Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.


			Page
Combined Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview			87
Results of Operations			88
Southern Company			88
Alabama Power			95
Georgia Power			99
Mississippi Power			103
Southern Power			106
Southern Company Gas			109
Future Earnings Potential			115
Accounting Policies			117
Financial Condition and Liquidity			118

The following Management's Discussion and Analysis of Financial Condition and Results of Operations is a combined presentation; however, information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf and each Registrant makes no representation as to information related to the other Registrants.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

OVERVIEW

Southern Company is a holding company that owns all of the common stock of three traditional electric operating companies (Alabama Power, Georgia Power, and Mississippi Power), Southern Power, and Southern Company Gas and owns other direct and indirect subsidiaries. The primary businesses of the Southern Company system are electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. Southern Company's reportable segments are the sale of electricity by the traditional electric operating companies, the sale of electricity in the competitive wholesale market by Southern Power, and the sale of natural gas and other complementary products and services by Southern Company Gas. Southern Company Gas' reportable segments are gas distribution operations, gas pipeline investments, and gas marketing services. Prior to the sale of Sequent on July 1, 2021, Southern Company Gas' reportable segments also included wholesale gas services. See Note (L) to the Condensed Financial Statements herein for additional information on segment reporting. For additional information on the Registrants' primary business activities and the sale of Sequent, see BUSINESS – "The Southern Company System" in Item 1 of the Form 10-K and Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K, respectively.

The Registrants continue to focus on several key performance indicators. For the traditional electric operating companies and Southern Company Gas, these indicators include, but are not limited to, customer satisfaction, plant availability, electric and natural gas system reliability, and execution of major construction projects. For Southern Power, these indicators include, but are not limited to, the equivalent forced outage rate and contract availability to evaluate operating results and help ensure its ability to meet its contractual commitments to customers. In addition, Southern Company and the Subsidiary Registrants focus on earnings per share and net income, respectively, as a key performance indicator.

Recent Developments

Georgia Power

Plant Vogtle Units 3 and 4 Construction and Start-Up Status

Construction continues on Plant Vogtle Units 3 and 4 (with electric generating capacity of approximately 1,100 MWs each), in which Georgia Power currently holds a 45.7% ownership interest. Georgia Power's share of the total project capital cost forecast to complete Plant Vogtle Units 3 and 4, including contingency, through the end of the first quarter 2023 and the fourth quarter 2023, respectively, is $10.4 billion.

Fuel load for Unit 3 is projected during the third quarter or the fourth quarter 2022 with an in-service date projected during the fourth quarter 2022 or the first quarter 2023. Unit 3's projected schedule primarily depends on improvements in overall construction productivity and production levels, the volume and completion of construction remediation work, completion of work packages, including inspection records, and other documentation necessary to submit the remaining ITAACs and begin fuel load, the pace of system and area turnovers, and the progression of startup and other testing. An in-service date during the third quarter or the fourth quarter 2023 for Unit 4 is projected. Unit 4's projected schedule primarily depends on overall construction productivity and production levels improving as well as appropriate levels of craft laborers, particularly electricians and pipefitters, being added and maintained. Any further delays could result in later in-service dates.

Georgia Power and the other Vogtle Owners do not agree on the starting dollar amount for the determination of cost increases subject to the cost-sharing and tender provisions of the Global Amendments (as defined in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Joint Owner Contracts" herein). The other Vogtle Owners have notified Georgia Power that they believe the current project capital cost forecast exceeds the cost-sharing thresholds and triggers the tender provisions under the Global Amendments. In October 2021, Georgia Power and the other Vogtle Owners entered into an agreement to clarify the process for the tender provisions of the Global Amendments to provide for a decision between 120 and 180 days after the tender option is triggered, which the other Vogtle Owners assert occurred on February 14, 2022.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

During the first quarter 2022, established construction contingency totaling $43 million was assigned to the base capital cost forecast for costs primarily associated with construction productivity, the pace of system turnovers, and support resources for Units 3 and 4.

The ultimate impact of these matters on the construction schedule and project capital cost forecast for Plant Vogtle Units 3 and 4 cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information.

Rate Plan

Georgia Power is required to file its next general base rate case by June 24, 2022. See Note 2 to the financial statements under "Georgia Power – Rate Plans" in Item 8 of the Form 10-K for additional information.

Mississippi Power

On March 15, 2022, Mississippi Power submitted its annual retail PEP filing for 2022 to the Mississippi PSC, which requested a 1.9%, or approximately $18 million, annual increase in revenues. In accordance with the PEP rate schedule, the rate increase became effective with the first billing cycle of April 2022, subject to refund. The related proceedings are expected to conclude in summer 2022; however, the ultimate outcome of this matter cannot be determined at this time.

Southern Power

During the three months ended March 31, 2022, Southern Power completed construction of and placed in service the remaining 40 MWs of the Tranquillity battery energy storage facility and the remaining 15 MWs of the Garland battery energy storage facility. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

At March 31, 2022, Southern Power's average investment coverage ratio for its generating assets, including those owned with various partners, based on the ratio of investment under contract to total investment using the respective facilities' net book value (or expected in-service value for facilities under construction) as the investment amount was 95% through 2026 and 92% through 2031, with an average remaining contract duration of approximately 13 years.

Southern Company Gas

On April 7, 2022, Virginia Natural Gas notified the Virginia State Corporation Commission of its intent to file a base rate case in the third quarter 2022. The ultimate outcome of this matter cannot be determined at this time.

RESULTS OF OPERATIONS

Southern Company

Net Income


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(103)	(9.1)

Consolidated net income attributable to Southern Company was $1.0 billion ($0.97 per share) for first quarter 2022 compared to $1.1 billion ($1.07 per share) for the corresponding period in 2021. The decrease was primarily due to the first quarter 2021 net income of $126 million at Sequent, which was sold on July 1, 2021, and higher non-fuel operations and maintenance costs, partially offset by an increase in natural gas revenues from base rate increases and continued infrastructure replacement, an increase in retail electric revenues primarily from base tariff increases in accordance with Georgia Power's 2019 ARP, and a $36 million after-tax charge in the first quarter 2021 related to the construction of Plant Vogtle Units 3 and 4.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Retail Electric Revenues


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$271	8.1

In the first quarter 2022, retail electric revenues were $3.6 billion compared to $3.3 billion for the corresponding period in 2021.

Details of the changes in retail electric revenues were as follows:


	First Quarter 2022
		(in millions)		(% change)
Retail electric – prior year		$	3,342
Estimated change resulting from –
Rates and pricing		56		1.7	%
Sales growth		20		0.6
Weather		16		0.5
Fuel and other cost recovery		179		5.3
Retail electric – current year		$	3,613	8.1	%

Revenues associated with changes in rates and pricing increased in the first quarter 2022 when compared to the corresponding period in 2021. The increase was primarily due to base tariff increases in accordance with Georgia Power's 2019 ARP. See Note 2 to the financial statements under "Georgia Power – Rate Plans" in Item 8 of the Form 10-K for additional information.

Revenues attributable to changes in sales increased in the first quarter 2022 when compared to the corresponding period in 2021. Weather-adjusted residential KWH sales decreased 1.1% and weather-adjusted commercial KWH sales increased 1.9% in the first quarter 2022 when compared to the corresponding period in 2021 primarily due to impacts on customer usage from increased activity outside the home following the expiration of COVID-19 restrictions. Increased customer growth partially offset the decrease in residential KWH sales and contributed to the increase in commercial KWH sales. Industrial KWH sales increased 1.7% in the first quarter 2022 when compared to the corresponding period in 2021 primarily due to strength in the pipeline segment.

Fuel and other cost recovery revenues increased $179 million in the first quarter 2022 compared to the corresponding period in 2021 primarily due to higher fuel and purchased power costs. Electric rates for the traditional electric operating companies include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the energy component of PPA costs, and do not affect net income. The traditional electric operating companies each have one or more regulatory mechanisms to recover other costs such as environmental and other compliance costs, storm damage, new plants, and PPA capacity costs.

Wholesale Electric Revenues


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$119	21.8

In the first quarter 2022, wholesale electric revenues were $664 million compared to $545 million for the corresponding period in 2021. The increase was primarily due to a $117 million increase in energy revenues in the first quarter 2022 as a result of higher natural gas prices when compared to the corresponding period in 2021 and an increase in the volume of KWHs sold at Southern Power primarily associated with natural gas PPAs.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Wholesale electric revenues consist of revenues from PPAs and short-term opportunity sales. Wholesale electric revenues from PPAs (other than solar and wind PPAs) have both capacity and energy components. Capacity revenues generally represent the greatest contribution to net income and are designed to provide recovery of fixed costs plus a return on investment. Energy revenues will vary depending on fuel prices, the market prices of wholesale energy compared to the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. Energy sales from solar and wind PPAs do not have a capacity charge and customers either purchase the energy output of a dedicated renewable facility through an energy charge or through a fixed price related to the energy. As a result, the ability to recover fixed and variable operations and maintenance expenses is dependent upon the level of energy generated from these facilities, which can be impacted by weather conditions, equipment performance, transmission constraints, and other factors. Wholesale electric revenues at Mississippi Power include FERC-regulated municipal and rural association sales under cost-based tariffs as well as market-based sales. Short-term opportunity sales are made at market-based rates that generally provide a margin above the Southern Company system's variable cost to produce the energy.

Natural Gas Revenues


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$364	21.5

In the first quarter 2022, natural gas revenues were $2.1 billion compared to $1.7 billion for the corresponding period in 2021.

Details of the changes in natural gas revenues were as follows:


	First Quarter 2022
		(in millions)		(% change)
Natural gas revenues – prior year		$	1,694
Estimated change resulting from –
Infrastructure replacement programs and base rate changes		86		5.1	%
Gas costs and other cost recovery		544		32.1
Gas marketing services		18		1.1
Wholesale gas services		(297)		(17.5)
Other		13		0.7
Natural gas revenues – current year		$	2,058	21.5	%

Revenues from infrastructure replacement programs and base rate changes at the natural gas distribution utilities increased in the first quarter 2022 compared to the corresponding period in 2021 primarily due to rate increases at Atlanta Gas Light and Chattanooga Gas and continued investment in infrastructure replacement. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K for additional information.

Revenues associated with gas costs and other cost recovery increased in the first quarter 2022 compared to the corresponding period in 2021 primarily due to higher volumes of natural gas sold and higher natural gas cost recovery. Natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities.

