNAH plans to obtain the funds required for construction and other purposes
from sources similar to those used in the past. The amount, type and timing of
any financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. Currently,
SAVANNAH expects to have adequate earnings coverage ratios for any anticipated
security sales through at least 1999. See Item 1 - BUSINESS - "Financing
Programs" in the Form 10-K for additional information.

     To meet short-term cash needs and contingencies, SAVANNAH had at September
30, 1997, approximately $10.2 million of cash and cash equivalents and
approximately $40.5 million of unused credit arrangements with banks. At
September 30, 1997, SAVANNAH had no short-term notes payable to banks. Since
SAVANNAH has no major generating plants under construction, management believes
that the need for working capital can be adequately met by utilizing lines of
credit.




                                       62
<PAGE>


                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS
                                       FOR
                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                              ALABAMA POWER COMPANY
                              GEORGIA POWER COMPANY
                               GULF POWER COMPANY
                            MISSISSIPPI POWER COMPANY
                       SAVANNAH ELECTRIC AND POWER COMPANY


                          INDEX TO APPLICABLE NOTES TO
                       FINANCIAL STATEMENTS BY REGISTRANT

<TABLE>
<CAPTION>

                  Registrant                                 Applicable Notes

                  <S>                                        <C>
                  SOUTHERN                                   A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, R

                  ALABAMA                                    A, B, C, G, H, I, J, K

                  GEORGIA                                    A, B, C, G, H, I, L, M, N, O, P

                  GULF                                       A, B, G, H, I

                  MISSISSIPPI                                A, B, G, H, I

                  SAVANNAH                                   A, B, H, Q

</TABLE>
                                       63

<PAGE>


                  THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
                              ALABAMA POWER COMPANY
                              GEORGIA POWER COMPANY
                               GULF POWER COMPANY
                            MISSISSIPPI POWER COMPANY
                       SAVANNAH ELECTRIC AND POWER COMPANY


NOTES TO THE CONDENSED FINANCIAL STATEMENTS:

(A)  The condensed financial  statements of the registrants included herein have
     been prepared by each registrant,  without audit, pursuant to the rules and
     regulations of the SEC. In the opinion of each registrant's management, the
     information   regarding  such  registrant  furnished  herein  reflects  all
     adjustments (which included only normal recurring adjustments) necessary to
     present  fairly the results for the periods  ended  September  30, 1997 and
     1996.  Certain  information and footnote  disclosures  normally included in
     financial   statements  prepared  in  accordance  with  generally  accepted
     accounting principles 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.  It is suggested that these condensed financial  statements
     be read in conjunction with the financial  statements and the notes thereto
     included in each  registrant's  latest annual report on Form 10-K.  Certain
     prior-period  amounts have been reclassified to conform with current-period
     presentation.  

     The  condensed  financial  statements of ALABAMA and GEORGIA
     included  herein have been reviewed by ALABAMA's and GEORGIA's  independent
     public accountants as set forth in their reports included herein as Exhibit
     1 to ALABAMA's and GEORGIA's condensed financial statements.

(B)   SOUTHERN's operating affiliates are subject to the provisions of FASB
      Statement No. 71, Accounting for the Effects of Certain Types of
      Regulation. In the event that a portion of a company's operations is no
      longer subject to these provisions, the company would be required to write
      off related unrecoverable regulatory assets and liabilities, and determine
      if any other assets have been impaired. For additional information, see
      Note 1 to the financial statements of each registrant in Item 8 of the
      Form 10-K.

(C)   The staff of the SEC has questioned certain of the current accounting
      practices of the electric utility industry--including
      SOUTHERN's--regarding the recognition, measurement and classification of
      decommissioning costs for nuclear generating facilities in the financial
      statements. In response to these questions, the FASB has decided to review
      the accounting for liabilities related to closure and removal of
      long-lived assets, including nuclear decommissioning. Reference is made to
      MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings Potential" of
      SOUTHERN, ALABAMA and GEORGIA in Item 7 and Note 1 to the financial
      statements of SOUTHERN, ALABAMA and GEORGIA under "Depreciation and
      Nuclear Decommissioning" in Item 8 of the Form 10-K.

