Document:

Exhibit 10.5

                             SOUTHERN COMPANY SYSTEM
                        INTERCOMPANY INTERCHANGE CONTRACT

                              ARTICLE I - RECITALS

        Section 1.1: This contract is made and entered into this 17th day of
        February, 2000, by and between Alabama Power Company, a corporation
        organized and existing under the laws of the State of Alabama with its
        principal office in Birmingham, Alabama; Georgia Power Company, a
        corporation organized and existing under the laws of the State of
        Georgia with its principal office in Atlanta, Georgia; Gulf Power
        Company, a corporation organized and existing under the laws of the
        State of Maine with its principal office in Pensacola, Florida;
        Mississippi Power Company, a corporation organized and existing under
        the laws of the State of Mississippi with its principal office in
        Gulfport, Mississippi; Savannah Electric and Power Company, a
        corporation organized and existing under the laws of the State of
        Georgia with its principal office in Savannah, Georgia; and Southern
        Power Company, a corporation organized and existing under the laws of
        the State of Delaware with its principal office in Birmingham, Alabama,
        all such companies being hereinafter collectively referred to as the

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Southern Company Services, Inc.                        Original Sheet No. 2
First Revised Rate Schedule FERC No. 138

Issued by:  Charles D. McCrary, Executive Vice-Pres.  Effective: April 18, 2000
Issued on: June 20, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259

     "OPERATING  COMPANIES";  and Southern Company Services,  Inc., a subsidiary
service company under the Public Utility Holding Company Act of 1935 ("AGENT" or
"SCSI").

                                   WITNESSETH:

         Section 1.2: WHEREAS, the common stock of the OPERATING COMPANIES is
         owned by The Southern Company, a public utility holding company
         organized and operating pursuant to the provisions of the Public
         Utility Holding Company Act of 1935 ("the Act"); and

          Section 1.3: WHEREAS,  the OPERATING COMPANIES can be operated as
          an integrated electric utility system pursuant to the standards of the
          Act; and

         Section 1.4: WHEREAS, the OPERATING COMPANIES have so operated their
         respective electric facilities and conducted interconnected electric
         operations pursuant to and in accordance with the provisions of
         interchange contracts, the most recent of

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Southern Company Services, Inc.                          Original Sheet No. 3
First Revised Rate Schedule FERC No. 138

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Southern Company Services, Inc.                      Original Sheet No. 32
First Revised Rate Schedule FERC No. 138

        which being The Southern Company System Intercompany Interchange
        Contract dated October 31, 1988, as amended ("the 1989 Contract"); and

        Section 1.5: WHEREAS, the OPERATING COMPANIES desire to replace the 1989
        Contract with an amended and restated contract to incorporate in one
        document the numerous amendments subsequently made thereto and also to
        make further revisions to reflect appropriate modifications to the
        current arrangement.

        Section 1.6:WHEREAS, all of the Operating Companies (including New Power
        Company) will share in all of the benefits and burdens of this IIC,
        including complying with operating, dispatch and reserve requirements,
        participating in opportunity sales transactions, and bearing
        responsibility for their portion of purchases.

        Section 1.7: NOW, THEREFORE, in consideration of the foregoing and the
        mutual covenants and agreements hereinafter stated, the OPERATING
        COMPANIES agree and contract as follows:

                          ARTICLE II - TERM OF CONTRACT

        Section 2.1: This contract will be referred to as the Southern Company
        System Intercompany Interchange Contract ("IIC"). Except as provided in
        Section 2.2, the IIC shall become effective on April 18, 2000, and shall
        continue in effect from year to year thereafter subject to termination
        as provided hereinafter. When this IIC has become effective, it shall
        supersede and replace the 1989 Contract, and references to a section of
        such superseded interchange contract in other agreements of the
        OPERATING COMPANIES shall be taken to mean reference to the section of
        substantially like import in this IIC.

        Section 2.2: Section 3.5 of the Allocation Methodology and Periodic Rate
        Computation Manual to the 1989 Contract contained a provision pertaining
        to the treatment of Operation and Maintenance ("O&M") expenses for units
        that were projected to operate at less than a ten percent (10%) annual
        capacity factor ("Ten Percent Rule"). The Ten Percent Rule is eliminated
        in Section 3.4 of this Manual, which change directly affects the
        dispatch of system resources. In the event the Federal

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        Energy Regulatory Commission ("FERC") does not allow Section 3.4 of this
        Manual to take effect without refund obligation, those provisions of
        Section 3.5 of the Manual of the 1989 Contract setting forth the Ten
        Percent Rule shall continue in effect until Section 3.4 of this Manual
        is approved at the conclusion of the proceeding.

        Section 2.3: This IIC may be terminated at any time by mutual agreement
        of the OPERATING COMPANIES or may be terminated at any time by any
        OPERATING COMPANY by its giving to each of the other OPERATING COMPANIES
        and the AGENT written notice of its election to so terminate its
        participation in this IIC at least five (5) years prior to the date of
        termination. This IIC shall continue in full force and effect as to each
        OPERATING COMPANY until terminated as hereinabove provided.

                      ARTICLE III - PRINCIPAL OBJECTIVES OF
                        INTERCOMPANY INTERCHANGE CONTRACT

           Section   3.1:  The  purpose  of  this  IIC  is  to  provide the
          contractual  basis  for  the  continued   operation  of  the electric
          facilities of the OPERATING COMPANIES in such

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        a manner as to achieve the maximum possible economies consistent with
        the highest practicable reliability of service, with the reasonable
        utilization of natural resources and effect on the environment, and to
        provide a basis for equitably sharing among the OPERATING COMPANIES the
        costs associated with the operation of facilities that are used for the
        mutual benefit of all the OPERATING COMPANIES.

        Section 3.2: It is recognized that reliability of service and economy of
        operation require that the energy supply to the system be controlled
        from a centralized dispatching office and that this will require
        adequate communication facilities and the provision of economic dispatch
        computer facilities and automatic controls of generation.

        Section 3.3: It is recognized that the IIC provides for the retention of
        lowest cost energy resources by each OPERATING COMPANY for its own
        customers. Energy in excess of that necessary to meet each OPERATING
        COMPANY's requirements is delivered to the Pool as Interchange Energy
        and may include: (i) energy generated from fossil fired generating
        plants and combustion turbines; and (ii) purchased energy.

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        Section 3.4: It is recognized that, under this IIC, each OPERATING
        COMPANY will share in the benefits and pay its share of the costs of
        coordinated operations as agreed upon in accordance with the terms
        hereof. All costs and revenues associated with wholesale transactions
        under this IIC will be shared among all OPERATING COMPANIES (including
        New Power Company) on a comparable basis through the application of the
        governing procedures and methodologies to all such OPERATING COMPANIES.
        Section 3.5: It is recognized by the OPERATING COMPANIES that
        coordinated electric operation contemplates minimum cost of power supply
        upon the interconnected system at all times, consistent with service
        requirements and other operating limitations. Benefits of integrated
        operation accruing to the respective OPERATING COMPANIES are predicated
        upon cooperative efforts toward this objective and are so reflected in
        all IIC determinations.

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                ARTICLE IV - ESTABLISHMENT OF OPERATING COMMITTEE
                      AND DESIGNATION OF AGENT TO ACT UNDER
                        DIRECTION OF OPERATING COMMITTEE

        Section 4.1 - Establishment of Operating Committee: A designated
        representative from each of the OPERATING COMPANIES, together with a
        designated representative of the AGENT who shall act as chairman, shall
        form and constitute an Operating Committee to meet at frequent intervals
        and determine the methods of operation hereunder.

        Section 4.2 - Duties of Operating Committee: The Operating Committee's
        areas of responsibility include such matters as developing the concepts,
        terms and conditions of this IIC; providing guidance and direction to
        the AGENT regarding economic power system operations and the costs
        associated therewith; reviewing and recommending generation expansion
        plans for approval by the respective OPERATING COMPANIES; and other
        power system matters that relate to the overall coordinated operation of
        the Southern electric system. Each OPERATING COMPANY representative has
        one vote and all decisions must be unanimous.

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        Section 4.3 - Designation of AGENT: SCSI, as a party to this IIC, is
        designated as AGENT of the OPERATING COMPANIES for administrative and
        coordination functions.

        Section 4.4 - Duties of AGENT: The AGENT will perform such services and
        will represent the OPERATING COMPANIES, or any of them, in all things to
        be done by their agent in the execution of and operation under existing
        contracts with nonaffiliated utilities or entities (hereinafter referred
        to as "OTHERS"), or contracts supplemental thereto, and under any other
        contracts in which SCSI has been designated to act as AGENT for the
        OPERATING COMPANIES.

                  The OPERATING COMPANIES have certain contracts with OTHERS
        that provide for the purchase and/or sale of capacity and/or energy by
        the OPERATING COMPANIES. The AGENT will make the payments associated
        with purchases under these contracts and under any other contracts or
        arrangements under which it acts as agent for the OPERATING COMPANIES in
        accordance with their terms. Each

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        OPERATING COMPANY will reimburse the AGENT for its portion of such total
        payments in accordance with the arrangement in effect with respect to
        the particular contract. Similarly, the AGENT will collect the payments
        due for sales under these contracts and under any other contracts or
        arrangements under which it acts as agent and will distribute such
        payments among the OPERATING COMPANIES in accordance with the
        arrangement in effect with respect to the particular contract.

        Section 4.5 - Term of Agency: The provisions of this IIC providing for
        authority for the AGENT to act on behalf of the OPERATING COMPANIES, or
        any of them, shall be deemed to refer, insofar as applicable, to all
        contracts under which the AGENT acts as AGENT for the OPERATING
        COMPANIES and notwithstanding anything to the contrary in ARTICLE II
        hereof, this IIC shall continue in effect insofar as it pertains to
        other contracts under which the AGENT acts as agent for the OPERATING
        COMPANIES during the life of any of the said contracts. The OPERATING
        COMPANIES may, however, designate a new agent to act hereunder by giving
        thirty

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        (30) days written notice thereof to the AGENT whereupon such new agent
shall be the AGENT hereunder.

                      ARTICLE V - OPERATION AND MAINTENANCE
                 OF THE OPERATING COMPANIES' ELECTRIC FACILITIES

        Section 5.1: The OPERATING COMPANIES agree to maintain their respective
        electric facilities in good operating condition and to operate such
        facilities in coordination with those of the other OPERATING COMPANIES
        as an integrated electric system in accordance with determinations made
        from time to time by the Operating Committee in order that an adequate
        power supply shall be available to meet the requirements of the
        customers of the respective parties hereto at the lowest cost consistent
        with a high degree of service reliability.

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                  ARTICLE VI - INCORPORATION OF THE ALLOCATION
                METHODOLOGY AND PERIODIC RATE COMPUTATION MANUAL

        Section 6.1 - Incorporation of Manual: The mechanics and methods for
        determining the charges for capacity and energy purchased and sold
        between the OPERATING COMPANIES, the monthly capability requirement
        determinations, and the monthly billings and payments between the
        OPERATING COMPANIES are described in detail in the Allocation
        Methodology and Periodic Rate Computation Manual ("Manual") attached
        hereto and incorporated herein by reference. The Manual also supplies
        more detailed explanation of provisions of this IIC and is necessary to
        effectuate its intent.

        Section 6.2 - Purpose of Manual: The Manual contains a description of
        the methodology and procedure used to calculate the charges for the
        services provided for in this IIC. The OPERATING COMPANIES recognize
        that the cost of providing such services will change during the term of
        this IIC due to changes in loads, investment and expenses and the
        addition of electric facilities. Thus, in order for the OPERATING
        COMPANIES to share equitably in the cost of the services to be provided
        under this

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        IIC, it will be necessary to revise or update, on a periodic basis, the
        cost, expense, load and investment figures utilized in the derivation of
        the charges for the services to be provided. The Manual will serve as a
        formula rate allowing periodic revision of the charges to reflect
        changes in the cost of providing the services contemplated by this IIC.

        Section 6.3 - Charges to be Shown on Informational Schedules: The Manual
        provides that charges derived by application of the formula rate will be
        shown on Informational Schedules. The Informational Schedules will be
        revised on a periodic basis to reflect application of the formula rate
        contained in the Manual.

        Section 6.4 - Revision of Charges and Regulatory Filings: Since the
        charges for the services provided for in this IIC will be computed in
        accordance with the formula rate method and procedures established in
        the Manual, it is contemplated that revisions in such charges will not
        be changes in rates which would require a filing and suspension under
        the Federal Power Act and the applicable Rules and Regulations of the
        FERC. The initial Informational Schedules will be submitted to the FERC,
        or its successor in

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        interest, for informational purposes to show the application of the
        formula rate and the resulting charges. In addition, work papers will be
        included with the initial Informational Schedules showing a detailed
        application of the formula rate contained in the Manual. Revised
        Informational Schedules will be submitted to the FERC for informational
        purposes only.

        Section 6.5 - Timing of Revisions to Charges: It is contemplated that
        charges, computed in accordance with the formula rate contained in the
        Manual, will be revised annually. It shall be the responsibility of the
        AGENT to obtain the data and figures required from the respective
        OPERATING COMPANIES for utilization in the formula rates. The AGENT will
        also be responsible for calculating the revised charges to be shown on
        the Informational Schedules, which will be submitted to the Operating
        Committee for review and confirmation.

        Section 6.6 - Revision of Manual: The Operating Committee will review
        the Manual periodically to determine whether revisions to the formula
        rate are necessary to meet

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        changed or changing conditions. If the Operating Committee determines
        that revisions to the formula rate are appropriate or necessary, it will
        revise the Manual accordingly. In such event, it will be the
        responsibility of the AGENT to file the revised Manual with the FERC, or
        its successor in interest, in order to obtain timely approval or
        acceptance thereof.

                 ARTICLE VII - INTERCHANGE CAPACITY TRANSACTIONS
                         BETWEEN THE OPERATING COMPANIES

        Section 7.1 - Provision for Sharing of Temporary Surpluses or Deficits
        of Capacity Between Operating Companies: The coordinated operation of
        the integrated electric system creates a pool of power, referred to
        herein as "the Pool," to which OPERATING COMPANIES commit their surplus
        power and from which OPERATING COMPANIES receive their deficit power.
        The OPERATING COMPANIES recognize that in a given year one or more of
        them may have a temporary surplus or deficit of capacity as a result of
        coordinated planning or other circumstances. It is the purpose of this
        IIC to allocate equitably between the OPERATING COMPANIES such

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        temporary surplus or deficit capacity so that each OPERATING COMPANY
        will share in the burdens and benefits of coordination of the integrated
        electric system. The OPERATING COMPANIES agree to purchase and sell such
        temporary surplus and deficit capacity among themselves on a monthly
        basis. The amount of capacity to be purchased or sold by the respective
        OPERATING COMPANIES is determined by the formula methodology set out in
        ARTICLE IV of the Manual.

        Section 7.2 - Charge for Monthly Capacity Transactions Among the
        OPERATING COMPANIES: The OPERATING COMPANIES recognize that capacity
        reserves in the Pool are predominantly made up of peaking plant or
        equivalent resources. Accordingly, the monthly charge for capacity
        transactions among the OPERATING COMPANIES will be based on the most
        recently acquired peaking plant resource that is available for
        year-round operation and scheduling. Each OPERATING COMPANY's monthly
        charge for capacity sold to the Pool is developed in accordance with the
        formula rate set out in ARTICLE V of the Manual. The monthly capacity
        charge for each OPERATING COMPANY, as developed in accordance with such

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        formula rate, will be shown on Informational Schedules. The selling
        OPERATING COMPANIES will make capacity available monthly to the Pool for
        purposes of reserve sharing at the charge shown on such Informational
        Schedules, and the buying OPERATING COMPANIES will purchase capacity at
        the average cost of peaking capacity to the Pool.

                 ARTICLE VIII - INTERCHANGE ENERGY TRANSACTIONS
                         BETWEEN THE OPERATING COMPANIES

        Section 8.1 - Provision for Interchange Energy: Coordinated electric
        system operation, utilizing the concept of centralized integrated
        electric system economic dispatch, results in energy transfers among the
        OPERATING COMPANIES. Such energy transfers are accounted for on an
        hourly basis and are referred to as Interchange Energy. The methodology
        for determining the amount of Interchange Energy supplied to or
        purchased from the Pool is set out in ARTICLE II of the Manual.
        Interchange Energy is composed of two categories designated as: (i)
        Associated Interchange Energy (energy purchased or delivered to serve an
        OPERATING COMPANY's requirements); and

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        (ii) Opportunity Interchange Energy (energy purchased or delivered to
        meet an OPERATING COMPANY's opportunity transactions).