Revenues from gas marketing services increased in the first quarter 2022 compared to the corresponding period in 2021 primarily due to higher commodity prices and higher sales to commercial customers.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The change in revenues related to Southern Company Gas' wholesale gas services was due to the sale of Sequent on July 1, 2021. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Other Revenues


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(23)	(14.5)

In the first quarter 2022, other revenues were $136 million compared to $159 million for the corresponding period in 2021. The decrease was primarily due to a $14 million decrease at PowerSecure primarily related to distributed infrastructure and energy efficiency projects and a $6 million decrease in unregulated sales associated with power delivery construction and maintenance projects at Georgia Power.

Fuel and Purchased Power Expenses


	First Quarter 2022 vs. First Quarter 2021
		(change in millions)		(% change)
Fuel		$	263	31.0
Purchased power		25		12.1
Total fuel and purchased power expenses		$	288

In the first quarter 2022, total fuel and purchased power expenses were $1.3 billion compared to $1.1 billion for the corresponding period in 2021. The increase was primarily the result of a $247 million increase in the average cost of fuel and purchased power and a $41 million increase in the volume of KWHs generated and purchased.

Fuel and purchased power energy transactions at the traditional electric operating companies are generally offset by fuel revenues and do not have a significant impact on net income. See Note 2 to the financial statements in Item 8 of the Form 10-K for additional information. Fuel expenses incurred under Southern Power's PPAs are generally the responsibility of the counterparties and do not significantly impact net income.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Details of the Southern Company system's generation and purchased power were as follows:


	First Quarter 2022	First Quarter 2021
Total generation (in billions of KWHs)(a)	46	43
Total purchased power (in billions of KWHs)	4	4
Sources of generation (percent)(a) —
Gas	46	46
Coal	23	24
Nuclear	17	17
Hydro	6	5
Wind, Solar, and Other	8	8
Cost of fuel, generated (in cents per net KWH)—
Gas(a)	3.53	2.55
Coal	3.11	2.82
Nuclear	0.72	0.75
Average cost of fuel, generated (in cents per net KWH)(a)	2.86	2.26
Average cost of purchased power (in cents per net KWH)(b)	5.58	5.10

(a)Excludes Central Alabama Generating Station KWHs and associated cost of fuel as its fuel is provided by the purchaser under a power sales agreement. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

(b)Average cost of purchased power includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider.

Fuel

In the first quarter 2022, fuel expense was $1.1 billion compared to $0.8 billion for the corresponding period in 2021. The increase was primarily due to a 38.4% increase in the average cost of natural gas per KWH generated, a 10.3% increase in the average cost of coal per KWH generated, and a 4.6% increase in the volume of KWHs generated by natural gas, partially offset by a 41.2% increase in the volume of KWHs generated by hydro.

Purchased Power

In the first quarter 2022, purchased power expense was $232 million compared to $207 million for the corresponding period in 2021. The increase was primarily due to a 9.4% increase in the average cost per KWH purchased primarily due to higher natural gas prices and a 4.6% increase in the volume of KWHs purchased.

Energy purchases will vary depending on demand for energy within the Southern Company system's electric service territory, the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, and the availability of the Southern Company system's generation.

Cost of Natural Gas


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$512	87.8

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

the natural gas distribution utilities. Cost of natural gas at the natural gas distribution utilities represented 90% of total cost of natural gas for the first quarter 2022.

In the first quarter 2022, cost of natural gas was $1.1 billion compared to $0.6 billion for the corresponding period in 2021. The increase reflects higher gas cost recovery as a result of an 83.9% increase in natural gas prices in the first quarter 2022 compared to the corresponding period in 2021.

Cost of Other Sales


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(13)	(15.9)

In the first quarter 2022, cost of other sales was $69 million compared to $82 million for the corresponding period in 2021. The decrease was primarily due to decreases of $9 million at Georgia Power primarily associated with unregulated power delivery construction and maintenance projects and $4 million related to distributed infrastructure and energy efficiency projects at PowerSecure.

Other Operations and Maintenance Expenses


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$144	10.5

In the first quarter 2022, other operations and maintenance expenses were $1.5 billion compared to $1.4 billion for the corresponding period in 2021. Excluding $48 million of expenses related to Sequent in 2021, other operations and maintenance expenses increased $192 million. The increase was primarily due to increases of $66 million in transmission and distribution expenses primarily related to line maintenance, $58 million in generation expenses primarily related to scheduled outage and maintenance, and $16 million in expenses at Southern Company Gas passed through directly to customers, primarily related to bad debt.

Depreciation and Amortization


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$21	2.4

In the first quarter 2022, depreciation and amortization was $892 million compared to $871 million for the corresponding period in 2021. The increase was primarily due to additional plant in service.

Taxes Other Than Income Taxes


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$27	7.8

In the first quarter 2022, taxes other than income taxes were $372 million compared to $345 million for the corresponding period in 2021. The increase primarily reflects an increase in revenue tax expenses as a result of higher natural gas revenues at Nicor Gas and an increase in municipal franchise fees related to higher retail revenues at Georgia Power.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Estimated Loss on Plant Vogtle Units 3 and 4


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(48)	N/M

N/M - Not meaningful

In the first quarter 2021, a $48 million estimated probable loss on Plant Vogtle Units 3 and 4 was recorded at Georgia Power. The loss reflects revisions to the total project capital cost forecast to complete construction and start-up of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information.

Gain on Dispositions, Net


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(21)	(47.7)

In the first quarter 2022, gain on dispositions, net was $23 million compared to $44 million for the corresponding period in 2021. The first quarter 2022 amount includes $17 million in gains from sales of integrated transmission system assets at Georgia Power. The first quarter 2021 amount includes $39 million in gains at Southern Power primarily from contributions of wind turbine equipment to various equity method investments. See Note 15 to the financial statements under "Southern Power – Development Projects" in Item 8 of the Form 10-K for additional information.

Interest Expense, Net of Amounts Capitalized


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$12	2.7

In the first quarter 2022, interest expense, net of amounts capitalized was $462 million compared to $450 million for the corresponding period in 2021. The increase was primarily due to higher average outstanding borrowings, partially offset by lower interest rates on newly issued debt relative to the debt that was retired since the first quarter 2021.

Other Income (Expense), Net


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$87	150.0

In the first quarter 2022, other income (expense), net was $145 million compared to $58 million for the corresponding period in 2021. The increase was primarily due to $75 million in charitable contributions at Southern Company Gas in the first quarter 2021 and a $13 million increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Income Taxes


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(17)	(8.9)

In the first quarter 2022, income taxes were $173 million compared to $190 million for the corresponding period in 2021. The decrease was primarily due to a decrease of $40 million at Southern Company Gas' wholesale gas services business as a result of the sale of Sequent on July 1, 2021, partially offset by $16 million of tax benefits in the first quarter 2021 resulting from new legislation that changed Southern Power's state apportionment methodology. See Note (G) to the Condensed Financial Statements herein for additional information.

Net Loss Attributable to Noncontrolling Interests


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$13	40.6

Substantially all noncontrolling interests relate to renewable projects at Southern Power. In the first quarter 2022, net loss attributable to noncontrolling interests was $45 million compared to $32 million for the corresponding period in 2021. The increased loss was primarily due to loss allocations to Southern Power's partners in the Garland and Tranquillity battery energy storage facilities and higher HLBV loss allocations to Southern Power's wind tax equity partners, including new partnerships entered into during 2021. The increased loss allocations were partially offset by higher income allocations to Southern Power's solar equity partners.

Alabama Power

Net Income


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(12)	(3.3)

Alabama Power's net income after dividends on preferred stock in the first quarter 2022 was $347 million compared to $359 million for the corresponding period in 2021. The decrease was primarily due to an increase in non-fuel operations and maintenance expenses, partially offset by an increase in retail revenues resulting from sales growth in the first quarter 2022 compared to the corresponding period in 2021.

Retail Revenues


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$27	2.0

In the first quarter 2022, retail revenues were $1.38 billion compared to $1.35 billion for the corresponding period in 2021.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Details of the changes in retail revenues were as follows:


	First Quarter 2022
		(in millions)		(% change)
Retail – prior year		$	1,352
Estimated change resulting from –
Rates and pricing		—		—	%
Sales growth		14		1.0
Weather		1		0.1
Fuel and other cost recovery		12		0.9
Retail – current year		$	1,379	2.0	%

Revenues attributable to changes in sales increased in the first quarter 2022 when compared to the corresponding period in 2021. Weather-adjusted residential and commercial KWH sales increased 0.6% and 1.0%, respectively, in the first quarter 2022 when compared to the corresponding period in 2021 primarily due to customer growth. Industrial KWH sales increased 0.1% in the first quarter 2022 when compared to the corresponding period in 2021 primarily due to a recovering industrial class that continues to experience disruptions in supply chain and business operations.

Fuel and other cost recovery revenues increased in the first quarter 2022 when compared to the corresponding period in 2021 primarily due to increases in the volume of KWHs generated and the average cost of fuel.

Electric rates include provisions to recognize the recovery of fuel costs, purchased power costs, PPAs certificated by the Alabama PSC, and costs associated with the NDR. Under these provisions, fuel and other cost recovery revenues generally equal fuel and other cost recovery expenses and do not affect net income. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Wholesale Revenues – Non-Affiliates


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$22	23.9

In the first quarter 2022, wholesale revenues from sales to non-affiliates were $114 million compared to $92 million for the corresponding period in 2021. The increase was primarily due to a 16.2% increase in KWH sales as a result of cooler weather in the first quarter 2022 compared to the corresponding period in 2021, as well as a 6.0% increase in the price of energy due to higher natural gas prices.

Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Alabama Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not affect net income. Short-term opportunity energy sales are also included in wholesale energy sales to non-affiliates. These opportunity sales are made at market-based rates that generally provide a margin above Alabama Power's variable cost to produce the energy.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Wholesale Revenues – Affiliates


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$33	103.1

In the first quarter 2022, wholesale revenues from sales to affiliates were $65 million compared to $32 million for the corresponding period in 2021. The increase was primarily due to a 47.1% increase in the price of energy due to higher natural gas prices and a 40.3% increase in KWH sales as a result of increased generation demand as a result of cooler weather in the first quarter 2022 compared to the corresponding period in 2021.

Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost and energy purchases are generally offset by energy revenues through Alabama Power's energy cost recovery clause.