(D)   SOUTHERN engages in price risk management activities for trading and
      non-trading purposes. Reference is made to Note 1 to the financial
      statements of SOUTHERN in Item 8 of the Form 10-K for a discussion of
      these activities. Activities for non-trading purposes consist of
      transactions that are employed to mitigate SOUTHERN's risk related to
      interest rate and foreign currency fluctuations. At September 30, 1997,
      the status of outstanding non-trading related derivative contracts was as
      follows:


                                       64
<PAGE>


NOTES TO THE CONDENSED FINANCIAL STATEMENTS:  (Continued)

<TABLE>
<CAPTION>


                                                  Year of
                                                Maturity or            Notional              Unrealized
                      Type                     Termination              Amount              Gain (Loss)
                                                                                (in thousands)
        <S>                                        <C>           <C>                        <C>                        
        Interest rate swaps                        2002-2012           $777,408             $(25,644)
                                                   2001-2012     (pound)500,000             $(50,890)
                                                   2002-2007          DM691,000             $(2,189)

        Cross currency swaps                       2001-2007     (pound)439,300             $9,777
        Cross currency swaption                         2003          DM570,000             $(5,522)
         (pound) - Denotes British pounds sterling.
         DM - Denotes Deutschemark.
</TABLE>

       Net unrealized gains and losses on outstanding positions with respect to
       trading activities were not material at September 30, 1997.

(E)   On January 29, 1997, Southern Energy, a wholly-owned subsidiary of
      SOUTHERN, completed the acquisition of an 80% interest in CEPA for a total
      net investment of approximately $2.0 billion. On August 13, 1997, an
      additional 19.99% interest was acquired for $150 million plus an interest
      in a project under development. (Reference is made to the Current Report
      on Form 8-K of SOUTHERN dated October 9, 1996 for a more detailed
      description of the acquisition. In addition, reference is also made to
      "Management's Discussion and Analysis - Future Earnings Potential" of
      SOUTHERN herein for more information relating to the acquisition in August
      1997 by Southern Energy of an additional 19.99% interest in CEPA.)

         The acquisition of CEPA was accounted for as a purchase with the $1.6
      billion excess of the acquisition cost over the preliminary estimate of
      the fair value of CEPA's net assets being assigned to goodwill. The
      allocation of the purchase price is preliminary and may be revised at a
      later date. Goodwill will be amortized on a straight-line basis over 40
      years. Results of operations of CEPA are included in the condensed
      consolidated financial statements subsequent to January 29, 1997.

         The following unaudited pro forma combined results of operations for
      the three months ended September 30, 1997 and 1996 and the nine months
      ended September 30, 1997 and 1996 have been prepared assuming the
      acquisition of CEPA had occurred at the beginning of each period. The pro
      forma results assume acquisition financing of $916 million of short-term
      borrowings, $792 million of long-term notes and $400 million of capital
      securities and SOUTHERN's assumed effective composite interest rate on
      these obligations for each period presented was 6.62%. Eventually, the
      existing borrowing may be replaced by some other combination of long-term
      debt and equity.


                                       65
<PAGE>


NOTES TO THE CONDENSED FINANCIAL STATEMENTS:  (Continued)


         The pro forma results are provided for information only. The results
      are not necessarily indicative of the actual results that would have been
      realized had the acquisition occurred on the indicated dates, nor are they
      necessarily indicative of future results of operations of the combined
      companies.
<TABLE>
<CAPTION>

                                                        As Reported and Pro Forma Information (Unaudited)
                                                          (Stated in Thousands of Dollars, except per share)

                                                                  For the Three Months Ended September 30,
                                                                1997                                1996
                                                     As Reported       Pro Forma        As Reported       Pro Forma
      <S>                                               <C>             <C>                <C>             <C>       
      Operating revenues                                $4,071,204      $4,071,204         $2,932,556      $2,989,161
      Consolidated Net Income                             $374,710        $378,257           $467,440        $467,681
      Earnings Per Share of Common Stock                     $0.55          $0.55               $0.69           $0.69