        Section 8.2 - Charge for Interchange Energy: The charge for Interchange
        Energy sales by an OPERATING COMPANY during any hour will be based on
        the variable costs of the generating resources that are considered as
        having supplied the Interchange Energy. The methodology for determining
        the charges for Associated and Opportunity Interchange Energy sales to
        the Pool during any hour is set out in ARTICLE III of the Manual.

                        ARTICLE IX - PROVISION FOR OTHER
                            INTERCHANGE TRANSACTIONS

        Section 9.1 - Assignable Energy: Assignable Energy is defined as energy
        acquired from internal sources or from OTHERS for a purpose other than
        economic dispatch. Assignable Energy is assigned to one or more of the
        OPERATING COMPANIES consistent with the purpose for which it is
        acquired. Such assignment will be accomplished by first identifying the
        beneficiary (or beneficiaries) of the Assignable

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        Energy and then determining the appropriate share for each such
        Operating Company. For example, these shares might be based on a Peak
        Period Load Ratio (PPLR) in proportion to the PPLRs of other
        beneficiaries or relative participation in a bilateral sale. Once
        assigned, Assignable Energy will not be delivered to the Pool unless it
        becomes economically usable on the integrated electric system.

        Section 9.2 - Hydroelectric Operation During Periods of Minimum Steam
        Operations: During certain periods of the year when unusually good flow
        conditions prevail, certain steam generating units may be taken out of
        service to increase the utilization of hydro energy. The OPERATING
        COMPANY having such hydro generation may elect to take a fossil fired
        generating unit out of service. In the alternative, if another OPERATING
        COMPANY takes a fossil fired generating unit out of service for the
        purpose of utilizing such hydro energy, the energy rate between the two
        OPERATING COMPANIES for that transaction will be the average of the
        operation and maintenance cost of such hydro energy and the variable
        cost of the fossil fired generating unit, or as otherwise agreed upon by
        the two OPERATING COMPANIES.

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        Section 9.3 - Tie-Line Frequency Regulation by Hydro Capacity: Tie-line
        load control and frequency regulation by hydro involves additional costs
        because of increased expenditures associated with such regulation. The
        charge for these transactions is computed in accordance with the formula
        rate contained in ARTICLE VI of the Manual.

        Section 9.4 - Pool Transactions with OTHERS: Capacity and energy
        transactions with OTHERS that are entered into on behalf of all
        OPERATING COMPANIES will be governed by the following principles:

                Section 9.4.1 - Pool Purchases of Capacity and Energy: The AGENT
        (or an individual OPERATING COMPANY for the AGENT) may periodically
        purchase capacity and energy from nonassociated sources for the benefit
        of the integrated electric system. Such Pool purchases will initially be
        allocated at cost to all OPERATING COMPANIES in proportion to their
        Peak-Period Load Ratios (as provided for in ARTICLE X of this IIC).
        Purchases so allocated may be sold as Interchange Energy

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        when they are economically usable on the integrated electric system.
        Adjustments may thereafter be made in order to reconcile any inequitable
        effects of this process among the OPERATING COMPANIES, with the intent
        being that none of the individual OPERATING COMPANIES should be
        adversely impacted by a purchase that benefits the system as a whole.
        These impacts will be determined through a system simulation that
        calculates each Operating Company's cost of generation that is avoided
        by the purchase. This avoided cost will be compared on an hourly basis
        to the cost of the purchase. To the extent the avoided cost exceeds the
        purchase cost, the effect is "positive" (i.e., cost savings) for that
        hour. These hourly results will be summed to determine the effect on
        each Operating Company for the day. In situations where individual
        Operating Companies are adversely impacted by a purchase that benefits
        the system as a whole, such adverse impacts will be offset through a
        proportional reduction in the positive net benefits realized by the
        other Operating Companies.

          Section 9.4.2 - Pool Sales of Capacity and Energy:  The AGENT may
          from  time to time  arrange  for the sale to OTHERS  of  capacity and
          energy available on the

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                integrated electric system at rates provided for in contracts or
        at rates mutually agreed upon. The capacity and/or energy obligation for
        the sale, as well as the associated cost, is allocated to each OPERATING
        COMPANY on a Peak-Period Load Ratio basis (as provided for in Article X
        of this IIC). Payments by OTHERS are also distributed to the respective
        OPERATING COMPANIES on the basis of the Peak-Period Load Ratios.

               ARTICLE X - UTILIZATION OF PEAK-PERIOD LOAD RATIOS

        Section 10.1 - Certain Allocations and Payments to be Based on
        Peak-Period Load Ratios: The AGENT is responsible for the annual
        development of Peak-Period Load Ratios for each of the OPERATING
        COMPANIES and such values shall be submitted to the Operating Committee
        for review and confirmation. These Ratios will be utilized for
        allocation of certain costs, payments, receipts and other obligations as
        provided for in this IIC or the Manual. The procedure and methodology
        for developing the Peak-Period Load Ratios are set out in ARTICLE I of
        the Manual and the values for such Ratios are shown on an Informational
        Schedule.

        Section 10.2 - Other Uses of Peak-Period Load Ratios: It is agreed that
        the Peak-Period Ratios shown on Informational Schedule No. 1 may be
        used, if appropriate, by the OPERATING COMPANIES to reimburse the AGENT
        for other expenses and costs not contemplated by this IIC.

                        ARTICLE XI - TRANSMISSION SERVICE

        Section 11.1 - Applicability of Network Integration Transmission
        Service: Network Integration Transmission Service ("Network Service")
        provides for the integration, economic dispatch and regulation of
        current and planned Network Resources to serve Network Load. Since the
        OPERATING COMPANIES integrate, economically dispatch and regulate their
        generating resources to serve their native load pursuant to this IIC,
        the associated use of the transmission system is in the nature of
        Network Service. The OPERATING COMPANIES' native load is specifically
        included in the determination of Load Ratio Shares used to derive the
        charge for Network Service under the Open Access Transmission Tariff,
        and therefore the OPERATING

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        COMPANIES are bearing a cost responsibility for transactions hereunder
        comparable to that assigned to other Network Customers.

        Section 11.2 - Transmission Service for Other Transactions: To the
        extent the OPERATING COMPANIES require transmission service associated
        with transactions that are entered into for purposes other than serving
        native load customers, such transmission service will be obtained
        pursuant to the Open Access Transmission Tariff and/or from other
        transmission providers.

                        ARTICLE XII - BILLING AND PAYMENT

        Section 12.1 - Recording and Billing of Energy Transactions: Each
        OPERATING COMPANY shall transmit to the AGENT daily all data and
        information necessary to develop the monthly bill for the various energy
        transactions contemplated by this IIC. Each OPERATING COMPANY will
        transmit such data and information to the AGENT for each hour of the
        year to provide for such accounting and billing. All these data are
        recorded by the AGENT as required to meet the provisions of this IIC and
        to

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        permit application of appropriate interchange charges. The OPERATING
        COMPANIES are responsible for an arithmetical check of all figures
        submitted. The AGENT is responsible for assembling all of the data and
        information and for determining amounts of various classes of energy
        delivered to and received from the Pool. The AGENT prepares intercompany
        energy billing for each month in accordance with the provisions of this
        IIC. The bills shall contain such details as required to permit review
        and verification by the OPERATING COMPANIES.

        Section 12.2 - Month-End Adjustment of Daily Energy Determinations: At
        the close of each month, the AGENT allocates energy from nonassociated
        sources to the OPERATING COMPANIES and determines the amounts of various
        classes of energy moved in interchange, based upon daily conditions. The
        sum of the daily totals in interchange does not exactly equal
        corresponding amounts determined by month-end meter readings because of
        certain minor transactions that are neither metered nor recorded daily.
        Such differences in energy receipts and deliveries are billed or
        credited to each OPERATING COMPANY at the average cost of

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        Interchange Energy to the Pool for the month.

        Section 12.3 - Billing of Capacity Transactions: The AGENT prepares a
        monthly bill to the OPERATING COMPANIES for all capacity transactions
        contemplated by this IIC. The bill shall contain such details as
        required to permit review and verification by the OPERATING COMPANIES.

        Section 12.4 - Billing and Payment Date: The AGENT renders all bills
        provided for in this IIC not later than the 10th day of the billing
        month. All payments by the OPERATING COMPANIES are made by the 20th day
        of the billing month.

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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
by their duly authorized representatives on the Operating Committee, which
signatures may be set forth on separate counterpart pages.

ALABAMA POWER COMPANY               MISSISSIPPI POWER COMPANY

By_________________________                 By ___________________________
Its ___________________                     Its__________________________

GEORGIA POWER COMPANY               SAVANNAH ELECTRIC AND POWER COMPANY

By_________________________                 By __________________________
Its ___________________                     Its__________________________

GULF POWER COMPANY                  SOUTHERN COMPANY SERVICES, INC.

By_________________________                 By __________________________
Its ___________________                     Its__________________________

                                           [NEW POWER COMPANY]

                                           By__[Information]_____________
                                           Its __________________________

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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
by their duly authorized representatives on the Operating Committee, which
signatures may be set forth on separate counterpart pages.

ALABAMA POWER COMPANY               MISSISSIPPI POWER COMPANY

By_________________________                 By _________________________
Its ___________________                     Its_________________________

GEORGIA POWER COMPANY               SAVANNAH ELECTRIC AND POWER COMPANY

By_________________________                 By _________________________
Its ___________________                     Its_________________________

GULF POWER COMPANY                  SOUTHERN COMPANY SERVICES,
                                                              INC.

By_________________________                 By _________________________
Its ___________________                     Its_________________________

                                             [NEW POWER COMPANY]

                                             By__[Information]__________
                                             Its _______________________

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
by their duly authorized representatives on the Operating Committee, which
signatures may be set forth on separate counterpart pages.

ALABAMA POWER COMPANY               MISSISSIPPI POWER COMPANY

By_________________________                 By __________________________
Its ___________________                     Its__________________________

GEORGIA POWER COMPANY               SAVANNAH ELECTRIC AND POWER
                                                              COMPANY

By_________________________                 By __________________________
Its ___________________                     Its__________________________

GULF POWER COMPANY                  SOUTHERN COMPANY SERVICES,
                                                              INC.

By_________________________                 By __________________________
Its ___________________                     Its__________________________

                                      [NEW POWER COMPANY]

                                            By  [Information]____________
                                            Its _________________________

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
by their duly authorized representatives on the Operating Committee, which
signatures may be set forth on separate counterpart pages.

ALABAMA POWER COMPANY               MISSISSIPPI POWER COMPANY

By_________________________                 By ___________________________
Its ___________________                     Its___________________________

GEORGIA POWER COMPANY               SAVANNAH ELECTRIC AND POWER COMPANY

By_________________________                 By ___________________________
Its ___________________                     Its___________________________

GULF POWER COMPANY                  SOUTHERN COMPANY SERVICES, INC.

By_________________________                 By ___________________________
Its ___________________                     Its___________________________

                                       [NEW POWER COMPANY]

                                            By__[Information]_____________
                                            Its __________________________

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
by their duly authorized representatives on the Operating Committee, which
signatures may be set forth on separate counterpart pages.

ALABAMA POWER COMPANY               MISSISSIPPI POWER COMPANY

By_________________________                 By _____________________________
Its ___________________                     Its_____________________________

GEORGIA POWER COMPANY               SAVANNAH ELECTRIC AND POWER COMPANY

By_________________________                 By _____________________________
Its ___________________                     Its_____________________________

GULF POWER COMPANY                  SOUTHERN COMPANY SERVICES, INC.

By_________________________                 By _____________________________
Its ___________________                     Its_____________________________

                                                     [NEW POWER COMPANY]

                                            By [Information]________________

                                            Its ____________________________

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
by their duly authorized representatives on the Operating Committee, which
signatures may be set forth on separate counterpart pages.

ALABAMA POWER COMPANY               MISSISSIPPI POWER COMPANY

By_________________________                 By __________________________
Its ___________________                     Its__________________________

GEORGIA POWER COMPANY               SAVANNAH ELECTRIC AND POWER COMPANY

By_________________________                 By __________________________
Its ___________________                     Its__________________________

GULF POWER COMPANY                  SOUTHERN COMPANY SERVICES, INC.

By_________________________                 By __________________________
Its ___________________                     Its__________________________

                                                     [NEW POWER COMPANY]

                                            By  [Information]____________

                                            Its _________________________

<PAGE>

Southern Company Services, Inc.               Original Sheet No. 32A
First Revised Rate Schedule FERC No. 138

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
by their duly authorized representatives on the Operating Committee, which
signatures may be set forth on separate counterpart pages.

ALABAMA POWER COMPANY               MISSISSIPPI POWER COMPANY

By_________________________                 By _____________________________
Its ___________________                     Its_____________________________

GEORGIA POWER COMPANY               SAVANNAH ELECTRIC AND POWER COMPANY

By_________________________                 By _____________________________
Its ___________________                     Its_____________________________

GULF POWER COMPANY                  SOUTHERN COMPANY SERVICES,  INC.

By_________________________                 By _____________________________
Its ___________________                     Its_____________________________

                                                     SOUTHERN POWER COMPANY

                                            By    ________________________

                                           Its _____________________________

<PAGE>

Southern Company Services, Inc.                      Original Sheet No. 33
First Revised Rate Schedule FERC Number 138

Issued by: Charles D. McCrary, Executive Vice Pres.  Effective: April 18, 2000
Issued on:  October 2, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259

<PAGE>

Issued by: Charles D. McCrary, Executive Vice Pres.   Effective: April 18, 2000
Issued on:  June 20, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259

                       ALLOCATION METHODOLOGY AND PERIODIC
                        RATE COMPUTATION PROCEDURE MANUAL

     Section 0.0 - Description and Purpose of Manual: This Manual is provided
     for in the Southern Company System Intercompany Interchange Contract
     ("IIC") entered into the 17th day of February, 2000, and contains a formula
     description of the methodology and procedure used to calculate the charges
     under the IIC. The Manual is divided into six (6) basic articles as
     follows:

                  ARTICLE I        -        Methodology for Determination
                                            of Peak-Period Load Ratios

                  ARTICLE II       -        Methodology for Determination
                                            of Amount of Interchange Energy
                                            Sold To and Purchased From
                                             the Pool

                  ARTICLE III      -        Rates for Interchange Energy

                  ARTICLE IV       -        Methodology for Determination
                                            of Monthly Amount of Capacity
                                            To Be Sold  To or Purchased From
                                             the Pool

<PAGE>

Southern Company Services, Inc.                          Original Sheet No. 34
First Revised Rate Schedule FERC Number 138

            ARTICLE V         -    Monthly Capacity Rate of Each
                                   OPERATING COMPANY Based on
                                   Ownership or Purchase of Peaking Plant or
                                   Equivalent Resources

            ARTICLE VI        -    Rate for Tie-Line Load Control
                                   and Frequency Regulation by
                                   Hydro Facilities

                                    ARTICLE I
                                 METHODOLOGY FOR
                    DETERMINATION OF PEAK-PERIOD LOAD RATIOS

     Section 1.1 - Provision for Peak-Period Load Ratios: This article of the
     Manual establishes and provides for the yearly derivation of Peak-Period
     Load Ratios that are utilized in energy and capacity transactions and in
     other allocations as provided for in the IIC. These Ratios are shown on
     Information Schedule No. 1.

     Section 1.2 - Methodology for Determining Peak-Period Load Ratios: The
     Contract Year in the IIC is defined to be January 1st through December 31st
     of the calendar year. The peak

<PAGE>

Southern Company Services, Inc.              Substitute Original Sheet No. 35
First Revised Rate Schedule FERC Number 138   superseding Original Sheet No. 35

Issued by: Charles D. McCrary, Executive Vice Pres.   Effective: April 18, 2000
Issued on:  October 2, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259 and letter order issued September 27, 2000
period is defined to be the  fourteen  (14) hours  between 7:00 a.m. and 9:00
p.m.  (Prevailing  Central Time) of each weekday, excluding holidays.

     The Peak-Period Load Ratios for the Contract Year are based upon the prior
     year's actual peak period energy in the critical months of June, July, and
     August for each OPERATING COMPANY. The system peak period energy is equal
     to the sum of all the OPERATING COMPANIES' peak period energy, excluding:
     (i) opportunity transactions of a transient nature in the shorter term
     markets (such as hourly, day ahead and week ahead); and (ii) any energy
     sales transactions for which there are no underlying supply resources.