Fuel and Purchased Power Expenses


	First Quarter 2022 vs. First Quarter 2021
		(change in millions)		(% change)
Fuel		$	42	14.4
Purchased power – non-affiliates		17		34.0
Purchased power – affiliates		(4)		(13.3)
Total fuel and purchased power expenses		$	55

In the first quarter 2022, total fuel and purchased power expenses were $426 million compared to $371 million for the corresponding period in 2021. The increase was primarily due to a $39 million increase in the average cost of fuel and purchased power and a $16 million increase related to the volume of KWHs generated and purchased.

Fuel and purchased power energy transactions do not have a significant impact on earnings, since energy expenses are generally offset by energy revenues through Alabama Power's energy cost recovery clause. See Note 2 to the financial statements under "Alabama Power – Rate ECR" in Item 8 of the Form 10-K for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Details of Alabama Power's generation and purchased power were as follows:


	First Quarter 2022	First Quarter 2021
Total generation (in billions of KWHs)(a)	15	15
Total purchased power (in billions of KWHs)	2	1
Sources of generation (percent)(a) —
Coal	42	46
Nuclear	25	25
Gas	19	19
Hydro	14	10
Cost of fuel, generated (in cents per net KWH) —
Coal	2.90	2.75
Nuclear	0.67	0.72
Gas(a)	3.45	2.51
Average cost of fuel, generated (in cents per net KWH)(a)	2.36	2.14
Average cost of purchased power (in cents per net KWH)(b)	6.82	6.52

(b)Average cost of purchased power includes fuel, energy, and transmission purchased by Alabama Power for tolling agreements where power is generated by the provider.

Fuel

In the first quarter 2022, fuel expense was $333 million compared to $291 million for the corresponding period in 2021. The increase was primarily due to a 37.5% increase in the average cost of natural gas per KWH generated, which excludes tolling agreements, and a 6.3% increase in the volume of KWHs generated by natural gas, partially offset by a 49.0% increase in the volume of KWHs generated by hydro.

Purchased Power – Non-Affiliates

In the first quarter 2022, purchased power expense from non-affiliates was $67 million compared to $50 million for the corresponding period in 2021. The increase was primarily due to a 29.9% increase in the volume of KWHs purchased as a result of cooler weather in 2022 compared to the corresponding period in 2021, as well as a 9.8% increase in the average cost per KWH purchased due to higher natural gas prices.

Energy purchases from non-affiliates will vary depending on the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation.

Purchased Power – Affiliates

For first quarter 2022, purchased power expense from affiliates was $26 million compared to $30 million for the corresponding period in 2021. The decrease was primarily due to a 17.7% decrease in the volume of KWHs purchased as a result of increased generation compared to the corresponding period in 2021, partially offset by a 5.6% increase in the average cost per KWH purchased due to higher natural gas prices.

Energy purchases from affiliates will vary depending on demand for energy and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC or other contractual agreements, as approved by the FERC.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Operations and Maintenance Expenses


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$48	13.3

In the first quarter 2022, other operations and maintenance expenses were $409 million compared to $361 million for the corresponding period in 2021. The increase was primarily due to increases of $26 million in generation expenses associated with scheduled outages and maintenance and Rate CNP Compliance-related expenses and $12 million in transmission and distribution expenses primarily associated with line maintenance. See Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance" in Item 8 of the Form 10-K for additional information.

Georgia Power

Net Income


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$34	9.7

Georgia Power's net income in the first quarter 2022 was $385 million compared to $351 million for the corresponding period in 2021. The increase was primarily due to higher retail revenues primarily from base tariff increases in accordance with the 2019 ARP and a $36 million after-tax charge in the first quarter 2021 related to the construction of Plant Vogtle Units 3 and 4, partially offset by higher non-fuel operations and maintenance costs. See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information regarding Plant Vogtle Units 3 and 4.

Retail Revenues


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$230	12.9

In the first quarter 2022, retail revenues were $2.02 billion compared to $1.79 billion for the corresponding period in 2021.

Details of the changes in retail revenues were as follows:


	First Quarter 2022
		(in millions)		(% change)
Retail – prior year		$	1,787
Estimated change resulting from –
Rates and pricing		53		3.0	%
Sales growth		2		0.1
Weather		18		1.0
Fuel cost recovery		157		8.8
Retail – current year		$	2,017	12.9	%

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Revenues associated with changes in rates and pricing increased in the first quarter 2022 when compared to the corresponding period in 2021. The increase was primarily due to base tariff increases in accordance with the 2019 ARP. See Note 2 to the financial statements under "Georgia Power – Rate Plans" in Item 8 of the Form 10-K for additional information.

Revenues attributable to changes in sales increased in the first quarter 2022 when compared to the corresponding period in 2021. Weather-adjusted residential KWH sales decreased 2.3% and weather-adjusted commercial KWH sales increased 2.2% in the first quarter 2022 when compared to the corresponding period in 2021 primarily due to the impacts on customer usage from increased activity outside the home following the expiration of COVID-19 restrictions. Increased customer growth partially offset the decrease in residential KWH sales and contributed to the increase in commercial KWH sales. Weather-adjusted industrial KWH sales increased 3.6% in the first quarter 2022 when compared to the corresponding period in 2021 primarily due to strength in the pipeline segment.

Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues increased in the first quarter 2022 when compared to the corresponding period in 2021 due to higher fuel and purchased power costs. Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses and do not affect net income. See Note 2 to the financial statements under "Georgia Power – Fuel Cost Recovery" in Item 8 of the Form 10-K for additional information.

Wholesale Revenues


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$23	53.5

In the first quarter 2022, wholesale revenues were $66 million compared to $43 million for the corresponding period in 2021. The increase was primarily due to increases of $18 million related to the average cost of fuel primarily due to higher natural gas and coal prices and $7 million in KWH sales associated with higher market demand as a result of cooler weather in the first quarter 2022 compared to the corresponding period in 2021, partially offset by a decrease of $4 million in capacity revenues from shared Southern Company power pool sales in accordance with the IIC.

Wholesale revenues from sales to non-affiliates consist of PPAs and short-term opportunity sales. Wholesale revenues from PPAs have both capacity and energy components. Wholesale capacity revenues from PPAs are recognized in amounts billable under the contract terms and provide for recovery of fixed costs and a return on investment. Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Georgia Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. Short-term opportunity sales are made at market-based rates that generally provide a margin above Georgia Power's variable cost of energy.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Other Revenues


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(15)	(10.7)

In the first quarter 2022, other revenues were $125 million compared to $140 million for the corresponding period in 2021. The decrease was primarily due to decreases of $8 million resulting from the termination of a transmission service contract and $6 million in unregulated sales associated with power delivery construction and maintenance projects.

Fuel and Purchased Power Expenses


	First Quarter 2022 vs. First Quarter 2021
		(change in millions)		(% change)
Fuel		$	106	33.9
Purchased power – non-affiliates		6		4.2
Purchased power – affiliates		70		51.5
Total fuel and purchased power expenses		$	182

In the first quarter 2022, total fuel and purchased power expenses were $775 million compared to $593 million for the corresponding period in 2021. The increase was due to an increase of $133 million related to the average cost of fuel and purchased power and an increase of $49 million related to the volume of KWHs generated and purchased.

Fuel and purchased power energy transactions do not have a significant impact on earnings since these fuel expenses are generally offset by fuel revenues through Georgia Power's fuel cost recovery mechanism. See Note 2 to the financial statements under "Georgia Power – Fuel Cost Recovery" in Item 8 of the Form 10-K for additional information.

Details of Georgia Power's generation and purchased power were as follows:


	First Quarter 2022	First Quarter 2021
Total generation (in billions of KWHs)	15	14
Total purchased power (in billions of KWHs)	8	7
Sources of generation (percent) —
Gas	46	47
Coal	25	22
Nuclear	24	27

Hydro and other	5	4
Cost of fuel, generated (in cents per net KWH) —
Gas	3.58	2.58
Coal	3.41	2.91
Nuclear	0.77	0.78

Average cost of fuel, generated (in cents per net KWH)	2.83	2.15
Average cost of purchased power (in cents per net KWH)(*)	4.81	4.22

(*)Average cost of purchased power includes fuel purchased by Georgia Power for tolling agreements where power is generated by the provider.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Fuel

In the first quarter 2022, fuel expense was $419 million compared to $313 million for the corresponding period in 2021. The increase was primarily due to increases of 38.8% and 17.2% in the average cost per KWH generated by natural gas and coal, respectively, and a 19.5% increase in the volume of KWHs generated by coal.

Purchased Power – Affiliates

In the first quarter 2022, purchased power expense from affiliates was $206 million compared to $136 million for the corresponding period in 2021. The increase was primarily due to an increase of 25.7% in the average cost per KWH purchased primarily due to higher natural gas and coal prices and an increase of 18.3% in the volume of KWHs purchased due to lower cost Southern Company system resources as compared to available Georgia Power-owned generation.

Energy purchases from affiliates will vary depending on the demand and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC or other contractual agreements, all as approved by the FERC.

Other Operations and Maintenance Expenses


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$43	9.1

In the first quarter 2022, other operations and maintenance expenses were $517 million compared to $474 million for the corresponding period in 2021. The increase was primarily due to increases of $45 million in transmission and distribution expenses primarily associated with line maintenance and $19 million in generation expenses primarily related to non-outage maintenance costs, partially offset by $17 million in gains from sales of integrated transmission system assets and a $9 million reduction in billing adjustments with integrated transmission system owners largely resulting from a terminated transmission service agreement.

Depreciation and Amortization


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$13	3.8

In the first quarter 2022, depreciation and amortization was $351 million compared to $338 million for the corresponding period in 2021. The increase was primarily due to additional plant in service.

Taxes Other Than Income Taxes


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$9	7.8

In the first quarter 2022, taxes other than income taxes was $125 million compared to $116 million for the corresponding period in 2021. The increase was primarily due to an increase in municipal franchise fees largely related to higher retail revenues.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Estimated Loss on Plant Vogtle Units 3 and 4


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(48)	N/M

N/M - Not meaningful

Other Income (Expense), Net


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$9	22.0

In the first quarter 2022, other income (expense), net was $50 million compared to $41 million for the corresponding period in 2021. The increase was primarily due to increases of $3 million in customer charges related to contributions in aid of construction and $3 million in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information on retirement benefits.

Income Taxes


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$12	66.7

In the first quarter 2022, income taxes were $30 million compared to $18 million for the corresponding period in 2021. The increase was primarily due to the reduction in pre-tax earnings in the first quarter 2021 resulting from a charge associated with the construction of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information.