                                                                  For the Nine Months Ended September 30,
                                                                1997                                1996
                                                     As Reported       Pro Forma        As Reported       Pro Forma
      Operating revenues                                $9,372,813      $9,393,470         $7,925,418      $8,015,914
      Consolidated Net Income                             $776,518        $781,471           $987,575        $963,476
      Earnings Per Share of Common Stock                     $1.14          $1.14               $1.47           $1.43


</TABLE>


                                       66
<PAGE>


NOTES TO THE CONDENSED FINANCIAL STATEMENTS:  (Continued)


(F)   SOUTHERN's principal business segment -- or its traditional core business
      -- is the five electric utility operating companies, which provide
      electric service in four southeastern states. The other reportable
      business segment is Southern Energy, which owns and operates power
      production and delivery facilities in the United States and various
      international markets. Southern Energy's energy trading activities also
      play an important role in its business. Financial data for business
      segments and geographic areas are as follows: (in thousands)
<TABLE>
<CAPTION>

         Business Segments                 Operating      Operating          Operating       Operating              Total
                                           Revenues        Income            Revenues         Income               Assets
                                         For the Three Months Ended          For the Nine Months Ended                At
                                             September 30, 1997                 September 30, 1997           September 30, 1997
                                      ------------------------------    -------------------------------      ------------------
         <S>                             <C>                 <C>             <C>              <C>                 <C>        
         Traditional core business       $2,782,063          $637,650        $6,741,141       $1,336,423          $25,100,862
         Southern Energy                  1,289,141            82,694         2,631,672          209,630           10,283,358
                                       ------------        ----------       -----------     ------------        -------------
              Consolidated               $4,071,204          $720,344        $9,372,813       $1,546,053          $35,384,220
                                         ==========          ========        ==========       ==========          ===========

                                         For the Three Months Ended          For the Nine Months Ended                At
                                             September 30, 1996                 September 30, 1996             December 31, 1996
                                      ------------------------------    -------------------------------        -----------------

         Traditional core business       $2,574,656          $627,831        $6,773,828       $1,427,607          $25,367,558
         Southern Energy                    357,900            37,595         1,151,590           95,779            4,924,244
                                       ------------        ----------    --------------    -------------        -------------
              Consolidated               $2,932,556          $665,426        $7,925,418       $1,523,386          $30,291,802
                                         ==========          ========        ==========       ==========          ===========


         Geographic Areas                  Operating      Operating          Operating       Operating              Total
                                           Revenues        Income            Revenues         Income               Assets
                                         For the Three Months Ended          For the Nine Months Ended                At
                                             September 30, 1997                 September 30, 1997           September 30, 1997
                                      ------------------------------    -------------------------------      ------------------

         Domestic                        $3,686,108          $640,266        $8,117,898       $1,344,696          $25,996,233
         International:
                  Europe                    254,265            35,301           911,649          106,482            3,593,606
                  Asia                       56,892            30,328           170,597           76,834            4,289,286
                  Other                      73,939            14,449           172,669           18,041            1,505,095
                                      -------------        ----------     -------------    -------------        -------------
                    Total                $4,071,204          $720,344        $9,372,813       $1,546,053          $35,384,220
                                         ==========          ========        ==========       ==========          ===========

                                         For the Three Months Ended          For the Nine Months Ended                At
                                             September 30, 1996                 September 30, 1996             December 31, 1996
                                      ------------------------------    -------------------------------        -----------------

         Domestic                        $2,606,715          $632,428        $6,852,782       $1,446,420          $25,868,253
         International:
                  Europe                    276,703            30,965           918,813           68,472            2,965,578
                  Asia                            -                 -                 -                -                    -
                  Other                      49,138             2,033           153,823            8,494            1,457,971
                                      -------------       -----------      ------------   --------------        -------------
                    Total                $2,932,556          $665,426        $7,925,418       $1,523,386          $30,291,802
                                         ==========          ========        ==========       ==========          ===========

</TABLE>

(G)   Reference is made to Note 3 to each of the registrant's financial
      statements, except SAVANNAH's, in Item 8 of the Form 10-K for a discussion
      of the proceedings initiated by the FERC regarding the reasonableness of
      the return on common equity on certain of the Southern electric system's
      wholesale rate schedules and contracts.