     The Peak-Period Load Ratios are determined by dividing each OPERATING
     COMPANY's summation of the June, July, and August actual weekday
     peak-period energy by the total system June, July, and August actual
     weekday peak-period energy.

                                   ARTICLE II
                                 METHODOLOGY FOR
                     DETERMINATION OF AMOUNT OF INTERCHANGE
                   ENERGY SOLD TO AND PURCHASED FROM THE POOL

     Section 2.1 - Methodology for Determination of Amount of Interchange
     Energy: The total of energy delivered by each OPERATING COMPANY to all
     other OPERATING COMPANIES and to OTHERS, less the total of energy received
     by each OPERATING COMPANY from all other OPERATING COMPANIES and from
     OTHERS, constitutes the

<PAGE>

Southern Company Services, Inc.                          Original Sheet No. 36
First Revised Rate Schedule FERC Number 138

Issued by: Charles D. McCrary, Executive Vice Pres.   Effective: April 18, 2000
Issued on:  June 20, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259
     net of interchange deliveries to and receipts from the Pool. Interchange
     Energy is the net of such energy deliveries and receipts from the Pool
     after adjustment for energy movements received from or delivered to sources
     within or outside the territory of the OPERATING COMPANIES and settled for
     under arrangements made for such energy movements; and after adjustment for
     excess energy not required or usable by any of the OPERATING COMPANIES that
     may be sold by one OPERATING COMPANY to OTHERS, not a party to this IIC;
     and after adjustment for energy delivered to or received from Southern
     Electric Generating Company, Greene County Steam Plant, Daniel Steam Plant,
     Scherer Steam Plant Unit No. 3, Southeastern Power Administration, South
     Mississippi Electric Power Association, and other similar arrangements; and
     after adjustment for hydro energy losses due to tie-line frequency
     regulation. The determination of the amount of Interchange Energy delivered
     to or received from the Pool is computed hourly.

                                   ARTICLE III
                          RATES FOR INTERCHANGE ENERGY

     Section 3.1 - Procedure for Economic Dispatch: Centralized economic
     dispatch is accomplished by dispatching system generating resources to meet
     the requirements of the OPERATING COMPANIES and to supply energy for sales
     to OTHERS. System resources are dispatched based on variable dispatch
     costs, which include the marginal replacement fuel cost (as defined in
     Section 3.6 of the Manual), variable operation and maintenance expenses,
     in-plant fuel handling costs, emission allowance replacement cost,
     compensation for

<PAGE>

Southern Company Services, Inc.                       Original Sheet No. 38
First Revised Rate Schedule FERC Number 138

     transmission losses, and other such energy related costs that would
otherwise not have been incurred.

     Section 3.2 - Associated Interchange Energy Rate: The Associated
     Interchange Energy Rate is determined for each hour and is defined as the
     system incremental energy cost. This cost shall be based on the variable
     cost of the resources that serve the requirements of the OPERATING
     COMPANIES. The variable cost of these resources shall include the marginal
     replacement fuel costs (as defined in Section 3.6 of the Manual), variable
     operation and maintenance expenses, in-plant fuel handling expenses,
     emission allowance replacement cost, compensation of incremental
     transmission losses, cost of purchases, and other such energy related costs
     that would otherwise not have been incurred. For each hour, an OPERATING
     COMPANY supplying Associated Interchange Energy to the Pool will receive a
     payment determined by multiplying the applicable Associated Interchange
     Energy Rate by the quantity of kilowatt-hours delivered to the Pool. For
     each hour, an OPERATING COMPANY purchasing Associated Interchange Energy
     from the Pool will be charged an amount determined by multiplying the
     Associated Interchange Energy Rate by the quantity of kilowatt-hours
     received from the Pool.

     Section 3.3 - Opportunity Interchange Energy Rate: The rate for energy
     delivered to the Pool for purposes of an opportunity transaction will be
     based upon the variable cost of the resources that supply such energy. The
     variable cost of these resources shall include the marginal replacement
     fuel cost (as defined in Section 3.6 of the Manual), variable operation and
     maintenance expenses, in-plant fuel handling expenses, emission allowance
     replacement cost, compensation for transmission losses, cost of purchases,
     and other such energy related costs that would otherwise not have been
     incurred. For each hour of the transaction, an Opportunity Interchange
     Energy Rate will be developed based on the variable costs of the resources
     used to supply the energy. This rate will be applied to each OPERATING
     COMPANY's energy obligation for that transaction to derive the payment due
     from such OPERATING COMPANY. The resulting payments will then be used to
     reimburse the cost of the OPERATING COMPANIES that supplied the Opportunity
     Interchange Energy.

     Section 3.3.1 - Opportunity Interchange Energy Rates Related to Certain
     Contracts and Other Obligations of the Operating Companies: The OPERATING
     COMPANIES are currently obligated to supply various types of energy on a
     Peak-Period Load Ratio basis under contracts with Florida Power & Light
     Company, Jacksonville Electric Authority, Florida Power Corporation, City
     of Tallahassee, Florida, and South Mississippi Electric Power Association.
     For purposes of these contracts, the variable cost of resources supplying
     the energy shall include the blended replacement fuel cost (as defined in
     Section 3.5 of this Manual), variable operation and maintenance expenses,
     in-plant fuel handling expenses, emission allowance replacement cost,
     compensation for transmission losses, cost of purchases, and other such
     energy related costs that would otherwise not have been incurred.

<PAGE>

Southern Company Services, Inc.                         Original Sheet No. 39
First Revised Rate Schedule FERC Number 138

Issued by: Charles D. McCrary, Executive Vice Pres.    Effective: June 15, 2000
Issued on:  June 20, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259

     Section 3.4 - Variable Operation and Maintenance Expenses For Fossil Fired
     Units: The variable Operation and Maintenance expenses for fossil steam and
     combustion turbine units for the Contract Year are derived by summing the
     following budgeted/forecasted components for each unit: (i) all operating
     material, non-labor, and on-site contract labor charged to FERC Accounts
     502 and 505 (Fossil Steam); and (ii) all maintenance material, non-labor,
     and contract labor charged to FERC Accounts 512 and 513 (Fossil Steam), and
     553 (Combustion Turbine). These budgeted expense estimates may be levelized
     over the major maintenance cycle of a particular unit or set of units.

     The estimated expenses are divided by the estimated net energy output of
     each unit to convert the values to mills per kilowatt-hour. The variable
     Operation and Maintenance expense for each fossil steam and combustion
     turbine unit is shown on Information Schedule No. 2 for the Contract Year.

<PAGE>

Southern Company Services, Inc.                          Original Sheet No. 41
First Revised Rate Schedule FERC Number 138

Issued by: Charles D. McCrary, Executive Vice Pres.   Effective: April 18, 2000
Issued on:  June 20, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259
     Section 3.4.1 - In-Plant Fuel Handling Costs for Fossil Fired Units:
     In-Plant fuel handling costs for each fossil steam and combustion turbine
     unit for the Contract Year are based on the budgeted/forecasted
     expenditures for in-plant fuel handling expenses charged to FERC Account
     501. These budgeted expense estimates may be levelized over the major
     maintenance cycle of a particular unit or set of units.

     The estimated expenses are divided by the estimated net energy output of
     each unit to convert the values to mills per kilowatt-hour. The in-plant
     fuel handling cost for each fossil steam and combustion turbine unit is
     shown on Informational Schedule No. 2 for the Contract Year.

     Section 3.5 - Blended Replacement Fuel Cost: Blended replacement fuel costs
     are determined monthly by the AGENT and are defined as the weighted average
     cost, escalated for the current dispatch period, of fuel receipts for the
     previous month (both long-term contract and spot market receipts) and the
     projected fuel receipts for the current month, or as otherwise agreed to by
     the OPERATING COMPANIES.

     Section 3.6 - Marginal Replacement Fuel Cost: Marginal replacement fuel
     costs are determined monthly by the AGENT, and reflect the costs of the
     next purchase of uncommitted fuel for a generating facility. Such marginal
     replacement fuel costs may be revised during the month if significant
     changes occur. For gas or oil-fired units, the marginal replacement fuel
     costs are based upon the volume of gas or oil necessary to replace the

<PAGE>

     projected  monthly  burn.  Marginal  replacement  gas or oil prices may be
     changed  during the month if a significant change occurs.

     The above described procedures will be periodically reviewed by the AGENT
     and may be revised upon approval of the OPERATING COMPANIES.

<PAGE>

Southern Company Services, Inc.                       Original Sheet No. 44
First Revised Rate Schedule FERC Number 138

                                   ARTICLE IV
                                 METHODOLOGY FOR
                       DETERMINATION OF MONTHLY AMOUNT OF
                       CAPACITY TO BE SOLD TO OR PURCHASED
                                  FROM THE POOL

     Section 4.1 - Formula for Determination of Monthly Capacity
     Sales/Purchases: The monthly capacity sale to or purchase from the pool for
     each OPERATING COMPANY is determined from the following formula:

                           CS or CP =       RS - R

                           Where:

                           CS                  or CP = Capacity sales to the
                                               Pool (CS) or capacity purchases
                                               from the Pool (CP) by an
                                               OPERATING COMPANY. A negative
                                               value indicates a sale to the
                                               Pool and a positive value
                                               indicates a purchase from the
                                               Pool

                           RS         =        Reserve   responsibility   for
                                               each OPERATING COMPANY  (See
                                               Section 4.1.1)

                           R          =        Reserve  capacity  for  each
                                               OPERATING COMPANY  (See Section
                                               4.1.2)

     Section 4.1.1 - Reserve Responsibility (RS): The responsibility for the
     reserve capacity on the integrated electric system is allocated among the
     OPERATING COMPANIES on the basis of peak hour load ratios for each month.

                           RS         =        L/L' x R

                           Where:

                           RS         =        Reserve responsibility for each
                                              OPERATING COMPANY

                           L          =        Monthly  peak  hour  load
                                               responsibility  of  each
                                               OPERATING
                                               COMPANY (See Section 4.3)

                           L'         =        Monthly peak hour load of the
                                               integrated electric  system (See
                                               Section 4.3)

                           R          =        Sum  of  the  reserve capacity
                                               for  all  of  the OPERATING
                                               COMPANIES

<PAGE>

     Section 4.1.2 - Reserve Capacity (R): The reserve capacity for each of the
     respective OPERATING COMPANIES is determined monthly by the following
     formula:

                           R          =        C - CR

                           Where:

                           C          =        Total capacity  available to the
                                               OPERATING COMPANY (See Section
                                               4.2)

                           CR         =        Total capacity required to meet
                                               reliably  the  OPERATING
                                               COMPANY's load responsibility

     The capacity required to meet the OPERATING COMPANY's load responsibility
     is determined by the following formula:

                           CR         =        LC + LCR

                           Where:

                           LC         =        Portion of the total  capacity
                                               required to meet reliably  the
                                               OPERATING COMPANY'S load
                                               responsibility

<PAGE>

Southern Company Services, Inc.                      Original Sheet No. 45
First Revised Rate Schedule FERC Number 138

               that is available for load service ("available  portion").LCR =
               Portion of the capacity  required to meet  reliably the OPERATING
               COMPANY'S  load  responsibility  that  is  unavailable  for  load
               service for any reason (including  forced outage,  partial outage
               or  maintenance  outage)  during the ten (10) highest system peak
               hours during each month averaged over the most recent  three-year
               period  ("unavailable  portion").  These unavailable  portions of
               capacity are determined by identifying unavailability specific to
               each  individual  OPERATING  COMPANY  by  each  generation  type.
               Individual OPERATING COMPANY unavailability factors for each type
               of generating  capacity will be applied to their respective owned
               resources in determining  their unavailable  capacity  associated
               with load service.

     The available portion of the total capacity is determined from the
following formula:

                           LC         =        CPS + DSO + Cha + Cna + Coa

<PAGE>

Southern Company Services, Inc.                    Original Sheet No. 46
First Revised Rate Schedule FERC Number 138

                   Where:

                   CPS   =   Net contract purchases from and sales to OTHERS
                   DSO   =    Demand side option equivalent capacity

                   Cha   =   Total   conventional   hydro  capacity  less the
                             unavailable portion of conventional hydro capacity
                   Cna   =   Total  nuclear  capacity  less  the  unavailable
                             portion  of nuclear capacity
                   Coa       = Total available pumped storage
                             hydro, coal, combustion turbine,
                             oil, and gas capacity required to
                             meet the remaining portion of the
                             OPERATING COMPANY's load
                             responsibility calculated as:
                             Coa     =        L - CPS - DSO - Cha - Cna

     The unavailable portion of the total capacity is determined from the
following formula:

                 LCR     =   Chu + Cnu + (Coa/(1 - (Cou/Cot)) - Coa)

                 Where:
                 Chu     =   Unavailable portion of conventional hydro capacity

<PAGE>

Southern Company Services, Inc.                         Original Sheet No. 47
First Revised Rate Schedule FERC Number 138

               Cnu       =   Unavailable portion of nuclear capacity
               Cou       =   Total  unavailable  pumped  storage  hydro,
                             coal,  combustion turbine, oil, and gas
                             capacity
              Cot        =   Total pumped storage hydro,
                             coal, combustion turbine, oil,
                              and gas capacity.

     Section 4.2 - Determination of Capacity Available to Each OPERATING COMPANY
     (C): The capacity available to each OPERATING COMPANY is determined monthly
     as the sum of available owned, leased or otherwise available generating
     units, net contract purchases from and sales to OTHERS, as approved by the
     Operating Committee, and seasonal or other power exchange from reliable
     sources. The capacity available is determined from the following formula:
                   C  =   Cc + Cn + Cog + Cp + Cct + Ch + Cpsh + DSO + CPS

                           Where:

                           Cc         =        Coal capacity
                           Cn         =        Nuclear capacity
                           Cog         =       Oil and gas capacity
                           Cp         =        Peak Load capacity
                           Cct        =        Combustion turbine capacity

<PAGE>

Southern Company Services, Inc.                      Original Sheet No. 48
First Revised Rate Schedule FERC Number 138

                           Ch            =     Conventional hydro capacity
                           Cpsh          =     Pumped storage hydro capacity
                           DSO           =     Demand side option equivalent
                                               capacity
                           CPS           =     Net contract purchases from and
                                               sales to    OTHERS

     The components of the above formula shall be computed as detailed below.
     Unless otherwise provided, the capability demonstrated in accord with such
     procedures shall be used in establishing the following year's capacity
     values. Where seasonal references are made, the seasons shall be defined as
     follows: Summer (June through September); Fall (October through November);
     Winter (December through February); and Spring (March through May).
     Section 4.2.1 - Certified Rating: The production officer at each OPERATING
     COMPANY will certify the full load capability of each coal electric
     generating unit (excluding units from which Unit Power Sales and other
     similar bulk power sales are made), oil and gas steam electric generating
     unit and combustion turbine unit. Southern Nuclear Operating Company will
     certify the capability of each nuclear steam electric generating unit.
     These certified ratings ("Full Load" ratings) shall represent the full load
     capability expected to be available continuously on a daily basis, under
     normal operating conditions, with all units at a given plant demonstrating
     concurrently. Where appropriate, certified ratings shall be adjusted to
     reflect cogeneration and seasonal impacts.

<PAGE>

Southern Company Services, Inc.                  Original Sheet No. 49
First Revised Rate Schedule FERC Number 138

     The production officer at each OPERATING COMPANY will also certify the peak
     load capability of generating units demonstrating such capability ("Peak
     Load" capability). The Peak Load capability shall represent the additional
     amount of generation obtained for a limited period of time by operating all
     units at a given plant concurrently and under conditions such as, but not
     limited to, overpressure, valves wide open and top feedwater heaters out of
     service.

     Section 4.2.2 - Coal (Cc)and Nuclear (Cn) Capacity: The Full Load rating of
     each coal and nuclear steam electric generating unit shall be based on the
     unit's capability during hours when such unit demonstrates full output
     during the months of June through August, adjusted for temporary
     identifiable deratings. Such demonstrated output shall be used to establish
     the following year's Full Load rating.

     Section 4.2.3 - Oil and Gas Capacity (Cog): The Full Load rating of each
     oil and gas steam electric generating unit shall be based on the unit's
     demonstrated capability during hours when such unit demonstrates full
     output during the months of June through August, adjusted for temporary
     identifiable deratings. Such demonstrated output shall be used to establish
     the following year's Full Load rating.

     Combined cycle units shall be demonstrated in accordance with the foregoing
     paragraph and the demonstrated output shall be used to determine the
     following year's summer rating. During the fall, winter and spring,
     adjustments may be made to the Full Load rating to reflect

<PAGE>

Southern Company Services, Inc.                         Original Sheet No. 50
First Revised Rate Schedule FERC Number 138

     the unit's capability at expected seasonal ambient temperatures.