Mississippi Power

Net Income


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(3)	(6.7)

Mississippi Power's net income in the first quarter 2022 was $42 million compared to $45 million for the corresponding period in 2021. The decrease was primarily due to an increase in operations and maintenance expenses, largely offset by an increase in revenues.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Retail Revenues


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$13	6.4

In the first quarter 2022, retail revenues were $217 million compared to $204 million for the corresponding period in 2021.

Details of the changes in retail revenues were as follows:


	First Quarter 2022
		(in millions)		(% change)
Retail – prior year		$	204
Estimated change resulting from –
Rates and pricing		3		1.5	%
Sales growth		1		0.5
Weather		(2)		(1.0)
Fuel and other cost recovery		11		5.4
Retail – current year		$	217	6.4	%

Revenues associated with changes in rates and pricing increased in the first quarter 2022 when compared to the corresponding period in 2021 primarily due to new PEP rates that became effective for the first billing cycle of April 2021. See Note 2 to the financial statements under "Mississippi Power – Performance Evaluation Plan" in Item 8 of the Form 10-K for additional information.

Revenues attributable to changes in sales increased in the first quarter 2022 when compared to the corresponding period in 2021. Weather-adjusted residential and commercial KWH sales increased 0.8% and 2.9%, respectively, in the first quarter 2022 when compared to the corresponding period in 2021 due to increased customer usage and customer growth. Industrial KWH sales decreased 0.1% in the first quarter 2022 when compared to the corresponding period in 2021.

Fuel and other cost recovery revenues increased in the first quarter 2022 when compared to the corresponding period in 2021 primarily as a result of higher recoverable fuel costs. Recoverable fuel costs include fuel and purchased power expenses reduced by the fuel portion of wholesale revenues from energy sold to customers outside Mississippi Power's service territory. Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the energy component of purchased power costs, and do not affect net income.

Wholesale Revenues – Non-Affiliates


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$5	7.9

In the first quarter 2022, wholesale revenues from sales to non-affiliates were $68 million compared to $63 million for the corresponding period in 2021. The increase was primarily due to higher fuel costs and customer usage.

Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Mississippi Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. In addition, Mississippi Power provides service under long-term contracts with rural electric cooperative associations and municipalities located in southeastern Mississippi under cost-based electric tariffs which are subject to regulation by the FERC. See Note 2 to the financial statements under "Mississippi Power" in Item 8 of the Form 10-K for additional information.

Wholesale Revenues – Affiliates


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$9	27.3

In the first quarter 2022, wholesale revenues from sales to affiliates were $42 million compared to $33 million for the corresponding period in 2021. The increase was primarily due to an increase of $14 million associated with higher natural gas prices, partially offset by a decrease of $4 million associated with lower KWH sales.

Fuel and Purchased Power Expenses


	First Quarter 2022 vs. First Quarter 2021
		(change in millions)		(% change)
Fuel		$	26	24.5
Purchased power		—		—
Total fuel and purchased power expenses		$	26

In the first quarter 2022, total fuel and purchased power expenses were $132 million compared to $106 million for the corresponding period in 2021. The increase was primarily due to a $33 million increase in the average cost of fuel, partially offset by a $7 million decrease associated with the volume of KWHs generated and purchased.

Fuel and purchased power energy transactions do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Mississippi Power's fuel cost recovery clause.

Details of Mississippi Power's generation and purchased power were as follows:


	First Quarter 2022	First Quarter 2021
Total generation (in millions of KWHs)	4,074	4,324
Total purchased power (in millions of KWHs)	120	121
Sources of generation (percent) –
Gas	92	91
Coal	8	9
Cost of fuel, generated (in cents per net KWH) –
Gas	3.30	2.41
Coal	3.74	3.17
Average cost of fuel, generated (in cents per net KWH)	3.34	2.49
Average cost of purchased power (in cents per net KWH)	4.54	4.08

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Fuel

In the first quarter 2022, fuel expense was $132 million compared to $106 million for the corresponding period in 2021. The increase was due to a 36.9% increase in the average cost of natural gas per KWH generated and an 18.0% increase in the average cost of coal per KWHs generated, partially offset by a 16.9% decrease in the volume of KWHs generated by coal and a 6.1% decrease in the volume of KWHs generated by natural gas.

Other Operations and Maintenance Expenses


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$8	11.8

In the first quarter 2022, other operations and maintenance expenses were $76 million compared to $68 million for the corresponding period in 2021. The increase was primarily due to increases of $4 million associated with the Kemper County energy facility (primarily related to additional dismantlement activities and lower salvage proceeds in 2022 as compared to 2021) and $3 million in distribution and transmission operations and maintenance activities.

Southern Power

Net Income Attributable to Southern Power


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(25)	(25.8)

Net income attributable to Southern Power in the first quarter 2022 was $72 million compared to $97 million for the corresponding period in 2021. The decrease was primarily due to gains from the contributions of wind turbine equipment to various equity method investments in the first quarter 2021.

Operating Revenues


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$99	22.5

Total operating revenues include PPA capacity revenues, which are derived primarily from long-term contracts involving natural gas facilities, and PPA energy revenues from Southern Power's generation facilities. To the extent Southern Power has capacity not contracted under a PPA, it may sell power into an accessible wholesale market, or, to the extent those generation assets are part of the FERC-approved IIC, it may sell power into the Southern Company power pool.

Natural Gas Capacity and Energy Revenue

Capacity revenues generally represent the greatest contribution to operating income and are designed to provide recovery of fixed costs plus a return on investment.

Energy is generally sold at variable cost or is indexed to published natural gas indices. Energy revenues will vary depending on the energy demand of Southern Power's customers and their generation capacity, as well as the market prices of wholesale energy compared to the cost of Southern Power's energy. Energy revenues also include fees for support services, fuel storage, and unit start charges. Increases and decreases in energy revenues under PPAs that are driven by fuel or purchased power prices are accompanied by an increase or decrease in fuel and purchased power costs and do not have a significant impact on net income.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Solar and Wind Energy Revenue

Southern Power's energy sales from solar and wind generating facilities are predominantly through long-term PPAs that do not have capacity revenue. Customers either purchase the energy output of a dedicated renewable facility through an energy charge or pay a fixed price related to the energy generated from the respective facility and sold to the grid. As a result, Southern Power's ability to recover fixed and variable operations and maintenance expenses is dependent upon the level of energy generated from these facilities, which can be impacted by weather conditions, equipment performance, transmission constraints, and other factors.

See FUTURE EARNINGS POTENTIAL – "Southern Power's Power Sales Agreements" in Item 7 of the Form 10-K for additional information regarding Southern Power's PPAs.

Operating Revenues Details

Details of Southern Power's operating revenues were as follows:


	First Quarter 2022		First Quarter 2021
	(in millions)
PPA capacity revenues	$	102	$	96
PPA energy revenues	345		245
Total PPA revenues	447		341
Non-PPA revenues	84		95
Other revenues	8		4
Total operating revenues	$	539	$	440

In the first quarter 2022, total operating revenues were $539 million, reflecting a $99 million, or 23%, increase from the corresponding period in 2021. The increase in operating revenues was primarily due to the following:

PPA capacity revenues increased $6 million, or 6%, primarily due to new natural gas PPAs and increased capacity sales under existing natural gas PPAs, partially offset by the contractual expiration of natural gas PPAs.
PPA energy revenues increased $100 million, or 41%, primarily due to a $59 million increase in sales under existing natural gas PPAs resulting from a $37 million increase in the price of fuel and purchased power and a $22 million increase in the volume of KWHs sold. Also contributing to the increase was a $47 million increase in sales associated with new natural gas PPAs, partially offset by a $13 million decrease due to the contractual expiration of natural gas PPAs.
Non-PPA revenues decreased $11 million, or 12%, primarily due to a $12 million decrease in the volume of KWHs sold through short-term sales.

Fuel and Purchased Power Expenses

Details of Southern Power's generation and purchased power were as follows:


	First Quarter 2022	First Quarter 2021
	(in billions of KWHs)
Generation	11.0	9.4
Purchased power	0.5	0.6
Total generation and purchased power	11.5	10.0

Total generation and purchased power (excluding solar, wind, fuel cells, and tolling agreements)	6.9	6.1

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Southern Power's PPAs for natural gas generation generally provide that the purchasers are responsible for either procuring the fuel (tolling agreements) or reimbursing Southern Power for substantially all of the cost of fuel relating to the energy delivered under such PPAs. Consequently, changes in such fuel costs are generally accompanied by a corresponding change in related fuel revenues and do not have a significant impact on net income. Southern Power is responsible for the cost of fuel for generating units that are not covered under PPAs. Power from these generating units is sold into the wholesale market or into the Southern Company power pool for capacity owned directly by Southern Power.

Purchased power expenses will vary depending on demand, availability, and the cost of generating resources throughout the Southern Company system and other contract resources. Load requirements are submitted to the Southern Company power pool on an hourly basis and are fulfilled with the lowest cost alternative, whether that is generation owned by Southern Power, an affiliate company, or external parties. Such purchased power costs are generally recovered through PPA revenues.

Details of Southern Power's fuel and purchased power expenses were as follows:


	First Quarter 2022 vs. First Quarter 2021
		(change in millions)		(% change)
Fuel		$	91	64.5
Purchased power		1		5.0
Total fuel and purchased power expenses		$	92

In the first quarter 2022, total fuel and purchased power expenses increased $92 million, or 57%, compared to the corresponding period in 2021 primarily due to a $68 million increase in the average cost of fuel per KWH generated and a $23 million increase associated with the volume of KWHs generated.

Gain on Dispositions, Net


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(37)	(94.9)

In the first quarter 2022, gain on dispositions, net was $2 million compared to $39 million for the corresponding period in 2021. The decrease primarily resulted from gains associated with contributions of wind turbine equipment to various equity method investments in the first quarter 2021. See Note 15 to the financial statements under "Southern Power – Development Projects" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements under "Southern Power" herein for additional information.

Net Loss Attributable to Noncontrolling Interests


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$13	40.6

In the first quarter 2022, net loss attributable to noncontrolling interests was $45 million compared to $32 million for the corresponding period in 2021. The increased loss was primarily due to loss allocations to the partners in the Garland and Tranquillity battery energy storage facilities and higher HLBV loss allocations to wind tax equity partners, including new partnerships entered into during 2021. The increased loss allocations were partially offset by higher income allocations to solar equity partners.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Southern Company Gas

Operating Metrics

Southern Company Gas continues to focus on several operating metrics, including Heating Degree Days, customer count, and volumes of natural gas sold.