                                       67
<PAGE>


NOTES TO THE CONDENSED FINANCIAL STATEMENTS:  (Continued)


(H)   Certain of the registrants and other SOUTHERN subsidiaries have instituted
      work force reduction programs. The expenses recognized under these
      programs and the unamortized balance of expenses deferred under regulatory
      orders were as follows: (in thousands)
<TABLE>
<CAPTION>

                                 Three Months Ended             Nine Months Ended           Unamortized Balance
                                      September 30,                  September 30,            at September 30, 1997
                                 -----------------------        --------------------        -----------------------
                                 1997              1996         1997          1996
                                 ----              ----         ----          ----

      <S>                         <C>             <C>           <C>          <C>                      <C>    
      ALABAMA                     $8,759          $5,951        $26,242      $18,360                  $25,304
      GEORGIA                      1,641           7,947          4,512       34,821                        -
      GULF                           950             238          2,192        2,472                        -
      MISSISSIPPI                  1,088           1,847          1,192        3,625                   16,696*
      SAVANNAH                       378              28          1,185          262                        -
      OTHER                           74             129            121          343                        -
                               ---------         -------      ---------     --------                  -------
      SOUTHERN
         system                  $12,890         $16,140        $35,444      $59,883                  $42,000
                                 =======         =======        =======      =======                  =======

</TABLE>

      * Of this amount, $15.7 million relates to the current workforce reduction
      plan. The remainder, $996,000, relates to workforce reduction programs
      initiated in previous years.

(I)   During the first nine months of 1997, statutory business trusts formed by
      ALABAMA, GEORGIA, GULF, MISSISSIPPI, Southern Investments UK plc ("SIUK")
      and Southern Company Capital Funding, Inc. ("Southern Capital"), of which
      the respective companies own all the common securities, issued mandatorily
      redeemable preferred or capital securities as follows: (in thousands)
<TABLE>
<CAPTION>

                                                                                                     Maturity Date
                                           Date of Issue       Amount        Rate        Notes          of Notes

           <S>                                  <C>            <C>           <C>         <C>            <C>   
           ALABAMA                              1/16/97        $200,000      7.60%       $206,000       12/31/2036
           GEORGIA                              1/16/97         175,000      7.60         180,000       12/31/2036
           GULF                                 1/31/97          40,000      7.625         41,000       12/31/2036
           MISSISSIPPI                          2/26/97          35,000      7.75          36,000        2/15/2037
           SIUK                                 1/29/97          82,000      8.23          85,000         2/1/2027
           Southern Capital                      2/4/97         325,000      8.19         335,000         2/1/2037
           Southern Capital                      2/4/97          75,000      8.14          77,000        2/15/2027
           GEORGIA                              6/11/97         189,250      7.75         195,000        3/31/2037
           Southern Capital                      6/6/97         200,000      7.75         206,000        3/31/2037
</TABLE>

      Substantially all the assets of each trust are junior subordinated notes
      issued by the related company in the respective approximate principal
      amounts set forth above. The notes of Southern Capital are guaranteed by
      SOUTHERN. ALABAMA, GEORGIA, GULF, MISSISSIPPI, SIUK and SOUTHERN each
      considers that the mechanisms and obligations relating to the preferred or
      capital securities issued for its benefit, taken together, constitute a
      full and unconditional guarantee by it of the respective trusts' payment
      obligations with respect to the preferred or capital securities. Reference
      is also made to Note 9 to the financial statements of ALABAMA and GEORGIA
      in the Form 10-K.



                                       68
<PAGE>


NOTES TO THE CONDENSED FINANCIAL STATEMENTS:  (Continued)


(J)   In June 1995, the Alabama PSC issued a rate order granting ALABAMA's
      request for gradual adjustments to move toward parity among customer
      classes. This order also calls for a moratorium on any periodic retail
      rate increases (but not decreases) until July 2001. In December 1995, the
      Alabama PSC issued an order authorizing ALABAMA to reduce balance sheet
      items--such as plant and deferred charges--at any time ALABAMA's actual
      base rate revenues exceed the budgeted revenues. Reference is made to Note
      3 to the financial statements of SOUTHERN and ALABAMA in Item 8 of the
      Form 10-K for additional information. In April 1997, the Alabama PSC
      issued an additional order authorizing ALABAMA to reduce balance sheet
      asset items. This order authorizes the reduction of such items up to an
      amount equal to 5 times the total estimated annual revenue reduction
      resulting from future rate reductions.