     Section 4.2.4 - Combustion Turbine Capacity (Cct): The Full Load rating of
     combustion turbine units is based on the demonstrated output of such unit
     and the manufacturer's base design curve rating. Combustion turbine units
     shall demonstrate daily sustained capability during the months of June
     through August, adjusted for temporary identifiable deratings. The
     demonstrated output shall be used to determine the following year's summer
     rating. During the fall, winter and spring, adjustments may be made to the
     Full Load rating to reflect the unit's capability at expected seasonal
     ambient temperatures.

     Section 4.2.5- Peak Load Capacity (Cp): The Peak Load capacity of
     demonstrating generating units shall be the additional amount of generation
     obtained by operating all units at a given plant concurrently and under
     conditions such as, but not limited to, overpressure, valves wide open and
     top feedwater heaters out of service. The Peak Load capacity shall be based
     on such unit's demonstrated capability during hours when the unit
     demonstrates peak load capability during the months of June through August,
     adjusted for temporary identifiable deratings. The capability demonstrated
     will be used in establishing the following year's Peak Load rating.

     Section 4.2.6 - Conventional (Ch) and Pumped Storage (Cpsh) Hydro Capacity:
     For purpose of the IIC, hydro capability is the average simulated
     generation during eight (8) consecutive hours occurring on five (5)
     consecutive weekdays using the average water inflows from

<PAGE>

Southern Company Services, Inc.                        Original Sheet No. 52
First Revised Rate Schedule FERC Number 138

     historical data. The simulation process utilizes maximum (full) gate
     setting and best (most efficient) gate setting to determine the capability
     of the hydro facilities. The capability for the months June-August is the
     summer maximum gate simulated rating. For the months December-May, the
     capability is the winter maximum gate simulated rating. The capability of
     the months September-November is the summer best gate simulated rating. To
     the extent that an OPERATING COMPANY can demonstrate to the satisfaction of
     the Operating Committee that a hydro facility can actually achieve the
     maximum gate rating during the fall months, the capability of such hydro
     facility will be the maximum gate rating.

     Section 4.2.7 - Adjustments to Unit Ratings: The Operating Committee
     periodically may evaluate and adjust determinations of unit ratings based
     upon evaluations of reliability. The Operating Committee will consider
     special circumstances to achieve precision in the ratings of units for IIC
     purposes for the forthcoming year when the aforementioned procedures do not
     yield an accurate result. The governing unit ratings will be included in
     the informational filing submitted in accordance with ARTICLE VI of the
     contract.

     Section 4.2.8 - Active Demand Side Options - Equivalent Capacity (DSO): The
     equivalent capacity of each active demand side option for each month of the
     calendar year is determined from the following formula:

               DSO = ((Cv x ICE) / (1 -(%TL/100))) x A Where:

               DSO     =       Demand side option equivalent capacity
               Cv      =       Contracted value
               ICE     =       Incremental capacity equivalent factor
               %TL     =       Six (6) percent incremental transmission losses
               A       =       Availability Factor

     The Incremental Capacity Equivalent Factor is a measure of the effect of a
     demand side option on generating system reliability. The Availability
     Factor is a measure of the probability of an active demand side option
     being available at the time it is needed.

     Section 4.2.9 - Contract Purchases and Sales (CPS): Contract purchases and
     sales include contracted capacity purchases from and sales to OTHERS for
     any month as agreed upon by the Operating Committee. The contracted
     capacity will be prorated according to the number of days in each month
     that it is available to an OPERATING COMPANY.

     Section 4.3 - Determination of Peak Hour Load Responsibility of Each
     OPERATING COMPANY (L): The monthly peak hour load responsibility of each
     OPERATING COMPANY is determined by the following formula:

<PAGE>

Southern Company Services, Inc.                     Original Sheet No. 53
First Revised Rate Schedule FERC Number 138

                           L = L' x La/100

                           Where:

                           L'     =   Monthly ten (10) highest  hour average
                                      load of the  integrated
                                      electric system
                           La     =   Monthly average percent contribution of
                                      each OPERATING COMPANY's ten (10) highest
                                      hour average loads to the monthly ten (10)
                                      highest hour average loads of the system
                                      for the most recent three-year period.

     Section 4.4 - Capacity Adjustment For Generating Unit Schedule: For a
     generating unit scheduled for commercial operation, retirement, or sale for
     the coming year, an adjustment will be made in the capability resources of
     the appropriate OPERATING COMPANY based upon the actual date of commercial
     operation, retirement, or sale; provided however, that the adjustment will
     not be made in a month earlier than that approved by the Operating
     Committee. If the actual date is on or before the 15th day of the month,
     the capacity adjustment begins in that month. If the actual date is beyond
     the 15th day of the month, the capacity adjustment begins in the following
     month.

<PAGE>

Southern Company Services, Inc.                         Original Sheet No. 54
First Revised Rate Schedule FERC Number 138

                                    ARTICLE V
                            MONTHLY CAPACITY RATE OF
                         EACH OPERATING COMPANY BASED ON
                            OWNERSHIP OR PURCHASE OF
                      PEAKING PLANT OR EQUIVALENT RESOURCES

     Section 5.1 - Provision for Monthly Capacity Rate: This article of the
     Manual establishes the formula rate for deriving the monthly capacity
     charge for each OPERATING COMPANY based on its most recently installed
     peaking facilities (or equivalent purchased resources) available for
     year-round operation or scheduling. OPERATING COMPANIES that have not
     installed or purchased such facilities or resources within the last five
     (5) years will utilize the weighted average rate of all the OPERATING
     COMPANIES that have installed or purchased such facilities or resources.
     The monthly capacity charges are utilized in the determination of payments
     to the Pool by the OPERATING COMPANIES purchasing capacity during the month
     and receipts from the Pool by the OPERATING COMPANIES selling capacity
     during the month. Each OPERATING COMPANY that sells capacity to the Pool
     will receive a payment based on the product of the amount of net capacity
     sales (CS) times that OPERATING COMPANY's monthly capacity rate. Each
     deficit OPERATING COMPANY will make payments to the Pool based on the
     product of the amount of net capacity purchased (CP) times the weighted
     average cost of such capacity sold to the Pool during the month. The
     monthly capacity rate of each OPERATING COMPANY for each month of the
     Contract

<PAGE>

Southern Company Services, Inc.                    Original Sheet No. 56
First Revised Rate Schedule FERC Number 138

     Year is shown on  Informational  Schedule  No. 3. Such  rates will be
     revised  in  accordance  with this Manual and the IIC in subsequent
     contract years.

     Section 5.2 - Derivation of Monthly Capacity Costs of Each Operating
     Company: The derivation of the monthly capacity costs of each OPERATING
     COMPANY is based on one of the following: (i) the capacity cost of the most
     recently added peaking facilities; (ii) the capacity cost of the most
     recent long-term capacity purchase; or (iii) the weighted system average of
     the capacity costs of the most recently added peaking facilities or
     long-term purchases.

     The monthly capacity rate of each OPERATING COMPANY for installed peaking
     facilities under (i) will be determined by the following formula:

           R1         =   (I x LFCC/100/C1) x MCWF
           Where:
           R1         =   Monthly charges for peaking
                          plant or equivalent resource
                          ($/kW-Month)
           I          =   Gross investment in peaking facilities ($)
           LFCC       =   16.3%, levelized fixed capacity charge
           C1         =   Peaking  facilities  rated  production   capability
                          (kW),  as
                          determined by Section 4.2 of this Manual

           MCWF       =   Monthly Capacity Worth Factor for the applicable
                          month.

     The AGENT may periodically re-evaluate the monthly capacity worth factors
     based upon evaluations of system reliability. The governing MCWFs will be
     included in the Informational Schedules submitted in accordance with
     ARTICLE VI of the Contract.

     For purposes of (ii), the monthly charge of each OPERATING COMPANY for
     purchased equivalent resources will be the annual capacity rate ($/kW-Year)
     paid for such purchased equivalent resources, multiplied by the applicable
     MCWF.

     For purposes of (iii), the monthly capacity rate will be the weighted
     system average so determined, multiplied by the applicable MCWF.

     Section 5.3 - Monthly Capacity Rate To Be Adjusted For Production Resource
     Change: If peaking facilities or purchased equivalent resources of an
     OPERATING COMPANY, approved by the Operating Committee, are to be in
     commercial operation or available for scheduling by the 15th day of a
     particular month, the budgeted investment cost or projected contract price
     will be used in the determination of the monthly capacity rate for such
     OPERATING COMPANY for that and subsequent months of the calendar year. If
     such facilities or resources are not placed in commercial operation or
     available for scheduling by the 15th day of such month, the monthly
     capacity charge for the previous month will remain

<PAGE>

Southern Company Services, Inc.                         Original Sheet No. 57
First Revised Rate Schedule FERC Number 138

     in effect until the month in which the facilities or resources are declared
     to be in commercial operation or available for scheduling on or before the
     15th day.

                                   ARTICLE VI
                       RATE FOR TIE-LINE LOAD CONTROL AND
                    FREQUENCY REGULATION BY HYDRO FACILITIES

     Section 6.1 - Provision for Hydro Regulation Energy Losses: Because of
     energy losses from hydro regulation, the OPERATING COMPANIES supplying this
     service are deprived of hydro energy. To distribute equitably this loss of
     energy among the OPERATING COMPANIES in accordance with size of loads
     regulated and to compensate the OPERATING COMPANIES for regulating services
     rendered, adjustments in billing determinations are necessary. Hydro energy
     losses actually incurred by regulating OPERATING COMPANIES during each day
     are replaced by the Pool at zero cost, and the AGENT allocates such energy
     losses to all OPERATING COMPANIES in accordance with Peak-Period Load
     Ratios. Energy lost during high-flow periods is replaced during the period
     in which such losses occur, and energy lost from poorer efficiencies during
     normal and low-flow periods is replaced during the 14-hour peak period
     since hydro energy so lost could have been retained in storage and
     generated during this period.

     Section  6.2 -  Provision  for  Increases  in Cost Due to Hydro
     Regulation:  Payments  are made to hydro
     regulating OPERATING COMPANIES for each hour of such regulation for the

<PAGE>

Southern Company Services, Inc.                   Original Sheet No. 58
First Revised Rate Schedule FERC Number 138

     increase in operating and maintenance expenditures for governor mechanisms
     and water turbine parts, and these expenses are allocated to all OPERATING
     COMPANIES in accordance with Peak-Period Load Ratios. Such payments are
     calculated using actual expenses incurred through the last calendar year
     available, adjusted to current-year dollars, for the cost of labor,
     engineering and supervision, and materials and supplies in the following
     FERC Accounts: 544-10, Generator and Exciters; 544-20, Hydraulic Turbines
     and Settings; 544-40, Governors and Control Apparatus; and 544-50,
     Powerhouse Remote Control Equipment. The basis for hourly payments is the
     difference in the average hourly costs for regulating plants and
     non-regulating plants, expressed in the following formula:

           Hourly Charge    =  [MCW - (MCWO/HWO) x MCWH]/HOR

           Where:

           MCW        =     Summation of costs for regulating plants
           MCWO       =     Summation of costs for non-regulating plants
           HWO        =     Summation of hours for non-regulating plants
           MCWH       =     Summation of hours for regulating plants
           HOR        =     Summation of hours in the regulating mode for
                             regulating plants

     The regulating OPERATING COMPANIES shall supply the AGENT an hourly
     statement

<PAGE>

Southern Company Services, Inc.            Original Sheet No. 59
First Revised Rate Schedule FERC Number 138

     of energy losses incurred in providing hydro regulating services. Such
     statement should include sufficient detail to permit review and
     verification by the AGENT. Data supporting energy loss determination and
     dollar allowance for increased operating and maintenance expenditures of
     hydraulic equipment shall be presented from time to time to the Operating
     Committee for review.

     Section 6.3 - Regulation by Pumped Storage Hydro Projects: It is understood
     that pumped storage hydro projects owned by the OPERATING COMPANIES may
     also be used for regulation of the integrated electric system. In such
     event, the hourly charge for such regulation will be the same charge
     derived under the formula contained in Section 7.2 hereof.

     Section 6.4 - Provision for Increases in Cost Due to Hydro Scheduling:
     Because the use of hydro resources for tie-line load control and frequency
     regulation does not allow the hydro energy to be scheduled in the most cost
     effective manner, less economic gains are achieved than would have been if
     the hydro energy had been used to displace only the highest cost other
     energy sources. The difference in actual displacement costs represents the
     value of the lost economic opportunity by the owning OPERATING COMPANY by
     such use of hydro energy, or the costs of providing higher cost energy. The
     AGENT shall allocate such costs to all the OPERATING COMPANIES in
     accordance with Peak-Period Load Ratios.

                                                  [END OF MANUAL]

<PAGE>

Southern Company Services, Inc.                     First Revised Sheet No. 60
First Revised Rate Schedule FERC Number 138  superseding Original Sheet No. 60

                        ADDENDUM TO THE SOUTHERN COMPANY
                    SYSTEM INTERCOMPANY INTERCHANGE CONTRACT

         In a transmittal dated February 18, 2000, SCSI described the formation
  of a new Operating Company ("NewCo", subsequently named "Southern Power
  Company") that, upon requisite regulatory approval from the Securities and
  Exchange Commission, will aggregate into one business unit the same type of
  wholesale resources that are currently being developed on a piecemeal basis by
  the existing Operating Companies. The new company will be a full participant
  in the IIC, and will share in the benefits and burdens under that arrangement
  like any other Operating Company. By letter dated April 14, 2000, the Staff
  asked for more information concerning the kinds of transactions that NewCo
  will undertake, the role that NewCo will have in relation to the other
  Operating Companies, and the effect of NewCo on the cost allocation provisions
  in the IIC.

         As explained in SCSI's supplemental filing letter dated May 8, 2000,
  NewCo is being created to simplify resource planning and expedite decision
  making among decentralized management groups. To this end, NewCo is expected
  to develop and build new wholesale generation that would otherwise have been
  developed by one or more of the existing Operating Companies.1 This new
  generation can be used to meet the needs of wholesale customers in the
  Southeast through bilateral arrangements and will also be made available to
  the Pool for reserve

1 The current plan is for NewCo to develop and build new generation, but if
NewCo should later seek to be the owner of existing generation, the transfer of
any such existing units would be subject to all requisite regulatory approvals.

<PAGE>

Southern Company Services, Inc.                Substitute Original Sheet No. 61
First Revised Rate Schedule FERC Number 138  superseding Original Sheet No. 61

Issued by: Charles D. McCrary, Executive Vice Pres. Effective: April 18, 2000
Issued on: October 2, 2000 Filed to comply with order of the Federal Energy
Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June
15, 2000, 91 FERC P. 61,259 and letter order issued September 27, 2000 sharing
and opportunity transactions (just as the other Operating Companies do today).
NewCo will not be engaged in any marketing activities. Rather, SCSI will
continue to perform wholesale marketing functions in its capacity as agent for
the Operating Companies of the Southern electric system (including NewCo). While
NewCo's units will be marketed by SCSI for long term bilateral sale in the
wholesale market, NewCo will not engage in transactions with the other Operating
Companies (other than those under the IIC) except to the extent that requisite
regulatory approvals are obtained from state retail commissions and/or this
Commission.

         As noted in the Staff's letter, NewCo is being added as a full
participant in the IIC "to share the benefits and burdens like any other
Operating Company." This means that NewCo's units will be subject to the Pool's
operating, dispatch and reserve requirements. NewCo will also participate in
opportunity sales transactions on a PPLR basis.2 In like manner, NewCo will bear
its pro rata share of Pool purchases, as determined through the PPLR
calculation. In short, NewCo will share in the benefits and burdens of the IIC
and will participate in the wholesale markets -- just as if its generation had
been developed and built by one of the existing Operating Companies.

--------

2 Under the IIC, the Pool can engage in off-system opportunity transactions that
are actually served out of the least expensive generation then available in the
Pool. The Operating Companies whose units actually provide the generation are
compensated for the variable cost of the energy provided, with any resulting
"profits" to the Pool being shared among all IIC participants. In other words,
only the Pool can engage in opportunity transactions of a transient nature in
the shorter term markets (hourly, day ahead and week ahead) out of pool
resources; neither NewCo nor any of the other Operating Companies can use such
generation solely for its own benefit in those wholesale opportunity markets.