Southern Company Gas measures weather and the effect on its business using Heating Degree Days. Generally, increased Heating Degree Days result in higher demand for natural gas on Southern Company Gas' distribution system. Southern Company Gas has various regulatory mechanisms, such as weather and revenue normalization and straight-fixed-variable rate design, which limit its exposure to weather changes within typical ranges in each of its utility's respective service territory. Southern Company Gas also utilizes weather hedges to limit the negative income impacts in the event of warmer-than-normal weather.

The number of customers served by gas distribution operations and gas marketing services can be impacted by natural gas prices, economic conditions, and competition from alternative fuels. Gas distribution operations and gas marketing services' customers are primarily located in Georgia and Illinois.

Southern Company Gas' natural gas volume metrics for gas distribution operations and gas marketing services illustrate the effects of weather and customer demand for natural gas.

Seasonality of Results

During the Heating Season, natural gas usage and operating revenues are generally higher as more customers are connected to the gas distribution systems and natural gas usage is higher in periods of colder weather. Prior to the sale of Sequent on July 1, 2021, wholesale gas services' operating revenues occasionally were impacted due to peak usage by power generators in response to summer energy demands. Southern Company Gas' base operating expenses, excluding cost of natural gas, bad debt expense, and certain incentive compensation costs, are incurred relatively evenly throughout the year. Seasonality also affects the comparison of certain balance sheet items across quarters, including receivables, unbilled revenues, natural gas for sale, and notes payable. However, these items are comparable when reviewing Southern Company Gas' annual results. Thus, Southern Company Gas' operating results for the interim periods presented are not necessarily indicative of annual results and can vary significantly from quarter to quarter.

Net Income


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(79)	(19.8)

In the first quarter 2022, net income was $319 million compared to $398 million for the corresponding period in 2021. The first quarter 2021 results include $126 million of net income from Sequent, which was sold on July 1, 2021. Net income increased $31 million at gas distribution operations primarily due to base rate increases and continued investment in infrastructure replacement and $10 million at gas marketing services primarily related to higher commodity prices and higher sales to commercial customers. See Notes 2 and 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Natural Gas Revenues, including Alternative Revenue Programs


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$364	21.5

In the first quarter 2022, natural gas revenues, including alternative revenue programs, were $2.1 billion compared to $1.7 billion for the corresponding period in 2021.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Details of the changes in natural gas revenues, including alternative revenue programs, were as follows:


	First Quarter 2022
		(in millions)		(% change)
Natural gas revenues – prior year		$	1,694
Estimated change resulting from –
Infrastructure replacement programs and base rate changes		86		5.1	%
Gas costs and other cost recovery		544		32.1
Gas marketing services		18		1.1
Wholesale gas services		(297)		(17.5)

Other		13		0.7
Natural gas revenues – current year		$	2,058	21.5	%

Revenues from infrastructure replacement programs and base rate changes increased in the first quarter 2022 compared to the corresponding period in 2021 primarily due to rate increases at Atlanta Gas Light and Chattanooga Gas and continued investment in infrastructure replacement. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K for additional information.

Revenues associated with gas costs and other cost recovery increased in the first quarter 2022 compared to the corresponding period in 2021 primarily due to higher volumes of natural gas sold and higher natural gas cost recovery. See "Cost of Natural Gas" herein for additional information. Revenue impacts from weather and customer growth are described further below.

The change in revenues related to wholesale gas services was due to the sale of Sequent on July 1, 2021. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Southern Company Gas' natural gas distribution utilities have various regulatory mechanisms that limit their exposure to weather changes. Southern Company Gas also uses hedges for any remaining exposure to warmer-than-normal weather in Illinois for gas distribution operations and in Illinois and Georgia for gas marketing services; therefore, weather typically does not have a significant net income impact. The following table presents Heating Degree Days information for Illinois and Georgia, the primary locations where Southern Company Gas' operations are impacted by weather.


	First Quarter			2022 vs. normal	2022 vs. 2021
		Normal*()**	2022	2021		colder (warmer)		colder (warmer)
	(in thousands)
Illinois		2,999	3,007	2,947		0.3	%	2.0	%
Georgia		1,302	1,251	1,254		(3.9)	%	(0.2)	%

(*)Normal represents the 10-year average from January 1, 2012 through March 31, 2021 for Illinois at Chicago Midway International Airport and for Georgia at Atlanta Hartsfield-Jackson International Airport, based on information obtained from the National Oceanic and Atmospheric Administration, National Climatic Data Center.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The following table provides the number of customers served by Southern Company Gas at March 31, 2022 and 2021:


	March 31,
	2022		2021		2022 vs. 2021
	(in thousands, except market share %)				(% change)
Gas distribution operations	4,358		4,335		0.5	%
Gas marketing services
Energy customers(*)	598		667		(10.3)	%
Market share of energy customers in Georgia	28.7	%	28.9	%

(*)Gas marketing services' customers are primarily located in Georgia and Illinois. March 31, 2021 also includes approximately 50,000 customers in Ohio contracted through an annual auction process to serve for 12 months beginning April 1, 2020.

Southern Company Gas anticipates customer growth and uses a variety of targeted marketing programs to attract new customers and to retain existing customers.

Cost of Natural Gas


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$512	87.8

Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from gas distribution operations. Cost of natural gas at gas distribution operations represented 90% of the total cost of natural gas in the first quarter 2022. See MANAGEMENT'S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – "Southern Company Gas – Cost of Natural Gas" in Item 7 of the Form 10-K and "Natural Gas Revenues, including Alternative Revenue Programs" herein for additional information.

In the first quarter 2022, cost of natural gas was $1.1 billion compared to $583 million for the corresponding period in 2021. The increase reflects higher gas cost recovery as a result of an 83.9% increase in natural gas prices in the first quarter 2022 compared to the corresponding period in 2021.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The following table details the volumes of natural gas sold during all periods presented.


	First Quarter		2022 vs. 2021
	2022	2021
Gas distribution operations (mmBtu in millions)
Firm		304	288	5.6	%
Interruptible		25	26	(3.8)
Total		329	314	4.8	%
Wholesale gas services (mmBtu in millions/day)
Daily physical sales(*)		—	7.1	(100.0)	%
Gas marketing services (mmBtu in millions)
Firm:
Georgia		16	19	(15.8)	%
Illinois		3	4	(25.0)

Other		4	6	(33.3)
Interruptible large commercial and industrial		4	4	—
Total		27	33	(18.2)	%

(*)As a result of the sale of Sequent, wholesale gas services had no sales in the first quarter 2022. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Other Operations and Maintenance Expenses


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$6	2.0

In the first quarter 2022, other operations and maintenance expenses were $305 million compared to $299 million for the corresponding period in 2021. Excluding $48 million of expenses related to Sequent in 2021, other operations and maintenance expenses increased approximately $54 million. The increase was primarily due to increases of $18 million in compensation and benefit expenses, $16 million in expenses passed through directly to customers primarily related to bad debt at distribution operations, and $6 million in customer account expenses.

Depreciation and Amortization


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$7	5.4

In the first quarter 2022, depreciation and amortization was $137 million compared to $130 million for the corresponding period in 2021. The increase was primarily due to continued infrastructure investments at the natural gas distribution utilities.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Taxes Other Than Income Taxes


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$19	23.5

In the first quarter 2022, taxes other than income taxes were $100 million compared to $81 million for the corresponding period in 2021. The increase primarily reflects an increase in revenue tax expenses as a result of higher natural gas revenues at Nicor Gas. These revenue tax expenses are passed directly to customers and have no impact on net income.

Other Income (Expense), Net


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$79	125.4

In the first quarter 2022, other income (expense), net was $16 million of income compared to $63 million of expense for the corresponding period in 2021. The change was largely due to charitable contributions of $75 million in the first quarter 2021.

Income Taxes


First Quarter 2022 vs. First Quarter 2021
	(change in millions)	(% change)
	$(24)	(19.8)

In the first quarter 2022, income taxes were $97 million compared to $121 million for the corresponding period in 2021. The decrease was primarily due to a decrease of $40 million at wholesale gas services including Sequent, which was sold on July 1, 2021, partially offset by higher pre-tax earnings from the other segments.

Segment Information

Operating revenues, operating expenses, and net income (loss) for each segment are provided in the table below. See Note (L) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.


	First Quarter 2022						First Quarter 2021
	Operating Revenues		Operating Expenses		Net Income (Loss)		Operating Revenues		Operating Expenses		Net Income (Loss)
	(in millions)						(in millions)
Gas distribution operations	$	1,803	$	1,475	$	214	$	1,200	$	913	$	183
Gas pipeline investments	8		3		29		8		3		29
Wholesale gas services(*)	—		—		—		298		56		126
Gas marketing services	243		150		66		195		120		56
All other	16		21		10		7		15		4
Intercompany eliminations	(12)		(12)		—		(14)		(14)		—
Consolidated	$	2,058	$	1,637	$	319	$	1,694	$	1,093	$	398

(*)As a result of the sale of Sequent, wholesale gas services is no longer a reportable segment for the first quarter 2022. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Gas Distribution Operations

Gas distribution operations is the largest component of Southern Company Gas' business and is subject to regulation and oversight by regulatory agencies in each of the states it serves. These agencies approve natural gas rates designed to provide Southern Company Gas with the opportunity to generate revenues to recover the cost of natural gas delivered to its customers and its fixed and variable costs, including depreciation, interest expense, operations and maintenance, taxes, and overhead costs, and to earn a reasonable return on its investments.

With the exception of Atlanta Gas Light, Southern Company Gas' second largest utility that operates in a deregulated natural gas market and has a straight-fixed-variable rate design that minimizes the variability of its revenues based on consumption, the earnings of the natural gas distribution utilities can be affected by customer consumption patterns that are a function of weather conditions, price levels for natural gas, and general economic conditions that may impact customers' ability to pay for natural gas consumed. Southern Company Gas has various regulatory and other mechanisms, such as weather and revenue normalization mechanisms and weather derivative instruments, that limit its exposure to changes in customer consumption, including weather changes within typical ranges in its natural gas distribution utilities' service territories. See Note 2 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

In the first quarter 2022, net income increased $31 million, or 16.9%, when compared to the corresponding period in 2021, as described further below:

Operating revenues increased $603 million primarily due to higher gas cost recovery, rate increases, and continued investment in infrastructure replacement. Gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas.
Operating expenses increased $562 million primarily due to a $479 million increase in the cost of gas as a result of higher natural gas prices and higher volumes sold compared to 2021, as well as higher compensation expenses and depreciation resulting from additional assets placed in service. The increase in operating expenses also includes higher costs passed through directly to customers, primarily related to bad debt expenses and revenue taxes.
Income taxes increased $12 million primarily due to higher pre-tax earnings.