(K)   In 1996, legal actions against ALABAMA were filed in several counties in
      Alabama charging ALABAMA with fraud and non-compliance with regulatory
      statutes relating to the offer, sale and financing of "extended service
      contracts" in connection with the sale of electric appliances. See Note 3
      to the financial statements of SOUTHERN and ALABAMA in Item 8 of the Form
      10-K for additional information.

(L)  In February 1996, the Georgia PSC approved a three-year  accounting  order,
     effective January 1, 1996. In November 1996, on appeal by a consumer group,
     the Superior Court of Fulton County,  Georgia reversed the accounting order
     and remanded the matter to the Georgia  PSC. In October  1997,  the Georgia
     Court of Appeals  upheld the  accounting  order and  reversed  the Superior
     Court's  decision.  GEORGIA  continued to recognize  expenses in accordance
     with the  accounting  order  while it was under  appeal.  Under the  order,
     earnings in excess of a 12.5% retail  return on common  equity will be used
     to accelerate the  amortization  of regulatory  assets or  depreciation  of
     electric  plant.  Accordingly,  for earnings in excess of the 12.5% return,
     GEORGIA recorded charges of $76.7 million and $104.9 million, respectively,
     for the three months and nine months ended September 30, 1997 (presented in
     the accompanying  financial  statements as depreciation expense of electric
     plant and as an addition to the reserve for  depreciation).  For additional
     information,  reference is made to Note 3 to the  financial  statements  of
     SOUTHERN and GEORGIA in Item 8 of the Form 10-K.

(M)   In 1987 and 1989, the Georgia PSC ordered that the allowed costs of Plant
      Vogtle, a two-unit nuclear facility of which GEORGIA owns 45.7%, be phased
      into rates. Pursuant to the orders, GEORGIA recorded a deferred return
      under phase-in plans until October 1991 when the allowed investment was
      fully reflected in rates. In 1991, the Georgia PSC levelized the remaining
      Plant Vogtle declining capacity buyback expenses over a six-year period.
      In addition, GEORGIA deferred certain Plant Vogtle operating expenses and
      financing costs under accounting orders issued by the Georgia PSC. These
      Georgia PSC orders provide for the recovery of deferred costs within 10
      years. The unamortized balance of these deferred costs at September 30,
      1997, was $58.2 million.

(N)  Reference  is made to Note 3 to the  financial  statements  of SOUTHERN and
     GEORGIA in Item 8 of the Form 10-K for information  concerning the recovery
     by GEORGIA of its costs  associated  with the Rocky Mountain pumped storage
     hydroelectric plant. At September 30, 1997, GEORGIA's net investment in the
     plant was  approximately  $163  million.  In August 1997,  the staff of the
     Georgia PSC issued a report regarding its prudence review of the plant. The
     report recommends that of GEORGIA's initial $202 million  investment in the
     plant,   approximately  $79  million  be  allowed  in  rate  base,  with  a
     disallowance of approximately $123 million.  The report also concludes that
     GEORGIA  should be allowed to retain the benefits of the plant's lower fuel
     costs (as compared to alternative sources of generation). The report states
     that as an alternative,  it may be reasonable to provide a larger allowance
     in rate  base and  allow  customers  to  receive  the  benefit  of the fuel
     savings. GEORGIA estimates the present value of the fuel benefits over the

                                       69
<PAGE>



NOTES TO THE CONDENSED FINANCIAL STATEMENTS:  (Continued)


      life of the plant to be in the range of approximately $50 million to $70
      million. The Georgia PSC intends to conclude hearings on this matter in
      December 1997, at which time the Georgia PSC will take the matter under
      advisement for future action. While GEORGIA disagrees with the Georgia PSC
      staff's conclusions, the outcome of this matter cannot now be determined.