Issued by:  Charles D. McCrary, Executive Vice-Pres.  Effective: April 18, 2000
Issued on: June 20, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259Exhibit 10.6

                               OPERATING AGREEMENT

                                     between

                              ALABAMA POWER COMPANY

                                       and

                             SOUTHERN POWER COMPANY

<PAGE>
<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

ARTICLE 1 Definitions.............................................................................................2
          -----------

<S>               <C>                                                                                            <C>
                  1.1 "Fuel Services".............................................................................2
                  1.2 "Generation Facility".......................................................................2
                  1.3 "Governmental Authority"....................................................................3
                  1.4 "Legal Requirements"........................................................................3
                  1.5 "New Investment Projects"...................................................................3
                  1.6 "New Investment Services"...................................................................4
                  1.7 "Operating Services"........................................................................4
                  1.8 "Operation and Maintenance Services"........................................................4
                  1.9 "Prudent Utility Practice"..................................................................5

ARTICLE 2 [OPCO]'s Authority and Responsibility with Respect to Operation of the
          -----------------------------------------------------------------------
                  Generation Facilities...........................................................................5
                  ---------------------

                  2.1 Responsibility of [OPCO]....................................................................5
                  2.2 Authorization of [OPCO].....................................................................6
                           2.2.1. Plant Operation and Maintenance.................................................7
                                    (a) Staff and Personnel.......................................................7
                                    (b) Licenses and Permits for Generation Facilities............................8
                                    (c) Reductions in Capacity and Outages at Each Plant..........................8
                                    (d) Events About Which Owner is to be Notified................................9
                                    (e) No Changes to Transmission or Distribution Facilities.....................9
                                    (f) Operation in Accordance with Operating Plan...............................9
                                    (g) Point of Interconnection.................................................10
                           2.2.2. New Investment Services........................................................10
                           2.2.3. Fuel Services..................................................................10
                  2.3 Retirement, Removal or Addition of Generating Facilities...................................10
                  2.4 Authority to Act as Agent for Owner and Right of Third Parties to Rely on
                           Agency................................................................................12
                  2.5 Assignment of Contracts; Liability and Allocation of Risks.................................12
                           2.5.1 Contracts with Third Parties....................................................12
                           2.5.2 Acceptance of Contract Provisions...............................................13
                           2.5.3 Enforcement of Rights Under Contracts...........................................13
                  2.6 Cooperation of Owner.......................................................................14
                  2.7 [OPCO] Interface Procedure.................................................................15

<PAGE>

                  2.8 Plans and Budgets..........................................................................15
                           2.8.1 Strategic Plan..................................................................16
                                    (a) Five-year Operating and Planned Outage Schedule..........................16
                                    (b) Availability and Performance Goals.......................................16
                                    (c) Planned Mandatory Projects...............................................16
                                    (d) Planned Improvement Projects.............................................17
                                    (e) Authorized Level of Staffing.............................................17
                           2.8.2 Fuel Plan.......................................................................18
                           2.8.3 Operating Budget................................................................18
                           2.8.4 Capital Budget..................................................................18
                           2.8.5 Fuel Budget.....................................................................18
                           2.8.6 Material Contracts..............................................................19
                  2.9 Information and Reports....................................................................19
                           2.9.1 Generation Facility Data........................................................19
                           2.9.2 Generation Facility Budget Reports..............................................19
                           2.9.3 Generation Facility Strategic Plan Reports......................................19
                           2.9.4 Audit Reports...................................................................19
                           2.9.5 Correspondence to and from Regulatory Agencies..................................20
                           2.9.6 Responses to Owner Inquiries....................................................20
                  2.10 Plant Tours...............................................................................20
                  2.11 Management Audit..........................................................................20

ARTICLE 3 Entitlement to Output..................................................................................21
          ---------------------

                  3.1 Entitlement to Output......................................................................21
                  3.2 Determination of Output-Responsibility for Station Service and Losses......................21

ARTICLE 4 Costs, Billing, Accounting and Audit...................................................................21
          ------------------------------------

                  4.1 Cost of Operation and Maintenance..........................................................21
                  4.2 New Investment Costs.......................................................................22
                  4.3 Fuel Costs.................................................................................22
                  4.4 Other Costs Required by Legal Requirements.................................................23
                  4.5 Revision...................................................................................23
                  4.6 Billing....................................................................................23
                  4.7 Payment....................................................................................23

<PAGE>

                  4.8 General Accounting Matters.................................................................24
                  4.9 Right to Inspect Records...................................................................24
                  4.10 Disputed Invoice..........................................................................24

ARTICLE 5 Advancement of Funds...................................................................................25
          --------------------

                  5.1 Advancement of Funds.......................................................................25
                      --------------------

ARTICLE 6 Taxes   25
          -----

                  6.1 Taxes......................................................................................25

ARTICLE 7 Compliance with Provisions of Permits and Requirements of Governmental
          -----------------------------------------------------------------------
                  Agencies.......................................................................................25
                  --------

                  7.1 Compliance with Provisions of Permits and Requirements of Governmental
                           Agencies..............................................................................25

ARTICLE 8 Confidentiality of Information.........................................................................26
          ------------------------------

ARTICLE 9 Damage to Persons or Property; Penalties; Fines........................................................26
          -----------------------------------------------

                  9.1 Applicability of Article...................................................................26
                  9.2 Absence of Warranty........................................................................27
                  9.3 Liabilities to Third Parties and Owner.....................................................27
                  9.4 Willful Misconduct.........................................................................28
                  9.5 Limitation of Liability....................................................................29
                  9.6 Severability...............................................................................30

ARTICLE 10 Insurance.............................................................................................30
           ---------

                  10.1 Parties Obligations Generally.............................................................30
                  10.2 Commercial Liability Insurance............................................................31
                  10.3 Workmen's Compensation Insurance..........................................................31
                  10.4 Additional Insurance......................................................................32
                  10.5 Waiver of Subrogation - Allocation and Payment of Premium.................................32

ARTICLE 11 Term   32

                  11.1 Term......................................................................................32

<PAGE>

ARTICLE 12 Remedies..............................................................................................33
           --------

                  12.1 Termination...............................................................................33

ARTICLE 13 Miscellaneous.........................................................................................35
           -------------

                  13.1 No Partnership or Joint Venture...........................................................35
                  13.2 Owner's Designated Representatives........................................................35
                  13.3 [OPCO]'s Designated Representative........................................................36
                  13.4 Depreciation..............................................................................36
                  13.5 Holidays, Business Days...................................................................36
                  13.6 Owner's Services to be Furnished at Cost..................................................36
                  13.7 Entire Agreement..........................................................................36
                  13.8 Amendments................................................................................37
                  13.9 Notices...................................................................................37
                  13.10 Captions.................................................................................37
                  13.11 Counterparts.............................................................................38
                  13.12 No Waiver................................................................................38
                  13.13 Singular and Plural......................................................................38
                  13.14 Third Party Beneficiaries................................................................38
                  13.15 Severability.............................................................................38

ARTICLE 14 Successors and Assigns................................................................................38

                  14.1 Successors and Assigns....................................................................39

ARTICLE 15 Governing Law.........................................................................................39

                  15.1 Governing Law.............................................................................39

</TABLE>

<PAGE>

                               OPERATING AGREEMENT
                                     BETWEEN
                              ALABAMA POWER COMPANY
                                       AND
                             SOUTHERN POWER COMPANY

         THIS AGREEMENT is made and entered into this 26th day of June 2001, to
be effective as of the close of business on June 30, 2001, (the "Effective
Date") by and between Alabama Power Company ("Operator") and Southern Power
Company ("Owner").

                              W I T N E S S E T H:

         WHEREAS, Operator and Owner are each a wholly-owned subsidiary of The

Southern Company ("Southern"), a registered holding company under the Public

Utility Holding Company Act of 1935 (the "1935 Act"); and

         WHEREAS, Owner owns certain generation stations, plants and other

generation-related facilities within the service territory of Operator and may
construct or acquire additional facilities in the future; and

         WHEREAS,  Owner intends to sell on the wholesale  market the electric
power generated by such  facilities;
and
         WHEREAS, Operator owns and operates generation stations, plants and
other related generation facilities and has developed the expertise and
experience to efficiently and economically operate such facilities; and

         WHEREAS, Owner believes that in order to more efficiently and
economically provide for the operation, maintenance, repair, and rehabilitation
of its generating stations, plants and other generation-related facilities, such
activities should be conducted and coordinated by Operator; and
<PAGE>

         WHEREAS, Owner desires that Operator undertake the operation,
maintenance, repair and rehabilitation of its generating stations, plants and
other generation-related facilities identified on Schedule 1, subject to the
receipt of any necessary regulatory approvals, and Operator has agreed to do so
under the terms and conditions set forth below.

         NOW THEREFORE, in consideration of these premises, the parties,
intending to be legally bound, do hereby agree as follows:

                                    ARTICLE 1
                                   Definitions

         As used herein, the following terms and phrases shall have,
 respectively, the following meanings:

                    1.1 "Fuel Services" shall mean work related to supplying and
               managing  all  necessary  fuels  for the Generation Facilities,
               including, without limitation, planning, procurement,  contract
               administration,  fuel  quality   assurance,  administration  of
               payables  and  receivables,  and all activities relating  to
               procurement, transportation, installation, monitoring, repairing,
               storage,  reprocessing  and  disposal of fuel for the  Generation
               Facilities, related materials and waste products.

                    1.2   "Generation Facility"  shall mean, and refer  to,
               respectively,  each of the fossil fuel, hydro-electric and pumped
               storage generation stations,  plants and other generation-related
               facilities owned by Owner,  located within the service  territory
               of Operator  and  identified  on  Schedule 1 attached  hereto and
               incorporated herein;  provided,  however,  that should activities
               concerning a Generation  Facility be  undertaken  with respect to
               one  unit  of  such  station,   plant  or  facility,  the  phrase
               "Generation  Facility"  shall  mean and  refer  to that  unit and
               related common facilities.  Generation stations, plants and other

                                       2
<PAGE>

               generation-related facilities may be removed from or added to the
               definition of "Generation  Facilities" as contemplated in Section
               2.3.

               1.3  "Governmental  Authority" shall mean any local,  state,
               regional  or  federal  legislative,  regulatory,  administrative,
               legal,  judicial or executive agency,  commission,  department or
               other entity and any person  acting on behalf of any such entity.

               1.4 "Legal Requirements" shall mean all laws, codes,  ordinances,
               orders,  judgments,   decrees,   injunctions,   licenses,  rules,
               permits,   approvals,   written   agreements,   regulations   and
               requirements of or issued by every Governmental  Authority having
               jurisdiction  over  the  matter  in  question,  whether  federal,
               regional, state or local, which may be applicable to Operator, or
               to Owner,  or to any  Generation  Facility  or any of the real or
               personal  property  comprising the Generation  Facilities,  or to
               services  to  be  provided  to  Owner  hereunder,   or  the  use,
               occupancy,  possession,  operation,  maintenance,   construction,
               retirement, acquisition,  installation,  alteration, replacement,
               reconstruction  or disposal of any one or more of the  Generation
               Facilities or any part  thereof.

                1.5 "New  Investment  Projects"  shall mean projects for the
               Generation   Facilities   relating  to  the   planning,   design,
               licensing,   acquisition,   construction,   completion,  renewal,
               improvement,  addition, repair, replacement or enlargement of any
               Unit of Property (as described in the Federal  Energy  Regulatory
               Commission's  "Units  of  Property  for  Use  in  Accounting  for
               Additions   and   Retirements   of   Electric   Plants"),   under
               circumstances  where  expenditures on or for such projects are to
               be capitalized in accordance with the Electric Plant Instructions
               of the Uniform  System of Accounts  prescribed  for Class A and B
               utilities by the Federal Energy Regulatory  Commission.

                                       3
<PAGE>

               1.6 "New Investment  Services" shall mean work on or for any
               New  Investment  Project,  including,  but not  limited  to,  any
               planning,  design,  engineering,  labor, procurement of materials
               and supplies, materials management,  quality assurance, training,
               security, and environmental protection, together with maintaining
               or obtaining  licenses and regulatory  approvals related thereto,
               governmental affairs or regulatory relationships,  administration
               of payables and receivables,  and all other activity required for
               the safe and  reliable  operation of the New  Investment  Project
               and/or the relevant  Generation  Facility or that may be required
               to comply with Legal Requirements.

               1.7  "Operating  Services"  shall  mean Fuel  Services,  New
               Investment Services, and Operation and Maintenance Services.

               1.8 "Operation and Maintenance Services" shall mean work for
               Owner relating to the possession,  management, control, start-up,
               operation,  availability,   production  of  energy,  maintenance,
               improvement,  renewal,  replacement, and shutdown, including, but
               not  limited  to,  any  planning,  design,  engineering,   labor,
               procurement  of materials  and  supplies,  materials  management,
               quality   assurance,   training,   security,   and  environmental
               protection,  together with maintaining or obtaining  licenses and
               regulatory  approvals  related thereto,  governmental  affairs or
               regulatory   relationships,   administration   of  payables   and
               receivables,  and all other  activity  required  for the safe and
               reliable  operation of the  Generation  Facilities or that may be
               required to comply with Legal Requirements.

               1.9 "Prudent  Utility  Practice"  shall mean at a particular
               time  any  of the  practices,  methods and  acts engaged  in or
               approved  by  a  significant  portion of  the electric  utility
               industry prior to such time, or any of the practices, methods and
               acts which,  in the exercise of  reasonable  judgment in light of

                                       4
<PAGE>

               the facts  known at the time the  decision  was made,  could have
               been  expected to  accomplish  the  desired  result at the lowest
               reasonable  cost   consistent   with  good  business   practices,
               reliability, safety and expedition. "Prudent Utility Practice" is
               not intended to be limited to the optimum practice, method or act
               to the  exclusion  of all others,  but rather to be a spectrum of
               possible practices,  methods or acts having due regard for, among
               other things,  manufacturers'  warranties and the requirements of
               governmental  agencies  of  competent  jurisdiction.

                                    ARTICLE 2
               Operator's Authority and Responsibility with Respect to Operation
                          of the Generation Facilities

                    2.1  Responsibility of Operator.  Operator,  consistent with
               such written  guidelines as may be jointly  developed with Owner,
               shall  provide  and be  responsible  for  (i) the  operation  and
               maintenance of the  Generation  Facilities in a safe and reliable
               manner in accordance with all Legal Requirements and with Prudent
               Utility Practice,  (ii) the generation of power and energy at the
               Generation Facilities to the credit of and for the benefit of the
               Owner as  economically  as is reasonably  practicable,  (iii) the
               repair and  rehabilitation  of the Generation  Facilities as may,
               from  time to  time,  be  necessary,  appropriate  or  reasonably
               practicable and advisable and (iv) as and to the extent deemed by
               Owner to be necessary or appropriate,  the construction of new or
               additional  non-nuclear generation facilities for Owner. Operator
               also  shall  make  such  further  changes  and  additions  to and
               retirements  from  the  Generation   Facilities  in  its  service
               territory   as  shall  be   consistent   with   such   operation,
               maintenance,   repair  and  rehabilitation.   Such  services  and
               construction   may  be  provided  by  Operator  through  its  own
               personnel or, in part, by others,  including  without  limitation
               affiliate  personnel,  under  contractual or other  arrangements,
               including  the use of Owner's  personnel  under the direction and
               supervision of Operator.

                                       5
<PAGE>

                    2.2  Authorization  of  Operator.   In  furtherance  of  the
               foregoing,  Owner  authorizes  Operator,  and Operator  agrees to
               provide, Operation and Maintenance Services and Fuel Services for
               the  Generation   Facilities  and,  as  authorized   herein,  New
               Investment Services. Owner hereby authorizes Operator to take all
               actions  that,  in  the   discretion  and  judgment  of  Operator
               consistent with Prudent Utility Practice, are deemed necessary or
               advisable in providing  these  Operating  Services.  Owner hereby
               authorizes  Operator,  as  operator,  to take any and all  action
               necessary to comply with all Legal  Requirements  and to take all
               action  necessary  to fulfill any  requirements  for the safe and
               reliable  operation of the Generation  Facilities.  The authority
               vested in  Operator  shall  include,  but not be limited  to, the
               authority  to  incur  costs,  liabilities,  and  obligations,  to
               purchase  equipment,  materials  and  supplies,  to  perform  and
               arrange   for   performance   of  work,   to  select  and  retain
               contractors,    engineers,   consultants,    architect-engineers,
               attorneys,  accountants  and other firms or persons,  and to take
               all actions in connection with the Generation Facilities that are
               within the scope set forth above. Without limiting the foregoing,
               the authority  vested in Operator  shall  include the  following:

                    2.2.1. Plant Operation and Maintenance.  Operator shall have
               the  authority to possess,  operate and  maintain the  Generation
               Facilities in accordance with policies and decisions  established
               and made by Owner.  Subject to the provisions of this  Agreement,
               Operator  shall  in  accordance  with  Prudent  Utility  Practice
               endeavor  to  achieve  reliable  performance  of each  Generation
               Facility,  to maximize the capacity and availability  factors and
               minimize  forced  outage rates and  durations at each  Generation
               Facility  and to  produce  busbar  costs  as  low  as  reasonably
               possible.