Gas Pipeline Investments

Gas pipeline investments consists primarily of joint ventures in natural gas pipeline investments including SNG, Dalton Pipeline, and PennEast Pipeline. See Note (E) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.

Gas Marketing Services

Gas marketing services provides energy-related products and services to natural gas markets and participants in customer choice programs that were approved in various states to increase competition. These programs allow customers to choose their natural gas supplier while the local distribution utility continues to provide distribution and transportation services. Gas marketing services is weather sensitive and uses a variety of hedging strategies, such as weather derivative instruments and other risk management tools, to partially mitigate potential weather impacts.

In the first quarter 2022, net income increased $10 million, or 17.9%, when compared to the corresponding period in 2021. The increase was primarily due to a $48 million increase in operating revenues as a result of higher commodity prices and higher sales to commercial customers, partially offset by a $30 million increase in operating expenses primarily due to higher cost of natural gas and an increase of $8 million in income taxes as a result of higher pre-tax earnings.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

All Other

All other includes natural gas storage businesses, a renewable natural gas business, AGL Services Company, and Southern Company Gas Capital, as well as various corporate operating expenses that are not allocated to the reportable segments and interest income (expense) associated with affiliate financing arrangements.

In the first quarter 2022, net income increased $6 million, or 150%, when compared to the corresponding period in 2021. Operating revenues increased $9 million primarily related to higher demand fees and favorable hedge gains at the natural gas storage businesses and higher sales from the renewable natural gas business, partially offset by a $6 million increase in operating expenses primarily due to higher cost of natural gas.

FUTURE EARNINGS POTENTIAL

Each Registrant's results of operations are not necessarily indicative of its future earnings potential. The level of the Registrants' future earnings depends on numerous factors that affect the opportunities, challenges, and risks of the Registrants' primary businesses of selling electricity and/or distributing natural gas, as described further herein.

For the traditional electric operating companies, these factors include the ability to maintain constructive regulatory environments that allow for the timely recovery of prudently-incurred costs during a time of increasing costs, including those related to projected long-term demand growth, stringent environmental standards, including CCR rules, safety, system reliability and resiliency, fuel, restoration following major storms, and capital expenditures, including constructing new electric generating plants and expanding and improving the transmission and distribution systems; continued customer growth; and the trend of reduced electricity usage per customer, especially in residential and commercial markets. For Georgia Power, completing construction of Plant Vogtle Units 3 and 4 and the related cost recovery proceedings is another major factor.

Earnings in the electricity business will also depend upon maintaining and growing sales, considering, among other things, the adoption and/or penetration rates of increasingly energy-efficient technologies and increasing volumes of electronic commerce transactions, which could contribute to a net reduction in customer usage.

Global and U.S. economic conditions have been significantly affected by a series of demand and supply shocks that caused a global and national economic recession in 2020. Most prominently, the COVID-19 pandemic has negatively impacted global supply chains and business operations as suppliers continue to experience difficulties keeping up with strong demand for factory goods, which is being driven by low business inventories. In addition, rising inflation in 2021 and 2022 has resulted in increasing costs for many goods and services. As a result of persistently high inflation, interest rates have been on the rise and are expected to continue rising in the near term. The combination of rising inoculation rates in the U.S. population and the federal COVID-19 relief package contributed to increased economic recovery in 2021 and has sustained the current economic expansion through the first quarter 2022; however, fiscal support of business and personal incomes is declining. Russia's invasion of Ukraine has intensified supply chain disruptions and heightened uncertainty surrounding the near-term outlook for the broader economy and the economy within the Southern Company system's service territory. The drivers, speed, and depth of the 2020 economic contraction were unprecedented and have reduced energy demand across the Southern Company system's service territory, primarily in the commercial and industrial classes. Retail electric revenues attributable to changes in sales increased in the first quarter 2022 when compared to the corresponding period in 2021 primarily due to the normalization of economic activity; however, retail electric sales continued to be negatively impacted by the COVID-19 pandemic when compared to pre-pandemic trends. The impacts of new COVID-19 variants, responses to the COVID-19 pandemic by both customers and governments, inflation, rising interest rates, and the unresolved geopolitical tensions relating to Russia's invasion of Ukraine could significantly affect the sustainability of current economic growth. See RESULTS OF OPERATIONS herein for information on COVID-19-related impacts on energy demand in the Southern Company system's service territory during the first quarter 2022.

The level of future earnings for Southern Power's competitive wholesale electric business depends on numerous factors including the parameters of the wholesale market and the efficient operation of its wholesale generating assets; Southern Power's ability to execute its growth strategy through the development or acquisition of renewable

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

facilities and other energy projects while containing costs; regulatory matters; customer creditworthiness; total electric generating capacity available in Southern Power's market areas; Southern Power's ability to successfully remarket capacity as current contracts expire; renewable portfolio standards; availability of federal and state ITCs and PTCs, which could be impacted by future tax legislation; transmission constraints; cost of generation from units within the Southern Company power pool; and operational limitations.

The level of future earnings for Southern Company Gas' primary business of distributing natural gas and its complementary businesses in the gas pipeline investments and gas marketing services sectors depends on numerous factors. These factors include the natural gas distribution utilities' ability to maintain constructive regulatory environments that allow for the timely recovery of prudently-incurred costs, including those related to projected long-term demand growth, safety, system reliability and resiliency, natural gas, and capital expenditures, including expanding and improving the natural gas distribution systems; the completion and subsequent operation of ongoing infrastructure and other construction projects; customer creditworthiness; certain policies to limit the use of natural gas, such as the potential across certain parts of the U.S. for state or municipal bans on the use of natural gas; and Southern Company Gas' ability to re-contract storage rates at favorable prices. The volatility of natural gas prices has an impact on Southern Company Gas' customer rates, its long-term competitive position against other energy sources, and the ability of Southern Company Gas' gas marketing services business to capture value from locational and seasonal spreads. Additionally, changes in commodity prices, primarily driven by tight gas supplies, geopolitical events, and diminished gas production, subject a portion of Southern Company Gas' operations to earnings variability and have recently resulted in higher natural gas prices. Additional economic factors may contribute to this environment. If current economic conditions continue to improve, the demand for natural gas may increase, which may cause natural gas prices to rise and drive higher volatility in the natural gas markets on a longer-term basis. Alternatively, a significant drop in oil and natural gas prices could lead to a consolidation of natural gas producers or reduced levels of natural gas production.

Earnings for both the electricity and natural gas businesses are subject to a variety of other factors. These factors include weather, competition, developing new and maintaining existing energy contracts and associated load requirements with wholesale customers, energy conservation practiced by customers, the use of alternative energy sources by customers, government incentives to reduce overall energy usage, the prices of electricity and natural gas, costs and availability of labor and materials in a time of rising costs and supply chain disruptions, and the price elasticity of demand. Demand for electricity and natural gas in the Registrants' service territories is primarily driven by the pace of economic growth or decline that may be affected by changes in regional and global economic conditions, which may impact future earnings.

As part of its ongoing effort to adapt to changing market conditions, Southern Company continues to evaluate and consider a wide array of potential business strategies. These strategies may include business combinations, partnerships, and acquisitions involving other utility or non-utility businesses or properties, disposition of, or the sale of interests in, certain assets or businesses, internal restructuring, or some combination thereof. Furthermore, Southern Company may engage in new business ventures that arise from competitive and regulatory changes in the utility industry. Pursuit of any of the above strategies, or any combination thereof, may significantly affect the business operations, risks, and financial condition of Southern Company. In addition, Southern Power and Southern Company Gas regularly consider and evaluate joint development arrangements as well as acquisitions and dispositions of businesses and assets as part of their business strategies. See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein for additional information.

For additional information relating to these issues, see RISK FACTORS in Item 1A and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL in Item 7 of the Form 10-K.

Environmental Matters

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" in Item 7 and Note 3 to the financial statements under "Environmental Remediation" in Item 8 of the Form 10-K, as well as Note (C) to the Condensed Financial Statements under "Environmental Remediation" herein, for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Regulatory Matters

See Note 2 to the financial statements in Item 8 of the Form 10-K, OVERVIEW – "Recent Developments" herein, and Note (B) to the Condensed Financial Statements herein for a discussion of regulatory matters related to Alabama Power, Georgia Power, Mississippi Power, and Southern Company Gas, including items that could impact the applicable Registrants' future earnings, cash flows, and/or financial condition.

Construction Programs

The Subsidiary Registrants are engaged in continuous construction programs to accommodate existing and estimated future loads on their respective systems. The Southern Company system strategy continues to include developing and constructing new electric generating facilities, expanding and improving the electric transmission and electric and natural gas distribution systems, and undertaking projects to comply with environmental laws and regulations.

For the traditional electric operating companies, major generation construction projects are subject to state PSC approval in order to be included in retail rates. The largest construction project currently underway in the Southern Company system is Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information. Also see Note 2 to the financial statements under "Alabama Power – Certificates of Convenience and Necessity" in Item 8 of the Form 10-K for information regarding Alabama Power's construction of Plant Barry Unit 8.

See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein under "Southern Power" for information about costs relating to Southern Power's construction of renewable energy facilities.

Southern Company Gas is engaged in various infrastructure improvement programs designed to update or expand the natural gas distribution systems of the natural gas distribution utilities to improve reliability and meet operational flexibility and growth. The natural gas distribution utilities recover their investment and a return associated with these infrastructure programs through their regulated rates. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Southern Company Gas" for additional information on Southern Company Gas' construction program.

See FINANCIAL CONDITION AND LIQUIDITY – "Cash Requirements" herein for additional information regarding the Registrants' capital requirements for their construction programs.