(O)   Reference is made to Note 3 to the financial statements of GEORGIA in Item
      8 of the Form 10-K for information relating to an agreement reached
      January 10, 1997, between GEORGIA and MEAG relating to a new power supply
      relationship. A power supply contract entered into between GEORGIA and
      MEAG has been approved by FERC and was implemented in August 1997.

(P)   Reference is made to Note 3 to the financial statements of SOUTHERN and
      GEORGIA in Item 8 of the Form 10-K for information regarding GEORGIA's
      designation as a potentially responsible party under the Comprehensive
      Environmental Response, Compensation and Liability Act and other
      environmental contingencies.

(Q)   On November 7, 1997, SAVANNAH filed with the Georgia PSC to request
      an accounting order to make certain accounting adjustments including
      implementation of new depreciation rates, to increase the provision in the
      storm damage reserve, and to provide a process to address SAVANNAH's level
      of earnings in the future. On November 10, 1997, SAVANNAH filed for a rate
      reduction, of approximately $1.0 million, targeted to the small business
      class.

(R)   In July 1997, the new Labor government in the United Kingdom introduced
      its first budget which became effective July 31, 1997. This budget
      included a one-time windfall profit tax on privatized utilities. As
      reflected in the "Condensed Consolidated Statements of Income", the effect
      of this tax, approximately (pound)90 million ($148 million), was recorded
      in the quarter ended September 30, 1997. The tax is payable in two equal
      installments on or before December 1, 1997 and December 1, 1998.


                                       70
<PAGE>


PART II       -  OTHER INFORMATION


Item 1.          Legal Proceedings.

                 (1)    Reference is made to the Notes to the Condensed
                        Financial Statements herein for information regarding
                        certain legal and administrative proceedings in which
                        SOUTHERN and its reporting subsidiaries are involved.

                 (2)    Reference is made to Item 3 - LEGAL PROCEEDINGS in the
                        Form 10-K for information regarding a tax deficiency
                        notice issued by the Internal Revenue Service claiming
                        that GEORGIA and SOUTHERN owed additional taxes for the
                        years 1984 through 1987 and regarding GEORGIA's and
                        SOUTHERN's claims for tax refunds for such years.

                        In August 1997, SOUTHERN and the Internal Revenue
                        Service entered into a settlement agreement which is
                        subject to the review and approval of the Joint
                        Congressional Committee on Taxation. If approved by the
                        Joint Committee, the agreement would resolve all issues
                        in the case for the years before the Tax Court,
                        resulting in a refund to SOUTHERN in an amount which is
                        not expected to have a material effect on earnings.
                        There can be no assurance that such Joint Committee
                        approval will be received.


                 (3)    ALABAMA, GEORGIA and MISSISSIPPI, et al. v. TVA
                        (U.S. District Court for the Northern District of 
                        Alabama)

                        On July 24, 1997, ALABAMA, GEORGIA, MISSISSIPPI and
                        other plaintiffs entered into an agreement with TVA that
                        will settle the action filed in April 1997, which sought
                        to enjoin TVA from violating a 1959 act that prohibits
                        TVA from selling power outside the area that was being
                        served by it in 1957. In the settlement agreement, TVA
                        agrees that it will enter into exchange power
                        arrangements only with authorized entities to which it
                        may lawfully sell such power under the 1959 act, and
                        that it will not knowingly engage in such transactions
                        where the authorized entity is reselling that power to
                        unauthorized entities.


Item 5.          Other Information.

                 On November 3, 1997, SOUTHERN commenced offers to purchase for
                 cash (the "Offers") certain series of the preferred stocks of
                 ALABAMA, GEORGIA, GULF and MISSISSIPPI. The Offers are being
                 made for one series ($36.4 million aggregate par value) in the
                 case of ALABAMA, nine series ($95.8 million aggregate stated
                 value) in the case of GEORGIA, five series ($50.1 million
                 aggregate par value or stated capital) in the case of GULF and
                 three series ($11.0 million aggregate par value) in the case of
                 MISSISSIPPI.

                        SOUTHERN will sell any shares purchased by it pursuant
                 to the Offers to the respective subsidiary companies at the
                 purchase price paid by SOUTHERN plus expenses, and the
                 respective subsidiary companies will thereupon retire and
                 cancel such shares.