                                       6
<PAGE>

                    (a)  Staff  and  Personnel.  Subject  to the  provisions  of
               Section 2.8.1 respecting Strategic Plans and approval of Owner or
               Owner's  designated  representative,   Operator  shall  have  the
               authority  to select,  hire,  compensate,  control and  discharge
               (when deemed  appropriate by Operator)  those  persons,  firms or
               corporations  which are required to satisfy its obligations under
               this  Agreement.  Operator shall keep Owner informed of any plans
               to change  either the  Operator  officer  responsible  for any of
               Owner's  Generation  Facilities  or the Operator  manager of such
               Generation  Facility.  Any input from Owner on such plans will be
               considered  by Operator,  but  Operator's  decisions on personnel
               matters shall be final. Operator shall also consider any positive
               or negative  comments from Owner regarding the performance of any
               of Operator's officers or managers,  but management  decisions on
               whether to take personnel or salary administration  actions shall
               be made solely by Operator.

                    (b) Licenses and Permits for Generation Facilities. Operator
               is  authorized  to  obtain  and  maintain   compliance  with  all
               licenses, approvals and permits for each Generation Facility from
               Governmental  Authorities  required for operation and maintenance
               of the Generation Facility. Upon mutual agreement of Operator and
               Owner,  or as required by Legal  Requirements,  Operator  will be
               designated  in such  licenses,  approvals  and  permits as having
               operating responsibility for the Generation Facilities.

                    (c) Reductions in Capacity and Outages at Each Plant.  Owner
               recognizes  that,  in the  course  of  operating  the  Generation
               Facilities,  it may be necessary to decide whether to operate the
               Generation  Facilities at less than full power or to terminate or

                                       7
<PAGE>

               suspend such operations altogether in light of technical,  legal,
               regulatory,  safety,  economic,  power system,  testing, or other
               considerations.  Operator recognizes the need to minimize periods
               of reduced capacity or outages at the Generation  Facilities that
               could have an adverse  effect on Owner's  power supply  system or
               its cost of providing  reliable electric  service.  Operator will
               endeavor  to  consult  with  Owner   concerning   any   operating
               conditions which are expected to result in capacity reductions of
               fifty percent  (50%) or more at a Generation  Facility or outages
               at a unit of any Generation Facility, and Operator will only take
               those actions when they  determine they are prudent and necessary
               from an operating standpoint.

                    (d) Events About Which Owner is to be Notified. In the event
               of an  occurrence  at a  Generation  Facility  of  any  unplanned
               outage,  any  significant  extension  of a  planned  outage,  any
               unplanned  reduction  in the  capacity  of a unit for an extended
               period,  or any event at a Generation  Facility or any regulatory
               action which is likely to attract  substantial media attention or
               to affect substantially the operation of the Generation Facility,
               Operator  shall  inform  Owner  as  soon  as  practical,   or  in
               accordance  with  guidelines   acceptable  to  Owner,  after  the
               occurrence  of such  event.

                    (e) No Changes to Transmission  or Distribution  Facilities.
               In order that the safe operation of the Generation  Facilities is
               assured, Owner shall not effect any operating or physical changes
               to  its  transmission  and  distribution   facilities  which  may
               adversely affect the safe operation of the Generation  Facilities
               without prior  consultation with and the concurrence of Operator.

                                       8
<PAGE>

               (f) Operation in Accordance  with Operating Plan. Each Generation
               Facility  shall be operated in  accordance  with Prudent  Utility
               Practice and pursuant to an operating  plan developed and updated
               regularly  by Operator and Owner and in  accordance  with Owner's
               obligations, if any, under any interconnection agreements,  power
               pooling  arrangements or other applicable  arrangements,  as such
               obligations may presently exist or may hereafter be modified from
               time to time,  including  the  obligations,  if any,  of Owner to
               maintain the design  integrity of each Generation  Facility under
               the requirements of the Southeast  Electric  Reliability  Council
               and the  National  Electric  Reliability  Council.

                    (g) Point of  Interconnection.  The point of interconnection
               between any Generation Facility and Operator's or a third party's
               transmission  system  and the  extent of  Operator's  operational
               responsibility  therefor shall be determined from time to time by
               Owner and Operator.

               2.2.2.   New   Investment    Services.    Operator   shall   have
          responsibility for all New Investment Services. Operator is authorized
          to  enter  into  such  arrangements  as it deems  appropriate  for the
          Generation   Facilities  and  to  make  all  decisions  regarding  the
          completion of New Investment  Projects that were  contemplated  in the
          construction  budgets  for  the  Generation   Facilities  as  of  this
          acquisition by Owner or that have been approved and provided for in an
          Operating  Budget or Capital Budget under the procedures  contemplated
          in  Section  2.8  and as  applicable  Section  2.3.3.  All  equipment,
          materials and supplies  included in such New  Investment  Projects for
          each  Generation  Facility  shall be acquired in the name of Owner and
          shall be the property of Owner.

                                       9
<PAGE>

               2.2.3. Fuel Services. Operator shall have responsibility for Fuel
          Services. Operator is authorized to enter into such arrangements as it
          deems  appropriate  and to make all decisions  regarding fuel and fuel
          services.

          2.3 Retirement,  Removal or Addition of Generating  Facilities.  Owner
     shall retain the  exclusive  authority  (i) to determine  when the economic
     life of the  Generation  Facility  has ended and  thereupon  to retire  the
     Generation  Facility  from  commercial   operation  or  (ii)  to  remove  a
     particular generation station, plant or other  generation-related  Facility
     from the  provisions  of this  Agreement and to arrange for other means for
     its  operation  and  maintenance.  Owner and  Operator may agree to add new
     generation stations, plants or other generation-related facilities of Owner
     within Operator's service territory to this Agreement.

          2.3.1 Retirement.  Upon Owner informing  Operator of any retirement or
     removal of a Generation Facility, Operator shall take such action as may be
     necessary to reduce  operation of the  Generation  Facility or to terminate
     operation  and place the  Generation  Facility  or unit in a safe  shutdown
     condition.   Owner   retains  the   authority  to  determine   whether  any
     to-be-retired  Generation  Facility  should be placed in standby  status or
     operated at reduced  output for  economic  reasons or Owner's  need for the
     capacity or energy of the  Generation  Facility.  Operator  shall also take
     such  steps  as  may  be  necessary  to  decommission  and  dispose  of and
     thereafter maintain, to the extent necessary,  any to-be-retired Generation
     Facility or any unit thereof designated for retirement.

          2.3.2  Removal.  Upon Owner  informing  Operator  of any  removal of a
     Generation Facility from this Agreement, Operator shall take such action as
     may be  necessary  to  transfer  operational  control  of  such  Generation
     Facility, and to comply with the provisions of Sections 12.1.2 and 12.1.3,

                                       10
<PAGE>

     which  shall also apply.  Upon the  transfer  of  operational  control of a
     Generation  Facility  as  contemplated  above and in  Sections  12.1.2  and
     12.1.3, such generation station, plant or other generation-related facility
     shall cease to be a "Generation  Facility."

          2.3.3 Addition.  Upon Owner and Operator agreeing to the addition of a
     generation  station,  plant or other  generation-related  facility  to this
     Agreement,  such  generation  station,  plant or  other  generation-related
     facility  shall be a  "Generation  Facility" and shall be subject to all of
     the provisions of this  Agreement.

     2.4  Authority to Act as Agent for Owner and Right of Third Parties to Rely
on Agency.  In the conduct of the  authority  vested in Operator in Sections 2.1
and 2.2 above,  Owner hereby  designates and  authorizes  Operator to act as its
attorney-in-fact  and agent for such purposes,  including,  without  limitation,
authority  to  enter  into and  administer  contracts  on  behalf  of Owner  for
procurement  of  material,  equipment or services  and  authority to  administer
contracts  entered into by Owner with respect to the Generation  Facilities.  As
relates to all third  parties,  the  designation  of  Operator as agent shall be
binding on Owner.  Operator  accepts such  appointment  as agent of Owner.  Upon
request from Operator,  Owner shall provide written  confirmation of this agency
relationship  to third  parties.

     2.5  Assignment of  Contracts;  Liability  and  Allocation of Risks.

          2.5.1 Contracts with Third Parties.  Upon mutual agreement of Operator
     and Owner, Owner shall assign and transfer to Operator those contracts with
     third parties relating to the operation of each Generation Facility.  Prior
     to assignment and transfer of such contracts, Operator may request Owner to
     appoint Operator as agent for  administration of any such contracts.  After
     receipt of any such  assignment,  transfer or  authorization to administer,
     Operator shall have the exclusive responsibility for the administration and
     enforcement thereof in accordance with the terms thereof.

                                       11
<PAGE>

          2.5.2  Acceptance  of  Contract  Provisions.  To the extent  permitted
     pursuant to Section 2.8,  Operator in such contracts with third parties may
     agree to such matters as limitations  on the liability of  contractors  for
     work  performed  or  materials   furnished,   restrictions  on  warranties,
     agreements to indemnify the contractors from liability,  requirements  that
     Owner be bound  by  financial  protection  provisions,  waivers,  releases,
     indemnifications,   limitations  of  liability  and  further  transfers  or
     assignments  under  such  contracts,  and other  similar  provisions  (each
     contract with a third party that contains any of the  provisions,  terms or
     other  effects  described  in this  sentence,  shall  be  referred  to as a
     "Material Contract"). Owner waives any claims against Operator for entering
     into  Material  Contracts  approved  pursuant  to the  process  provided in
     Section  2.8.  Owner  also  agrees  to be  bound  by the  requirements  for
     financial protection,  waivers,  releases,  indemnification,  limitation of
     liability and further  transfers or assignments  that bind Operator as they
     now exist in existing Material Contracts or as they may exist in the future
     with respect to Material  Contracts  approved or entered  into  pursuant to
     such process  provided in Section 2.8.

          2.5.3  Enforcement of Rights Under  Contracts. Owner covenants that,
     Owner will  notify  Operator  in  writing  in  advance if Owner intends to
     threaten  suit or bring suit against  third  parties or otherwise  make any
     claim under any contract or  arrangement  relating to any of the Generation
     Facilities  or Operating  Services  being  provided by  Operator.  If Owner
     desires for  Operator to  threaten or bring suit or  otherwise  to make any
     claim,  or desires that such action  contemplated  by Operator shall not be

                                       12
<PAGE>

     taken, Owner shall, by written notice to Operator,  request it so to act or
     refrain from acting.  Upon Operator's  receipt of a notice under one of the
     previous two sentences,  Owner and Operator shall arrange for  consultation
     within ten (10) working days  thereafter on the questions  raised,  or such
     lesser  period of time as Operator  or Owner shall  specify in the light of
     circumstances requiring a more expeditious determination.  Neither Operator
     nor Owner  shall make its final  determination  whether it will or will not
     bring any such suit or make any such claim until  after such  consultation;
     however, the determination by Operator regarding the action that it will or
     will not  take,  shall be final and  binding  (irrespective  of what  Owner
     decides to do), and the decision of Owner regarding the action that it will
     or will not take  will  also be final  and  binding  (irrespective  of what
     Operator  decides  to do).

     2.6 Cooperation  of Owner.  Subject to the requirements and procedures of
Sections 2.5.2 and 2.8, and in the case of New Investment Services Section 2.2.2
and as applicable  Section 2.3.3,  Owner agrees that it will take all necessary
action  in a prompt  manner to  execute  any  agreements  with respect  to the
provision  of  Operation and  Maintenance  Services  and Fuel  Services for the
Generation  Facilities,  and New Investment  Services,  as and when requested by
Operator to permit  Operator  to carry out its  authority  and  responsibilities
pursuant to this Article 2.  Operator may request  Owner to furnish  services or
assistance,  materials,  supplies,  licenses,  offices and real property  rights
including,   without  limitation,   power  supply  services,  transmission  and
distribution   system  repair,   replacement,   construction  and maintenance,
accounting  services,   maintenance  personnel,  security  services,  and  other
personnel,  services or  assistance  as Operator may require with respect to any
one or more Generation Facilities.  Any such items which Owner agrees to furnish
to Operator shall be provided at cost.

                                       13
<PAGE>

     2.7 Operator Interface Procedure. Operator and Owner will jointly establish
and maintain an Operator Interface Procedure to govern the working relationships
between the two  companies.  The  Operator  Interface  Procedure  shall  contain
procedures  by which  Owner can  maintain an  overview  of  Generation  Facility
operations,  procedures  for  administering  this  Operating  Agreement  through
designated  executive points of contact, and procedures to define interfaces for
support  services  and  assistance  provided  by Owner  pursuant  to Section 2.6
hereof.

     2.8 Plans and Budgets.  Strategic  Plans,  Fuel Plans,  Operating  Budgets,
Capital Budgets, Fuel Budgets and Material Contracts shall be submitted to Owner
by Operator as provided in Paragraphs 2.8.1 through 2.8.5 below. The contents of
these plans,  budgets and Material  Contracts shall conform to the  requirements
and guidelines  established pursuant to the Operator Interface Procedure.  Owner
shall approve or disapprove each such plan,  budget or Material  Contract within
thirty (30) days after its  submittal.  In the event Owner  disapproves  a plan,
budget or Material  Contract,  Owner shall inform Operator of the basis for such
disapproval.  Operator shall then modify such plan, budget or Material Contracts
as required to make it acceptable  to Owner and shall  resubmit it for approval;
provided,  however, that in no event shall Operator be required to submit plans,
budgets or Material Contracts which would cause Operator to operate a Generation
Facility in  violation  of any Legal  Requirements  or in a manner that fails to
provide reasonable  assurance of health and safety to employees.  Operator shall
attempt to provide Operating Services in accordance with such approved plans and
within  the  aggregate  annual  amount  of  such  budgets.  Notwithstanding  the
foregoing, Operator makes no representation,  warranty or promise of any kind as
to accuracy of any such plan or budget,  or that any attempt  referred to in the
preceding  sentence will be successful,  and in no event shall Owner be relieved
of its responsibility to pay costs incurred by Operator as required in Article 4
hereof.

                                       14
<PAGE>

     2.8.1 Strategic  Plan. A Strategic Plan for each Generating  Facility shall
be submitted  to Owner by Operator no later than July 1 of each year.  Owner may
separately  approve or disapprove  individual  projects  which are classified as
planned  improvement  projects  pursuant  to  Paragraph  (d)  below,  but  shall
otherwise  approve or disapprove each Strategic Plan in its entirety.  Strategic
Plans may cover one or more  Generation  Facilities.  Each  Strategic Plan shall
identify key assumptions to be used in the preparation of budgets and forecasts,
including:

          (a) Five-year  Operating  and Planned  Outage  Schedule.  This section
     shall  identify  the  scheduled  operating  cycles and planned  outages for
     maintenance and other work during the succeeding  five years.  The schedule
     shall  describe in reasonable  detail the time and duration of each planned
     outage and the  maintenance  and other work planned to be performed  during
     such outage.

          (b)  Availability  and Performance  Goals.  This section shall contain
     overall  performance  goals which have been established by Operator for the
     Generation Facility for the current year.

          (c) Planned  Mandatory  Projects.  A mandatory  project is any project
     with a total estimated cost in excess of one million  dollars  ($1,000,000)
     or such other amount as Owner may  establish,  including but not limited to
     any upgrade, replacement,  addition or program, which is needed in order to
     support normal operations in accordance with Prudent Utility Practice or in
     order to comply with  regulatory  or safety  requirements.  The  associated
     schedule and estimated annual funding  requirements shall be included.

                                       15
<PAGE>

          (d)  Planned  Improvement  Projects.  An  improvement  project  is any
     project  with a total  estimated  cost in  excess  of one  million  dollars
     ($1,000,000) or such other amount as Owner may establish, including but not
     limited to any upgrade,  replacement,  addition,  or program,  which is not
     mandatory  as defined  in (c)  above.  Examples  of such  projects  include
     efforts to improve performance of a Generation Facility or conditions, such
     as improved  Generation  Facility capacity or efficiency,  enhanced working
     conditions,  and appearance.  The associated  schedule and estimated annual
     funding  requirements shall be included.