General Litigation and Other Matters

The Registrants are involved in various matters being litigated and/or regulatory and other matters that could affect future earnings, cash flows, and/or financial condition. The ultimate outcome of such pending or potential litigation against each Registrant and any subsidiaries or regulatory and other matters cannot be determined at this time; however, for current proceedings and/or matters not specifically reported herein or in Notes (B) and (C) to the Condensed Financial Statements herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings and/or matters would have a material effect on such Registrant's financial statements. See Notes (B) and (C) to the Condensed Financial Statements for a discussion of various contingencies, including matters being litigated, regulatory matters, and other matters which may affect future earnings potential.

ACCOUNTING POLICIES

See MANAGEMENT'S DISCUSSION AND ANALYSIS – ACCOUNTING POLICIES in Item 7 of the Form 10-K for a complete discussion of the Registrants' critical accounting policies and estimates, as well as recently issued accounting standards.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The Registrants prepare their financial statements in accordance with GAAP. Significant accounting policies are described in the notes to the financial statements in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on the Registrants' results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements.

FINANCIAL CONDITION AND LIQUIDITY

Overview

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Overview" in Item 7 of the Form 10-K for additional information. The financial condition of each Registrant remained stable at March 31, 2022. The Registrants intend to continue to monitor their access to short-term and long-term capital markets as well as their bank credit arrangements to meet future capital and liquidity needs. See "Cash Requirements," "Sources of Capital," and "Financing Activities" herein for additional information.

At the end of the first quarter 2022, the market price of Southern Company's common stock was $72.51 per share (based on the closing price as reported on the NYSE) and the book value was $26.63 per share, representing a market-to-book ratio of 272%, compared to $68.58, $26.30, and 261%, respectively, at the end of 2021. Southern Company's common stock dividend for the first quarter 2022 was $0.66 per share compared to $0.64 per share in the first quarter 2021.

Cash Requirements

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Cash Requirements" in Item 7 of the Form 10-K for a description of the Registrants' significant cash requirements.

The Registrants' significant cash requirements include estimated capital expenditures associated with their construction programs. The construction programs are subject to periodic review and revision, and actual construction costs may vary from these estimates because of numerous factors. These factors include: changes in business conditions; changes in load projections; changes in environmental laws and regulations; the outcome of any legal challenges to environmental rules; changes in electric generating plants, including unit retirements and replacements and adding or changing fuel sources at existing electric generating units, to meet regulatory requirements; changes in FERC rules and regulations; state regulatory agency approvals; changes in the expected environmental compliance program; changes in legislation and/or regulation; the cost, availability, and efficiency of construction labor, equipment, and materials; project scope and design changes; abnormal weather; delays in construction due to judicial or regulatory action; storm impacts; and the cost of capital. The continued impacts of the COVID-19 pandemic could also impair the ability to develop, construct, and operate facilities, as discussed further in Item 1A of the Form 10-K. In addition, there can be no assurance that costs related to capital expenditures and AROs will be fully recovered. Additionally, expenditures associated with Southern Power's planned acquisitions may vary due to market opportunities and the execution of its growth strategy. See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein under "Southern Power" for additional information regarding Southern Power's plant acquisitions and construction projects.

The construction program of Georgia Power includes Plant Vogtle Units 3 and 4, which includes components based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale and which may be subject to additional revised cost estimates during construction. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Georgia Power – Nuclear Construction" for information regarding Plant Vogtle Units 3 and 4 and additional factors that may impact construction expenditures.

Long-term debt maturities and the interest payable on long-term debt each represent a significant cash requirement for the Registrants. See "Financing Activities" herein for information on changes in the Registrants' long-term debt balances since December 31, 2021.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Sources of Capital

See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" in Item 7 of the Form 10-K for additional information. Southern Company intends to meet its future capital needs through operating cash flows, borrowings from financial institutions, and debt and equity issuances. Equity capital can be provided from any combination of Southern Company's stock plans, private placements, or public offerings. With the exception of the settlement later in 2022 of stock purchase contracts associated with its equity units, Southern Company does not expect to issue any equity in the capital markets through 2026, but may issue equity through its stock plans during this time. See Note 8 to the financial statements under "Equity Units" in Item 8 of the Form 10-K for additional information.

The Subsidiary Registrants plan to obtain the funds to meet their future capital needs from sources similar to those they used in the past, which were primarily from operating cash flows, external securities issuances, borrowings from financial institutions, and equity contributions from Southern Company. In addition, Southern Power plans to utilize tax equity partnership contributions (as discussed further herein).

The amount, type, and timing of any financings in 2022, as well as in subsequent years, will be contingent on investment opportunities and the Registrants' capital requirements and will depend upon prevailing market conditions, regulatory approvals (for certain of the Subsidiary Registrants), and other factors. See "Cash Requirements" and "Financing Activities" herein for additional information.

Southern Power utilizes tax equity partnerships as one of its financing sources, where the tax partner takes significantly all of the federal tax benefits. These tax equity partnerships are consolidated in Southern Power's financial statements and are accounted for using HLBV methodology to allocate partnership gains and losses. During the first quarter 2022, Southern Power obtained tax equity funding for existing tax equity partnerships totaling $51 million. See Note 1 to the financial statements under "General" in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

By regulation, Nicor Gas is restricted, to the extent of its retained earnings balance, in the amount it can dividend or loan to affiliates and is not permitted to make money pool loans to affiliates. At March 31, 2022, the amount of subsidiary retained earnings restricted to dividend totaled $1.4 billion. This restriction did not impact Southern Company Gas' ability to meet its cash obligations, nor does management expect such restriction to materially impact Southern Company Gas' ability to meet its currently anticipated cash obligations.

Certain Registrants' current liabilities frequently exceed their current assets because of long-term debt maturities and the periodic use of short-term debt as a funding source, as well as significant seasonal fluctuations in cash needs. The Registrants generally plan to refinance long-term debt as it matures. The following table shows the amount by which current liabilities exceeded current assets at March 31, 2022 for the applicable Registrants:


At March 31, 2022	Southern Company		Georgia Power		Southern Power		Southern Company Gas
	(in millions)
Current liabilities in excess of current assets	$	1,137	$	1,764	$	235	$	186

The Registrants believe the need for working capital can be adequately met by utilizing operating cash flows, as well as commercial paper, lines of credit, and short-term bank notes, as market conditions permit. In addition, under certain circumstances, the Subsidiary Registrants may utilize equity contributions and/or loans from Southern Company.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Bank Credit Arrangements

At March 31, 2022, the Registrants' unused committed credit arrangements with banks were as follows:


At March 31, 2022	Southern Company parent		Alabama Power		Georgia Power		Mississippi Power		Southern Power(a)		Southern Company Gas(b)		SEGCO		Southern Company
	(in millions)
Unused committed credit	$	1,998	$	1,250	$	1,726	$	255	$	568	$	1,747	$	30	$	7,574

(a)At March 31, 2022, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $30 million was unused. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.

(b)Includes $1.047 billion and $700 million at Southern Company Gas Capital and Nicor Gas, respectively.

Subject to applicable market conditions, the Registrants, Nicor Gas, and SEGCO expect to renew or replace their bank credit arrangements as needed, prior to expiration. In connection therewith, the Registrants, Nicor Gas, and SEGCO may extend the maturity dates and/or increase or decrease the lending commitments thereunder.

A portion of the unused credit with banks is allocated to provide liquidity support to the revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants, Nicor Gas, and SEGCO. The amount of variable rate revenue bonds of the traditional electric operating companies outstanding requiring liquidity support at March 31, 2022 was approximately $1.5 billion (comprised of approximately $789 million at Alabama Power, $672 million at Georgia Power, and $34 million at Mississippi Power). In addition, at March 31, 2022, Georgia Power had approximately $330 million of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.

See Note 8 to the financial statements in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein under "Bank Credit Arrangements" for additional information.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Short-term Borrowings

The Registrants, Nicor Gas, and SEGCO make short-term borrowings primarily through commercial paper programs that have the liquidity support of the committed bank credit arrangements described above. Southern Power's subsidiaries are not issuers or obligors under its commercial paper program. Commercial paper and short-term bank term loans are included in notes payable in the balance sheets. Details of the Registrants' short-term borrowings were as follows:


	Short-term Debt at March 31, 2022				Short-term Debt During the Period*()**
	Amount Outstanding		Weighted Average Interest Rate		Average Amount Outstanding		Weighted Average Interest Rate		Maximum Amount Outstanding
	(in millions)				(in millions)				(in millions)
Southern Company	$	2,330	0.9	%	$	1,878	0.5	%	$	2,894
Alabama Power	—		—		4		0.6		100
Georgia Power	860		0.9		290		0.7		900
Mississippi Power	25		1.5		10		0.8		71
Southern Power	208		0.9		164		0.4		220
Southern Company Gas:
Southern Company Gas Capital	$	259	0.9	%	$	312	0.4	%	$	379
Nicor Gas	273		0.8		551		0.5		830
Southern Company Gas Total	$	532	0.8	%	$	863	0.5	%

(*)Average and maximum amounts are based upon daily balances during the three-month period ended March 31, 2022.

Analysis of Cash Flows

Net cash flows provided from (used for) operating, investing, and financing activities for the three months ended March 31, 2022 and 2021 are presented in the following table:


Net cash provided from (used for):	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Three Months Ended March 31, 2022
Operating activities	$	1,592	$	154	$	361	$	(16)	$	117	$	1,024
Investing activities	(1,555)		(365)		(809)		(68)		(37)		(271)
Financing activities	(193)		504		441		32		(76)		(768)

Three Months Ended March 31, 2021
Operating activities	$	1,242	$	214	$	489	$	(38)	$	187	$	550
Investing activities	(2,243)		(466)		(913)		(67)		(504)		(308)
Financing activities	1,734		341		444		90		478		50

Fluctuations in cash flows from financing activities vary from year to year based on capital needs and the maturity or redemption of securities.

Table of Contents Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Southern Company

Net cash provided from operating activities increased $350 million for the three months ended March 31, 2022 as compared to the corresponding period in 2021 primarily due to increased natural gas cost recovery at the natural gas distribution utilities and the timing of vendor payments, partially offset by the timing of customer receivable collections.

The net cash used for investing activities for the three months ended March 31, 2022 was primarily related to the Subsidiary Registrants' construction programs.

The net cash used for financing activities for the three months ended March 31, 2022 was primarily related to common stock dividend payments and net redemptions of long-term debt, largely offset by an increase in short-term debt.

Alabama Power

Net cash provided from operating activities decreased $60 million for the three months ended March 31, 2022 as compared to the corresponding period in 2021 primarily due to the timing of customer receivable collections, decreased fuel cost recovery, and the timing of fuel stock purchases, partially offset by the timing of vendor payments.