                        Concurrently with the Offers, the subsidiary companies
                 are soliciting proxies on behalf of their respective boards of
                 directors in connection with special meetings of stockholders
                 scheduled to be held on December 10, 1997. The purpose of the
                 special meetings is to consider a proposed


                                       71
<PAGE>


Item 5.          Other Information.  (Continued)


                 amendment to each such subsidiary company's charter to
                 eliminate certain provisions restricting its ability to issue
                 unsecured indebtedness, to sell assets, merge or consolidate
                 without preferred stockholder approval under certain
                 circumstances and to pay dividends on its common stock.

                        For further information with regard to this matter,
                 including the terms and conditions of the Offers, reference is
                 made to the four Issuer Tender Offer Statements on Schedule
                 13E-4 filed by SOUTHERN with the SEC on November 3, 1997.




Item 6.          Exhibits and Reports on Form 8-K.

                 (a)    Exhibits.

                        Exhibit 24    -   Powers of Attorney and resolutions.  
                                          (Designated in the Form 10-K for the
                                          year ended December 31, 1996, File 
                                          Nos. 1-3526, 1-3164, 1-6468, 0-2429,
                                          0-6849 and 1-5072 as Exhibits 24(a), 
                                          24(b), 24(c), 24(d), 24(e) and 24(f),
                                          respectively, and incorporated herein 
                                          by reference.)

                        Exhibits 27   -   Financial Data Schedules
                                          (a)    SOUTHERN
                                          (b)    ALABAMA
                                          (c)    GEORGIA
                                          (d)    GULF
                                          (e)    MISSISSIPPI
                                          (f)    SAVANNAH


                 (b)    Reports on Form 8-K.

                        GULF filed a Current Report on Form 8-K dated 
                        July 28, 1997:
                              Items reported:                 Item 5
                                                              Item 7
                              Financial statements filed:     None




                                       72

<PAGE>


                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          THE SOUTHERN COMPANY

     By   A. W. Dahlberg
          Chairman, President and Chief Executive Officer
          (Principal Executive Officer)

     By   W. L. Westbrook
          Financial Vice President, Chief Financial Officer and Treasurer
          (Principal Financial and Accounting Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)

                             Date: November 12, 1997

--------------------------------------------------------------------------------

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          ALABAMA POWER COMPANY

     By   Elmer B. Harris
          President and Chief Executive Officer
          (Principal Executive Officer)

     By   William B. Hutchins, III
          Executive Vice President and Chief Financial Officer
          (Principal Financial Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)

                             Date: November 12, 1997

                                       73
<PAGE>


                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          GEORGIA POWER COMPANY

     By   H. Allen Franklin
          President and Chief Executive Officer
          (Principal Executive Officer)

     By   Warren Y. Jobe
          Executive Vice President, Treasurer and Chief Financial Officer
          (Principal Financial Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)


                             Date: November 12, 1997

--------------------------------------------------------------------------------

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          GULF POWER COMPANY

     By   Travis J. Bowden
          President and Chief Executive Officer
          (Principal Executive Officer)

     By   A. E. Scarbrough
          Vice President - Finance
          (Principal Financial and Accounting Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)


                             Date: November 12, 1997

                                       74
<PAGE>


                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          MISSISSIPPI POWER COMPANY

     By   Dwight H. Evans
          President and Chief Executive Officer
          (Principal Executive Officer)

     By   Michael W. Southern
          Vice President, Secretary, Treasurer and Chief Financial Officer
          (Principal Financial and Accounting Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)


                             Date: November 12, 1997

--------------------------------------------------------------------------------

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.

          SAVANNAH ELECTRIC AND POWER COMPANY

     By   /s/ G. Edison Holland,  Jr.
          President and Chief Executive Officer
          (Principal Executive Officer)

     By   Kirby R. Willis
          Vice President, Treasurer and Chief Financial Officer
          (Principal Financial and Accounting Officer)

     By   /s/ Wayne Boston
          (Wayne Boston, Attorney-in-fact)

                             Date: November 12, 1997



                                       75