          (e)  Authorized  Level of  Staffing.  This section  shall  provide the
     current  authorized  number of permanent staff positions which are assigned
     to the  Generation  Facility  and  its  offsite  support.  Such  number  of
     positions  shall be broken  down by  functional  areas  (e.g.,  operations,
     maintenance,  administrative,  technical, corporate support), shall include
     positions  which are located either on-site or off-site,  and shall include
     all positions  regardless of the actual  employer.  This section shall also
     show  any  estimates  of  planned  changes  in such  authorized  number  of
     positions over the succeeding five years.

     2.8.2 Fuel Plan. A five-year Fuel Plan for each  Generation  Facility shall
be  submitted  to Owner by  September  15 of each year.  Owner shall  approve or
disapprove  each Fuel Plan within  thirty days after  submittal.  Each Fuel Plan
shall describe in reasonable  detail plans for  procurement  and  utilization of
fuel for the Generation  Facility and information on disposal of waste products.
A Fuel Plan may cover one or more Generation Facilities.

                                       16
<PAGE>

     2.8.3 Operating Budget. By September 1 of each year,  Operator shall submit
to Owner a written Operating Budget showing the estimated costs of operating and
maintaining Owner's Generation  Facilities during the next calendar year, with a
forecast of budget  requirements  for the succeeding four calendar  years.  Each
budget  shall be  supported  by detail  reasonably  adequate  for the purpose of
review by Owner.

     2.8.4 Capital Budget. By September 1 of each year, Operator shall submit to
Owner a written  Capital  Budget  estimate of capital  expenditures  for each of
Owner's  Generation  Facilities for the next calendar  year,  with a forecast of
budget requirements for the succeeding four calendar years. Each budget shall be
supported by detail reasonably adequate for the purpose of review by Owner.

     2.8.5 Fuel Budget.  By September 15 of each year,  Operator shall submit to
Owner a written Fuel Budget  estimate of fuel  expenditures  for each of Owner's
Generation  Facilities  for the next  calendar  year,  with a forecast of budget
requirements  for the  succeeding  four  calendar  years.  Each budget  shall be
supported by detail reasonably adequate for the purpose of review by Owner.

     2.8.6  Material  Contracts.  Reasonably  in advance of the time it plans to
enter into a Material  Contract  with a third  party,  Operator  shall submit to
Owner a draft of such Material  Contract.  Each draft Material  Contract will be
supported with all attachments and sufficient  information for Owner to evaluate
the provisions that render such draft a Material Contract.

     2.9 Information and Reports.  Operator shall furnish to Owner the following

                                       17
<PAGE>

information and reports:

     2.9.1 Generation  Facility Data. At the time of submittal of each Strategic
Plan,  Operator  shall also  furnish a  comparison  of the  performance  of each
Generation   Facility  with  other  generating   facilities  using   performance
indicators in common use in the electric utility industry or as may be specified
by Owner.

     2.9.2  Generation  Facility Budget Reports.  Operator shall furnish monthly
data showing actual costs for operation and maintenance,  capital  expenditures,
and direct fuel  expenditures with comparisons to the respective  budgets.  This
report will normally be provided by the end of the succeeding month.

     2.9.3  Generation  Facility  Strategic  Plan Reports.  At least  quarterly,
Operator  shall furnish data showing  actual  performance  for each unit at each
Generation  Facility  compared to goals  contained in the Strategic Plan for the
Generation Facility.

     2.9.4 Audit  Reports.  Operator  shall make  available  for review by Owner
copies  of  financial  or  accounting   reports  concerning  Owner's  Generation
Facilities containing the results of audits by or for Southern Company Services,
Inc.,  or any  affiliate  or  subsidiary  of  The  Southern  Company,  or by any
regulatory agency.

     2.9.5  Correspondence  to and from Regulatory  Agencies.  At the request of
Owner,  Operator  shall  furnish to Owner copies of  correspondence  to and from
regulatory agencies concerning one or more of Owner's Generation Facilities.

     2.9.6  Responses  to Owner  Inquiries.  In  addition to the  obligation  of
Operator to provide the  information  as explicitly  required  herein,  Operator
shall  respond  to  reasonable   written  or  verbal  requests  from  Owner  for
information  not  otherwise  specifically  provided  for herein.

                                       18
<PAGE>

     2.10 Plant  Tours.  Owner shall have the right to have its  representatives
and guests visit its Generation Facilities, to tour the facilities,  and observe
activities at the Generation Facilities; provided that such visits or tours will
not interfere with the operation of the Generation  Facilities,  or the security
or safety of such facilities.  Owner shall assure that its  representatives  and
guests  comply  with  all  applicable  rules  and  regulations  in  effect  at a
Generation Facility whether imposed by Governmental Authority or by Operator.

     2.11 Management  Audit.  Owner shall have the right to conduct a management
audit,  at its own cost, of  Operator's  performance  hereunder  either by Owner
officers   and   employees   or  through   their  duly   authorized   agents  or
representatives.  Operator shall  cooperate with Owner in the conducting of such
audit and,  subject to applicable  Legal  Requirements  and the  requirements of
vendors,  give  Owner  reasonable  access to all  contracts,  records  and other
documents relating to the Generating  Facilities.  Following any such management
audit,  Operator  shall respond to the findings of such audit if requested to do
so by Owner. Management audits by Owner shall be scheduled so as to minimize the
number of audits required and so as to not to exceed one management audit in any
consecutive    twelve-month   period.

                                       19
<PAGE>

                                    ARTICLE 3
                              Entitlement to Output

     3.1  Entitlement  to Output.  Owner  shall be entitled to all of the output
from its  Generation  Facilities  at the time  generation  in such units occurs.
Subject  to  Operator's  primary   responsibility  for  safe  operation  of  the
Generation  Facilities,  Owner shall have the right to schedule and dispatch the
capacity and energy needed from the facilities,  and Operator shall use its best
efforts to honor such schedule.

     3.2 Determination of Output-Responsibility  for Station Service and Losses.
Output  of  each  Generation  Facility  shall  be the  gross  generation  of the
facility,  less station service  requirements,  and less  adjustments for losses
experienced.  Owner shall be  responsible  for providing  all off-site  electric
power  required at the  Generation  Facility  whenever  the station  service and
losses exceed the gross generation of the Generation Facility.

                                   ARTICLE 4
                      Costs, Billing, Accounting and Audit

  4.1......Cost of Operation and
Maintenance.  Owner shall pay to Operator all direct costs  incurred by Operator
relating to Operation and  Maintenance  Services for the  Generation  Facilities
(including  all  costs  identified  in  Section  9.3 and any costs  incurred  by
Operator as a consequence  of termination  hereunder).  Such costs shall include
all payments made to Operator employees  (including payment of wages,  salaries,
workmen's  compensation  and other benefits)  relating to work performed by such
employees  while on the premises of any of the Generation  Facilities.  Operator
and  Owner  acknowledge  that  all such  payments  made to  Operator  employees,
relating  to work  performed  by such  employees  while on  Generation  Facility
premises,  are  effectively  made by Owner,  since Owner is responsible for such
payments  and they are made  from  funds  placed on  deposit  by Owner for those
purposes.  Owner shall also pay to Operator the  Generation  Facility  allocated
share  of other of  Operator's  costs.  Allocation  of  costs to  Operation  and
Maintenance  Services  shall be performed  in  accordance  with the  methodology
agreed-upon  from time to time by Owner and  Operator.

                                       20
<PAGE>

     4.2 New Investment Costs. Owner shall pay to Operator all costs incurred by
Operator  relating to New  Investment  Services for the  Generation  Facilities,
including  obligations  incurred  to third  parties,  direct  costs of  Operator
associated  with such New  Investment  Services and the  Generation  Facilities'
allocated  share of  Operator's  other costs  associated  with such  activities.
Allocation of costs to New Investment  Services shall be performed in accordance
with  the  methodology  agreed-upon  from  time to time by  Owner  and  Operator
pursuant to Section 4.1 hereof.

     4.3 Fuel Costs.  Owner shall pay to Operator all direct  costs  incurred by
Operator  relating  to Fuel  Services  for  the  Generation  Facilities  and the
Generation  Facilities allocated share of other of Operator's costs.  Allocation
of costs to Fuel Costs shall be performed  in  accordance  with the  methodology
agreed-upon  from time to time by Owner and  Operator  pursuant  to Section  4.1
hereof.

     4.4 Other Costs Required by Legal Requirements. Owner shall pay to Operator
all direct costs incurred by Operator and the Generation  Facilities'  allocated
share of other of  Operator's  costs  associated  with any other  activities  of
Operator  relative to the Generation  Facilities that are required to meet Legal
Requirements.

     4.5 Revision.  Should Operator  undertake to perform services for any other
affiliated company or for any non-affiliated  company where the cost to Operator
of providing  such  services  affects the cost of Operator to provide  Operating
Services pursuant to this Agreement, Operator shall discuss the matter and reach
agreement  with Owner  respecting  the need for or the terms of any amendment of
this Section 4 as may be  appropriate  to assure the  continued  fairness of the
determination of the responsibility for costs payable to Operator hereunder.

                                       21
<PAGE>

     4.6 Billing.  Operator shall render to Owner a monthly  billing  statement,
with detailed data in a computer readable form as reasonably requested by Owner,
no later than the fifth (5th) day of each month  detailing  costs  incurred  for
Operation  and  Maintenance  Services  during the  preceding  month  pursuant to
Section 4.1;  costs incurred for New  Investment  Services  during the preceding
month  pursuant to Section  4.2;  costs  incurred for Fuel  Services  during the
preceding month pursuant to Section 4.3; and the other costs incurred during the
preceding month pursuant to Section 4.4.

     4.7 Payment.  The  obligation  to make  payments as specified  herein shall
continue   notwithstanding  the  capability  (or  lack  of  capability)  of  the
Generation Facilities to produce power for any reason.

     4.8  General  Accounting   Matters.   Determinations  by  Operator  on  all
accounting  matters related to the  transactions  contemplated by this Agreement
will be in accordance  with  Generally  Accepted  Accounting  Principles and the
Securities and Exchange  Commission's  Uniform System of Accounts for Mutual and
Subsidiary Service Companies, utilizing the accrual method of accounting, unless
otherwise specifically provided in this Agreement or mutually agreed by Operator
and Owner or as prescribed by other regulatory agencies having jurisdiction,  as
in effect from time to time.

     4.9 Right to Inspect  Records.  During normal business hours and subject to
conditions  consistent  with the conduct by  Operator  of its  regular  business
affairs  and  responsibilities,  Operator  will  provide  Owner  or any  auditor
utilized by Owner and  reasonably  acceptable  to  Operator,  or any  nationally

                                       22
<PAGE>

recognized  accounting  firm  retained  by Owner,  access to  Operator's  books,
records,  and other documents  directly related to the performance of Operator's
obligations  under this  Agreement  and, upon  request,  copies  thereof,  which
pertain to (a) costs  applicable  to Operation  and  Maintenance  Services,  New
Investment  Services,  Fuel  Services,  and Other Costs for  Owner's  Generation
Facilities  to the extent  necessary  to enable  Owner to verify the costs which
have been billed to Owner  pursuant to the  provisions  of this  Agreement;  (b)
compliance with all environmental Legal  Requirements;  and (c) matters relating
to the design,  construction and operation and retirement of Owner's  Generation
Facilities in proceedings before any Governmental Authority.

4.10     Disputed  Invoice.  In the event Owner  shall  question  any  statement
rendered by Operator in  accordance  with the  provisions of Section 4.1 hereof,
Owner  shall  nevertheless  promptly  pay amounts  called for by Operator  under
Section 4.1 hereof but such  payment  shall not be deemed to prevent  Owner from
claiming an adjustment of any statement rendered.

                                    ARTICLE 5
                              Advancement of Funds

     5.1 Operator shall prepare forecasts, in such frequency, form and detail as
Owner shall direct, of the funds required to pay Operator's anticipated costs of
the  services  to be  provided  to Owner and the dates on which  payment of such
costs shall become due.  Owner shall  advance  funds to Operator in such amounts
and at such times determined on the basis of such forecasts,  to enable Operator
to pay its costs of  services  on or before  payment of such costs shall be due.
Such  advances  shall be made by  deposits  or bank  transfers  to  accounts  of
Operator with such  financial  institutions  as Operator  shall  designate.  Any
excess funds in such accounts  shall be invested by Operator in accordance  with
prudent cash  management  practices and all investment  income and  appreciation
received on such funds shall be credited against the cost of service provided to
Owner.

                                       23
<PAGE>

                                    ARTICLE 6
                                      Taxes

         6.1       Owner shall report, file returns with respect to, be
responsible for and pay all real property, franchise, business or other taxes,
except payroll and sales or use taxes, arising out of or relating to its
ownership of the Generation Facilities.

                                    ARTICLE 7
                      Compliance with Provisions of Permits
                    and Requirements of Governmental Agencies

         7.1       Owner and Operator shall cooperate in taking whatever action
may be necessary to comply with the terms and provisions of all permits and
licenses for the Generation Facilities and with all applicable lawful
requirements of any federal, state or local agency or regulatory body having
jurisdiction in or over the Generation Facilities.

                                    ARTICLE 8
                         Confidentiality of Information

         8.1      Each party to this Agreement may, from time to time, come into
possession of information of the other parties that is either confidential or
proprietary. Any party having any such information which is known to be
considered by any other party as either confidential or proprietary will not
reproduce, copy, use or disclose (except when required by a Governmental
Authority) any such information in whole or in part for any purpose without the
written consent of the other party. In disclosing confidential or proprietary
information to a Governmental Authority, the disclosing party shall cooperate
with the other party in minimizing the amount of such information furnished. At
the specific request of the other party, the disclosing party will endeavor to
secure the agreement of such Governmental Authority to maintain specified

portions of such information in confidence. Public dissemination of information
by the furnishing party before or after it is furnished shall constitute a
termination of the confidentiality requirement as to that specific information.

                                       24
<PAGE>

                                    ARTICLE 9
                 Damage to Persons or Property; Penalties; Fines

         9.1      Applicability of Article. Since Operator is undertaking its
responsibilities hereunder (i) at cost and (ii) in order to assist Owner in
meeting its responsibilities with respect to its Generation Facilities, the
following provisions shall be applicable to loss or damage to the property of
any or all of the parties hereto (including Generation Facilities property) or
of third parties, or injuries to or loss of life by any person, including
employees of the parties hereto, and to penalties or fines assessed with respect
to the Generation Facilities:

         9.2      Absence of Warranty. Operator does not warrant that its
performance of Operating Services will meet the standards set forth in Sections
2.1 and 2.2 hereof, and its sole obligation if it fails to meet such standards
is to reperform at the request of Owner the deficient work at cost payable by
Owner in a manner that complies with such standards. Owner acknowledges that
such services are not subject to any warranty of any nature, express or implied,
including, without limitation, any warranty of merchantability or fitness for a
particular purpose.

         9.3      Liabilities to Third Parties and Owner. (a) To the fullest
extent provided by law, all liability to third parties other than liability for
Operator's Willful Misconduct (as defined in 9.4 below), fraud or gross
negligence whether arising in contract (including breach of warranty), tort
(including negligence, product liability, breach of fiduciary duty or any other
theory of tort liability), under the laws of real property or otherwise, or as a
result of fines or other penalties imposed by any Governmental Authority, that

                                       25
<PAGE>

results from or is in any way connected with the provision of Operation and
Maintenance Services, New Investment Services, or Fuel Services for the
Generation Facilities shall be borne by Owner in their entirety. Owner shall
indemnify and hold harmless Operator, its agents servants, directors, employees
and affiliates (the "Indemnified Parties") from and against any and all claims,
losses, damages, expenses and costs of any kind, including without limitation
attorneys fees, costs of investigation and court costs, other than those
attributable to Willful Misconduct, fraud or gross negligence of Operator,
whether direct or indirect, on account of or by reason of bodily injuries
(including death) to any person or persons or property damage arising out of or
occurring in connection with the provision of Operation and Maintenance
Services, New Investment Services, or Fuel Services for the Generation
Facilities, whether or not such claims, losses, damages, expenses or costs were
caused by or alleged to have been caused by or contributed to by the active,
passive, affirmative, sole or concurrent negligence or by breach of any
statutory or other duty (whether non-delegable or otherwise) of any of the
Indemnified Parties.