The net cash used for investing activities for the three months ended March 31, 2022 was primarily related to gross property additions.

The net cash provided from financing activities for the three months ended March 31, 2022 was primarily related to capital contributions from Southern Company and the net issuance of long-term debt, partially offset by common stock dividend payments.

Georgia Power

Net cash provided from operating activities decreased $128 million for the three months ended March 31, 2022 as compared to the corresponding period in 2021 primarily due to the timing of customer receivable collections and decreased fuel cost recovery, partially offset by the timing of vendor payments.

The net cash used for investing activities for the three months ended March 31, 2022 was primarily related to gross property additions, including a total of approximately $240 million related to the construction of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on construction of Plant Vogtle Units 3 and 4.

The net cash provided from financing activities for the three months ended March 31, 2022 was primarily related to an increase in short-term borrowings and capital contributions from Southern Company, partially offset by common stock dividend payments and the redemption of senior notes.

Mississippi Power

Net cash used for operating activities decreased $22 million for the three months ended March 31, 2022 as compared to the corresponding period in 2021 primarily due to the timing of vendor payments.

The net cash used for investing activities for the three months ended March 31, 2022 was primarily related to gross property additions.

The net cash provided from financing activities for the three months ended March 31, 2022 was primarily related to capital contributions from Southern Company and an increase in short-term borrowings, partially offset by common stock dividend payments.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Southern Power

Net cash provided from operating activities decreased $70 million for the three months ended March 31, 2022 as compared to the corresponding period in 2021 primarily due to the timing of vendor payments and customer receivable collections.

The net cash used for investing activities for the three months ended March 31, 2022 was primarily related to construction payments. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.

The net cash used for financing activities for the three months ended March 31, 2022 was primarily related to common stock dividend payments and a net capital distribution to noncontrolling interests.

Southern Company Gas

Net cash provided from operating activities increased $474 million for the three months ended March 31, 2022 as compared to the corresponding period in 2021 primarily due to increased natural gas cost recovery, partially offset by the timing of customer receivable collections.

The net cash used for investing activities for the three months ended March 31, 2022 was primarily related to construction of transportation and distribution assets recovered through base rates and infrastructure investment recovered through replacement programs at gas distribution operations.

The net cash used for financing activities for the three months ended March 31, 2022 was primarily related to net repayments of short-term debt and common stock dividend payments, partially offset by capital contributions from Southern Company.

Significant Balance Sheet Changes

Southern Company

Significant balance sheet changes for the three months ended March 31, 2022 included:

an increase of $0.9 billion in notes payable due to an increase in short-term bank debt and commercial paper borrowings;
an increase of $0.7 billion in total property, plant, and equipment primarily related to the Subsidiary Registrants' construction programs;
increases of $0.6 billion in accumulated deferred income taxes and $0.4 billion in prepaid expenses primarily related to the expected utilization of ITCs in 2022;
a decrease of $0.5 billion in accrued compensation due to the timing of payments; and
a decrease of $0.5 billion in long-term debt (including securities due within one year) primarily due to the redemption of senior notes.

See "Financing Activities" herein and Note (G) to the Condensed Financial Statements herein for additional information.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Alabama Power

Significant balance sheet changes for the three months ended March 31, 2022 included:

an increase of $719 million in common stockholder's equity primarily due to capital contributions from Southern Company;
an increase of $293 million in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Alabama Power" herein;
an increase of $161 million in total property, plant, and equipment primarily related to construction of distribution and transmission facilities, construction of Plant Barry Unit 8, and the installation of equipment to comply with environmental standards; and
an increase of $145 million in long-term debt (including securities due within one year) primarily due to a net increase in outstanding senior notes.

See "Financing Activities – Alabama Power" herein for additional information.

Georgia Power

Significant balance sheet changes for the three months ended March 31, 2022 included:

an increase of $860 million in notes payable due to an increase in short-term bank debt and commercial paper borrowings;
an increase of $499 million in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities, including $303 million for Plant Vogtle Units 3 and 4;
a decrease of $421 million in long-term debt (including securities due within one year) primarily due to the redemption of senior notes; and
an increase of $415 million in common stockholder's equity primarily due to capital contributions from Southern Company.

See "Financing Activities – Georgia Power" herein and Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information.

Mississippi Power

Significant balance sheet changes for the three months ended March 31, 2022 included:

increases of $66 million in assets from risk management activities and $61 million in other regulatory liabilities, current primarily due to unrealized gains on short-term energy-related derivatives;
a decrease of $64 million in accrued taxes primarily due to the payment of ad valorem taxes; and
a decrease of $52 million in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Mississippi Power" herein.

See Note (J) to the Condensed Financial Statements herein for additional information.

Southern Power

Significant balance sheet changes for the three months ended March 31, 2022 included increases of $441 million in prepaid income taxes and $446 million in accumulated deferred income tax liabilities primarily related to the expected utilization of ITCs in 2022. See Note (G) to the Condensed Financial Statements herein for additional information.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Southern Company Gas

Significant balance sheet changes for the three months ended March 31, 2022 included:

a decrease of $677 million in notes payable due to repayments of short-term debt and commercial paper borrowings;
an increase of $259 million in common stockholder's equity related to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
a decrease of $241 million in natural gas for sale primarily due to higher volumes of natural gas sold;
an increase of $209 million in temporary LIFO liquidation due to use of stored natural gas;
a decrease of $181 million in other regulatory assets, deferred primarily due to a $163 million reduction in natural gas cost under recovery;
an increase of $147 million in total property, plant, and equipment primarily related to the construction of transportation and distribution assets recovered through base rates and infrastructure investment recovered through replacement programs; and
an increase of $141 million in customer accounts receivable due to the timing of collections.

See "Financing Activities – Southern Company Gas" herein and Note (B) to the Condensed Financial Statements herein for additional information.

Financing Activities

The following table outlines the Registrants' long-term debt financing activities for the first three months of 2022:


			Maturities and Redemptions
Company	Senior Note Issuances			Senior Notes		Other Long-Term Debt*()**
	(in millions)

Alabama Power	$	700		$	550	$	—
Georgia Power	—			400		24



Other	—			—		3

Southern Company	$	700		$	950	$	27

(*)Includes reductions in finance lease obligations resulting from cash payments under finance leases and, for Georgia Power, principal amortization payments totaling $24 million for FFB borrowings. See Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for additional information.

Except as otherwise described herein, the Registrants used the proceeds of debt issuances for their redemptions and maturities shown in the table above, to repay short-term indebtedness, and for general corporate purposes, including working capital. The Subsidiary Registrants also used the proceeds for their construction programs.

In addition to any financings that may be necessary to meet capital requirements and contractual obligations, the Registrants plan to continue, when economically feasible, a program to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit.

Southern Company

During the first quarter 2022, Southern Company issued approximately 2.6 million shares of common stock primarily through employee equity compensation plans and received proceeds of approximately $38 million.

In March 2022, Southern Company entered into a $400 million short-term floating rate bank loan bearing interest based on term SOFR.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Alabama Power

In February 2022, Alabama Power redeemed all $550 million aggregate principal amount of its Series 2017A 2.45% Senior Notes due March 30, 2022.

In March 2022, Alabama Power issued $700 million aggregate principal amount of Series 2022A 3.05% Senior Notes due March 15, 2032.

Georgia Power

In January 2022, Georgia Power redeemed all $400 million aggregate principal amount of its Series 2012B 2.85% Senior Notes due May 15, 2022.

In February 2022, Georgia Power borrowed $250 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a rate agreed upon by Georgia Power and the bank from time to time and payable on demand, following specified notice by the bank.

In March 2022, Georgia Power entered into a $200 million short-term floating rate bank loan bearing interest based on term SOFR.

Subsequent to March 31, 2022, Georgia Power entered into an additional $200 million short-term floating rate bank loan bearing interest based on term SOFR.

Mississippi Power

In March 2022, Mississippi Power borrowed $20 million (short term) pursuant to its $125 million revolving credit arrangement bearing interest based on term SOFR.

Southern Company Gas

During the first quarter 2022, Nicor Gas repaid one of its three $100 million short-term floating rate bank loans entered into in March 2021. Nicor Gas repaid $50 million of one of the other loans and increased the borrowing amount under the other loan to $150 million. In addition, both loans were renewed and amended to extend the maturity dates and change the interest rate provisions so the loans bear interest based on term SOFR.

Subsequent to March 31, 2022, Atlanta Gas Light repaid at maturity $36 million aggregate principal amount of medium-term notes with a weighted average interest rate of 8.65%.

Credit Rating Risk

At March 31, 2022, the Registrants did not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade.

There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating change of certain Registrants to BBB and/or Baa2 or below. These contracts are primarily for physical electricity and natural gas purchases and sales, fuel purchases, fuel transportation and storage, energy price risk management, transmission, interest rate management, and, for Georgia Power, construction of new generation at Plant Vogtle Units 3 and 4.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

The maximum potential collateral requirements under these contracts at March 31, 2022 were as follows:


Credit Ratings	Southern Company*()**		Alabama Power		Georgia Power		Mississippi Power		Southern Power*()**		Southern Company Gas
	(in millions)
At BBB and/or Baa2	$	37	$	1	$	—	$	—	$	36	$	—
At BBB- and/or Baa3	427		2		61		1		365		—
At BB+ and/or Ba1 or below	1,946		405		924		305		1,202		5

(*)Southern Power has PPAs that could require collateral, but not accelerated payment, in the event of a downgrade of Southern Power's credit. The PPAs require credit assurances without stating a specific credit rating. The amount of collateral required would depend upon actual losses resulting from a credit downgrade. Southern Power had $105 million of cash collateral posted related to PPA requirements at March 31, 2022.

The amounts in the previous table for the traditional electric operating companies and Southern Power include certain agreements that could require collateral if either Alabama Power or Georgia Power has a credit rating change to below investment grade. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. Additionally, a credit rating downgrade could impact the ability of the Registrants to access capital markets and would be likely to impact the cost at which they do so.

On February 22, 2022, Fitch downgraded the senior unsecured long-term debt rating of Georgia Power to BBB+ from A- with a stable outlook.

Also on February 22, 2022, Fitch revised the ratings outlook of Southern Company, Alabama Power, Southern Power, Nicor Gas, and SEGCO to negative from stable.

Table of Contents Index to Financial Statements

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