         Except for consequences of Operator's Willful Misconduct or fraud,
Owner and its affiliates, servants, employees, agents and insurers hereby
release, acquit and forever discharge the Indemnified Parties, to the fullest
extent permitted by applicable law, from any and all damages, claims, causes of
action, damage to property of Owner or expenses of whatever kind or nature, that
are in any manner connected with the provision of any Operating Services or the
performance and prosecution of any project or work by any of the Indemnified
Parties for or on behalf of Owner for its Generation Facilities, whether arising
in tort (including negligence, strict liability, breach of fiduciary duty or any
other theory of tort liability), contract (including breach of warranty), under
the laws of real property or otherwise, or as a result of any fine or other
penalty imposed by any Governmental Authority. This release shall be effective
whether or not such claims, causes of action, damages, or expenses were caused

                                       26
<PAGE>

or alleged to have been caused by or contributed to by the active, passive,
affirmative, sole or concurrent negligence or by breach of any statutory or
other duty (whether non-delegable or otherwise) of any of the Indemnified
Parties.

         9.4      Willful Misconduct. As used in this Agreement, the term
"Willful Misconduct" shall mean any act or omission by any of the Indemnified
Parties that is performed or omitted consciously with actual knowledge that such
conduct is likely to result in damage or injury to persons or property;
provided, however, that any such act or omission, if performed or omitted by an
Indemnified Party, shall not be deemed Willful Misconduct unless an officer or
employee of Operator at or above the officer level of Vice President or the
employee level of plant manager shall have expressly authorized such act or
omission. Operator shall exercise reasonable and customary supervision or
control over the activities of its agents, servants and employees, and its
affiliates, so as to minimize the potential for adverse willful actions by such
agents, servants or employees or affiliates; provided, however, that failure of
Operator to prevent such adverse willful actions shall not itself be considered
Willful Misconduct. Liability attributable to Operator's Willful Misconduct,
fraud or gross negligence shall be borne by Operator, subject to the limitations
of liability in Section 9.5 below and the last paragraph of Section 9.3 above in
the case of liability to Owner.

         9.5      Limitation of Liability. Notwithstanding Sections 9.3 and 9.4
hereof, Owner agrees that in no event shall any of the Indemnified Parties be
liable to Owner for any indirect, special, punitive, incidental or consequential
damages including, without limitation, (1) loss of profits or revenues, (2)
damages suffered as a result of the loss of the use of Owner's power system,
Generation Facilities or equipment, (3) cost of purchase of replacement power

                                       27
<PAGE>

(including any differential in fuel or power costs), or (4) cost of capital with
respect to any claim based on or in any way connected with this Agreement
whether arising in contract (including breach of warranty), tort (including
negligence, strict liability, breach of fiduciary duty or any other theory of
tort liability), under the laws of real property or any other legal or equitable
theory of law, or as a result of any fine or other penalty imposed by any
Governmental Authority. Owner shall release, acquit, forever discharge,
indemnify, and hold harmless the Indemnified Parties from and against any claim
by any customer of Owner, or any other third party, for any direct, indirect,
special, punitive, incidental or consequential damages arising out of any
performance or failure to perform under this Agreement. The provisions of this
Section 9.5 shall apply to the fullest extent permitted by law.

         9.6      Severability. In the event that any particular application of
any of the limitations of liability contained in this Article 9 should be
finally adjudicated to be void as a violation of the public policy of the State
of Alabama, then such limitation of liability shall not apply with respect to
such application to the extent (but only to the extent) required in order for
such limitation of liability not to be void as a violation of such public
policy, and such limitations of liability shall remain in full force and effect
with respect to all other applications to the fullest extent permitted by law.

                                   ARTICLE 10
                                   Insurance

         10.1     Parties' Obligations Generally. During the term of this
Agreement, Owner and Operator shall make reasonable efforts to procure and
maintain in force such physical damage and loss, public liability, worker's
compensation, officers' liability and other insurance as Owner may deem
appropriate with respect to all losses, damages, liability and claims arising

                                       28
<PAGE>

out of Owner's ownership of its Generation Facilities and Operator's operation
thereof and the provision of Operating Services hereunder. All such insurance
policies shall identify Operator and Owner as additional insureds thereunder as
their interests may appear, and shall contain a waiver of subrogation clause in
favor of Operator and Owner to the extent of the applicable limits of such
policies. The aggregate cost of all insurance, applicable to each Generation
Facility and procured by Operator pursuant to this Agreement, and any payment by
Operator of any deductible, self-insured retention, or co-payment in connection
with any policy claim arising out of Operator's performance of this Agreement
shall be included in the costs of Operating Services. Operator will take steps
to meet the requirements of such insurance policies and cooperate with Owner to
furnish information, establish procedures, erect or change physical facilities
and otherwise meet the requirements of the insurers to maintain coverage in
effect and to collect claims that may be made under such insurance. In the event
that any of the insurance described in this Article 10 is canceled by a party,
that party shall give written notice of such cancellation to the other party at
least sixty (60) days prior to the effective date of such cancellation.

         10.2     Commercial Liability Insurance. Operator will carry insurance
to cover the legal obligations to pay damages because of bodily injury or
property damage. The limits and deductibles of such coverage shall be as
mutually agreed by Operator and Owner.

         10.3     Workmen's Compensation Insurance. Operator shall qualify as a
self-insurer in Alabama and with the U.S. Department of Labor for purposes of
the U.S. Longshoreman's and Harbor Worker's Act, but will provide an umbrella
policy to cover benefits in excess of its assumed liability for workmen's
compensation, the Longshoreman's and Harbor Worker's Act, and employers
liability. Owner and Operator acknowledge that, pursuant to the terms of this

                                       29
<PAGE>

Agreement, all premiums for Operator's workmen's compensation insurance and all
payments to Operator employees, including workmen's compensation benefits,
relating to work performed by such employees while on the premises of a
Generation Facility, are effectively made by the Owner, since such premiums and
payments constitute direct charges incurred by Operator in relation to the
performance of Operating Services for such Generation Facility. It is the intent
of Owner and Operator that for purposes of workmen's compensation Owner not be
exposed to greater liability by virtue of this Agreement than Owner would have
if Owner had utilized Owner employees to perform Operating Services. If Operator
and Owner agree, as an alternative, the parties can purchase any such insurance.

         10.4     Additional Insurance. In the event Owner at any time or from
time to time shall have elected to participate in supplemental insurance
programs to cover other risks arising from the ownership and operation of a
Generation Facility, including the extra costs of replacement power, the costs
of such protection shall be borne by Owner.

         10.5     Waiver of Subrogation - Allocation and Payment of Premium.
Each insurance policy obtained by a party hereto shall contain waivers of
subrogation against the other party, if obtainable from the insurer. The
aggregate cost of all insurance, applicable to the Generation Facilities and
procured by Operator pursuant to this Agreement, shall be considered an
operating cost subject to reimbursement under Section 4.1. In the event that any
of the foregoing insurance policies is canceled by a party, that party shall
give written notice of such cancellation to the other party sixty (60) days
prior to the effective date of such cancellation.

                                       30
<PAGE>

                                   ARTICLE 11
                                      Term

         11.1     Term. The term of this Agreement shall commence on the
Effective Date, subject nevertheless to any applicable rules, regulations or
approvals of any regulatory authority whose approval is required. This Agreement
shall expire (i) when all Generation Facilities have been retired and each site
has been returned to a condition acceptable to Owner, all in compliance with
Legal Requirements; (ii) upon termination pursuant to Section 12.1; or (c) upon
mutual agreement of the parties. Owner's obligation to make payments to Operator
under this Agreement that have not been satisfied prior to the expiration of the
term of this Agreement shall survive such expiration of the term.

..                 11.1.1 It is recognized in the case of expiration under
         Sections 11.1(i) or 11.1(iii), however, that this Agreement shall not
         expire, unless all necessary regulatory approvals, if any, have been
         obtained to transfer the operating responsibility for all Generation
         Facilities to Owner or Owner's designee. Until the date on which such
         transfer of operating responsibility is accomplished, or as Owner may
         otherwise notify Operator in writing, Operator agrees to continue to
         provide Operating Services for the Generation Facilities.

                                   ARTICLE 12
                                    Remedies

               12.1 Termination. In the event Owner determines that it is in its
          interest to do so, or  Operator  determines  that it is in  Operator's
          interest to do so, either Operator or Owner may at will terminate this
          Agreement as provided  below.  Except as may be otherwise  provided in
          Section  11.1,  this Section 12.1 and Article 9 hereof,  this right of
          termination  shall be  Owner's  sole and  exclusive  remedy,  legal or
          equitable,  for any  failure by  Operator  at any time to perform  its
          duties, responsibilities, obligations, or functions under this

                                       31
<PAGE>

          Agreement, or for any other breach by Operator of this Agreement.
          The  procedure for exercise of this right of  termination  shall be as
          follows:

                  12.1.1 Owner shall give written notice to Operator of Owner's
         determination to terminate this Agreement or Operator shall give
         written notice to Owner of its determination to terminate this
         Agreement.

                  12.1.2 Following the giving of such notice, the parties agree
         to cooperate, in good faith, to accomplish the transfer of operating
         responsibility in a prompt manner, including without limitation
         assigning contracts, transferring employees, and modifying licenses,
         approvals and permits as necessary to reflect such change (including,
         if required to effectuate transfer to Owner for regulatory purposes of
         the operating responsibility for the Generation Facilities).

                  12.1.3 It is recognized that no termination shall be
         accomplished until all necessary regulatory approvals, if any, have
         been obtained to transfer the operating responsibility for all
         Generation Facilities to Owner or Owner's designee. During the period
         between the giving of the notice of determination to terminate, and the
         date on which such transfer of operating responsibility is
         accomplished, Operator agrees to continue the provision of Operating
         Services for the Generation Facilities.

                  12.1.4 Upon receipt of all necessary governmental
         authorization for transfer of operating responsibility for each
         Generation Facility from Operator to Owner or Owner's designee, this
         Agreement shall terminate. Except as may otherwise be provided in
         Section 11.1 and this Section 12.1 and except for the consequences of
         Operator's Willful Misconduct, fraud or gross negligence and the other
         limitations provided in Article 9 hereof, Owner hereby agrees that from

                                       32
<PAGE>

         and after such termination Owner shall indemnify and forever hold
         Operator, its servants, directors, employees, affiliates and its agents
         harmless from and against any and all liability, costs, expenses
         (including reasonable attorneys' fees) and judgments, which may
         thereafter be experienced by Operator, which are in any way related to,
         arise out of or are in connection with the activities of Operator, its
         agents, servants, directors, employees and affiliates under this
         Agreement (whether the cause occurred before or after termination).
         Except as may otherwise be provided in Section 11.1 and this Section
         12.1 and except for the consequences of Operator's Willful Misconduct
         or fraud and the other limitations provided in Article 9 hereof, Owner
         further waives any claim Owner may have against Operator, its officers,
         directors, employees, affiliates and agents for damage to property of
         Owner, that arose out of or in connection with the activities of
         Operator, its officers, directors, employees, affiliates and agents
         under this Agreement. The indemnification and waiver contained herein
         shall survive termination and shall be specifically enforceable by
         Operator against Owner.

                                   ARTICLE 13
                                  Miscellaneous

         13.1     No Partnership or Joint Venture. Nothing in this Agreement
shall be deemed to create or constitute a partnership, joint venture or
association among the parties hereto or any of them, the sole purpose of this
Agreement being limited to providing for the orderly and efficient operation,
maintenance, repair, upgrade, rehabilitation, renewal, replacement, additions
and construction of the Generation Facilities.

         13.2     Owner's Designated Representatives. Owner hereby designates
its President as Owner's Representative, who shall receive notices and

                                       33
<PAGE>

communications from Operator under the provisions of this Agreement and who
shall send to the designated Representative of Operator all notices and
communications under the provisions of this Agreement.

         13.3     Operator's Designated Representative, Operator hereby
designates its President as the Operator Representative, who shall receive
notices and communications from Owner's Representative under the provisions of
this Agreement and who shall send to Owner's Representative all notices and
communications concerning the provisions of this Agreement.

         13.4     Depreciation. Owner shall determine the basis and method it
will use for purposes of depreciation and other matters where investment in
Generation Facilities property is relevant.

         13.5     Holidays, Business Days. Any obligations to perform under this
Agreement, including payment obligations, which shall become due on a
non-business day shall become due upon the next business day. The term "business
day" shall mean any day other than a day on which banking institutions in the
City of Birmingham, Alabama are authorized by law to close.

         13.6     Owner's Services to be Furnished at Cost. To the extent that
Owner may, from time to time, provide goods or services to Operator, Operator
shall pay for such goods and services at Owner's cost determined as herein
provided, which payments shall thereupon be treated as Generation Facilities
costs under Article 4.

         13.7     Entire Agreement. This Agreement constitutes the entire
understanding among the parties hereto, superseding any and all previous
understandings, oral or written, pertaining to the subject matter contained
herein. No party hereto has relied or will rely upon any verbal or written
representation or verbal or written information made or given to such party by
any representative of the other party or anyone on its behalf.

                                       34
<PAGE>

         13.8     Amendments. This Agreement may not be amended, modified, or
terminated, nor may any obligation hereunder be waived verbally, and no such
amendment, modification, termination or waiver shall be effective for any
purpose unless it is in writing, and signed by both parties hereto, and all
necessary regulatory approvals have been obtained.

         13.9     Notices. Any notice, request, consent or other communication
permitted or required by this Agreement shall be in writing and shall be deemed
given when deposited in the United States Mail, first class postage prepaid, and
addressed as follows:

         If to Operator:            Alabama Power Company
                                    600 North 18th Street
                                    Birmingham, AL  35291
                                    Attention: President

         If to Owner:               Southern Power Company
                                    270 Peachtree Street
                                    Atlanta, GA  30303
                                    Attention: President

         Unless a different officer or address shall have been designated by the
respective party by notice in writing.

         13.10....Captions. The descriptive captions of the various Articles,
Sections and Paragraphs of this Agreement have been inserted for convenience of
reference only and shall in no way modify or restrict any of the terms and
provisions hereof.

         13.11....Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

         13.12....No Waiver. Failure of any party to enforce any rights or to
require performance of any other party of any of the provisions of this
Agreement shall not release any party of any of its obligations under this

                                       35
<PAGE>

Agreement and shall not be deemed a waiver of any rights of the parties to
insist on performance thereof, or of any of the parties' rights or remedies
hereunder, and in no way shall affect the validity of these terms and conditions
or any part thereof, or the right of any party thereafter to enforce every
provision hereof.

         13.13    Singular and Plural. Throughout this Agreement, whenever any
word in the singular number is used, it shall include the plural unless the
context otherwise requires; and whenever the plural number is used, it shall
include the singular unless the context otherwise requires.

         13.14    Third Party Beneficiaries. This Agreement is for the benefit
of Owner and Operator, and no person or entity other than Owner and Operator is
or shall be entitled to bring any action to enforce any provision of this
Agreement against anyone.

         13.15    Severability. Should any provision of this Agreement be held
to be invalid or unenforceable by a court of competent jurisdiction, the
remaining provisions shall remain in full force and effect, provided that
deletion of the invalid or unenforceable provision does not materially affect
the agreement of the parties contained herein.

                                   ARTICLE 14
                             Successors and Assigns
         14.1     This Agreement and all of the terms and conditions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of Operator's obligations hereunder shall be assignable by
Operator, in whole or in part, without the express written consent of Owner. Any
mortgage indenture trustee which shall foreclose on substantially all of the
electric generation properties of Owner may, at such trustee's own election, be
deemed to be a successor and assign of Owner under this Agreement.

                                       36
<PAGE>

                                   ARTICLE 15
                                  Governing Law

         15.1     This Agreement shall be construed in accordance with, and to
be governed by, the laws of the State of Alabama.

                         [Signatures on following page]

                                       37
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and by their duly authorized representatives as of the day and year
first above written.
                                    "Operator"

                                    ALABAMA POWER COMPANY

                                    By: _________________________________
                                          William B. Hutchins, III
                                          Executive Vice President and CFO

                                    "Owner"

                                     SOUTHERN POWER COMPANY

                                    By: __________________________________
                                          C.B. Harreld
                                          Vice President, Comptroller and
                                          Chief Financial Officer

                                       38
<PAGE>

                                   SCHEDULE 1

                  SOUTHERN POWER COMPANY GENERATION FACILITIES

          GENERATING STATION                LOCATION
          Autaugaville 1 and 2              Autauga County, Alabama

                                       39

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